Item 1. Business
Overview
We had been a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel small molecule therapeutics to address chronic and progressive fibrotic diseases, prior to our 2022 Strategic Realignment. Our goal was to transform the treatment paradigm for patients suffering from these potentially life-threatening conditions for which there are no approved medicines or where existing approved medicines have known limitations. Our product candidates and programs included ANG-3070, a highly selective oral tyrosine kinase receptor inhibitor (TKI) in development as a treatment for fibrotic diseases, a ROCK2 preclinical program targeted towards the treatment of fibrotic diseases, a CYP11B2 preclinical program targeted towards diseases related to aldosterone synthase dysregulation, and a CYP26 (retinoic acid metabolism) inhibitor program targeted towards a number of indications, including cancer, and ANG-3777, a hepatocyte growth factor (HGF) mimetic. If we do not complete the merger transaction with Elicio Therapeutices, Inc. (Elicio) , we expect to move forward with developing ANG-3070 and conducting further preclinical studies for our ROCK2 program.
On January 17, 2023, we entered into a definitive merger agreement with Elicio under which Elicio will merge with a wholly-owned subsidiary of Angion in an all-stock transaction (the “Merger”). Upon completion of the Merger, the combined company will focus on advancing Elicio’s proprietary lymph node AMP technology to develop immunotherapies, with a focus on ELI-002, a therapeutic cancer vaccine targeting mKRAS-driven tumors.
Our 2022 Strategic Realignment was announced following our June 2022 termination of our Phase 2 “JUNIPER” dose-finding trial for ANG-3070 in patients with primary proteinuric kidney diseases, specifically focal segmental glomerulorsclerosis (FSGS) and immunoglobulin A nephropathy (IgAN). The JUNIPER trial was terminated in the interests of patient safety based upon a reassessment of the risk/benefit profile of ANG-3070 in patients with established serious kidney disease. We completed the data collection work necessary related to the JUNIPER trial to ascertain whether the drug had any effect, positive or negative, in patients with fibrotic kidney diseases and determined there was no economically-viable path forward for ANG-3070 in primary proteinuric kidney diseases.
ANG-3070
Prior to the termination of the Phase 2 study, we had been focused on developing ANG-3070 in for fibrotic diseases in the kidney and lung. We continue to believe that, notwithstanding the termination of the ANG-3070 program in kidney indication, ANG-3070 could be a viable development candidate in lung indications such as idiopathic pulmonary fibrosis (IPF).
Pulmonary fibrosis is characterized by progressive scarring (fibrosis) of the lungs, which leads to their deterioration and destruction. Over time, patients’ lung scarring progresses and breathing becomes difficult, often resulting in the lungs failing to take in enough oxygen to meet the body’s needs.
IPF is an aggressive form of pulmonary fibrosis with a median survival of two to three years from diagnosis. The course of the disease is highly variable. Certain patients become seriously ill within a few months, while others may survive for five years or longer. Most deaths in IPF occur from progression of pulmonary fibrosis leading to respiratory failure. According to the National Institutes of Health (NIH), approximately 140,000 people in the United States have IPF, and approximately 30,000 to 40,000 new cases are diagnosed each year, usually affecting people between the ages of 50 to 70. EU incidence rates are estimated to be similar. Over half are undiagnosed in the mild category alone, while more could be underdiagnosed. The disease is of unknown cause and represents an important area of unmet medical need.
There are currently two approved therapies for IPF, pirfenidone (Esbriet®, sold by Roche/Genentech) and the kinase inhibitor nintedanib (OFEV®, sold by Boehringer-Ingelheim). Nintedanib is also approved for SSc-ILD patients. Both drugs have known tolerability challenges for patients. Diarrhea and nausea are very common side effects, with 62% of patients taking nintedanib reporting diarrhea and 29% reporting nausea according to its drug label. Similarly, diarrhea was reported by 26% and nausea by 36% of patients taking pirfenidone according to its label. Patient convenience is also a recognized challenge, with nintedanib required to be dosed twice per day with food and pirfenidone three times per day with food after a three-step titration over the first two weeks. Patient drop-out rates for both drugs are substantial, with 43.8% of patients on nintedanib and 51.5% of patients on pirfenidone
dropping out after 12 months. Neither therapy demonstrated an impact on patient survival in the clinical trials forming the basis for their approval. Due to the recognized limitations of these approved medicines, under 30% of U.S. patients diagnosed with IPF, despite it being a life-threatening disease, are prescribed nintedanib or pirfenidone.
Despite these drawbacks to tolerability, convenience, and efficacy, pirfenidone and nintedanib generated approximately $3.8 billion in combined 2021 worldwide sales. If we are able to demonstrate in clinical trials ANG-3070 provides IPF patients with an alternative treatment option with a more acceptable tolerability, convenience, and/or efficacy profile, we would expect ANG-3070, if approved, to compete successfully with these two approved medicines. However, there is no guarantee ANG-3070 will be able to achieve these goals or, if it does, generate comparable revenues.
The next steps for the ANG-3070 program would be additional preclinical and/or clinical work to confirm target engagement and dose levels in patients with IPF. In anticipation of the announced Merger, however, we have suspended the advancement of ANG-3070 in preclinical or clinical studies. Absent completion of the transaction with Elicio, we could move forward with this program. We hold global rights to the ANG-3070 program.
ANG-3777
In 2022, we completed preclinical work and the process of closing out analyses of data from the 2021 clinical trial readouts of ANG-3777, that was formerly our lead product candidate until December 2021. We have shared these data with our license partner Vifor International, Ltd, (Vifor Pharma) and conversations continue on next steps for the program, if any. We do not intend to continue the clinical development plan for ANG-3777 set forth in the Vifor License, which had included a Phase 3 study for the prevention of AKI in patients undergoing cardiac surgery involving cardiopulmonary bypass (CSA-AKI) and a Phase 4 confirmatory study in donor kidney transplant patients who were at risk for developing delayed graft function (DGF), given we do not believe the earlier Phase 2 and Phase 3 clinical trial results in the respective indications support regulatory approval.
ROCK2, CYP11B2 and CYP26
During 2022, we also conducted activities in our ROCK2, CYP11B2 and CYP26 preclinical programs.
ROCK2
Our ROCK2 program includes a number of highly selective, oral small molecule inhibitors of ROCK2 developed internally as a potential treatment for fibrotic and other diseases. Over the past year, we conducted additional chemistry work resulting in additional libraries of ROCK(Rho-associated coiled-coil forming protein kinase)-targeting compounds with differing ratios of ROCK2 and ROCK1 selectivity ranging from 300-fold to 1,600-fold selectivity for ROCK2 versus ROCK1 with promising bioavailability.
ROCK signal transduction pathways are implicated in the development of fibrosis. Inhibition of ROCK isoforms ROCK1 and ROCK2 have shown promise in fibrosis and cardiovascular remodeling diseases. However, ROCK1 inhibition has been associated with hypotension (low blood pressure) and enhanced vascular permeability.
Recent scientific work using specific genetic or pharmacological reduction of ROCK2 indicates ROCK2 inhibition by itself can result in anti-fibrotic activity without causing hypotension. These findings informed our strategy to develop a ROCK2-specific inhibitor, with the goal of minimizing ROCK1 inhibition, as a potential treatment for fibrosis and other diseases. We believe this approach could translate into product candidates with enhanced tolerability potentially supporting long-term systemic use.
Multiple dual ROCK1/2 inhibitors have received regulatory approval, including ripasudil (Glanatec®), which is approved in Japan for treating glaucoma and ocular hypertension, fasudil (ErilTM), which is approved in Japan and China for treating cerebral vasospasm in hemorrhagic stroke, and netarsudil (Rhopressa®), which is approved in the United States for the treatment of glaucoma. The ROCK2-selective inhibitor belumosudil has been approved by the United States Food and Drug Administration (FDA) for the treatment of chronic graft-versus-host disease.
Elevated expression of ROCK2 has been implicated in a number of chronic fibrotic conditions and other diseases. ROCK2 is significantly upregulated in fibrotic kidneys in both pediatric and adult patients, with ROCK2 levels positively correlated with the severity of the fibrosis. Study of ROCK2 inhibition in the unilateral ureteral obstruction (UUO) model of renal fibrosis showed ROCK2 inhibition alleviates renal fibrosis. Furthermore, in a
mouse model of IPF, researchers found mice with either ROCK1 or ROCK2 genetically deleted were protected from bleomycin-induced IPF, indicating specifically targeting either ROCK isoform would be an effective therapeutic strategy against IPF. ROCK2 expression in vitro has also been associated with co-expression of fibrotic liver markers. Elevated ROCK2 levels are seen in cardiac hypertrophy, cardiac fibrosis and diastolic dysfunction. ROCK2 has also been shown to play a role in neurodegenerative disorders such as amyotrophic lateral sclerosis, Parkinson's disease and Alzheimer's disease. As a result, we believe a potent ROCK2 inhibitor should prevent disease progression in chronic fibrotic diseases and potentially be useful in a variety of other cardiac and neurodegenerative disorders.
Dual ROCK1/2 inhibitors can have problematic side effects including hypotension and increased vascular permeability. In an in vitro analysis measuring binding affinity for ROCK2 and ROCK1, our ROCK2 selective inhibitors show much stronger binding affinity for ROCK2 versus ROCK1. We believe high selectivity for ROCK2 could provide enhanced tolerability, potentially supporting long-term systemic use.
We hold global rights to our ROCK2 inhibitor program. Currently, we are completing certain discovery and preclinical activities in our ROCK2 program, and absent completion of the announced Merger, we could move forward with this program, which is also currently available for out-licensing. Given the early stage of the program, prior to a lead candidate being selected, investors should not expect any significant funds would be generated from a transaction, or even such a transaction occurring.
CYP11B2
We created a selection of inhibitor molecules with high specificity to CYP11B2 (aldosterone synthase) relative to CYP11B1, which we were investigating for the purpose of targeting aldosterone-related diseases including resistant hypertension, congestive heart failure, renal fibrosis, and primary hyperaldosteronism.
Aldosterone is a hormone produced in the adrenal glands which helps control the body's blood pressure by causing the kidneys to retain salt and excrete potassium, thereby increasing water retention, blood volume and blood pressure. CYP11B2 is a member of the broad cytochrome P450 family and is responsible for the biosynthesis of aldosterone. There are a number of diseases associated with dysregulated aldosterone, including primary hyperaldosteronism (Conn's Syndrome), refractory hypertension, congestive heart failure and kidney fibrosis. As a result, we believe inhibition of CYP11B2 could potentially be used in aldosterone-related diseases. We have determined not to proceed with this program.
CYP26
We also worked on a CYP26 (retinoic acid metabolism) inhibitor program targeted towards a number of indications, including cancer. The CYP26 program focuses on selective and potent inhibitors of CYP26, which is responsible for the degradation of retinoic acid. Retinoic acid, primarily in the form of ATRA (all-trans retinoic acid) has been used both topically and systemically to treat conditions including acne, acyte promyelocytic leukemia, and photoaging. In a variety of animal models, we demonstrated CYP26 inhibition can increase retinoic acid levels in target tissue while reducing systemic exposure of retinoic acid. We hold global rights to our CYP26 inhibitor program. We have determined not to proceed with this program, other than under our exclusive license agreement with Ohr Cosmetics LLC.
Manufacturing
We have relied on third-party contract manufacturing organizations to manufacture and supply product candidates for our clinical trials. Currently, we have agreements with a single third-party contract manufacturer to supply the drug substance for ANG-3070 and with a single third-party contract manufacturer to manufacture all clinical trial supplies of ANG-3070. Currently, we believe we have sufficient inventory of ANG 3070 to meet the immediate requirements of potential future clinical trials, which may be conducted absent the completion of the announced Merger.
Competition
The biotechnology and pharmaceutical industries are characterized by intense competition and rapid innovation. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative
arrangements with large, established companies. We believe the key competitive factors affecting the development and commercial success of our product candidates will be whether or not such product candidates are deemed to be safe and effective by relevant regulatory authorities, as well as their tolerability profile, reliability, convenience of dosing, price, and reimbursement. Absent the completion of the announced Merger, we could face significant competition in our ANG-3070 program for IPF from both approved therapies such as pirfenidone (Esbriet®, sold by Roche/Genentech) for IPF and nintedanib (OFEV®, sold by Boehringer Ingleheim) and from product candidates in development for IPF, such as PLN-74809 from Pliant Therapeutics for IPF, BI 1015550 from Boehringer Ingelheim, pamrevlumab from FibroGen, and other companies. We would also face competition for our ROCK2 program from Kadmon Holdings, Inc.'s belumosudil (KD025) and RXC007/RXC008 from Redx Pharma as well as other companies developing ROCK inhibitors.
Intellectual Property
The proprietary nature of, and protection for, our product candidates, processes and know-how are important to our business. We pursue various avenues of intellectual property protection, including consideration of patent, trademark, and trade secret strategies. We have sought patent protection in the United States and internationally for our programs relating to small molecule compounds with our tyrosine kinase inhibitors (including ANG-3070), HGF-like activity (including ANG-3777), our ROCK2 inhibitors and our CYP inhibitors. Our patent strategy seeks to protect our product candidates by filing patent applications, in the United States and in relevant foreign jurisdictions, and we pursue multi-faceted protection, as available, for example to relevant small molecule compounds and analogs, pharmaceutical compositions and related methods of manufacture and use. Our policy is to pursue, maintain and defend patent rights in order to protect the technology, inventions and improvements that are commercially important to our business. We also rely on trade secret protection for certain intellectual property that may be important to the development of our business and expect to pursue trademark registrations for brand names or other text or images that may provide commercial value.
In the United States and worldwide, issued patents have a presumptive term, assuming all maintenance fees are paid, of twenty years from their earliest non-provisional filing date. Certain jurisdictions offer opportunities to extend this term. For example, the U.S. Patent and Trademark Office (USPTO) may add term to a patent (referred to as Patent Term Adjustment) if delays by the USPTO of certain activities exceed prespecified durations, from which delays by the Applicant are subtracted. Additionally, many jurisdictions, including the United States and Europe, provide opportunities for extending the term of patents relating to approved pharmaceutical products or their approved uses. In the United States, a single patent can be extended per approved product, for a period (referred to as Patent Term Extension) of up to five years, depending on the dates of patent issuance relative to submission of an application for premarketing approval (i.e., of a NDA or a BLA) under provisions of the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. Similar restoration of term is available in Europe under so-called Supplementary Protection Certificate rights, and extensions under similar policies may be available in other countries.
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, if any, one or more of our patents may be eligible for limited Patent Term Extension under the Hatch-Waxman Act in the United States, Supplementary Protection Certificate in Europe.
Our commercial success will depend in part on obtaining and maintaining patent protection and/or other intellectual property protection for our current and future product candidates, including for their use, production, formulation, etc., with commercially relevant terms; our commercial success may also depend in part on our ability to successfully defend our patent and/or other intellectual property rights against third-party challenges. Our ability to stop third parties from making, using, selling, offering to sell and/or importing our products may depend on the extent to which we have rights under valid and enforceable intellectual property rights that cover these activities. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our product candidates, discovery programs and processes. Additionally, we cannot be certain that we will always be able to establish sufficient ownership rights to ensure complete or necessary control over our intellectual property rights as required in order to obtain, maintain, and/or enforce them. For these and more comprehensive risks related to our intellectual property, please see "Risk Factors—Risks Relating to Our Intellectual Property." The expiration dates of the patents discussed below assume in all cases that the appropriate maintenance, renewal, annuity, or other governmental fees are paid to maintain the patent(s) in force for the full extent of their term and any extension(s) thereof.
Our ANG-3070 Tyrosine Kinase Inhibitor Program
As of March 17, 2023, compound, pharmaceutical composition and methods of use claims to our kinase inhibitors are covered in patents issued in the United States. We also owned issued patents in Australia, Canada, China, Europe, Hong Kong, Israel, India, and Japan. The European patent was validated in Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, Monaco, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland/Liechtenstein, Turkey, and the United Kingdom. A continuation application is pending in the United States. These patents, and patents that may issue from the pending applications, provide patent protection until 2033, assuming payment of all appropriate annuities and/or maintenance fees.
As of March 17, 2023, we had filed applications directed to the use of ANG-3070 in the treatment of irritable bowel disease (IBD) in Australia, Canada, China, Europe, Israel, Japan, and the United States. Patents issuing from corresponding national applications will expire in 2040.
As of March 17, 2023, we had filed applications in the United States and Europe relating to solid forms of ANG-3070. Patents issuing from corresponding national applications will expire in 2041.
As of March 17, 2023, we had filed a PCT patent application relating to gene expression levels associated with treatment comprising ANG-3070. Patents issuing from corresponding national applications, if granted, will expire in 2042.
Under the Hatch-Waxman Act, a single patent term restoration of up to five years in the United States may be available. We also may be eligible for similar restoration of term in Europe under supplementary protection certificate rights, and similar extensions in certain other countries.
ROCK2 Inhibitor Program
As of March 17, 2023, the patent portfolio for the ROCK2 inhibitor program consists of three composition of matter patents. The first family includes granted patents in the United States and India, and pending applications in the United States, Australia, Canada, China, Europe, Hong Kong, Israel, and Japan, each of which would have presumed twenty-year terms expiring in 2038. A second family includes pending applications in the United States, Australia, Canada, China, Europe, Israel, India, and Japan, each of which would have presumed twenty-year terms expiring in 2040. A third family includes or will include pending applications in the United States, Canada, China, Europe, Israel, and Japan, each of which would have presumed twenty-year terms expiring in 2041.
CYP11B2 Inhibitor Program
As of March 17, 2023, the patent portfolio for the CYP11B2 inhibitor program includes pending applications in the United States, Europe and Israel, each of which would have presumed twenty-year terms expiring in 2038. As of March 15, 2023, we owned issued patents in the United States that claim, among other things, ANG-3598 composition of matter, pharmaceutical compositions comprising ANG-3598, and methods of treating renal fibrosis. We also owned issued patents in Australia, China, Israel, India and Japan. Each of the patents expire in 2035.
ANG-3777
The patent portfolio for ANG-3777 includes patents and patent applications that describe and/or specifically claim pharmaceutical compositions whose active agent is ANG-3777 and uses thereof, as well as compounds structurally related to ANG-3777, pharmaceutical compositions and uses thereof. As of March 15, 2023, we owned issued patents in the United States that claim, among other things, pharmaceutical compositions comprising ANG-3777. We also owned issued patents in Australia, Canada, China, Europe, Hong Kong, Israel, and Japan. Granted European patents have been validated in the following European countries: Denmark, France, Germany, Hungary, Ireland, Italy, Luxembourg, Monaco, Netherlands, Sweden, Switzerland/Liechtenstein, and the United Kingdom. These patents should remain in force, if the appropriate maintenance, renewal, annuity or other governmental fees are paid, in the United States until 2024, and in other jurisdictions until mid-2023.
An aqueous formulation of ANG-3777 and analogues of sufficient solubility for intravenous administration is the subject of claims in a patent issued in the United States that will expire in 2030 assuming continued payment of all maintenance fees.
We have issued United States patents on the use of ANG-3777 and related compounds for the treatment of chronic obstructive pulmonary disease, (COPD), and scleroderma, which expire in 2028 and 2029, respectively.
We have issued claims in the United States to solid forms of ANG-3777 which expires in 2040, and pending applications in Australia, Brazil, Canada, China, Israel, Japan, Korea, Mexico, New Zealand, Singapore, and the United States. Patents issuing from these applications will expire in 2040.
As of March 17, 2023, we have filed applications in the United States and Europe directed to the use of ANG-3777 in the treatment of delayed graft function. Patents issuing from these applications will expire in 2040.
As of March 17, 2023, we have filed a PCT application directed to methods of manufacturing ANG-3777 drug product. The presumptive twenty-year expiration of any national applications arising therefrom is 2041.
As of March 17, 2023, we have filed a PCT application directed to methods of administering ANG-3777. The presumptive twenty-year expiration of any national applications arising therefrom is 2042.
As of March 17, 2023, we have filed a PCT application directed to ANG-3777 prodrugs. The presumptive twenty-year expiration of any national applications arising therefrom is 2042.
Under the Hatch-Waxman Act, a single patent term restoration of up to five years in the United States may be available. We also may be eligible for similar restoration of term in Europe under supplementary protection, certificate rights, and similar extensions in certain other countries.
Licenses and Collaborations
License Agreement with Vifor Pharma
In November 2020, we granted Vifor Pharma, an exclusive, global (excluding Greater China), royalty-bearing license (the Vifor License), for the commercialization of ANG-3777 in all Renal Indications, beginning with DGF and CSA-AKI. The Vifor License also grants Vifor Pharma exclusive rights, with a right to sublicense subject to our consent for certain specified conditions, to develop and manufacture ANG-3777 for commercialization in Renal Indications worldwide (excluding Greater China) in cooperation with us or independently. We retain the right to develop and commercialize combination therapy products combining ANG-3777 with our other proprietary molecules, subject to Vifor Pharma's right of first negotiation with respect to global (excluding Greater China) rights to such combination therapy products in the Renal Indications. Although the Vifor License includes additional milestone and royalty objectives, we do not expect to receive any clinical, post-approval, or sales milestones, or royalties, as we do not intend to continue to pursue the clinical development plan for ANG-3777, which had included a Phase 3 study for CSA-AKI and a phase 4 confirmatory study in DGF. We and Vifor continue to discuss the analyses of the results of the clinical trials announced in the fourth quarter of 2021 and the future of the collaboration.
Collaboration with the University of Michigan
In 2019, we entered into a subcontractor agreement with The Regents of the University of Michigan (UM),
under which we provided funding for identification of ANG-3070-responsive disease marker profiles in rodent models, and their intersection with existing data on patients with various forms of nephrotic kidney disease, to identify potential ANG-3070-responsive patient subsets. Under this agreement we obtained access to the Nephrotic Syndrome Study Network (NEPTUNE), an integrated group of academic centers, patient support organizations and clinical resources dedicated to advancing the treatment of kidney disorders. The goal of work under this agreement, which we support through a grant from the U.S. Department of Defense, is to identify human disease and drug response profiles based upon the genes, networks and pathways that correlate with the therapeutic activity of ANG-3070 in primary FSGS and other fibrotic renal diseases. We are obligated to provide to UM up to a total of $520,000 over the course of the project. We have an option to license and commercialize intellectual property generated during the term of the agreement that is solely owned by UM under commercially reasonable terms. On March 21, 2022, we provided written notice to UM of our intention to terminate the subcontractor agreement as we believe the work under the related U.S. Department of Defense grant to be complete.
Collaboration with Ohr Cosmetics LLC
In November 2013, we granted Ohr an exclusive worldwide license, with the right to sublicense, under our patent rights covering one of our CYP26 inhibitors, for the use in treating conditions of the skin or hair. Sublicensees
may not grant further sublicenses under our patent rights other than to affiliates of such sublicensees and entities with which sublicensees are collaborating for the research, development, manufacture and commercialization of the products. Ohr will pay us a royalty at a rate in the low single digits on gross revenue of products incorporating ANG‑3522, and milestone payments potentially totaling up to $9.0 million based on achievement of sales milestones. Royalties and milestone payments will be paid until the later of 15 years from the first commercial sale of a licensed product or the last to expire licensed patent rights. The royalty rate is subject to adjustments under certain circumstances. The Ohr License represents a related-party transaction, as discussed in our financial statements included in Item 8 in this Annual Report on Form 10-K below, and we believe the Ohr License was made on terms no less favorable to us than those we could obtain from unaffiliated third parties. On February 5, 2023, we and Ohr executed the First Amendment to the Ohr license agreement. This amendment allows Ohr access to our CYP26 inhibitors beyond ANG-3522 for the use in treating conditions of the skin and hair, eliminates our obligation to prosecute or maintain the patents rights licensed to Ohr at its principal expense, and allows Ohr to prosecute and maintain such patent rights its sole own expense. No revenue from this license agreement was recognized during the year ended December 31, 2022 or 2021.
Government Regulation and Product Approval
The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, marketing and promotion, distribution, post-approval monitoring and reporting, sampling, and import and export of drugs, such as those we are developing. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
U.S. Drug Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and its implementing regulations. FDA approval is required before any new drug can be marketed in the United States. Drugs are also subject to other federal, state and local statutes and regulations. Failure to comply with applicable FDA or other requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA clinical holds, refusal to approve pending applications, withdrawal of an approval, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
The process required by the FDA before product candidates may be marketed in the United States generally involves the following:
▪completion of preclinical laboratory tests and animal studies, all performed in accordance with the FDA's Good Laboratory Practice (GLP) regulations;
▪submission to the FDA of an investigational new drug application (IND) which must become effective before human clinical studies may begin and must be updated annually or when significant changes are made;
▪approval by an independent institutional review board (IRB) representing each clinical site before a clinical study may be initiated;
▪performance of adequate and well-controlled human clinical trials in accordance with good clinical practice (GCP) regulations to establish the safety and efficacy of the product candidate for each proposed indication;
▪preparation of and submission to the FDA of a new drug application (NDA);
▪satisfactory completion of an FDA advisory committee review, if applicable;
▪a determination by the FDA within 60 days of its receipt of an NDA to file the application for review;
▪satisfactory completion of an FDA pre-approval inspection of the manufacturing facility(ies) where the product is manufactured to assess compliance with current good manufacturing practice (cGMP) regulations, and of selected clinical investigation sites to assess compliance with GCP; and
▪FDA review and approval of an NDA to permit commercial marketing of the product for its particular labeled uses in the United States.
International Regulation
In addition to regulations in the United States, we could become subject to a variety of foreign regulations regarding development, approval, commercial sales and distribution of our products if we seek to market our product candidates in other jurisdictions. Whether or not we obtain FDA approval for a product, we must obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional review periods, and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing, among other things, the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Human Capital Resources
As of December 31, 2022, we have three full-time employees and nine part-time consultants.
Corporate Information
We were incorporated in the State of Delaware on April 6, 1998. Our corporate headquarters are located at 7-57 Wells Avenue, Newton, Massachusetts 02459 and our telephone number is (415) 655-4899. Our website address is www.angion.com. The information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference into and does not constitute part of this filing.
Available Information
We are subject to the information requirements of the Securities Exchange Act of 1934, as amended, and we therefore file periodic reports, proxy statements and other information with the SEC relating to our business, financial statements and other matters. The SEC maintains an Internet site, www.sec.gov, that contains reports, proxy statements and other information regarding issuers such as Angion Biomedica Corp.
For more information about us, including free access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, visit our website, www.angion.com. The information found on or accessible through our website is not incorporated into, and does not form a part of, this Annual Report on Form 10-K.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes, before deciding whether to invest in shares of our common stock. Many of the following risks and uncertainties are, and will be, exacerbated by the coronavirus disease 2019 (COVID-19) pandemic and any worsening of the global business and economic environment as a result. The occurrence of any of the adverse developments described in the following risk factors could materially and adversely harm our business, financial condition, results of operations or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Relating to Our Merger with Elicio
If the conditions to the closing of our pending Merger with Elicio are not met, the Merger may not occur.
Even if our stockholders approve the Merger, specified conditions must be satisfied or waived to complete the Merger. We cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and we may lose some or all the intended benefits of the Merger.
Failure to complete the Merger may result in Angion paying a termination fee to Elicio and could harm our common stock price and future business and operations.
If the Merger is not completed:
•upon termination of the Merger Agreement, we may be required to pay Elicio a termination fee of $2.0 million or $1.0 million, under certain circumstances, and/or up to $500,000 in expense reimbursements;
•we will have incurred significant expenses related to the Merger, such as legal and accounting fees, which must be paid even if the Merger is not completed;
•the price of our common stock may decline and remain volatile; and
•we may be forced to cease its operations, dissolve and liquidate its assets.
In addition, if the Merger Agreement is terminated and our board of directors (Board or the Angion Board) determines to seek another business combination, there can be no assurance that we will be able to find a partner willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger or any partner at all.
The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and/or other causes.
In general, we or Elicio can refuse to complete the Merger if there is a material adverse change affecting the other party between January 17, 2023, the date of the Merger Agreement, and the closing of the Merger, subject to certain exceptions.
Purported lawsuits have been filed, and additional lawsuits may be filed, relating to the Merger. An adverse ruling in any such lawsuit may prevent the Merger from being consummated.
Following announcement of the merger agreement with Elicio on January 17, 2023, and the filing of a Registration Statement on Form S-4 on February 13, 2023, a lawsuit was filed in the United States District Court for the Eastern District of New York on February 17, 2023 by a purported stockholder of Angion in connection with the proposed merger between Angion and Elicio. The lawsuit was captioned Klein v. Angion Biomedica Corp., et al., No. 1:23-cv-01313 (E.D.N.Y.). The Klein complaint named as defendants Angion, and the members of the Angion Board. The Klein complaint alleged claims for breaches of fiduciary duty against the members of the Angion Board, aiding and abetting breaches of fiduciary duty against Angion, violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against all defendants, and violations of Section 20(a) of the Exchange Act against the members of the Angion Board. The plaintiff contended that the registration statement on Form S-4 filed on February 13, 2023 omitted or misrepresented material information regarding the proposed merger between Angion and Elicio, rendering the registration statement false and misleading. The Klein complaint sought injunctive and declaratory relief, as well as damages. On February 21, 2023, the plaintiff filed a notice of voluntary dismissal of the Klein lawsuit. Although the plaintiffs voluntarily dismissed this case, litigation of this type is prevalent in mergers involving public companies, and other potential plaintiffs may file lawsuits challenging the Merger.
The outcome of any additional future litigation is uncertain. Such litigation, if not resolved, could prevent or delay completion of the Merger and result in substantial costs to Angion, including any costs associated with the indemnification of directors and officers. One of the conditions to the completion of the Merger is the absence of any law or order from a governmental entity (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger. Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the Merger on the agreed-upon terms, then such injunction may prevent the Merger from being completed, or from being completed within the expected timeframe. The defense or settlement of any lawsuit or claim that remains unresolved at the time the Merger is completed may adversely affect Angion’s business, financial condition, results of operations and cash flows.
During the pendency of the Merger, we may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger agreement, which could adversely affect our business.
Covenants in the Merger Agreement impede the our ability to make acquisitions, subject to specified exceptions relating to fiduciary duties, or complete other mergers, sales of assets or other business combinations that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, we may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, we are generally prohibited from soliciting, initiating, encouraging or entering into specified
extraordinary transactions, such as a merger, sale of assets or other business combination, with any third party, subject to specified exceptions, even if any such transaction could be favorable to our stockholders.
Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.
The terms of the Merger Agreement prohibit each of Angion and Elicio from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when such party’s board of directors determines in good faith, after consultation with its outside financial advisor and outside counsel, that an unsolicited competing proposal constitutes, or is reasonably likely to result in, a superior competing proposal and, after consultation with its outside counsel, that failure to take such action is reasonably likely to be inconsistent with the fiduciary duties of the applicable board of directors. In addition, if Angion or Elicio terminate the Merger Agreement under specified circumstances, including terminating because of a decision of the Angion Board to recommend a superior competing proposal, Angion may be required to pay Elicio a termination fee of $2.0 million or $1.0 million or up to $0.5 million in expense reimbursements or Elicio may be required to pay Angion a termination fee of $1.0 million, or up to $0.5 million in expense reimbursements, as defined and described under “The Merger Agreement—Termination of the Merger Agreement and Termination Fee.” This termination fee may discourage third parties from submitting competing proposals to Angion or its stockholders and may cause the Angion Board to be less inclined to recommend a competing proposal.
Risks Relating to Our 2022 Strategic Realignment
Our recent organizational changes and cost cutting measures may not be successful.
In July 2022, we implemented a reduction-in-force affecting a majority of our workforce and a process to explore strategic options for enhancing and preserving shareholder value (2022 Strategic Realignment), which resulted in us entering into the Merger Agreement with Elicio. As of March 15, 2023, we have three employees. The reductions in workforce and cost cutting measures will make it difficult for us to resume development activities we suspended or pursue new initiatives if we do not successfully complete the Merger, requiring us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses. As a result of the loss of services of substantially all of our personnel, including several of our executive officers, we may be unable to continue our operations and meet our ongoing obligations if we do not successfully complete the Merger. Any of these unintended consequences may have a material adverse impact on our business, financial condition, and results of operations.
We may not be able to comply with Nasdaq’s continued listing standards.
Our common stock trades on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “ANGN.” There is also no guarantee we will be able to perpetually satisfy Nasdaq’s continued listing requirements to maintain our listing on Nasdaq for any periods of time. Among the conditions required for continued listing on Nasdaq, we are required to maintain a stock price over $1.00 per share pursuant to Rule 5550(a)(2) of the Nasdaq Listing Rules. On December 15, 2022, we received a letter from Nasdaq notifying us that for the last 30 consecutive business days the bid price of our common stock had closed below $1.00 per share, the minimum closing bid price required by the continued listing requirements of Nasdaq listing rule 5450(a)(1). If our common stock does not achieve compliance by June 13, 2023, we may be eligible for an additional 180-day period to regain compliance if we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards, with the exception of the bid price requirement, and provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. However, if it appears to the Nasdaq staff that we will not be able to cure the deficiency, or if we do not meet the other listing standards, Nasdaq could provide notice that our common stock will become subject to delisting. In the event we receive notice that our common stock is being delisted, Nasdaq rules permit Angion to appeal any delisting determination.
In addition, even if we demonstrate compliance with the requirement above, we will have to continue to meet other objective and subjective listing requirements to continue to be listed on Nasdaq, which we may not be able to continue to meet. Delisting from Nasdaq could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq listing, stockholders may have a difficult time obtaining a quote for the sale or purchase of our common stock, the sale or purchase of our common stock would likely be made more difficult, and the trading volume and liquidity of our common stock could decline.
Delisting from Nasdaq could also result in negative publicity and could also make it more difficult for us to raise additional capital.
Risks Relating to Our Financial Position and Need for Additional Capital
We have temporarily suspended our clinical programs and we have no products approved for sale, which makes it difficult to assess our future viability.
We are a biopharmaceutical company that has suspended our clinical programs, has only a small number of pre-clinical programs, and has no products approved for sale. Drug development is a highly speculative undertaking and involves a substantial degree of risk. We have not yet submitted any product candidates for approval or received approval of any product candidate by regulatory authorities in any jurisdiction, including the FDA. We do not expect to generate revenue from product sales unless we, or we or our collaborators, resume clinical development of our product candidates and obtain approval and commercialize our product candidates, which we do not expect to occur for several years, if ever. We expect to continue to incur net losses for the foreseeable future to the extent we advance our product candidates through preclinical and clinical and development, and as we continue to incur expenses to protect our intellectual property, maintain our general and administrative support functions, and incur costs associated with operating as a public company. If we are unable to enroll clinical trials for any of our product candidates, or we fail in clinical trials or do not gain regulatory approval, we may never generate revenue or become profitable.
To achieve our goals we will require substantial additional funding, which capital may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our operations
We have invested and, to the extent we resume clinical development and clinical trials of our product candidates following our 2022 Strategic Realignment process, will continue to invest a significant portion of our efforts and financial resources in research and development activities. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is expensive. We will require substantial additional future capital to complete clinical development, including additional clinical trials, and seek regulatory approval to bring our product candidates to market. Regulatory authorities in the United States and elsewhere could also require us to perform additional preclinical studies or clinical trials to receive or maintain regulatory approval of our product candidates, and our expenses would further increase beyond what we currently expect. Because successful development of our product candidates is uncertain, we are unable to estimate the actual funds we will require to complete research and development of our product candidates as well as the costs of commercializing any of our wholly-owned product candidates and those for which we retain the right to commercialize.
In addition, whether or not we resume clinical trials of our product candidates, we will continue to incur costs:
▪to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, and
▪the costs associated with being a public company, including our need to implement additional internal systems and infrastructure, including financial and reporting systems.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions could adversely affect our current financial condition and projected business operations.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (SVB), where we hold substantially all of our cash and cash equivalents, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, (FDIC), as receiver. On March 12, 2023, the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at SVB would have access to their funds, even those funds in
excess of the standard FDIC insurance limits, under a systemic risk exception. As of March 13, 2023, we had access to our cash and cash equivalents at SVB; however, there is uncertainty in the markets regarding the stability of regional banks and the safety of deposits in excess of the FDIC insured deposit limits. The ultimate outcome of these events cannot be predicted, but these events could have a material adverse effect on our business operations as well as our ability to complete the merger transaction with Elicio if our ability to access funds at SVB is compromised.
Risks Relating to the Development and Regulatory Approval of Our Product Candidates
COVID-19 could adversely impact our business, including our clinical trials and financial condition.
We have been and continue to be subject to risks related to public health crises such as the global pandemic associated with COVID-19. As COVID-19 continues to persist around the globe, to the extent we resume clinical trials or commence new clinical trials, we may experience disruptions that could severely impact our business and clinical trials, including:
▪delays or difficulties in enrolling patients in our clinical trials;
▪delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;
▪diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
▪interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;
▪risk that participants enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;
▪limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;
▪delays in receiving authorizations from local regulatory authorities to initiate our planned clinical trials;
▪delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;
▪interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials;
▪changes in local regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
▪interruptions or delays in preclinical studies due to restricted or limited operations at our research and development laboratory facilities;
▪delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.
▪refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.
The global pandemic of COVID-19 continues to evolve. The extent to which COVID-19 may impact our business and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the geographic spread of the disease and its variants, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
Product development and regulatory approval involve a lengthy and expensive process with uncertain outcomes. We cannot be certain ANG-3070 or any of our other product candidates will receive or maintain
regulatory approval and, without regulatory approval, we and our collaborators will not be able to market our product candidates.
We currently have suspended our clinical programs, only have a small number of pre-clinical programs, and have no products approved for sale, and even if we resume clinical trials we cannot guarantee we will ever have approved products we or our collaborators can market and sell. The development of a product candidate and issues relating to approval and marketing are subject to extensive regulation by regulatory authorities, including the FDA in the United States and other regulatory authorities in other foreign countries, with regulations differing from country to country. We are not permitted to market our product candidates in the United States or elsewhere until we receive regulatory approval and/or marketing authorization, such as approval of an NDA from the FDA. We have not submitted any marketing applications for any of our product candidates.
New drug marketing applications must include extensive preclinical and clinical data and supporting information to establish the product candidate's safety and effectiveness for each desired indication. Such marketing applications must also include significant information regarding the chemistry, manufacturing, and controls for the product. Obtaining approval of our product candidates will be a lengthy, expensive, and uncertain process, and we may not be successful. Specifically, the review processes of the FDA and foreign regulatory authorities can take years to complete, and approval is never guaranteed. Even if a product is approved, the FDA or foreign regulatory authorities may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval. The FDA or foreign regulatory authorities also may not approve our product candidates with the labeling that we believe is necessary or desirable for the successful commercialization of such product candidates. Obtaining regulatory approval for marketing of a product candidate in one country does not ensure we will be able to obtain regulatory approval in any other country.
If we resume clinical trials, we cannot predict whether the clinical trials of our product candidates will be successful, or whether regulators will agree with our conclusions regarding the preclinical studies and clinical trials we have conducted to date or we conduct in the future. If we are unable to obtain approval from regulatory authorities for any of our product candidates, we may not be able to generate sufficient revenue to become profitable or to continue our operations.
Delays or difficulties in the commencement, enrollment and completion of clinical trials could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates.
If we resume or commence clinical trials, delays in the commencement, enrollment, and completion of clinical trials would increase our product development costs beyond what we expect or could limit the regulatory approval of our product candidates. Delays in any of our clinical trials may increase the amount of additional funding we will require to complete these trials.
Changes in regulatory requirements and related guidance related to regulatory approval may also occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs for re-examination, which may impact the costs, timing or successful completion of our clinical trials.
Furthermore, if we are required to conduct additional clinical trials or other preclinical studies of our product candidates beyond those contemplated, our ability to obtain or maintain regulatory approval of these product candidates and generate revenue from their sales would be similarly harmed.
Clinical failure can occur at any stage of clinical development, and the results of earlier clinical trials are not necessarily predictive of future results.
Clinical failure can occur at any stage of our clinical development. For example, in the fourth quarter of 2021, we disclosed the results of the ANG-3777 Phase 3 clinical trial for DGF and AKI associated with cardiac surgery involving CSA-AKI, neither of which met their primary endpoints despite the existence of encouraging pre-clinical and clinical data for ANG-3777 established prior to initiating such studies. Clinical trials may produce negative or inconclusive results, and we or our collaborators may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are susceptible to various interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Success in preclinical studies and early clinical trials does not ensure subsequent clinical trials
will generate the same or similar results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. A number of companies in the pharmaceutical industry, including those with greater resources and experience than us, have suffered significant setbacks in Phase 3 registration trials, even after seeing promising results in earlier pre-clinical studies.
In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials as we have never previously completed a Phase 3 registration trial with results sufficient to obtain regulatory approval or submitted an NDA to the FDA or a marketing application to any foreign regulatory authority, and we may be unable to design and execute a clinical trial to support regulatory approval. Further, clinical trials of potential products often reveal it is not practical or feasible to continue development efforts, as has occurred with the clinical development of ANGN-3070.
If we resume or commence clinical trials, the product candidates in those clinical trials may be the subject of clinical trial failures or found to be unsafe or lack efficacy, and if that were to occur we would not be able to obtain regulatory approval for them and our business would be harmed.
Our product candidates may have undesirable side effects which may delay or halt clinical development or prevent marketing approval or, if approval is received, require them to be taken off the market, require them to include safety warnings, or otherwise limit their sales.
The results of any clinical trials of our product candidates we may resume or commence may show such product candidates led to patient safety concerns or undesirable or unacceptable side effects, creating risk to the patient which is deemed to outweigh the potential benefits of treatment to that patient. Unforeseen side effects from any of our product candidates could arise either during clinical development or, if approved, after the approved product has been marketed. Any such event could interrupt, delay or halt such clinical trials, resulting in the denial of regulatory approval by the FDA and other regulatory authorities or result in restrictive label warnings, if approved. In light of widely publicized events concerning the safety risk of certain drug products, regulatory authorities, members of Congress, the Government Accounting Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and establishment of risk management programs that may, for instance, restrict distribution of drug products. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense and a delay or failure in obtaining approval or approval for a more limited indication than originally sought.
We have relied, and may continue to rely, on single-source third party contract manufacturing organizations to manufacture and supply our product candidates, and if the FDA or foreign regulatory authorities do not approve these manufacturing facilities or if these organizations fail to perform, our ability to conduct clinical trials and obtain regulatory approval our product candidates may be harmed.
We do not own facilities for clinical and commercial manufacturing of our product candidates, and to the extent we resume or commence clinical trials of any of our product candidates, we will rely upon third-party contract manufacturing organizations to manufacture and supply product candidates for our clinical trials and we will rely in such manufacturers to meet commercial demand.
Additionally, the facilities at which any of our product candidates are manufactured must be the subject of a satisfactory inspection before the FDA or the regulators in other jurisdictions approve the product candidate manufactured at that facility. We are completely dependent third-party vendors for compliance with the current Good Manufacturing Practice requirements (cGMPs), and the requirements of United States and non-United States regulators for the manufacture of our active ingredients, drug products, and finished products. If our manufacturers cannot successfully manufacture material conforming to our specifications and cGMPs of any applicable governmental agency, our product candidates will not be approved or, if already approved, may be subject to recalls or demands by regulatory agencies to stop selling the product until manufacturing issues are resolved.
If we are able to develop and obtain regulatory approval for any of our product candidates, our business will be materially harmed if we are unable to successfully commercialize such approved products.
Even if we pursue and receive regulatory approval of any product candidate, it is uncertain whether we will be able to successfully commercialize such product. Our marketing of any approved product will be limited to the product’s approved use and potentially subject to other limitations as set forth in its approved prescribing information and package insert. Accordingly, we cannot ensure any of our future approved products will be successfully developed, approved or commercialized. If we are unable to successfully commercialize any future approved products, we may not be able to generate sufficient revenue to operate our business.
Risks Relating to Our Business
We face competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We will have competitors in the United States, Europe, and other jurisdictions, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical and generic drug companies, and universities and other research institutions, for any of our product candidates we determine to pursue. Many of these competitors have greater financial and other resources, such as larger research and development staff and more experienced marketing and manufacturing organizations. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients, and manufacturing pharmaceutical products. These companies also have significantly greater research, sales, and marketing capabilities and collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds potentially making the product candidates we develop obsolete. As a result of all of these factors, any of these competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing, and commercializing drugs for kidney, heart, liver, lung and other diseases we are targeting before we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. In addition, many universities and private and public research institutes may become active in our target disease areas.
We will depend on single third-party suppliers for the manufacture and supply of drug substance and potential future commercial product supplies for our product candidates, and any performance failure on the part of our supplier could delay the development and potential commercialization of our product candidates.
To the extent we resume or commence clinical trials of our product candidates, we cannot be certain our drug substance supplier will continue to provide us with sufficient quantities of drug substance, or our manufacturers will be able to produce sufficient quantities of drug product incorporating such drug substance, to satisfy our anticipated specifications and quality requirements, or such quantities can be obtained at pricing necessary to sustain acceptable pharmaceutical margins for any of our product candidates, if approved. Our dependence on a single supplier for our drug substance and the challenges we may face in obtaining adequate supply of drug substance involves several risks, including limited control over pricing, availability, quality and delivery schedules, and such risks may be heightened as a result of the COVID-19 pandemic. Any supply interruption in drug substance or drug product could materially harm our ability to complete our development program for such indications, until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.
We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for a product candidate and may have to limit its commercialization.
The use of our product candidates in clinical trials and the sale of any products for which we may obtain marketing approval expose us to the risk of product liability claims. Product liability claims may be brought against us or our collaborators by participants enrolled in our past and any future clinical trials, patients, healthcare
providers, or others using, administering, or selling our products. If we cannot successfully defend ourselves against any such claims, we would incur substantial liabilities.
Under the terms of the government grant funding we have received, the government may compel us to license to a third party, or suspend, terminate or withhold grant funding.
A significant amount of our discovery and initial clinical research we have conducted has been funded principally by United States government grants and contracts. As with all other pharmaceutical research programs supported in part by federal research dollars, conducting research under federal grants required us to grant the U.S. government a nonexclusive, nontransferable, irrevocable, paid-up license for the government to practice or have the invention practiced on its behalf throughout the world. Under certain circumstances, the government can require the grantee to license a third party, or the government may take title and grant a license itself, known as march-in rights, which may occur if the invention is not brought to practical use within a reasonable time, if health or safety issues arise, if public use of the invention is in jeopardy, or if other legal requirements are not satisfied. Although, to our knowledge, the U.S. government has never forced a grantee to license a third party or taken title and granted a license itself, these march-in rights are available to the government, and we cannot assure you the government will not exercise such rights in the future.
Under the terms and conditions of the government grant funding, we are obligated to comply with various reporting requirements and to take certain administrative actions. Material noncompliance with the terms and conditions of the grant funding may result in one or more enforcement actions by the grant agency. These enforcement actions include denying funds for the cost of funded activities, suspending the grant in whole or in part, pending corrective action, and withholding further grant awards. The grant agency may also terminate the grant for cause, or take other legally available remedies.
Risks Relating to Our Intellectual Property
It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection. If our patent position and potential regulatory exclusivity do not adequately protect our product candidates, others could compete against us more directly, which would harm our business, possibly materially.
Our success will depend in part on obtaining and maintaining patent protection and trade secret protection of our current and future product candidates, and their methods of manufacture and use. Our ability to stop third parties from making, using, selling, offering to sell or importing our product candidates is dependent upon the extent to which we have rights under valid and enforceable patents and/or trade secrets that cover these activities. The patent positions of biotechnology and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United States or in many jurisdictions outside of the United States. Changes in either the patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be issued in relevant jurisdictions from our present or future patent filings, or those we license from third parties, and further cannot predict the extent to which we will be able to enforce such issued claims in jurisdictions important to our business. If any patents we obtain or license are deemed invalid and unenforceable, our ability to commercialize or license our technology could be adversely affected.
It is possible others have filed, and in the future may file, patent applications covering products and technologies similar, identical or competitive to ours, or are otherwise important to our business. We cannot be certain any patent filings owned by a third party will not have priority over patent applications filed or in-licensed by us, or we or our licensors will not be involved in interference, opposition or invalidity proceedings before United States or foreign patent offices. The costs of defending our patents or enforcing our proprietary rights in post-issuance administrative proceedings and litigation can be substantial and the outcome can be uncertain. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, and/or could allow third parties to commercialize our technology or products and compete directly with us, without payment to us. Furthermore, third-party filings may issue as patents infringed by our manufacture or commercialization of our products. Licenses may not be available to such third party patents, and challenges to their validity or infringement may be expensive and may not succeed. If the breadth or strength of protection provided by our patents and patent applications is threatened, or if we are perceived or found to infringe intellectual property
rights of others, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates, and could impede or preclude our ability to commercialize our products.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. We may become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, any of which could limit our ability to stop others from using or commercializing similar or identical technology and products, and/or limit the duration of the patent protection of our technology and products.
Without patent protection for our compounds, pharmaceutical compositions, or formulations of our product candidates, our ability to stop others from using or selling our product, or other competitive products including our compounds, may be limited.
If the patent applications we hold or have in-licensed with respect to present or future product candidates fail to issue, if their breadth and/or strength of protection is limited or challenged, or if they fail to provide meaningful exclusivity for present or future product candidates, it could dissuade companies from collaborating with us to develop future candidates and threaten our ability to commercialize future commercial products. Any such outcome could have a materially adverse effect on our business.
We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.
If we choose to go to court to stop another party from using the inventions claimed in any patents we obtain, that individual or company has the right to ask the court to rule such patents are invalid or should not be enforced against that third party. These lawsuits are expensive, would consume time and resources and would divert the attention of managerial and scientific personnel even if we were successful in stopping the infringement of such patents. In addition, there is a risk the court will decide such patents are not valid and we do not have the right to stop the other party from using the inventions.
There is also a risk, even if the validity of such patents is upheld, the court will refuse to stop the other party on the grounds such other party's activities do not infringe our patents. In addition, the United States Supreme Court has recently modified some tests used by the USPTO in granting patents over the past 20 years, which may decrease the likelihood we will be able to obtain patents and increase the likelihood of challenge of any patents we obtain or license.
We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our product candidates.
Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. We cannot guarantee our products or product candidates, or their manufacture or use, will not infringe third-party patents. Furthermore, a third party may claim we or our manufacturing or commercialization collaborators are using inventions covered by the third party's patent rights. It is also possible a third party might allege our products or product candidates, or their manufacture or use, incorporate or rely on trade secrets improperly received from the third party. A third party alleging violations of their intellectual property rights may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates. Defense of such claims, regardless of their merit, are costly and could affect our results of operations and divert the attention of managerial and scientific personnel.
There is a risk a court would decide we or our commercialization collaborators are infringing the third party's intellectual property rights and would order us or our collaborators to stop relevant activities. In that event, we or our commercialization collaborators may not have a viable way to avoid the infringement and may need to halt commercialization of the relevant product. In addition, there is a risk a court will order us or our collaborators to pay the other party damages for having infringed the other party's intellectual property rights. In the future, we may agree to indemnify our commercial collaborators against certain intellectual property infringement claims brought by third parties. The pharmaceutical and biotechnology industries have produced a proliferation of patents, and it is not
always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform.
If we are sued for patent or other intellectual property (e.g., trade secret, trademark, etc.) infringement, we could incur significant costs, and delays in our product development or commercialization.
Our competitors may have filed, and may in the future file, patent applications covering technology like ours. Any such patent application may have priority over our patent applications, which could further require us to obtain rights to issued patents covering such technologies. If another party has filed a United States patent application on inventions similar to ours, we may have to participate in an interference or derivation proceeding declared by the USPTO to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible such efforts would be unsuccessful if, unbeknownst to us, the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our United States patent position with respect to such inventions, and granting such position to the third party, so we may need to seek a license from such third party to continue our use of the technologies, which license might not be available, or might impose significant costs.
Other countries have similar laws permitting secrecy of patent applications and may be entitled to priority over our applications in such jurisdictions.
In addition, we may be subject to claims we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
We may not have sufficient resources to bring actions alleging intellectual property infringement to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may incur substantial monetary damages, encounter significant delays in bringing our product candidates to market and be precluded from manufacturing or selling our product candidates. Furthermore, even if we are successful in proceedings relating to alleged intellectual property infringement or misappropriation, we may incur substantial costs and divert management's time and attention in pursuing these proceedings, which could have a material adverse effect on us.
Some of our competitors may be able to sustain the costs of complex litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to the USPTO and non-United States patent agencies. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance could have a material adverse effect on our business.
The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States, and we may encounter significant problems in securing and defending our intellectual property rights outside the United States.
Many companies have encountered significant problems in protecting and defending intellectual property rights in certain countries. The legal systems of certain countries, particularly certain developing countries, do not always favor the enforcement of patents, trade secrets, and other intellectual property rights, particularly those relating to pharmaceutical products, which could make it difficult for us to stop infringement of our patents, misappropriation of our trade secrets, or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our intellectual property rights in foreign countries could result in substantial costs, divert our efforts and attention from other aspects of our business, and put our patents in these territories at risk of being invalidated or interpreted narrowly, or our patent applications at risk of not being granted, and could provoke third parties to assert claims against us. We may not prevail in all legal or other proceedings we may initiate and, if we were to prevail, the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property we develop or license.
Risks Relating to Our Common Stock
Our stock price may be volatile and you may not be able to resell shares of our common stock at or above the price you paid.
The trading price of our common stock could be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed above.
In addition, the stock markets in general, and the markets for pharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If we were to become involved in securities litigation, we could incur substantial costs and resources and the attention of our management could be diverted from the operation of our business.
We are an "emerging growth company" and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.
We are an "emerging growth company," as defined in Jumpstart Our Business Act of 2012, (JOBS Act), and we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and obtaining stockholder approval of any golden parachute payments not previously approved. In addition, as an "emerging growth company," the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards applicable to public companies, which may make comparison of our financials to those of other public companies more difficult. Even after we no longer qualify as an emerging growth company, we may still qualify as a "smaller reporting company" which would allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply for a period of time with the auditor attestation requirements of Section 404, and reduced disclosure obligations regarding executive compensation in this report and our periodic reports and proxy statements.
We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company or smaller reporting company.
We have completed and may in the future complete related party transactions that were not and may not be conducted on an arm's length basis.
We have in the past and continue to be party to certain transactions with certain entities affiliated with Dr. Goldberg, director and Chairman Emeritus on our Board, as well as certain of his immediate family members. For instance, in November 2013, we granted Ohr Cosmetics, LLC (Ohr), an affiliated company, an exclusive worldwide license, with the right to sublicense, under our patent rights covering one of our CYP26 inhibitors, ANG-3522, for the use in treating conditions of the skin or hair. We own, and the family of Dr. Goldberg, owns approximately 2.4% and 78.7%, respectively, of the membership interests in Ohr. Dr. Goldberg's son is the manager of Ohr. In addition, Dr. Venkatesan, our President and Chief Executive Officer and director, and Mr. Ganzi, our lead independent director, each own approximately 1.6% of the membership interests in Ohr.
In addition, prior to March 2023, we rented office and laboratory space in Uniondale, New York from NovaPark LLC (NovaPark), an affiliated company, under a lease scheduled to expire on June 20, 2026. The space we rented was part of an approximately 110,000-square-foot general laboratory and development facility (the “Property”) for biological and chemistry research owned by NovaPark. In March 2023, we entered into a Surrender Agreement with NovaPark which terminated the Uniondale, New York lease for a termination fee of $3.03 million and entered into a Membership Interest Redemption Agreement with NovaPark to relinquish our 10% membership interest in NovaPark. Prior to entering into the Membership Interest Redemption Agreement, we owned, and Dr. Goldberg, and Rina Kurz, Dr. Goldberg's spouse, owned 10%, 45% and 45%, respectively, of the membership interests in NovaPark.
Provisions in our charter documents and under Delaware law could discourage a takeover stockholders may consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions include the following:
•a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;
•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
•the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;
• the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;
•the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;
• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
• the requirement that a special meeting of stockholders may be called only by our chief executive officer or president or chairperson of the board of directors or by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
•advance notice procedures stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror's own slate of directors or otherwise attempting to obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the DGCL. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of our capital
stock unless the holder has held the stock for three years or, among other exceptions, our Board has approved the transaction.
Our amended and restated certificate of incorporation and amended and restated bylaws provide for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation and amended and restated bylaws also provide the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible a court could find these types of provisions to be inapplicable or unenforceable. While the Delaware courts have determined such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive-forum provisions, and there can be no assurance such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Security breaches, cyber-attacks or other disruptions or incidents could expose us to liability and affect our business and reputation.
We are increasingly dependent on our information technology systems and infrastructure for our business. We, our collaborators and our service providers collect, store, and transmit sensitive information including intellectual property, proprietary business information, clinical trial data and personal information in connection with our business operations. The secure maintenance of this information is critical to our operations and business strategy. Some of this information could be an attractive target of criminal attack by third parties with a wide range of motives and expertise, including organized criminal groups, "hacktivists," patient groups, disgruntled current or former employees, nation-state and nation-state supported actors and others. Cyber-attacks are of ever-increasing levels of sophistication, and despite our security measures, our information technology and infrastructure may be vulnerable to such attacks or may be breached, including due to employee error or malfeasance. We have implemented information security measures to protect our systems, proprietary information and sensitive data, including the personal information of clinical trial participants against the risk of inappropriate and unauthorized external use and disclosure and other types of compromise. However, despite these measures, and due to the ever changing information cyber-threat landscape, we cannot guarantee these measures will be adequate to detect,
prevent or mitigate security breaches and other incidents and we may be subject to data breaches through cyber-attacks, malicious code (such as viruses and worms), phishing attacks, social engineering schemes, and insider theft or misuse. Any such breach could compromise our networks and the information stored there could be accessed, modified, destroyed, publicly disclosed, lost or stolen. If our systems become compromised, we may not promptly discover the intrusion. Like other companies in our industry, we have experienced attacks to our data and systems, including malware and computer viruses. Any security breach or other incident, whether real or perceived, would cause us to lose product sales, if any, and suffer reputational damage and loss of customer confidence. Such incidents could result in costs to respond to, investigate and remedy such incidents, notification obligations to affected individuals, government agencies, credit reporting agencies and other third parties, legal claims or proceedings, and liability under our contracts with other parties and federal and state laws that protect the privacy and security of personal information. If a security breach, cyber-attack, or other disruption is the result of state-sponsored activities, it may be considered an "act-of-war", potentially making us ineligible for reimbursement under our insurance policies covering such attacks. Any one of these events could cause our business to be materially harmed and our results of operations would be adversely impacted.
