Indaptus Therapeutics, Inc S-1, filed Feb 12, 2025
Indaptus Therapeutics, Inc. (INDP)
As
filed with the Securities and Exchange Commission on
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Chief Executive Officer
Indaptus Therapeutics, Inc.
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
Gary Emmanuel, Esq.
Greenberg Traurig LLP
One Vanderbilt Avenue
New York, New York 10017
+1 (212) 801 9337
Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The information in this preliminary prospectus is not complete and may be changed. The selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 2025
PROSPECTUS
Indaptus Therapeutics, Inc.
10,000,000 Shares of Common Stock
This prospectus relates to the offer and sale of up to 10,000,000 shares of our common stock, par value $0.01 per share, by YA II PN, LTD., or YA or the selling stockholder, a Cayman Islands exempt limited partnership.
The shares of common stock being offered by the selling stockholder are to be issued pursuant to the Standby Equity Purchase Agreement dated February 12, 2025 that we entered into with YA, or the Purchase Agreement. We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of our shares by the selling stockholder. However, we may receive up to $20.0 million in aggregate gross proceeds from sales of our shares to YA that we may make under the Purchase Agreement, from time to time during the 36 months following the execution of the Purchase Agreement, or the Advance Shares. Pursuant to the Purchase Agreement, we are issuing 305,960 shares of common stock to YA as consideration for its irrevocable commitment to purchase our shares of common stock under the Purchase Agreement, or the Commitment Shares. The additional 9,694,040 shares of common stock representing Advance Shares, that may be offered pursuant to this prospectus would be purchased by YA from time to time pursuant to the Purchase Agreement at a price equal to 97% of the lowest of the three daily volume weighted average prices, or VWAPs, during a pricing period as set forth in the Purchase Agreement and would be subject to certain limitations.
The selling stockholder may sell the shares of common stock included in this prospectus in a number of different ways and at varying prices. We provide more information about how the selling stockholder may sell the shares in the section entitled “Plan of Distribution.” The selling stockholder is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended, the Securities Act.
The selling stockholder will pay all brokerage fees and commissions and similar expenses in connection with the offer and sale of the shares by the selling stockholder pursuant to this prospectus. We will pay the expenses (except brokerage fees and commissions and similar expenses) incurred in registering under the Securities Act the offer and sale of the shares included in this prospectus by the selling stockholder. See “Plan of Distribution.”
Our common stock is listed on the Nasdaq Capital Market under the symbol “INDP”. On February 11, 2025, the last reported sale price of our common stock on the Nasdaq Capital Market was $0.8053 per share.
Investing in our securities involves risks. See the section entitled “Risk Factors” included in into the prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is February , 2025
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”). As permitted by the rules and regulations of the SEC, the registration statement filed by us includes additional information not contained in this prospectus. You may read the registration statement and the other reports we file with the SEC at the SEC’s website or its offices described below under the heading “Where You Can Find More Information”.
You should rely only on the information contained in this prospectus. We have not, and the selling stockholder has not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The distribution of this prospectus and sale of these securities in certain jurisdictions may be restricted by law. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. Persons in possession of this prospectus are required to inform themselves about and observe any such restrictions. The information contained in this prospectus that we have authorized for use in connection with this offering, is accurate only as of the date of those respective documents regardless of the time of delivery of this prospectus when any sale of our securities occurs. Our business, financial condition, results of operations and prospects may have changed since those dates.
You should read this prospectus in its entirety, before making an investment decision. You should also read and consider the information in the documents to which we have referred you in the section of this prospectus entitled “Where You Can Find More Information.”
This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or will be filed as exhibits to the registration statement, and you may obtain copies of those documents as described below under the section entitled “Where You Can Find More Information.”
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit the registration statement to which this prospectus relates were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
This prospectus contains market data and certain industry data and forecasts that were obtained from market research databases, publicly available information and industry publications and surveys. Industry surveys, publications and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. We have relied on certain data from third-party sources, including industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Risk Factors” in this prospectus.
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PROSPECTUS SUMMARY
The following summary highlights certain information contained elsewhere in this prospectus. Because this is only a summary, however, it does not contain all the information you should consider before investing in our securities and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information included elsewhere in this prospectus. Before you make an investment decision, you should read this entire prospectus carefully, including the risks of investing in our securities discussed under the section of this prospectus entitled “Risk Factors”.
Unless the context indicates otherwise, in this prospectus, the terms “Indaptus,” “Company,” “we,” “us” and “our” refer to Indaptus Therapeutics, Inc. (formerly Intec Parent, Inc.) and, where appropriate, its consolidated subsidiaries following the domestication merger and the reverse merger described in our previous periodic reports. References to “Intec Israel” refer to Intec Pharma Ltd., the predecessor of Indaptus prior to the domestication merger, and references to “Decoy” refer to Decoy Biosystems, Inc., the entity acquired by Indaptus in connection with the reverse merger.
Overview
We are a clinical biotechnology company developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. We have evolved from more than a century of immunotherapy advances. Our approach is based on the hypothesis that efficient activation of both innate and adaptive immune cells and associated anti-tumor and anti-viral immune responses will require a multi-targeted package of immune system activating signals that can be administered safely intravenously. Our patented technology is composed of single strains of attenuated and killed, non-pathogenic, Gram-negative bacteria, designed to have reduced i.v. toxicity, but largely uncompromised ability to prime or activate many of the cellular components of innate and adaptive immunity. This approach has led to broad anti-tumor and anti-viral activity in preclinical models, including durable anti-tumor response synergy observed with each of four different classes of existing agents, including NSAIDs, checkpoint therapy, targeted antibody therapy and low-dose chemotherapy. Tumor eradication by our technology was associated with induction of both innate and adaptive immunological memory and, importantly, did not require provision of or targeting a tumor antigen in preclinical models. We have carried out successful current Good Manufacturing Practice (cGMP) manufacturing of our lead clinical candidate, Decoy20.
In May 2022, the U.S. Food and Drug Administration, or the FDA, allowed us to proceed under our IND for a Phase 1 clinical trial in patients with advanced solid tumors where currently approved therapies have failed. In December 2022, we initiated an open label, multi-center, dose escalation and expansion, single arm (monotherapy) Phase 1 study conducted in 2 parts. The Phase 1 study began with single dose administration and has now been followed with continuous weekly dosing of Decoy20 in tumor-specific expansion cohorts. The study is enrolling patients with any one of six advanced/metastatic solid tumors, who have exhausted approved treatment options. The study’s objectives are to assess the safety and tolerability of Decoy20, to determine the maximum tolerated dose, the optimal biologically active and recommended Phase 2 dose, as well as to assess Decoy20 pharmacokinetics (PK), pharmacodynamics and clinical activity. The primary endpoints of the study are incidence, relatedness and severity of adverse events and treatment-emergent adverse events and determining the number of subjects per cohort with dose limiting toxicity-based adverse events. Secondary endpoints include the incidence of anti-drug antibodies and neutralizing antibodies pre- and post-treatment, change in Decoy20 PK parameters over time, objective response rate and duration of response.
In August 2023, we evaluated the first four patients who received a single dose of 7 x 10^7 Decoy20 in Part 1 of the Phase 1 clinical trial. All four patients who enrolled were evaluable in the first cohort. These patients experienced generally anticipated transient adverse events including hemodynamic changes such as changes in pulse or blood pressure that resolved within 30 minutes and laboratory abnormalities such as grade 1-3 elevations in transaminases (liver function tests) and grade 4 reductions in lymphocytes that generally resolved within three days. One patient had a dose-limiting toxicity of grade 3 bradycardia (slow heart rate) and grade 2 hypotension (low blood pressure) which resolved within approximately 90 minutes with i.v. fluids. Patients also experienced transient induction of over 50 different biomarkers associated with innate and adaptive anti-tumor immune responses. After the end of infusion, Decoy20 was cleared from the blood within 30 to 120 minutes. Peak cytokine and chemokine induction occurred within ~4 to 24 hours and most cytokine/chemokines returned to the patient’s respective baseline by 24-72 hours. This rapid clearance and associated transient cytokine/chemokine induction are desired to avoid prolonged toxicity, often associated with longer term cytokine exposure.
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In September 2023, we began the second cohort of the Phase 1 clinical trial after receiving authorization from the Safety Review Committee. The second cohort dose was a reduction from 7 x 10^7 Decoy20 dose to 3 x 10^7 Decoy20. In March 2024, we completed the second cohort of patients who received a single dose of 3 x 10^7 Decoy20 in Part 1 of the clinical trial Patients on the second (lower dose) cohort experienced adverse events similar in frequency and severity to the higher dose cohort with one dose-limiting toxicity of grade 3 ALT elevation that required one week to resolve. Pharmacodynamic effects included transient induction of multiple biomarkers. Clearance of Decoy20 was similarly rapid. Following authorization from the Safety Review Committee, we advanced into the weekly dosing part of the trial.
In May and June 2024, we enrolled two additional patients in the first cohort who received a single dose of 7 x 10^7 Decoy20, and in August 2024 we received the authorization from the Safety Review Committee to initiate the weekly dosing with 7 x 10^7 Decoy20.
As of October 2024, we completed one month of the weekly dosing part in the first six patients at the 3 x 10^7 Decoy20 dose and following the review of the safety data by the Safety Review Committee we received the authorization to initiate unrestricted enrollment of patients at the 3 x 10^7 Decoy20 dose.
In October 2024, we entered into a clinical supply agreement (the “Supply Agreement”) with BeiGene Switzerland GmbH, or BeiGene, to advance clinical evaluation of Decoy20 in combination with BeiGene’s anti-PD-1 antibody, tislelizumab, or the BeiGene Product, for the treatment of patients with advanced solid tumors, or the Combination Study. This Combination Study builds on preclinical results where Decoy20, combined with a PD-1 inhibitor, demonstrated high tumor eradication rates and established immunological memory. We intend to seek approval from the FDA to initiate the Combination Study, which is anticipated to begin in 2025.
Under the terms of the Supply Agreement, we will pay for all costs associated with the Combination Study (other than the cost of the BeiGene Product), BeiGene will supply the BeiGene Product to us for the purposes of the study, and we will supply Decoy20 for the purposes of the Combination Study. The Supply Agreement will terminate upon the earlier of (i) the one-year anniversary of the date that we provide BeiGene with the Combination Study’s final clinical study report or (ii) the date of termination of the Combination Study, subject to early termination in certain circumstances.
In February 2025, we announced that we received clinical trial authorization from Health Canada to initiate a clinical trial for Decoy20 which allows us to expand our ongoing U.S. clinical trial to Canadian sites. The trial will enroll patients in Canada under the current protocol, which involves weekly dosing of Decoy20. We also plan to submit an amendment to Health Canada to initiate the Combination Study in Canada.
August 2024 Financing
On August 8, 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors, including an officer and director of the Company, 1,643,837 shares of our common stock. In addition, in a concurrent private placement, we issued to the investors unregistered warrants to purchase 1,643,837 shares of our common stock. The warrants are immediately exercisable at an exercise price of $1.70 per share and expire five years from the date of issuance. The combined purchase price for one share of common stock and one warrant was $1.825, resulting in gross proceeds of approximately $3.0 million, before deducting placement agent and other offering expenses in the amount of approximately $0.5 million.
November 2024 Financing
On November 25, 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors, including an officer and director of the Company, 1,817,017 shares of our common stock. In addition, in a concurrent private placement, we issued to the investors unregistered warrants to purchase 1,817,017 shares of our common stock. The warrants are immediately exercisable at an exercise price of $1.05 per share and expire five years from the date of issuance. The combined purchase price for one share of common stock and one warrant was $1.175, resulting in gross proceeds of approximately $2.13 million, before deducting placement agent and other offering expenses in the amount of approximately $0.345 million. In connection with the November 2024 financing, we issued to the placement agent and its designees placement agent warrants to purchase an aggregate of 124,212 shares of common stock at an exercise price per share equal to $1.3125. The placement agent warrants are exercisable six months from the date of issuance and expire on the fifth anniversary of the issue date.
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January 2025 Private Placement
On January 16, 2025, we completed a private placement, pursuant to which we sold and issued to certain investors 2,109,383 unregistered shares of our common stock and unregistered warrants to purchase 2,109,383 shares of our common stock. The warrants are immediately exercisable at an exercise price of $0.94 per share and expire five years from the date of issuance. In connection with the January 2025 financing, we issued to the placement agent and its designees placement agent warrants to purchase an aggregate of 147,656 shares of common stock at an exercise price per share equal to $1.175. The placement agent warrants are exercisable six months from the date of issuance and expire on the fifth anniversary of the issue date.
Minimum Bid Price Deficiency
On January 31, 2025, we were notified by the Nasdaq Listing Qualifications that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. We have until July 30, 2025, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. In the event we do not regain compliance by July 30, 2025, we may then be eligible for an additional 180 days if we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second compliance period, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determination to a Hearings Panel.
Standby Equity Purchase Agreement with YA
On February 12, 2025, we entered into the Purchase Agreement with YA, pursuant to which YA has committed to purchase up to $20.0 million of Advance Shares, or the Commitment Amount, at our direction from time to time, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, during the period commencing on the date of execution of the Purchase Agreement until the earlier of (i) the first day of the month following the 36-month anniversary of the date of execution of the Purchase Agreement, and (ii) YA’s purchase of the total Commitment Amount under the Purchase Agreement, such period being the Commitment Period. Pursuant to the terms of the Purchase Agreement, we have issued and agreed to issue the Commitment Shares to YA as consideration for its irrevocable commitment to purchase the Advance Shares under the Purchase Agreement. The Commitment Shares are also covered by this prospectus.
This prospectus covers the resale of up to 10,000,000 shares of common stock comprised of: (i) 305,960 shares of common stock we are issuing as the Commitment Shares on the date of execution of the Purchase Agreement; and (ii) 9,694,040 shares of common stock as the Advance Shares that that we have reserved for issuance and sale to YA as Advance Shares under the Purchase Agreement from time to time during the Commitment Period, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, if and when we determine to sell additional shares to YA under the Purchase Agreement.
YA has no right to require us to sell any shares to YA, but YA is obligated to make purchases of the Advance Shares as directed by us, subject to the restrictions and satisfaction of conditions set forth in the Purchase Agreement upon receipt of a notice sent by us to YA setting forth the number of shares that we desire to issue and sell to YA, or an Advance Notice. Actual sales of the Advance Shares to YA from time to time will depend on a variety of factors, including, among others, market conditions, the trading price of our shares and determinations by us as to the appropriate sources of funding for us and our operations. The purchase price of the Advance Shares that we may direct YA to purchase from time to time under the Purchase Agreement will be equal to 97% of the lowest of the three daily VWAPs during the three consecutive trading day period commencing on the date that we deliver any Advance Notice to YA, or the Pricing Period.
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As of February 11, 2025, there were 14,123,284 shares of common stock outstanding, of which 12,551,249 shares were held by non-affiliates. If all of the 10,000,000 shares of common stock offered by YA under this prospectus were issued and outstanding, such shares would represent approximately 41% of the total number of shares of common stock outstanding and approximately 44% of the total number of outstanding shares of common stock held by non-affiliates, in each case as of February 11, 2025. The Purchase Agreement provides that we may sell up to an aggregate of $20.0 million of shares of common stock to YA. We have filed the registration statement that includes this prospectus so that we may issue and sell to YA up 10,000,000 shares of common stock from time to time from during the Commitment Period, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, through sales under the Purchase Agreement. Depending on the market prices of our shares at the time we elect to issue such shares to YA under the Purchase Agreement, we may need to sell more shares to YA than are offered under this prospectus to receive aggregate gross proceeds equal to the $20.0 million total commitment of YA under the Purchase Agreement, in which case we must first register for resale under the Securities Act additional shares, which could cause additional substantial dilution to our stockholders. The number of shares ultimately offered for resale by YA is dependent upon the number of shares we issue and sell to YA under the Purchase Agreement.
The net proceeds under the Purchase Agreement to us will depend on the frequency and prices at which we sell our shares, our ability to meet the conditions set forth in the Purchase Agreement and any impacts of the Ownership Limitation (as defined below). We expect that any proceeds received by us from such sales of shares under the Purchase Agreement will be used continued development of our pipeline products, as well as the advancement of new programs, business development activities, and general corporate purposes.
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. In addition, YA has agreed that, during the term of the Purchase Agreement, neither YA nor its affiliates will engage in any short sales or hedging transactions with respect to our shares of common stock, provided YA or its affiliates may (i) sell “long”, as such term is defined in Rule 200 of Regulation SHO of the Exchange Act, the Commitment Shares and any Advance Shares issued and sold by us to YA pursuant to an Advance Notice, and (ii) sell a number of shares equal to the number of Advance Shares that YA is unconditionally obligated to purchase under a pending Advance Notice but has not yet received from us or our transfer agent pursuant to the Purchase Agreement, or (i) and (ii) collectively, the Permitted Sales.
The Purchase Agreement prohibits us from directing YA to purchase shares if those shares, when aggregated with all other shares of our shares then beneficially owned by YA and its affiliates, would result in YA and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of common stock, as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 13d-3 thereunder, which limitation we refer to as the Ownership Limitation. In addition, the aggregate number of shares of common stock that we can issue to YA under the Purchase Agreement may in no case exceed 2,823,244 shares (subject to adjustment) of common stock (which is equal to approximately 19.99% of the shares of common stock outstanding immediately prior to the execution of the Purchase Agreement), or the Exchange Cap, unless (i) Company stockholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of Common Stock to YA under the Purchase Agreement equals or exceeds $0.81722 per share of common stock (which represents the lower of (A) the Nasdaq official closing price of the common stock on the trading day immediately preceding the date of the Purchase Agreement or (B) the average Nasdaq official closing price of the common stock for the five consecutive trading days ending on the trading day immediately preceding the date of the Purchase Agreement).
The Purchase Agreement contains customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
The Purchase Agreement will automatically terminate upon the earliest of (i) the first day of the month following the 36-month anniversary of the date of execution of the Purchase Agreement, and (ii) YA’s purchase of the total Commitment Amount under the Purchase Agreement. We have the right to terminate the Purchase Agreement at any time, at no cost or penalty, upon five trading days’ prior written notice to YA, provided that (i) there are no outstanding Advance Notices, the Advance Shares under which have yet to be issued and (ii) we have paid all amount owed to YA pursuant to the Purchase Agreement.
There are substantial risks to our stockholders as a result of the sale and issuance of shares of common stock to YA under the Purchase Agreement. These risks include substantial dilution, significant declines in our share price and our inability to draw sufficient funds when needed. See “Risk Factors.” Issuances of our shares under the Purchase Agreement will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted as a result of any such issuance. Although the number of shares of common stock that our existing stockholders own will not decrease, the shares owned by our existing stockholders will represent a smaller percentage of our total outstanding shares after any such issuances pursuant to the Purchase Agreement.
Company Information
Our principal executive offices are located at 3 Columbus Circle, 15th Floor, New York, NY 10019 and our telephone number is (646) 427-2727. Our website address is http://www.indaptusrx.com. The information contained on, or that can be accessed through, our website is neither a part of nor incorporated into this Registration Statement. We have included our website address in this Registration Statement solely as an inactive textual reference.
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The Offering
| Shares of Common Stock Outstanding Prior to this Offering | 14,123,284 shares of common stock (as of February 11, 2025). | |
| Shares of Common Stock Offered by the Selling Stockholder | 10,000,000 shares of common stock, represented as (i) 305,960 shares of common stock being issued as the Commitment Shares on the date of execution of the Purchase Agreement; and (ii) 9,694,040 shares of common stock as the Advance Shares that we may sell to YA under the Purchase Agreement from time to time. | |
| Shares of Common Stock Outstanding Immediately After this Offering | 24,123,284 shares of common stock, assuming the issuance of the Commitment Shares and Advance Shares. The actual number of shares of common stock will vary depending upon the number of shares of common stock we sell under the Purchase Agreement. | |
| Use of proceeds | We will not receive any proceeds from the sale of the YA Shares included in this prospectus by the selling stockholder. We may receive up to $20.0 million aggregate gross proceeds under the Purchase Agreement from sales of shares of our common stock that we elect to make to YA as Advance Shares pursuant to the Purchase Agreement, if any, from time to time in our sole discretion, although the actual amount of proceeds that we may receive cannot be determined at this time and will depend on the number of shares we sell under the Purchase Agreement and market prices at the times of such sales. Any proceeds that we receive from sales of shares under the Purchase Agreement will be used to fund our research and development activities and for working capital and general corporate purposes. See “Use of Proceeds.” | |
| Risk factors | Investing in our Securities involves a high degree of risk. You should read the “Risk Factors” section starting on page 8 of this prospectus for a discussion of factors to consider carefully before deciding to invest in our Securities. | |
| Nasdaq Capital Market symbol | “INDP”. |
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Summary Risk Factors
The principal factors and uncertainties that make investing in our common stock risky, include, among others:
| ● | We are a clinical-stage company with a limited operating history. We are not currently profitable, do not expect to become profitable in the near future and may never become profitable. | |
| ● | We have identified conditions and events that raise substantial doubt regarding our ability to continue as going concern. | |
| ● | Given our lack of current cash flow, we will need to raise additional capital. If we are unable to raise a sufficient amount of capital when needed on acceptable terms or at all, we may be forced to delay, limit or eliminate some or all of our research programs, product development activities and commercialization efforts. | |
| ● | Raising additional capital would cause dilution to our existing shareholders and may restrict our operations or require us to relinquish rights to our technologies or product candidates. | |
| ● | Clinical and preclinical development involves lengthy and expensive processes with uncertain outcomes. Any difficulties or delays in the commencement or completion, or the termination or suspension, of our current or planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue or adversely affect our commercial prospects. | |
| ● | We expect to continue to incur significant research and development expenses and other operating expenses, which may make it difficult for us to attain profitability. | |
| ● | We may expend our limited resources to pursue a limited number of research programs, product candidates and specific indications and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. | |
| ● | Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization or have other significant adverse implications on our business, financial condition and results of operations. | |
| ● | The commercial success of our product candidates depends upon their market acceptance among physicians, patients, healthcare payors and the medical community. | |
| ● | We rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business, financial condition and results of operations could be substantially harmed. |
| ● | We currently rely on third parties for the manufacture of our product candidates during clinical development, and expect to continue to rely on third parties for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates, or such quantities at an acceptable cost, which could delay, prevent or impair our development or potential commercialization efforts. | |
| ● | The successful commercialization of Decoy20 or any future product candidates, if approved, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our products could limit our ability to market those products and decrease our ability to generate revenue. | |
| ● | Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize Decoy20 and any future product candidates and may affect the prices we may set. | |
| ● | If our competitors have product candidates that are approved faster, marketed more effectively, are better tolerated, have a more favorable safety profile or are demonstrated to be more effective than our product candidates, our commercial opportunity may be adversely affected. | |
| ● | Any product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated. | |
| ● | We may not be able to adequately protect our proprietary or licensed technology in the marketplace. | |
| ● | We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses. | |
| ● | We are subject to various U.S. federal, state and foreign healthcare laws and regulations, which could increase compliance costs, and our failure to comply with these laws and regulations could harm our results of operations and financial condition. | |
| ● | Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition. | |
| ● | Our business and operations may suffer in the event of information technology system failures, cyberattacks or deficiencies in our cybersecurity. | |
| ● | Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members. | |
| ● | Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations. | |
| ● | If we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. | |
| ● | The market price of our common stock is volatile and you may sustain a complete loss of your investment. | |
| ● | It is not possible to predict the actual number of shares we will sell under the Purchase Agreement to the selling stockholder, or the actual gross proceeds resulting from those sales. | |
| ● | The sale of a substantial amount of shares of our common stock, including resale of the held by the selling stockholder in the public market could adversely affect the prevailing market price of shares of our common stock. | |
| ● | Management will have broad discretion as to the use of the net proceeds from the Purchase Agreement. |
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RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our financial statements and related notes appearing at the end of this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our securities. If any of the events or developments described below were to occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our shares of common stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Risks Related to Our Financial Position and Capital Requirements
We are a clinical-stage company with a limited operating history. We are not currently profitable, do not expect to become profitable in the near future and may never become profitable.
We are a clinical-stage biotechnology company focused primarily on developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. All of our product candidates are in the preclinical or early clinical development stage, and none of our product candidates have been approved for marketing or are being marketed or commercialized.
As a result, we have no meaningful historical operations upon which to evaluate our business and prospects and have not yet demonstrated an ability to obtain marketing approval for any of our product candidates or successfully overcome the risks and uncertainties frequently encountered by companies in the biopharmaceutical industry. As a result, we have not been profitable and have incurred significant operating losses in every reporting period since our inception. For the year ended December 31, 2023, we reported a net loss of approximately $15.4 million and as of December 31, 2023, we had an accumulated deficit of approximately $45.4 million. For the nine-month period ended September 30, 2024, we reported a net loss of approximately $10.9 million and as of September 30, 2024, we had an accumulated deficit of approximately $56.3 million.
For the foreseeable future, we expect to continue to incur losses, which will increase significantly from historical levels as we expand our development activities, seek regulatory approvals for our product candidates, and begin to commercialize them if they are approved by the FDA, the European Medicines Agency, or the EMA, or comparable foreign authorities. Further, the net losses we incur may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Even if we succeed in developing and commercializing one or more product candidates, we may never become profitable, or even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
We have identified conditions and events that raise substantial doubt regarding our ability to continue as a going concern.
We have incurred net losses and utilized cash in operations since inception as described above. In addition, as of September 30, 2024, we had approximately $7.4 million in cash and cash equivalents, and during the nine-month period ended September 30, 2024, we used $8.9 million of cash in operations and expect to continue to incur significant cash outflows and incur future additional losses to execute our operating plan. We believe that the cash and cash equivalents as of September 30, 2024 together with proceeds from financings consummated subsequent to September 30, 2024, will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2025. We will need to increase our capital resources through equity or debt financings. We may also seek to finance our cash needs through collaborations, strategic alliances, or license agreements with third parties and/or debt or equity financings. If sources of financing are available, they may result in substantial dilution to our stockholders. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms or in the amounts required, if at all. Due to the uncertainty in securing additional funding, and as existing cash resources are not sufficient to fund planned operations for at least 12 months from the date of this prospectus, we have concluded that substantial doubt exists about our ability to continue as a going concern. If we are unsuccessful in securing sufficient financing, we may need to delay, reduce, or eliminate our research and development programs, which could adversely affect our business prospects, or cease operations.
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Our audited consolidated financial statements and unaudited condensed consolidated financial statements included in this prospectus have been prepared on a going concern basis under which an entity is able to realize its assets and satisfy its liabilities in the ordinary course of business. The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should we be unable to continue as a going concern within one year after the date that the financial statements are issued.
Our future operations are dependent upon the successful entry into collaborations, strategic alliances, or license agreements with third parties and/or on the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful in completing these collaborations or alliances, equity or debt financing or in achieving profitability. As such, there can be no assurance that we will be able to continue as a going concern.
Substantial doubt about our ability to continue as a going concern may materially and adversely affect the price per share of our common stock, and it may be more difficult for us to obtain financing. If potential collaborators decline to do business with us or potential investors decline to participate in any future financing due to such concerns, our ability to increase our cash position may be limited. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations. If we are unable to continue as a going concern, you could lose all or part of your investment in our Company.
Given our lack of current cash flow, we will need to raise additional capital. If we are unable to raise a sufficient amount of capital when needed in required amounts and on acceptable terms or at all, we may be forced to delay, limit or eliminate some or all of our research programs, product development activities and commercialization efforts.
Since we will be unable to generate sufficient, if any, cash flow to fund our operations for the foreseeable future, we will need to seek additional equity or debt financing to provide the capital required to maintain or expand our operations.
There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, we may be required to delay, limit or eliminate some or all of our research programs, product development activities and commercialization efforts, and our ability to achieve our business objectives, our competitiveness, and our business, financial condition and results of operations may be materially adversely affected. In addition, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our inability to fund our business could lead to the loss of your investment.
Our future capital requirements will depend on many factors, including, but not limited to:
| ● | the scope, progress, results and costs of preclinical studies and clinical trials; | |
| ● | the scope, prioritization and number of our clinical trials and other research and development programs; |
| ● | the amount of revenues we receive under future licensing, collaboration, development and commercialization arrangements with respect to our product candidates; | |
| ● | the impact of any pandemic, epidemic or other future health crisis on our business and operations; | |
| ● | the costs of the development and expansion of our operational infrastructure; | |
| ● | the costs, timing and outcome of regulatory review of our product candidates; |
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| ● | the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements; | |
| ● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; | |
| ● | the costs and timing of securing manufacturing arrangements for clinical or commercial production; | |
| ● | the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves; | |
| ● | the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or technology; | |
| ● | the costs associated with being a public company; and | |
| ● | any cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates. |
Even if we believe we have sufficient funds for our current or future operating plans, we may continue to seek additional capital if market conditions are favorable or in light of specific strategic considerations. Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to obtain sufficient funding on a timely basis, in required amounts or on favorable terms, we may be required to significantly delay, reduce or eliminate one or more of our research or product development programs and/or commercialization efforts. We may also be unable to expand our operations or otherwise capitalize on business opportunities as desired. Any of these events could materially adversely affect our financial condition and business prospects.
Raising additional capital would cause dilution to our shareholders and may restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity and/or debt financings and collaborations, licensing agreements or other strategic arrangements. We may seek additional capital through a combination of private and public equity offerings, “at-the-market” issuances, equity-linked and structured transactions, debt (straight, convertible, or otherwise) financings, collaborations and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. For example, in June 2022, we entered into an at the market offering agreement, which was amended on September 1, 2022, with a sales agent pursuant to which we may offer and sell from time to time shares of our common stock for aggregate gross proceeds of up to $3.7 million, and in 2024, we sold 152,000 shares of our common stock for aggregate gross proceeds of approximately $0.4 million. On August 6, 2024, we filed a prospectus supplement to reduce the amount of shares registered under the prospectus for the ATM to $0.00 and to suspend the ATM program, but the ATM Agreement remains in full force and effect. In August 2024, November 2024 and January 2025, we raised an aggregate of approximately $6.4 million, net of placement agent and other offering expenses. We may also issue in the future equity securities that provide for rights, preferences and privileges senior to those of our common stock. Given our need for cash and that equity issuances are the most common type of fundraising for similarly situated companies, the risk of dilution is particularly significant for our stockholders. Depending upon market liquidity at the time, additional sales of shares registered at any given time could cause the trading price of our common stock to decline. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.
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Risks Related to the Discovery and Development of Our Product Candidates
We are dependent on the success of one or more of our current product candidates, and we cannot be certain that any of them will receive regulatory approval or be commercialized.
We have spent significant time, money and effort on the development of our lead product candidate, Decoy20. As a result, our business is largely dependent on the commencement of and success of clinical trials evaluating Decoy20 and our ability to complete the development of, obtain regulatory approval for, and successfully commercialize Decoy20 in a timely manner. The process to develop, obtain regulatory approval and commercialize Decoy20 is long, complex, costly and uncertain as to the outcome.
To date, no clinical trials designed to provide substantial evidence of safety, purity, potency or efficacy have been completed with any of our product candidates. All of our product candidates will require additional development, including clinical trials as well as further preclinical studies to evaluate their toxicology and optimize their formulation and regulatory approvals before they can be commercialized. Positive results obtained during early development do not necessarily mean later development will succeed or that regulatory approvals will be obtained. Our development efforts may not lead to commercial products, either because our product candidates fail to be safe and effective, or in the case of our product candidates regulated as biologics, safe, pure and potent, or because we have inadequate financial or other resources to advance our product candidates through the clinical development and approval processes. If any of our product candidates fail to demonstrate safety, purity, potency or efficacy at any time or during any phase of development, we would experience potentially significant delays in, or be required to abandon, development of the product candidate.
We do not anticipate that any of our current product candidates will be eligible to receive regulatory approval from the FDA, the EMA or comparable foreign authorities and begin commercialization for a number of years, if ever. Even if we ultimately receive regulatory approval for any of these product candidates, we or our potential future partners, if any, may be unable to commercialize them successfully for a variety of reasons. These include, for example, the availability of alternative treatments, lack of cost-effectiveness, the cost of manufacturing the product on a commercial scale and competition with other products. The success of our product candidates may also be limited by the prevalence and severity of any adverse side effects. If we fail to commercialize one or more of our current product candidates, we may be unable to generate sufficient revenues to attain or maintain profitability, and our financial condition may decline.
Clinical and preclinical development involves a lengthy and expensive process with an uncertain outcome. Any difficulties or delays in the commencement or completion, or the termination or suspension, of our current or planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue or adversely affect our commercial prospects.
Before obtaining approval from regulatory authorities for the commercialization of any of our product candidates, we must conduct extensive clinical trials to demonstrate the safety, purity, and potency, or efficacy of the product candidate in humans. Preclinical and clinical drug development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the preclinical study or clinical trial process. Despite promising preclinical or clinical results, any product candidate can unexpectedly fail at any stage of preclinical or clinical development. The historical failure rate for product candidates in our industry is high.
The results from preclinical studies or early clinical trials of a product candidate may not predict the results of later clinical trials of the product candidate, and interim results of a clinical trial are not necessarily indicative of final results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials. It is not uncommon to observe results in clinical trials that are unexpected based on preclinical studies and early clinical trials, and many product candidates fail in clinical trials despite very promising early results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies.
Before we can initiate clinical trials for any product candidates, we must submit the results of preclinical studies to the FDA, the EMA or comparable foreign regulatory authorities along with other information, including information about product candidate chemistry, manufacturing and controls and our proposed clinical trial protocol, as part of an IND or similar regulatory submission. The FDA, the EMA or comparable foreign regulatory authorities may require us to conduct additional preclinical studies for any product candidate before it allows us to initiate clinical trials under any IND or similar regulatory submission, which may lead to delays and increase the costs of our preclinical development programs. Moreover, even if we commence clinical trials, issues may arise that could cause regulatory authorities to suspend or terminate such clinical trials. Any such delays in the commencement or completion of our ongoing and planned clinical trials for our product candidates could significantly affect our product development timelines and product development costs and harm our financial position.
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We do not know whether our planned clinical trials will begin on time or be completed on schedule, if at all. The commencement, data readouts and completion of clinical trials can be delayed for a number of reasons, including delays related to:
| ● | inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials; | |
| ● | failure in obtaining allowance or approval from regulatory authorities to commence a trial or reaching a consensus with regulatory authorities on trial design; | |
| ● | the FDA, the EMA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials; |
| ● | any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; | |
| ● | delays in identifying, recruiting and training suitable clinical investigators; | |
| ● | failure in obtaining approval from one or more institutional review boards (IRBs) or ethics committees at clinical trial sites; | |
| ● | IRBs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial; | |
| ● | changes or amendments to the clinical trial protocol; | |
| ● | clinical sites deviating from the trial protocol or dropping out of a trial; | |
| ● | failure by our CROs to perform in accordance with Good Clinical Practice (GCP) requirements or applicable regulatory rules and guidelines in other countries; | |
| ● | failure in manufacturing sufficient quantities of our product candidates, or obtaining sufficient quantities of combination therapies, for use in clinical trials; | |
| ● | subjects failing to enroll or remain in our trials at the rate we expect, or failing to return for post-treatment follow-up, including subjects failing to remain in our trials; | |
| ● | patients choosing an alternative product for the indications for which we are developing our product candidates, or participating in competing clinical trials; | |
| ● | lack of adequate funding to continue a clinical trial, or costs being greater than we anticipate; | |
| ● | subjects experiencing severe or serious unexpected drug-related adverse effects; | |
| ● | occurrence of serious adverse events in trials of the same class of agents conducted by other companies that could be considered similar to our product candidates; | |
| ● | selection of clinical endpoints that require prolonged periods of clinical observation or extended analysis of the resulting data; | |
| ● | transfer of manufacturing processes to larger-scale facilities operated by a contract manufacturing organization (CMO), delays or failure by our CMOs or us to make any necessary changes to such manufacturing process, or failure of our CMOs to produce clinical trial materials in accordance with current Good Manufacturing Practice (cGMP), regulations or other applicable requirements; and | |
| ● | third parties being unwilling or unable to satisfy their contractual obligations to us in a timely manner. |
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Clinical trials must be conducted in accordance with the FDA and other applicable regulatory authorities’ legal requirements, regulations and guidelines, and remain subject to oversight by these governmental agencies and ethics committees or IRBs at the medical institutions where such clinical trials are conducted. We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA, the EMA or comparable foreign regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or applicable clinical trial protocols, adverse findings from inspections of clinical trial sites by the FDA, the EMA or comparable foreign regulatory authorities, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to regulators or to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.
Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA, the EMA or comparable foreign regulatory authorities. The FDA, the EMA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA, the EMA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA, the EMA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.
In addition, the FDA’s, the EMA’s and other regulatory authorities’ policies with respect to clinical trials may change and additional government regulations may be enacted. For instance, the regulatory landscape related to clinical trials in the EU recently evolved. The EU Clinical Trials Regulation (CTR) which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. While the Clinical Trials Directive required a separate clinical trial application (CTA) to be submitted in each member state, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application to all member states concerned. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. Clinical trials for which an application was submitted (i) prior to January 31, 2022 under the Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which the sponsor has opted for the application of the Clinical Trials Directive remain governed by said Directive until January 31, 2025. After this date, all clinical trials (including those which are ongoing) will become subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our developments plans. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted.
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In addition, many of the factors that cause, or lead to, the termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Any resulting delays to our clinical trials could shorten any period during which we may have the exclusive right to commercialize our product candidates. In such cases, our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects.
We expect to continue to incur significant research and development expenses and other operating expenses, which may make it difficult for us to attain profitability.
We expect to expend substantial funds in research and development, including preclinical studies and clinical trials of our product candidates, and to manufacture and market any product candidates in the event they are approved for commercial sale. We also may need additional funding to develop or acquire complementary companies, technologies and assets, as well as for working capital requirements and other operating and general corporate purposes. Moreover, our planned increases in staffing will dramatically increase our costs in the near and long-term.
Because the successful development of our product candidates is uncertain, we are unable to precisely estimate the actual funds we will require to develop and potentially commercialize them. In addition, we may not be able to generate sufficient revenue, even if we are able to commercialize any of our product candidates, to become profitable.
We may expend our limited resources to pursue a limited number of research programs, product candidates and specific indications and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Due to our limited financial and managerial resources, we must focus on a limited number of research programs and product candidates and on specific indications. As such, we are currently focused on the development of Decoy20. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications for anti-cancer and anti-viral immunotherapy that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products.
Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization, cause us to suspend or discontinue clinical trials, abandon a product candidate, limit the commercial profile of an approved product, or result in other significant adverse implications on our business, financial condition and results of operations.
As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events associated with our product candidates’ use. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. For example, because the mechanism of action of our product candidates depends on stimulation of the immune system, there is the potential for over-stimulation or undesirable immune reactions. Undesirable side effects caused by our product candidates, whether used alone or in combination with other therapies, could cause us or regulatory authorities to interrupt, delay or halt clinical trials or the delay or denial of regulatory approval by the FDA, the EMA or comparable foreign regulatory authorities, or, if such product candidates are approved, result in a more restrictive label and other post-approval requirements. Any treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or could result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
If our product candidates are associated with undesirable side effects or have unexpected characteristics in preclinical studies or clinical trial, when used alone or in combination with other approved products or product candidates, we may need to interrupt, delay or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
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Patients in our ongoing and planned clinical trials may, in the future, suffer significant adverse events or other side effects not observed in our preclinical studies or previous clinical trials. Patients treated with our product candidates may also be undergoing surgical, radiation or chemotherapy treatments, which can cause side effects or adverse events that are unrelated to our product candidate, but may still impact the success of our clinical trials. The inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using or due to the gravity of such patients’ illnesses. If such significant adverse events or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to the clinical trials, or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA, other comparable regulatory authorities or an IRB may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Even if the side effects do not preclude the product candidate from obtaining or maintaining regulatory approval, undesirable side effects may inhibit market acceptance due to tolerability concerns as compared to other available therapies. Any of these developments could materially harm our business, financial condition and prospects.
Additionally, if any of our product candidates receives regulatory approval, and we or others later identify undesirable side effects caused by such product, a number of potentially significant negative consequences could result. For example, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy (REMS), to ensure that the benefits of treatment with such product candidate outweigh the risks for each potential patient, which may include, among other things, a communication plan to health care practitioners, patient education, extensive patient monitoring or distribution systems and processes that are highly controlled, restrictive and more costly than what is typical for the industry. We or our collaborators may also be required to adopt a REMS or engage in similar actions, such as patient education, certification of health care professionals or specific monitoring, if we or others later identify undesirable side effects caused by any product that we develop alone or with collaborators. Other potentially significant negative consequences associated with adverse events include:
| ● | we may be required to suspend marketing of a product, or we may decide to remove such product from the marketplace; | |
| ● | regulatory authorities may withdraw or change their approvals of a product; | |
| ● | regulatory authorities may require additional warnings on the label or limit access of a product to selective specialized centers with additional safety reporting and with requirements that patients be geographically close to these centers for all or part of their treatment; | |
| ● | we may be required to create a medication guide outlining the risks of a product for patients, or to conduct post-marketing studies; | |
| ● | we may be required to change the way a product is administered; | |
| ● | we could be subject to fines, injunctions, or the imposition of criminal or civil penalties, or be sued and held liable for harm caused to subjects or patients; and | |
| ● | a product may become less competitive, and our reputation may suffer. |
Any of these events could diminish the usage or otherwise limit the commercial success of our product candidates and prevent us from achieving or maintaining market acceptance of our product candidates, if approved by the FDA or other regulatory authorities.
We may find it difficult to enroll patients in our clinical trials. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Patient enrollment is a significant factor in the timing of clinical trials, and the timing of our clinical trials depends, in part, on the speed at which we can recruit patients to participate in our trials, as well as completion of required follow-up periods. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials to such trial’s conclusion as required by the FDA or other comparable regulatory authorities. The conditions for which we currently plan to evaluate our product candidates are diseases with limited patient pools from which to draw for clinical trials. The eligibility criteria of our clinical trials, once established, may further limit the pool of available trial participants.
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Patient enrollment for any of our clinical trials may be affected by other factors, including:
| ● | size and nature of the targeted patient population; | |
| ● | severity of the disease or condition under investigation; | |
| ● | availability and efficacy of approved therapies for the disease or condition under investigation; | |
| ● | patient eligibility criteria for the trial in question as defined in the protocol; | |
| ● | perceived risks and benefits of the product candidate under study; | |
| ● | clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any products that may be approved for, or any product candidates under investigation for, the indications we are investigating; | |
| ● | efforts to facilitate timely enrollment in clinical trials; | |
| ● | patient referral practices of physicians; | |
| ● | the ability to monitor patients adequately during and after treatment; | |
| ● | proximity and availability of clinical trial sites for prospective patients; | |
| ● | continued enrollment of prospective patients by clinical trial sites; and | |
| ● | the risk that patients enrolled in clinical trials will drop out of such trials before completion. |
Additionally, other pharmaceutical companies targeting these same diseases are recruiting clinical trial patients from these patient populations, which may make it more difficult to fully enroll our clinical trials. We also rely on, and will continue to rely on, CROs and clinical trial sites to ensure proper and timely conduct of our clinical trials and preclinical studies. Though we have entered into agreements governing their services, we will have limited influence over their actual performance. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates and jeopardize our ability to obtain regulatory approval for the sale of our product candidates. Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining enrollment of such patients in our clinical trials.
Interim, “topline” and preliminary data from our clinical trials and preclinical studies that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim, topline, or preliminary data from our clinical trials and preclinical studies, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, topline, or preliminary results that we report may differ from future results of the same studies or trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the topline or preliminary data we previously published. As a result, topline and preliminary data should be viewed with caution until the final data is available.
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Interim data from clinical trials that we may complete are further subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data becomes available. Adverse differences between interim, topline, or preliminary data and final data could significantly harm our business prospects. Further, disclosure of such data by us or by our competitors could result in volatility in the price of our common stock.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
Our efforts to discover product candidates beyond our current product candidates may not succeed, and any product candidates we recommend for clinical development may not actually begin clinical trials.
We intend to expand our existing pipeline of core assets. However, the process of researching and developing new product candidates is expensive, time-consuming and unpredictable. Data from our current preclinical programs may not support the clinical development of our product candidates, and we may not identify any additional products suitable for recommendation for clinical development. Moreover, any product candidate we recommend for clinical development may not demonstrate, through preclinical studies, indications of safety and potential efficacy that would support advancement into clinical trials. Such findings would potentially impede our ability to maintain or expand our clinical development pipeline. Our ability to develop new product candidates and advance them into clinical development also depends upon our ability to fund our research and development operations, and we cannot be certain that additional funding will be available on acceptable terms, or at all.
The regulatory approval processes of the FDA, the EMA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates are subject to extensive regulation by the FDA in the U.S. and by comparable foreign regulatory authorities in foreign markets, such as the EMA in Europe. In the U.S., we are not permitted to market our product candidates in the U.S. until we receive regulatory approval of a Biologics License Application (BLA) or New Drug Application (NDA) from the FDA. The process of obtaining such regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications and patient population. Approval policies or regulations may change, and the FDA, EMA and comparable regulatory authorities have substantial discretion in the approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval of a product candidate is never guaranteed. Of the large number of drugs in development, only a small percentage successfully complete the FDA, EMA or comparable regulatory approval processes and are commercialized.
Prior to obtaining approval to commercialize a product candidate in the U.S. or abroad, we must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses, and in the case of biological products, that such product candidates are safe, pure and potent. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe available nonclinical or clinical data support the safety purity, potency or efficacy of our product candidates, such data may not be sufficient to obtain approval from the FDA and comparable foreign regulatory authorities. The FDA, EMA or comparable foreign regulatory authorities, as the case may be, may also require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or post-approval, or may object to elements of our clinical development program.
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The FDA, EMA or comparable foreign regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including:
| ● | such authorities may disagree with the design or execution of our clinical trials; | |
| ● | negative or ambiguous results from our clinical trials or results may not meet the level of statistical significance required by the FDA, EMA or comparable foreign regulatory agencies for approval; | |
| ● | serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates; | |
| ● | the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; | |
| ● | such authorities may not accept clinical data from trials that are conducted at clinical facilities or in countries where the standard of care is potentially different from that of their own country; | |
| ● | we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; | |
| ● | such authorities may disagree with our interpretation of data from preclinical studies or clinical trials; | |
| ● | such authorities may not agree that the data collected from clinical trials of our product candidates are acceptable or sufficient to support the submission of a BLA, NDA or other submission or to obtain regulatory approval in the U.S. or elsewhere, and such authorities may impose requirements for additional preclinical studies or clinical trials; | |
| ● | such authorities may disagree with us regarding the formulation, labeling and/or the product specifications of our product candidates; | |
| ● | approval may be granted only for indications that are significantly more limited than those sought by us, and/or may include significant restrictions on distribution and use; | |
| ● | such authorities may find deficiencies in the manufacturing processes or facilities of the third-party manufacturers with which we contract for clinical and commercial supplies; or | |
| ● | such authorities may not accept a submission due to, among other reasons, the content or formatting of the submission. |
With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods and agreements with pricing authorities. Even if we eventually complete clinical trials and receive approval of a BLA, NDA or comparable foreign marketing application for our product candidates, the FDA or comparable foreign regulatory authority may grant approval contingent on the performance of costly additional clinical trials and/or the implementation of a REMS, which may be required because the FDA believes it is necessary to ensure safe use of the product after approval. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects.
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Even if we obtain FDA approval for any of our product candidates in the United States, we may never obtain approval for or commercialize such candidates in any other jurisdiction, which would limit our ability to realize their full market potential.
In order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country.
Approval processes vary among countries and can involve additional product testing and validation, as well as additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional preclinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, prevent new or modified products from being developed, reviewed, approved or commercialized in a timely manner or at all, which could negatively impact our business.
The ability of the FDA and foreign regulatory authorities to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s or foreign regulatory authorities’ ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s or foreign regulatory authorities’ ability to perform routine functions. Average review times at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies, such as the EMA following its relocation to Amsterdam and resulting staff changes, may also slow the time necessary for new drugs, and biologics or modifications to approved drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
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Even if we receive regulatory approval for any product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expenses.
Any regulatory approvals that we may receive for our product candidates will require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of the product candidate, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements. For example, the FDA may require a REMS in order to approve our product candidates, which could entail requirements for a medication guide, physician training and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or foreign regulatory authorities approve our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as on-going compliance with cGMPs and GCP for any clinical trials that we may conduct. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facilities where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. In addition, failure to comply with FDA and other comparable foreign regulatory requirements may subject our company to administrative or judicially imposed sanctions, including:
| ● | restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls; | |
| ● | restrictions on product distribution or use, or requirements to conduct post-marketing studies or clinical trials; |
| ● | fines, restitutions, disgorgement of profits or revenues, warning letters, untitled letters or holds on clinical trials; | |
| ● | refusal by the FDA to approve pending applications or supplements to approved applications submitted by us or suspension or revocation of approvals; | |
| ● | product seizure or detention, or refusal to permit the import or export of our products; and | |
| ● | injunctions or the imposition of civil or criminal penalties. |
The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue and could require us to expend significant time and resources in response and could generate negative publicity.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be promulgated that could prevent, limit or delay marketing authorization of any product candidates we develop. We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.
The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.
The FDA strictly regulates marketing, labeling, advertising and promotion of prescription drugs. These regulations include standards and restrictions for direct-to-consumer advertising, industry-sponsored scientific and educational activities, promotional activities involving the internet and off-label promotion. Any regulatory approval that the FDA grants is limited to those specific diseases and indications for which a product is deemed to be safe and effective by FDA. While physicians in the United States may choose, and are generally permitted, to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical trials and approved by the regulatory authorities, our ability to promote any products will be narrowly limited to those indications that are specifically approved by the FDA.
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If we are found to have promoted such off-label uses, we may become subject to significant liability. The U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of any product candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.
Risks Related to Our Dependence on Third Parties
The commercial success of our product candidates depends upon their market acceptance among physicians, patients, healthcare payors and the medical community.
Even if our product candidates obtain regulatory approval, our products, if any, may not gain market acceptance among physicians, patients, healthcare payors and the medical community. The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including:
| ● | the effectiveness of our approved product candidates as compared to currently available products; | |
| ● | patient willingness to adopt our approved product candidates in place of current therapies; | |
| ● | our ability to provide acceptable evidence of safety and efficacy; | |
| ● | relative convenience and ease of administration; | |
| ● | the prevalence and severity of any adverse side effects; | |
| ● | restrictions on use in combination with other products; | |
| ● | availability of alternative treatments; | |
| ● | pricing and cost-effectiveness assuming either competitive or potential premium pricing requirements, based on the profile of our product candidates and target markets; | |
| ● | effectiveness of our or our partners’ sales and marketing strategy; | |
| ● | our ability to obtain sufficient third-party coverage or reimbursement; and | |
| ● | potential product liability claims. |
In addition, the potential market opportunity for our product candidates is difficult to precisely estimate. Our estimates of the potential market opportunity for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research reports and other surveys. Independent sources have not verified all of our assumptions. If any of these assumptions prove to be inaccurate, then the actual market for our product candidates could be smaller than our estimates of our potential market opportunity. If the actual market for our product candidates is smaller than we expect, our product revenues may be limited, it may be harder than expected to raise funds, and it may be more difficult for us to achieve or maintain profitability. If we fail to achieve market acceptance of our product candidates in the U.S. and abroad, our revenue will be limited and it will be more difficult to achieve profitability.
We rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business, financial condition and results of operations could be substantially harmed.
We rely upon third-party CROs, medical institutions, clinical investigators and contract laboratories to monitor and manage data for our ongoing preclinical and clinical programs. These CROs, investigators and other third parties play a significant role in the conduct and timing of these trials and subsequent collection and analysis of data. Though we expect to carefully manage our relationships with such CROs, investigators and other third parties, there can be no assurance that we will not encounter challenges or delays in the future, or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects. Further, while we have and will have agreements governing the activities of our third-party contractors, we have limited influence over their actual performance. Nevertheless, we maintain responsibility for ensuring that each of our clinical trials and preclinical studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on these third parties does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with requirements for cGMP, or similar foreign requirements, GCP, and good laboratory practice (GLP), which are a collection of laws and regulations enforced by the FDA, the EMA and comparable foreign authorities for all of our product candidates in clinical development. Regulatory authorities enforce these regulations through periodic inspections of preclinical study and clinical trial sponsors, principal investigators, preclinical study and clinical trial sites, and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our preclinical studies and clinical trials may be deemed unreliable, and the FDA, the EMA or comparable foreign authorities may require us to perform additional preclinical studies and clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with products produced consistent with cGMP regulations, or similar foreign requirements. Our failure to comply with these regulations may require it to repeat clinical trials, which would delay the development and regulatory approval processes.
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We may not be able to enter into arrangements with CROs on commercially reasonable terms, or at all. In addition, our CROs will not be our employees, and except for remedies available to us under our agreements with such CROs, we will not be able to control whether or not they devote sufficient time and resources to our ongoing preclinical and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated. As a result, our business, financial condition and results of operations and the commercial prospects for our product candidates could be materially and adversely affected, our costs could increase, and our ability to generate revenue could be delayed.
In addition, principal investigators for our clinical trials may be asked to serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA of any BLA or NDA we submit. Any such delay or rejection could prevent us from commercializing our product candidates.
In addition, our CROs have the right to terminate their agreements with us in the event of an uncured material breach and under other specified circumstances. If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third parties on commercially reasonable terms or at all. Switching or adding additional CROs, medical institutions, clinical investigators or contract laboratories involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work replacing a previous CRO. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. There can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse effect on our business, financial condition or results of operations.
We currently rely on third parties for the manufacture of our product candidates during clinical development, and expect to continue to rely on third parties for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates, or such quantities at an acceptable cost, which could delay, prevent or impair our development or potential commercialization efforts.
We do not own or operate manufacturing facilities and have no current plans to develop our own clinical or commercial-scale manufacturing capabilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates, and related raw materials for clinical development, as well as for commercial manufacture if any of our product candidates receives regulatory approval. The facilities used by our third-party manufacturers must be approved for the manufacture of our product candidates by the FDA, EMA, or any comparable foreign regulatory authority, pursuant to inspections that will be conducted after we submit an NDA or BLA to the FDA, or submit a comparable marketing application to a foreign regulatory authority. We do not control the manufacturing process of, and are completely dependent on, third-party manufacturers for compliance with cGMP requirements for manufacture of our product candidates. If these third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or any comparable foreign regulatory authority, they will not be able to secure and/or maintain regulatory approval for the use of their manufacturing facilities.
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In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA, EMA or any comparable foreign regulatory authority does not approve these facilities for the manufacture our product candidates, or if such authorities withdraw any such approval in the future, we may be required to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our financial position.
Our or a third party’s failure to execute on our manufacturing requirements on commercially reasonable terms and in compliance with cGMP or other regulatory requirements could adversely affect our business in a number of ways, including:
| ● | an inability to initiate or complete clinical trials of our product candidates in a timely manner; | |
| ● | delay in submitting regulatory applications, or receiving regulatory approvals, for our product candidates; | |
| ● | subjecting third-party manufacturing facilities to additional inspections by regulatory authorities; | |
| ● | requirements to cease development or to recall batches of our product candidates; and | |
| ● | in the event of approval to market and commercialize any product candidate, an inability to meet commercial demands. |
In addition, we do not have any long-term commitments or supply agreements with any third-party manufacturers. We may be unable to establish any long-term supply agreements with third-party manufacturers or to do so on acceptable terms, which increases the risk of failing to timely obtain sufficient quantities of our product candidates or such quantities at an acceptable cost. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
| ● | failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance; | |
| ● | breach of the manufacturing agreement by the third party; | |
| ● | failure to manufacture our product candidates according to our specifications; | |
| ● | failure to manufacture our product according to our schedule or at all; | |
| ● | misappropriation of our proprietary information, including our trade secrets and know-how; and | |
| ● | termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us. |
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Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval, and any related remedial measures may be costly or time consuming to implement. We do not currently have arrangements in place for redundant supply or a second source for all required raw materials used in the manufacture of our product candidates. If our existing or future third-party manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all, which would have a material adverse impact on our financial position.
Any clinical supply or collaboration arrangement that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our current and potential future product candidates.
We may seek clinical supply or collaboration arrangements with biopharmaceutical companies for the development or commercialization of our current and potential future product candidates. For example, in October 2024, we entered into a clinical supply agreement with BeiGene to advance the clinical trial evaluation of Decoy20 in combination with BeiGene’s anti-PD-1 antibody, tislelizumab (the “BeiGene Product”) for the treatment of patients with advanced solid tumors (the “Combination Study”). Under our agreement with BeiGene, we will rely on BeiGene for the supply of the Beigene Product. If BeiGene cannot perform as agreed, we may be unable to initiate or complete the Combination Study in a timely manner or at all.
To the extent that we decide to enter into collaboration agreements, we will face significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, execute and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements should we choose to enter into such arrangements, and the terms of the arrangements may not be favorable to us. If and when we collaborate with a third party for development and commercialization of a product candidate, we can expect to relinquish some or all of the control over the future success of that product candidate to the third party. The success of our clinical supply or collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.
Disagreements between parties to a clinical supply or collaboration arrangement can lead to delays in developing or commercializing the applicable product candidate and can be difficult to resolve in a mutually beneficial manner. In some cases, collaborations with biopharmaceutical companies and other third parties are terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect our business, financial condition and results of operations.
If we are unable to develop our own commercial organization or enter into agreements with third parties to sell and market our product candidates, we may be unable to generate significant revenues.
We do not have a sales and marketing organization, and we have no experience as a company in the sales, marketing and distribution of pharmaceutical products. If any of our product candidates are ever approved for commercialization, we may be required to develop our sales, marketing and distribution capabilities, or make arrangements with a third party to perform sales and marketing services. Developing a sales force for any product resulting from any of our product candidates is expensive and time consuming and could delay any product launch. We may be unable to establish and manage an effective sales force in a timely or cost-effective manner, if at all, and any sales force we do establish may not be capable of generating sufficient demand for our product candidates. To the extent that we enter into arrangements with collaborators or other third parties to perform sales and marketing services, our product revenues are likely to be lower than if we marketed and sold our product candidates independently. If we are unable to establish adequate sales and marketing capabilities, independently or with others, we may not be able to generate significant revenues and may not become profitable.
Risks Related to Commercialization
The successful commercialization of Decoy20 or any future product candidates, if approved, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our products could limit our ability to market those products and decrease our ability to generate revenue.
The availability of coverage and the adequacy of reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford prescription medications such as Decoy20 and any future product candidates, if approved. Our ability to achieve coverage and acceptable levels of reimbursement for our products by third-party payors will have an effect on our ability to successfully commercialize those products. Accordingly, we will need to successfully implement a coverage and reimbursement strategy for any approved product candidate. Even if we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high.
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If we participate in the Medicaid Drug Rebate Program or other governmental pricing programs, in certain circumstances, our products would be subject to ceiling prices set by such programs, which could reduce the revenue we may generate from any such products. Participation in such programs would also expose us to the risk of significant civil monetary penalties, sanctions and fines should we be found to be in violation of any applicable obligations thereunder.
For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available, or at an acceptable level, for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.
Third-party payors increasingly are challenging prices charged for biopharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payor may consider our products as substitutable and only offer to reimburse patients for the less expensive product. Even if we are successful in demonstrating improved efficacy or improved convenience of administration with our products, pricing of existing drugs may limit the amount we will be able to charge for our products. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our products and may not be able to obtain a satisfactory financial return on products that we may develop.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for Decoy20 and any future product candidates.
Obtaining and maintaining reimbursement status is time-consuming, costly and uncertain. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs. However, no uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently and, in some cases, at short notice, and we believe that changes in these rules and regulations are likely.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of our products candidates, if approved in these jurisdictions. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our products. Accordingly, in markets outside the United States, if any, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.
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Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our products. We expect to experience pricing pressures in connection with the sale of any of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, and prescription drugs, surgical procedures and other treatments in particular, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize Decoy20 and any future product candidates and may affect the prices we may set.
In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system, including cost-containment measures that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any product candidates for which we obtain marketing approval. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare.
By way of example, in March 2010, the ACA was enacted in the United States. The ACA established an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents; extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; expanded eligibility criteria for Medicaid programs; expanded the entities eligible for discounts under the 340B drug pricing program; increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and establishes a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending.
Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and on June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden had issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the healthcare reform measures will impact our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminate the statutory cap on the Medicaid drug rebate, beginning January 1, 2024 at 100% of a drug’s AMP. Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient assistance programs, and reform government program reimbursement methodologies for products. Most recently, the Inflation Reduction Act of 2022, or IRA, included a number of significant drug pricing reforms, which include the establishment of a drug price negotiation program within the U.S. Department of Health and Human Services, or HHS (beginning in 2026) that requires manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation (first due in 2023), and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs (beginning in 2025). The IRA permits the HHS Secretary to implement many of these provisions through guidance, as opposed to regulation, for the initial years. On August 29, 2023, HHS announced the list of the first ten drug that will be subject to price negotiations, although the drug price negotiation program is currently subject to legal challenges. For that and other reasons, it is currently unclear how the IRA will be effectuated. Additional drug pricing proposals could appear in future legislation.
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At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for Decoy20 and any future product candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
We expect that these new laws and other healthcare reform measures that may be adopted in the future may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize Decoy20 and any future product candidates, if approved.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any product candidates that we may develop.
We will face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any product candidates that we may develop. If we cannot successfully defend ourselves against claims that our product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
| ● | decreased demand for any product candidates that we may develop; | |
| ● | injury to our reputation and significant negative media attention; | |
| ● | regulatory investigations that could require costly recalls or product modifications; | |
| ● | withdrawal of clinical trial participants; | |
| ● | significant costs to defend the related litigation; | |
| ● | substantial monetary awards to trial participants or patients; | |
| ● | loss of potential revenue; | |
| ● | the diversion of management’s attention away from managing our business; and | |
| ● | the inability to commercialize any product candidates that we may develop. |
Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that we may incur and is subject to deductibles and coverage limitations. We anticipate that we will need to increase our insurance coverage when and if we successfully commercialize any product candidate. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If we are unable to obtain insurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our commercialization efforts.
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We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit the supply of our product candidates.
The process of manufacturing our product candidates is complex, highly regulated, and subject to several risks. For example, the process of manufacturing our product candidates is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing processes for any of our product candidates could result in reduced production yields, product defects, and other supply disruptions. If microbial, viral, or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. In addition, the manufacturing facilities in which our product candidates are made could be adversely affected by equipment failures, labor shortages, natural disasters, power failures and numerous other factors.
In addition, any adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls, or other interruptions in the supply of our product candidates. We also may need to take inventory write-offs and incur other charges and expenses for product candidates that fail to meet specifications, undertake costly remediation efforts, or seek costlier manufacturing alternatives.
Risks Related to Competition, Retaining Key Employees and Managing Growth
If our competitors have product candidates that are approved faster, marketed more effectively, are better tolerated, have a more favorable safety profile or are demonstrated to be more effective than our product candidates, our commercial opportunity may be adversely affected.
The industry in which we operate is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, knowledge, experience and scientific resources provide it with competitive advantages, we face potential competition from many different sources, including commercial biotechnology enterprises, academic institutions, government agencies and private and public research institutions. Any product candidates that we successfully develop and commercialize will compete with existing immunotherapies and new immunotherapies that may become available in the future.
Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies, clinical trials, regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our competitors may succeed in developing technologies and therapies that are more effective, better tolerated or less costly than any which we are developing, or that would render our product candidates obsolete and noncompetitive. Even if we obtain regulatory approval for any of our product candidates, our competitors may succeed in obtaining regulatory approvals for their products earlier than we do. We will also face competition from these third parties in recruiting and retaining qualified scientific and management personnel, in establishing clinical trial sites and patient registration for clinical trials, and in acquiring and in-licensing technologies and products complementary to our programs or advantageous to our business.
The key competitive factors affecting the success of each of our product candidates, if approved, are likely to be its efficacy, safety, tolerability, frequency and route of administration, convenience and price, the level of branded and generic competition, market acceptance by physicians and patients, and the availability of coverage and reimbursement from government and other third-party payors.
Any product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product.
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We believe that any of our future product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to Congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, could be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products will depend on a number of marketplace and regulatory factors that are still developing.
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on our current senior management. If we fail to retain current members of our senior management and scientific personnel, or to attract and keep additional key personnel, we may be unable to successfully develop or commercialize our product candidates. We are highly dependent on our chief executive officer, Jeffrey A. Meckler, and our chief scientific officer, Michael J. Newman, Ph.D. Our success depends on our continued ability to attract, retain and motivate highly qualified management and scientific personnel. However, competition for qualified personnel is intense. We may not be successful in attracting qualified personnel to fulfill our current or future needs on a full-time employment basis, or at all. In the event we are unable to fill critical open employment positions, we may need to delay our operational activities and goals, including the development of the company’s product candidates, and may have difficulty in meeting our obligations as a public company. We do not currently maintain “key person” insurance on any of our employees.
In addition, competitors and others are likely in the future to attempt to recruit our employees. The loss of the services of any of our key personnel, the inability to attract or retain highly qualified personnel in the future or delays in hiring such personnel, particularly senior management and other technical personnel, could materially and adversely affect our business, financial condition and results of operations. In addition, the replacement of key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives. From time to time, our management seeks the advice and guidance of certain scientific advisors and consultants regarding clinical and regulatory development programs and other customary matters. These scientific advisors and consultants are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our scientific advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with us.
We will need to increase the size of our organization and may not successfully manage our growth.
We are an early clinical-stage biotechnology company with a small number of employees, and our management systems currently in place are not likely to be adequate to support our future growth plans. Our ability to grow and to manage our growth effectively will require us to hire, train, retain, manage and motivate additional employees and to implement and improve our operational, financial and management systems. These demands also may require the hiring of additional senior management personnel or the development of additional expertise by our senior management personnel. Hiring a significant number of additional employees, particularly those at the management level, would increase our expenses significantly. Moreover, if we fail to expand and enhance our operational, financial and management systems in conjunction with our potential future growth, it could have a material adverse effect on our business, financial condition and results of operations.
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Risks Related to Our Intellectual Property
We may not be able to adequately protect our proprietary or licensed technology in the marketplace.
We depend on our ability to protect our proprietary technology and products, or those that we may license. We intend to rely on trade secret, patent, copyright and trademark laws, confidentiality, license, and other agreements with employees and third parties to protect our intellectual property. Our success depends in large part on our ability and any licensor’s or licensee’s ability to obtain and maintain patent protection in the U.S. and other countries with respect to our proprietary or licensed technology and products. We cannot be certain that patent enforcement activities by future licensors will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights. We also cannot be certain that future licensors will allocate sufficient resources or prioritize their or our enforcement of such patents. Even if we are not a party to these legal actions, an adverse outcome could prevent us from licensing intellectual property that we may need to operate our business, which would have a material adverse effect on our business, financial condition and results of operations.
We believe we will be able to obtain, through prosecution of patent applications covering our owned technology, adequate patent protection for our proprietary technology. If we are compelled to spend significant time and money protecting or enforcing our patents and future patents that we may own, designing around patents held by others or licensing or acquiring, potentially for large fees, patents or other proprietary rights held by others, our business, financial condition and results of operations may be materially and adversely affected. If we are unable to effectively protect the intellectual property that we own or in-license, other companies may be able to offer the same or similar products for sale, which could materially adversely affect our business, financial condition and results of operations. The patents of others from whom we may license technology, and any future patents we may own, may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing the same or similar products or limit the length of term of patent protection that we may have for our products.
We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.
We may be unable to acquire or in-license any compositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary for our current or future product candidates. We may face competition with regard to acquiring and in-licensing third-party intellectual property rights, including from a number of more established companies. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license intellectual property rights to us. We also may be unable to acquire or in- license third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment.
We may enter into collaboration agreements with U.S. and foreign academic institutions to accelerate development of our current or future preclinical product candidates. Typically, these agreements include an option for the company to negotiate a license to the institution’s intellectual property rights resulting from the collaboration. Even with such an option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to license rights from a collaborating institution, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our desired program.
If we are unable to successfully obtain required third-party intellectual property rights or maintain our existing intellectual property rights, we may need to abandon development of the related program and our business, financial condition and results of operations could be materially and adversely affected.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection for licensed patents, pending patent applications and potential future patent applications and patents 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 patent applications will be due to be paid to the United States Patent and Trademark Office “USPTO” and various governmental patent agencies outside of the U.S. in several stages over the lifetime of the applicable patent and/or patent application. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. 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. If this occurs with respect to our in-licensed patents or patent applications we may file in the future, our competitors might be able to use our technologies, which would have a material adverse effect on our business, financial condition and results of operations.
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The patent positions of products are often complex and uncertain. The breadth of claims allowed in patents in the U.S. and many jurisdictions outside of the U.S. may not be consistent. Changes in either the patent laws or interpretations of patent laws in the U.S. and other countries may diminish the value of our licensed or owned intellectual property or create uncertainty. In addition, publication of information related to our current product candidates and potential products may prevent us from obtaining or enforcing patents relating to these product candidates and potential products, including without limitation composition-of-matter patents, which are generally believed to offer the strongest patent protection.
Patents that we may own now or may own or license in the future do not necessarily ensure the protection of our licensed or owned intellectual property for a number of reasons, including, without limitation, the following:
| ● | the patents may not be broad or strong enough to prevent competition from other products that are identical or similar to our product candidates; | |
| ● | there can be no assurance that the term of a patent can be extended under the provisions of patent term extensions afforded by U.S. law or similar provisions in foreign countries, where available; | |
| ● | the issued patents and patents that we may own now or may obtain or license in the future may not prevent generic or biosimilar entry into the market for our product candidates; | |
| ● | we, or third parties from whom we in-license or may license patents, may be required to disclaim part of the term of one or more patents; | |
| ● | there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim; | |
| ● | there may be prior art of which we are aware, which we do not believe affects the validity or enforceability of a patent claim, but which, nonetheless, ultimately may be found to affect the validity or enforceability of a patent claim; | |
| ● | there may be other patents issued to others that will affect our freedom to operate; | |
| ● | if the patents are challenged, a court could determine that they are invalid or unenforceable; | |
| ● | there might be a significant change in the law that governs patentability, validity and infringement of our licensed patents or any future patents we may own that adversely affects the scope of our patent rights; | |
| ● | a court could determine that a competitor’s technology or product does not infringe our patents or any future patents we may own; and | |
| ● | the patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be subject to compulsory licensing. If we encounter delays in our development or clinical trials, the period of time during which we could market our potential products under patent protection would be reduced. |
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Our competitors may be able to circumvent patents or future patents that we may own by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may seek to market generic or biosimilar versions of any approved products by submitting abbreviated new applications or biosimilar biological product applications to the FDA in which our competitors claim that our licensed patents or any future patents we may own are invalid, unenforceable or not infringed. Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products. In these circumstances, we may need to defend or assert our patents or any future patents we may own, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our licensed patents or any future patents we may own invalid or unenforceable. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Even if we own or in-license valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.
The issuance of a patent is not conclusive as to its inventorship, scope, ownership, priority, validity or enforceability. In this regard, third parties may challenge our patents or any future patents we may own in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and potential products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan, and the protection patents afford is limited. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Even if patents covering our product candidates are obtained, once the patent life has expired for patents covering a product or product candidate, we may be open to competition from competitive products and services. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and prevent us from commercializing, or increase the costs of commercializing, our products.
Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties. For example, there could be issued patents of which we are not aware that our current or potential future product candidates infringe. There also could be patents that we believe we do not infringe upon, but that we may ultimately be found to infringe upon.
Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our product candidates or potential products infringe. For example, pending applications may exist that claim or can be amended to claim subject matter that our product candidates or potential products infringe. Competitors may file continuing patent applications claiming priority to already issued patents in the form of continuation, divisional, or continuation-in-part applications, in order to maintain the pendency of a patent family and attempt to cover our product candidates.
Third parties may assert that we are employing their proprietary technology without authorization and may sue us for patent or other intellectual property infringement. These lawsuits are costly and could adversely affect our business, financial condition and results of operations and divert the attention of managerial and scientific personnel. If we are sued for patent infringement, we would need to demonstrate that our product candidates, potential products or methods either do not infringe the claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving invalidity is difficult. For example, in the U.S., proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion. If a court holds that any third-party patents are valid, enforceable and cover our products or their use, the holders of any of these patents may be able to block our ability to commercialize our products unless it acquires or obtains a license under the applicable patents or until the patents expire.
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We may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to secure licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by us. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially and adversely affect our business, financial condition and results of operations. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar material and adverse effect on our business, financial condition and results of operations. 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.
Any claims or lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time consuming and may adversely affect our business, financial condition and results of operations.
We may be required to initiate litigation to enforce or defend our licensed and owned intellectual property. Lawsuits to protect our intellectual property rights can be very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the biopharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating expenses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
In any infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
In addition, our patents and patent applications, and patents and patent applications that we may apply for, own or license in the future, could face other challenges, such as interference proceedings, opposition proceedings, re-examination proceedings and other forms of post-grant review. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our patents and patent applications and patents and patent applications that we may apply for, own or license in the future subject to challenge. Any of these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management and scientific personnel’s time and attention.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involves both technological and legal complexity and is costly, time-consuming and inherently uncertain. For example, the U.S. previously enacted and is currently implementing wide-ranging patent reform legislation. Specifically, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law and included a number of significant changes to U.S. patent law, and many of the provisions became effective in March 2013. However, it may take the courts years to interpret the provisions of the Leahy-Smith Act, and the implementation of the statute could increase the uncertainties and costs surrounding the prosecution of our licensed and future patent applications and the enforcement or defense of our licensed and future patents, all of which could have a material adverse effect on our business, financial condition and results of operations.
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In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we might obtain in the future.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on product candidates throughout the world could be prohibitively expensive. Competitors may use our licensed and owned technologies in jurisdictions where we have not licensed or obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain or license patent protection, but where patent enforcement is not as strong as that in the U.S. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our licensed patents and future patents we may own, or marketing of competing products in violation of our proprietary rights generally. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our licensed and owned intellectual property both in the U.S. and abroad. Proceedings to enforce our future patent rights, if any, in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our corporate partners, employees, consultants, manufacturers, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of our confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
We may be subject to claims challenging the inventorship of our patents, any future patents we may own, and other intellectual property.
Although we are not currently experiencing any claims challenging the inventorship of our patents or our owned intellectual property, we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other owned intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business, financial condition and results of operations. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
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Risks Related to Healthcare Laws and Other Legal Compliance Matters
We are subject to various U.S. federal, state and foreign healthcare laws and regulations, which could increase compliance costs, and our failure to comply with these laws and regulations could harm our results of operations and financial condition.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers expose us to broadly applicable foreign, federal and state fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute any products for which we obtain marketing approval. Such laws include:
| ● | the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, in return for, either the referral of an individual or the purchase, lease, or order, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation; | |
| ● | the federal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making or causing to be made a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; | |
| ● | the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the federal Anti- Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; | |
| ● | the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare & Medicaid Services (CMS), information related to payments and other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives), and teaching hospitals and other healthcare providers, as well as ownership and investment interests held by such healthcare professionals and their immediate family members; and | |
| ● | analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; some state laws require biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; some state laws that require biotechnology companies to report information on the pricing of certain drug products; and some state and local laws that require the registration or pharmaceutical sales representatives. |
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Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare and privacy laws and regulations will involve ongoing substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government-funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations. Defending against any such actions can be costly and time-consuming and may require significant financial and personnel resources.
Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found not to be in compliance with applicable laws or regulations, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.
Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal information. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. Each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues. If we fail to comply with applicable laws and regulations, we may face government investigations and/or enforcement actions, fines, civil or criminal penalties, private litigation or adverse publicity that could adversely affect our business, financial condition and results of operation. For example, we may be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information from a covered entity in a manner that is not authorized or permitted by the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder or applicable state laws.
Violations of or liabilities under environmental, health and safety laws and regulations could subject us to fines, penalties or other costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures, the handling, use, storage, treatment and disposal of hazardous materials and wastes and the cleanup of contaminated sites. Our operations involve the use of potentially hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We could incur substantial costs as a result of violations of or liabilities under environmental requirements in connection with our operations or property, including fines, penalties and other sanctions, investigation and cleanup costs and third-party claims. Although we generally contract with third parties for the disposal of hazardous materials and wastes from our operations, we cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.
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Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of changes to applicable laws and regulations and cannot be certain of our future compliance. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.
Other Risks Related to Our Business
Our business and operations may suffer in the event of information technology system failures, cyberattacks or deficiencies in our cybersecurity.
We collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information of customers and our employees and contractors. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.
Our information technology systems and those of our third-party service providers, strategic partners and other contractors or consultants are vulnerable to attack and damage or interruption from computer viruses and malware (e.g. ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information.
Further, attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. As a result of the changes brought about by the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.
We and certain of our service providers are from time to time subject to cyberattacks and security incidents. While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss, corruption or unauthorized disclosure of our trade secrets, personal information or other proprietary or sensitive information or other similar disruptions. If a security breach or other incident were to result in the unauthorized access to or unauthorized use, disclosure, release or other processing of personal information, it may be necessary to notify individuals, governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and security laws. We could also incur liability, including litigation exposure, penalties and fines, and we could become the subject of regulatory action or investigation. Our competitive position could be harmed and the further development and commercialization of our products and services could be delayed. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. While we have implemented a cybersecurity risk management program, there can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
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We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.
From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products, product candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our business, financial condition and results of operations. For example, these transactions may entail numerous operational and financial risks, including:
| ● | exposure to unknown liabilities; | |
| ● | disruption of our business and diversion of our management’s time and attention in order to develop acquired products, product candidates or technologies; | |
| ● | incurrence of substantial debt or dilutive issuances of equity securities to pay for any of these transactions; | |
| ● | higher-than-expected transaction and integration costs; | |
| ● | write-downs of assets or goodwill or impairment charges; | |
| ● | increased amortization expenses; | |
| ● | difficulty and cost in combining the operations and personnel of any acquired businesses or product lines with our operations and personnel; | |
| ● | impairment of relationships with key suppliers or customers of any acquired businesses or product lines due to changes in management and ownership; and | |
| ● | inability to retain key employees of any acquired businesses. |
Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Common Stock
If we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
Nasdaq has established certain standards for the continued listing of a security on the Nasdaq Capital Market. The standards for continued listing include, among other things, that the minimum bid price for the listed securities not fall below $1.00 per share for a period of 30 consecutive trading days and that we maintain a minimum of $2,500,000 in stockholders’ equity.
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On January 31, 2025, we were notified, or the Notification Letter, by the Nasdaq Listing Qualifications that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2), or the Rule, for continued listing on The Nasdaq Capital Market.
The Notification Letter provides that the Company has 180 calendar days, or until July 30, 2025, to regain compliance with the Rule. To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. In the event we do not regain compliance by July 30, 2025, we may then be eligible for an additional 180 days if we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second compliance period, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity to appeal the delisting determination to a Hearings Panel.
No assurance can be given that we will be able to regain compliance with the Rule. Failure to meet applicable Nasdaq continued listing standards could result in a delisting of our common stock. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities.
The market price of our common stock is volatile and you may sustain a complete loss of your investment.
Our common stock currently trades on the Nasdaq Capital Market. The market price of our common stock has been, and is likely to continue to be, volatile. The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:
| ● | inability to obtain the approvals necessary to commence clinical trials; | |
| ● | results of clinical and preclinical studies; |
| ● | announcements of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process; | |
| ● | announcements of technological innovations, new products or product enhancements by us or others; | |
| ● | adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities; | |
| ● | changes or developments in laws, regulations or decisions applicable to our product candidates or patents; | |
| ● | any adverse changes to our relationship with manufacturers, suppliers or partners; | |
| ● | announcements concerning our competitors or the pharmaceutical or biotechnology industries in general; | |
| ● | achievement of expected product sales and profitability or our failure to meet expectations; | |
| ● | our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual property infringement actions; | |
| ● | any major changes in our board of directors, management or other key personnel; | |
| ● | legislation in the United States, Europe and other foreign countries relating to the sale or pricing of pharmaceuticals; | |
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| ● | announcements by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments; | |
| ● | expiration or terminations of licenses, research contracts or other collaboration agreements; | |
| ● | public concern as to the safety of therapeutics we, any licensees or others develop; | |
| ● | success of research and development projects; | |
| ● | developments concerning intellectual property rights or regulatory approvals; | |
| ● | variations in us and our competitors’ results of operations; | |
| ● | changes in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts; | |
| ● | future issuances of common stock or other securities; | |
| ● | general market conditions, including the volatility of market prices for shares of biotechnology companies generally, and other factors, including factors unrelated to our operating performance; | |
| ● | political and economic instability, war or acts of terrorism (such as Russia’s invasion of Ukraine and the conflict in the Middle East) or natural disasters, emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency, similar to the unprecedented COVID-19 pandemic); and | |
| ● | the other factors described in this “Risk Factors” section. |
These factors and any corresponding price fluctuations may materially and adversely affect the market price of our common stock, which would result in substantial losses by our investors.
Further, the stock market in general, the Nasdaq Capital Market and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like theirs. See also “General Risk Factors - “Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.” Broad market and industry factors may negatively affect the market price of our common stock regardless of our actual operating performance. In addition, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly. Price volatility of our common stock might be worse if the trading volume of our common stock is low. In the past, following periods of market volatility, stockholders have often instituted securities class action litigation. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such securities litigation, it could result in substantial costs and a diversion of management’s resources and attention, which could harm our business. Future sales of our common stock could also reduce the market price of our stock.
Moreover, the liquidity of our common stock will be limited, not only in terms of the number of shares of common stock that can be bought and sold at a given price, but by potential delays in the timing of executing transactions in our common stock and a reduction in security analyst and media’s coverage of us, if any. These factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and ask prices for our common stock. In addition, without a large float, our common stock will be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate their investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our common stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.
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An active trading market for our common stock may not be sustained.
An active public trading market for our common stock may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
If securities or industry analysts do not publish or cease publishing research or reports, or publish unfavorable reports about us, our business or our market, our share price and trading volume could be negatively impacted.
The trading market for our common stock could be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our common stock, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact our share price or trading volume.
Sales of a substantial number of our shares in the public market by our existing s could cause our share price to decline.
Sales of a substantial number of our shares in the public market or the perception that these sales might occur, could depress the market price of our securities and could impair our ability to raise capital through the sale of additional equity securities. We are not able to predict the effect that sales may have on the prevailing market price of our securities.
We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
We are considered a “smaller reporting company.” We are therefore entitled to rely on certain reduced disclosure requirements, such as an exemption from providing selected financial data and executive compensation information. These exemptions and reduced disclosures in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict whether investors will find our common stock less attractive because we may 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 prices may be more volatile.
Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act and The Nasdaq Stock Market LLC (“Nasdaq”) rules. The requirements of these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and place strain on our personnel, systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition.
The Sarbanes-Oxley Act requires, among other things, that we disclose whether we maintain effective disclosure controls and procedures and internal control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently.
We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers and employees, entail substantial costs, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud.
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In accordance with Nasdaq rules, we will be required to maintain a majority independent board of directors. The various rules and regulations applicable to public companies make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate directors’ and officers’ insurance, our ability to recruit and retain qualified officers and directors will be significantly curtailed.
It is expected that the rules and regulations applicable to public companies will result in us incurring substantial legal and financial compliance costs. These costs will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business.
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our share price.
As a public company in the U.S., we incur significant accounting, legal and other expenses in order to comply with requirements of the SEC, and the Nasdaq Capital Market, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act. Pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting. However, so long as we remain a smaller reporting company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. The process to document and evaluate our internal control over financial reporting to achieve compliance with Section 404 within the prescribed period is both costly and challenging. If we fail to maintain the adequacy of our internal control over financial reporting as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC. If we cannot in the future favorably assess the effectiveness of our internal control over financial reporting, investor confidence in the reliability of our financial reports may be adversely affected, which could have a material adverse effect on our share price.
If the Domestication Merger (defined below), taken together with the Merger (defined below), fails to qualify as a Section 351(a) Exchange, former U.S. holders of Intec Pharma (“Intec Israel”) ordinary shares may recognize taxable gain as a result of the Domestication Merger.
On July 27, 2021, Intec Israel, Indaptus Therapeutics, Inc. and Domestication Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of Indaptus, completed a domestication merger (the “Domestication Merger”), pursuant to the terms and conditions of an Agreement and Plan of Merger and Reorganization, dated April 27, 2021, whereby Domestication Merger Sub Ltd. merged with and into Intec Israel, with Intec Israel being the surviving entity and a wholly-owned subsidiary of Indaptus Therapeutics, Inc. On August 3, 2021, Indaptus Therapeutics, Inc. completed its merger with Decoy, pursuant to an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated March 15, 2021, following which Decoy became the surviving entity and a wholly-owned subsidiary of Indaptus Therapeutics, Inc. and the business conducted by Decoy became the business conducted by the combined company. Intec Israel intended for the Merger to qualify as a Section 351(a) Exchange. The position of Intec Israel is not binding on the IRS or the courts, and Intec Israel does not intend to request a ruling from the IRS with respect to the Merger. Accordingly, there can be no assurance that the IRS will not challenge the qualification of the Domestication Merger and the Merger as a Section 351(a) Exchange or that a court will not sustain such a challenge. If the IRS were to be successful in any such contention, or if for any other reason the Domestication Merger was not treated as part of a Section 351(a) Exchange, the Domestication Merger could be a taxable event to the former U.S. holders of ordinary shares of Intec Israel. Former holders of Intec Israel’s ordinary shares are urged to consult with their own tax advisors with respect to the tax consequences of the Domestication Merger.
Notwithstanding that the Domestication Merger and the Merger together are intended to qualify as a Section 351(a) Exchange, the Domestication Merger could be a taxable event for certain former U.S. Holders of Intec Israel ordinary shares.
Subject to the limitations and qualifications described in “The Merger - Material U.S. Federal Income Tax Consequences of the Domestication Merger and the Merger,” described in the registration statement on Form S-4, as amended (File No. 333-255389), filed by us with the SEC, or the Form S-4, including the application of the passive foreign investment company, or PFIC rules, the Domestication Merger is intended to qualify, taken together with the Merger, as a Section 351(a) Exchange. Nonetheless, certain former U.S. Holders of Intec Israel’s ordinary shares are likely to be taxed under the PFIC rules of the Code because of the likelihood that Intec Israel is classified as a PFIC.
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General Risk Factors
Unfavorable global economic or geopolitical conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For example, the U.S. and global markets have been experiencing and are continuing to experience extreme volatility and disruptions in the capital and credit markets and commodity prices due to rising inflation and interest rates, geopolitical tensions such as the conflict between Russia and Ukraine and the armed conflict in Israel and Gaza, and other macroeconomic factors. A severe or prolonged economic downturn, such as the current macroeconomic environment, could result in a variety of risks to our business, including, our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers of raw materials used to manufacture our product candidates for our clinical trials, possibly resulting in supply disruption. Furthermore, our stock price may decline due in part to the volatility of the stock market and any general economic downturn.
Changes in tax law and regulations could adversely affect our business, financial condition and results of operations.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of any of our future earnings. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. Generally, future changes in applicable tax laws and regulations, or their interpretation and application, potentially with retroactive effect, could have an adverse effect on our business, financial condition and results of operations. We are unable to predict whether such changes will occur and, if so, the ultimate impact on our business. We urge investors to consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.
Risks Related to the Offering
It is not possible to predict the actual number of shares we will sell under the Purchase Agreement to the selling stockholder, or the actual gross proceeds resulting from those sales.
On February 12, 2025, we entered into the Purchase Agreement with YA, pursuant to which YA has committed to purchase up to $20.0 million in shares of our common stock, subject to certain limitations and conditions set forth in the Purchase Agreement. The shares of common stock that may be issued under the Purchase Agreement may be sold by us to YA at our discretion from time to time during the Commitment Period.
We generally have the right to control the timing and amount of any sales of the shares of our common stock to YA under the Purchase Agreement. Sales of shares of our common stock, if any, to YA under the Purchase Agreement will depend upon market conditions and other factors. We may ultimately decide to sell to YA all, some or none of the shares of our common stock that may be available for us to sell to YA pursuant to the Purchase Agreement.
Because the purchase price per share to be paid by YA for the shares of our common stock that we may elect to sell to YA under the Purchase Agreement, if any, will fluctuate based on the market prices of our the shares of our common stock during the applicable Pricing Period for each purchase made pursuant to the Purchase Agreement, if any, it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the number of shares of our common stock that we will sell to YA under the Purchase Agreement, the purchase price per share that YA will pay for shares purchased from us under the Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by YA under the Purchase Agreement, if any.
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Limitations in the Purchase Agreement, including the Ownership Limitation, and our ability to meet the conditions necessary to deliver an Advance Notice, could prevent us from being able to raise funds up to the Commitment Amount.
Moreover, although the Purchase Agreement provides that we may sell up to an aggregate of $20.0 million of shares of our common stock to YA, only 10,000,000 shares of our common stock are being registered for resale by YA under the registration statement that includes this prospectus, consisting of (i) the Commitment Shares that we agreed to issue to YA upon execution of the Purchase Agreement as consideration for its commitment to purchase shares of our common stock under the Purchase Agreement, and (ii) the Advance Shares that we may elect to sell to YA, in our sole discretion, from time to time from during the Commitment Period, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, through sales under the Purchase Agreement. Even if we elect to sell to YA all of the shares being registered for resale under this prospectus, depending on the market prices of shares of our common stock at the time of such sales, the actual gross proceeds from the sale of all such shares may be substantially less than the $20.0 million Commitment Amount under the Purchase Agreement, which could materially adversely affect our liquidity.
If we desire to issue and sell to YA under the Purchase Agreement more than the a number of shares of our common stock in excess of the YA Shares being registered for resale under this prospectus, and the Ownership Limitation and other limitations in the Purchase Agreement would allow us to do so, we would need to file with the SEC one or more additional registration statements to register under the Securities Act the resale by YA of any such additional shares of our common stock and the SEC would have to declare such registration statement or statements effective before we could sell additional shares of our common stock.
Any issuance and sale by us under the Purchase Agreement of a substantial amount of shares of our common stock in addition to the shares of our common stock being registered for resale by YA under this prospectus could cause additional substantial dilution to our stockholders. The number of shares of our common stock ultimately offered for sale by YA is dependent upon the shares of our common stock, if any, we ultimately sell to YA under the Purchase Agreement.
The resale by YA of a significant amount of shares registered for resale in this offering at any given time, or the perception that these sales may occur, could cause the market price of shares of our common stock to decline and to be highly volatile.
Investors who buy shares at different times will likely pay different prices.
Pursuant to the Purchase Agreement, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to YA. If and when we do elect to sell shares of our common stock to YA pursuant to the Purchase Agreement, YA may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from YA in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from YA in this offering as a result of future sales made by us to YA at prices lower than the prices such investors paid for their shares in this offering.
We may require additional financing to sustain our operations and without it we will not be able to continue operations.
The extent to which we rely on YA as a source of funding will depend on a number of factors, including the prevailing market price of shares of our common stock, our ability to meet the conditions necessary to deliver Advance Notices under the Purchase Agreement, the impacts of the Ownership Limitation and the extent to which we are able to secure funding from other sources. Regardless of the amount of funds we ultimately raise under the Purchase Agreement, if any, we expect to continue to seek other sources of funding. Even if we were to sell to YA the total Commitment Amount under the Purchase Agreement, we expect that we will need additional capital to fully implement our business plan.
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The sale of a substantial amount of shares of our common stock, including resale of the held by the selling stockholder in the public market could adversely affect the prevailing market price of shares of our common stock.
We are registering for resale 10,000,000 shares of our common stock. Sales of substantial amounts of shares of our shares of our common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of shares of our common stock, and the market value of our other securities. We cannot predict if and when the selling stockholder may sell such shares in the public markets. Furthermore, in the future, we may issue additional shares of our common stock or other equity or debt securities convertible into shares of our common stock. Any such issuance could result in substantial dilution to our existing stockholders and could cause our share price to decline.
Future sales and issuances of shares of our common stock or other securities might result in significant dilution and could cause the price of shares of our common stock to decline.
To raise capital, we may sell shares of our common stock, convertible securities or other equity securities in one or more transactions other than those contemplated by the Purchase Agreement, at prices and in a manner we determine from time to time. We may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into shares of our common stock, in future transactions may be higher or lower than the price per share paid by investors in this offering. Any sales of additional shares will dilute our stockholders.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could depress the market price of shares of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of shares of our common stock. In addition, the sale of substantial numbers of shares of our common stock could adversely impact their price.
Management will have broad discretion as to the use of the net proceeds from the Purchase Agreement.
Our management will have broad discretion in the allocation of the net proceeds and could use them for purposes other than those contemplated at the time of this offering. Accordingly, you will be relying on the judgment of our management with regard to the use of those net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest those net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flows.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information in this prospectus and any free writing prospectus that we have authorized for use in connection with this offering contain forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements regarding our product candidates’ development, including the timing and design of the Phase 1 clinical trial of Decoy20; our expectations regarding the recommended Phase 2 dose for subsequent multi-dosing and combination studies and related timing; the anticipated effects of our product candidates; our plans to develop and commercialize our product candidates; the market potential and treatment potential of our product candidates, including Decoy20; our commercialization, marketing and manufacturing capabilities and strategy; our expectations about the willingness of healthcare professionals to use our product candidates; our general business strategy and the plans and objectives of management for future operations; our research and development activities and costs; our future results of operations and condition; the sufficiency of our cash and cash equivalents to fund our ongoing activities and our ability to continue as a going concern; the impact of current macroeconomic conditions on our operations, ability to access capital, and liquidity. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “targets”, “may”, “plans”, “projects”, “potential”, “will”, “would”, “could” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All such forward-looking statements involve significant risks and uncertainties, including, but not limited to, statements regarding:
| ● | our plans to develop and potentially commercialize our technology; | |
| ● | the timing and cost of our planned investigational new drug application and any clinical trials; | |
| ● | the completion and receipt of favorable results in any clinical trials; | |
| ● | our ability to obtain and maintain regulatory approval of any product candidate; | |
| ● | our ability to protect and maintain our intellectual property and licensing arrangements; | |
| ● | our ability to develop, manufacture and commercialize our product candidates; | |
| ● | the risk of product liability claims, the availability of reimbursement, the influence of extensive and costly government regulation; | |
| ● | our estimates regarding future revenue, expenses capital requirements and the need for additional financing; and | |
| ● | our ability to maintain the listing of our shares of common stock on Nasdaq; | |
| ● | our ability to continue as a going concern. |
As more fully described under the heading “Risk Factors” and elsewhere in this prospectus and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and any subsequent Quarterly Report on Form 10-Q, many important factors affect our ability to achieve our stated objectives and to develop and commercialize any product candidates. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks and uncertainties set forth in our filings with the SEC. You should read this prospectus and any free writing prospectuses that we have authorized for use in this offering with the understanding that our actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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USE OF PROCEEDS
This prospectus relates to our shares of common stock that may be offered and sold from time to time by YA. All of our shares offered by the selling stockholder pursuant to this prospectus will be sold by the selling stockholder for its own account. We will not receive any of the proceeds from these sales.
We may receive up to $20.0 million aggregate gross proceeds under the Purchase Agreement from any sales of shares of our common stock we make to YA pursuant to the Purchase Agreement. However, we are unable to estimate the actual amount of proceeds that we may receive, as it will depend on the number of shares that we choose to sell, our ability to meet the conditions to purchases set forth in the Purchase Agreement, market conditions and the price of our shares, among other factors.
We currently intend to use the net proceeds of sales of shares under the Purchase Agreement, if any, to fund our research and development activities and for working capital and general corporate purposes. Although we have identified some potential uses of the net proceeds to be received upon sales of shares under the Purchase Agreement, we cannot specify these uses with certainty. Our management will have broad discretion in the application of the net proceeds and could use them for purposes other than those contemplated as of the date of this prospectus. Our stockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not result in our being profitable or increase our market value.
Our expected use of net proceeds under the Purchase Agreement represents our current intentions based on our present plans and business condition, which could change in the future as our plans and business conditions evolve. As of the date of this prospectus, we cannot predict with certainty any or all of the particular uses for the net proceeds to be received under the Purchase Agreement, or the amounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds may vary depending on numerous factors, including our ability to obtain additional financing and changes we may make to our development plan. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, and investors will be relying on our judgment regarding the application of the net proceeds from this offering.
Pending the use of the net proceeds from this offering as described above, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments. It is possible that, pending their use, we may invest the net proceeds in a way that does not yield a favorable, or any, return for us.
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DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, for use in our business and therefore do not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and other factors our board of directors deems relevant.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations along with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions. You should review the sections titled “Summary Risk Factors” and “Risk Factors” in this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described below.
Overview
We are a clinical biotechnology company developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. We have evolved from more than a century of immunotherapy advances. Our approach is based on the hypothesis that efficient activation of both innate and adaptive immune cells and associated anti-tumor and anti-viral immune responses will require a multi-targeted package of immune system activating signals that can be administered safely intravenously. Our patented technology is composed of single strains of attenuated and killed, non-pathogenic, Gram-negative bacteria, designed to have reduced i.v. toxicity, but largely uncompromised ability to prime or activate many of the cellular components of innate and adaptive immunity. This approach has led to broad anti-tumor and anti-viral activity in preclinical models, including durable anti-tumor response synergy observed with each of five different classes of existing agents, including checkpoint therapy, targeted antibody therapy and low-dose chemotherapy. Tumor eradication by our technology has demonstrated activation of both innate and adaptive immunological memory and, importantly, did not require provision of or targeting a tumor antigen in preclinical models. In 2023, we initiated a Phase 1 clinical trial with our lead clinical candidate, Decoy20, in patients with advanced solid tumors where currently approved therapies have failed. For further information regarding our business and operations, see “Business.”
Impact of Macroeconomic Conditions on our Operations
Economic developments such as supply chain constraints and rising inflation and interest rates have negatively affected the global financial markets and may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. The ultimate impact of the current economic conditions is highly uncertain and subject to change. While it is unknown how long these conditions will last and what the complete financial effect will be to us, capital raise efforts and additional development of our technologies may be negatively affected. In addition, our business operations expose us to risks associated with public health crises and epidemics/pandemics, which could affect our operations and those of third parties on which we rely, including by causing disruptions in the supply of our product candidates and the conduct of current and future clinical trials.
Components of Operating Results
Research and Development Expenses
Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of fees paid to contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, as well as compensation expenses for certain employees involved in the planning, managing, and analyzing the work of the CROs and CMOs and materials used for research and development activities. We expense research and development costs as incurred.
We accrue expenses for manufacturing, preclinical studies and clinical trial activities performed by third parties based on estimates of services received and efforts expended pursuant to agreements with CROs, CMOs, and other outside service providers. We determine these estimates based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. In the event advance payments are made to a CRO, CMO, or outside service provider, we record the payments as a prepaid asset, which will be amortized or expensed as the contracted services are performed. However, actual costs and timing of these activities are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.
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We expect our research and development expenses to increase substantially for the foreseeable future as we continue to ramp up our clinical development activities and incur expenses associated with hiring additional personnel to support our research and development efforts. Our expenditures on future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of preclinical studies and clinical trials and development of product candidates will depend on a variety of factors, including:
| ● | the timing and receipt of regulatory approvals; | |
| ● | the scope, rate of progress and expenses of preclinical studies and clinical trials and other research and development activities; | |
| ● | potential safety monitoring and other studies requested by regulatory agencies; and | |
| ● | significant and changing government regulation. |
The process of conducting the necessary clinical research to obtain FDA and other regulatory approval is costly and time consuming and the successful development of product candidates is highly uncertain. These risks and uncertainties associated with our research and development projects are discussed more fully in Part I. Item 1A. “Risk Factors - We expect to continue to incur significant research and development expenses and other operating expenses, which may make it difficult for us to attain profitability.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses include compensation, employee benefits, and stock-based compensation for executive management, finance administration and human resources, facility costs (including rent), professional service fees, and other general overhead costs, including depreciation, to support our operations.
We expect our general and administrative expenses to increase substantially for the foreseeable future as we continue to increase our headcount to support our research and development activities and operations generally, the growth of our business and, if any of our product candidates receive marketing approval, commercialization activities. We also expect to continue to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, additional director and officer insurance expenses, investor relations activities, and other administrative and professional services.
Other Income, Net
Other income, net includes interest earned on deposits and investments and other items of income, expense, gain and loss that are incidental to the core operations of the Company.
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Results of Operations
Year Ended December 31, 2023 compared to Year Ended December 31, 2022
The following tables set forth our results of operations for the years ended December 31, 2023 and 2022 and the relative dollar and percentage change between the two years.
Year ended December 31, | Change (2023 to 2022) | |||||||||||||||
| 2023 | 2022 | ($) | % | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 7,621,707 | $ | 6,324,657 | $ | 1,297,050 | 21 | % | ||||||||
| General and administrative | 8,756,767 | 8,586,249 | 170,518 | 2 | % | |||||||||||
| Total operating expenses | 16,378,474 | 14,910,906 | 1,467,568 | 10 | % | |||||||||||
| Loss from operations | (16,378,474 | ) | (14,910,906 | ) | (1,467,568 | ) | 10 | % | ||||||||
| Other income, net | 955,003 | 588,108 | 366,895 | 62 | % | |||||||||||
| Net loss | $ | (15,423,471 | ) | $ | (14,322,798 | ) | $ | (1,100,673 | ) | 8 | % | |||||
| Net loss attributable to common stockholders per share, basic and diluted | $ | (1.83 | ) | $ | (1.73 | ) | $ | (0.10 | ) | 6 | % | |||||
| Weighted average number of shares used in calculating net loss per share, basic and diluted | 8,401,047 | 8,262,119 | ||||||||||||||
Research and Development Expenses
Our research and development expenses for the year ended December 31, 2023 amounted to approximately $7.6 million, an increase of approximately $1.3 million, or approximately 21%, compared with approximately $6.3 million for the year ended December 31, 2022. This increase was attributable primarily to (i) an increase of approximately $0.4 million for payroll and related expenses including approximately $0.1 million of stock-based compensation, and (ii) an increase of approximately $0.9 million for the Phase 1 clinical trial and activities related to the expansion of our pipeline.
General and Administrative Expenses
Our general and administrative expenses for the year ended December 31, 2023 amounted to approximately $8.8 million, an increase of approximately $0.2 million, or approximately 2%, compared with approximately $8.6 million for the year ended December 31, 2022. This increase was attributable primarily to an increase of approximately $0.6 million for legal fees, recruitment costs, investor relations expenses and other professional fees, and was partially offset by a decrease of approximately $0.4 million for payroll and related expenses and for directors’ and officers’ insurance expenses.
Other Income
Our other income, net, for the year ended December 31, 2023 amounted to approximately $1.0 million, an increase of approximately $0.4 million, or approximately 62%, compared to approximately $0.6 million for the year ended December 31, 2022. This increase was attributable primarily to an increase of approximately $0.7 million in interest earned on deposits and interest earned on marketable securities, which was partially offset by a decrease of approximately $0.3 million from a gain that resulted from our settlement relating to a contractual dispute with Lohmann Therapie Systeme AG in February 2023.
Three months ended September 30, 2024 compared to three months ended September 30, 2023
The following tables set forth our results of operations for the three months ended September 30, 2024 and 2023 and the relative dollar change between the two periods.
| Three months ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2024 | 2023 | ($) | % | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 1,466,037 | $ | 2,226,688 | $ | (760,651 | ) | (34 | )% | |||||||
| General and administrative | 1,676,020 | 2,021,724 | (345,704 | ) | (17 | )% | ||||||||||
| Total operating expenses | 3,142,057 | 4,248,412 | (1,106,355 | ) | (26 | )% | ||||||||||
| Loss from operations | (3,142,057 | ) | (4,248,412 | ) | 1,106,355 | (26 | )% | |||||||||
| Other income, net | 73,021 | 326,024 | (253,003 | ) | (78 | )% | ||||||||||
| Net loss | $ | (3,069,036 | ) | $ | (3,922,388 | ) | $ | 853,352 | (22 | )% | ||||||
| Net loss attributable to common stockholders per share, basic and diluted | $ | (0.32 | ) | $ | (0.47 | ) | ||||||||||
| Weighted average number of shares used in calculating net loss per share, basic and diluted | 9,510,447 | 8,401,047 | ||||||||||||||
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Research and Development Expenses
During the three months ended September 30, 2024, our research and development expenses were approximately $1.5 million, which represented a decrease of approximately $0.7 million, or approximately 34%, compared to approximately $2.2 million for the three months ended September 30, 2023. This decrease was attributable primarily to the development of our manufacturing processes of Decoy20 that were conducted in the three months ended September 30, 2023. We expect our research and development expenses to increase for the remainder of the year as our Phase 1 clinical trial progresses.
General and Administrative Expenses
Our general and administrative expenses for the three months ended September 30, 2024 amounted to approximately $1.7 million, a decrease of approximately $0.3 million, or approximately 17%, compared to approximately $2.0 million for the three months ended September 30, 2023. This decrease was attributable primarily to stock-based compensation, legal fees and recruitment costs.
Other Income, Net
During the three months ended September 30, 2024, our other income, net was approximately $0.1 million, which represented a decrease of approximately $0.2 million as compared to the three months ended September 30, 2023. The other income generated in the period consists primarily of income earned on the Company’s cash and cash equivalent accounts, the balances of which were lower during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Nine months ended September 30, 2024 compared to nine months ended September 30, 2023
The following tables set forth our results of operations for the nine months ended September 30, 2024 and 2023 and the relative dollar change between the two periods.
| Nine months ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2024 | 2023 | ($) | % | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 4,771,152 | $ | 5,587,073 | $ | (815,921 | ) | (15 | )% | |||||||
| General and administrative | 6,423,029 | 6,611,767 | (188,738 | ) | (3 | )% | ||||||||||
| Total operating expenses | 11,194,181 | 12,198,840 | (1,004,659 | ) | (8 | )% | ||||||||||
| Loss from operations | (11,194,181 | ) | (12,198,840 | ) | 1,004,659 | (8 | )% | |||||||||
| Other income, net | 303,201 | 778,149 | (474,948 | ) | (61 | )% | ||||||||||
| Net loss | $ | (10,890,980 | ) | $ | (11,420,691 | ) | $ | 529,711 | (5 | )% | ||||||
| Net loss attributable to common stockholders per share, basic and diluted | $ | (1.23 | ) | $ | (1.36 | ) | ||||||||||
| Weighted average number of shares used in calculating net loss per share, basic and diluted | 8,832,630 | 8,401,047 | ||||||||||||||
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Research and Development Expenses
During the nine months ended September 30, 2024, our research and development expenses were approximately $4.8 million, which represented a decrease of approximately $0.8 million, or approximately 15%, compared to approximately $5.6 million for the nine months ended September 30, 2023. This decrease was attributable primarily to a decrease of approximately $1.1 million in the development of our manufacturing processes of Decoy20 that were conducted in 2023 and was offset by an increase of approximately $0.3 million in our Phase 1 clinical trial and in payroll and related expenses. We expect our research and development expenses to increase for the remainder of the year as our Phase 1 clinical trial progresses.
General and Administrative Expenses
Our general and administrative expenses for the nine months ended September 30, 2024 amounted to approximately $6.4 million, a decrease of approximately $0.2 million, or approximately 3%, compared to approximately $6.6 million for the nine months ended September 30, 2023. This decrease was attributable primarily to a decrease of approximately $0.7 million in legal fees, payroll and related expenses, recruitment costs and directors’ and officers’ insurance expenses, and was offset by an increase of approximately $0.5 million in investor relations and business development expenses.
Other Income, Net
During the nine months ended September 30, 2024, our other income, net was approximately $0.3 million, which represented a decrease of approximately $0.5 million as compared to the nine months ended September 30, 2023. The other income generated in the period consists primarily of income earned on the Company’s cash and cash equivalent accounts, the balances of which were lower during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Liquidity and Resources
We do not currently have any approved products and have never generated any revenue from product sales. Since our inception, we have funded our operations primarily through public and private offerings of our equity securities.
In January 2025, we completed a private placement for the sale and issuance by us of an aggregate of: (i) 2,109,383 shares of our common stock and (ii) warrants to purchase 2,109,383 shares of common stock. The shares and warrants were sold on a combined basis for consideration of $1.065 for one share and a warrant for aggregate gross proceeds of approximately $2.25 million.
In November 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors 1,817,017 shares of our common stock in a registered direct offering. In addition, in a concurrent private placement, we issued to the investors unregistered warrants to purchase 1,817,017 shares of common. The combined purchase price for one share of common stock and one warrant was $1.175, resulting in gross proceeds of approximately $2.135 million.
In August 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors, 1,643,837 shares of common stock. In addition, in a concurrent private placement, we issued to the investors unregistered warrants to purchase 1,643,837 shares of common stock. The combined purchase price for one share of common stock and one warrant was $1.825, resulting in gross proceeds of approximately $3.0 million.
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In June 2022, we entered into an At The Market Offering Agreement (the “ATM Agreement”) which was amended on September 1, 2022 with H.C. Wainwright & Co., LLC, as sales agent (“Wainwright”), pursuant to which we may offer and sell, from time to time through Wainwright, shares of our common stock, par value $0.01 per share, for aggregate gross proceeds of up to $3.7 million. The issuance and sale of common stock by us under the ATM Agreement is being made pursuant to our effective “shelf” registration statement on Form S-3 filed with the SEC on September 1, 2022 and declared effective on September 9, 2022. In 2024, we sold 152,000 shares of our common stock for aggregate gross proceeds of approximately $0.4 million. On August 6, 2024, we filed a prospectus supplement to reduce the amount of shares registered under the prospectus for the ATM to $0.00 and to suspend the ATM program, but the ATM Agreement remains in full force and effect.
In December 2022, we entered into a purchase agreement and a registration rights agreement with Lincoln Park pursuant to which we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $20.0 million of our common stock (subject to certain limitations) from time to time over the term of the purchase agreement. Upon execution of the purchase agreement, we issued to Lincoln Park 142,450 initial commitment shares. No shares of common stock have been sold under the program and in February 2025, we terminated the purchase agreement with Lincoln Park.
We believe that the cash and cash equivalents of approximately $7.4 million that we had as of September 30, 2024 together with proceeds from financings consummated subsequent to September 30, 2024, will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2025. We will need to increase our capital resources through equity or debt financings, and we may need to do so sooner than we expect. We may also seek to finance our cash needs through collaborations, strategic alliances, or license agreements with third parties. If sources of financing are available, they may result in substantial dilution to our stockholders. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms or in the amounts required, if at all. If we are unable to consummate a financing or other transaction, we may need to delay, reduce, or eliminate our research and development programs, which could adversely affect our business prospects, or cease operations. These conditions raise substantial doubt regarding our ability to continue as a going concern within one year after the date of this prospectus. For additional information, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
We have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years.
Cash Flows
Operating Activities
Net cash used in operating activities was approximately $13.4 million for the year ended December 31, 2023, compared with net cash used in operating activities of approximately $13.1 million for the year ended December 31, 2022. The approximately $0.3 million increase in net cash used was primarily attributable to an increase in our spending related to research and development activities in connection with the Phase 1 clinical trial.
Net cash used in operating activities was approximately $8.9 million for the nine months ended September 30, 2024, compared with net cash used in operating activities of approximately $10.8 million for the nine months ended September 30, 2023. This decrease resulted primarily from a decrease in our research and development activities and general and administrative expenses and by net changes in operating asset and liability items.
Investing Activities
Net cash provided by investing activities was approximately $17.1 million for the year ended December 31, 2023 which was related to the maturity of $24.0 million in marketable securities, offset by investment of approximately $6.9 million in marketable securities. Net cash used in investing activities was approximately $16.4 million for the year ended December 31, 2022, which was primarily related to approximately $29.6 million investment in marketable securities, offset by approximately $0.2 million from the proceeds received for assets held for sale and by $13.0 million from the maturity of marketable securities.
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There was no net cash provided by or used in investing activities in the nine months ended September 30, 2024. Net cash provided by investing activities was approximately $17.1 million for the nine months ended September 30, 2023, which was related to the maturity of $24.0 million in marketable securities, offset by net investment of approximately $6.9 million in marketable securities.
Financing Activities
There was no net cash provided by or used in financing activities for the years ended December 31, 2023 and 2022.
Net cash provided by financing activities for the nine months ended September 30, 2024 was approximately $2.9 million, which was provided by issuance and sale of our common stock under the ATM Agreement and issuance and sale of our common stock and warrants in the August 2024 Offering. There was no net cash provided by or used in financing activities in the nine months ended September 30, 2023.
Funding Requirements
Our operating expenses are expected to continue to increase in the future in connection with our ongoing activities, particularly as we expect to continue to ramp up our clinical development activities and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to continue to incur significant costs associated with operating as a public company.
We believe that our existing cash and cash equivalents as of the date of this prospectus are adequate to fund our ongoing activities through the second quarter of 2025.
Our future capital requirements will depend on many factors, including, but not limited to:
| ● | the scope, progress, results and costs of preclinical studies and clinical trials; | |
| ● | the scope, prioritization and number of our clinical trials and other research and development programs; | |
| ● | the amount of revenues we receive under future licensing, collaboration, development and commercialization arrangements with respect to our product candidates; | |
| ● | the impact of any pandemic, epidemic or other future health crisis on our business and operations; | |
| ● | the costs of the development and expansion of our operational infrastructure; | |
| ● | the costs, timing and outcome of regulatory review of our product candidates; | |
| ● | the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements; | |
| ● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; | |
| ● | the costs and timing of securing manufacturing arrangements for clinical or commercial production; | |
| ● | the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves; | |
| ● | the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or technology; | |
| ● | the costs associated with being a public company; and | |
| ● | any cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates. |
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Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for the next couple of years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of current macroeconomic conditions and market volatility. As a result, we may face difficulties raising capital through sales of our common stock on acceptable terms, if at all. If we are unsuccessful in securing sufficient financing, we may need to delay, reduce, or eliminate our research and development programs, which could adversely affect our business prospects, or cease operations. For additional information, see Note 1 to our consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus and “Risk Factors” in this prospectus.
Contractual Obligations
Operating lease liabilities represent our commitment for future rent made under a non-cancelable lease for our offices in San Diego, CA. The total future payments for our operating lease obligation on September 30, 2024 were approximately $0.1 million which is due through October 2025. For additional details regarding our lease, see Note 7 to our unaudited condensed consolidated financial statements included in this prospectus.
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under the SEC rules.
Critical Accounting Policies
This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates that affect the reported amounts of our assets, liabilities and expenses. Significant accounting policies employed by us, including the use of estimates, are presented in the notes to our annual financial statements included in this prospectus. We periodically evaluate our estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require our subjective or complex judgments, resulting in the need to make estimates about the effect of matters that are inherently uncertain. If actual performance should differ from historical experience or if the underlying assumptions were to change, our financial condition and results of operations may be materially impacted.
We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements:
Accounting for Research and Development Costs
We record the costs associated with services provided by CROs and CMOs as they are incurred. Though the scope and timing of work are generally based on signed agreements, some judgement is involved in determining periodic expenses because payment flows do not always match the periods over which services and materials are provided to us. As a result, our management is required to make estimates of services received and efforts expended pursuant to agreements established with these third-parties at each period-end date. During the year ended December 31, 2023, we incurred approximately $7.6 million of research and development expenses, of which approximately $3.9 million were for services provided by our CROs and CMOs. As of December 31, 2023, we recorded an accrued liability of approximately $0.4 million for expenses incurred, but not yet invoiced, and prepaid expenses and non-current other assets of approximately $0.8 million for payments made that relate to future periods. Overestimating or underestimating the services received or efforts expended could cause us to overstate or understate research and development expenses incurred within a reporting period, and related accrued and prepaid expenses.
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Stock-Based Compensation
Compensation expense related to stock options granted is measured at the grant date based on the estimated fair value of the award and is recognized over the requisite service period of the individual grant, generally equal to the vesting period, on a straight-line basis. We determine the estimated fair value of each stock option on the date of grant using the Black-Scholes valuation model which uses assumptions regarding a number of complex and subjective variables. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatility is based on an analysis of the historical volatility of a peer group of companies. The expected term represents the period that we expect our stock options to be outstanding. The expected term assumption is estimated using the simplified method set forth in the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin Topic 14, which is the mid-point between the option vesting date and the expiration date. We have never declared or paid dividends on our common stock and have no plans to do so in the foreseeable future. Changes in these assumptions may lead to variability with respect to the amount of stock compensation expense we recognize related to stock options.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which sets forth improvements to the current segment disclosure requirements in accordance with Topic 280 “Segment Reporting,” including clarifying that entities with a single reportable segment are subject to both new and existing segment reporting requirements. ASU 2023-07 will be effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Adoption of this ASU is currently being evaluated.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.
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BUSINESS
Overview
We are a clinical biotechnology company developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. We have evolved from more than a century of immunotherapy advances. Our approach is based on the hypothesis that efficient activation of both innate and adaptive immune cells and associated anti-tumor and anti-viral immune responses will require a multi-targeted package of immune system activating signals that can be administered safely intravenously. Our patented technology is composed of single strains of attenuated and killed, non-pathogenic, Gram-negative bacteria, designed to have reduced i.v. toxicity, but largely uncompromised ability to prime or activate many of the cellular components of innate and adaptive immunity. This approach has led to broad anti-tumor and anti-viral activity in preclinical models, including durable anti-tumor response synergy observed with each of four different classes of existing agents, including NSAIDs, checkpoint therapy, targeted antibody therapy and low-dose chemotherapy. Tumor eradication by our technology was associated with induction of both innate and adaptive immunological memory and, importantly, did not require provision of or targeting a tumor antigen in preclinical models. We have carried out successful current Good Manufacturing Practice (cGMP) manufacturing of our lead clinical candidate, Decoy20.
In May 2022, the U.S. Food and Drug Administration, or the FDA, allowed us to proceed under our IND for a Phase 1 clinical trial in patients with advanced solid tumors where currently approved therapies have failed. In December 2022, we initiated an open label, multi-center, dose escalation and expansion, single arm (monotherapy) Phase 1 study conducted in 2 parts. The Phase 1 study began with single dose administration and has now been followed with continuous weekly dosing of Decoy20 in tumor-specific expansion cohorts. The study is enrolling patients with any one of six advanced/metastatic solid tumors, who have exhausted approved treatment options. The study’s objectives are to assess the safety and tolerability of Decoy20, to determine the maximum tolerated dose, the optimal biologically active and recommended Phase 2 dose, as well as to assess Decoy20 pharmacokinetics (PK), pharmacodynamics and clinical activity. The primary endpoints of the study are incidence, relatedness and severity of adverse events and treatment-emergent adverse events and determining the number of subjects per cohort with dose limiting toxicity-based adverse events. Secondary endpoints include the incidence of anti-drug antibodies and neutralizing antibodies pre- and post-treatment, change in Decoy20 PK parameters over time, objective response rate and duration of response.
In August 2023, we evaluated the first four patients who received a single dose of 7 x 10^7 Decoy20 in Part 1 of the Phase 1 clinical trial. All four patients who enrolled were evaluable in the first cohort. These patients experienced generally anticipated transient adverse events including hemodynamic changes such as changes in pulse or blood pressure that resolved within 30 minutes and laboratory abnormalities such as grade 1-3 elevations in transaminases (liver function tests) and grade 4 reductions in lymphocytes that generally resolved within three days. One patient had a dose-limiting toxicity of grade 3 bradycardia (slow heart rate) and grade 2 hypotension (low blood pressure) which resolved within approximately 90 minutes with i.v. fluids. Patients also experienced transient induction of over 50 different biomarkers associated with innate and adaptive anti-tumor immune responses. After the end of infusion, Decoy20 was cleared from the blood within 30 to 120 minutes. Peak cytokine and chemokine induction occurred within ~4 to 24 hours and most cytokine/chemokines returned to the patient’s respective baseline by 24-72 hours. This rapid clearance and associated transient cytokine/chemokine induction are desired to avoid prolonged toxicity, often associated with longer term cytokine exposure.
In September 2023, we began the second cohort of the Phase 1 clinical trial after receiving authorization from the Safety Review Committee. The second cohort dose was a reduction from 7 x 10^7 Decoy20 dose to 3 x 10^7 Decoy20. In March 2024, we completed the second cohort of patients who received a single dose of 3 x 10^7 Decoy20 in Part 1 of the clinical trial Patients on the second (lower dose) cohort experienced adverse events similar in frequency and severity to the higher dose cohort with one dose-limiting toxicity of grade 3 ALT elevation that required one week to resolve. Pharmacodynamic effects included transient induction of multiple biomarkers. Clearance of Decoy20 was similarly rapid. Following authorization from the Safety Review Committee, we advanced into the weekly dosing part of the trial.
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In May and June 2024, we enrolled two additional patients in the first cohort who received a single dose of 7 x 10^7 Decoy20, and in August 2024 we received the authorization from the Safety Review Committee to initiate the weekly dosing with 7 x 10^7 Decoy20.
As of October 2024, we completed one month of the weekly dosing part in the first six patients at the 3 x 10^7 Decoy20 dose and following the review of the safety data by the Safety Review Committee we received the authorization to initiate unrestricted enrollment of patients at the 3 x 10^7 Decoy20 dose.
In October 2024, we entered into a clinical supply agreement, or the Supply Agreement, with BeiGene Switzerland GmbH, or BeiGene, to advance clinical evaluation of Decoy20 in combination with BeiGene’s anti-PD-1 antibody, tislelizumab, or the BeiGene Product, for the treatment of patients with advanced solid tumors, or the Combination Study. This Combination Study builds on preclinical results where Decoy20, combined with a PD-1 inhibitor, demonstrated high tumor eradication rates and established immunological memory. We intend to seek approval from the FDA to initiate the Combination Study, which is anticipated to begin in 2025.
Under the terms of the Supply Agreement, we will pay for all costs associated with the Combination Study (other than the cost of the BeiGene Product), BeiGene will supply the BeiGene Product to us for the purposes of the study, and we will supply Decoy20 for the purposes of the Combination Study. The Supply Agreement will terminate upon the earlier of (i) the one-year anniversary of the date that we provide BeiGene with the Combination Study’s final clinical study report or (ii) the date of termination of the Combination Study, subject to early termination in certain circumstances.
In February 2025, we announced that we received clinical trial authorization from Health Canada to initiate a clinical trial for Decoy20 which allows us to expand our ongoing U.S. clinical trial to Canadian sites. The trial will enroll patients in Canada under the current protocol, which involves weekly dosing of Decoy20. We also plan to submit an amendment to Health Canada to initiate the Combination Study in Canada.
Unlike many competitor products, our technology does not depend on targeting with or to a specific antigen, providing broad potential across multiple indications. Our products are designed to have a much shorter half-life and produce less systemic exposure than small molecule, antibody or human cell-based therapies, potentially reducing the risk of non-specific auto-immune reactions. Our technology has produced single agent activity and/or combination therapy-based durable responses in lymphoma, hepatocellular, colorectal and pancreatic tumors and has also showed activity against hepatitis B virus (HBV) and HIV infection in standard preclinical models. Our target indications include, but are not limited to, colorectal, hepatocellular (± HBV), bladder, cervical and pancreatic carcinoma, which according to GLOBOCAN 2020, account in the aggregate for 23% of yearly cancer cases and over 28% of yearly cancer deaths world-wide.
Historically, we have operated virtually with a team of highly experienced consultants and advisors, carrying out research and development at contract research organizations (CROs). We have developed patented treatment methods (and associated patented compositions) for attenuation and killing of non-pathogenic, Gram-negative bacteria (34 issued or granted patents). Since our inception, we have funded our operations primarily through public and private offerings of our equity securities.
Recent Developments
January 2025 Financing
On January 12, 2025, we entered into securities purchase agreements, or the January 2025 Purchase Agreements, with certain institutional and accredited investors, or the January 2025 Purchasers. The January 2025 Purchase Agreements provide for the sale and issuance by us of an aggregate of: (i) 2,109,383 shares of our common stock and (ii) warrants to purchase 2,109,383 shares of common stock in a private placement, or the January 2025 Warrants. The shares and January 2025 Warrants were sold on a combined basis for consideration of $1.065 for one share and a January 2025 Warrant. The exercise price of the January 2025 Warrants is $0.94 per share.
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The January 2025 Warrants were immediately exercisable upon issuance and will expire five years following the date of issuance. The January 2025 Warrants contain standard adjustments to the exercise price including for stock splits, stock dividends and reorganizations. In lieu of making the cash payment otherwise contemplated to be made upon exercise in payment of the aggregate exercise price, the holder may, in the event the shares underlying the January 2025 Warrants are not registered under the Securities Act, elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the January 2025 Warrants. Under the terms of the January 2025 Warrants, a holder (together with its affiliates) may not exercise any portion of its January 2025 Warrant to the extent that the holder would beneficially own more than 4.99% or 9.99%, depending on the individual investor, of the outstanding common stock immediately after exercise, or the Beneficial Ownership Limitation, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation in no event exceeds 19.99%.
Paulson Investment Company, LLC, or Paulson, served as the exclusive placement agent for the issuance and sale of the securities. As compensation for such placement agent services, we paid Paulson an aggregate cash fee equal to 7.0% of the gross proceeds received by us from the offering, and a non-accountable expense of $25,000. As additional compensation to Paulson, we issued to the Paulson (or its designees) a warrant, or the January 2025 Placement Agent Warrants, to purchase an aggregate of 147,656 shares at an exercise price per share equal to $1.175 per share. The January 2025 Placement Agent Warrants are exercisable six months from the date of issuance and expire on the fifth anniversary of the issue date.
November 2024 Financing
On November 22, 2024, we entered into securities purchase agreements, or the November 2024 Purchase Agreements, with certain institutional and accredited investors, or the November 2024 Purchasers. The November 2024 Purchase Agreements provide for the sale and issuance by us of an aggregate of: (i) 1,817,017 shares of our common stock in a registered direct offering and (ii) warrants to purchase 1,817,017 shares of common stock in a private placement, or the November 2024 Warrants. The shares and November 2024 Warrants were sold on a combined basis for consideration of $1.175 for one share and a November 2024 Warrant. The exercise price of the November 2024 Warrants is $1.05 per share. One of the November 2024 Purchasers was our Chief Executive Officer, who purchased 42,553 shares and November 2024 Warrants to purchase 42,553 shares, or the Affiliate Securities, at the same price and upon the same terms as the other November 2024 Purchasers.
The November 2024 Warrants were immediately exercisable upon issuance and will expire five years following the date of issuance. The November 2024 Warrants contain standard adjustments to the exercise price including for stock splits, stock dividends and reorganizations. In lieu of making the cash payment otherwise contemplated to be made upon exercise in payment of the aggregate exercise price, the holder may, in the event the shares underlying the November 2024 Warrants are not registered under the Securities Act, elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the November 2024 Warrants. Under the terms of the November 2024 Warrants, a holder (together with its affiliates) may not exercise any portion of its November 2024 Warrant to the extent that the holder would beneficially own more than the Beneficial Ownership Limitation, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation in no event exceeds 19.99%.
Paulson served as the exclusive placement agent for the issuance and sale of the securities. As compensation for such placement agent services, we paid Paulson an aggregate cash fee equal to 7.0% of the gross proceeds received by us from the offering (excluding the Affiliate Securities), and a non-accountable expense of $25,000. As additional compensation to Paulson, we issued to the Paulson (or its designees) a warrant, or the November 2024 Placement Agent Warrants, to purchase an aggregate of 124,212 shares at an exercise price per share equal to $1.3125 per share. The November 2024 Placement Agent Warrants are exercisable six months from the date of issuance and expire on the fifth anniversary of the issue date.
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Supply Agreement
On October 17, 2024, we entered into a clinical supply agreement, or the Supply Agreement, with BeiGene Switzerland GmbH, or BeiGene, to advance clinical evaluation of Decoy20, our novel product candidate designed to induce a broad immune response to fight cancer, in combination with BeiGene’s anti-PD-1 antibody, tislelizumab, or the BeiGene Product, for the treatment of patients with advanced solid tumors, or the Combination Study. We intend to seek approval from the FDA to initiate the Combination Study, which is anticipated to begin in 2025. Under the terms of the Supply Agreement, we will pay for all costs associated with the Combination Study (other than the cost of the BeiGene Product), BeiGene will supply the BeiGene Product to us for the purposes of the study, and we will supply Decoy20 for the purposes of the Combination Study. The Supply Agreement will terminate upon the earlier of (i) the one-year anniversary of the date that we provide BeiGene with the Combination Study’s final clinical study report or (ii) the date of termination of the Combination Study, subject to early termination in certain circumstances.
August 2024 Financing
On August 8, 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors, including one of our officers, 1,643,837 shares of common stock. In addition, in a concurrent private placement, we issued to the investors unregistered warrants to purchase 1,643,837 shares of common stock, or the August 2024 Private Placement. The warrants were immediately exercisable at an exercise price of $1.70 per share and expire five years from the date of issuance. The combined purchase price for one share of common stock and one warrant was $1.825, resulting in gross proceeds of approximately $3.0 million, before deducting placement agent and other offering expenses in the amount of approximately $0.5 million.
Background
Approved immunotherapies, such as Interluekin-2, Interferon-alpha and the more recently approved “checkpoint” and CAR-T therapies produce durable responses in a few percent to about fifty percent of patients across about a dozen out of over one hundred different types of cancer. Although checkpoint therapies are able to effectively cure many previously incurable patients, only about 15% of patients receiving this type of therapy respond. The main limitation of existing immunotherapies is that they each activate only one or a small number of key steps in either the innate or adaptive immune system, but there is general agreement that highly efficient cancer immunotherapy will require activation of both innate and adaptive immunity. The human body’s innate and adaptive immune systems are each capable of cell-mediated destruction of tumors if the tumor cells are recognized as foreign or damaged. Activation of innate and adaptive responses is also dependent on immune cells sensing the presence of “danger.” The most potent immune cell activating danger signals are released by bacteria and viruses in the setting of infection, and include agonists of immune cell receptors, such as Toll-Like (TLR), NOD and STING. Bacterial danger signals, including TLR agonists are called pathogen-associated molecular patterns (PAMPs) and can activate both innate and adaptive immune cells, including antigen-presenting cells, promoting innate (NK, macrophage) and adaptive (T cell-mediated) destruction of tumors.
The oldest form of cancer immunotherapy involves the provision of decoy danger signals from bacteria. It was based on the long-standing observation of tumor regression in the setting of bacterial infection. Treatment of cancer patients with heat-killed bacteria (“Coley’s toxins”) was established in 1891 and used for 70 years with significant success. For example, ≥5-year survival was reported for 45% of 432 inoperable sarcoma, lymphoma, melanoma, and carcinoma patients. Despite this success, several limitations led to the abandonment of this approach by the pharmaceutical industry. Although there was an indication that Coley’s toxins worked best when administered intravenously (i.v.), it was too toxic when given by this route, limiting the approach to local administration, which produced highly variable results. Another limitation was lack of knowledge about the mechanism of action, preventing optimization and standardization of manufacturing, leading to another source of variability in clinical response. Due to this high variability, Coley’s toxins was not grandfathered-in as an approved drug by the FDA in 1963 and was supplanted by radiation and chemotherapy, despite the fact that these more modern approaches rarely produce durable responses in advanced cancer patients. Scientists now understand the mechanism of action of Coley’s toxins. Gram-negative bacteria contain multiple immune-stimulating danger signals, including TLR agonists such as lipopolysaccharide (LPS). Bacteria and purified or mono-specific TLR agonists, including LPS derivatives, have been validated and approved for prevention and treatment of early stage cancer. However, a safe and effective TLR agonist-based approach for advanced cancer has been elusive, possibly due to limitations in the ability of intratumorally administered, mono-specific TLR agonists to induce potent, systemic anti-tumor immune responses. In addition, the intratumoral approach is not feasible with all tumor types or patients. Our hypothesis is that an effective TLR agonist-based immunotherapy for advanced cancer will require invention of a packaged, multi-TLR agonist or multi-danger signal product that is modified or attenuated to allow safe i.v. administration.
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Our Approach
Our patented approach is based on the hypothesis that efficient activation of both innate and adaptive immune cells and associated anti-tumor immune responses can be achieved by using intact bacteria, containing multiple PAMPs, which have been attenuated so that they can be administered safely intravenously. Because LPS appears to be the most important contributor to both toxicity and efficacy, our patented product candidates are single strains of killed, non-pathogenic Gram-negative bacteria that have been treated in an effort to kill the bacteria and significantly reduce, but not completely eliminate, the cell surface LPS-endotoxin activity. Our product candidates are designed to have enhanced sufficient residual LPS to synergize with other PAMPs in the bacteria to efficiently prime innate and adaptive immune pathways. This approach has led to broad anti-tumor responses, including synergistic regressions and durable responses with five different classes of existing anti-tumor agents, in preclinical models, including checkpoint therapy, targeted antibody therapy and low-dose chemotherapy. Tumor eradication by our technology is designed to produce both innate and adaptive immunological memory and, importantly, not require provision of an exogenous tumor antigen, potentially due to the ability of LPS and other PAMPS to activate dendritic cells that have already captured a tumor antigen.
All immune cells can participate in killing of tumors and viruses. As illustrated below, current therapies activate only one or a small subset of both pathways and cure only a small percentage of patients.
Our technology, however, is designed to synergize with existing therapies to activate both innate and adaptive immune cells, inducing efficient anti- tumor immune responses with a wide safety margin. Induction of adaptive anti-tumor immune responses and immunological memory by our technology does not require an exogenous tumor antigen.
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Innate and adaptive immune responses require identification of a tumor as foreign or not self. However, most steps required for migration and activation of immune cells are unrelated to the tumor or are tumor non-specific. All innate and adaptive non-specific steps are induced or promoted by immune system “danger signal” molecules, such as those found in our bacteria. Bacteria-derived danger signals are also able to enhance the processing and recognition of tumor antigens, which are frequently present, but not “seen” by the immune system.
Results
Preclinical Trials
In preclinical models, Indaptus treated bacteria induced less systemic toxicity than untreated bacteria but were still able to activate innate and adaptive immune responses. Despite exhibiting reduced in vivo pyrogenicity and a higher maximally tolerated dose, our bacteria were able to induce secretion of most cytokines and chemokines from mouse and human immune cells in vitro at levels comparable to those seen with untreated bacteria. Our bacteria were also able to synergize with human immune cells to kill human tumor cells in vitro.
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We have observed significant single agent anti-tumor activity and/or combination therapy-mediated regression with durable responses in established non-Hodgkin’s lymphoma, as well as colorectal, hepatocellular and pancreatic carcinoma in preclinical syngeneic and human tumor xenograft models. Our bacteria synergized with each of five different classes of approved agents in preclinical models, including checkpoint therapy, targeted antibodies, low-dose chemotherapy, non-steroidal anti-inflammatory drugs (NSAIDs) and cytokines to induce tumor regression, providing significant flexibility for targeting of diverse types of cancer. Our technology is designed to eradicate tumors via activation of both innate (NK cell) and adaptive (CD4+ and CD8+ T cell) mechanisms, with the goal of producing both innate and adaptive immunological memory. In our preclinical studies, tumor eradication occurred at non-toxic doses of our bacteria, with a very wide (10 to ≥33-fold) therapeutic index. Notable mechanism of action information has also been obtained, via gene expression analysis with treated tumors and plasma cytokine analysis, demonstrating that our combination technology has the potential to turn “cold” tumors into “hot” tumors and induce, activate or recruit innate and adaptive genes, cells and pathways. Immune cell pre-depletion studies have demonstrated that both innate (NK) and adaptive (CD4 T and CD8 T) immune cells are involved in tumor eradication. We have also demonstrated significant single agent activity against chronic Hepatitis B virus (HBV) and human immunodeficiency virus (HIV) infection in standard preclinical models.
We have carried out successful cGMP manufacturing and stability studies with our lead product candidate, Decoy20. In addition, IND-enabling multi-dose toxicology studies have been completed and did not produce sustained induction of factors that are associated with cytokine release syndrome.
The chart above demonstrates that our bacteria synergize with Anti-PD-1 Checkpoint therapy to regress established mouse hepatocellular carcinoma (HCC) Tumors. All mice (all groups) received a low-dose, non-steroidal anti-inflammatory drug (NSAID/Indomethacin), which increases the number of regressions in the combination setting. Most regressions were durable, with 5/6 combination regressions stable through termination at Day 91 and in a repeat experiment through termination at Day 143 (see next Figure below) (CR = complete response or complete regression). The repeat experiment also produced 5/6 or 6/6 durable regressions per group over a 33-fold Indaptus concentration range and an absence of safety concerns, demonstrating a very wide therapeutic index. Similar tumor eradication results have been obtained by combining our bacteria with low-dose chemotherapy in a mouse non-Hodgkin’s lymphoma model. Eradication of established non-Hodgkin’s lymphoma tumors by our technology has also been observed with human tumor xenografts, via activation of the innate immune system. Development and preclinical efficacy characterization of a systemically administered multiple Toll-like receptor (TLR) agonist for antitumor immunotherapy [abstract]. In: Proceedings of the Fourth CRI-CIMT-EATI-AACR International Cancer Immunotherapy Conference: Translating Science into Survival; Sept 30-Oct 3, 2018; New York, NY. Philadelphia (PA): AACR; Cancer Immunol Res 2019;7(2 Suppl):Abstract nr B178.
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The chart above illustrates that the synergistic tumor eradication by our technology and Anti-PD-1 produces immunological memory. Established tumors were regressed in 11 mice by combination treatment as in the Figure above and then the mice were re-challenged with fresh HCC tumor cells, without further treatment. All of the new tumors were rejected. Similar results have been obtained by combining our bacteria with low-dose chemotherapy in a non-Hodgkin’s lymphoma model.
Clinical Trial
In May 2022, the FDA allowed us to proceed under our IND application for a Phase 1 clinical trial in patients with advanced solid tumors where currently approved therapies have failed, and in December 2022, we initiated this Phase 1 clinical trial which is an open label, multi-center, dose escalation and expansion, single arm (monotherapy) study conducted in 2 parts. The Phase 1 study has begun with a single dose escalation, which is planned to be followed by an expansion part with continuous weekly administration of Decoy20. The study is enrolling patients with advanced/metastatic solid tumors, who have exhausted approved treatment options. The study’s objectives are to assess the safety and tolerability of Decoy20, to determine the maximum tolerated dose and recommended Phase 2 dose, as well as to assess Decoy20 pharmacokinetics PK, pharmacodynamics and clinical activity. The primary endpoint of the study is incidence, relatedness and severity of adverse events and treatment-emergent adverse events and determining the number of subjects per cohort with dose limiting toxicity-based adverse events. Secondary endpoints include the incidence of anti-drug antibodies and neutralizing antibodies pre- and post-treatment, change in Decoy20 PK parameters over time, objective response rate in subjects with measurable disease and duration of response. In August 2023, we completed the first cohort of patients who received a single dose in Part 1 of the Phase 1 clinical trial. Four patients were enrolled and evaluable in the first cohort. Overall, patients experienced symptoms or adverse events (AEs) that were short-lived and consistent with the mechanism of action of Decoy20. In September 2023, we advanced into the second cohort of the Phase 1 clinical trial after receiving authorization from the Safety Review Committee. In early March 2024, we completed the second cohort of patients who received a single dose in Part 1 of the Phase 1 clinical trial and, following authorization from the Safety Review Committee, advanced into the multi-dosing cohort of the Phase 1 clinical trial. The second cohort dose was a reduction from the dosing in the first cohort based on the significant pharmacodynamic effect seen with the first cohort and anticipated optimal Decoy20 safety profile for both multi-dosing and combination approaches. In May 2024, we successfully dosed the first patient in the multi-dose portion of the Phase I clinical trial with Decoy20. The primary goal of this stage of the trial was to evaluate the safety of Decoy20 when administered multiple times to the same patient. We intend to progress Decoy20 into combination studies with a checkpoint inhibitor. In August 2024, the Safety Review Committee convened to review the safety data at the higher Decoy20 dose with single dose administration and the safety data at the lower Decoy20 dose with weekly administration. The data led to the decision to continue dosing additional patients at the lower Decoy20 dose on a weekly schedule and initiate dosing patients at the higher Decoy20 dose on a weekly schedule. In October 2024, the Safety Review Committee examined weekly administration data at the lower Decoy20 dose and cleared unrestricted enrollment of patients at this dose. In February 2025, we announced that we received clinical trial authorization from Health Canada to initiate a clinical trial for Decoy20 which allows us to expand our ongoing U.S. clinical trial to Canadian sites. The trial will enroll patients in Canada under the current protocol, which involves weekly dosing of Decoy20. We also plan to submit an amendment to Health Canada to initiate the Combination Study in Canada.
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Business Strategy
Our mission is to enhance and expand curative cancer immunotherapy for patients with unresectable or metastatic solid tumors and lymphomas, which are responsible for approximately 90% of all cancer deaths.
Our business strategy includes:
| ● | adding operational, financial and management information systems and personnel, including personnel to support our planned product development and commercialization efforts, as well as to support our reporting and other compliance obligations as a public reporting company; |
| ● | advancing to the expansion portion of the Phase 1 clinical trial for Decoy20; | |
| ● | expanding our bacterial product platform to target additional types of cancer, as well as additional infectious diseases; | |
| ● | maintaining, expanding and protecting our intellectual property portfolio; and | |
| ● | seeking regulatory approvals for any product candidates that successfully complete clinical trials. |
Competitive Advantages
Our bacteria contain multiple constituents, capable of priming or activating many of the cellular components of both innate and adaptive immunity, but have been attenuated by a patented process to reduce the potential for over-stimulation of the immune system and consequential induction of undesirable autoimmune reactions. Our bacteria are also likely to be cleared very quickly by the liver and spleen, which may further reduce the risk of non-specific autoimmune side effects, relative to other types of immunotherapy that are designed for continuous exposure. We believe a short exposure of our products is sufficient to act alone and as a “primer” to enhance other products. Additionally, our products can be manufactured by a highly cost-efficient process, potentially providing accelerated patient access in both developed and developing geographical regions.
Governmental Regulation
Among others, the FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs such as those we are developing. These agencies and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling and export and import of our product candidates.
U.S. Regulation of Drugs and Biologics
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FDCA) and its implementing regulations, and biologics under the FDCA and the Public Health Service Act (PHSA) and its implementing regulations. FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approved drug, can be marketed in the United States. Drugs and biologics are also subject to other federal, state, and local statutes and regulations. The process required by the FDA before product candidates may be marketed in the United States generally involves the following:
| ● | completion of extensive preclinical laboratory tests, animal studies and formulation studies, performed in accordance with the Good Laboratory Practices (GLP) regulations and other applicable regulations; | |
| ● | submission to the FDA an IND, which must become effective before human clinical studies may begin and must be updated annually; |
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| ● | approval by an independent institutional review board (IRB) or ethics committee representing each clinical site before each clinical study may be initiated; | |
| ● | performance of adequate and well-controlled human clinical studies in accordance with Good Clinical Practice (GCP), requirements to establish the safety and efficacy, or with respect to biologics, the safety, purity and potency of the product candidate for each proposed indication; | |
| ● | preparation of and submission to the FDA of a new drug application (NDA) or biologics license application, (BLA), after completion of all pivotal clinical studies; | |
| ● | a determination by the FDA within 60 days of its receipt of an NDA or BLA to file the application for review; |
| ● | potential review of the product application by an FDA advisory committee, where appropriate and if applicable; | |
| ● | satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the proposed product drug is produced to assess compliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity, and of potential inspection of selected clinical investigation sites to assess compliance with GCPs; and | |
| ● | FDA review and approval of an NDA or BLA prior to any commercial marketing or sale of the drug in the United States. |
Once a product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. An IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the trial includes an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns about on-going or proposed clinical trials or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted.
All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials must be conducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and a separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. While the IND is active, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.
Furthermore, an independent IRB at each institution participating in the clinical trial must review and approve each protocol before a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations. The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. In addition, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries, including clinicaltrials.gov.
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The clinical investigation of a drug is generally divided into three phases. Although the phases are usually conducted sequentially, they may overlap or be combined.
| ● | Phase 1. The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. | |
| ● | Phase 2. The product candidate is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. | |
| ● | Phase 3. The product candidate is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. |
Post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.
During the development of a product candidate, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA or BLA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMPs. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
NDA and BLA Review Process
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one or more indications. The NDA or BLA must include all relevant data available from pertinent preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing and controls and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of the product, or from a number of alternative sources, including studies initiated and sponsored by investigators. The submission of an NDA or BLA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies.
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In addition, under the Pediatric Research Equity Act, or PREA, an NDA or BLA or supplement to an NDA or BLA must contain data to assess the safety and effectiveness of the biological product candidate for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The Food and Drug Administration Safety and Innovation Act requires that a sponsor who is planning to submit a marketing application for a drug or biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial pediatric study plan within sixty days after an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA. Unless otherwise required by regulation, PREA does not apply to any drug or biological product for an indication for which orphan designation has been granted.
Within 60 days following submission of the application, the FDA reviews the submitted BLA or NDA to determine if the application is substantially complete before the agency accepts it for filing. The FDA may refuse to file any NDA or BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the NDA or BLA must be resubmitted with the additional information. Once an NDA or BLA has been accepted for filing, the FDA’s goal is to review standard applications within ten months after the filing date, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review process may also be extended by FDA requests for additional information or clarification. The FDA reviews an NDA to determine, among other things, whether a product candidate is safe and effective for its intended use and whether its manufacturing is sufficient to assure and preserve the product’s identity, strength, quality and purity. The FDA reviews a BLA to determine, among other things, whether a product candidate is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. When reviewing an NDA or BLA, the FDA may convene an advisory committee to provide clinical insight on application review questions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA or BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
After the FDA evaluates the NDA or BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter, or CRL. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A CRL usually describes the specific deficiencies in the NDA or BLA identified by the FDA and may require additional clinical data, including additional clinical trials, or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a CRL is issued, the sponsor must resubmit the NDA or BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA or BLA does not satisfy the criteria for approval.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the NDA or BLA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. The FDA may also require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.
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Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates. For example, the fast track program is intended to expedite or facilitate the process for reviewing new products that meet certain criteria. Specifically, product candidates are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product candidate and the specific indication for which it is being studied. The sponsor of a fast track product candidate has opportunities for more frequent interactions with the review team during product development and, once an NDA or BLA is submitted, the application may be eligible for priority review. A fast track product candidate may also be eligible for rolling review, where the FDA may consider for review sections of the NDA or BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA or BLA, the FDA agrees to accept sections of the NDA or BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA or BLA.
A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product candidate can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.
Any marketing application for a drug or biologic submitted to the FDA for approval, including a product candidate with a fast track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review. A product candidate is eligible for priority review if it has the potential to provide a significant improvement in the treatment, diagnosis or prevention of a serious disease or condition. For new-molecular-entity NDAs and original BLAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (as compared to ten months under standard review).
Additionally, depending on the design of the applicable clinical trials, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled confirmatory clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit, and may require that such confirmatory studies be underway before granting any accelerated approval. Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required confirmatory studies in a timely manner or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.
Fast track designation, breakthrough therapy designation, priority review, and accelerated approval do not change the standards for approval but may expedite the development or approval process. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. We may explore some of these opportunities for our product candidates as appropriate.
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Orphan drug designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States or, if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a drug product available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan designation must be requested before submitting an NDA or BLA. After the FDA grants orphan designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biologic for the same disease or condition for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or inability to manufacture the product in sufficient quantities. The designation of such drug or biologic also entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. However, competitors, may receive approval of different products for the disease or condition for which the orphan product has exclusivity or obtain approval for the same product but for a different disease or condition for which the orphan product has exclusivity. Orphan exclusivity also could block the approval of a competing product for seven years if a competitor obtains approval of the “same drug,” as defined by the FDA, or if the active ingredient of the product candidate is determined to be contained within the competitor’s product for the same disease or condition. In addition, if an orphan designated product receives marketing approval for a disease or condition broader than what is designated, it may not be entitled to orphan exclusivity.
Post-Approval Requirements
Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which the FDA assesses an annual program fee for each product identified in an approved NDA or BLA. Drug and biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMPs, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMPs and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMPs and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
| ● | restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls; | |
| ● | fines, warning letters or holds on post-approval clinical studies; | |
| ● | refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals; | |
| ● | product seizure or detention, or refusal of the FDA to permit the import or export of products; |
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| ● | consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; | |
| ● | mandated modification of promotional materials and labeling and the issuance of corrective information; | |
| ● | the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or | |
| ● | injunctions or the imposition of civil or criminal penalties. |
The FDA closely regulates the marketing, labeling, advertising and promotion of drug products and biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
Drug Product Marketing Exclusivity
Market exclusivity provisions authorized under the FDCA can delay the submission or the approval of certain marketing applications. For example, the FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not approve or even accept for review an abbreviated new drug application, or ANDA, or an NDA submitted under Section 505(b)(2), or 505(b)(2) NDA, submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.
The FDCA alternatively provides three years of non-patent exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to any preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of existing exclusivity, including patent terms, if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials.
Biosimilars and Reference Product Exclusivity
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated approval pathway for biological products that are highly similar, or “biosimilar,” to or interchangeable with an FDA-approved reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, is generally shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. A product shown to be biosimilar or interchangeable with an FDA-approved reference biological product may rely in part on the FDA’s previous determination of safety and effectiveness for the reference product for approval, which can potentially reduce the cost and time required to obtain approval to market the product.
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Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of existing exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.
Other Healthcare Laws
Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we research as well as sell, market and distribute any products for which we obtain marketing approval. Such laws include, without limitation, federal and state anti-kickback, fraud and abuse, false claims, data privacy and security and physician and other healthcare provider transparency laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, they may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and imprisonment.
Coverage and Reimbursement
Sales of any product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. The coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. These third-party payors are increasingly reducing reimbursements for medical products, drugs and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product and also have a material adverse effect on sales.
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Healthcare Reform
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, each as amended, collectively known as the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affected the pharmaceutical industry. The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement adjustments and changes to fraud and abuse laws. By way of example, the ACA:
| ● | increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1% of the average manufacturer price; |
| ● | required collection of rebates for drugs paid by Medicaid managed care organizations; | |
| ● | required manufacturers to participate in a coverage gap discount program, under which they must agree to offer 70 percent point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; and | |
| ● | imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs” to specified federal government programs. |
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminated the statutory Medicaid drug rebate cap, beginning January 1, 2024. The rebate was previously capped at 100% of a drug’s average manufacturer price, or AMP. Most recently, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the drug price negotiation programs is currently subject to legal challenges. For that and other reasons, it is currently unclear how the IRA will be effectuated.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries, proposed and enacted legislation and executive orders issued by the President designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Data Privacy and Security Laws
Numerous state, federal and foreign laws, regulations and standards govern the collection, use, access to, confidentiality and security of health-related and other personal information, and could apply now or in the future to our operations or the operations of our partners. In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.
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Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, knowledge and scientific resources provide us with certain competitive advantages, we face competition from many sources, including pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions. Many of these competitors may have access to greater capital and resources than us. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel. Any product candidates that we successfully develop and commercialize will compete with new immunotherapies that may become available in the future. Our competitors include larger and better funded biopharmaceutical, biotechnology and therapeutics companies, specifically companies focused on cancer immunotherapies, such as Amgen, Inc., AstraZeneca plc, BMS, Genentech, Inc., GlaxoSmithKline PLC, Merck & Co., Inc., Novartis AG, Pfizer Inc., Roche Holding Ltd and Sanofi S.A. On the other hand, many of these companies are developing immunotherapeutics which may have potential to be used in concert with Decoy20 and in this regard, we view them as potentially complimentary.
With respect to our lead candidate, Decoy20, there are a number of companies that are developing possible treatments for cancer, however, we believe we are the only company using systemic administration of killed, non-pathogenic Gram-negative bacteria with reduced lipopolysaccharide-endotoxin to stimulate innate and adaptive immune system pathways.
Our success will be based in part upon our ability to successfully commercialize Decoy20 and to identify, develop and manage a portfolio of therapeutics that are safer and more effective than competing products in our target indications. Our market opportunity has the potential to be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects, are more convenient or are less expensive than any therapeutics we may develop. Our competitive position will also be dependent upon our ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes, and protect our intellectual property, and to secure sufficient capital resources for the period between technological conception and commercial sales. The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our products. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.
Intellectual Property
Our success depends, at least in part, on our ability to protect our proprietary technology and intellectual property, and to operate without infringing or violating the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws, know-how, intellectual property licenses and other contractual rights (including confidentiality and invention assignment agreements) to protect our proprietary technology and intellectual property, including related intellectual property rights.
Patents
As of the date of this prospectus, we own 58 granted patents and 11 pending patent applications to use within our field of business. Our patents and patent applications generally relate to compositions and methods for treating cancer and infectious diseases, and our patents and any patents that issue from our pending patent applications are expected to expire at various dates between 2033 and 2043.
We intend to submit patent applications for each new product and technology that we develop. The patent outlook for companies like ours is generally uncertain and may involve complex legal and factual questions. Our ability to maintain and consolidate our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent applications or any patent applications that we may license will result in the issuance of any patents. Our issued patents and those that may be issued in the future, or patents that we may exclusively license, may be challenged, narrowed, circumvented or found to be invalid or unenforceable, which could limit our ability to stop competitors from marketing related products or the length of term of patent protection that we may have for our products. We cannot be certain that we were the first to invent the inventions claimed in our owned patents or patent applications. In addition, our competitors may independently develop similar technologies or duplicate any technology developed by us, and the rights granted under any issued patents may not provide us with any meaningful competitive advantages against these competitors. Furthermore, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.
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Trade Secrets and Confidential Information
In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect. We rely on, among other things, confidentiality and invention assignment agreements to protect our proprietary know-how and other intellectual property that may not be patentable, or that we believe is best protected by means that do not require public disclosure. For example, we require our employees to execute confidentiality agreements in connection with their employment relationships with us, and to disclose and assign to us inventions conceived in connection with their services to us. However, there can be no assurance that these agreements will be enforceable or that they will provide us with adequate protection. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems.
We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business. For a more comprehensive summary of the risks related to our intellectual property, see “Risk Factors - Risks Related to Our Intellectual Property.”
Environmental Matters
We are subject to various environmental, health and safety laws and regulations, including those governing laboratory procedures, the handling, use, storage, treatment and disposal of hazardous materials and wastes and the cleanup of contaminated sites. Our operations involve the use of potentially hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. Although we generally contract with third parties for the operations that involve the disposal of hazardous materials and wastes, we cannot eliminate the risk of contamination or injury from these materials. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on us. However, we could incur substantial costs as a result of violations of or liabilities under environmental requirements in connection with our operations or property, including fines, penalties and other sanctions, investigation and cleanup costs and third-party claims. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. See “Risk Factors – Risks Related to Healthcare Laws and Other Legal Compliance Matters - Violations of or liabilities under environmental, health and safety laws and regulations could subject us to fines, penalties or other costs that could have a material adverse effect on the success of our business.”
We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations.
Human Capital Management
As of the date of this prospectus, we have seven full-time employees. None of our employees are represented by labor unions or covered by collective bargaining agreements.
We believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel. In particular, we depend on the skills, experience and performance of our senior management and research personnel. We compete for qualified personnel with other biotechnology, medical device, pharmaceutical and healthcare companies, as well as universities and non-profit research institutions.
We provide competitive compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs include incentive compensation plan, pension, healthcare and insurance benefits, paid time off, and family leave, among others. We also use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly for our key employees.
The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees and we consider our relations with our employees to be good.
Properties
Our principal executive offices are located at 3 Columbus Circle, 15th Floor, New York, NY. In addition, we lease approximately 2,000 square feet of office space in San Diego, California under a lease agreement that was amended on April 19, 2023 and will expire on October 31, 2025. We believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed.
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MANAGEMENT
The following table sets forth information relating to our executive officers and directors as of the date of this prospectus.
| Name | Age | Position | ||
| Executive Officers | ||||
| Jeffrey A. Meckler | 58 | Chief Executive Officer and Director | ||
| Michael J. Newman, Ph.D. | 69 | Chief Scientific Officer and Director | ||
| Nir Sassi | 49 | Chief Financial Officer | ||
| Walt A. Linscott, Esq. | 65 | Chief Operating Officer | ||
| Roger J. Waltzman, M.D. | 58 | Chief Medical Officer | ||
| Non-Executive Directors | ||||
| Dr. Roger J. Pomerantz | 68 | Chairman of the Board of Directors | ||
| Hila Karah | 56 | Director | ||
| Anthony J. Maddaluna | 72 | Director | ||
| William B. Hayes | 59 | Director | ||
| Mark J. Gilbert, M.D. | 64 | Director | ||
| Robert E. Martell, M.D., Ph.D. | 62 | Director |
Biographical information with respect to our executive officers and directors is provided below.
Information about Our Executive Officers
Jeffrey A. Meckler has served as our Chief Executive Officer since July 2021 and member of our board of directors since inception in February 2021. Previously, Mr. Meckler served as our sole officer from inception to July 2021, Intec Israel’s Vice Chairman of the board of directors from April 2017, as Intec Israel’s Chief Executive Officer from July 2017 and as President and Secretary and director of Intec Parent, Inc. from March 2021 until the Merger. Mr. Meckler has served on numerous public and private corporate boards and since October 2014 has served as a director of Travere Therapeutics (Nasdaq: TVTX). Mr. Meckler served as Chief Executive Officer and a director of CoCrystal Pharma, Inc., a pharmaceutical company, from April 2015 to July 2016. He has also served as a director of QLT, Inc. (Nasdaq: QLTI), a biotechnology company, from June 2012 to November 2016, as well as the Managing Director of The Andra Group, a life sciences consulting firm since 2009. Mr. Meckler also served as Chief Executive Officer of Trieber Therapeutics from January 2017 to July 2017. Earlier in his career, Mr. Meckler held a series of positions at Pfizer Inc. in manufacturing systems, market research, business development, strategic planning and corporate finance, which included playing a significant role in acquisitions and divestitures. Mr. Meckler is the past President and continues to serve on the board of directors of Children of Bellevue, a non-profit organization focused on advocating and developing pediatric programs at Bellevue Hospital Center. Mr. Meckler holds a B.S. in Industrial Management and M.S. in Industrial Administration from Carnegie Mellon University. In addition, Mr. Meckler received his J.D. from Fordham University School of Law. We believe that Mr. Meckler is qualified to serve on our board of directors because of his extensive executive leadership experience in the biopharmaceutical industry, including his service at Pfizer, and his experience serving on public company boards.
Michael J. Newman, Ph.D. has served as our Chief Scientific Officer and a member of our board of directors since August 2021. Dr. Newman is a pharmaceutical/biotechnology executive with over 40 years of experience carrying out and managing oncology research and development, in addition to undergraduate and graduate research and training in microbiology. He was the Founder, President, Chief Executive Officer and a member of the board of directors of Decoy (from August 2013 to August 2021). His previous positions also include faculty appointments in Biochemistry at Brandeis University (from 1984 to 1987) and the Roche Institute of Molecular Biology (from 1987 to 1992), Senior Associate Director of Oncology at Sandoz Pharmaceuticals (world-wide head of Cancer Biology), and Executive Director of Oncology at Novartis Pharmaceuticals (Head of Cancer Biology in the U.S.) (from 1992 to 1997), and senior management at several Biotechnology companies (from 1998 to 2012). Dr. Newman received a bachelor’s degree in Biology from the University of California at San Diego, a Ph.D. in Cell and Developmental Biology from Harvard Medical School (National Science Foundation Pre-Doctoral Fellow), and carried out post-doctoral research at Cornell University. We believe that Dr. Newman is qualified to serve on our board of directors because of his extensive scientific and research background, as well as his experience as founder and CEO of Decoy.
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Nir Sassi has served as our Chief Financial Officer since July 2021 and served as Intec Israel’s Chief Financial Officer from March 2010 until the Merger (other than from January 2015 to August 2016, during which period Mr. Sassi served as Intec Israel’s VP Finance), and its President from March 2021 until the Merger. Prior to his service with Intec Israel, Mr. Sassi served as a Senior Manager at PricewaterhouseCoopers Israel, an accounting firm, from 2002 until 2010, including two years relocation to the PricewaterhouseCoopers New York office. Mr. Sassi is a certified public accountant in Israel and has a bachelor’s degree in economics and accounting from Ben Gurion University in Be’er Sheva, Israel.
Walt A. Linscott, Esq. has served as our Chief Operating Officer since March 2023. Prior to that, he served as our Chief Business Officer from July 2021 until March 2023. Mr. Linscott joined Intec Israel in October 2017 and served as its Chief Business Officer from July 2018 until the Merger. Previously, from October 2017 to July 2018, Mr. Linscott served as Intec Israel’s Chief Administrative Officer. Prior to his service with Intec Israel, Mr. Linscott co-founded a global consulting enterprise in October 2014 providing strategic advice to developing companies and most recently served as the President and Chief Operating Officer of Treiber Therapeutics, Inc. from March 2017 to October 2017. Mr. Linscott also has held senior level executive positions at public and private medical device and pharmaceutical companies including Cocrystal Pharma, Inc., from July 2015 to March 2017, Carestream Health, Inc., from January 2011 to January 2015 and Solvay Pharmaceuticals, Inc., from 2001 to 2005. In addition to this experience, he was an associate and partner at Thompson Hine LLP from 1990 to 2001, and again as a partner from 2005 to 2010 where he founded the firm’s Atlanta, Georgia office, served as Partner in Charge and Chair of the firm’s Life Science Practice Group. Mr. Linscott holds a Master of Science in Experimental and Translational Therapeutics from the University of Oxford, a Postgraduate Diploma in Global Business from the University of Oxford and a Postgraduate Diploma in Entrepreneurship from Cambridge University. He earned a bachelor’s degree from Syracuse University and a Juris Doctor from the University of Dayton School of Law. Mr. Linscott served on active duty as an Officer in the United States Marine Corps prior to attending law school.
Roger Waltzman M.D., M.B.A. has served as our Chief Medical Officer since August 2023. Prior to that, he served as Chief Business Officer of Molecular Templates from 2019 to 2023 and in multiple senior drug development roles at Novartis Oncology from 2007 to 2013, where he played a leading role in the development of imatinib, nilotinib, and ruxolitinib. From 2013 to 2016, Dr. Waltzman was the Full Development Head of Malaria Drug Development at Novartis. More recently, Dr. Waltzman was CMO at Rgenix (now Inspirna), where he supervised the development of immuno-oncology and metabolic inhibitor assets through Phase 1 a/b. Previously, he served as CSO at Jaguar Health and Napo Pharmaceuticals, where he led scientific aspects of development and commercialization of Mytesi® (crofelemer). Before joining the industry, Dr. Waltzman held assistant professorships in medical oncology and palliative care at Saint Vincent’s Hospital and Mount Sinai School of Medicine in New York. He completed his fellowship in hematology/oncology at Memorial Sloan Kettering Cancer Center. Dr. Waltzman earned a Master of Business Administration at Columbia Business School and a Doctor of Medicine and Bachelor of Arts from Brown University.
Non-Employee Directors
Dr. Roger J. Pomerantz has served as our Chairman since July 2021 and previously served on Intec Israel’s board of directors from March 2018 until the Merger. Dr. Pomerantz served as Chairman and Chief Executive Officer of Contrafect Corporation (Nasdaq: CFRX) from April 2019 to November 2023. Prior to that, he served as Vice Chairman of Contrafect from May 2014 to April 2019. Previously, Dr. Pomerantz was a Venture Partner at Flagship Pioneering from 2014 through 2019. In addition, from November 2013 to December 2019, Dr. Pomerantz served as Chairman of the board of directors of Seres Therapeutics, Inc. (Nasdaq: MCRB), a biotechnology company, and as its President and Chief Executive Officer from June 2014 to January 2019. Prior to joining Seres, Dr. Pomerantz was Worldwide Head of Licensing & Acquisitions, Senior Vice President at Merck & Co., Inc., where he oversaw all licensing and acquisitions at Merck Research Laboratories, including external research, out-licensing regional deals, and academic alliances. Previously, he served as Senior Vice President and Global Franchise Head of Infectious Diseases at Merck. Prior to joining Merck, Dr. Pomerantz was Global Head of Infectious Diseases for J&J. Dr. Pomerantz has served as a member of the board of directors of Viracta (Nasdaq: VIRX) since June 2020 and was appointed Chair in September 2020. Since February 2020, he served as Chairman of Collplant Biotechnologies (Nasdaq: CLPT) and was previously a member of the board of directors of Rubius Therapeutics (Nasdaq: RUBY). Dr. Pomerantz earned his B.A. in biochemistry at the Johns Hopkins University and his M.D. at the Johns Hopkins School of Medicine. He completed his internal medicine internship and residency training, and his subspecialty clinical and research training in infectious diseases and virology at the Massachusetts General Hospital of Harvard Medical School. His post-doctoral research training in molecular retrovirology was obtained at both Harvard Medical School and the Whitehead Institute of the Massachusetts Institute of Technology (MIT). Dr. Pomerantz also served as the Chief Resident at the Massachusetts General Hospital. Following his medical-scientist training, he was an Endowed, Tenured Professor of Medicine and Molecular Pharmacology and Chairman of the Infectious Diseases Department of Thomas Jefferson University in Philadelphia. Dr. Pomerantz is an internationally recognized expert in HIV molecular pathogenesis and latency. He has developed ten approved infectious disease drugs in important diseases including HIV, HCV, tuberculosis, and Clostridium difficile infection. We believe Dr. Pomerantz is qualified to serve on our board of directors because of his significant scientific, executive and board leadership experience in drug development and in the pharmaceutical industry.
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Hila Karah has served on our board since July 2021 and previously served as a member of Intec Israel’s board of directors since December 2009 until the Merger. Ms. Karah is a managing Partner of Pitango HealthTech VC and an experienced board director. Prior to Pitango she served as an independent business consultant to private and public companies on strategy, operations, financing, regulatory and corporate governance. From 2006 until 2013, Ms. Karah was the chief investment officer of Eurotrust Ltd., a family office, where she focused primarily on investments in life science, internet and high-tech companies. Prior to joining Eurotrust, Ms. Karah served as a senior analyst at Perceptive Life Sciences Ltd., a New York-based life healthcare focused hedge fund. Prior to her position at Perceptive, Ms. Karah was a research analyst at Oracle Partners Ltd., a healthcare-focused hedge fund based in Connecticut. Ms. Karah has served on the board of Cyren Ltd., a cyber security company (Nasdaq, TASE: CYRN), since 2008 and the board of Dario Health Corp. (Nasdaq: DRIO) since 2014. She also serves on the board of several private companies. Ms. Karah has a BA in molecular and cell biology from the University of California, Berkeley, and has studied at the UCSB – UCSF Joint Medical Program. We believe Ms. Karah is qualified to serve on our board of directors because of her longstanding service with Intec Israel, her investment career in life science companies, her scientific background and experience serving on public company boards.
Anthony J. Maddaluna has served on our board since July 2021 and previously served on Intec Israel’s board of directors since December 2017 until the Merger. Mr. Maddaluna has more than 40 years of experience in the pharmaceutical manufacturing industry, including leadership positions in plants, regions and globally. From January 2011 to December 2016, Mr. Maddaluna held a series of positions at Pfizer Inc., most recently serving as the Executive Vice President and President of Pfizer Global Supply. Prior to that Mr. Maddaluna served as Senior Vice President of Pfizer Global Manufacturing Strategy and Supply Network Transformation from 2008 until 2011, and as Vice President of Pfizer Global Manufacturing Europe Area from 1998 until 2008. Mr. Maddaluna served as a director of Albany Molecular Research Inc. from February 2016 until its acquisition by The Carlyle Group and GTCR in August 2017 and currently serves on the board of managers for the private company. Mr. Maddaluna holds a B.S. in Chemical Engineering from Northeastern University and an M.B.A. from Southern Illinois University. We believe Mr. Maddaluna is qualified to serve on our board of directors because of his extensive experience in the pharmaceutical manufacturing industry, including his service at Pfizer, and his experience serving on company boards.
William B. Hayes has served on our board since July 2021 and previously served on Intec Israel’s board of directors since June 2018 until the Merger. Most recently, Mr. Hayes was Executive Vice President, Chief Financial Officer and Treasurer of Laboratory Corporation of America Holdings (LabCorp) (NYSE: LH), a diagnostics laboratory company. Mr. Hayes joined LabCorp in 1996, where he was responsible for day-to-day operations of the revenue cycle function. He rose through a series of promotions and in 2005 was named Executive Vice President, Chief Financial Officer and Treasurer of LabCorp, a role he held until his retirement in 2014. Prior to LabCorp, Mr. Hayes was at KPMG for nine years in their audit department. Since October 2019, Mr. Hayes has served on the board of Builders FirstSource, a supplier and manufacturer of building materials (Nasdaq: BLDR), and currently chairs its audit committee. Previously, Mr. Hayes served as a director from March 2016 for Patheon N.V. (NYSE: PTHN), a pharmaceutical manufacturing company, until its acquisition by Thermo Fisher in late 2017. Mr. Hayes holds a Bachelor of Science in accounting from the University of North Carolina at Greensboro. We believe Mr. Hayes is qualified to serve on our board of directors because of his accounting background and experience serving on public company boards.
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Mark J. Gilbert has served on our board of directors since November 2021. Dr. Gilbert brings more than 30 years of experience in global medical and clinical research and development, and management of medical affairs. From March 2019 to March 2022, Dr. Gilbert served as Executive Vice President of Research and Development at Acepodia, Inc., a clinical-stage biotechnology company addressing gaps in cancer care and since June 2021, Dr. Gilbert has served as a Clinical Development Advisor to Decoy Biosystems, Inc., the Company’s wholly owned-subsidiary. In addition, from October 2020 to January 2024, Dr. Gilbert served as the Chairman of the Scientific Advisory Board at Inceptor Bio, LLC, a biotechnology company developing multiple next- generation cell and gene therapy platforms for underserved and difficult-to-treat cancers, after January 2024 he remains an SAB member, and from October 2020, he serves as a Strategic Advisor at Kineticos Ventures, a firm providing advisory services and capital to emerging life sciences firms. Prior to these positions, between November 2013 and January 2020, Dr. Gilbert was the Chief Medical Officer of Juno Therapeutics Inc., a biopharmaceutical company, where he led the clinical development of some of the first CAR-T cell therapies. Before that, Dr. Gilbert held leadership positions at Bayer Schering Pharma AG, where he served as Vice President and Head of Global Clinical Development, Therapeutic Area Oncology; Berlex Pharmaceuticals, Inc., where he served as Vice President of Medical Affairs, Oncology, and Vice President and Head of Global Medical Development Group, Oncology; and Immunex Corporation, where he served as Senior Medical Director, Clinical Research and Development. Between May 2019 and May 2021, Dr. Gilbert served as an Independent Director of Silicon Therapeutics, Inc., a fully integrated drug design and development company. Dr. Gilbert earned a Bachelor of Science degree in Biochemistry from the University of Iowa and a Medical Doctor degree from the University of Iowa College of Medicine. He trained in internal medicine, infectious disease and medical oncology at the University of California, San Francisco, and the University of Washington, respectively. We believe Dr. Gilbert is qualified to serve on our board of directors because of his significant scientific and executive in drug development and in the pharmaceutical industry.
Robert E. Martell, M.D., Ph.D. has served on our board of directors since February 2023. Dr. Martell brings more than 20 years of experience in the pharmaceutical industry. Dr. Martell is Chief Scientific Officer at Curis, having previously served as Head of Research & Development. From September 2011 to May 2018, Dr. Martell served on Curis’ Board of Directors. He is also co-founder of Epi-Cure Pharmaceuticals, a privately held early-stage biotechnology company, and served as its president and member of board of directors from 2016 to 2018. Dr. Martell served as Chief Medical Officer of Tesaro, Inc., a biopharmaceutical company developing Zejula and Varubi from 2012 to 2015; as Chief Medical Officer at MethylGene, a publicly traded biopharmaceutical focused on cancer therapeutics from 2005 to 2009; as Director of Oncology Global Clinical Research at Bristol-Myers Squibb, a biopharmaceutical company developing Sprycel, Erbitux and Ixempra from 2002 to 2005; and as Associate/Deputy Director at Bayer Corporation Pharmaceutical Division developing Nexavar from 2000 to 2002. In addition, Dr. Martell is a part-time treating physician at Champlain Valley Hematology Oncology and he has held a number of academic positions, including at Tufts Medical Center since 2009, where he has served in various roles including Associate Chief in the Division of Hematology/Oncology, Director of the Neely Center for Clinical Cancer Research, Leader of the Cancer Center’s Program in Experimental Therapeutics and Attending Physician; at Yale University School of Medicine as Assistant Clinical Professor of Oncology from 2001 to 2005; and as Assistant Professor at Duke Medical Center from 1998 to 2000. Dr. Martell received a B.A. in chemistry from Kalamazoo College, a Ph.D. in Pharmacology from University of Michigan and an M.D. from Wayne State University. He completed his Internal Medicine internship and residency at Duke University Medical Center, and his Fellowship in Medical Oncology also at Duke.
Board Leadership Structure
Our Board is committed to promoting effective, independent governance of the Company. Our Board believes it is in the best interests of the stockholders and the Company for the Board to have the flexibility to select the best director to serve as Chairman at any given time, regardless of whether that director is an independent director or the Chief Executive Officer. Consequently, we do not have a policy governing whether the roles of Chairman of the Board and Chief Executive Officer should be separate or combined. This decision is made by our Board, based on the best interests of the Company considering the circumstances at the time.
Currently, the offices of the Chairman of the Board and the Chief Executive Officer are held by two different people. Dr. Pomerantz is our independent, non-executive Chairman of the Board and Mr. Meckler is our Chief Executive Officer. The Chief Executive Officer is responsible for the day to day leadership and performance of the Company, while the Chairman of the Board provides guidance to the Chief Executive Officer and sets the agenda for Board meetings and presides over meetings of the Board. We believe that separation of the positions reinforces the independence of the Board in its oversight of the business and affairs of the Company, and creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board to monitor whether management’s actions are in the best interests of the Company and its stockholders. Furthermore, we believe that Dr. Pomerantz is especially suited to serve as our Chairman of the Board, in light of his significant strategic management experience in the U.S. healthcare industry, which provides him with a unique perspective on the best methods of growth for a life sciences company.
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However, our Board of Directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.
Role of the Board in Risk Oversight
One of the key functions of our Board is informed oversight of our risk management process. Our Board does not have a standing risk management committee, but rather administers this oversight function directly through our Board as a whole, as well as through various standing committees of our Board that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure. Our Board considers cybersecurity risk as part of its risk oversight function and oversees our cybersecurity and other information technology risks and management’s implementation of our cybersecurity risk management program. Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements and considers and approves or disapproves any related person transactions. Our Compensation Committee assesses and monitors whether our compensation plans, policies and programs comply with applicable legal and regulatory requirements. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure.
Clawback Policy
Our Board of Directors has adopted a Policy for Recovery of Erroneously Awarded Compensation (the “Clawback Policy”), in accordance with the Nasdaq listing standards and Exchange Act Rule 10D-1, which applies to our current and former executive officers. Under the Clawback Policy, we are required to recoup the amount of any Erroneously Awarded Compensation (as defined in the Clawback Policy) on a pre-tax basis within a specified lookback period in the event of any Financial Restatement (as defined in the Clawback Policy), subject to limited impracticability exception.
Policies and Practices Related to the Grant of Certain Equity Awards
From time to time, we award stock options to our employees, including the named executive officers. Historically, the Company we awarded new-hire option grants on or soon after a new hire’s employment start date and periodic annual refresh employee option grants, which refresh grants are typically approved at a meeting of the compensation committee or board. Non-employee directors receive automatic initial and annual stock option grants, at the time of a director’s appointment or election to the board and at the time of each annual meeting of our stockholders, respectively. For additional information on our non-employee director compensation policy see below under the heading, “Director Compensation.”
We do not otherwise maintain any written policies on the timing of awards of stock options, stock appreciation rights, or similar instruments with option-like features. It is the Company’s practice to not grant any awards to its named executive officers when in possession of any material nonpublic information, and to wait until such material nonpublic information has been fully disclosed, widely disseminated to the public and at least two full business days has passed after such material nonpublic information has been disclosed.
Code of Ethics
We have a written Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the Code of Business Conduct and Ethics on our website, www.indaptusrx.com, in the “Investors” section under “Corporate Governance.” In addition, we intend to post on our website all disclosures that are required by law or the rules of Nasdaq concerning any amendments to, or waivers from, any provision of the Code of Business Conduct and Ethics.
Anti-Hedging Policy
Our Board of Directors has adopted an Insider Trading Compliance Policy, which applies to all of our directors, officers and employees. The policy prohibits our directors, officers and employees and any entities they control from engaging in short sales and transactions in put or call options and other forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, and other similar transactions, unless such transaction has been pre-approved by the Chief Financial Officer.
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COMMITTEES OF THE BOARD
Our Board has established four standing committees—Audit, Compensation, Nominating, and Science and Technology. Each of Audit, Compensation and Nominating Committee operates under a written charter that has been approved by our Board.
The members of each of the Board committees and committee Chairpersons are set forth in the following chart.
| Name | Audit | Compensation | Nominating | Science and Technology | ||||||||||||
| Mark J. Gilbert, M.D. | X | |||||||||||||||
| William B. Hayes | Chairperson | X | ||||||||||||||
| Hila Karah | X | Chairperson | ||||||||||||||
| Anthony J. Maddaluna | Chairperson | X | X | |||||||||||||
| Robert E. Martell, M.D., Ph.D. | X | X | ||||||||||||||
| Michael J. Newman, Ph.D. | Chairperson |
Audit Committee
Our Audit Committee’s responsibilities include:
| ● | appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm; | |
| ● | monitoring the rotation of the partners of our independent registered public accounting firm on our audit engagement team and considering periodically the rotation of auditing firms; | |
| ● | overseeing the work of our independent registered public accounting firm; | |
| ● | reviewing and discussing with management and the independent registered public accounting firm the results of the annual audit, including our annual financial statements and related disclosures, and the results of the review by the independent registered public accounting firm of our quarterly financial statements and related disclosures; | |
| ● | discussing with management and the independent registered public accounting firm the adequacy of our internal control over financial reporting, disclosure controls and procedures, compliance with legal and regulatory requirements, and code of business conduct and ethics; | |
| ● | discussing with management and the independent registered public accounting firm our risk management policies; | |
| ● | establishing policies regarding hiring employees from the independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns; | |
| ● | meeting independently with our independent registered public accounting firm and management; | |
| ● | reviewing and providing oversight of any related person transactions, including establishing such policies and procedures as appropriate to facilitate such review; and | |
| ● | preparing the audit committee report required by the SEC rules (which is included on page 11 of this proxy statement). |
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The Audit Committee charter is available on the Investors page of our website at www.indaptusrx.com. The members of the Audit Committee are Mr. Hayes, Ms. Karah, and Dr. Martell. Mr. Hayes serves as the Chairperson of the committee. Our Board has affirmatively determined that each of Mr. Hayes, Ms. Karah, and Dr. Martell is independent for purposes of serving on an audit committee under Rule 10A-3 promulgated under the Exchange Act and the Nasdaq Rules, including those related to Audit Committee membership.
The members of our Audit Committee meet the requirements for financial literacy under the applicable Nasdaq rules. In addition, our Board of Directors has determined that Mr. Hayes qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K, and under the similar Nasdaq Rules requirement that the Audit Committee have a financially sophisticated member.
Compensation Committee
Our Compensation Committee is responsible for assisting the Board in the discharge of its oversight responsibilities relating to the evaluation of our executive officers (including the Chief Executive Officer), determining the compensation of our executive officers, and overseeing the management of risks associated therewith. In fulfilling its purpose, our Compensation Committee has the following principal duties:
| ● | reviewing and approving, or recommending for approval by the Board, our overall compensation strategy and policies, including evaluating risks associated with our compensation policies and practices; | |
| ● | reviewing and approving, or recommending for approval by the Board, the compensation of our CEO and our other executive officers; | |
| ● | overseeing and administering our cash and equity incentive plans; | |
| ● | reviewing and making recommendations to the Board of Directors with respect to non-employee director compensation; | |
| ● | reviewing and discussing annually with management our “Compensation Discussion and Analysis,” to the extent required; and | |
| ● | preparing the annual compensation committee report, to the extent required by SEC rules. |
The Compensation Committee generally considers the Chief Executive Officer’s recommendations when making decisions regarding the compensation of executive officers (other than the Chief Executive Officer). Pursuant to the Compensation Committee’s charter, which is available on the Investors page of our website at www.indaptusrx.com, the Compensation Committee has the authority to retain or obtain the advice of compensation consultants, legal counsel and other advisors to assist in carrying out its responsibilities. The Compensation Committee did not engage the services of a compensation consultant in 2023.
The Compensation Committee may delegate its authority under its charter to one or more subcommittees as it deems appropriate from time to time. The Compensation Committee may also delegate to an officer the authority to grant equity awards to certain employees, as further described in its charter and subject to the terms of our equity plans.
The members of our Compensation Committee are Mr. Maddaluna and Mr. Hayes. Mr. Maddaluna serves as the Chairperson of the Compensation Committee. Each member of the Compensation Committee qualifies as an independent director under Nasdaq’s heightened independence standards for members of a compensation committee and as a “non-employee director” as defined in Rule 16b-3 of the Exchange Act.
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Nominating Committee
Our Nominating Committee’s responsibilities include:
| ● | identifying individuals qualified to become Board members; | |
| ● | recommending to the Board the persons to be nominated for election as directors and to each Board committee; | |
| ● | reviewing with the Chief Executive Officer and making recommendations to the Board with respect to our succession plans for the Chief Executive Officer and other executive officers; | |
| ● | reviewing and making recommendations to the Board the composition and chairperson of each Board committee; and | |
| ● | overseeing the evaluation of the Board and its committees. |
The Nominating Committee charter is available on the Investors page of our website at www.indaptusrx.com. The members of our Nominating Committee are Ms. Karah and Mr. Maddaluna. Ms. Karah serves as the Chairperson of the Nominating Committee. The Nominating Committee has the authority to consult with outside advisors or retain search firms to assist in the search for qualified candidates or consider director candidates recommended by our stockholders.
Science and Technology Committee
Our Science and Technology Committee’s responsibilities include:
| ● | reviewing and advising on our drug development strategy, including the selection of therapeutic targets, the design and execution of clinical trials, and the regulatory pathway for approval; | |
| ● | assessing our research pipeline and recommending changes or improvements to ensure a sustainable and diverse portfolio of drug candidates; | |
| ● | evaluating our intellectual property strategy and overseeing the implementation of appropriate measures to protect our discoveries and inventions; and | |
| ● | reviewing our manufacturing strategy and overseeing the quality controls put in place to meet regulatory requirements. |
The members of our Science and Technology Committee are Dr. Gilbert, Mr. Maddaluna, Dr. Martell, and Mr. Newman. Mr. Newman serves as the Chairperson of the Science and Technology Committee.
EXECUTIVE COMPENSATION
Our named executive officers for 2024, which consist of our principal executive officer and the next two most-highly compensated executive officers who were serving as executive officers as of December 31, 2024 are:
| ● | Jeffrey A. Meckler, Chief Executive Officer and Director; | |
| ● | Walt. A. Linscott, Esq., Chief Operating Officer; and | |
| ● | Roger J. Waltzman, M.D., Chief Medical Officer |
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Summary Compensation Table
The following table sets forth all of the compensation awarded to, earned by or paid to our named executive officers during 2024 and 2023.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards(1) ($) | Non-equity Incentive Plan Compensation | All
Other | Total ($) | ||||||||||||||||||||||
| Jeffrey A. Meckler, | 2024 | 575,000 | — | — | 219,421 | 287,500 | 75,296 | 1,157,217 | ||||||||||||||||||||||
| Chief Executive Office | 2023 | 565,000 | — | — | 134,221 | 223,175 | 78,853 | 1,001,249 | ||||||||||||||||||||||
| Walt A. Linscott, Esq., | 2024 | 475,000 | — | — | 182,156 | 237,500 | 75,744 | 970,400 | ||||||||||||||||||||||
| Chief Operating Officer | 2023 | 425,000 | — | — | 53,688 | 212,500 | 78,851 | 770,039 | ||||||||||||||||||||||
| Roger Waltzman, M.D. | 2024 | 500,000 | — | — | 182,156 | 200,000 | 46,723 | 928,879 | ||||||||||||||||||||||
| Chief Medical Officer | 2023 | 196,742 | 20,000 | (3) | — | 140,811 | 196,000 | 32,612 | 586,165 | |||||||||||||||||||||
(1) The amounts reported do not reflect the amounts actually received by our named executive officers. Instead, in accordance with SEC rules, these amounts reflect the grant date fair value of stock options granted to our named executive officers during the fiscal years ended December 31, 2024 and 2023, as computed in accordance with Financial Accounting Standard Board Accounting Standards Codification Topic 718 for stock-based compensation transaction. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Assumptions used in the calculation of amounts for 2023 are included in Note 6 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 13, 2024. Our named executive officers will only realize compensation with regard to these options to the extent the trading price of our common stock is greater than the exercise price of such options.
(2) For 2024 and 2023, referenced amount is for the Company paid portion of medical and life insurance premiums, and Company 401(k) contributions.
(3) Amount represents a sign on bonus paid to Dr. Waltzman in 2023.
Narrative Description to Summary Compensation Table
Base Salaries
In general, base salaries for our named executive officers are initially established through arm’s length negotiation at the time the executive is hired, taking into account such executive’s qualifications, experience and prior salary. Base salaries of our named executive officers are approved and reviewed annually by our Compensation Committee or Board of Directors and adjustments to base salaries are based on the scope of an executive’s responsibilities, individual contribution, prior experience and sustained performance. Decisions regarding salary increases may take into account an executive officer’s current salary, equity ownership, and the amounts paid to an executive officer’s peers inside our company by conducting an internal analysis, which compares the pay of an executive officer to other members of the management team. Base salaries are also reviewed in the case of promotions or other significant changes in responsibility. Base salaries are not automatically increased if the Board of Directors and Compensation Committee believe that other elements of the named executive officer’s compensation are more appropriate in light of our stated objectives. This strategy is consistent with our intent of offering compensation that is both cost-effective, competitive and contingent on the achievement of performance objectives.
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The actual base salaries paid to all of our named executive officers for 2024 are set forth in the “Summary Compensation Table” above.
In January 2024, our Compensation Committee approved base salary increases for 2024 for Mr. Meckler, Dr. Waltzman and Mr. Linscott to $575,000, $500,000 and $475,000, respectively. These base salary increases represented adjustments of approximately 1.8%, 2.0% and 11.8%, respectively. In January 2025, our Compensation Committee approved base salary increases for 2025 for Mr. Meckler, Dr. Waltzman and Mr. Linscott to $595,000, $518,000 and $491,000, respectively. These base salary increases represented adjustments of approximately 3.4%, 3.5% and 3.6%, respectively.
Annual Cash Performance Bonuses
Each named executive officer is also eligible for a performance bonus based upon the achievement of certain corporate performance goals and objectives approved by our Compensation Committee and Board of Directors.
Bonuses are set based on a percentage of the executive’s base salary as of the end of the bonus year and are expected to be paid out in the first quarter of the following year. The target levels for 2024 executive bonuses were as follows: 50% for Mr. Meckler, 50% for Mr. Linscott and 40% for Dr. Waltzman. All final bonus payments to our named executive officers are determined by our Compensation Committee or our Board of Directors. The actual bonuses awarded in any year, if any, may be more or less than the target, depending on individual performance and the achievement of corporate objectives and may also vary based on other factors at the discretion of the Compensation Committee.
For 2024, the corporate performance objectives for our named executive officers were related to clinical milestones, research and development goals, business development opportunities, financing objectives and human capital management objectives. These performance objectives and areas of emphasis were used as a guide by the Compensation Committee and Board of Directors in determining overall corporate performance for these executives as they represented those areas in which they were expected to focus their efforts during the year. Both qualitative and quantitative guidelines were established for purposes of evaluating performance relating to these corporate objectives during 2024. Based on its review of our overall performance relative to our corporate objectives, the Compensation Committee determined that every goal was achieved or exceeded for annual bonus plan purposes.
The overall achievement level was then used to determine each named executive officer’s bonus. The bonuses paid to our named executive officers for 2024 are set forth in the “Summary Compensation Table” above.
Equity Compensation
The goals of our long-term, equity-based incentive awards are to align the interests of our named executive officers and other employees, non-employee directors and consultants with the interests of our stockholders. Because vesting is based on continued employment, our equity-based incentives also encourage the retention of our named executive officers through the vesting period of the awards. In determining the size of the long-term equity incentives to be awarded to our named executive officers, we take into account a number of internal factors, such as the relative job scope, the value of existing long-term incentive awards, individual performance history, prior contributions to us and the size of prior grants.
To reward and retain our named executive officers in a manner that best aligns employees’ interests with stockholders’ interests, we use stock options as the primary incentive vehicles for long-term compensation. We believe that stock options are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance. Because employees are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time.
The exercise price of each stock option grant is the fair market value of our common stock on the grant date, as determined by our Board of Directors from time to time. Stock option awards granted to our named executive officers generally vest as to one-third of the total shares on the first anniversary of the grant date and thereafter the remaining shares vest in equal quarterly installments over the following 24 months. From time to time, our Compensation Committee may, however, determine that a different vesting schedule is appropriate.
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In January 2024, Mr. Meckler, Mr. Linscott and Dr. Waltzman and were granted stock options to purchase 100,000 shares, 75,000 shares and 75,000 shares of our common stock, respectively. The stock options vest as to one-third of the total shares on January 22, 2025 and thereafter the remaining shares vest in equal quarterly installments over the following 24 months. In October 2024, Mr. Meckler, Mr. Linscott and Dr. Waltzman were granted stock options to purchase 75,000 shares of our common stock, each. The stock options are fully vest following 18 months from grant date.
We have had no program, plan or practice pertaining to the timing of stock option grants to named executive officers coinciding with the release of material non-public information. Stock options granted to our named executive officers may be subject to accelerated vesting in certain circumstance. For additional discussion, please see “Employment Agreements and Potential Payments on Employment Termination” below.
Other Elements of Compensation
Retirement Plans
Effective January 1, 2023, we maintain a 401(k) retirement savings plan that allows eligible employees to contribute a portion of their compensation, within limits prescribed by the Internal Revenue Code, on a pre-tax basis through contributions to the plan. Our named executive officers are eligible to participate in the 401(k) plan. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our named executive officers in accordance with our compensation policies.
Employee Benefits and Perquisites
Our named executive officers are eligible to participate in our health and welfare plans. We pay for the health and welfare benefits of our named executive officers. We do not provide our named executive officers with any other significant perquisites or other personal benefits.
No Tax Gross-Ups
We do not make gross-up payments to cover our named executive officers’ personal income taxes that may pertain to any of the compensation paid or provided by our company.
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning outstanding option awards as of December 31, 2024, for each named executive officer:
Option Awards
| Name | Grant Date | Number
of Securities Underlying Unexercised Options Exercisable (#) |
Number
of Securities Underlying Unexercised Options Unexercisable (#) |
Equity incentive plan awards: Number of securities underlying unexercised unearned options exercise price (#) |
Option Exercise Price ($) |
Option Expiration Date(1) | |||||||||||||
| Jeffrey A. Meckler, Chief Executive Officer | 04/10/17 | 1,500 | — | — | 425.6 | 04/10/27 | |||||||||||||
| 05/01/17 | 813 | — | — | 425.6 | 05/01/27 | ||||||||||||||
| 12/11/17 | 4,750 | — | — | 536.0 | 12/11/27 | ||||||||||||||
| 06/28/18 | 1,250 | — | — | 355.2 | 06/28/25 | ||||||||||||||
| 04/04/19 | 1,562 | — | — | 611.2 | 04/04/26 | ||||||||||||||
| 07/15/20 | 3,750 | — | — | 24.6 | 07/15/27 | ||||||||||||||
| 08/04/21 | (2) | 375,000 | - | — | 8.87 | 8/4/2031 | |||||||||||||
| 01/26/22 | (3) | 183,333 | 16,667 | — | 4.90 | 01/26/32 | |||||||||||||
| 01/18/23 | (4) | 58,333 | 41,667 | — | 1.61 | 01/18/33 | |||||||||||||
| 01/22/24 | (5) | - | 100,000 | — | 1.74 | 01/22/34 | |||||||||||||
| 10/09/24 | (6) | - | 75,000 | — | 1.105 | 10/09/34 | |||||||||||||
| Walt A. Linscott, Esq., Chief Operating Officer | 10/23/17 | 750 | — | — | 684.8 | 10/23/27 | |||||||||||||
| 12/11/17 | 1,750 | — | — | 684.8 | 12/11/27 | ||||||||||||||
| 01/22/19 | 1,125 | — | — | 610.4 | 01/22/26 | ||||||||||||||
| 09/13/19 | 2,500 | — | — | 72.0 | 09/13/26 | ||||||||||||||
| 02/17/20 | 1,125 | — | — | 34.3 | 02/17/27 | ||||||||||||||
| 09/16/20 | 1,250 | — | — | 25.7 | 09/16/27 | ||||||||||||||
| 08/04/21 | (2) | 210,000 | - | — | 8.87 | 8/4/2031 | |||||||||||||
| 01/26/22 | (3) | 42,029 | 3,821 | — | 4.90 | 01/26/32 | |||||||||||||
| 01/18/23 | (4) | 23,333 | 16,667 | — | 1.61 | 01/18/33 | |||||||||||||
| 01/22/24 | (5) | - | 75,000 | — | 1.74 | 01/22/34 | |||||||||||||
| 10/09/24 | (6) | - | 75,000 | — | 1.105 | 10/09/34 | |||||||||||||
| Roger J. Waltzman, Chief Medical Officer | |||||||||||||||||||
| 08/07/23 | (7) | 37,500 | 52,500 | — | 1.85 | 08/07/33 | |||||||||||||
| 01/22/24 | (5) | - | 75,000 | — | 1.74 | 01/22/34 | |||||||||||||
| 10/09/24 | (6) | - | 75,000 | — | 1.105 | 10/09/34 | |||||||||||||
(1) The options have a seven-year term or ten-year term as noted in the table subject to earlier expiration upon termination.
(2) The options vest over a period of three years from August 4, 2021, 33.3% on the first anniversary of such date and 8.33% every three months thereafter, ending August 4, 2024.
(3) The options vest over a period of three years from January 26, 2022, 33.3% on the first anniversary of such date and 8.33% every three months thereafter, ending January 26, 2025.
(4) The options vest over a period of three years from January 18, 2023, 33.3% on the first anniversary of such date and 8.33% every three months thereafter, ending January 18, 2026.
(5) The options vest over a period of three years from January 22, 2024, 33.3% on the first anniversary of such date and 8.33% every three months thereafter, ending January 18, 2027.
(6) The options vest over a period of three years from October 9, 2024, 33.3% on the first anniversary of such date and 8.33% every three months thereafter, ending October 9, 2027.
(7) The options vest over a period of three years from August 7, 2023, 33.3% on the first anniversary of such date and 8.33% every three months thereafter, ending August 7, 2026.
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Employment Agreements and Potential Payments on Employment Termination
Set forth below is a description of the employment agreements with our named executive officers and a summary of the benefits that would be payable upon termination of employment or in connection with a change in control to our named executive officers under their employment agreements with us.
Jeffrey A. Meckler
We have entered into an employment agreement with Jeffrey A. Meckler (the “Meckler Employment Agreement”), which superseded and replaced his employment agreement dated December 11, 2017 with Intec Pharma, Inc., a subsidiary of Intec Israel, to serve as our Chief Executive Officer. The Meckler Employment Agreement provides for an annual base salary, subject to review for an upward adjustment on at least an annual basis. Mr. Meckler is eligible to participate in an annual executive bonus plan, pursuant to which he may earn an annual target bonus of up to 50% of his base salary, based on the achievement of certain individual and company-wide objectives, which shall be established by our Board of Directors on an annual basis. The Board may, in its discretion, grant Mr. Meckler a bonus in excess of the target bonus if the performance criteria are exceeded or for such additional contributions that the Board may choose to recognize.
Upon termination of Mr. Meckler’s employment by us without cause or Mr. Meckler’s resignation for good reason, Mr. Meckler will be entitled to a severance benefit equal to (i) twelve months of his base salary as in effect prior to the termination date, payable in bi-monthly installments and (ii) an amount equal to Mr. Meckler’s cost of continued health insurance coverage for twelve months. In addition, if Mr. Meckler is entitled to receive a bonus for the year of termination based on the achievement of pre-determined performance goals (and ignoring any continuation of employment requirements), Mr. Meckler (or his representatives) shall be entitled to receive such bonus on the same basis as the other participants in the bonus plan, except that the bonus amount shall be prorated based on the percentage of days Mr. Meckler was employed relative to the total number of days in the bonus earning period.
If Mr. Meckler’s employment is terminated by us without cause or by Mr. Meckler for good reason during the one year period immediately following a change in control or six months before a change in control, then Mr. Meckler will be entitled to receive, (i) eighteen months of his base salary as in effect prior to the termination date, payable in bi-monthly installments, (ii) an amount equal to Mr. Meckler’s cost of continued health insurance coverage for eighteen months, (iii) his target annual bonus for the year of termination, which shall be paid within 30 days of termination, and (iv) full accelerated vesting of all of outstanding equity incentive awards upon the later of the change in control or Mr. Meckler’s termination of employment.
In the event that Mr. Meckler’s employment terminates by reason of his death or disability, and Mr. Meckler is entitled to receive a bonus for the year of termination based on the achievement of pre-determined performance goals (and ignoring any continuation of employment requirements), Mr. Meckler (or his representatives) shall be entitled to receive such bonus on the same basis as the other participants in the bonus plan, except that the bonus amount shall be prorated based on the percentage of days Mr. Meckler was employed relative to the total number of days in the bonus earning period.
Walt A. Linscott, Esq.
We have entered into an employment agreement with Walt A. Linscott, Esq. (the “Linscott Employment Agreement”), which supersedes and replaces his employment agreement dated October 23, 2017 with Intec Pharma, Inc., a subsidiary of Intec Israel. The Linscott Employment Agreement provides for an annual base salary, subject to review for an upward adjustment on at least an annual basis. Mr. Linscott is eligible to participate in an annual executive bonus plan, pursuant to which he may earn an annual target bonus of up to 50% of his base salary, based on the achievement of certain individual and company-wide objectives, which shall be established by the Company’s Board of Directors on an annual basis. The Board may, in its discretion, grant Mr. Linscott a bonus in excess of the target bonus if the performance criteria are exceeded or for such additional contributions that the Board may choose to recognize.
Upon termination of Mr. Linscott’s employment by us without cause or Mr. Linscott’s resignation for good reason, Mr. Linscott will be entitled to a severance benefit equal to (i) twelve months of his base salary as in effect prior to the termination date, payable in bi-monthly installments and (ii) an amount equal to Mr. Linscott’s cost of continued health insurance coverage for twelve months. In addition, if Mr. Linscott is entitled to receive a bonus for the year of termination based on the achievement of pre-determined performance goals (and ignoring any continuation of employment requirements), Mr. Linscott (or his representatives) shall be entitled to receive such bonus on the same basis as the other participants in the bonus plan, except that the bonus amount shall be prorated based on the percentage of days Mr. Linscott was employed relative to the total number of days in the bonus earning period.
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If Mr. Linscott’s employment is terminated by us without cause or by Mr. Linscott for good reason during the one year period immediately following a change in control or six months before a change in control, then Mr. Linscott will be entitled to receive, (i) eighteen months of his base salary as in effect prior to the termination date, payable in bi-monthly installments, (ii) an amount equal to Mr. Linscott’s cost of continued health insurance coverage for eighteen months, (iii) his target annual bonus for the year of termination, which shall be paid within 30 days of termination, and (iv) full accelerated vesting of all of outstanding equity incentive awards upon the later of the change in control or Mr. Linscott’s termination of employment.
In the event that Mr. Linscott’s employment terminates by reason of his death or disability, and Mr. Linscott is entitled to receive a bonus for the year of termination based on the achievement of pre-determined performance goals (and ignoring any continuation of employment requirements), Mr. Linscott (or his representatives) shall be entitled to receive such bonus on the same basis as the other participants in the bonus plan, except that the bonus amount shall be prorated based on the percentage of days Mr. Linscott was employed relative to the total number of days in the bonus earning period.
Roger J. Waltzman
We have entered into an employment agreement with Roger J. Waltzman (the “Waltzman Employment Agreement”). The Waltzman Employment Agreement provides for an annual base salary, subject to review for an upward adjustment on at least an annual basis. Dr. Waltzman is eligible to participate in an annual executive bonus plan, pursuant to which he may earn an annual target bonus of up to 40% of his base salary, based on the achievement of certain individual and company-wide objectives, which shall be established by the Company’s Board of Directors on an annual basis. The Board may, in its discretion, grant Dr. Waltzman a bonus in excess of the target bonus if the performance criteria are exceeded or for such additional contributions that the Board may choose to recognize.
Upon termination of Dr. Waltzman’s employment by us without cause or Dr. Waltzman’s resignation for good reason, Dr. Waltzman will be entitled to a severance benefit equal to (i) twelve months of his base salary as in effect prior to the termination date, payable in bi-monthly installments and (ii) an amount equal to Dr. Waltzman’s cost of continued health insurance coverage for twelve months. In addition, if Dr. Waltzman is entitled to receive a bonus for the year of termination based on the achievement of pre-determined performance goals (and ignoring any continuation of employment requirements), Dr. Waltzman (or his representatives) shall be entitled to receive such bonus on the same basis as the other participants in the bonus plan, except that the bonus amount shall be prorated based on the percentage of days Dr. Waltzman was employed relative to the total number of days in the bonus earning period.
If Dr. Waltzman’s employment is terminated by us without cause or by Dr. Waltzman for good reason during the one year period immediately following a change in control or six months before a change in control, then Dr. Waltzman will be entitled to receive, (i) twelve months of his base salary as in effect prior to the termination date, payable in bi-monthly installments, (ii) an amount equal to Dr. Waltzman’s cost of continued health insurance coverage for eighteen months, (iii) his target annual bonus for the year of termination, which shall be paid within 30 days of termination, and (iv) full accelerated vesting of all of outstanding equity incentive awards upon the later of the change in control or Dr. Waltzman’s termination of employment.
In the event that Dr. Waltzman’s employment terminates by reason of his death or disability, and Dr. Waltzman is entitled to receive a bonus for the year of termination based on the achievement of pre-determined performance goals (and ignoring any continuation of employment requirements), Dr. Waltzman (or his representatives) shall be entitled to receive such bonus on the same basis as the other participants in the bonus plan, except that the bonus amount shall be prorated based on the percentage of days Dr. Waltzman was employed relative to the total number of days in the bonus earning period.
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Equity Compensation Plans
The following table gives information as of December 31, 2024 about shares of our common stock that may be issued upon the exercise of options under the Indaptus Therapeutics, Inc. 2021 Stock Incentive Plan (the “2021 Plan”):
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) | |||||||||
| Equity compensation plan approved by security holders(2) | 2,887,822 | $ | 8.06 | 103,608 | ||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
(1) Represents stock options outstanding under the 2021 Plan.
(2) Our 2021 Plan has an evergreen provision that allows for an annual increase on each January 1 from January 1, 2025 and ending on and including January 1, 2029, equal to the lesser of (A) 5% of the aggregate number of shares of our shares of common stock outstanding on the final day of the immediately preceding calendar year or (B) such smaller number of shares as is determined by our Board of Directors.
Pay Versus Performance Table
The following table sets forth information concerning the compensation of our named executive officers, or NEOs, the compensation actually paid to our NEOs, as determined under SEC rules (and described below), our total shareholder return and our net loss, in each case for each of the fiscal years ended December 31, 2022, 2023 and 2024:
| (a) | (b) | (c) | (d) | (e) | (f) | (h) | ||||||||||||||||||
| Year | Summary Compensation Table Total for PEO ($) |
Compensation Actually Paid to PEO ($)(1) |
Average Summary Compensation Table Total for Non-PEO NEOs ($) |
Average Compensation Actually Paid to Non-PEO NEOs ($)(1) |
Value
of Initial Fixed $100 Investment Based on: Total Shareholder Return ($) |
Net
Loss ($)(2) |
||||||||||||||||||
| 2024 | 1,157,217 | 1,029,281 | 949,640 | 845,621 | $ | 48 | $ | (15,000,000 | ) | |||||||||||||||
| 2023 | $ | 1,001,249 | $ | 1,122,094 | $ | 744,039 | $ | 799,786 | $ | 121 | $ | (15,423,471 | ) | |||||||||||
| 2022 | $ | 1,680,532 | $ | (38,385 | ) | $ | 1,062,955 | $ | 500,074 | $ | 41 | $ | (14,322,798 | ) | ||||||||||
| (1) | Amounts represent compensation actually paid to our PEO and the average compensation actually paid to our remaining NEOs for the relevant fiscal year, as determined under SEC rules, which includes the individuals indicated in the table below for each fiscal year: |
| (2) | With respect to year 2024, amount of net loss represents current estimate. |
| Year | PEO | Non-PEO NEOs | ||
| 2024 | Jeffrey A. Meckler | Walt A. Linscott, Esq. and Roger Waltzman M.D. | ||
| 2023 | Jeffrey A. Meckler | Walt A. Linscott, Esq. and Michael J. Newman, Ph.D. | ||
| 2022 | Jeffrey A. Meckler | Walt A. Linscott, Esq. and Boyan Litchev, M.D. |
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The amounts reported in the “Compensation Actually Paid to PEO” and “Average Compensation Actually Paid to Non-PEO NEOs” columns do not reflect the actual compensation paid to or realized by our PEO or our non-PEO NEOs during each applicable year. The calculation of compensation actually paid for purposes of this table includes point-in-time fair values of stock awards and these values will fluctuate based on our stock price and various accounting valuation assumptions. See the Summary Compensation Table for certain other compensation of our PEO and our non-PEO NEOs for each applicable fiscal year.
Compensation actually paid to our NEOs represents the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year, as adjusted as follows:
| 2024 | ||||||||
| Adjustments | PEO | Average Non-PEO NEOs | ||||||
| Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table for Applicable FY | $ | (219,421 | ) | $ | (182,156 | ) | ||
| Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Remain Unvested as of Applicable FY End, determined as of Applicable FY End | 123,369 | 106,209 | ||||||
| Decrease for Awards Granted during Prior FY that were Outstanding and Unvested as of Applicable FY End, determined based on change in ASC 718 Fair Value from Prior FY End to Applicable FY End | (46,684 | ) | (29,455 | ) | ||||
| Increase for Awards Granted during Prior FY that Vested During Applicable FY, determined based on change in ASC 718 Fair Value from Prior FY End to Vesting Date | 14,800 | 1,383 | ||||||
| TOTAL ADJUSTMENTS | $ | (127,936 | ) | $ | (104,019 | ) | ||
Fair value or change in fair value, as applicable, of equity awards in the “Compensation Actually Paid” columns was determined by reference to a Black Scholes value as of the applicable year-end or vesting date(s), determined based on the same methodology as used to determine grant date fair value but using the closing stock price on the applicable revaluation date as the current market price and with an estimated expected life using the simplified method, and in all cases based on volatility and risk free rates determined as of the revaluation date based on the expected life period and based on an expected dividend rate of 0%. For additional information on the assumptions used to calculate the valuation of the awards, see Note 6 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 13, 2024, and our Quarterly Reports on 10-Q that were filed in 2024 and Annual Reports on Form 10-K for prior fiscal years.
Narrative Disclosure to Pay Versus Performance Table
Relationship Between Financial Performance Measures
The graph below compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs, with our cumulative TSR for the fiscal years ended December 31, 2022, 2023 and 2024.
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TSR amounts reported in the graph assume an initial fixed investment of $100. We do not pay dividends.
The graph below compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs, with our net loss for the fiscal years ended December 31, 2022, 2023 and 2024.
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DIRECTOR COMPENSATION
The following table provides certain information concerning the compensation for services rendered in all capacities by each non-employee director serving on our Board during the year ended December 31, 2024, other than Mr. Meckler, our Chief Executive Officer who did not receive additional compensation for their service as a director and whose compensation is set forth in the Summary Compensation Table under the section entitled Executive Compensation above. Dr. Newman, our Chief Scientific Officer, is also an employee and executive officer, who did not receive additional compensation for his service as a director. Dr. Newman is not one of our named executive officers for 2024 and so he does not appear in the Summary Compensation Table. Because Dr. Newman is an employee and an executive officer, he is not required to be included in the table below.
| Name | Fees
earned ($) |
Stock
awards ($) |
Option
awards ($)(1) |
All
other compensation ($) |
Total ($) |
|||||||||||||||
| Roger J. Pomerantz | 150,000 | — | 66,000 | — | 216,000 | |||||||||||||||
| Hila Karah | 65,500 | — | 27,500 | — | 93,000 | |||||||||||||||
| Anthony J. Maddaluna | 69,000 | — | 27,500 | — | 96,500 | |||||||||||||||
| William B. Hayes | 71,000 | — | 27,500 | — | 98,500 | |||||||||||||||
| Robert E. Martell | 61,500 | — | 27,500 | — | 89,000 | |||||||||||||||
| Mark Gilbert | 54,000 | — | 27,500 | — | 81,500 | |||||||||||||||
(1) The amounts reported do not reflect the amounts actually received by our non-employee directors. Instead, in accordance with SEC rules, these amounts reflect the grant date fair value of stock options granted to our non-employee directors during the fiscal year ended December 31, 2024, as computed in accordance with Financial Accounting Standard Board Accounting Standards Codification Topic 718 for stock-based compensation transaction. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Assumptions used in the calculation of these amounts are included in Note 5 to our consolidated financial statements included in our Quarterly Report on Form 10-Q for the nine month period ended September 30, 2024, which was filed with the SEC on November 12, 2024. Our non-employee directors who have received options will only realize compensation with regard to these options to the extent the trading price of our common stock is greater than the exercise price of such options. As of December 31, 2024, our non-employee directors held the following numbers of stock options: Dr. Pomerantz, 182,000 stock options; Ms. Karah 53,781 stock options, Mr. Maddaluna 53,500 stock options, Mr. Hayes 53,500 stock options, Mr. Martell 32,500 stock options, and Dr. Gilbert 58,750 stock options.
Pursuant to our director compensation policy, the annual retainer for non-employee directors is $50,000 and the annual retainer for the chair of the Board of Directors is $150,000. Annual retainers for committee membership are as follows:
| Audit committee chairperson | $ | 15,000 | ||
| Audit committee member | $ | 7,500 | ||
| Compensation committee chairperson | $ | 10,000 | ||
| Compensation committee member | $ | 6,000 | ||
| Nominating committee chairperson | $ | 8,000 | ||
| Nominating committee member | $ | 5,000 | ||
| Scientific and technology committee chairperson | $ | 8,000 | ||
| Scientific and technology committee member | $ | 4,000 |
These fees are payable in advance in four equal quarterly installments during the first week of each quarter, provided that the amount of such payment will be prorated for any portion of such quarter that a director is not serving on our Board of Directors, on such committee or in such position. Non-employee directors are also reimbursed for reasonable out-of-pocket business expenses incurred in connection with attending meetings of the Board of Directors and any committee of the Board of Directors on which they serve and in connection with other business related to the Board of Directors. Directors may also be reimbursed for reasonable out-of-pocket business expenses authorized by the Board of Directors or a committee that are incurred in connection with attending conferences or meetings with management in accordance with a travel policy, as may be in effect from time to time.
In March 2023, the Board amended our director compensation policy to provide that, on the date an individual is first elected or appointed as a non-employee director, such individual will receive a grant of 25,000 stock options, and that, on the date of each annual meeting of stockholders, commencing with the annual meeting of stockholders for 2023, each non-employee director (other than the board chair) will receive a grant of 12,500 stock options and the board chair will receive 30,000 stock options. The initial stock options vest in over three years from the grant date in equal quarterly installments, subject to continued service on the Board and the options shall also vest in full immediately upon a director’s death, disability or a change of control. The annual stock options vest in full on the first anniversary of the grant date, subject to continued service on the Board and the options shall also vest in full immediately upon a director’s death, disability or a change of control.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Policies and Procedures for Related Person Transactions
In accordance with our audit committee charter, the Audit Committee is required to approve related party transactions. In general, the Audit Committee will review any proposed transaction that has been identified as a related person transaction under Item 404 of Regulation S-K, which means a transaction, arrangement or relationship in which we and any related person (as defined below) are participants in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at fiscal year-end for the last two completed fiscal years, and in which any related person had, has or will have a direct or indirect material interest. A “related person” includes (i) a director, director nominee or executive officer of the Company, (ii) any immediate family member of the foregoing, or (iii) a security holder known to be a beneficial owner of more than 5% of any class of our voting securities.
Other than the compensation agreements and other arrangements described under “Executive Compensation” and the transactions described below, since January 1, 2022, there has not been and there is not currently proposed, any transaction or series of similar transactions to which we were, or will be, a participant in which the amount involved exceeded, or will exceed, $120,000 (or, if less, 1% of the average of our total assets at December 31, 2023 and 2022, as applicable) and in which any related person, had, or will have, a direct or indirect material interest.
Participation in 2024 Financings
August 2024 Financing
On August 8, 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors 1,643,837 shares of our common stock. In addition, in a concurrent private placement, we issued to the investors unregistered warrants to purchase 1,643,837 shares of our common stock. The warrants are immediately exercisable at an exercise price of $1.70 per share and expire five years from the date of issuance. The combined purchase price for one share of common stock and one warrant was $1.825, resulting in gross proceeds of approximately $3.0 million, before deducting placement agent and other offering expenses in the amount of approximately $0.5 million. One of the purchasers was Jeffrey Meckler, our Chief Executive Officer and director, who purchased 84,932 shares of common stock and warrants to purchase 84,932 shares of common stock (at the same price and upon the same terms as the other purchasers.
November 2024 Financing
On November 25, 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors 1,817,017 shares of our common stock. In addition, in a concurrent private placement, we issued to the investors unregistered warrants to purchase 1,817,017 shares of our common stock. The warrants are immediately exercisable at an exercise price of $1.05 per share and expire five years from the date of issuance. The combined purchase price for one share of common stock and one warrant was $1.175, resulting in gross proceeds of approximately $2.13 million, before deducting placement agent and other offering expenses in the amount of approximately $0.345 million. One of the purchasers was Jeffrey Meckler, our Chief Executive Officer and director, who purchased 42,553 shares of common stock and warrants to purchase 42,553 shares of common stock (at the same price and upon the same terms as the other purchasers.
Director and Officer Indemnification and Insurance
We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us or will require us to indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer.
We also maintain an insurance policy that insures our directors and executive officers against certain liabilities, including liabilities arising under applicable securities laws.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to holdings of our common stock by (i) stockholders who beneficially owned more than 5% of the outstanding shares of our common stock, and (ii) each of our directors (which includes all nominees), each of our named executive officers and all directors and executive officers as a group as of February 11, 2025, unless otherwise indicated. The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power. Applicable percentage ownership is based on 14,123,284 shares of common stock outstanding as of February 11, 2025. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options, or other rights held by such person that are currently exercisable or will become exercisable within 60 days of February 11, 2025 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listed below is 3 Columbus Circle, 15th Floor, New York, NY 10019. We believe, based on information provided to us, that each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
| Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | ||||||
| Persons or entities holding 5% or more our outstanding common stock | ||||||||
| Glen R. Anderson | 1,190,400 | (1) | 8.4 | % | ||||
| Matthew Joseph Nachtrab Revocable Trust dtd 12/15/2014 | 2,142,462 | (2) | 14.1 | % | ||||
| Yehuda Shimoni | 1,644,300 | (3) | 11.0 | % | ||||
| Thomas Mollick | 2,438,598 | (4) | 15.4 | % | ||||
| Named executive officers and directors | ||||||||
| Michael J. Newman, Ph.D. | 1,744,956 | (5) | 12.0 | % | ||||
| Jeffrey A. Meckler | 1,018,969 | (6) | 6.8 | % | ||||
| Roger Waltzman, M.D. | 70,000 | (7) | * | |||||
| Walt A. Linscott, Esq. | 316,167 | (8) | 2.2 | % | ||||
| Hila Karah | 41,281 | (9) | * | |||||
| Anthony J. Maddaluna | 41,670 | (10) | * | |||||
| William B. Hayes | 41,000 | (11) | * | |||||
| Dr. Roger J. Pomerantz | 153,000 | (12) | 1.1 | |||||
| Mark Gilbert, M.D. | 46,250 | (13) | * | |||||
| Robert E. Martell, M.D., Ph.D. | 20,000 | (14) | * | |||||
| All executive officers and directors as a group (11 persons) | 3,636,495 | (15) | 22.5 | % | ||||
| * | Less than one percent. |
| (1) | Based solely upon a Schedule 13G/A filed with the SEC on August 17, 2023. 1,076,482 shares are held by the Anderson Family Trust U/A/D January 7, 2017 in which Glen R. Anderson is a trustee of the Anderson Family Trust and shares voting and dispositive control with his spouse, and 113,918 shares are held by Mr. Anderson over which he has sole voting and dispositive power. The business address of Mr. Anderson is 101 South 200 East, Suite 700, Salt Lake City, UT 84111. |
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| (2) | Consists of (i) 1,071,231 shares of common stock, and (ii) 1,071,231 shares of common stock issuable upon exercise of warrants which are subject to either a 4.99% or 9.99% beneficial ownership limitation. The amounts and percentages in the table do not give effect to such beneficial ownership limitation. |
| (3) | Consists of (i) 865,158 shares of common stock, and (ii) 779,142 shares of common stock issuable upon exercise of warrants which are subject to either a 4.99% or 9.99% beneficial ownership limitation. The amounts and percentages in the table do not give effect to such beneficial ownership limitation. |
| (4) | Consists of (i) 1,212,837 shares of common stock, and (ii) 1,135,761 shares of common stock issuable upon exercise of warrants which are subject to either a 4.99% or 9.99% beneficial ownership limitation. The amounts and percentages in the table do not give effect to such beneficial ownership limitation. |
| (5) | Consists of (i) 1,341,524 shares of common stock held by the Michael J. Newman Trust, dated January 21, 2008, Michael J. Newman, Trustee; (ii) 26,832 shares of common stock held by Janet Lee Harris, Trustee of the Janet Harris Living Trust, executed on March 25, 2009. Ms. Harris is the spouse of Dr. Newman, and as such, Dr. Newman is deemed to beneficially own such shares; and (iii) 316,367 shares of common stock issuable upon exercise of outstanding options. |
| (6) | Consists of (i) 202,859 shares of common stock, (ii) 127,485 shares of common stock issuable upon exercise of warrants, and (ii) 688,625 shares of common stock issuable upon exercise of outstanding options. |
| (7) | Consists of 70,000 shares of common stock issuable upon exercise of outstanding options, of which 32,500 will vest within 60 days of February 11, 2025. |
| (8) | Consists of (i) 150 shares of common stock and (ii) 316,017 shares of common stock issuable upon exercise of outstanding options. |
| (9) | Consists of 41,281 shares of common stock issuable upon exercise of outstanding options. |
| (10) | Consists of (i) 670 shares of common stock and (ii) 41,000 shares of common stock issuable upon exercise of outstanding options. |
| (11) | Consists of 41,000 shares of common stock issuable upon exercise of outstanding options. |
| (12) | Consists of 154,000 shares of common stock issuable upon exercise of outstanding options. |
| (13) | Consists of 46,250 shares of common stock issuable upon exercise of outstanding options. |
| (14) | Consists of 20,000 shares of common stock issuable upon exercise of outstanding options. |
| (15) | Consists of (i) 1,572,035 shares of common stock, (ii) 127,485 shares of common stock issuable upon exercise of warrants, and (ii) 1,936,939 shares of common stock issuable upon exercise of outstanding options, of which 37,500 will vest within 60 days of days of February 11, 2025. |
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SELLING STOCKHOLDER
This prospectus relates to the possible resale from time to time by YA of any or all of the shares of common stock that are to be issued by us to YA under the Purchase Agreement. For additional information regarding the issuance of shares of common stock covered by this prospectus, see the section titled “Prospectus Summary—Standby Equity Purchase Agreement with YA” above. Except for the transactions contemplated by the Purchase Agreement, YA does not, and has not had, any material relationship with us.
The table below presents information regarding the selling stockholder and the shares of common stock that it may offer from time to time under this prospectus. This table is prepared based on information supplied to us by the selling stockholder. The number of shares in the column “Maximum Number of Shares to be Offered Pursuant to this Prospectus” represents all of the shares of common stock that the selling stockholder may offer under this prospectus. The selling stockholder may sell some, all or none of its shares in this offering. We do not know how long the selling stockholder will hold the shares before selling them, and we currently have no agreements, arrangements or understandings with the selling stockholder regarding the sale of any of the shares.
The beneficial ownership of our shares of common stock is determined in accordance with the rules of the SEC. See “Security Ownership of Certain Beneficial Owners and Management” for additional information.
The percentage of shares of common stock beneficially owned by the selling stockholder prior to the offering shown in the table below is based on an aggregate of on 14,123,284 shares of common stock outstanding on February 11, 2025. The number of shares that may actually be sold by us under the Purchase Agreement may be fewer than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered by the selling stockholder pursuant to this prospectus.
| Name of Selling Stockholder | Number of Shares Owned Prior to Offering |
Maximum Number of Shares to be Offered Pursuant to | Number of Shares Owned After Offering |
|||||||||||||||
| Number(1) | Percent | this Prospectus (2) | Number(3) | Percent | ||||||||||||||
| YA II PN, LTD.(4) | 305,960 | * | 10,000,000 | – | – | |||||||||||||
| * | Represents ownership of less than 1%. |
| (1) | This number represents the 305,960 shares of common stock as the Commitment Shares that we are issuing to YA Shares in consideration for entering into the Purchase Agreement with us. In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares of common stock beneficially owned prior to the offering all of the shares of common stock that YA may be required to purchase under the Purchase Agreement, because the issuance of such shares of common stock is solely at our discretion and is subject to conditions contained in the Purchase Agreement, the satisfaction of which are entirely outside of YA’s control, including the registration statement that includes this prospectus becoming and remaining effective. |
| (2) | Although the Purchase Agreement provides that we may sell up to $20.0 million of our shares of common stock to YA, we are only registering 10,000,000 shares for resale under this prospectus, including the Commitment Shares we have issued to YA, in consideration of YA’s obligation to purchase shares of common stock at our direction under the Purchase Agreement and, for which we will receive no cash proceeds. Therefore, only 9,694,040 of such shares of common stock represent shares that we may issue and sell to YA for cash consideration in purchases under the Purchase Agreement from time to time, at our sole discretion, during the 36-month period. Depending on the price per share at which we sell the Advance Shares to YA pursuant to the Purchase Agreement, we may need to sell to YA under the Purchase Agreement more shares than are offered under this prospectus in order to receive aggregate gross proceeds equal to the $20.0 million Commitment Amount under the Purchase Agreement. If we choose to do so and otherwise satisfy the conditions in the Purchase Agreement, we must first register for resale under the Securities Act such additional shares of common stock. The number of shares ultimately offered for resale by YA is dependent upon the number of shares of common stock we sell to YA under the Purchase Agreement. |
| (3) | Assumes the sale of all shares being offered pursuant to this prospectus. |
| (4) | YA is a fund managed by Yorkville Advisors Global, LP or Yorkville LP. Yorkville Advisors Global II, LLC or Yorkville LLC is the General Partner of Yorkville LP. All investment decisions for YA are made by Yorkville LLC’s President and Managing Member, Mr. Mark Angelo. The business address of YA is 1012 Springfield Avenue, Mountainside, NJ 07092. |
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DESCRIPTION OF SECURITIES
This section describes the general terms and provisions of the shares of our common stock, par value $0.01 per share, and preferred stock, par value $0.01 per share, and some of the provisions of our certificate of incorporation and bylaws and of the Delaware General Corporation Law, or DGCL. This description is only a summary. Our amended and restated certificate of incorporation, as amended, and our amended and restated bylaws on the registration statement to which this prospectus relates. You should read our amended and restated certificate of incorporation and our amended and restated bylaws for additional information before you buy any of our common stock, preferred stock or other securities. See “Where You Can Find More Information.”
General
Our authorized capital stock consists of shares made up of 200,000,000 shares of common stock, par value $0.01 per share and 5,000,000 shares of undesignated preferred stock, par value $0.01 per share.
As of February 11, 2025, there were 14,123,284 shares of common stock outstanding, and there were 24 holders of record of our common stock.
Common stock
Each share of our common stock outstanding is entitled to one vote on all matters on which our stockholders generally are entitled to vote. However, holders of our common stock are not be entitled to vote on any amendment to the Amended and Restated Certificate of Incorporation that relates solely to the terms of one or more outstanding classes or series of preferred stock if the holders of such affected classes or series are entitled, either separately or together with the holders of one or more other such class or series, to vote thereon pursuant to the Amended and Restated Certificate of Incorporation or the DGCL.
Generally, the Amended and Restated Bylaws provide that, subject to applicable law or the Amended and Restated Certificate of Incorporation and/or the Amended and Restated Bylaws, all corporate actions to be taken by vote of the stockholders are authorized by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person, or by remote communication, if applicable, or represented by proxy, and where a separate vote by class or series is required, a majority of the votes cast by the stockholders of such class or series who are present in person, or by remote communication, if applicable, or represented by proxy will be the act of such class or series. Directors are elected by a plurality of the votes cast at a meeting of our stockholders for the election of directors at which a quorum is present.
Subject to the rights of holders of any then outstanding class or series of preferred stock, holders of our common stock are entitled to receive dividends and other distributions in cash, stock or property as the board of directors may declare thereon from time to time, and share equally on a per share basis in all such dividends and other distributions. In the event of our dissolution, whether voluntary or involuntary, after the payment in full of the amounts required to be paid to the holders of any outstanding class or series of preferred stock, our remaining assets and funds available for distribution will be distributed pro rata to the holders of our Common stock in proportion to the number of shares held by them and to the holders of any class or series of preferred stock entitled to a distribution. Holders of our Common stock do not have preemptive rights to purchase shares of our Common stock. All outstanding shares of our Common stock are to be fully paid and non-assessable. The rights, preferences and privileges of holders of our Common stock are subject to those of the holders of any outstanding class or series of our preferred stock that we may issue in the future.
Blank Check Preferred Stock
Our board of directors may, from time to time, authorize the issuance of one or more classes or series of preferred stock without stockholder approval. The Amended and Restated Certificate of Incorporation permits us to issue up to 5,000,000 shares of preferred stock. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of our capital stock entitled to vote thereon, without a separate class vote of the holders of preferred stock, or any separate series votes of any series thereof, unless a vote of any such holders is required pursuant to the terms of any preferred stock certificate of designations.
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Subject to the provisions of the Amended and Restated Certificate of Incorporation and limitations prescribed by law, our board of directors is expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of preferred stock, for classes and series of preferred stock. The board of directors may fix the number of shares constituting such class or series and the designation of such class or series and the powers (including voting, if any), preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such class or series. Each class or series is appropriately designated by a distinguishing designation prior to the issuance of any shares thereof. The powers (including voting, if any), preferences and relative, participating, optional and other special rights of each series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other classes and series of preferred stock at any time outstanding.
The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, may adversely affect the rights our common stockholders by, among other things:
| ● | restricting dividends on the common stock; | |
| ● | diluting the voting power of the common stock; | |
| ● | impairing the liquidation rights of the common stock; or | |
| ● | delaying or preventing a change in control without further action by the stockholders. |
As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock. There is no current intention for us to issue any shares of preferred stock.
Anti-takeover Effects of Certain Provisions of the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws
General
The Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contains provisions that are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and that could make it more difficult to acquire control of us by means of a tender offer, open market purchases, a proxy contest or otherwise. A description of these provisions is set forth below.
Delaware Anti-Takeover Law
We are subject to Section 203 of the Delaware General Corporation Law. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:
| ● | prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; | |
| ● | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding specified shares; or | |
| ● | at or subsequent to the date of the transaction, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. |
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Section 203 defines a “business combination” to include:
| ● | any merger or consolidation involving the corporation and the interested stockholder; | |
| ● | any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more of the assets of the corporation to or with the interested stockholder; | |
| ● | subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; | |
| ● | subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or | |
| ● | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as any person that is:
| ● | the owner of 15% or more of the outstanding voting stock of the corporation; | |
| ● | an affiliate or associate of the corporation who was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the relevant date; or | |
| ● | the affiliates and associates of the above. |
Under specific circumstances, Section 203 makes it more difficult for an “interested stockholder” to effect various business combinations with a corporation for a three-year period, although the stockholders may, by adopting an amendment to the corporation’s certificate of incorporation or bylaws, elect not to be governed by Section 203. The election not to be governed by Section 203 is effective (i) upon the filing of the certificate of amendment with the Secretary of State of the State of Delaware or the adoption of the amendment to the bylaws, as applicable, for a corporation that does not have a class of voting stock listed on a national securities exchange or held of record by more than 2,000 stockholders or (ii) 12 months after such action for all other corporations.
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws do not exclude it from the restrictions of Section 203. We anticipate that the provisions of Section 203 might encourage companies interested in acquiring it to negotiate in advance with its board of directors since the stockholder approval requirement would be avoided if a majority of the directors then in office approve either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder.
No Cumulative Voting
Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation specifically authorizes cumulative voting. The Amended and Restated Certificate of Incorporation does not grant stockholders the right to vote cumulatively.
Blank Check Preferred Stock
We believe that the availability of the preferred stock under the Amended and Restated Certificate of Incorporation provides us with flexibility in addressing corporate issues that may arise. Having these authorized shares available for issuance allows us to issue shares of preferred stock without the expense and delay of a special stockholders’ meeting. The authorized shares of preferred stock, as well as shares of common stock, is available for issuance without further action by our stockholders, with the exception of any actions required by applicable law or the rules of any stock exchange on which our securities may be listed. The board of directors has the power, subject to applicable law, to issue classes or series of preferred stock that could, depending on the terms of the class or series, impede the completion of a merger, tender offer or other takeover attempt.
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Advance Notice Procedure
The Amended and Restated Bylaws provide an advance notice procedure for stockholders to nominate director candidates for election or to bring business before an annual meeting of stockholders, including proposed nominations of persons for election to the board of directors.
The Amended and Restated Bylaws provide that as to the notice of stockholder proposals of business to be brought at the annual meeting of stockholders, notice must be delivered to our secretary (i) not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting or (ii) (x) if the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the first anniversary of the preceding year’s annual meeting, or (y) with respect to the first annual meeting held after the issuance of securities pursuant to the registration statement of which this prospectus forms a part, not more than 120 days nor less than 90 days prior to the date of such annual meeting or, if later, the 10th day following the day on which public announcement of the date of such meeting is first made by us. In addition, any proposed business other than the nomination of persons for election to our board of directors must constitute a proper matter for stockholder action.
The Amended and Restated Bylaws provide that in the case of nominations for election at an annual meeting, notice must be delivered to, or mailed and received at, our principal executive offices (i) not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting or (ii) (x) if the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the first anniversary of the preceding year’s annual meeting, or (y) with respect to the first annual meeting held after the issuance of securities pursuant to the registration statement of which this prospectus forms a part, not more than 120 days nor less than 90 days prior to the date of such annual meeting or, if later, the 10th day following the day on which public announcement of the date of such annual meeting is first made by us. In the case of nominations for election at a special meeting of stockholders called for the election of directors, notice must be delivered to, or mailed and received at, our principal executive offices (i) not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting or (ii) if later, the 10th day following the day on which public announcement of the date of such special meeting is first made by us. In addition, each such stockholder’s notice must include certain information regarding the stockholder and the director nominee as set forth in the Amended and Restated Bylaws.
Staggered Board
Our Amended and Restated Certificate of Incorporation provides that our board of directors is be divided into three classes of directors, with the classes as nearly equal in number as possible. At each annual meeting of the stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. As a result, approximately one-third of our directors is elected each year. The initial term of office of the directors of Class I shall expire as of our first annual meeting of stockholders; the initial term of office of the directors of Class II shall expire as of our second annual meeting; and the initial term of office of the directors of Class III shall expire as of the third annual meeting of our stockholders.
| ● | The Class I directors are Hila Karah, Dr. Mark J. Gilbert and Robert E. Martell; | |
| ● | The Class II directors are Anthony Maddaluna and William B. Hayes; and | |
| ● | The Class III directors are Jeffrey A. Meckler, Michael J. Newman, Ph.D. and Dr. Roger J. Pomerantz. |
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws provide that the number of directors shall be fixed from time to time by a resolution of the majority of its board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class shall consist of one-third of the board of directors.
The division of our board of directors into three classes with staggered three-year terms may delay or prevent stockholder efforts to effect a change of its management or a change in control.
Action by Written Consent; Special Meetings of Stockholders
Our Amended and Restated Certificate of Incorporation provide that stockholder action can be taken only at an annual or special meeting of stockholders and cannot be taken by written consent in lieu of a meeting. Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws provides that, except as otherwise required by law, special meetings of the stockholders can be called only by the board of directors, the chairperson of the board of directors, our chief executive officer or our president (in the absence of a chief executive officer). Except as provided above, our stockholders are not to be permitted to call a special meeting or to require the board of directors to call a special meeting.
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Removal of Directors
Our Amended and Restated Certificate of Incorporation does not provide for the removal of directors by stockholders.
Exclusive Forum
Our Amended and Restated Certificate of Incorporation provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be, to the fullest extent permitted by law, the sole and exclusive forum for any derivative action or proceeding brought on its behalf, any action asserting a claim for breach of a fiduciary duty owed by any of its directors and officers to it or its stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, its Amended and Restated Certificate of Incorporation, its Amended and Restated Bylaws, or any action asserting a claim governed by the internal affairs doctrine. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or its directors, officers or other team members, which may discourage such lawsuits against us and our directors, officers and other team members.
Federal Forum for Securities Act Claims
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, our Amended and Restated Certificate of Incorporation contains a federal forum provision which provides that unless we consent in writing to the selection of an alternative forum, 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 arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock are deemed to have notice of and consented to this provision. The Supreme Court of Delaware has held that this type of exclusive federal forum provision is enforceable. There may be uncertainty, however, as to whether courts of other jurisdictions would enforce such a provision, if applicable.
This choice of federal forum for Securities Act claims may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable, which may discourage such lawsuits against us and our directors, officers and other team members.
Stock Exchange Listing
Our common stock is listed on the Nasdaq Capital Market under the trading symbol “INDP.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is VStock Transfer, LLC, 18 Lafayette Pl, Woodmere, NY 11598.
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PLAN OF DISTRIBUTION
On February 12, 2025, we entered into the Purchase Agreement with YA. The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, YA is committed to purchase up to $20.0 million in shares of our common stock during the Commitment Period. From time to time, and at our sole discretion, we may present YA with Advance Notices to purchase our shares. The shares would be purchased pursuant to the Purchase Agreement at 97% of the lowest of the three daily VWAPs during the applicable Pricing Period as set forth in the Purchase Agreement.
The shares of common stock offered by this prospectus are being offered by the selling stockholder. The selling stockholder is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act. We have agreed in the Purchase Agreement to provide customary indemnification to YA.
It is possible that our shares may be sold from time to time by YA in one or more of the following manners:
| ● | ordinary brokerage transactions and transactions in which the broker solicits purchasers; | |
| ● | a block trade in which the broker or dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; | |
| ● | to a broker-dealer as principal and resale by the broker-dealer for its account; or | |
| ● | a combination of any such methods of sale. |
YA has agreed that, during the term of the Purchase Agreement, neither YA or its affiliates will engage in any short sales or hedging transactions with respect to our shares of common stock, provided that YA and its affiliates may enter into Permitted Sales.
YA and any unaffiliated broker-dealer will be subject to liability under the federal securities laws and must comply with the requirements of the Exchange Act, including without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares of common stock by YA or any unaffiliated broker-dealer. Under these rules and regulations, YA and any unaffiliated broker-dealer:
| ● | may not engage in any stabilization activity in connection with our securities; | |
| ● | must furnish each broker which offers our shares of common stock covered by the prospectus and accompanying prospectus that are a part of our Registration Statement with the number of copies of such prospectus and accompanying prospectus which are required by each broker; and | |
| ● | may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act. |
These restrictions may affect the marketability of the shares by YA and any unaffiliated broker-dealer.
We have advised YA that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus.
We will pay the expenses incident to the registration under the Securities Act of the offer and sale of our shares of common stock covered by this prospectus by the selling stockholder. We estimate that our total expenses for the offering will be approximately $50,000 (excluding the Commitment Shares). As consideration for its irrevocable commitment to purchase our shares of common stock under the Purchase Agreement, we agreed to issue the Commitment Shares to the selling stockholder, calculated as 1.25% of the Commitment Amount. We also paid a $25,000 structuring fee to an affiliate of the selling stockholder in connection with entry into the Purchase Agreement.
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LEGAL MATTERS
The validity of the common stock being offered by this prospectus has been passed upon for us by Greenberg Traurig LLP.
EXPERTS
Our consolidated financial statements as of December 31, 2023 and 2022, and for each of the years then ended, have been included in reliance upon the report of Haskell & White LLP, independent registered public accounting firm, which report includes an explanatory paragraph expressing substantial doubt regarding the Company’s ability to continue as a going concern, and upon the authority of said firm as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the internet at the SEC’s website at www.sec.gov. Copies of certain information filed by us with the SEC are also available on our website at www.indaptusrx.com. The information on our web site, however, is not, and should not be deemed to be, a part of or incorporated by reference in this prospectus.
This prospectus is a part of a registration statement on Form S-1 that we filed with the SEC and does not contain all of the information in the registration statement. This prospectus omits some information contained in the registration statement in accordance with SEC rules and regulations. The full registration statement may be obtained from the SEC or us, as provided below. Other documents establishing the terms of the offered securities are or may be filed as exhibits to the registration statement. Statements in this prospectus about these documents are summaries and each statement is qualified in all respects by reference to the document to which it refers. You should refer to the actual documents for a more complete description of the relevant matters. You may inspect a copy of the registration statement through the SEC’s website, as provided above.
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INDAPTUS THERAPEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
INDAPTUS THERAPEUTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Indaptus Therapeutics, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Indaptus Therapeutics, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced recurring losses, negative cash flows from operations, and has limited capital resources. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
| /s/ Haskell & White LLP | |
| HASKELL & WHITE LLP | |
| We have served as the Company’s auditor since 2021. | |
| Irvine, California | |
| March 13, 2024 |
| F-2 |
INDAPTUS THERAPEUTICS, INC.
Consolidated Balance Sheets
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use asset | ||||||||
| Other assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and other current liabilities | $ | $ | ||||||
| Operating lease liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock: $ par value, shares authorized as of December 31, 2023 and December 31, 2022; shares issued and outstanding as of December 31, 2023 and December 31, 2022 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the consolidated financial statements and report of independent registered public accounting firm
| F-3 |
INDAPTUS THERAPEUTICS, INC.
Consolidated Statements of Operations and Comprehensive Loss
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss available to common stockholders per share of common stock, basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of shares used in calculating net loss per share, basic and diluted | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income: | ||||||||
| Reclassification adjustment for interest earned on marketable securities included in net loss | ( | ) | ( | ) | ||||
| Change in unrealized gain on marketable securities | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
See accompanying notes to the consolidated financial statements and report of independent registered public accounting firm
| F-4 |
INDAPTUS THERAPEUTICS, INC.
Consolidated Statements of Stockholders’ Equity
| Common stock | Additional paid in | Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | deficit | Income (Loss) | Total | |||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of initial commitment shares | ( | ) | ||||||||||||||||||||||
| Reclassification adjustment for interest earned on marketable securities included in net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Change in unrealized gain on marketable securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Reclassification adjustment for interest earned on marketable securities included in net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Change in unrealized gain on marketable securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
See accompanying notes to the consolidated financial statements and report of independent registered public accounting firm
| F-5 |
INDAPTUS THERAPEUTICS, INC.
Consolidated Statements of Cash Flows
| 2023 | 2022 | |||||||
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Realized gain on assets held for sale | ( | ) | ||||||
| Interest earned on marketable securities | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable and other current liabilities | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Operating lease right-of-use asset and liability, net | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds received for assets held for sale | ||||||||
| Purchase of marketable securities | ( | ) | ( | ) | ||||
| Maturity of marketable securities | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of shares of common stock and warrants | ||||||||
| Issuance costs | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of year | ||||||||
| Cash and cash equivalents at end of year | $ | $ | ||||||
| Noncash investing and financing activities | ||||||||
| Transaction costs in accounts payable and other current liabilities | ||||||||
| ASC 842 lease renewal option exercise | $ | $ | ||||||
| Issuance of initial commitment shares | $ | $ | ||||||
| Change in accumulated other comprehensive (loss) income | $ | ( | ) | $ | ||||
| Change in unrealized gain/loss on marketable securities | $ | ( | ) | $ | ||||
| Reclassification of security deposit | ||||||||
| Supplemental cash flow disclosures | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
See accompanying notes to the consolidated financial statements and report of independent registered public accounting firm
| F-6 |
INDAPTUS THERAPEUTICS, INC.
Notes to Consolidated Financial Statements
NOTE 1: GENERAL
Indaptus Therapeutics, Inc. and its wholly-owned subsidiaries, Decoy Biosystems, Inc. and Intec Pharma Ltd., collectively (the “Company”), is a biotechnology company dedicated to enhancing and expanding curative cancer immunotherapy for patients with unresectable or metastatic solid tumors and lymphomas, which are responsible for more than 90% of all cancer deaths. The Company is developing a novel, multi-targeted product that activates both innate and adaptive anti-tumor and anti-viral immune responses.
Risks and uncertainties
The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operations (see below), competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, and dependence on key individuals.
Going concern and management’s plans
The
Company has incurred net losses and utilized cash in operations since inception. For the year ended December 31, 2023, the Company incurred
a net loss of approximately $
As a result of these uncertainties, there is substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Principles of consolidation
The consolidated financial statements include the accounts of Indaptus and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.
| F-7 |
Use of estimates
The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting periods. The most significant estimates relate to the determination of the fair value of stock-based compensation and the determination of period-end obligations to certain contract research organizations. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates.
Loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number of common stock outstanding during the period. Diluted loss per share is based upon the weighted average number of common stock and of common stock equivalents outstanding when dilutive. Common stock equivalents include outstanding stock options and warrants which are included under the treasury stock method when dilutive.
SCHEDULE OF ANTI-DILUTIVE SECURITIES
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Outstanding stock options | ||||||||
| Warrants | ||||||||
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. As of December 31, 2023, and 2022, cash and cash equivalents consist primarily of checking and money market deposits. The Company’s cash balances exceed those that are federally insured; however, the Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. To date, the Company has not recognized any losses caused by uninsured balances.
Marketable securities
The Company’s investments in marketable securities included U.S. treasury bonds that were classified as available-for-sale securities pursuant to Accounting Standards Codification (“ASC”) 320 “Investments — Debt Securities”. These investments were recorded at fair value with unrealized gains and losses recorded in Accumulated Other Comprehensive Income (Loss), or AOCI, as a separate component of stockholders’ equity.
Property and equipment
Property
and equipment assets are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over
the estimated useful lives of the assets. The Company uses an estimated useful life of
Patents
The Company expenses patent costs, including related legal costs, as incurred and records such costs within general and administrative expense in the accompanying consolidated statements of operations.
Research and development expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, stock-based compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including clinical trials and professional services. All costs associated with research and development are expensed as incurred.
| F-8 |
The Company accrues for expenses resulting from obligations under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers for which payment flows do not match the periods over which services or materials are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. In the event advance payments are made to a CRO, CMO, or other outside service provider, the payments will be recorded as a prepaid expense or other asset, which will be amortized or expensed as the contracted services are performed.
General and administrative expenses
General and administrative expenses include compensation, employee benefits, and stock-based compensation for executive management, finance administration and human resources, facility costs (including rent), professional service fees, and other general overhead costs, including depreciation, to support the Company’s operations.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized in the foreseeable future. As of December 31, 2023, and 2022, the Company has recorded a full valuation allowance against its deferred tax assets.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses.
The Company measures and records the expense related to stock-based payment awards based on the fair value of those awards as determined using the Black-Scholes-Merton (“Black-Scholes”) model as of the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period, on a straight-line basis.
The Black-Scholes model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based payment awards, including the option’s expected term and the price volatility of the underlying stock. The Company estimates the fair value of options granted by using the Black-Scholes model with the following assumptions:
Expected Volatility—The Company estimated volatility for option grants by evaluating the historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options’ expected term.
Expected Term—The expected term of the Company’s options represents the period that the stock-based payment awards are expected to be outstanding. The expected term was estimated using the simplified method for employee stock options since the Company does not have adequate historical exercise data to estimate the expected term.
| F-9 |
Risk-Free Interest Rate—The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is equal to the options’ expected term at the grant date.
Dividend Yield—The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero.
The Company has elected to recognize forfeitures as they occur.
Fair value measurements
Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company follows the established framework for measuring fair value and providing disclosures about fair value measurements.
The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. |
| Level 2: | Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. |
| Level 3: | Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. |
ASC 820, Fair Value Measurement, requires all entities to disclose the fair value of financial instruments, both assets and liabilities, for which it is practicable to estimate fair value, and defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of December 31, 2023, and 2022, the recorded values of cash and cash equivalents, prepaid expenses, and accounts payable and other current liabilities approximate their fair values due to the short-term nature of these items.
The following financial assets are measured and recorded at fair value on the Company’s consolidated balance sheet as of December 31, 2022. As of December 31, 2023, there were no such assets on the Company’s consolidated balance sheet.
SCHEDULE OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE MEASUREMENT
| December 31, 2022 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Marketable securities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Segment information
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”). The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company currently operates in one business segment, which is biotechnology. The Company is not organized by market and is managed and operated as one business.
| F-10 |
Recently adopted accounting pronouncements
On January 1, 2023, the Company adopted ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. This standard amended guidance on the recognition of impairment losses of certain financial instruments. The ASU established the current expected credit loss model, which is based on expected losses rather than incurred losses. Adoption of this standard had no impact on the Company’s consolidated financial statements.
Recently issued accounting pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
NOTE 3: MARKETABLE SECURITIES
The Company’s investments in marketable securities included U.S. treasury bonds with maturities of less than one year. These investments were classified as available-for-sale and were recorded at fair value with unrealized gains and losses recorded in Accumulated Other Comprehensive Income (Loss). These investments were categorized as Level 2.
As
of December 31, 2023, the Company had marketable securities. As of December 31, 2022, the fair value of the marketable securities
was $
NOTE 4: PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are comprised of the following:
SCHEDULE OF PREPAID EXPENSE AND OTHER CURRENT ASSETS
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid research and development | ||||||||
| Other prepaid expenses | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
NOTE 5: ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities are comprised of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued employee costs | ||||||||
| Accrued professional fees | ||||||||
| Accrued research and development | ||||||||
| Accrued board fees | ||||||||
| Delaware franchise taxes payable | ||||||||
| Other accrued expenses | ||||||||
| Total accounts payable and other current liabilities | $ | $ | ||||||
The Company has an equity incentive plan for grants to employees, officers, consultants, directors, and other service providers that was approved in 2021 (the “2021 Plan”). The maximum aggregate number of shares that may be issued pursuant to this 2021 Plan is shares (the “Pool”); provided, however that
| F-11 |
The 2021 Plan provides for the grant of non-qualified stock options, incentive stock options, restricted stock awards, restricted stock units, unrestricted stock awards, stock appreciation rights and other forms of stock-based compensation. The 2021 Plan permits the Company’s board to change the type, terms and conditions of awards as circumstances may change. This flexibility to adjust the type of compensation to be granted is particularly important given current economic and world events.
SCHEDULE OF STOCK OPTION ACTIVITY
| Weighted average | ||||||||||||||||
| Number of options | Exercise price | Remaining contractual life (in years) | Intrinsic value | |||||||||||||
| Outstanding as of January 1, 2023 | $ | $ | ||||||||||||||
| Granted | $ | - | $ | - | ||||||||||||
| Forfeited and cancelled | ( | ) | $ | - | $ | - | ||||||||||
| Outstanding as of December 31, 2023 | $ | $ | ||||||||||||||
| Exercisable as of December 31, 2023 | $ | $ | ||||||||||||||
| Vested and expected to vest as of December 31, 2023 | $ | $ | ||||||||||||||
The following table summarizes the total stock-based compensation expense included in the consolidated statements of operations for the periods presented:
| 2023 | 2022 | |||||||
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Total stock-based compensation expense | $ | $ | ||||||
As of December 31, 2023, total compensation cost not yet recognized related to unvested stock options was approximately $ million, which is expected to be recognized over a weighted-average period of approximately years.
The
Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes
option-pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option. The weighted
average inputs used to measure the value of the options granted during the years ended December 31, 2023 and 2022 are presented in the
table below. The weighted average fair value of stock options issued during the years ended December 31, 2023 and 2022 was $
| 2023 | 2022 | |||||||
| Exercise price | $ | $ | ||||||
| Expected term (in years) | ||||||||
| Volatility | % | % | ||||||
| Risk free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| F-12 |
SCHEDULE OF EXERCISE PRICE OF OUTSTANDING STOCK OPTIONS
| Exercise price | Options outstanding | |||
| $0.01 - $8.00 | ||||
| $ - $ | ||||
| $ - $ | ||||
| $ or higher | ||||
| Total | ||||
NOTE 7: CAPITALIZATION
| a. | As of December 31, 2023 and December 31, 2022, the Company had shares of common stock authorized and shares of common stock issued and outstanding. As of December 31, 2023 and December 31, 2022, there were warrants outstanding to purchase an aggregate of shares of common stock of the Company. As of December 31, 2023, these warrants are exercisable at a weighted average price of $ and their weighted average remaining contractual term is approximately years. |
| b. | On
June 1, 2022, the Company entered into an At The Market Offering Agreement (the “ATM
Agreement”) which was amended on September 1, 2022 with H.C. Wainwright & Co.,
LLC, as sales agent (“Wainwright”), pursuant to which the Company may offer and
sell, from time to time through Wainwright, shares of the Company’s common stock, par
value $ per share, for aggregate gross proceeds of up to $ |
| c. | On December, 22, 2022, the
Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln
Park”), which provides that, upon the terms and subject to the conditions and limitations in the Purchase Agreement, Lincoln
Park is committed to purchase up to an aggregate of $ |
NOTE 8: COMMITMENTS AND CONTINGENCIES
Litigation
On
July 13, 2022, LTS Lohmann Therapie Systeme AG (“LTS”) filed a Request for Arbitration with the International Chamber of
Commerce (“Request”), naming as respondent the Company’s subsidiary, Intec Pharma. The Request alleges that LTS is
entitled to payment of Euro
On
February 7, 2023, Intec Israel settled the dispute with LTS by paying Euro
From time to time, the Company could become involved in additional disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount of such potential loss can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.
Leases
On
October 1, 2021, the Company entered into a noncancelable two-year operating lease agreement for approximately
On
April 19, 2023, the Company executed an amendment to the
| F-13 |
Future minimum annual lease payments and a reconciliation to the Company’s operating lease liability under the Company’s noncancelable operating lease as of December 31, 2023 are as follows:
SUMMARY OF MINIMUM LEASE PAYMENTS
| 2024 | $ | |||
| 2025 | ||||
| Total minimum lease payments | ||||
| Less: amount representing interest | ( | ) | ||
| Present value of operating lease liability | ||||
| Less: current portion | ( | ) | ||
| Operating lease liability, net of current portion | $ |
The
Company recognized rent expense of $
NOTE 9: INCOME TAXES
As of December 31, 2023, the Company had net operating loss carry forwards that may be available to reduce future years’ taxable income.
The Company’s provision for income taxes consisted of the following:
SCHEDULE OF PROVISION FOR INCOME TAXES
| For the year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Computed “expected” tax benefit | $ | ( | ) | $ | ( | ) | ||
| State taxes, net of federal benefit | ( | ) | ||||||
| Non-deductible items | ||||||||
| Change in deferred tax asset valuation allowance | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Return-to-provision adjustments | ||||||||
| Other | ||||||||
| Income tax expense | $ | $ | ||||||
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
The Company’s net deferred tax assets were comprised of the following as of December 31, 2023 and 2022:
SCHEDULE OF NET DEFERRED TAX ASSETS
| 2023 | 2022 | |||||||
| Deferred tax assets: | ||||||||
| Net operating losses | $ | $ | ||||||
| Capitalized research and development | ||||||||
| Stock-based compensation | ||||||||
| Accruals | ||||||||
| Operating lease liabilities | ||||||||
| Other | ||||||||
| Total gross deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Right-of-use asset | ( | ) | ( | ) | ||||
| Gross deferred tax liabilities | ( | ) | ( | ) | ||||
| Less: Deferred tax asset valuation allowance | ( | ) | ( | ) | ||||
| Total net deferred tax assets | $ | $ | ||||||
| F-14 |
Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
ASC
740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to
the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is
dependent on the Company’s ability to generate sufficient taxable income within the carryforward periods. Because of the Company’s
recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned
future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance for the years ended
December 31, 2023 and 2022. The net change in total valuation allowance for the years ended December 31, 2023 and 2022 was an increase
of $
At
December 31, 2023, the Company has United States federal and state net operating loss (NOL) carryforwards of $
The Company’s ability to utilize its net operating losses may be limited under Section 382 and 383 of the Internal Revenue Code. The limitations apply if an ownership change, as defined by Section 382, occurs. Generally, an ownership change occurs when certain shareholders increase their aggregate ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). Although the Company has not undergone a Section 382 analysis, it is possible that the utilization of the net operating losses could be substantially limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be utilized against future taxes. As a result, the Company may not be able to take full advantage of these carryforwards for federal and state tax purposes. Future changes in stock ownership may also trigger an ownership change and, consequently, a Section 382 limitation.
The
Company recognizes the benefit of tax positions taken or expected to be taken in its tax returns in the consolidated financial statements
when it is more likely than not that the position will be sustained upon examination by authorities. Recognized tax positions are measured
at the largest amount of benefit that is
The
Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses.
As of December 31, 2023 and 2022, the Company recorded
The Company files U.S. federal and various state income tax returns and is subject to the examination for tax years back to 2020 and 2019 for federal and state purposes, respectively, and its NOL’s dating back to inception are subject to adjustment by the taxing authorities if claimed on future tax filings for which the statute remain open to examination. The Company also files Israeli tax returns and is subject to examination for tax years back to 2019. The Company is not currently under audit by the Internal Revenue Service or other similar national, state and local authorities.
NOTE 10: SUBSEQUENT EVENTS
The
Company evaluated subsequent events from December 31, 2023, the date of these consolidated financial statements, through March 13, 2024,
which represents the date the consolidated financial statements were issued, for events requiring recognition or disclosure in the consolidated
financial statements for the year ended December 31, 2023. The Company concluded that no events have occurred that would require recognition or disclosure in the consolidated
financial statements, except for the sale of
shares of the Company’s common stock for an aggregate gross proceeds of $
| F-15 |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Balance Sheets
| September 30, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use asset | ||||||||
| Other assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and other current liabilities | $ | $ | ||||||
| Operating lease liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock: $ par value, shares authorized as of September 30, 2024 and December 31, 2023; shares issued and outstanding as of September 30, 2024 and shares issued and outstanding as of December 31, 2023 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements
| F-16 |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, net | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss available to common stockholders per share of common stock, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares used in calculating net loss per share, basic and diluted | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Reclassification adjustment for interest earned on marketable securities included in net loss | ( | ) | ( | ) | ||||||||||||
| Change in unrealized gain on marketable securities | ||||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes to the unaudited condensed consolidated financial statements
| F-17 |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
| Common stock | Additional Paid In | Accumulated | Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income (Loss) | Total | |||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Reclassification adjustment for interest earned on marketable securities included in net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Change in unrealized gain on marketable securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Reclassification adjustment for interest earned on marketable securities included in net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Change in unrealized gain on marketable securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance June 30, 2023 | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Reclassification adjustment for interest earned on marketable securities included in net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Change in unrealized gain on marketable securities | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of shares of common stock, net of issuance costs (Note 6b) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of shares of common stock, net of issuance costs (Note 6b) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2024 | ( | ) | ||||||||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Issuance of shares of common stock and warrants, net of issuance costs (Note 6c) | ||||||||||||||||||||||||
| Issuance of shares of common stock and warrants, net of issuance costs | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
| F-18 |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Interest earned on marketable securities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current and non- current assets | ( | ) | ||||||
| Accounts payable and other current liabilities | ( | ) | ( | ) | ||||
| Operating lease right-of-use asset and liability, net | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Maturity of marketable securities | ||||||||
| Purchase of marketable securities | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of shares of common stock and warrants | ||||||||
| Issuance costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Noncash investing and financing activities | ||||||||
| Transaction costs in accounts payable and other current liabilities | $ | $ | ||||||
| Change in unrealized gain/loss on marketable securities | $ | $ | ( | ) | ||||
| ASC 842 lease renewal option exercise | $ | $ | ||||||
| Reclassification of security deposit | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements
| F-19 |
INDAPTUS THERAPEUTICS, INC.
Notes to the unaudited condensed consolidated financial statements
NOTE 1: GENERAL
Indaptus Therapeutics, Inc. and its wholly-owned subsidiaries, Decoy Biosystems, Inc. and Intec Pharma Ltd., (collectively the “Company”), is a biotechnology company dedicated to enhancing and expanding curative cancer immunotherapy for patients with unresectable or metastatic solid tumors and lymphomas, which are responsible for more than 90% of all cancer deaths. The Company is developing a novel, multi-targeted product that activates both innate and adaptive anti-tumor and anti-viral immune responses.
Risks and uncertainties
The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operations (see below), competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, and dependence on key individuals.
Going concern and management’s plans
The
Company has incurred net losses and utilized cash in operations since inception. For the nine-month period ended September 30, 2024,
the Company incurred a net loss of approximately $
As a result of these uncertainties, there is substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern.
| F-20 |
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and SEC Regulation S-X Article 10 for interim financial statements. Accordingly, they do not contain all the information and notes required by US GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of September 30, 2024, and the consolidated results of operations and comprehensive loss and changes in stockholders’ equity for the three- and nine-month periods ended September 30, 2024 and 2023 and cash flows for the nine-month periods ended September 30, 2024 and 2023.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on March 13, 2024. The condensed consolidated balance sheet data as of December 31, 2023, included in these unaudited condensed consolidated financial statements was derived from the audited financial statements for the year ended December 31, 2023, but does not include all disclosures required by US GAAP for annual financial statements.
The results for the nine-month period ended September 30, 2024, are not necessarily indicative of the results expected for the year ending December 31, 2024.
Principles of consolidation
The unaudited condensed consolidated financial statements include the accounts of Indaptus Therapeutics, Inc. and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.
Use of estimates
The preparation of the unaudited condensed consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting periods. The most significant estimates relate to the determination of the fair value of stock-based compensation and the determination of period-end obligations to certain contract research organizations. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and adjusts when facts and circumstances dictate. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates.
Loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is based upon the weighted average number of shares of common stock and of common stock equivalents outstanding when dilutive. Common stock equivalents include outstanding stock options and warrants which are included under the treasury stock method when dilutive.
SCHEDULE OF ANTI-DILUTIVE SECURITIES
| Weighted average | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Outstanding stock options | ||||||||||||||||
| Warrants | ||||||||||||||||
| F-21 |
Research and development expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including clinical trials and professional services. All costs associated with research and development are expensed as incurred.
The Company accrues for expenses resulting from obligations under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers for which payment flows do not match the periods over which services or materials are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. In the event advance payments are made to a CRO, CMO, or outside service provider, the payments will be recorded as a prepaid expense, which will be amortized or expensed as the contracted services are performed.
Recently issued accounting standards
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which sets forth improvements to the current segment disclosure requirements in accordance with Topic 280 “Segment Reporting,” including clarifying that entities with a single reportable segment are subject to both new and existing segment reporting requirements. ASU 2023-07 will be effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Adoption of this ASU is currently being evaluated by the Company.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
NOTE 3: PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are comprised of the following:
SCHEDULE OF PREPAID EXPENSE AND OTHER CURRENT ASSETS
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid research and development | ||||||||
| Other prepaid expenses | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
NOTE 4: ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities are comprised of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued employee costs | ||||||||
| Accrued professional fees | ||||||||
| Accrued research and development | ||||||||
| Accrued board fees | ||||||||
| Delaware franchise taxes payable | ||||||||
| Other accrued expenses | ||||||||
| Total accounts payable and other current liabilities | $ | $ | ||||||
| F-22 |
The Company has an equity incentive plan for grants to employees, officers, consultants, directors, and other service providers that was approved in 2021 (the “2021 Plan”). The 2021 Plan provides for the grant of non-qualified stock options, incentive stock options, restricted stock awards, restricted stock units, unrestricted stock awards, stock appreciation rights and other forms of stock-based compensation. The 2021 Plan permits the Company’s board to change the type, terms and conditions of awards as circumstances may change. This flexibility to adjust the type of compensation to be granted is particularly important given current economic and world events.
SCHEDULE OF STOCK OPTION ACTIVITY
| Weighted average | ||||||||||||||||
| Number of options | Exercise price | Remaining contractual life (in years) | Intrinsic value | |||||||||||||
| Outstanding as of January 1, 2024 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Forfeited and cancelled | ( | ) | - | - | ||||||||||||
| Outstanding as of September 30, 2024 | $ | $ | ||||||||||||||
| Exercisable as of September 30, 2024 | $ | $ | ||||||||||||||
| Vested and expected to vest as of September 30, 2024 | $ | $ | ||||||||||||||
SCHEDULE OF STOCK BASED COMPENSATION EXPENSES
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Research and development | $ | |||||||||||||||
| General and administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | |||||||||||||||
As of September 30, 2024, total compensation cost not yet recognized related to unvested stock options was approximately $ million and such amount is expected to be recognized over a weighted average period of years.
The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option. The weighted average inputs used to measure the value of the options granted during the nine months ended September 30, 2024 are presented in the table below. The weighted average fair value of stock options granted during the nine months ended September 30, 2024 was $ per share.
| 2024 | ||||
| Exercise price | $ | |||
| Expected term (in years) | ||||
| Volatility | % | |||
| Risk free rate | % | |||
| Dividend yield | % | |||
| F-23 |
SCHEDULE OF EXERCISE PRICE OF OUTSTANDING STOCK OPTIONS
| Exercise price | Options outstanding | |||
| $0.01 - $8.00 | ||||
| $ - $ | ||||
| $ - $ | ||||
| $ or higher | ||||
| Total | ||||
NOTE 6: CAPITALIZATION
| a. | As
of September 30, 2024 and December 31, 2023, the Company had shares of common stock authorized and and
shares issued and outstanding, respectively. As of September 30, 2024 and December
31, 2023, there were warrants outstanding to purchase an aggregate of | |
| b. | On
June 1, 2022, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) which was amended on
September 1, 2022 with a sales agent, pursuant to which the Company may offer and sell, from time to time through the sales agent,
shares of the Company’s common stock, par value $ per share. The issuance and sale of common stock by the Company under
the ATM Agreement is being made pursuant to the Company’s effective “shelf”
registration statement on Form S-3 filed with the SEC on September 1, 2022 and declared effective on September 9, 2022. In
2024, the Company sold shares of the Company’s common stock for aggregate gross proceeds of approximately $ | |
| c. | On
August 8, 2024, the Company completed a registered direct offering, pursuant to which the Company sold and issued to certain
investors, including an officer of the Company,
shares of the Company’s common stock at a purchase price per share of $.
In addition, in a concurrent private placement, the Company also issued to the purchasers in the August 2024 Offering unregistered
warrants to purchase |
NOTE 7: COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount of such potential loss can be estimated, the Company accrues liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.
| F-24 |
Leases
Future minimum annual lease payments and a reconciliation to the Company’s operating lease liability under the Company’s noncancelable operating lease as of September 30, 2024 are as follows:
SUMMARY OF MINIMUM LEASE PAYMENTS
| 2024 (remaining) | $ | |||
| Year one | $ | |||
| 2025 (lease ends October 31, 2025) | ||||
| Year two | ||||
| Total minimum lease payments | ||||
| Less: amount representing interest | ( | ) | ||
| Present value of operating lease liability | ||||
| Less: current portion | ( | ) | ||
| Operating lease liability, net of current portion | $ |
The
Company recognized rent expense of $
NOTE 8: SUBSEQUENT EVENTS
The Company evaluated subsequent events from September 30, 2024, the date of these unaudited condensed consolidated financial statements, through November 12, 2024, which represents the date the condensed consolidated financial statements were issued, for events requiring recognition or disclosure in the condensed consolidated financial statements for the nine months ended September 30, 2024. The Company concluded that no events have occurred that would require recognition or disclosure in the condensed consolidated financial statements.
| F-25 |
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following is an estimate of the expenses (all of which are to be paid by the registrant) that we may incur in connection with the securities being registered hereby, other than the Securities and Exchange Commission registration fee:
| SEC Registration Fee | $ | 1,238 | ||
| Accounting Fees and Expenses | 7,500 | |||
| Legal Fees and Expenses | 35,000 | |||
| Printing Fees and Expenses | 5,000 | |||
| Total | $ | 48,738 |
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with various actions, suits or proceedings, whether civil, criminal, administrative or investigative other than an action by or in the right of the corporation, a derivative action, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses including attorneys’ fees incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, agreement, a vote of stockholders or disinterested directors or otherwise.
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws provide that we will indemnify and hold harmless, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, each person that such section grants us the power to indemnify.
The Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
| ● | any breach of the director’s duty of loyalty to the corporation or its stockholders; | |
| ● | acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; | |
| ● | payments of unlawful dividends or unlawful stock repurchases or redemptions; or | |
| ● | any transaction from which the director derived an improper personal benefit. |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, offices or controlling persons of ours, pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of ours in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
| II-1 |
Item 15. Recent Sales of Unregistered Securities.
The securities described below were sold within the past three years and were not registered under the Securities Act.
Sales by Indaptus
On February 12, 2025, Indaptus entered into a standby equity purchase agreement, or the Purchase Agreement, with YA II PN, LTD., or YA, pursuant to which we have the right to sell to YA up to $20.0 million in shares of our common stock subject to certain limitations, from time to time during 36-month period following the date of execution of the Purchase Agreement. Indaptus is issuing 305,960 shares of common stock to YA as consideration for its commitment to purchase our shares of common stock under the Purchase Agreement, or the Commitment Shares, and may issue up to $20.0 million of our shares of common stock pursuant to the Purchase Agreement, or the Advance Shares. The resale of 10,000,000 shares of common stock, representing the Commitment Shares and the Advance Shares, is being registered for resale pursuant to this Registration Statement. In the Purchase Agreement, YA represented to Indaptus, among other things, that it was an “accredited investor”, as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended, or the Securities Act. The securities were sold by us under the Purchase Agreement in reliance upon an exemption from the registration requirements under the Securities Act afforded by Section 4(a)(2) of the Securities Act.
On January 16, 2025, Indaptus completed a private placement, pursuant to which it sold and issued to certain investors 2,109,383 unregistered shares of common stock and unregistered warrants to purchase 2,109,383 shares of common stock. The warrants are immediately exercisable at an exercise price of $0.94 per share and expire five years from the date of issuance. In connection with the January 2025 financing, Indaptus issued to the placement agent and its designees placement agent warrants to purchase an aggregate of 147,656 shares of common stock at an exercise price per share equal to $1.175. The placement agent warrants are exercisable six months from the date of issuance and expire on the fifth anniversary of the issue date.
On November 25, 2024, Indaptus completed a registered direct offering, pursuant to which it sold and issued to certain investors, including an officer and director of the Company, 1,817,017 shares of common stock. In addition, in a concurrent private placement, Indaptus issued to the investors unregistered warrants to purchase 1,817,017 shares of common stock. The warrants are immediately exercisable at an exercise price of $1.05 per share and expire five years from the date of issuance. The combined purchase price for one share of common stock and one warrant was $1.175, resulting in gross proceeds of approximately $2.13 million, before deducting placement agent and other offering expenses in the amount of approximately $0.345 million. In connection with the November 2024 financing, Indaptus issued to the placement agent and its designees placement agent warrants to purchase an aggregate of 124,212 shares of common stock at an exercise price per share equal to $1.3125. The placement agent warrants are exercisable six months from the date of issuance and expire on the fifth anniversary of the issue date.
On August 8, 2024, Indaptus completed a registered direct offering, pursuant to which it sold and issued to certain investors, including an officer and director of the Company, 1,643,837 shares of common stock. In addition, in a concurrent private placement, Indaptus issued to the investors unregistered warrants to purchase 1,643,837 shares of common stock. The warrants are immediately exercisable at an exercise price of $1.70 per share and expire five years from the date of issuance. The combined purchase price for one share of common stock and one warrant was $1.825, resulting in gross proceeds of approximately $3.0 million, before deducting placement agent and other offering expenses in the amount of approximately $0.5 million.
| II-2 |
On December 22, 2022, Indaptus entered into a purchase agreement, or the Purchase Agreement, and a registration rights agreement, or the Registration Rights Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, pursuant to which Lincoln Park has committed to purchase up to $20.0 million of Indaptus’ common stock. Under the terms and subject to the conditions of the Purchase Agreement, Indaptus has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $20.0 million of Indaptus’ common stock. Such sales of common stock by Indaptus, if any, will be subject to certain limitations, and may occur from time to time, at Indaptus’ sole discretion, over the 36-month period (unless extended to a 48-month period pursuant to the Purchase Agreement) commencing on the date that a registration statement covering the resale of shares of common stock that have been and may be issued under the Purchase Agreement, which Indaptus agreed to file with the SEC pursuant to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed and the other conditions set forth in the Purchase Agreement are satisfied. As consideration for Lincoln Park’s irrevocable commitment to purchase shares of Indaptus’ common stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, Indaptus (i) issued to Lincoln Park 142,450 shares of common stock, as the initial commitment shares, and (ii) will issue additional commitment shares, of common stock equal to $125,000 divided by the arithmetic average of the ten (10) Nasdaq Official Closing Prices for the common stock immediately preceding the date that Indaptus has sold over $10,000,000 purchase shares to Lincoln Park, (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction) provided that the additional commitment shares number shall be no greater than 76,220. No shares of common stock have been sold under the program and in February 2025, we terminated the purchase agreement with Lincoln Park.
The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The exhibits to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated herein by reference.
(b) Financial Statement Schedules.
All schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth in the financial statements and related notes thereto.
| II-3 |
Exhibit Index
| * | Filed herewith | |
| + | Indicates management contract or compensatory plan. |
| II-4 |
Item 17. Undertakings
| (a) | The undersigned Registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; | |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; | |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
provided, however, that: Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act, that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
| (4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
| (i) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§ 230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and | |
| (ii) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§ 230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (§ 230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date. |
| (b) | That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (c) | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
| II-5 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, NY, on the 12th day of February, 2025.
| INDAPTUS THERAPEUTICS, INC. | ||
| By: | /s/ Jeffrey A. Meckler | |
| Name: | Jeffrey A. Meckler | |
| Title: | Chief Executive Officer | |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTED, that each director and officer of Indaptus Therapeutics, Inc., whose signature appears below hereby appoints Jeffrey A. Meckler and Nir Sassi, and each of them severally, his or her true and lawful attorneys-in-fact and agents with full powers of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all supplements amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys- in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
| Name | Title | Date | ||
| /s/ Jeffrey A. Meckler | Chief Executive Officer and Director | February 12, 2025 | ||
| Jeffrey A. Meckler | (principal executive officer) | |||
| /s/ Nir Sassi | Chief Financial Officer | February 12, 2025 | ||
| Nir Sassi | (principal financial officer and principal accounting officer) | |||
| /s/ Michael J. Newman, Ph.D. | Chief Scientific Officer and Director | February 12, 2025 | ||
| Michael J. Newman, Ph.D. | ||||
| /s/ Dr. Roger J. Pomerantz | Chairman | February 12, 2025 | ||
| Dr. Roger J. Pomerantz | ||||
| /s/ William B. Hayes | Director | February 12, 2025 | ||
| William B. Hayes | ||||
| /s/ Hila Karah | Director | February 12, 2025 | ||
| Hila Karah | ||||
| /s/ Anthony J. Maddaluna | Director | February 12, 2025 | ||
| Anthony J. Maddaluna | ||||
| /s/ Dr. Mark J. Gilbert | Director | February 12, 2025 | ||
| Mark J. Gilbert | ||||
| /s/ Robert E. Martell, M.D., Ph.D. | Director | February 12, 2025 | ||
| Robert E. Martell, M.D., Ph.D. |
| II-6 |
Exhibit 5.1
February 12, 2025
Indaptus Therapeutics, Inc.
3 Columbus Circle
15th Floor
New York, New York
| Re: | Registration Statement on Form S-1 |
Ladies and Gentlemen:
We have acted as counsel to Indaptus Therapeutics, Inc. a Delaware corporation (the “Company”), in connection with the preparation of a Registration Statement on Form S-1, including the prospectus constituting a part thereof (as may be amended, the “Registration Statement”), being filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”). This opinion letter is being furnished to you in connection with your filing of the Registration Statement. The Registration Statement relates to the resale of up to 10,000,000 shares of common stock, par value $0.01 per share (the “Common Stock”) of the Company (the “Shares”) of which (i) 305,960 shares (the “Commitment Shares”) are to be issued as commitment shares to YA II PN Ltd. (the “Selling Stockholder”) pursuant to that certain Standby Equity Purchase Agreement between the Company and Selling Stockholder, dated as of February 12, 2025 (the “Purchase Agreement”) and (iii) 9,694,040 shares (the “Advance Shares” and together with the Commitment Shares, the “Shares”) are reserved for future issuance pursuant to that certain Purchase Agreement.
In rendering the opinion set forth herein, we have examined the originals, or photostatic or certified copies, of (i) the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of the Company, (ii) certain resolutions of the Board of Directors of the Company, the authorization and issuance of the Shares and related matters, (iii) the Registration Statement and all exhibits thereto, and (iv) such other records, documents and instruments as we deemed relevant and necessary for purposes of the opinion stated herein.
In making the foregoing examination we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as photostatic or certified copies, and the authenticity of the originals of such copies. As to all questions of fact material to this opinion, where such facts have not been independently established, we have relied, to the extent we have deemed reasonably appropriate, upon representations or certificates of officers of the Company or governmental officials. For purposes of our opinion, we have assumed that at the time of the issuance of the Shares following the date hereof, a sufficient number of shares of authorized Common Stock of the Company will be authorized and available for issuance under the Amended and Restated Certificate of Incorporation as then in effect.
We do not express any opinion herein concerning any law other than the laws of the General Corporation Law of the State of Delaware.
Based upon the foregoing, and subject to the qualifications, assumptions, limitations and exceptions stated herein, we are of the opinion that the Shares when issued against payment therefor in accordance with the terms of the Purchase Agreement, will be validly issued, fully paid and nonassessable.
This opinion speaks only as of the date hereof. We expressly disclaim any responsibility to advise you of any development or circumstance of any kind, including any change of law or fact, that may occur after the date of this opinion that might affect the opinions expressed therein.
We hereby consent to the submission of this opinion to the Commission as an exhibit to the Registration Statement. We hereby also consent to the reference to our firm under the caption “Legal Matters” in the Registration Statement. We do not admit in providing such consent that we are included within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations of the Commission thereunder.
Very truly yours,
| /s/ Greenberg Traurig, LLP | |
| Greenberg Traurig, LLP |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the inclusion in this Registration Statement on Form S-1 of Indaptus Therapeutics, Inc. (the “Company”) of our report dated March 13, 2024, relating to our audits of the Company’s consolidated financial statements as of December 31, 2023 and 2022, and for each of the years then ended, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which report includes an explanatory paragraph expressing substantial doubt regarding the Company’s ability to continue as a going concern.
We also consent to the reference to us under the heading “Experts.”
| /s/ Haskell & White LLP | |
| HASKELL & WHITE LLP |
Irvine, California
February 12, 2025
