Selected Financial Data

* Statement of comprehensive income data has been restated for the year ended December 31, 2015 as a consequence of the disposal of Midatech US that occurred effective as of November 1, 2018, to be consistent with the presentation in the consolidated financial statements included elsewhere herein. Selected financial data for the year ended December 31, 2014 has not been affected as Midatech US was acquired on December 4, 2015.

Exchange Rates

Our financial reporting currency is the British pound sterling. Fluctuations in the exchange rate between the British pound sterling and the United States dollar will affect the United States dollar amounts received by owners of our Depositary Shares on conversion of dividends, if any, paid in British pound sterling on our Ordinary Shares, and will affect the United States dollar price of the Depositary Shares on the NASDAQ Capital Market.

Not Applicable

Not Applicable

Our business has significant risks. In addition to the other information included in this annual report, including the matters addressed in the section of the annual report entitled “Cautionary Note Regarding Forward-Looking Statements” and in our financial statements and the related notes, you should consider carefully the risks described below. The risks and uncertainties described below are not the only risks and uncertainties we may face. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial could also negatively affect our business, financial condition, results of operations, prospects, profits and stock prices. If any of the risks described below actually occur, our business, financial condition, results of operations, prospects, profits and stock prices could be materially adversely affected.

Risks Related to Our Financial Operations and Capital Needs

We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.

We are an early-stage biopharmaceutical company. Investment in biopharmaceutical product development is highly speculative because we entail substantial upfront capital expenditures and significant risk that a product candidate will fail in development, will fail to gain regulatory approval or otherwise fail to become commercially viable. We continue to incur significant development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred substantial losses since our inception. For the year ended December 31, 2018, we had a net loss of £15.03 million and an accumulated deficit of £89.72 million.

We expect to continue to incur losses for the foreseeable future, and do not expect these losses to reduce as we continue our development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products.

We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If our products fail to develop a market, or if any of our product candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have an adverse effect on our shareholders’ equity and working capital.

Our operations are in early-stage development with few sources of recurring revenue and there is no assurance that we will successfully develop and commercialize our product candidates or ever become profitable.

We are at a relatively early stage of our commercial development. To date, we have generated a minimal amount of revenue from our product candidates. Our ability to generate revenue and become and remain profitable depends, in part, on our ability to successfully commercialize products in the future, including any of our product candidates, or other product candidates we may in-license or acquire. Even if we were to successfully achieve regulatory approval of our product candidates, we do not know when any of the product candidates will generate revenue, if at all. Our ability to generate revenue from our product candidates also depends on a number of additional factors, including our ability to:

In addition, because of the numerous risks and uncertainties associated with product development, including that our product candidates may not advance through development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Even if we are able to complete the process described above, we anticipate incurring significant costs associated with commercializing these products.

Even if we are able to generate revenues from the sale of products, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to cease or reduce our operations.

Potential investors should be aware of the risks associated with an investment in companies with limited trading histories. There can be no assurance that we will operate profitably, produce a reasonable return, if any, on investment, or remain solvent. If our strategy proves unsuccessful, stockholders could lose all or part of their investment.

If we require or seek to raise additional capital to fund our operations and we fail to obtain necessary financing, we may be unable to complete the development and commercialization of our product candidates.

We expect to continue to spend substantial amounts of our cash resources going forward in order to advance the clinical development of our product candidates and launch and commercialize any product candidates for which we receive regulatory approval.

Until such time as we can generate a sufficient amount of revenue from our products, if ever, we expect that we may finance future cash needs through, among other things, public or private equity or debt offerings. Such offerings may take place in the United Kingdom, the United States or other foreign countries. However, if we are unable to raise capital when needed, in the offerings or in any additional financings we may pursue, or on terms acceptable to us, our business could be significantly harmed. If we raise additional funds through the issuance of debt or additional equity securities, such issuance could result in dilution to our existing shareholders and/or increased fixed payment obligations. Furthermore, these securities may have rights senior to those of our Ordinary Shares and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “ Risk Factors ” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

If a lack of available capital means that we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected.

We are exposed to political, regulatory, social and economic risk relating to the United Kingdom’s exit from the European Union.

On June 23, 2016, the United Kingdom government held an in-or-out referendum on the United Kingdom’s membership of the European Union in which voters approved the United Kingdom’s exit from the European Union, commonly referred to as “Brexit.” On March 29, 2017, the United Kingdom formally initiated its withdrawal from the European Union by triggering Article 50 of the Treaty of Lisbon. The United Kingdom had a period of a maximum of two years from the date of its formal notification to negotiate the terms of its withdrawal from, and future relationship with, the European Union. Discussions between the United Kingdom and the European Union focused on finalizing withdrawal issues and transition agreements are ongoing. On April 11, 2019, the European Council, in agreement with the United Kingdom, unanimously agreed to extend the deadline to October 31, 2019. However, ongoing uncertainty within the United Kingdom government and Parliament sustains the possibility of the United Kingdom leaving the European Union without a withdrawal agreement and associated transition period in place, which is likely to cause significant market and economic disruption.

From a regulatory perspective, the United Kingdom’s withdrawal could bear significant complexity and risks.  A basic requirement related to the grant of a marketing authorization for a medicinal product in the European Union is that the applicant is established in the European Union. Following the withdrawal of the United Kingdom from the European Union, marketing authorizations previously granted to applicants established in the United Kingdom may no longer be valid.  Moreover, depending upon the exact terms of the United Kingdom’s withdrawal, the scope of a marketing authorization for a medicinal product granted by the European Commission pursuant to the centralized procedure might not, in the future, include the United Kingdom. In these circumstances, an authorization granted by competent United Kingdom authorities would be required to place medicinal products on the United Kingdom market. In addition, the laws and regulations that will apply after the United Kingdom withdraws from the European Union would affect the manufacturing sites that hold a certification issued by the United Kingdom competent authorities, and vice versa.  Our capability to rely on these manufacturing sites for products intended for the European Union market would also depend upon the exact terms of the United Kingdom withdrawal. A significant portion of our manufacturing infrastructure is located in Spain, which is a member of the European Union. When the United Kingdom ceases to be a member of the European Union, our ability to integrate our United Kingdom and Spanish operations could be adversely affected. For example, depending on the terms of Brexit, we could become subject to export tariffs and regulatory restrictions that could increase the costs and time related to doing business in Spain.

The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal from the European Union. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could significantly increase the complexity of our activities in the European Union and in the United Kingdom, could depress our economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our Ordinary Shares and Depositary Shares.

We have recognized material intangible asset impairment losses and may be required to recognize additional non-cash impairment losses in the future.

As of December 31, 2017, in connection with our decision to suspend development of our program for Opsisporin and the resulting reduction in sales forecasts, we recognized an impairment loss for in-process research and development of Opsisporin, resulting in a charge to the income statement of £1.5 million. While Opsisporin is currently outside of our strategic focus, pre-clinical proof of concept studies have been completed and we believe that Opsisporin still has merit and development may be restarted when we have more available resources.

Further, as of December 31, 2016, we recognized an impairment loss for marketing and intangible product rights of £11.4 million, which arose as a result of the underperformance of Oravig, a product marketed by Midatech US, in comparison to forecast sales at the time of acquisition. The underperformance was caused in part by the heavily genericized market in which Oravig is sold. This impairment is included within the £14.0 million loss from discontinued operations disclosed herein.

These charges discussed above and any future impairment charges could materially increase our expenses and reduce our profitability. The process of testing goodwill and intangible assets for impairment involves numerous judgments, assumptions and estimates made by our management including expected future profitability, cash flows and the fair values of assets and liabilities, which inherently reflect a high degree of uncertainty and may be affected by significant variability. If the business climate deteriorates, including the markets in which certain of our products are sold, then actual results may not be consistent with these judgments, assumptions and estimates, and our goodwill and intangible assets may become impaired in future periods. This would in turn have an adverse impact on our financial position and results of operations.

In connection with our sale of Midatech US, we may be subject to significant indemnity obligations.

In connection with our sale of Midatech US to Kanwa Holdings, LP, and pursuant to the terms of the Stock Purchase Agreement dated September 26, 2018, by and among the Company, Midatech US and Kanwa Holdings, LP, we agreed to indemnify Kanwa Holdings, LP from certain breaches of representations and warranties, taxes and other matters, including, but not limited to, any liability related to any prescription drug user fee amounts owed under the Prescription Drug Fee User Act (“PDUFA”) to the FDA by Midatech US for the U.S. government’s fiscal year ended September 30, 2018. While Midatech US and the Company have sought a waiver for such PDUFA user fee, there can be no guarantee that such waiver will be granted. While certain of our indemnity obligations are limited and subject to a cap, any liability related to the PDUFA user fee, should it be subject to an indemnification claim, will not be limited in amount or subject to any cap. To the extent any indemnity obligation is not capped in amount, we may not have sufficient cash flow to make such indemnity payment. Further, we cannot predict the nature of and amount of all indemnity or other obligations we have to Kanwa Holdings, LP. Such payments may be costly and may materially adversely affect our financial condition and results of operations.

Risks Related to Our Business and Industry

Our future success is dependent on product development, regulatory approval and commercialization of our current product candidates and any product candidates we may acquire in the future.

We continue to conduct clinical trials and research and development for our product candidates; however there can be no assurance that any of our targeted developments will be successful. We must develop functional products that address specific market needs. We must therefore engage in new development activities, which may not produce innovative, commercially viable results in a timely manner or at all. In addition, we may not be able to develop new technologies or identify specific market needs that are addressable by our technologies, or technologies available to us. We may encounter delays and incur additional development and production costs and expenses, over and above those expected, in order to develop technologies and products suitable for licensing. If our development program is curtailed due to any of the above issues, this may have a material adverse effect on our business and financial conditions.

Our business is dependent on our ability to complete the development of, obtain regulatory approval for and commercialize our product candidates in a timely manner. We cannot commercialize a product without first obtaining regulatory approval from the appropriate regulatory authorities in a country. Before obtaining regulatory approvals for the commercial sale of any product candidate for a target indication, we must demonstrate with substantial evidence gathered in preclinical and well-controlled clinical studies that the product candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate. The process of developing, obtaining regulatory approval for and commercializing product candidates is long, complex and costly. Even if a product candidate were to successfully obtain approval from the EMA, the MHRA, the FDA and/or comparable foreign regulatory authorities, any approval might contain significant limitations related to use restrictions for certain age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If we are unable to obtain regulatory approval for our product candidates in one or more jurisdictions, or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of any other product candidate that we are currently developing or that we may in-license or acquire in the future. Furthermore, even if we obtain approval for a product candidate from the regulatory authorities, it is likely that we will need to expand our commercial operations, establish commercially viable pricing and obtain approval for adequate reimbursement from third parties and government departments and healthcare payors for such products. If we are unable to successfully commercialize our current product candidates, we may not be able to earn sufficient revenues to continue our business

Clinical drug development involves a risky, lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of any preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, even after seeing promising results in earlier clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry, including many with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. For example, in May 2016, we announced that the results of our Phase II dosing study of our transbuccal insulin delivery system, which delivered insulin through the mouth, were unfavorable compared to the traditional sub-cutaneous, or through the skin, insulin delivery system. Our future clinical trial results for our other products and programs may also be unsuccessful.

We have embarked on a clinical trial program for our MTD201 (Q-Octreotide) and MTX110 products, which both commenced their first-in-human studies in the first half of 2018, with MTD201 completing in the third quarter of 2018. The MTX110 clinical study is currently ongoing, and other clinical studies are also expected to commence in 2019. We may experience delays in our ongoing or future clinical trials and we do not know whether planned clinical trials will begin or enroll subjects on time, need to be redesigned or be completed on schedule, if at all. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as:

Patient and/or volunteer enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of subjects to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, the ability to obtain and maintain patient consents, whether enrolled subjects drop out before completion, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. Furthermore, we rely on contract research organizations and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their activities, we have limited influence over their actual performance.

If we experience delays in the completion of, or termination of, any ongoing or future clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials may increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

The regulatory approval processes in the United States and Europe are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business may be substantially harmed.

The time required to obtain approval for a product candidate by the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities is unpredictable, but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. It is possible that none of our existing product candidates or any product candidates we may in-license or acquire and seek to develop in the future will ever obtain regulatory approval.

Our product candidates could fail to receive regulatory approval from the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities for many reasons, including:

In addition, the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities may require more information, including additional preclinical or clinical data to support approval, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. If we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. In addition, if our product candidate produces undesirable side effects or safety issues, the regulatory authorities (the FDA, MHRA, EMA or a comparable foreign regulatory authority) may require the establishment of Risk Evaluation and Mitigation Strategy (“REMS”), which may, for instance, restrict distribution of our products and impose burdensome implementation requirements on us. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval and limit the commercial profile of an approved label, and such side effects or other properties could result in significant negative consequences following any marketing approval of any of our products or product candidates.

Undesirable side effects caused by any of our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the EMA, the MHRA, the FDA or other comparable foreign regulatory authority. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or risks associated with a product candidate’s use. In such an event, our trials could be suspended or terminated and the regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, if undesirable side effects of our products are identified following marketing approval, a number of potentially significant negative consequences could result, including:

Consequently, our reputation and business operations may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product or product candidate, if approved, and could significantly harm our business, results of operations and prospects.

Even if our product candidates receive regulatory approval, they may still face future development, manufacturing and regulatory difficulties.

Our product candidates, if they receive regulatory approval, will be subject to the ongoing requirements of the EMA, the MHPA, the FDA and other regulatory agencies governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The safety profile of any product is closely monitored by the EMA, the MHRA, the FDA and other regulatory authorities after approval. If the EMA, the MHRA, the FDA or other regulatory authorities become aware of new safety information after approval of any of our products or product candidates, regulatory authorities may require labeling changes or establishment of a risk mitigation strategy or similar strategy, impose significant restrictions on a product’s indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.

In addition, manufacturers of drug and biological products and their facilities are subject to continual review and periodic inspections by the EMA, the MHRA, the FDA and other governmental regulatory authorities for compliance with current good manufacturing practices (“cGMP”) regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our future products or product candidates or the manufacturing facilities for our future product or product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

The occurrence of any of these events or penalties described above may inhibit our ability to commercialize our products and generate revenue.

Any advertising and promotion of any product candidate we may commercialize will be heavily scrutinized.

Advertising and promotion of any of our product candidates we may commercialize will be heavily scrutinized by various regulatory authorities in the jurisdictions in which the product is promoted. Violations of applicable advertising and promotion laws and regulations, including promotion of our products for unapproved (or off-label) uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA and comparable foreign regulatory authorities.

In the United States, engaging in impermissible promotion of approved products for off-label uses can subject us to false claims litigation under federal and state statutes, which, if successful, could result in civil and criminal penalties and fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. These false claims statutes include the federal civil False Claims Act, which allows the federal government or any individual to bring a lawsuit against a pharmaceutical company, on behalf of the federal government, alleging the submission of false or fraudulent claims, or causing the submission of such false or fraudulent claims, for payment of government funds, and any successful individual could share in any judgment or settlement funds. In recent years, False Claims Act lawsuits against pharmaceutical companies have led to several substantial civil and criminal settlements based on certain sales practices promoting off-label drug uses. This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay treble damages and penalties, or agree to comply with burdensome reporting and compliance obligations pursuant to a Corporate Integrity Agreement or other settlement agreement with the U.S. Department of Health and Human Services Office of Inspector General to avoid exclusion from the Medicare, Medicaid, and other federal and state healthcare programs. If we do not lawfully promote our approved products, we may become subject to such litigation and, if we are not successful in defending against such actions, those actions may have a material adverse effect on our business, financial condition and results of operations. Equivalent laws and potential consequences exist in foreign jurisdictions.

Advertising and promotion of our products will be similarly subject to close scrutiny in the European Union. Allegations of off-label promotion of our products could lead to imposition of administrative measures, fines and imprisonment and limitations or restrictions on permitted communications concerning the advertising and promotion of our products.

Our commercialization strategy includes possible revenue generation from product royalty revenue, which could expose us to risks.

Our commercialization strategy includes possible revenue generation from product royalty deals. Specifically, in January 2019, we entered into that certain Licensing, Collaboration and Distribution Agreement (the “CMS Licensing Agreement”) with China Medical System Holdings Limited, CMS Bridging Limited and CMS Medical Hong Kong Limited (each, a “CMS Party”), pursuant to which, among other things, we agreed to license certain of our products to the CMS Parties in exchange for, among other things, royalty revenue. The right to receive possible product royalty revenues in the future may be challenged by the customer or licensee or there may be legal restrictions on the payment of royalties on product sales. Remittance of royalty revenues to us may be restricted from certain territories or subject to withholding taxes that we may not be able to recover or offset.

The commercial success of any of our product candidates we commercialize is not guaranteed.

There can be no assurance that any of our product candidates currently in development will be successfully developed into any commercially viable product or products and/or be manufactured in commercial quantities at an acceptable cost or be marketed successfully and profitably. If we, or our partners, encounter delays at any stage, and fail successfully to address such delays, it may have a material adverse effect on our business, financial condition and prospects. In addition, our success will depend on the market’s acceptance of our products and there can be no guarantee that this acceptance will be forthcoming or that our technologies will succeed as an alternative to competing products. The development of a market for our future products is, and may be, affected by many factors, some of which are beyond our control, including the emergence of newer, more effective technologies and products, and the cost of our products themselves, including the availability of products for which healthcare reimbursement is available. Notwithstanding the technical merits of a product developed or acquired by us, there can be no guarantee that the customer base of our distributors for the products will purchase or continue to purchase the particular product. Demand for our products may also decrease if competitor products are introduced with perceived advantages over our products or product candidates, or governments amend their policies on limiting drug costs or reimbursement practice or other healthcare reform measures within public health provision or private insurance-based models. If a market fails to develop or develops more slowly than anticipated, we may be unable to recover the costs we may have incurred in the development of particular products and may never achieve profitable revenues from that product. In addition, we cannot guarantee that we will continue to identify, develop, manufacture or market our products if market conditions do not support the continuation of such product.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates that we commercialize, we may be unable to generate any revenue.

We are currently in the early stage of our commercial operations and have only a limited operating history on which to base an evaluation of our current business and prospects. In order to market any products that may be approved by the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities, we must establish and/or build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and may not become profitable. We will be competing with many companies that currently have extensive and well-funded sales and marketing operations. Without enhancements to our internal commercial organization or the support of a third party to perform sales and marketing functions, we may be unable to compete successfully against these more established companies.

Some of our revenues are derived, or in the future may be derived, from licensing or collaboration agreements with other organizations and entities, and our commercial success may be subject to capabilities of those organizations and entities to successfully perform pursuant to the licensing and collaboration agreements. Additionally, if we fail to fulfill our obligations pursuant to such agreements, these agreements may be subject to termination.

Some of our revenues are derived from licensing or collaboration agreements with other biopharmaceutical companies, research institutes and universities. Our success may be dependent on these commercial arrangements and on similar arrangements for future exploitation of product candidates in development that have not yet been partnered. Our collaborators have substantial responsibility for some of the development and commercialization of our product candidates. Certain of our collaborators also have significant discretion over the resources they devote to these efforts. The success from any such collaboration, therefore, will in part depend on the ability and efforts of those third parties. We cannot guarantee that these collaborators will devote sufficient resources to collaborations with us or that our product candidates can be developed and commercialized without these collaborators. In addition, there can be no assurance that any company that enters into agreements with us will not pursue alternative technologies, either on our own or in collaboration with others, including our competitors, as a means of developing treatments for the conditions targeted by those products which we have licensed. Some of our collaboration agreements are contracted, and are likely to be contracted in the future, with partners who are in strong negotiating positions and who have greater financial resources than we do. While we seek to negotiate contracts on terms that we consider are the most beneficial to us, a number of existing contracts contain, and we expect that future contracts may contain, what could be considered potentially onerous terms for us, such as (in some cases) on-demand termination, uncapped indemnities, extensive warranties and broad confidentiality restrictions (in terms of scope and time).

If claims on liability and indemnity were to be successfully made under such contracts (i) we could be liable for substantial damage awards that may significantly exceed our liability insurance coverage by unknown but significant amounts; (ii) such claims could result in early termination of contracts; and/or (iii) we could incur financial penalties, all of which could materially and adversely affect our financial condition.

Further, if we fail to meet our obligations under our licensing agreements or collaboration agreements, our licensors or collaborators may have the right to terminate these agreements. Any uncured, material breach under the licenses or collaboration agreements could result in loss of our rights and may lead to a complete termination of our product development and any commercialization efforts for the applicable product candidate.

The pharmaceutical and biotechnology industries are highly competitive.

The development and commercialization of new drug products is highly competitive. Our business faces competition from a range of major and specialty pharmaceutical and biotechnology companies worldwide with respect to our product candidates, and will face competition in the future with respect to any product candidates that we may seek to develop or commercialize.

There are a number of pharmaceutical and biotechnology companies that currently market and sell products or are pursuing development of products similar to our technology and product candidates. With respect to our product candidates, from a technology perspective, we believe other companies using gold nanoparticle technologies include CytImmune Sciences, Inc., and Nanospectra Biosciences, Inc. In oncology, there are marketed nanodrugs on the market including a paclitaxel protein-bound particles for injectable suspension, known by its brand name Abraxane and marketed by Celgene Corporation for breast and various other cancers, doxorubicin HCI liposome injection, known by its brand name Doxil and marketed by Janssen Products for ovarian cancer, lyso-thermosensitive liposomal doxorubicin, known by its brand name ThermoDox and marketed by Celsion Corporation for breast and liver cancer, as well as a number of drugs in development for various cancers at Phase I or II. Our Q-Sphera technology for biodegradable sustained-release formulation takes a microsphere-based approach that is based on a unique combination of microfluidics and 3-D printing. It enables next-generation formulation and engineering. We believe other companies in the sustained release space include GP Pharm, S.A., Peptron, Inc., Graybug, Inc. and Nanomi B.V. In addition, Teva Pharmaceutical Industries, Dr. Reddy’s Laboratories and Mylan N.V. are all believed to be developing a sustained release octreotide injection.

Some of these competitive products and therapies are based on scientific approaches that are the same or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Our competitors in the biotechnology and pharmaceutical industries may have superior research and development capabilities, products, manufacturing capability or sales and marketing expertise. Many of our competitors may have significantly greater financial and human resources and may have more experience in research and development.

As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection of other intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop products that are more effective, more widely used and less costly than our own products, and may be more successful in manufacturing and marketing their products.

We anticipate that we will face increased competition in the future as new companies enter our markets and alternative products and technologies become available. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The success of any products we may commercialize will depend on the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community.

Any products that we acquire or bring to the market may not gain market acceptance by physicians, patients, healthcare payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate material product revenues and may not become profitable. The degree of market acceptance of our products and product candidates, if approved for commercial sale, will depend on a number of factors, including, but not limited to:

Any product or product candidate we may commercialize may become subject to unfavorable pricing regulation, third party regulation, third party reimbursement practices or healthcare reform initiatives, which could harm our business.

Our ability to market and commercialize products successfully will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Our future revenues and profitability will be adversely affected if these third-party payors do not sufficiently cover and reimburse the cost of these products and related procedures or services. If these entities do not provide sufficient coverage and reimbursement for any drug products we market, these products may be too costly for general use, and physicians may prescribe them less frequently.

The Medicare program and certain government pricing programs, including the Medicaid drug rebate program, the Public Health Service’s 340B drug pricing program (the “340B program”) and the pricing program under Section 603 of the Veterans Health Care Act of 1992, impact the revenues we may derive from future products that we may commercialize. Any future legislation or regulatory actions altering these programs or imposing new compliance requirements could have a significant adverse effect on our business. There have been, and we expect there will continue to be, a number of legislative and regulatory actions and proposals to control and reduce health care costs. These measures may, among other things: negatively impact the level of reimbursement for pharmaceutical products; require higher levels of cost-sharing by beneficiaries; change the discounts required to be provided by pharmaceutical manufacturers to government payors and/or providers; extend government discounts to additional government programs and/or providers; or reduce the level of reimbursement for health care services and other non-drug items. Any such measures could indirectly impact demand for pharmaceutical products because they can cause payors and providers to apply heightened scrutiny and/or austerity actions to their entire operations, including pharmacy budgets.

Also, the trend toward managed health care in the United States, as well as the implementation of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), and the concurrent growth of organizations such as managed care organizations, accountable care organizations and integrated delivery networks, may result in increased pricing pressures for pharmaceutical products, including any products that may be offered by us in the future. Moreover, legislative and regulatory changes to the Affordable Care Act, including possible repeal, remain possible under the Trump Administration. Certain changes, such as the removal of the Affordable Care Act’s individual health insurance mandate, have already been made by the U.S. Congress via enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts Act”), and the effects of such legislative changes to the Affordable Care Act are unknown. In addition, third-party payors, in an effort to control costs, are increasingly making patients responsible for a higher percentage of the total cost of drugs in the outpatient setting. This can lower the demand for our products if the increased patient cost sharing obligations are more than they can afford. Individual states’ responses to ongoing financial pressures could also result in measures designed to limit reimbursement, restrict access, or impose broader or deeper discounts on branded pharmaceutical products utilized for Medicaid patients. We are unable to predict what changes in legislation or regulation relating to the health care industry or third-party coverage and reimbursement, including possible repeal of the Affordable Care Act, may be enacted in the future or what effect such legislation or regulation would have on our business.

There may be significant delays in obtaining coverage and reimbursement for any drug for which we obtain approval, and coverage may be more limited than the purposes for which the drug is approved by the EMA, the MHRA, the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacturing, selling and distribution costs. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be temporary.

We may experience pricing pressure on the price of any products and products candidates we may commercialize in the future, due to social or political pressure to lower the cost of drugs, which could reduce our revenue and future profitability.

We may experience downward pricing pressure on the price of any product or product candidate we may commercialize in the future, due to social or political pressure to lower the cost of drugs, which could reduce our revenue and future profitability. Recent events have resulted in increased public and governmental scrutiny of the cost of drugs. In particular, U.S. federal prosecutors have issued subpoenas to pharmaceutical companies seeking information about drug pricing practices. The U.S. Senate has, in the past, publicly investigated a number of pharmaceutical companies relating to drug-price increases and pricing practices. Our revenue and future profitability could be negatively affected if these inquiries were to result in legislative or regulatory proposals that limit our ability to increase the prices of our products or any product candidates we may commercialize.

In addition, legislation was previously introduced in the U.S. Congress that would require pharmaceutical manufacturers to justify price increases of more than 10% in a 12-month period, and a large number of individual states have introduced legislation aimed at drug pricing regulation, transparency or both. Our revenue and future profitability could be negatively affected by the passage of these laws or similar federal or state legislation. Pressure from social activist groups and future government regulations may also put downward pressure on the price of drugs, which could result in downward pressure on the prices of any product candidates we may commercialize in the future.

Currently enacted and future legislation in the United Kingdom, United States and other foreign jurisdictions may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United Kingdom, United States and other foreign jurisdictions, legislative and regulatory changes and proposed changes regarding the healthcare system could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any products or product candidates for which we obtain marketing approval.  

In the United States, in recent years, Congress has considered reductions in Medicare reimbursement levels for drugs administered by physicians. The Centers for Medicare also has authority to revise reimbursement rates and to implement coverage restrictions for some drugs. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products, which in turn would affect the price we can receive for those products. While Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from federal legislation or regulation may result in a similar reduction in payments from private payors.

In March 2010, President Obama signed into law the Affordable Care Act. This law substantially changes the way healthcare is financed by both governmental and private insurers in the United States, and significantly impacts the pharmaceutical industry.  The Affordable Care Act is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms.  The Affordable Care Act expanded manufacturers’ rebate liability under the Medicaid program from fee-for-service Medicaid utilization to include the utilization of Medicaid managed care organizations as well; increased the minimum Medicaid rebate due for most innovator drugs in general from 15.1% of average manufacturer price (“AMP”) to 23.1% of AMP; and capped the total rebate amount for innovator drugs at 100% of AMP.  The Affordable Care Act and subsequent legislation also changed the definition of AMP.  The Affordable Care Act requires pharmaceutical manufacturers of branded prescription drugs to pay a branded prescription drug fee to the federal government.  Each such manufacturer pays a prorated share of the branded prescription drug fee of $4.1 billion in 2018, based on the dollar value of its branded prescription drug sales to certain federal programs identified in the law.  Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with healthcare practitioners if our product candidates are not approved and marketed in the United States.  The Affordable Care Act also expanded the 340B program to include additional types of covered entities.  Final Centers for Medicare regulations to implement the changes to the Medicaid drug rebate program under the Affordable Care Act became effective on April 1, 2016.  If not repealed or amended, it is likely that the Affordable Care Act will continue the pressure on pharmaceutical pricing, especially under the Medicare and Medicaid programs, and may also increase our regulatory burdens and operating costs.

In addition, other legislative changes have been adopted since the Affordable Care Act was enacted. Beginning April 1, 2013, Medicare payments for all items and services, including drugs and biologics, were reduced by 2% under the sequestration (i.e., automatic spending reductions) required by the Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012.  Subsequent legislation extended the 2% reduction, on average, to 2025.  This could cause Medicare Part D plans to seek lower prices from manufacturers. Even if favorable coverage and reimbursement status is attained for our products, less favorable coverage policies and reimbursement rates may be implemented in the future.

As previously noted, in December 2017, the Tax Cuts Act repealed the Affordable Care Act’s penalties against individuals for failure to purchase health insurance, commonly known as the individual mandate, effective January 1, 2019. The repeal of the individual mandate will likely cause fewer Americans to be insured in the future, as compared with the prior version of the law. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain Affordable Care Act-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, among other things, amends the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.”  Congress could consider other legislation to repeal or replace certain elements of the Affordable Care Act. We ultimately cannot predict with any assurance the ultimate effect of changes to the Affordable Care Act on us, nor can we provide any assurance that recent or future changes to the Affordable Care Act provisions will not have an adverse effect on its business, financial condition, results of operations, cash flows and the trading price of our Ordinary Shares or Depositary Shares, as well as anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval. The scope of potential future legislation to further amend the Affordable Care Act provisions is highly uncertain in many respects, as is the effect of such future legislation on our business and prospects. It is possible that some of the Affordable Care Act provisions that generally are not favorable for the research-based pharmaceutical industry could also be repealed along with Affordable Care Act coverage expansion provisions.

In Europe, members of the European Union, or signatories thereto, are obliged to integrate directives into their national laws. European Union regulations, as in other European Union Member States, become immediately and directly enforceable in the member territories. These include without limitation:

In the United Kingdom, the regulation of medicinal products derives from European Union legislation, particularly Directive 2001/83/EC on the European Community code relating to medicinal products for human use, and Regulation (EC) 726/2004 on the authorization and supervision of medicinal products and establishing the EMA. This legislation has been adopted in the United Kingdom by the Human Medicines Regulations 2012 (SI 2012/1916) and applied through the MHRA, which is the executive agency of the Department of Health implementing pharmaceutical legislation in the United Kingdom. Accordingly, the terms of Brexit, which are negotiated between the United Kingdom and the European member states, may alter such regulation.

In the European Union, marketing approvals can be submitted through the national, mutual recognition or decentralized procedures. For marketing authorizations submitted through the centralized procedure, the EMA is responsible. The EMA advises the European Commission in relation to decisions on marketing authorizations.

Reimbursement in the European Union is typically controlled by statutory stipulations and controls on pharmaceutical pricing. Healthcare is broadly divided into public and private health. Products that are not to be supplied through the countries’ public health services are typically less subject to price controls. All medicines validly prescribed on a public health prescription are in principle reimbursed from that country’s public funds.

In many European Union member states and signatories, a separate cost/benefit analysis may be required or requested (not a legal requirement) in order for prescribed products to be reimbursed. In the United Kingdom, most new medicines undergo an assessment by the United Kingdom National Institute for Health and Care Excellence (“NICE”), which will issue guidance on if and how to use the product in the National Health Service (“NHS”) in England and Wales. This decision is largely based on the opinion of NICE regarding clinical effectiveness and cost effectiveness relative to alternative therapies. NICE appraisals follow a comprehensive and inclusive process including consultations with and contributions from stakeholders. Clinicians are expected to take NICE’s guidance into account when making prescribing decisions. Where NICE issues a positive recommendation, NHS bodies are required to make funding available to cover the cost of the product as a treatment option, consistent with NICE’s guidance. In contrast, products which are not recommended by NICE are generally not funded on a routine basis.

We cannot be sure whether additional legislative changes will be enacted, or whether the FDA or other jurisdictional regulations, guidance or interpretations will be changed, or what the impact of such changes (or in some instances, current regulations, guidance or interpretations) on the marketing approvals of our products or product candidates, if any, may be.

We are subject to environmental laws and regulations that govern the use, storage, handling and disposal of hazardous materials and other waste products.

We are subject to environmental laws and regulations governing the use, storage, handling and disposal of hazardous materials and other waste products. We have health and safety policies and procedures in place to assess the risks associated with use of hazardous materials, and the assessment includes information for employees on how the substances should be used to avoid contamination of the environment and inadvertent exposure to themselves and their colleagues. Despite our precautions for handling and disposing of these materials, we cannot eliminate the risk of accidental contamination or injury. In the event of a hazardous waste spill or other accident, we could be liable for damages, penalties or other forms of censure. If we fail to comply with any laws or regulations, or if an accident occurs, we may have to pay significant penalties and may be held liable for any damages that result. This liability could exceed our financial resources and could harm our reputation. We may also have to incur significant additional costs to comply with current or future environmental laws and regulations. Our failure to comply with any government regulation applicable to our laboratory and the materials used in our laboratory may adversely affect our ability to develop, produce, market or partner any products we may commercialize or develop.

Our success depends in part on our ability to protect rights in our intellectual property, which cannot be assured.

Our success and ability to compete effectively are in large part dependent upon exploitation of proprietary technologies and products that we have developed internally or have acquired or in- licensed. To date, we have relied on copyright, trademark and trade secret laws, as well as confidentiality procedures, non-compete and/or work for hire invention assignment agreements and licensing arrangements with our employees, consultants, contractors, customers and vendors, to establish and protect our rights to our technology and, to the best extent possible, control the access to and distribution of our technology, software, documentation and other proprietary information, all of which offer only limited protection. Where we have the right to do so under our agreements, we seek to protect our proprietary position by filing patent applications in the United States, the United Kingdom and worldwide related to our novel technologies and products that are important to our business. The patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. There can be no assurance that:

The steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside and outside of the United Kingdom and United States. The rights already granted under any of our currently issued patents and those that may be granted under future issued patents may not provide us with the proprietary protection or competitive advantages we are seeking. If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected.

With respect to patent rights, we do not know whether any of the pending patent applications for any of our licensed compounds will result in the issuance of patents that protect our technology or products, or which will effectively prevent others from commercializing competitive technologies and products. Although we have a number of issued patents covering our technology, our pending applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Further, the examination process may require us to narrow the claims, which may limit the scope of patent protection that may be obtained. Because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, issued patents that we own or have licensed from third parties may be challenged in the courts or patent offices in the European Union, United Kingdom, the United States and other foreign jurisdictions. Overall, such challenges may result in the loss of patent protection, the narrowing of claims in such patents, or the invalidity or unenforceability of such patents, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection for our technology and products. Protecting against the unauthorized use of our patented technology, trademarks and other intellectual property rights is expensive, difficult and may in some cases not be possible. In some cases, it may be difficult or impossible to detect third party infringement or misappropriation of our intellectual property rights, even in relation to issued patent claims, and proving any such infringement may be even more difficult.

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 inventions made in the course of our development and commercialization activities before it is too late to obtain patent protection on them. Further, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms where they are available in any countries where we are prosecuting patents. However, the applicable authorities, including the FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Changes in either the patent laws or interpretation of the patent laws in the European Union, the United Kingdom, the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United Kingdom or the United States, and these foreign laws may also be subject to change. Publication of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications typically are not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot be certain that 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.

Previously, in the United States, assuming the other requirements for patentability are met, the first to make the claimed invention was entitled to the patent. Outside the United States, the first to file a patent application is entitled to the patent. In March 2013, the United States transitioned to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Under either the previous or current system, third parties will be allowed to submit prior art prior to the issuance of a patent by the United States Patent and Trademark Office, and may become involved in opposition, derivation, reexamination, inter-partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position with respect to third parties.

Our commercial success depends, in part, upon our not infringing intellectual property rights owned by others.

Although we believe that we have proprietary platforms for our technologies and product candidates, we cannot determine with certainty whether any existing third party patents or the issuance of any third party patents in the future would require us to alter our technology, obtain licenses or cease certain activities. We may become subject to claims by third parties that our technology infringes their intellectual property rights, in which case we will have no option other than to defend the allegation, which may be possible to resolve through negotiation or which might result in court proceedings. An adverse outcome in any of these circumstances is that we might be subject to significant liabilities, be required to cease using a technology or to pay license fees (both prospectively and retrospectively); and may be subject to the payment of significant damages. We could incur substantial costs in any litigation or other proceedings relating to patent rights, even if it is resolved in our favor. If the proceedings occur in the United States, it is likely that we will be responsible for our own legal costs, no matter the outcome of the litigation. In contrast, in the United Kingdom, the losing party typically is ordered to pay the winning party’s costs, although it is rare to have a complete recovery of all costs from the losing side. Some of our competitors may be able to sustain the costs of complex litigation more effectively or for a longer time than we can because of their substantially greater resources. In addition, uncertainties or threatened or actual disputes relating to any patent, patent application or other intellectual property right (including confidential information) could have a material adverse effect on our ability to market a product, enter into collaborations in respect of the affected products, or raise additional funds.

The policing of unauthorized use of our patented technologies and product candidates is difficult and expensive. There can be no assurance that the steps we take will prevent misappropriation of, or prevent an unauthorized third party from obtaining or using, the technologies, know-how and products we rely on. In addition, effective protection may be unavailable or limited in some jurisdictions. Any misappropriation of our proprietary technology, products and intellectual property could have a negative impact on our business and our operating results. Litigation may be necessary in the future to enforce or protect our rights or to determine the validity or scope of the proprietary rights of others. Litigation could cause us to incur substantial costs and divert resources and management attention away from our daily business and there can be no guarantees as to the outcome of any such litigation. In addition, a defendant in any such litigation may counterclaim against us, resulting in additional time and expense to defend against such a counterclaim, which defense may not be successful.

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe on our patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. This can be expensive and time consuming. Many of our current and potential competitors have the ability to dedicate substantially greater resources to defend our intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. 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.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates, and to use our proprietary technologies without infringing the proprietary rights of third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and commercializing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated our confidential information or trade secrets could have a similar negative impact on our business.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies. Some of these employees, including members of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our senior management, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a potential distraction to management.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. In addition, a court may determine that we failed to take adequate steps to protect our trade secrets, in which case it may not be possible to enforce our trade secret rights. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some may be less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.

We may face product liability claims stemming from our future products.

In carrying out our activities, we may potentially face contractual and statutory claims, or other types of claims from customers, suppliers and/or investors. In addition, we are exposed to potential product liability risks that are inherent in the research, development, production and supply of products. Subjects enrolled in our clinical trials, consumers, healthcare providers or other persons administering or selling products based on our and our collaborators’ technology may be able to bring claims against us based on the use of such products. If we cannot successfully defend ourselves against claims that any products we may commercialize caused injuries, we could incur substantial costs and liabilities. Irrespective of their merits or actual outcome, liability claims may result in:

We have obtained product liability insurance coverage with a £8.0 million annual aggregate coverage. Our insurance coverage may not be sufficient to cover our entire product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our product liability coverage based on sales of our products, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects, including side effects that may be less severe than those of our products. A successful product liability claim or series of claims brought against us could cause the price of the Ordinary Shares and/or American Depositary Shares to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect our business, results of operations, financial condition and prospects.

Our future products may be faced with recalls.

We may be faced with the necessity of recalling one or more of our future products or batches of products from the market. This necessity may also occur if no de facto product property exists that makes a recall obligatory, in particular a side effect or defect, but rather if such a property is merely suspected of being present. A recall may result in loss of revenue, damage to reputation and consequential fall in cash flow, and product supply interruption, among other things. Affected products could not be sold any longer, and moreover, trust among, in particular, doctors and patients could be affected, which could lead to reductions in sales or profits. Further, options for refinancing on the capital market could be negatively affected or even excluded.

We rely on third parties to conduct our preclinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We are, and may continue to be, reliant on other parties for the successful development and commercialization of many of our product candidates. We rely upon CROs for the conduct of our clinical studies. We rely on these parties for execution of our preclinical and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs or collaboration partners does not relieve us of our regulatory responsibilities. We also rely on third parties to assist in conducting our preclinical studies in accordance with Good Laboratory Practices and requirements with respect to animal welfare. We and our CROs or collaboration partners are required to comply with Good Clinical Practices (“GCP”), which are regulations and guidelines enforced by the MHRA, the FDA, the EMA and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCP through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or partners fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemed unreliable and the EMA, the MHPA, the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot be assured that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP requirements. Failure to comply with these regulations may require us to repeat preclinical and clinical trials, which would delay the regulatory approval process.

Our CROs are not our employees, and except for remedies available to us under such agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or 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, regulatory requirements or for other reasons, then our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Because we have relied on third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risk that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third party providers. To the extent we are unable to identify and successfully manage the performance of third party service providers in the future, our business may be adversely affected. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

We are dependent on third party suppliers, and if we experience problems with any of these third parties, the manufacturing of our product candidates or products could be delayed, which could harm our results of operations.

We are also dependent upon certain qualified suppliers, of which there are a limited number, for the supply of raw materials, components, devices and manufacturing equipment. Additionally, these suppliers may also have downstream suppliers who supply materials, components, devices and manufacturing equipment, which may indirectly impact our business operations. We may also become dependent in the future on third party contract manufacturing organizations for the production of our product candidates for commercial sale. Thus, the success of our business may be adversely affected by the underperformance of third parties, exploitation by third parties of our commercial dependence and by unforeseen interruptions to third parties’ businesses. Although the existence of several alternative suppliers for each function mitigates the risks associated with this dependence, as does the availability of commercial insurance in respect of the impact of accidental events, the failure of a third party to properly to carry out their contractual duties or regulatory obligations could be highly disruptive to our business. Supply chain failures can result in significant clinical or commercial supply interruptions which could materially hamper our ability to conduct clinical trials or to supply adequate commercial supplies, and efforts to qualify new suppliers can be costly and time consuming. Further, any action taken by a third party that is detrimental to our reputation could have a negative impact on our ability to register our trademarks and/or market and sell our products.

In the future, we intend to license certain of our products to other companies for later stages of development and subsequent marketing, and consequently we will be increasingly reliant on securing and retaining such partners once our products advance through the development process. There can be no assurance that we will be able to secure such partners or that, once secured, our partners will continue to make the necessary and timely investments in our products to complete their development in the expected time and achieve commercial success.

Our counterparties may become insolvent.

There is a risk that parties with whom we trade or have other business relationships with (including partners, joint venturers, customers, suppliers, subcontractors and other parties) may become insolvent. This may be due to general economic conditions or factors specific to that company. In the event that a party with whom we trade becomes insolvent, this could have an adverse impact on our revenues and profitability.

We may lose our sterile production license and may encounter unexpected difficulties in the scale-up of production to viable clinical trial or commercialization levels.

We completed a major upgrade of our infrastructure in Spain in September 2014 by integrating a separated sterile production unit within the manufacturing containment area. Through integrating the separated sterile production unit within the manufacturing facility, we can produce clinical candidate compounds under sterile conditions, allowing us to clinically test and evaluate candidate gold nanoparticles-based cancer therapies, which are administered by intravenous injection. A further upgrade was completed in December 2016 with the addition of a non-sterile production unit for our sustained release products. The Spanish regulatory authority grants us the requisite licenses necessary for the activities that occur at this facility. If the Spanish regulatory authority were to revoke or fail to issue the requisite licenses, we may need to outsource our requirements of the sterile production and cGMP manufacturing, which will increase our reliance on third parties to manufacture the candidate compounds to the required standards, and will be therefore be at risk of underperformance and unforeseen interruptions, which could adversely affect our business and financial performance.

Because of the complex nature of our product candidates, we may not be able to manufacture the product candidates in a timely manner at cost or in quantities necessary to successfully commercialize our products. Certain of our product candidates have historically only been manufactured in small quantities. Later stage development and commercial supply of such products will require us to scale up the manufacture of our products. There can be no assurance that this can be successfully completed or that, if completed, it will result in commercially acceptable manufacturing costs.

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

Healthcare providers, physicians and third party payors play a primary role in the recommendation and prescription of any of our products or any product candidate for which we obtain marketing approval. Our arrangements with third party payors and customers exposes 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 will market, sell and distribute our products for which we obtain marketing approval.

The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance or reporting requirements in multiple jurisdictions increase the possibility that a healthcare or pharmaceutical company may fail to comply fully with such laws and regulations. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with applicable fraud and abuse or other healthcare laws and regulations or guidance. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid in the United States, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business is found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our financial condition and divert resources and the attention of our management from operating our business.

We are subject to cybersecurity risks and other cyber incidents, including the misappropriation of our information and other breaches of information security that may result in disruption and the incurrence of costs in an effort to minimize those risks.

In the normal course of conducting our business, we collect and store sensitive data on our networks, including intellectual property, personal information of our employees, and our proprietary business information and that of our customers, vendors and business partners.  Despite the security measures we have in place and any additional measures we may implement in the future to safeguard our systems and to mitigate potential security risks, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism or other events. Any steps we take to deter and mitigate these risks may not be successful and may cause us to incur increasing costs. Any disruption of our systems or security breach or event resulting in the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us directly or by our third-party service providers, could damage our reputation, result in the incurrence of costs, expose us to the risks of litigation and liability, result in regulatory penalties under laws that protect privacy of personal information, disrupt our business or otherwise affect our results of operations.

Regulatory, legislative or self-regulatory/standard developments regarding privacy and data security matters could adversely affect our ability to conduct our business.

In the European Union, the General Data Protection Regulation (“GDPR”), which came into effect on May 25, 2018, may increase our burden of regulatory compliance and require us to change certain of our privacy and data security practices in order to achieve compliance. The GDPR implements more stringent operational requirements for processors and controllers of personal data, including, for example, requiring expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements, and higher standards for data controllers to demonstrate that they have obtained either valid consent or have another legal basis in place to justify their data processing activities. The GDPR further provides that European Union member states may make their own additional laws and regulations in relation to certain data processing activities, which could further limit our ability to use and share personal data and could require localized changes. Under the GDPR, fines of up to €20 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, may be assessed for non-compliance, which significantly increases our potential financial exposure for non-compliance. We do not routinely handle or process personal data, although we do maintain a database of employee information; however, since the GDPR only came into effect recently, the potential risks associated with non-compliance therewith are uniquely difficult to predict.

We are currently undergoing a leadership transition and this transition, along with the possibility that we may in the future be unable to retain and recruit qualified scientists, ke y  executives, ke y  emplo y ees or key consultants, may delay our development efforts or otherwise harm our business.

On May 31, 2018, Dr. James Phillips, our then-Chief Executive Officer and member of the Board of Directors, stepped down from all of his positions with the Company and its subsidiaries. Dr. Craig Cook, formerly our Chief Operating Officer and Head of Research and Development, was appointed by the Board of Directors to succeed Dr. Phillips.  Further, on February 26, 2019, three of our non-executive directors, John Johnston, Michele Luzi, and Pavlo Protopapa, resigned, and we appointed Dr. Huaizheng Peng to the Board of Directors. While we have confidence in Dr. Cook and our remaining leadership team, including the Board of Directors, the uncertainty inherent in this ongoing leadership transition may be difficult to manage, may cause concerns from third parties with whom we do business, and may increase the likelihood of turnover of other key officers and employees.

In addition, our future development and prospects depend to a large degree on the experience, performance and continued service of our senior management team, including members of our Board of Directors. We have invested in our management team at all levels. We have entered into contractual arrangements with our directors and senior management team with the aim of securing the services of each of them. However, retention of these services or the identification of suitable replacements cannot be guaranteed. There can be no guarantee that the services of the current directors and senior management team will be retained, or that suitably skilled and qualified individuals can be identified and employed, which may adversely impact our ability to develop our technologies and/or provide our services at the time requested by our customers or our ability to market our services and technologies, and otherwise to grow our business, could be impaired. The loss of the services of any of the directors or other members of the senior management team and the costs of recruiting replacements may have a material adverse effect on us and our commercial and financial performance.

The ability to continue to attract and retain employees with the appropriate expertise and skills also cannot be guaranteed. Finding and hiring any additional personnel and replacements could be costly and might require us to grant significant equity awards or other incentive compensation, which could adversely impact our financial results, and there can be no assurance that we will have sufficient financial resources to do so. Effective product development and innovation, upon which our success is dependent, is in turn dependent upon attracting and retaining talented technical and scientific personnel, who represent a significant asset and serve as the source of our technological and product innovations. If we are unable to hire, train and retain such personnel in a timely manner, the development and introduction of our products could be delayed and our ability to sell our products and otherwise to grow our business will be impaired and the delay and inability may have a detrimental effect upon our performance.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with applicable regulations, provide accurate information to regulatory authorities, comply with manufacturing standards, comply with healthcare fraud and abuse laws and regulations, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we have taken 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 results of operations, including the imposition of significant fines or other sanctions.

Unexpected facility shutdowns or system failures may occur and our disaster recovery plans may not be sufficient.

We depend on the performance, reliability and availability of our properties, plant, machinery, and laboratory equipment and information technology systems. We may not be able to access our facilities as a result of events beyond our control, such as extreme weather conditions, flood, fire, theft, terrorism and acts of God. Any damage to or failure of our equipment and/or systems could also result in disruptions to our operations. A complete or partial failure of our information technology systems, or those of our CROs and other third parties on which we rely, or corruption of data could result in our inability to access information that we need in order to meet our obligations to our customers or a breach of confidentiality with respect to our or our customers’ proprietary information. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Our disaster recovery plans may not adequately address every potential event and our insurance policies may not cover any loss in full or in part (including losses resulting from business interruptions) or damage that we suffer fully or at all. The occurrence of one or more of these events could have a material adverse effect on our business, financial position, reputation or prospects, and might lead to a claim for damages.

Our business may be adversely affected by economic conditions and current economic weakness.

Any economic downturn either globally, regionally or locally in any country in which we operate may have an adverse effect on the demand for our products. A more prolonged economic downturn may lead to an overall decline in our sales, limiting our ability to generate a profit and positive cash flow. The markets in which we expect to offer our products are directly affected by many national and international factors that are beyond our control, such as political, economic, currency, social and other factors.

We are exposed to the risks of doing business internationally.

We currently operate in a number of countries in Europe. Our international operations are subject to a number of risks inherent in operating in different countries. These include, but are not limited to, risks regarding:

The occurrence of any of these events or conditions could adversely affect our ability to increase or maintain our operations in various countries.

We have undertaken, and may in the future undertake, additional strategic acquisitions. Failure to integrate acquisitions could adversely affect our value.

One of the ways we have grown our pipeline and business in the past is through strategic acquisitions, such as our acquisition of DARA. We may, from time to time, evaluate additional acquisition opportunities, and may, in the future, strategically make further acquisitions of, and investments in, businesses and technologies when we believe the opportunity is advantageous to our prospects. There can be no assurance that in the future we will be able to find appropriate acquisitions or investments. In connection with these acquisitions or investments, we may:

We also may be unable to find suitable acquisition candidates and may not be able to complete acquisitions on favorable terms, if at all. If we do complete an acquisition, this may not ultimately strengthen our competitive position or ensure that we will not be viewed negatively by customers, financial markets or investors. Further, acquisitions could also pose numerous additional risks to our operations, including:

We may not be able to complete one or more acquisitions or effectively integrate the operations, products or personnel gained through any such acquisition without a material adverse effect on our business, financial condition and results of operations.

We are exposed to risks related to currency exchange rates.

We conduct a significant portion of our operations outside of the United Kingdom. Because we use the British pound sterling as our financial statement reporting currency, changes in currency exchange rates have had and could have a significant effect on our operating results when our operating results are translated from the local currency into the British pound sterling. Exchange rate fluctuations between local currencies and the British pound sterling create risk in several ways, including the following: weakening of the British pound sterling, as seen, for example, following the results of the Brexit referendum, may increase the British pound sterling cost of overseas research and development expenses and the cost of sourced product components outside the United Kingdom; strengthening of the British pound sterling may decrease the value of our revenues denominated in other currencies; the exchange rates on non-sterling transactions and cash deposits can distort our financial results; and commercial pricing and profit margins are affected by currency fluctuations. Future changes in currency exchange rates could have a material adverse effect on our financial results.

The ownership of a significant portion of our outstanding ordinary shares by Chinese entities may expose us to greater regulatory scrutiny.

At various times during recent years, the governments of the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect our ability to successfully conduct our business in China or the United States, the market price of our ordinary shares or American Depositary Shares and our ability to access the capital markets in the United States. Also, as a result of recent controversies involving Chinese controlled companies, it is possible that such companies have come under increased scrutiny in the United States and other countries, including the united Kingdom. If we become subject to enhanced regulatory review and oversight, responding to such review and oversight may be expensive and time consuming and may have a material adverse effect on our operations, even if we otherwise have complied with all legal and regulatory requirements.

Risks Related to Ownership of Our Securities

The price of our Ordinary Shares and Depositary Shares may be volatile.

Each Depositary Share represents 20 Ordinary Shares. A public market has only been established for the Depositary Shares since December 2015, and such a market may not be sustained. Both the United States and United Kingdom stock markets have experienced significant volatility, including in pharmaceutical and biotechnology stocks. In particular, the closing price of our ordinary shares on the AIM Market of the London Stock Exchange (“AIM”) has fluctuated between £0.0375 and £3.30 between December 8, 2014 and April 26, 2019, and the closing price of our Depositary Shares on the NASDAQ Capital Market has fluctuated between $1.08 and $73.50 between December 7, 2015 and April 26, 2019 (as adjusted for our Depositary Share consolidation).

In addition to the factors discussed in this “ Risk Factors ” section and elsewhere in this Annual Report on Form 20-F, the factors that could cause volatility in the market price of each Ordinary Share and the Depositary Shares include:

In addition, the stock market in general, the NASDAQ Stock Market LLC (“NASDAQ”), and pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.  Broad market and industry factors may negatively affect the market price of our Ordinary Shares, regardless of our actual operating performance.  The realization of any of the above risks or any of a broad range of other risks, including those described in these “ Risk Factors ,” could have a dramatic and material adverse impact on the market price of our Ordinary Shares and American Depositary Shares.

Forecasting sales of our product candidates, if approved, may be difficult, and if our revenue projections are inaccurate, our business may be harmed and our stock price may decline.

Sales of any product candidates we may commercialize in the future are and will be difficult to forecast.  Factors that increase the difficulty of forecasting sales of each of our current and future products include the following:

The extent to which any of these or other factors individually or in the aggregate may impact future sales of our products is uncertain and difficult to predict.  Our management must make forecasting decisions regarding future revenue in the course of business planning despite this uncertainty, and actual results of operations may deviate materially from projected results.  If our revenues from product sales are lower than we anticipate, we will incur costs in the short term that will result in losses that are unavoidable.  A shortfall in revenue would have a direct impact on our expected cash flow, our stock price and on our business generally.  Furthermore, to the extent that any projections we disclosed publicly regarding future product sales or our financial performance are incorrect, including as a result of the challenges in forecasting such sales, our stock price could be adversely affected, and we could be subject to an increased risk of litigation.  In addition, fluctuations in our results can adversely and significantly affect the market price of our Ordinary Shares and Depositary Shares.

We may be subject to securities litigation, which is expensive and could divert management attention.

The market price of our Ordinary Shares and Depositary Shares may be volatile, and in the past, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

China Medical Systems Holdings Limited and A&B (HK) Company Ltd. beneficially own a significant interest in our Ordinary Shares. As a result, they are able to exert control over us, and their interests may conflict with the interests of our other stockholders.

On February 26, 2019, we issued an aggregate of 207,792,206 Ordinary Shares to CMS Medical Ventures Investment (HK) Limited (“CMS HK”) and A&B (HK) Company Limited (“A&B HK,” and collectively with CMS HK, the “CMS Stockholders”), each of whom are affiliated entities of the other and of China Medical System Holdings Limited (“CMS”). In addition, the CMS Stockholders also received warrants to acquire 207,792,206 ordinary shares, if such warrants are exercised. Based upon this, the CMS Stockholders collectively control approximately 50.8% of the voting power of our ordinary shares as of such date (67% if the warrants held by the CMS Stockholders (and no other warrants) were exercised as of such date) and are able to exert substantial influence over us, including the election of our directors and most matters requiring board or stockholder approval, including business strategies, mergers, business combinations, acquisitions or dispositions of significant assets, issuances of common stock, incurrence of debt or other financing and the payment of dividends. A controlling or significant stockholder may have the effect of making it difficult for a third party to seek, or may discourage or delay a third party from seeking, to acquire a majority of our outstanding ordinary shares, which could adversely affect the market price of our Ordinary Shares or Depositary Shares. The CMS Stockholders maintain separate business operations from us. As a result, their interests may not always be consistent with the interests of our other stockholders. To the extent that conflicts of interest may arise among us, the CMS Stockholders and their affiliates, those conflicts may be resolved in a manner adverse to our other stockholders.

The Depositary Shares may not be as liquid as Ordinary Shares.

Some companies that have issued American depositary shares on United States stock exchanges have experienced lower levels of liquidity in their American depositary shares than is the case for their ordinary shares listed on their domestic exchange. Although the Depositary Shares now trade on the NASDAQ Capital Market, an active trading market for the Depositary Shares may not be sustained. It may be difficult for you to sell your Depositary Shares without depressing the market price for the Depositary Shares or at all. As a result of these and other factors, you may not be able to sell your Depositary Shares. In addition, investors may incur higher transaction costs when buying and selling Depositary Shares than they would incur in buying and selling common stock.

Further, an inactive market may also impair our ability to raise capital by selling Depositary Shares and ordinary shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our ordinary shares as consideration. 

Our Ordinary Shares and Depositary Shares trade on two different markets, and this may result in price variations and regulatory compliance issues.

Depositary Shares representing our Ordinary Shares are listed for trading on the NASDAQ Capital Market and our Ordinary Shares are traded on AIM. Trading in our securities on these markets is made in different currencies and at different times, including as a result of different time zones, different trading days and different public holidays in the U.S. and the United Kingdom. Consequently, the effective trading prices of our securities on these two markets may differ. Any decrease in the trading price of our securities on one of these markets could cause a decrease in the trading price of our securities on the other market.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our Ordinary Shares and Depositary Shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, the price of our Ordinary Shares and Depositary Shares would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price of our Ordinary Shares and Depositary Shares and our trading volume to decline.

The rights of holders of Depositary Shares are not the same as the rights of holders of Ordinary Shares.

We are a public limited company organized under the laws of England and Wales. The Depositary Shares represent a beneficial ownership interest in our Ordinary Shares. The rights of holders of Depositary Shares will be governed by English law, our constitutional documents, the listing rules of AIM (“AIM Rules”), and the deposit agreement pursuant to which the Depositary Shares are issued. The rights and terms of the Depositary Shares are designed to replicate, to the extent reasonably practicable, the rights attendant to the Ordinary Shares, for which there is currently no active trading market in the United States. However, because of aspects of British law, our constitutional documents and the terms of the deposit agreement, the rights of holders of Depositary Shares will not be identical to and, in some respects, may be less favorable than, the rights of holders of Ordinary Shares.

For example, as a holder of Depositary Shares, you will not have the right to vote the shares underlying the Depositary Shares directly unless you cancel the Depositary Shares in accordance with the terms of the related deposit agreement and vote the underlying shares at the applicable shareholders meeting. Holders of the Depositary Shares will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the ordinary shares represented by the Depositary Shares. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their Depositary Shares through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

You may not receive distributions on Ordinary Shares represented by Depositary Shares or any value for them if it is illegal or impractical to make them available to holders of Depositary Shares.

The depositary of the Depositary Shares has agreed to pay to you distributions with respect to cash or other distributions it or the custodian receives on Ordinary Shares or other deposited securities after deducting its agreed fees and expenses. You will receive these distributions in proportion to the number of Ordinary Shares your Depositary Shares represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of Depositary Shares. We have no obligation to take any other action to permit the distribution of our Depositary Shares, Ordinary Shares, rights or anything else to holders of our American Depositary Shares. As a result, you may not receive the distributions made on Ordinary Shares or any value from them if it is illegal or impractical for us to make them available to you. These restrictions may have a material adverse effect on the value of your Depositary Shares.

You may be subject to limitations on transfer of your Depositary Shares.

Your Depositary Shares are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your Depositary Shares generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Securities traded on AIM may carry a higher risk than shares traded on other exchanges that may impact the value of your investment.

Our Ordinary Shares are currently traded on the AIM. Investment in equities traded on the AIM is perceived to carry a higher risk than an investment in equities quoted on exchanges with more stringent listing requirements, such as the London Stock Exchange, New York Stock Exchange or NASDAQ. This is because the AIM imposes less stringent corporate governance and ongoing reporting requirements than those other exchanges. In addition, the AIM requires only semi-annual, rather than quarterly, financial reporting. You should be aware that the value of our ordinary shares may be influenced by many factors, some of which may be specific to us and some of which may affect AIM-listed companies generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our ordinary shares, legislative changes and general economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive fluctuations. Therefore, the market price of our Ordinary Shares underlying the Depositary Shares may not reflect the underlying value of the Company.

It may be difficult for you to bring any action or enforce any judgment obtained in the United States against us or members of our Board of Directors, which may limit the remedies otherwise available to you.

We are incorporated as a public limited company in England and Wales. In addition, all of the members of our Board of Directors are nationals and residents of countries, including the United Kingdom, outside of the United States. Most or all of the assets of these individuals are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe your rights have been infringed under the securities laws or otherwise. In addition, a United Kingdom court may prevent you from enforcing a judgment of a United States court against us or these individuals based on the securities laws of the United States or any state thereof. A United Kingdom court may not allow you to bring an action against us or our directors based on the securities laws of the United States or any state thereof.

  We have no present intention to pay dividends on our Ordinary Shares in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during that time may be if the price of American Depositary Shares appreciates.

We have no present intention to pay dividends on our Ordinary Shares in the foreseeable future. Any determination by our Board of Directors to pay dividends will depend on many factors, including our financial condition, results of operations, legal requirements and other factors. Accordingly, if the price of the Depositary Shares falls in the foreseeable future and you sell your Depositary Shares, you will lose money on your investment, without the likelihood that this loss will be offset in part or at all by cash dividends.

We are a “foreign private issuer” under the rules and regulations of the SEC and, as a result, are exempt from a number of rules under the Exchange Act and are permitted to file less information with the SEC than a company incorporated in the United States.

We are incorporated as a public limited company in England and Wales and are deemed to be a “foreign private issuer” under the rules and regulations of the SEC. As a foreign private issuer, we are exempt from certain rules under the Exchange Act that would otherwise apply if we were a company incorporated in the United States, including:

In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the related rules with respect to their purchases and sales of Ordinary Shares and Depositary Shares. Accordingly, you may receive less information about us than you would receive about a public company incorporated in the United States and may be afforded less protection under the United States federal securities laws than you would be if we were incorporated in the United States.

If we lose our status as a foreign private issuer at some future time, then we will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements as if we were a company incorporated in the United States. The costs incurred in fulfilling these additional regulatory requirements could be substantial. 

As a foreign private issuer, we are not required to comply with many of the corporate governance standards of NASDAQ applicable to companies incorporated in the United States.

Our Board of Directors is required to maintain an audit committee comprised solely of three or more directors satisfying the independence standards of NASDAQ applicable to audit committee members. As a foreign private issuer, however, we are not required to comply with most of the other corporate governance rules of NASDAQ, including the requirement to maintain a majority of independent directors, and nominating and compensation committees of our Board of Directors comprised solely of independent directors. Although the AIM Rules and the United Kingdom Corporate Governance Code have comparable requirements, holders of Depositary Shares may not be afforded the benefits of the corporate governance standards of NASDAQ to the same extent applicable to companies incorporated in the United States.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our securities less attractive to investors.

We are an “emerging growth company,” as defined under the Jumpstart Our Business Startups Act. We will remain an “emerging growth company” until December 31, 2020; provided, however, that if our annual gross revenues exceed $1.07 billion, or our non-convertible debt issued within a three-year period or revenues exceeds $1 billion, or the market value of our common shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), we have reduced disclosure obligations, including with regard to our financial statements and executive compensation, and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act. We design our disclosure controls and procedures to reasonably assure that information we are required to disclose 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. For example, we had to restate our 2017 consolidated financial statements to reflect adjustments relating to reclassifications between administrative costs and research and development costs in the consolidated statement of comprehensive income. While this was remediated in fiscal 2018, we did not prevent this error from being recorded, nor did we detect it after it had occurred. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosure due to error or fraud may occur and we may not detect them.

Any failure to maintain effective internal controls and procedures over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. 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 begin its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial statements and reports, the market price of our Ordinary Shares and/or Depositary Shares could decline, and we could be subject to sanctions or investigations by NASDAQ, 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.

We are incurring increased costs as a result of operating as a public company, and management will be required to devote substantial time to new compliance initiatives.

As a public company in the United Kingdom and United States, we are incurring significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after we are no longer an “emerging growth company.” We will be subject to the reporting requirements of the AIM Rules, the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be adopted, by the SEC and NASDAQ. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as executive officers.

Regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

In August 2012, the SEC adopted a rule requiring disclosures of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured by U.S. public companies. The conflict minerals rule requires companies annually to diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and other specified countries. The rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including gold. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. Since our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. In addition, we may encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.

If we cannot continue to meet NASDAQ’s continued listing requirements, NASDAQ may delist our Depositary Shares, which could have an adverse impact on the liquidity and market price of our Depositary Shares.

Our Depositary Shares are currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to maintain the listing of our Depositary Shares on NASDAQ. On May 1, 2018, we received a letter from NASDAQ stating that, for the previous 30 consecutive business days, the bid price for our Depositary Shares had closed below the minimum $1.00 bid price per share requirement for continued listing on The NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2). On October 30, 2018, we were granted an extension of time until April 29, 2019 to regain compliance with the minimum bid price requirement. On April 23, 2019, we received written notice from NASDAQ notifying us that for the preceding 10 consecutive business days the closing bid price for our Depositary Shares had been $1.00 or greater. Accordingly, NASDAQ determined that we had regained compliance with NASDAQ Listing Rule 5550(a)(2).

Having regained compliance with these rules, we are now in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market. However, we cannot assure you that we will remain in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market. If, in the future, we fail to sustain compliance with all applicable requirements for continued listing on NASDAQ, our Depositary Shares may be subject to delisting by NASDAQ. This could inhibit the ability of our holders of Depositary Shares to trade their shares in the open market, thereby severely limiting the liquidity of such shares. Although stockholders may be able to trade their shares of Depositary Shares on the over-the-counter market, there can be no assurance that this would occur. Further, the over-the-counter market provides significantly less liquidity than NASDAQ and other national securities exchanges, is thinly traded and highly volatile, has fewer market makers and is not followed by analysts. As a result, your ability to trade or obtain quotations for these securities may be more limited than if they were quoted on NASDAQ or other national securities exchanges.

We intend to operate so as to be treated exclusively as a resident of the United Kingdom for tax purposes, but the relevant tax authorities may treat us as also being a resident of another jurisdiction for tax purposes.

We are a public limited company incorporated under the laws of England and Wales. Under current English law, the decisions of the English courts and the published practice of Her Majesty’s Revenue and Customs suggest that we are likely to be regarded as being a United Kingdom resident and should remain so if, as we intend that, (i) all major meetings of our Board of Directors and most routine meetings are held in the United Kingdom with a majority of directors present in the United Kingdom for those meetings; (ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic issues affecting us and our subsidiaries; (iii) those meetings are properly minuted; (iv) at least some of our directors, together with supporting staff, are based in the United Kingdom; and (v) we have permanent staffed office premises in the United Kingdom sufficient to discharge our functions.

Even if we are considered by Her Majesty’s Revenue and Customs as resident in the United Kingdom for United Kingdom tax purposes, as expected, we would nevertheless not be treated as resident in the United Kingdom if (a) we were concurrently resident in another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the United Kingdom and (b) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction. Because this analysis is highly factual and may depend on future changes in our management and organizational structure, there can be no assurance regarding the final determination of our tax residence. Should we be treated as resident for tax purposes in another jurisdiction other than the United Kingdom, we would be subject to taxation in such jurisdiction in accordance with such jurisdiction’s laws, which could result in additional costs and expenses.

We may be a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. This may result in adverse U.S. federal income tax consequences for U.S. taxpayers that are holders of our securities.

We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. We do not believe we were a PFIC for 2018 but there can be no assurance that we will not be a PFIC in 2019 or subsequent years, as our operating results for any such years may cause us to be a PFIC. If we are a PFIC in 2019, or any subsequent year, and a U.S. shareholder does not make an election to treat us as a “qualified electing fund (a “QEF”), or make a “mark-to-market” election, then “excess distributions” to a U.S. shareholder, and any gain realized on the sale or other disposition of our securities will be subject to special rules. Under these rules: (1) the excess distribution or gain would be allocated ratably over the U.S. shareholder’s holding period for the securities; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the United States Internal Revenue Service (the “IRS”) determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. shareholder to make a timely QEF or mark-to-market election. U.S. shareholders who hold or have held our securities during a period when we were or are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. shareholders who made a timely QEF or mark-to-market election. We do not intend to prepare or provide the information necessary for U.S. shareholders to make a QEF election.

Recent and potential future changes to U.S. and non-U.S. tax laws could materially adversely affect our Company and holders of our Ordinary Shares and the Depositary Shares.

Legislation bringing about broad changes in the existing corporate tax system, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), was enacted in the United States in December 2017. Many aspects of the legislation are unclear at this time and remain subject to pending regulatory and accounting guidance as well as potential amendments and technical corrections, any of which could modify various aspects of the legislation in ways that are either positive or negative for us or holders of the Depositary Shares. As a result, the overall impact of this legislation on us or on holders of our Ordinary Shares and the Depositary Shares is uncertain and could be adverse. Other legislative or regulatory changes and judicial developments could also affect the taxation of our business or of holders of our Ordinary Shares and the Depositary Shares

Future changes in tax laws, regulations and treaties, or the interpretation thereof, in addition to initiatives related to the Base Erosion and Profit Shifting, Project of the Organisation for Economic Co-Operation and Development; the European Commission’s “state aid” investigations; and other developments could have an adverse effect on the taxation of international businesses, including our own. Furthermore, countries where we are subject to taxes evaluate their tax policies and rules on a regular basis, and we may see significant changes in legislation and regulations concerning taxation.

We are unable to predict what tax changes may be enacted in the future or what effect such changes would have on our business, but such changes could affect our effective tax rates in countries where we have operations and could have an adverse effect on our overall tax position in the future, along with increasing the complexity, burden and cost of tax compliance.