Monopar Therapeutics 10-K for FY2019
Monopar Therapeutics (MNPR)
10-K
2020-03-27
For: 2019-12-31
View Original
Added on
April 10, 2026
About this 10-K
Monopar Therapeutics filed this 10-K on March 27, 2020, covering the fiscal year ended December 31, 2019 (FY2019).
Headline figures
Fiscal year ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $0 a year earlier
- Net loss
- $4.22M
- compared with a net loss of $3.23M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark
One)
For the Fiscal Year Ended December 31, 2019
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period
from __________ to ____________
Commission File Number: 001-39070
MONOPAR THERAPEUTICS INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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32-0463781
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S.
employer identification number)
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1000 Skokie Blvd., Suite 350, Wilmette, IL
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60091
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(Address of principal executive offices)
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(zip code)
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(847)
388-0349
(Registrant’s telephone number, including area
code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title
of each class
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Trading
Symbol(s)
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Name
of each exchange on which registered
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Common stock, $0.001 par value
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MNPR
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The
Nasdaq Stock Market LLC
(Nasdaq
Capital Market)
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Securities registered pursuant to section 12(g)
of the Act:
None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of
the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or 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.
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller
reporting company
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☒
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Emerging
growth company
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☒
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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 pursuant to Section 13(a) of the
Exchange Act. ☒
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Act). Yes
☐ No
☒
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal
quarter. As
of June 30, 2019, the last business day of the registrant's most
recently completed second fiscal quarter, there was no established
public trading market for the registrant's equity
securities.
The
number of shares outstanding with respect to each of the classes of
our common stock, as of March 13, 2020, is set forth
below:
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Class
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Number
of shares outstanding
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Common stock, par
value $0.001 per share
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10,621,535
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The
documents incorporated by reference are as follows: portions of the
Registrant’s Proxy Statement for its 2020 annual meeting of
stockholders are incorporated by reference into Part
III
MONOPAR
THERAPEUTICS INC. TABLE OF CONTENTS
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Page
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Part I
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Business
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2
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Risk Factors
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22
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Properties
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42
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Legal Proceedings
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42
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Part II
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Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
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43
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Management's Discussion and Analysis of Financial Condition and
Results of Operations
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44
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Financial Statements and Supplementary Data
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58
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Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
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59
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Control and Procedures
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59
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Part III
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Directors, Executive Officers and Corporate Governance
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60
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Executive Compensation
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60
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Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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60
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Certain Relationships and Related Transactions and Director
Independence
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60
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Principal Accountant Fees and Services
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60
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Part IV
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Exhibits and Financial Statement Schedules
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61
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Signatures
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63
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Item 16.
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Form 10-K Summary
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N/A
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Forward-Looking Statements
This
Annual Report on Form 10-K contains “forward-looking
statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Act”) and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included in
this Annual Report on Form 10-K are forward-looking statements. The
words “hopes,” “believes,”
“anticipates,” “plans,”
“seeks,” “estimates,”
“projects,” “expects,”
“intends,” “may,” “could,”
“should,” “would,” “will,”
“continue,” and similar expressions are intended to
identify forward-looking statements. The following uncertainties
and factors, among others, could affect future performance and
cause actual results to differ materially from those matters
expressed in or implied by forward-looking statements:
●
our ability to
raise sufficient funds in the coming months in order for us to
start our Validive Phase 3 clinical trial and thereafter in order to complete
Validive’s Phase 3 clinical trial, support further
development of camsirubicin beyond Phase 2 and generally to support
our current and any future product candidates through completion of
trials, approval processes and, if applicable,
commercialization;
●
our ability to find
a suitable pharmaceutical partner to further our development
efforts, if we are unable to raise sufficient additional
financing;
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risks and
uncertainties associated with our research and development
activities, including our clinical trials;
●
estimated
timeframes for our clinical trials and regulatory reviews for
approval to market products;
●
plans to research,
develop and commercialize our current and future product
candidates;
●
the rate and degree
of market acceptance and clinical utility of any products for which
we receive marketing approval;
●
the difficulties of
commercialization, marketing and manufacturing capabilities and
strategy;
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uncertainties of
intellectual property position and strategy;
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challenging future
financial performance;
●
the risks inherent
in our estimates regarding expenses, capital requirements and need
for additional financing;
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the impact of
government laws and regulations;
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our ability to
attract and retain key personnel;
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the impact of the
COVID-19 pandemic on our ability to advance our clinical programs
and raise additional financing; and
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uncertainty of
financial and operational projections.
Although we believe
that the expectations reflected in such forward-looking statements
are appropriate, we can give no assurance that such expectations
will be realized. Cautionary statements are disclosed in this
Annual Report on Form 10-K, including without limitation statements
in the section entitled “Risk Factors,” addressing
forward-looking statements. All subsequent written and oral
forward-looking statements attributable to us or persons acting on
our behalf are expressly qualified in their entirety by the
cautionary statements. We undertake no obligation to update any
statements made in this Annual Report on Form 10-K or elsewhere,
including without limitation any forward-looking statements, except
as required by law.
1
PART I
Item 1. Business
You
should read the following discussion in conjunction with our
financial statements as of December 31, 2019 and the notes to such
financial statements included elsewhere in this Annual Report on
Form 10-K.
Overview
We are
a clinical stage biopharmaceutical company focused on developing
proprietary therapeutics designed to extend life or improve quality
of life for cancer patients. We are building a drug development
pipeline through the licensing and acquisition of oncology
therapeutics in late preclinical and clinical development stages.
We leverage our scientific and clinical experience to help reduce
the risk and accelerate the clinical development of our drug
product candidates.
On December 23,
2019, we closed our initial public offering. We sold 1,277,778
shares of our common stock at a public offering price of $8.00 per
share. Net proceeds were approximately $9.4 million, after
deducting underwriting discounts and accrued, unpaid offering
expenses. Our common stock began trading on the Nasdaq Capital
Market on December 19, 2019.
On
January 13, 2020, we entered into a Capital on DemandTM Sales Agreement
with JonesTrading Institutional Services, LLC
(“JonesTrading”), as sales agent, pursuant to which we
may offer and sell (at our discretion), from time to time, through
or to JonesTrading shares of our common stock, having an aggregate
offering price of up to $19.7 million. Pursuant to this agreement,
as of March 13, 2020, we sold 33,903 shares of our common stock at
an average gross price of $15.9994 for net proceeds of $526,143,
after fees and commissions of $16,284.
We are
devoting a significant portion of the net proceeds from our initial
public offering to fund our camsirubicin Phase 2 clinical trial for
which we recently signed a collaboration agreement with Grupo
Español de Investigación en Sarcomas
(“GEIS”), discussed in further detail
below. We believe the net
proceeds from our initial public offering will be sufficient to
enable us to obtain topline results for that camsirubicin Phase 2
clinical trial. We are aiming to enroll the first patient in a
Phase 3 clinical development program for our lead product
candidate, Validive (clonidine mucobuccal tablet; clonidine MBT)
within a few months of raising sufficient funds. To do so, we will
require additional funding in the millions or tens of millions of
dollars (depending on if we have consummated a collaboration or
partnership or neither for Validive), or find a suitable
pharmaceutical partner, both of which we are planning to pursue in
the coming months.
Our Product Candidates
Validive is
designed to be used prophylactically to reduce the incidence, delay
the time to onset, and decrease the duration of severe oral
mucositis (“SOM”) in patients undergoing
chemoradiotherapy (“CRT”) for oropharyngeal cancer
(“OPC”). SOM is a painful and debilitating inflammation
and ulceration of the mucous membranes lining the oral cavity and
oropharynx in response to chemoradiation. The majority of patients
receiving CRT to treat their OPC develop SOM, which remains one of
the most common and devastating side effects of treatment in this
indication. The potential clinical benefits to patients of reducing
or delaying the incidence of SOM, or reducing the duration of SOM,
include: reduced treatment discontinuations leading to potentially
improved overall survival outcomes; reduced mouth and throat pain
avoiding the need to receive parenteral nutrition; and decreased
long-term and often permanent debilitation arising from swallowing
difficulties, neck and throat spasms, and lung complications due to
food aspiration. Our mucobuccal tablet (“MBT”)
formulation is a novel delivery system for clonidine that allows
for prolonged and enhanced local delivery of drug in the regions of
mucosal radiation damage in patients with OPC. Validive has been
granted fast track designation in the U.S., orphan drug designation
in the EU, and has global intellectual property patent protection
through mid-2029 not accounting for possible
extensions.
In
September 2017, we exercised an option to license Validive from
Onxeo S.A., the company that developed Validive through its Phase 2
clinical trial. In the completed Phase 2 clinical trial, Validive
demonstrated clinically meaningful efficacy signals within the
64-patient OPC population randomized to placebo, Validive 50
µg dose and Validive 100 µg dose. The absolute incidence
of SOM in OPC patients who received a dose of Validive 100 µg
once per day was reduced by 26.3% (incidence rate of 65.2% in
placebo, 45.0% in Validive 50 µg group, and 38.9% in Validive
100 µg group). The median time to onset of SOM was 37 days in
the placebo cohort; 45 days in the Validive 50 µg cohort and
no median time of onset was reached in the Validive 100 µg
group since fewer than half of this cohort of patients developed
SOM. There was also a 37.8% reduction in the median duration of the
SOM for the Validive 100 µg group versus placebo (41.0 days
placebo group, 34.0 days Validive 50 µg group, and 25.5 days
Validive 100 µg group) in patients that developed SOM. Median
duration of SOM across all patients, inclusive of both those that
did and did not develop SOM, was 17 days in the placebo group and 0
days in each of the Validive 50 and 100 µg groups. A positive
dose response was seen in each of these three clinical endpoints.
Additionally, patients in the Validive cohorts in the Phase 2
clinical trial demonstrated a safety profile similar to that of
placebo. While not designed by us, Onxeo’s promising
preclinical studies and Phase 2 clinical trial have informed the
design and conduct of what we believe will be an effective Phase 3
clinical program.
SOM
typically arises in the immune tissue at the back of the tongue and
throat, which comprise the oropharynx, and consists of acute severe
tissue damage and pain that prevents patients from swallowing,
eating and drinking. Validive stimulates the alpha-2 adrenergic
receptor (alpha-2AR) on macrophages (white blood cells present in
the immune tissues of the oropharynx) suppressing pro-inflammatory
cytokine expression. Validive exerts its effects locally in the
oral cavity and oropharynx over a prolonged period of time through
its unique MBT formulation. Patients who develop SOM are also at
increased risk of developing late onset toxicities, including
trismus (jaw, neck, and throat spasms), dysphagia, and lung
complications, which are often irreversible and lead to increased
hospitalization and the need for further interventions sometimes
years after completion of chemoradiotherapy. We believe that a
reduction in the incidence and duration of SOM by Validive will
have the potential to reduce treatment discontinuation and/or
treatment delays potentially leading to improved survival outcomes,
and reducing or eliminating these long-term morbidities resulting
from CRT.
The OPC
target population for Validive is the most rapidly growing segment
of head and neck cancer (“HNC”) patients, with an
estimated 40,000 new cases of OPC in the U.S alone in 2019. The
growth in OPC is driven by the increasing prevalence of oral human
papilloma virus (“HPV”) infections in the U.S. and
around the world. Despite the availability of a
pediatric/adolescent HPV vaccine, the rate of OPC incidence in
adults is not anticipated to be materially reduced for many decades
due to low adoption of the vaccine to date. As a result, the
incidence of HPV-driven OPC is projected to increase for many years
to come and will continue to support a clinical need for Validive
for the prevention of CRT-induced SOM in patients with OPC since
CRT is the standard of care treatment, and we do not anticipate
this changing for years to come.
2
A
pre-Phase 3 meeting with the FDA was held and based on the meeting
discussion, a Phase 3 clinical protocol and accompanying
statistical analysis plan (“SAP”) was submitted to the
FDA for review and comments. We have also received protocol
assistance and advice on our Phase 3 protocol and SAP from the
European Medicines Agency Committee on Human Medicinal Products
(EMA/CHMP/SAWP). Based on comments and guidance provided by FDA and
EMA, subject to our ability to raise additional funding or find a
suitable pharmaceutical partner, we are aiming to enroll the first
patient in our Phase 3 randomized trial for our lead product
candidate, Validive, within the few months following consummation
of such partnership or additional financing. The Validive program
will consist of an adaptive design trial with an interim analysis
planned for approximately twelve months after the first patient is
dosed, and a confirmatory second trial planned to commence shortly
after completion of this interim analysis.
Our
second product candidate, camsirubicin, is a novel analog of
doxorubicin which has been designed to reduce the cardiotoxic side
effects generated by doxorubicin while retaining anti-cancer
activity. Camsirubicin is not metabolized to the derivatives that
are believed to be responsible for doxorubicin’s cardiotoxic
effects. A Phase 2 clinical trial for camsirubicin has been
completed in patients with advanced (e.g. unresectable or
metastatic) soft tissue sarcoma (“ASTS”). Average life
expectancy for these patients is 12-15 months. In this study, 52.6%
of patients evaluable for tumor progression demonstrated clinical
benefit (partial response or stable disease), which was
proportional to dose and consistently observed at higher cumulative
doses of camsirubicin (>1000 mg/m2). Camsirubicin was
very well tolerated in this study and underscored the ability to
potentially administer camsirubicin without restriction of
cumulative dose in patients with ASTS. Doxorubicin is limited to a
lifetime cumulative dose maximum of 450 mg/m2. Even if a patient
is responding, they are pulled off of doxorubicin treatment once
this cumulative dose has been reached.
Based
on encouraging clinical results to date, we plan to continue the
development of camsirubicin as 1st-line treatment in
patients with ASTS, where the current first line treatment is
doxorubicin. The aim is to administer camsirubicin without
restricting cumulative dose, thereby potentially improving efficacy
by keeping patients who are responding on treatment. In June 2019,
we entered into a clinical collaboration with GEIS. GEIS will lead
a multi-country, randomized, open-label Phase 2 clinical trial
evaluating camsirubicin head-to-head against doxorubicin in
patients with ASTS. GEIS is an internationally renowned non-profit
organization focused on the research, development and management of
clinical trials for sarcoma, that has worked with many of the
leading biotech and global pharmaceutical companies. Enrollment of
the trial is currently anticipated to begin in the second half of
2020, and to include approximately 170 ASTS patients, an interim
analysis, and take around two years to enroll. The primary endpoint
of the trial will be progression-free survival, with secondary
endpoints including overall survival and incidence of
treatment-emergent adverse events. In November 2019, the European
Commission granted orphan drug designation for camsirubicin for the
treatment of soft tissue sarcoma in the EU.
Our
third program, MNPR-101 (formerly
huATN-658), is a novel first-in-class humanized monoclonal
antibody to the urokinase plasminogen activator receptor
(“uPAR”) for the treatment of advanced cancers. The
IND-enabling work is nearly completed.
Our
management team has extensive experience in developing therapeutics
through regulatory approval and commercialization. In aggregate,
companies they co-founded have achieved four drug approvals in the
U.S. and the EU, successfully sold an asset developed by management
which is currently in Phase 3 clinical trials, and completed the
sale of a biopharmaceutical company for over $800 million in cash.
Understanding the preclinical, clinical, regulatory and commercial
development processes and hurdles are key factors in successful
drug development and the expertise demonstrated by our management
team across all of these areas increases the probability of success
in advancing the product candidates in our product
pipeline.
Our
Product Pipeline
3
Our Strategy
Leveraging
the experience and the demonstrated competencies of our management
team, our strategic goal is to acquire, develop and commercialize
promising oncology product candidates that address the unmet
medical needs of cancer patients. The key elements of our strategy
to achieve this goal are to:
●
Advance the clinical
development of camsirubicin, by pursuing clinical indications where
doxorubicin has demonstrated efficacy. ASTS will be the first indication, which
will allow camsirubicin to go head to head against doxorubicin, the
current 1st-line treatment. In
this indication, camsirubicin previously demonstrated clinical
benefit (stable disease or partial response) in 52.6% of
patients evaluable for tumor progression in a single arm
Phase 2 study. Clinical benefit was proportional to dose and
consistently observed at higher cumulative doses of camsirubicin
(>1000 mg/m2).
Camsirubicin was very well tolerated in this Phase 2 study and
underscored the ability to potentially administer camsirubicin
without restriction for cumulative dose (doxorubicin is limited to
450 mg/m2 cumulative
dose due to heart toxicity).
●
Leverage data generated from
the Phase 2 Validive clinical trial to position us well for a
successful Phase 3 clinical program for Validive for SOM in
OPC. In a Phase 2 clinical
trial the absolute incidence of SOM in OPC patients was reduced by
26.3%, the time to onset was delayed, and the duration in patients
that developed SOM was decreased by 15.5 days in the Validive 100
µg cohort versus placebo. In addition to the data from the
Phase 2 clinical trial, we believe the guidance from our key
opinion leaders (“KOLs”) as well as from the FDA and
EMA, and our own internal clinical trial design expertise, position
us well for a successful Phase 3 clinical trial
program.
●
Obtain FDA approval of Validive
and maximize the commercial potential of Validive in the U.S. and
the EU, seeking partnerships outside these
markets. Following a
potentially successful Phase 3 clinical program of Validive and
potential FDA approval, we intend to commercialize Validive in the
U.S. and the EU which may include establishing our own specialty
sales force and seeking partnerships outside of these territories
for regulatory approval and drug sales and
distribution.
●
Continue the development of
MNPR-101 and expand our drug development pipeline through
in-license and acquisition of oncology product
candidates. We plan to
continue the development of MNPR-101 and the expansion of our drug
development pipeline through acquiring or in-licensing additional
oncology product candidates, particularly those that leverage
existing scientific and clinical data that helps de-risk the next
steps in clinical development.
●
Utilize the expertise and prior
experience of our team in the areas of asset acquisition, drug
development and commercialization to establish ourselves as a
leading biopharmaceutical company. Our senior executive team has relevant
experience in biopharmaceutical in-licensing and acquisitions as
well as developing product candidates through approval and
commercialization. In aggregate, our team has co-founded BioMarin
Pharmaceutical (Nasdaq: BMRN), Raptor Pharmaceuticals ($800 million
sale to Horizon Pharma), and Tactic Pharma, LLC (“Tactic
Pharma”) (sale of lead asset, choline tetrathiomolybdate,
which was ultimately acquired by Alexion in June 2018 for $764
million).
Validive (clonidine mucobuccal tablet; clonidine MBT)
Validive
is an MBT of clonidine. The MBT formulation was developed to
enhance the oral mucosal drug delivery and significantly increase
the salivary concentrations of the active ingredient while
minimizing systemic absorption. The Validive tablet is tasteless
and administered once daily by affixing it to the outside of the
patient’s upper gum where it dissolves slowly over a period
of several hours, resulting in the extended release of clonidine
into the oral cavity and oropharynx, the site of SOM following
chemoradiation treatment for OPC. Validive therapy is designed to
begin on the first day of chemoradiation treatment and continue
daily through the last day of treatment.
SOM
is a painful and debilitating inflammation and ulceration of the
mucous membranes lining the oral cavity and oropharynx in response
to chemoradiation therapy. Patients receiving CRT to treat their
OPC often develop SOM, which remains one of the most common and
devastating side effects of treatment in this indication. We
believe Validive has the potential to address several critical
elements that affect SOM patients, including:
●
Reduction in the incidence of
SOM. SOM increases the risk of
acute and chronic comorbidities, including dysphagia, trismus and
lung complications, which are often irreversible and lead to
increased hospitalization and the need for additional
interventions. In a Phase 2 clinical trial, the OPC patient cohort
treated with Validive 100 µg demonstrated a reduction in the
absolute incidence of SOM compared to placebo of 26.3% (incidence
rate of 65.2% in placebo, 45.0% in Validive 50 µg group, 38.9%
in Validive 100 µg group). A reduced incidence of SOM in OPC
patients may lower the risk of acute and chronic comorbidities and
improve quality of life.
●
Delay in the time to onset of
SOM. SOM can cause cancer
treatment delay and/or discontinuation, which may impact overall
survival and efficacy outcomes. In a Phase 2 clinical trial, the
OPC patients had a time to onset of SOM of 37 days in the placebo
cohort; 45-day time to onset of SOM in the Validive 50 µg
cohort; and a median time to onset was not reached in the Validive
100 µg
group as fewer than half of the patients developed SOM. Delaying
the time to onset of SOM may lead to fewer missed chemoradiotherapy
treatments, resulting in improved overall survival
outcomes.
●
Decrease in the duration of
SOM. Longer duration of SOM
leads to a higher risk of the need for parenteral nutrition and
lower quality of life. SOM patients experience inability to drink
and/or eat and difficulty swallowing often resulting in
malnourishment and feeding tube intervention. The Phase 2 clinical
trial data demonstrated a 15.5-day reduction (by 37.8%) in the
duration of SOM for patients treated with Validive 100 µg (41
day median duration with placebo, 34 days with the Validive 50
µg group, and 25.5 days for the Validive 100 µg group) in
patients that developed SOM. Median duration across all patients,
inclusive of both those that did and did not develop SOM, was 17
days in the placebo group and 0 days in each of the Validive 50 and
100 µg groups. Reduced duration of SOM results in lower risk
of malnourishment and feeding tube intervention, and fewer
treatment terminations/delays.
Validive U.S. Market Opportunity
The
incidence of HNC (all anatomical types, including larynx, oral
cavity, oropharynx, etc.) in the U.S. was estimated to be
approximately 65,000 cases in 2017 (American Society of Clinical
Oncology, cancer.net). The most rapidly growing type of HNC is OPC.
The oropharynx is comprised largely of immune tissue and includes
the soft palate, the base (rear one third) of the tongue, and the
tonsils. In the U.S., the incidence of OPC is estimated to be
around 40,000 cases in 2019. The majority of these OPC patients
(approximately 70%) are human papilloma virus positive
(“HPV+”). The incidence of OPC is also increasing in
the rest of the world (>30% of HNC), with >50% of all OPC
being HPV+. While certain types of HNC have been in decline in the
U.S., such as laryngeal cancer as a result of a reduction in the
smoking population, the total incidence of HNC has been growing
steadily primarily due to OPC. The increase in OPC is directly
associated with increased infection with the human papilloma virus.
The incidence of HPV+ OPC has outpaced the incidence of HPV–
HNC by 4-5-fold over the past decade. This trend of HPV+ OPC
driving an increase in overall HNC is expected to continue for some
time as the relatively recent introduction of a vaccine designed to
prevent the transfer and colonization with HPV is only effective if
administered prior to infection, and until October 2018, it was
only recommended for those under the age of 26 (newer FDA
guidelines include those up to age 45). Even for those under the
age of 26 who are eligible for the vaccine, oral HPV infections are
predicted to increase due to the lack of adequate use of HPV
vaccinations. Approximately 50% of eligible females and 33% of
eligible males are presently being vaccinated.
Most
OPC is caused by the HPV16 strain, with virus detectable in the
tumor. More than 3% of adult men and 1% of adult woman have HPV16
detectable in their saliva at any one time. The virus is
transmitted through sexual contact and studies estimate 3-5% of
adolescents and 5-10% of all adults in the U.S. have an active oral
HPV infection. The latency period for that proportion that does go
on to develop HPV+ OPC is 15-20+ years. This HPV+ OPC population is
expected to be a long-term driver of the incidence of OPC and the
resultant SOM associated with what is frequently curative therapy
for this serious malignancy.
In previous studies describing SOM in OPC patients
receiving the CRT regimen we are proposing for our Validive Phase 3
clinical program, patients had a SOM incidence rate of 55%-90%
across studies. In the Validive Phase 2 trial, the incidence of SOM
in OPC patients receiving placebo was 65.2% (see
“Validive Phase 2 Clinical
Trial Data” section
below). Currently there is no way to predict which patients will
develop SOM, so any preventive treatment for SOM will likely be
used in most OPC patients receiving CRT. With approximately 40,000
annual cases of OPC in the U.S., and a consistently growing
incidence of OPC as a result of the human papillomavirus, there is
the potential for a substantial and growing market for
Validive.
4
Validive Mechanism of Action
Validive
is designed to deliver high local concentrations of clonidine, an
agonist of alpha-2AR, to the oral cavity and oropharynx, the site
of irradiation in the treatment of OPC. In the oropharynx,
alpha-2AR is expressed on macrophages, immune cells that produce
inflammatory cytokines, the molecules that are responsible for the
development of SOM, in response to chemoradiation. A recent
clinical study demonstrated that chemoradiation treatment
substantially increased salivary cytokine levels and that these
were positively associated with the formation of SOM in patients
with head and neck cancer. Patients with HPV+ OPC demonstrate an
increased accumulation of macrophages in the tumor microenvironment
compared to patients with OPC that were negative for human
papilloma virus (“HPV–”), thus further priming
HPV+ OPC patients for the development of SOM. The alpha-2AR
regulates the expression of cytokines by macrophages, and clonidine
reduces this cytokine production. Macrophages are the primary
immune cells in the oropharynx that express alpha-2AR, making
clonidine’s mechanism of cytokine suppression macrophage
selective and distinct from the mechanism of other
anti-inflammatory drugs. Further, Validive delivers clonidine to
the mucosal surface, the site of chemoradiation treatment in OPC.
This results in high salivary concentrations of clonidine,
minimizing systemic absorption, and allowing for maximal exposure
of drug to the at-risk oral mucosa and the OPC microenvironment.
Preclinical studies and a Phase 2 clinical trial of Validive have
provided data that support Validive’s mechanism of action and
therapeutic potential for reducing the development of SOM in
patients with OPC, improving oral mucositis-related symptoms, and
decreasing chemoradiotherapy-related adverse events, while
exhibiting a favorable safety profile and high compliance rate in
patients.
Validive Development Strategy
A
pre-Phase 3 meeting with the FDA was held and based on the meeting
discussion, a Phase 3 clinical protocol and accompanying
statistical analysis plan (“SAP”) were submitted to the
FDA for review and comments. We have also received protocol
assistance and advice on our Phase 3 protocol and SAP from the
European Medicines Agency Committee on Human Medicinal Products
(EMA/CHMP/SAWP) in June 2018. Based on comments and guidance
provided by the FDA and EMA, subject to our ability to raise
additional funding or find a suitable pharmaceutical partner, we
are aiming to enroll the first patient in our Phase 3 randomized
trial for our lead product candidate, Validive, within the few
months following consummation of such partnership or additional
financing. The Validive program will consist of an adaptive
design trial with an interim analysis planned after a predetermined
number of patients are enrolled (estimated to occur approximately
twelve months after the first patient is dosed), and a confirmatory
second trial planned to commence shortly after completion of this
interim analysis. The
program is powered based on the Phase 2 data in OPC patients. Each trial will be randomized, double-blinded,
placebo-controlled, with a two-sided alpha of 0.05
(p<0.05(1)).
The dose for both trials will be Validive 100 µg, once daily.
The primary endpoint will be the proportion of subjects that
develop SOM (World Health Organization grade ≥
3). Secondary endpoints are currently planned to include
the total number of days of SOM per patient (i.e. duration) and
risk of onset of SOM (which is based on time to onset). Enrollment
for the first trial is anticipated to be around 250 patients and to
take approximately a year-and-a-half to two years. Patients will be
stratified based on HPV status. At the interim, the drug monitoring
committee for the trial will recommend continued accrual in all OPC
patients, enrichment for HPV+ OPC patients only, or to stop the
trial if a pre-defined futility threshold is not met. The second
trial is currently planned to be smaller (approximately 200
patients) and to include either all OPC patients or only HPV+ OPC
patients, depending on the interim results of the first trial.
Given the fact that Validive has Fast Track designation from the
FDA, if the data in the first trial is sufficiently positive, it
could be possible to start a rolling NDA submission after
completion of the first trial. Additionally, since several
formulations of clonidine are already approved in the US, Validive
may be eligible for FDA’s 505(b)2 pathway using clonidine as
the reference drug.
(1)
p-value is a conventional
statistical method for measuring the statistical significance of
experimental results. A p-value of less than 0.05 is generally
considered to represent statistical significance, meaning that
there is a less than five percent likelihood that the observed
results occurred by chance.
Validive Phase 2 Clinical Trial Data
In
October 2015, the results from an international Phase 2 clinical
trial of Validive were announced, demonstrating promising signs of
clinical activity and safety compared to placebo. The trial
enrolled 183 patients and was conducted in more than thirty centers
in Europe and the United States. HNC patients who had undergone
surgical resection of their head and neck cancer with curative
intent and who were planned to receive at least 50 Gray (Gy) of
radiation in combination with chemotherapy, regardless of
anatomical location of disease, were included in this study. This
global, multi-center, double-blind, randomized, placebo-controlled,
three-arm study (NCT01385748) compared the efficacy and safety of
Validive 50 µg and 100 µg to placebo in patients with HNC
receiving chemoradiotherapy. Of the 183 HNC patients, 64 had OPC
(placebo = 24, Validive 50 µg = 21, Validive 100 µg =
19). Validive and placebo were administered once daily beginning 1
to 3 days prior to chemoradiotherapy and continuing until the end
of chemoradiation.
We
believe the Phase 2 clinical trial data support the development of
Validive for reducing the incidence, delaying the time to onset,
and reducing the duration of SOM in OPC patients. We believe there
is the potential for an enhanced benefit in HPV+ patients. These
patients have an increased prevalence of macrophages in the
oropharynx, and a 6.9-fold higher risk of developing SOM. The onset
of SOM also occurs sooner in HPV+ patients than in HPV– OPC
patients, likely due to the increased accumulation of immune cells
such as macrophages in the tumor due to the presence of the HPV
infection. These cells express oral mucosa damaging cytokines in
response to chemoradiation, and Validive exerts its effect by
suppressing this expression.
5
The analysis of
OPC patients in this study showed:
●
The
incidence of SOM (primary endpoint) was reduced by 26.3% (40%
relative to placebo) in OPC patients treated with Validive 100
µg (p=0.09, a meaningful trend but not statistically
significant). 65.2% of OPC patients on placebo experienced SOM
compared to only 38.9% of OPC patients on Validive 100
µg.
Incidence
of SOM in OPC Patients
Validive has
demonstrated reduced incidence of SOM trend in a Phase 2 clinical
trial (p=0.09)
●
Patients
on Validive experienced a delay in the time to onset of SOM.
Patients receiving placebo experienced a median time to onset of
SOM of 37 days; patients receiving Validive (50 µg one per
day) experienced a 45 day median time to onset of SOM; and patients
receiving Validive (100 µg once per day) did not reach a
median time to onset. A comparison of hazards for time to onset
demonstrated that patients that received Validive 100 µg had a
hazard ratio (HR)=0.48 compared to placebo.
●
Patients
receiving Validive experienced a decrease in the median duration of
SOM. In patients that developed SOM, a 15.5 day reduction (by
37.8%) in the median duration of SOM was observed in patients
treated with Validive 100 µg (41 day median duration with
placebo, 34 days in the Validive 50 µg group, and 25.5 days in
the Validive 100 µg group). Median duration across all
patients, inclusive of both those that did and did not develop SOM,
was 17 days in the placebo group and 0 days in each of the Validive
50 and 100 µg groups.
Median
Duration of SOM in OPC Patients
Validive decreased duration of SOM in a Phase 2 clinical
trial
●
Severe
drinking, eating, and speaking limitations due to mouth and throat
soreness (“MTS”) score were also reduced in the
Validive 100 µg treated cohort.
●
Improvements
in other indicators of clinical benefit, including decreased weight
loss, decreased opiate use and increased cumulative dose of
radiation received, strongly favored the Validive 100 µg
treated group.
●
A
dose response was observed with the Validive 100 µg dose,
demonstrating a trend toward superiority over the Validive 50
µg dose as well as placebo. Individual patient-level data
supports advancing the Validive 100 µg dose into Phase
3.
6
Individual Patient Data Showing Incidence, Time to Onset, and
Duration of SOM in OPC patients
Treated with Placebo and Two Different Doses of Validive (50 and
100 µg/day)
7
For
the full 183-patient Phase 2 population, which included various
types of head and neck cancer such as oral and laryngeal cancer in
addition to OPC, the incidence of SOM was lower in patients treated
with Validive (45.3% when the 50 and 100 µg dose groups were
pooled together) than in patients receiving placebo (60.0%) (p =
0.064). Additionally, Validive was very well tolerated, with the
occurrence of adverse events of any type or grade being similar
between placebo and Validive treated groups. Patients treated with
Validive experienced less nausea and dysphagia compared to placebo.
No clinically meaningful decreases in systolic blood pressure or
diastolic blood pressure were noted between the placebo and
Validive arms. There was no statistical difference in the number of
patients having experienced at least one treatment emergent adverse
event related to the study treatment between placebo and Validive
as summarized in the table below. Two patients in the placebo group
and 2 patients in the Validive 50 µg group experienced a
serious treatment-emergent adverse event (“STEAE”). No
STEAEs were observed in the Validive 100 µg cohort. No
patients in the Validive-treated cohorts were discontinued due to
study drug. The 2-year survival rate was not statistically
different between patients treated with placebo and Validive
indicating that Validive did not interfere with primary disease
treatment.
All Serious Treatment-emergent Adverse Events Related to Study
Drug
|
System
Organ
Class
Preferred
Term
|
Placebo
|
Clonidine MBT
(50 µg)
|
Clonidine MBT
(100 µg)
|
|
|
n=62
|
n=55
|
n=64
|
||
|
All
|
All
|
2
(3.2%)
|
2
(3.6%)
|
0
|
|
Vascular
Disorders
|
Hypotension
|
0
|
2
(3.6%)
|
0
|
|
Gastrointestinal
disorders
|
Dysphagia
|
1
(1.6%)
|
0
|
0
|
|
Metabolism
and nutritional disorders
|
Dehydration
|
1
(1.6%)
|
0
|
0
|
MBT=mucoadhesive buccal tablet; n=number of patients
studied
The
mean overall patient compliance as assessed by the investigators
was approximately 90%, and similar across all treatment groups.
Overall compliance according to patient diaries was also similar in
all treatment groups and consistent with the compliance according
to the investigator’s evaluation. The mean incidence of
swallowing the MBT was low (4.7%) for all patients based on 7,366
daily MBT applications across all treatment groups.
Our
review of the Phase 2 clinical trial data suggests that the effect
of Validive was much greater in OPC compared to non-OPC patients.
We believe the Phase 2 data along with the mechanism of action of
Validive provide a rationale for developing Validive for the
treatment of chemoradiation induced SOM in OPC patients as a first
indication. The most rapidly growing sub-population of HNC in the
U.S. and Europe are patients with OPC, largely driven by HPV+
disease. The oropharynx is the part of the throat at the back of
the mouth, which includes the soft palate, the base (rear one
third) of the tongue, and the tonsils. HPV+ OPC is a molecularly
defined population of HNC characterized by the expression of a
protein biomarker, p16 INK4a, and the presence of HPV DNA in the
tumor. Evaluation of HPV status is part of the routine clinical
assessment of patients with OPC prior to initiating
treatment.
Validive Phase 1 Clinical Trial Data
A
Phase 1 clinical trial in 36 healthy volunteers comparing the
pharmacokinetics of the systemic (oral tablet) clonidine HCl with
clonidine MBT (local delivery of clonidine to oral mucosa and
oropharynx – Validive’s formulation) was completed.
This was a single-center, Phase 1, single-blind randomized,
three-period, three-sequence, single-dose crossover study was
conducted between August and November 2015. Healthy volunteers
receiving Validive had far less systemic exposure to clonidine with
the 50 µg and 100 µg clonidine MBTs (Validive) versus 100
µg clonidine HCl tablets (swallowed oral tablet). In contrast,
levels of clonidine in saliva in volunteers receiving a single dose
of 50 and 100 µg clonidine MBT (Validive) was much greater
than saliva levels in volunteers receiving a single dose of 100
µg clonidine HCl tablets. Additionally, no significant effects
on blood pressure were observed with the clonidine MBTs (Validive).
Blood pressure effects were tested because clonidine is known to
lower blood pressure when absorbed systemically. These results are
consistent with the expectation that the MBT formulation (Validive)
is targeted to release clonidine in the oral cavity and oropharynx,
as opposed to distributed systemically.
8
Both
Validive 50 µg and 100 µg showed high salivary exposure
(as seen above), with low systematic and blood pressure effect (as
seen below):
Validive Preclinical Data
The
anti-inflammatory properties of clonidine were studied in a human
oral mucosa organotypic culture model, as pro-inflammatory
cytokines are believed to drive the development of SOM. Samples of
healthy non-keratinized human oral mucosa were obtained from
patients undergoing surgery. The experimental oral mucosa
pro-inflammatory process was mediated by the addition of
neuropeptide substance P (“SP”) to the culture medium.
The addition of SP on human gingiva induced a significant increase
in TNF-alpha, an important pro-inflammatory molecule involved in
mucositis pathogenesis. Overall, on human gingiva stimulated by SP,
a concentration dependent decrease in TNF-alpha production was
observed with clonidine, which was statistically significant at 3
µg/ml clonidine; see below:
Clonidine
Inhibits the Production of Pro-Inflammatory Cytokine Release from
Oral Tissue
**
= different from SP treatment alone, p<0.01
9
Camsirubicin (5-imino-13-deoxydoxorubicin; formerly MNPR-201,
GPX-150)
Camsirubicin is a proprietary doxorubicin
analog that is selective for topoisomerase II-alpha. Doxorubicin is
used to treat adult and pediatric solid and blood (hematologic)
cancers, including soft tissue sarcomas, breast, gastric, ovarian
and bladder cancers, leukemias and lymphomas. The clinical efficacy
of doxorubicin has historically been limited by the risk of
patients developing irreversible, potentially life-threatening
cardiotoxicity despite clinical studies demonstrating the
anti-cancer benefit of higher doses of doxorubicin administered for
longer periods of time. For example, several clinical studies
completed in the 1990s demonstrated that concurrent doxorubicin (60
mg/m2,
8 cycles) and paclitaxel gave a 94% overall response rate in
patients with metastatic breast cancer but led to 18% of these
patients developing congestive heart failure. Reduction of
doxorubicin to 4-6 cycles of treatment decreased the incidence of
congestive heart failure, but also reduced response rates to
45-55%.
Camsirubicin
has been engineered specifically to retain the anticancer activity
of doxorubicin while minimizing the toxic effects on the heart.
Similar to doxorubicin, the antitumor effects of camsirubicin are
mediated through the stabilization of the topoisomerase II complex
after a DNA strand break and DNA intercalation leading to tumor
cell apoptosis (cell death). Inhibiting the topoisomerase II-alpha
isoform is desired for the anti-cancer effect, while inhibiting the
topoisomerase II-beta isoform has been demonstrated to mediate, at
least in part, the cardiotoxicity associated with all anthracycline
drugs currently used in the clinic. Camsirubicin is substantially
more selective than doxorubicin for inhibiting topoisomerase
II-alpha versus topoisomerase II-beta. This selectivity may at
least partly explain the minimal cardiotoxicity that has been
observed for camsirubicin in preclinical and clinical studies to
date. We believe that these attributes provide a strong rationale
to develop camsirubicin as a monotherapy as well as in combination
with other anticancer agents, without potential restrictions on
cumulative dose, and offer the opportunity to pursue a large market
opportunity for camsirubicin in a broad spectrum of cancer
types.
Development of camsirubicin is being pursued
initially in patients with advanced soft tissue sarcoma (ASTS).
Currently, these patients receive doxorubicin in the 1st-line, so
camsirubicin will be evaluated in a randomized Phase 2 trial
head-to-head against doxorubicin. Although doxorubicin has been the
standard of care treatment for ASTS for over 40 years, even if
patients are experiencing clinical benefit, they are pulled off
treatment once their cumulative dose reaches the lifetime maximum
of 450 mg/m2.
In a clinical study looking at dose response, sarcoma patients on
the high dose (75 mg/m2)
doxorubicin had a response rate of 37% compared to just 18% in the
low dose (45 mg/m2)
doxorubicin group. With the cumulative dose restriction on
doxorubicin, the median progression free survival for ASTS patients
is approximately 6 months, with median overall survival of 12-15
months. There is a significant unmet opportunity to develop a
replacement for doxorubicin that can be dosed higher and for
longer.
Camsirubicin U.S. Market Opportunity
Camsirubicin is an analog of doxorubicin, the
first anthracycline to gain FDA approval. Anthracyclines are a
class of drugs that are among the most commonly used agents in the
treatment of cancer. They have demonstrated efficacy in a wide
variety of cancers, including soft tissue sarcoma, breast cancer,
lung cancer, ovarian cancer, and lymphomas. Although doxorubicin
was approved decades ago, it is still widely used. According to
Grand View Research, in 2015 the global doxorubicin market was
$809.6 million, with $349.7 million of those sales in the U.S.
According to IMS Health (now known as IQVIA), in 2015 the European
Union had over $270 million in sales between doxorubicin HCl and
liposomal doxorubicin. Liposomal versions of doxorubicin (e.g.
Doxil®)
demonstrated that a different formulation of doxorubicin with
improved clinical benefits can command a significantly higher price
premium compared to generic doxorubicin HCl.
The
market opportunity for the first indication, ASTS, is anticipated
to be quite significant. In 2018, there were an estimated 13,040
new cases of soft tissue sarcoma (STS) in the US, and approximately
5,150 deaths from STS, mainly from metastatic disease.
Additionally, a few years ago a PDGFR-targeted antibody
(olaratumab) was granted accelerated approval based on data from an
open label Phase 2 trial. Earlier this year, the olaratumab Phase 3
trial came back negative, resulting in the drug being pulled from
the market. Olaratumab had just completed its second full year on
the market in the US and abroad before being pulled, reaching over
$304M in 2018 annual sales, demonstrating the large unmet medical
need and market opportunity in ASTS.
Camsirubicin Development Strategy
The objective is to achieve superior
efficacy to doxorubicin by using a novel doxorubicin analog,
camsirubicin, with little to no restriction on cumulative dose, to
allow dosing to go higher and longer. We plan to initiate a
randomized, open label Phase 2 trial that will
compare camsirubicin to doxorubicin in patients with
advanced soft tissue sarcoma (ASTS). These are patients who are not
amenable to surgery or radiation treatment, and are largely made up
of patients with metastatic disease. Doxorubicin is the current
standard of care in the 1st-line
setting for these patients. Doxorubicin-treated ASTS patients have
a median overall survival of just 12-15 months, likely due to the
cumulative dose restriction of doxorubicin to 450
mg/m2.
In our planned Phase 2 study, patients randomized to the
doxorubicin cohort are expected to receive the standard of care
dosing of doxorubicin limited to 6 cycles (cumulative dose of
≤450 mg/m2).
Patients in the camsirubicin cohort are planned to also
receive 6 cycles of drug, but would be allowed to continue
on camsirubicin as long as they don’t progress and
the drug is well-tolerated. All patients on camsirubicin will be
given G-CSF prophylactically to allow for higher dosing of
camsirubicin before running into the dose-limiting neutropenia
observed with all anthracyclines. The adverse event profile
of camsirubicin in the previously completed Phase 2 ASTS
trial suggests that, in the presence of G-CSF, the dose
of camsirubicin can be safely escalated beyond 265 mg/
m2 administered
once every three weeks. The planned Phase 2 trial will have a short
run-in phase to dose-escalate camsirubicin when given with G-CSF to
further optimize the dose.
In
support of this strategy, we signed a clinical collaboration
agreement with Grupo Español de Investigación en Sarcomas
(“GEIS”) in June 2019. GEIS is a renowned non-profit
organization in Spain engaged in the research, development and
management of studies and clinical trials for sarcoma, that has
worked with many of the leading biotech and global pharma
companies. Pursuant to our clinical collaboration agreement, GEIS
will be the study sponsor and will lead a multi-country,
randomized, open-label Phase 2 clinical trial to evaluate
camsirubicin head-to-head against doxorubicin in patients with
ASTS. Enrollment of the trial is currently anticipated to begin in
the second half of 2020, and to include approximately 170 ASTS
patients, an interim analysis, and take around 2 years to enroll.
The endpoint for this Phase 2 study will be PFS, with overall
response rate (ORR) and median overall survival (mOS) as secondary
endpoints. This trial is anticipated to include approximately 170
patients randomized to achieve a p<0.05 with 80% power.
Camsirubicin has orphan drug designation in the U.S. and in
the EU, and with the precedent of drugs getting accelerated
approval in ASTS, positive results in this study could conceivably
support a rapid path to approval. We will provide study drug to
GEIS and supplemental financial support for the clinical trial. We
are currently experiencing manufacturing delays in the production
of camsirubicin due to the current geopolitical situation in the
region where the manufacturing plant is located. We are working to
resolve the situation either by having the contract manufacturer
produce camsirubicin at their plant in another country, or by us
contracting with another contract manufacturer located
elsewhere.
10
Camsirubicin Clinical Data
Several
clinical studies of camsirubicin have been
completed.
In October 2013, a Phase 1 dose escalation study
conducted at the University of Iowa completed enrolment of 24
patients who received one of eight different dose levels
of camsirubicin ranging from 14 to 265
mg/m2.
No evidence of irreversible cardiotoxicity was observed in any of
these patients, including 4 patients who received prior
anthracycline (doxorubicin or related molecules)
treatment. Stable disease was observed in 55.0% of patients in
this Phase 1 study, including 3 out of 4 patients with
leiomyosarcoma, which is a type of soft tissue sarcoma that
originates in connective tissue and smooth muscle most commonly in
the uterus, stomach and small intestine. No growth factor support
(G-CSF) was given to patients, and the limiting toxicity was
neutropenia.
In January 2015, a multi-center open label
single arm Phase 2 clinical trial was initiated in
doxorubicin-naïve patients with ASTS. This Phase 2 clinical
trial enrolled 22 patients and was completed in August
2016. Camsirubicin was administered intravenously at 265
mg/m2 every
3 weeks for up to 16 doses, with all patients being given growth
factor support, and there was clear indication of anticancer
activity at this well-tolerated dose and schedule. 52.6% of
patients evaluable for tumor progression demonstrated
clinical benefit (stable disease or partial response), which was
proportional to dose and consistently observed at higher cumulative
doses of camsirubicin (>1000 mg/m2).
The progression-free survival at 6 months was 38%, higher than the
6-month PFS of doxorubicin in three recent studies, which showed
23%, 25%, and 33% 6-month PFS for doxorubicin. Camsirubicin was
very well tolerated in this study and underscored the potential
ability to administer camsirubicin without restriction for
cumulative dose in patients with ASTS. Under compassionate use
access, one patient received 20 cycles
of camsirubicin (cumulative dose 5,300
mg/m2).
Apart from one patient who developed febrile neutropenia and severe
leukopenia, there were no grade 4 toxicities reported and no grade
3 side effects other than anemia. A transient decrease in left
ventricular ejection fraction (“LVEF”) was observed in
four patients treated with camsirubicin. These decreases in
LVEF in camsirubicin treated patients were not serious
adverse events and were transient, with LVEF subsequently returning
to normal levels in all four subjects. Despite some subjects in
this study receiving camsirubicin for up to 20 cycles,
effects on cardiac function were of no clinical significance and
there was no evidence of irreversible heart failure in any
subject.
Camsirubicin Preclinical Data
In preclinical
studies, camsirubicin showed a lack of acute as well as
chronic functional cardiotoxicity and did not cause the cardiac
histopathologic lesions observed with doxorubicin in a chronic
rabbit model. Below is in vitro data showing the lack of altered
contractility with acute exposure of rabbit atria
to camsirubicin, even at high
concentrations:
Camsirubicin Cardiac Contractility
Camsirubicin demonstrated limited effect on cardiac
contractility, in-line with control
11
Chronic
administration of camsirubicin two times per week through
IV administration into rabbits over 13 weeks also showed a lack of
cardiotoxicity of camsirubicin when compared to
doxorubicin (“DOX”). Echocardiography was performed
weekly to obtain left ventricular fractional shortening
(“LVFS”) measurements to assess cardiac function. At
sacrifice, all six doxorubicin-treated rabbits showed cardiac
dysfunction by echocardiography, and LVFS was significantly
different from control values (p<0.001). In contrast, none of
the camsirubicin-treated rabbits exhibited cardiac dysfunction
by echocardiography at any time during the study. Below is a graph
of the results:
Weekly Cardiac Echoes
None of the camsirubicin treated rabbits showed
significant cardiac dysfunction compared to the vehicle
control.
At the conclusion of the 13 weeks of drug dosing,
the rabbits were sacrificed, and the left atria were studied to
assess cardiac function ex vivo. Atria from the doxorubicin-treated rabbits had
impaired cardiac contractility (dF/dt) compared to controls over
the entire force-frequency range (1, 2 and 3 Hz). Cardiac
contractility for the camsirubicin treated cohort was not
significantly different than the vehicle control. Below is a graph
of the results:
Camsirubicin Cardiac Contractility
Cardiac
contractility (dF/dt) of isolated atria at the three contraction
rates (1, 2, and 3 contractions/sec) obtained from rabbits
chronically infused with either
doxorubicin, camsirubicin or saline vehicle (control).
Values are mean, error bars are standard error of the mean
(SEM). Camsirubicin demonstrated limited effect on
cardiac contractility, in-line with placebo.
Finally, cardiac
scoring by a histopathologist of the left ventricle walls obtained
from the rabbits in this study showed increased microscopic injury
in hearts from doxorubicin-treated rabbits compared to hearts from
rabbits administered the vehicle control. Heart tissues
from camsirubicin-treated rabbits were the same as the vehicle
controls.
12
MNPR-101 (formerly huATN-658)
MNPR-101
is a humanized monoclonal antibody designed to bind a specific cell
surface receptor found on cancer cells, the urokinase plasminogen
activator receptor (“uPAR”), and to interrupt several
pathways required for tumor growth and progression. MNPR-101
represents a novel approach for drug targeting of uPAR as it does
not interfere with normal binding of uPA to uPAR. It blocks the
CD11b (alpha-M)-uPAR interaction, a possible regulator of tumor
immunity expressed by myeloid derived suppressor cells. MNPR-101 is
believed to have potential activity against many different cancer
types because it:
●
is
selectively expressed on metastatic tumor, tumor-associated immune,
and angiogenic endothelial cells, but not on most normal cells.
Several Phase 1 positron emission tomography (PET) imaging studies
in human advanced cancer patients show that uPAR can only be
detected in the tumor and not in normal tissues;
●
is
central to several extracellular and intracellular oncogenic
pathways required for metastasis (inhibiting the uPA system in turn
inhibits many other downstream targets, such as MAPK, AKT, MEK, and
FAK, that are currently being targeted by other
companies);
●
is
expressed on immune cells that allow the tumor to evade recognition
by the immune system;
●
mediates
antibody-dependent cellular cytotoxicity (ADCC);
and
●
has
the potential to interfere at several different signaling pathways
that converge at uPAR.
MNPR-101 Preclinical Studies
MNPR-101
has demonstrated significant anti-tumor activity as a monotherapy
in numerous preclinical models of tumor growth as well as an
enhanced effect of multiple approved chemotherapeutics when used in
combination in vivo.
MNPR-101 Development Strategy
Based
upon the non-overlapping toxicity and distinct mechanism of action,
we plan to develop MNPR-101 in combination with existing cancer
therapies. The selective expression of uPAR in tumors underpins our
expectation that MNPR-101 will be well-tolerated and amenable to a
variety of treatment approaches, including combinations with
existing treatments, radiopharmaceutical, and antibody-drug
conjugate approaches. Published preclinical data have shown the
ability of MNPR-101 to enhance the anti-tumor activity of
chemotherapies such as paclitaxel and gemcitabine. The expression
and targeting of uPAR, in general, also suggests that MNPR-101 may
combine with other targeted agents that mediate signaling leading
to tumor growth including the ability of tumors to evade immune
response. In particular, uPAR is selectively expressed on cells of
the myeloid lineage, such as myeloid derived suppressor cells,
neutrophils and macrophages, all of which drive tumor progression
and may mediate resistance to immune checkpoint inhibitors. Our
current thinking is to run a Phase 1a/1b trial in indications where
uPAR expression is highly prevalent, and explore novel combinations
in the Phase 1b portion. These indications could include
pancreatic, glioblastoma, metastatic breast, metastatic melanoma,
and ovarian cancers.
Aside
from manufacturing, we expect to continue IND-enabling studies in
order to file an IND with the FDA.
Partnerships, Licensing, and Acquisition
Since
our inception, we have entered into three material business
development agreements, one with Onxeo S.A., one with XOMA (US)
LLC, and one with Cancer Research UK, which has since been
terminated. None of the agreements have required any issuance of
equity or any annual maintenance fee. See the summary of the two
ongoing material agreements below.
13
Onxeo, S.A.
In
June 2016, we executed an agreement with Onxeo S.A., a French
public company, which gave us the option to license Validive
(clonidine mucobuccal tablet), a mucoadhesive tablet of clonidine
based on the Lauriad® mucoadhesive technology to potentially
prevent and treat severe oral mucositis in patients undergoing
treatment for head and neck cancers. The pre-negotiated license
terms included as part of the option agreement included clinical,
regulatory, developmental and sales milestones that could reach up
to a total of $108 million if we achieve all milestones, and in
addition escalating royalties of 5% to 10% on net sales. On
September 8, 2017, pursuant to the Onxeo license option agreement,
we exercised the option to license Validive for $1 million. The
exercise of the option assigns all of Onxeo’s rights to the
Validive intellectual property to us, which allows us to commence
the planning of our Phase 3 clinical development program in severe
oral mucositis. Under the agreement, we are required to pay
royalties to Onxeo on a product-by-product and country-by-country
basis until the later of (1) the date when a given product is no
longer within the scope of a patent claim in the country of sale or
manufacture, (2) the expiry of any extended exclusivity period in
the relevant country (such as orphan drug exclusivity, pediatric
exclusivity, new chemical entity exclusivity, or other exclusivity
granted beyond the expiry of the relevant patent), or (3) a
specific time period after the first commercial sale of the product
in such country. In most countries, including the U.S., the patent
term is generally 20 years from the earliest claimed filing date of
a non-provisional patent application in the applicable country, not
taking into consideration any potential patent term adjustment that
may be filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever our royalty payment obligations with respect
to such product have expired. The agreement may also be terminated
early for cause if either we or Onxeo materially breach the
agreement, or if either we or Onxeo become insolvent. We may also
choose to terminate the agreement, either in its entirety or as to
a certain product and a certain country, by providing Onxeo with
advance notice.
XOMA
To
humanize our MNPR-101 antibody, we have taken a non-exclusive
license to XOMA (US) LLC’s humanization technology and
know-how. Humanization involves replacing most of the non-critical
parts of the mouse sequence of an antibody with the human sequence
to minimize the ability of the human immune system to recognize
this antibody as foreign. As such, MNPR-101 has been engineered to
be 95% human sequence using the XOMA technology. Under the terms of
the license, we are to pay only upon developmental and sales
milestone achievements which could reach up to $14.925 million if
we achieve all milestones. The agreement does not require the
payment of sales royalties. There can be no assurance that we will
reach any milestones. The first milestone payment is payable upon
first dosing of a human patient in a Phase 2 clinical
trial.
Intellectual Property Portfolio and Exclusivity
An
important part of our strategy is obtaining patent protection to
help preserve the proprietary nature of our product candidates, and
to prevent others from developing competitive agents that are
similar. Our patent portfolio includes issued patents and pending
patent applications in the U.S. and in foreign countries. Our
general practice is to seek patent protection in major markets
worldwide.
Validive
We
license all intellectual property related to Validive from Onxeo
S.A., a French public company. See “Business –
Partnerships, Licensing and Acquisition”. Validive is covered
by 31 issued patents in 30 jurisdictions, including the U.S., EU,
Japan, and other Asian countries, and has orphan drug designation
in the EU as well as Fast Track designation from the FDA. These
patents are method of use patents that cover the use of Validive to
prevent and/or treat inflammation and inflammatory pain of the
mucosa including cancer therapy-induced mucositis, and have been
assigned to us pursuant to our license agreement with Onxeo. These
patents expire in 2029 not accounting for possible
extensions.
Camsirubicin
Camsirubicin (GPX-150)
is covered by manufacturing process patents. We have a patent for
chemical synthesis technology that efficiently converts cardiotoxic
“13-keto” anthracyclines such as doxorubicin,
daunorubicin, epirubicin, and idarubicin into novel, patentable,
and most likely less-cardiotoxic “5-imino-13-deoxy”
analogs. A novel chemical composition of an intermediate for this
synthesis is also patented. In addition, we have a patent covering
the combination of camsirubicin with paclitaxel for the
treatment of cancer, plus covering the method of use of these two
drugs for this purpose. Our camsirubicin patent portfolio
contains seven issued U.S. patents (two of which have expired) and
one U.S. pending patent application. We have certain corresponding
patents and applications in twenty-nine foreign jurisdictions,
including the U.S., EU, Japan, and other Asian countries. The
process patents for the synthesis
of camsirubicin intermediates will expire in 2024 and the
patents covering the combination use of camsirubicin and
its analogs with taxanes will expire in 2026. We may pursue patent
term extensions where appropriate. We have obtained patent
protection around the intermediates and process used to
manufacture camsirubicin and we expect to obtain
Hatch-Waxman exclusivity (applicable to new chemical entities) for
5 years that will prevent generic competition. We have also
obtained U.S. and EU orphan drug status in soft tissue sarcoma with
additional orphan cancer indications expected to follow. In
addition, we have a pending International Nonproprietary Name
(“INN”) request with the World Health Organization for
a non-proprietary (generic) name
for camsirubicin.
14
MNPR-101
Our
patent portfolio for our MNPR-101 antibody (huATN-658), as well as
its epitope, consists of two issued U.S. composition of matter and
their methods of use patents and corresponding (granted and
pending) patents and patent applications in twenty-two foreign
jurisdictions, including the European Union, Japan, and other Asian
countries. These patents are owned by us. The patents covering the
composition of matter of MNPR-101 will expire in 2025 and the
patents covering the MNPR-101 epitope will expire in 2027. Being a
novel biologic, it is eligible for 12 years of exclusivity in the
U.S. under the Biologics Price Competition and Innovation Act
(“BPCI Act”), and it will benefit from varying
durations of similar exclusivity in numerous other
countries.
Patent
life determination depends on the date of filing of the application
and other factors as promulgated under the patent laws. In most
countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date (the priority date) of
a non-provisional patent application in the applicable country, not
taking into consideration any potential patent term adjustment that
may be filed in the future or any regulatory extensions that may be
obtained. Some of our patents are currently near expiration and we
may pursue patent term extensions for these where appropriate. See
“Risk Factors – Risks Related to our Intellectual
Property”.
Manufacturing
We
do not currently own or operate manufacturing facilities for the
production or testing of Validive, camsirubicin, or MNPR-101,
nor do we have plans to develop our own manufacturing operations in
the foreseeable future. We presently depend on third-party contract
manufacturers for all our required raw materials, Active
Pharmaceutical Ingredients (“API”), and finished drug
products for our preclinical and clinical studies. We have executed
a manufacturing agreement for the next clinical batch of drug
product for Validive, which will provide sufficient drug to
complete the Phase 3 trials. We have also engaged contract
manufacturers for the camsirubicin API and drug product in order to
supply clinical material for the GEIS camsirubicin Phase 2 clinical
trial. We have not yet secured a manufacturing agreement for
MNPR-101.
Sales and Marketing
In
light of our stage of development, we have not yet established a
commercial organization or distribution capabilities. We have
retained worldwide commercial rights for our product candidates. If
our product candidates receive marketing approval, we plan to
commercialize them in the U.S. and potentially in Europe with our
own focused, specialty sales force. We would expect to conduct most
of the buildout of this organization following approval in the U.S.
or following similar marketing authorizations in Europe of any of
our product candidates. We expect to explore commercialization of
Validive and potentially other product candidates in certain
markets outside the U.S., including the EU, utilizing a variety of
collaboration, distribution and other sales and marketing
arrangements with one or more third parties.
Oncology Market Competition
The
pharmaceutical industry in general, and the oncology therapeutics
sector in particular, are characterized by intense competition. We
face competition from pharmaceutical and biotechnology companies,
many of which are larger and better financed than us. We also face
competition in our efforts to develop and commercialize new
oncology therapeutics from academic and government laboratories.
The therapeutics that we are developing, if successfully
commercialized, will have to compete with existing therapeutics
already on the market and novel therapeutics currently in
development, as well as new therapeutics that may be discovered and
developed in the future. Our product candidates will also have to
compete with alternate treatment modalities, such as improvements
in radiation treatments, which are also subject to continual
innovation and improvement. Additional information can be found in
the section entitled “Risk Factors – Risks Related to
Our Business Operations and Industry.”
There
is no effective standard of care or FDA approved preventive or
therapeutic treatment for patients that develop
chemoradiation-induced SOM. Only symptomatic treatments such as
opioids and palliative mouthwashes are available but have no effect
on the occurrence, time to onset, or duration of SOM. Our primary
competitor is a dismutase mimetic in early Phase 3 clinical
development, which is administered through a daily 60-minute
intravenous (“IV”) infusion to be completed within an
hour before each radiation treatment. Validive, in comparison, acts
locally at the sites of SOM and is a once a day self-administered
oral/buccal tablet.
We
believe our camsirubicin program, if approved, could
replace doxorubicin as the 1st-line treatment for
ASTS. In addition, we believe that camsirubicin would compete with
a number of currently available anthracycline-based drugs on the
market for other cancer indications. These are largely derivatives
of doxorubicin, or reformulations of doxorubicin such as liposomal
doxorubicin (e.g. Doxil, owned by Johnson & Johnson). All of
these have the issue of cardiotoxicity. In addition to approved
products, there are a number of product candidates in development,
largely as new formulations or derivatives of
doxorubicin.
Our
MNPR-101 program is in the early stages of development and the most
susceptible to all of the competitive factors listed in the first
paragraph of this section.
Government Regulation and Product Approval
Government
authorities in the U.S., at the federal, state and local level, and
other countries extensively regulate, among other things, the
research, development, testing, manufacture, quality control,
approval, labeling, packaging, storage, record-keeping, promotion,
advertising, distribution, post-approval monitoring and reporting,
marketing and export and import of products such as those we are
developing. The pharmaceutical product candidates that we develop
must be approved by the FDA before they may be legally marketed in
the U.S. See “Risk Factors – Risks Related to Clinical
Development and Regulatory Approval”.
15
U.S. Pharmaceutical Product Development Process
In
the U.S., the FDA regulates pharmaceutical products under the
Federal Food, Drug and Cosmetic Act (“FDCA”) and
implementing regulations. Pharmaceutical products are also subject
to other federal, state and local statutes and regulations. The
process of obtaining regulatory approvals and the subsequent
compliance with appropriate federal, state, local and foreign
statutes and regulations require the expenditure of substantial
time and financial resources. Failure to comply with the applicable
U.S. requirements at any time during the product development
process, approval process or after approval, may subject an
applicant to administrative or judicial enforcement. FDA
enforcement could result in refusal to approve pending
applications, withdrawal of an approval, a clinical hold, warning
letters, product recalls, product seizures, total or partial
suspension of production or distribution injunctions, fines,
refusals of government contracts, restitution, disgorgement or
civil or criminal penalties. Any agency or judicial enforcement
action could have a material adverse effect on us. The process
required by the FDA before a non-biological pharmaceutical product
may be marketed in the U.S. generally involves the
following:
●
Completion
of preclinical laboratory tests, animal studies and formulation
studies according to Good Laboratory Practices (“GLP”),
or other applicable regulations;
●
Submission
to the FDA of an Investigational New Drug application
(“IND”), which must become effective before human
clinical studies may begin;
●
Performance
of adequate and well-controlled human clinical studies according to
the FDA’s current Good Clinical Practices
(“GCP”), to establish the safety, efficacy and optimum
dose of the proposed pharmaceutical product for its intended
use;
●
Submission
to the FDA of a New Drug Application (“NDA”) or
Biologics License Application (“BLA”), for a new
pharmaceutical product;
●
Satisfactory
completion of an FDA inspection of the manufacturing facility or
facilities where the pharmaceutical product is produced to assess
compliance with the FDA’s current Good Manufacturing Practice
standards (“cGMP:”), to assure that the facilities,
methods and controls are adequate to preserve the pharmaceutical
product’s identity, strength, quality and
purity;
●
FDA
audits of the preclinical and clinical study sites that generated
the data in support of the NDA or BLA; and
●
FDA review and approval of the
NDA.
The lengthy process of seeking required approvals and the
continuing need for compliance with applicable statutes and
regulations require the expenditure of substantial resources,
and
approvals are inherently uncertain.
Before
testing any compounds with potential therapeutic value in humans,
the pharmaceutical product candidate enters the preclinical testing
stage. Preclinical tests include laboratory evaluations of product
chemistry, toxicity and formulation, as well as animal studies to
assess the potential safety and activity of the pharmaceutical
product candidate. These early proof-of-principle studies are done
using sound scientific procedures and thorough documentation. The
conduct of single and repeat dose toxicology and toxicokinetic
studies in animals must comply with federal regulations and
requirements including GLP. The sponsor must submit the results of
the preclinical tests, together with manufacturing information,
analytical data, any available clinical data or literature and a
proposed clinical protocol, to the FDA as part of the IND. The IND
automatically becomes effective 30 days after receipt by the FDA,
unless the FDA has concerns and notifies the sponsor. In such a
case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical study can begin. If resolution cannot
be reached within the 30-day review period, either the FDA places
the IND on clinical hold or the sponsor withdraws the application.
The FDA may also impose clinical holds on a pharmaceutical product
candidate at any time before or during clinical studies due to
safety concerns or non-compliance. Accordingly, it is not certain
that submission of an IND will result in the FDA allowing clinical
studies to begin, or that, once begun, issues will not arise that
suspend or terminate such clinical studies.
During
the development of a new drug, 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 sponsor to ask
specific questions to the FDA, for the FDA to provide advice, and
for the sponsor and FDA to reach agreement on the next phase of
development. Sponsors typically use the end of Phase 2 meeting to
discuss their Phase 2 clinical results and present their plans for
the pivotal Phase 3 clinical (registration) trial(s) that they
believe will support approval of the new drug. A sponsor may be
able to request a Special Protocol Assessment (“SPA”),
the purpose of which is to reach agreement with the FDA on the
Phase 3 clinical trial protocol design and analyses that will form
the primary basis of an efficacy claim.
According
to FDA guidance for industry on the SPA process, a sponsor which
meets the prerequisites may make a specific request for a SPA and
provide information regarding the design and size of the proposed
clinical trial. The FDA’s goal is to evaluate the protocol
within 45 days of the request to assess whether the proposed trial
is adequate, and that evaluation may result in discussions and a
request for additional information. A SPA request must be made
before the proposed trial begins, and all open issues must be
resolved before the trial begins. If a written agreement is
reached, it will be documented and made part of the IND record. The
agreement will be binding on the FDA and may not be changed by the
sponsor or the FDA after the trial begins except with the written
agreement of the sponsor and the FDA or if the FDA determines that
a substantial scientific issue essential to determining the safety
or efficacy of the drug was identified after the testing
began.
Clinical
studies involve the administration of the pharmaceutical product
candidate to healthy volunteers or patients under the supervision
of qualified investigators, generally physicians not employed by or
under the clinical study sponsor’s control. Clinical studies
are conducted under protocols detailing, among other things, the
objectives of the clinical study, dosing procedures, subject
selection and exclusion criteria, how the results will be analyzed
and presented and the parameters to be used to monitor subject
safety. Each protocol must be submitted to the FDA as part of the
IND. Clinical studies must be conducted in accordance with Good
Clinical Practice (“GCP”) guidelines. Further, each
clinical study must be reviewed and approved by an independent
institutional review board (“IRB”), at, or servicing,
each institution at which the clinical study will be conducted. An
IRB is charged with protecting the welfare and rights of study
participants and is tasked with considering such items as whether
the risks to individuals participating in the clinical studies are
minimized and are reasonable in relation to anticipated benefits.
The IRB also approves the informed consent form that must be
provided to each clinical study subject or his or her legal
representative and must monitor the clinical study until
completed.
Human
clinical studies are typically conducted in three sequential phases
that may overlap or be combined:
●
Phase
1. The pharmaceutical product is initially introduced into healthy
human subjects and tested for safety, dosage tolerance, absorption,
metabolism, distribution and excretion.
●
Phase
2. The pharmaceutical product is evaluated in a limited patient
population to identify possible adverse effects and safety risks,
to preliminarily evaluate the efficacy of the product for specific
targeted diseases, to determine dosage tolerance, optimal dosage
and dosing schedule and to identify patient populations with
specific characteristics where the pharmaceutical product may be
more effective.
●
Phase
3. Clinical studies are undertaken to further evaluate dosage,
clinical efficacy and safety in an expanded patient population at
geographically dispersed clinical study sites. These clinical
studies are intended to establish the overall risk/benefit ratio of
the product and provide an adequate basis for product labeling. The
studies must be well-controlled and usually include a control arm
for comparison. One or two Phase 3 studies are required by the FDA
for an NDA or BLA approval, depending on the disease severity and
other available treatment options.
●
Post-approval
studies, or Phase 4 clinical studies, may be conducted after
initial marketing approval. These studies are used to gain
additional experience from the treatment of patients in the
intended therapeutic indication.
●
Progress
reports detailing the results of the clinical studies must be
submitted at least annually to the FDA and written IND safety
reports must be submitted to the FDA and the investigators for
serious and unexpected adverse events or any finding from tests in
laboratory animals that suggests a significant risk for human
subjects. Phase 1, Phase 2 and Phase 3 clinical studies may not be
completed successfully within any specified period, if at all. The
FDA or the sponsor or its data safety monitoring board may suspend
a clinical study 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 study at its institution if the
clinical study is not being conducted in accordance with the
IRB’s requirements or if the pharmaceutical product has been
associated with unexpected serious harm to patients.
Concurrent
with clinical studies, companies usually complete additional animal
studies and must also develop additional information about the
chemistry and physical characteristics of the pharmaceutical
product as well as finalize a process for manufacturing the product
in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing
quality batches of the pharmaceutical product candidate and, among
other things, must develop methods for testing the identity,
strength, quality and purity of the final pharmaceutical product.
Additionally, appropriate packaging must be selected and tested and
stability studies must be conducted to demonstrate that the
pharmaceutical product candidate does not undergo unacceptable
deterioration over its shelf life.
16
U.S. Review and Approval Processes
The
results of product development, preclinical studies and clinical
studies, along with descriptions of the manufacturing process,
analytical tests conducted on the chemistry of the pharmaceutical
product, proposed labeling and other relevant information are
submitted to the FDA as part of an NDA or BLA requesting approval
to market the product. The submission of an NDA or BLA is subject
to the payment of substantial user fees; a waiver of such fees may
be obtained under certain limited circumstances.
In
addition, under the Pediatric Research Equity Act
(“PREA”), an NDA, BLA or a supplement thereof must
contain data to assess the safety and effectiveness of the
pharmaceutical product for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration
for each pediatric subpopulation for which the product is safe and
effective. The FDA may grant deferrals for submission of data or
full or partial waivers. Unless otherwise required by regulation,
PREA does not apply to any pharmaceutical product for an indication
for which orphan designation has been granted.
The
FDA reviews all NDAs and BLAs submitted before it accepts them for
filing and may request additional information rather than accepting
an NDA or BLA for filing. Once the submission is accepted for
filing, the FDA begins an in-depth review of the NDA or BLA. Under
the goals and policies agreed to by the FDA under the Prescription
Drug User Fee Act (“PDUFA”), the FDA has 10 months in
which to complete its initial review of a standard NDA or BLA and
respond to the applicant, and six months for a priority NDA or BLA.
The FDA does not always meet its PDUFA goal dates for standard and
priority NDAs or BLAs. The review process and the PDUFA goal date
may be extended by three months if the FDA requests or if the NDA
or BLA sponsor otherwise provides additional information or
clarification regarding information already provided in the
submission within the last three months before the PDUFA goal
date.
After
the NDA or BLA submission is accepted for filing, the FDA reviews
the NDA or BLA application to determine, among other things,
whether the proposed product is safe and effective for its intended
use, and whether the product is being manufactured in accordance
with cGMP to assure and preserve the product’s identity,
strength, quality and purity. The FDA may refer applications for
novel pharmaceutical products or pharmaceutical products which
present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other
experts, for review, evaluation and a recommendation as to whether
the application should be approved and under what conditions. The
FDA is not bound by the recommendations of an advisory committee,
but it considers such recommendations carefully when making
decisions. During the pharmaceutical product approval process, the
FDA also will determine whether a risk evaluation and mitigation
strategy (“REMS”), is necessary to assure the safe use
of the pharmaceutical product. If the FDA concludes that a REMS is
needed, the sponsor of the NDA or BLA must submit a proposed REMS;
the FDA will not approve the NDA or BLA without a REMS, if
required.
Before
approving an NDA or BLA, the FDA will inspect the facilities at
which the product is manufactured. The FDA will not approve the
product 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 as well as
the site where the pharmaceutical product is manufactured to assure
compliance with GCP and cGMP. If the FDA determines the
application, manufacturing process or manufacturing facilities are
not acceptable, it will outline the deficiencies in the submission
and often will request additional testing or information. In
addition, the FDA will require the review and approval of product
labeling.
The
NDA and BLA review and approval process is lengthy and difficult
and the FDA may refuse to approve an NDA or BLA if the applicable
regulatory criteria are not satisfied or may require additional
clinical data or other data and information. Even if such data and
information are submitted, the FDA may ultimately decide that the
NDA or BLA does not satisfy the criteria for approval. Data
obtained from clinical studies are not always conclusive and the
FDA may interpret data differently than the sponsor interprets the
same data. The FDA will issue a complete response letter if the
agency decides not to approve the NDA or BLA. The complete response
letter usually describes all of the specific deficiencies in the
NDA or BLA identified by the FDA. The deficiencies identified may
be minor, for example, requiring labeling changes, or major, for
example, requiring additional clinical studies. Additionally, the
complete response letter may include recommended actions that the
applicant might take to place the application in a condition for
approval. If a complete response letter is issued, the applicant
may either resubmit the NDA or BLA, addressing all of the
deficiencies identified in the letter, or withdraw the
application.
If
a product receives regulatory approval, the approval may be
significantly limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could restrict
the commercial value of the product. Further, the FDA may require
that certain contraindications, warnings or precautions be included
in the product labeling. In addition, the FDA may require Phase 4
testing which involves clinical studies designed to further assess
pharmaceutical product safety and effectiveness and may require
testing and surveillance programs to monitor the safety of approved
products that have been commercialized.
Expedited Development and Review Programs
The
FDA has a Fast Track program that is intended to expedite or
facilitate the process for reviewing new pharmaceutical products
that meet certain criteria. Specifically, new pharmaceutical
products are eligible for Fast Track designation if they are
intended to treat a serious or life-threatening condition and
demonstrate the potential to address unmet medical needs for the
condition. The Fast Track designation must be requested by the
sponsor. Fast Track designation applies to the combination of the
product and the specific indication for which it is being studied.
With a Fast Track designated product, 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, if
the FDA agrees to accept sections of the NDA or BLA and determines
that the schedule is acceptable and if the sponsor pays any
required user fees upon submission of the first section of the NDA
or BLA.
Any
product submitted to the FDA for marketing approval, including a
Fast Track program, may also be eligible for other types of FDA
programs intended to expedite development and review, such as
priority review and accelerated approval. Any product is eligible
for priority review if it has the potential to provide safe and
effective therapy where no satisfactory alternative therapy exists
or a significant improvement in the treatment, diagnosis or
prevention of a disease compared to marketed products. The FDA will
attempt to direct additional resources to the evaluation of an
application for a new pharmaceutical product designated for
priority review in an effort to facilitate the review.
Additionally, a product may be eligible for accelerated approval.
Pharmaceutical products studied for their safety and effectiveness
in treating serious or life-threatening illnesses and that provide
meaningful therapeutic benefit over existing treatments may receive
accelerated approval, which means that the products may be approved
on the basis of adequate and well-controlled clinical studies
establishing that the product has an effect on a surrogate endpoint
that is reasonably likely to predict a clinical benefit, or on the
basis of an effect on a clinical endpoint other than survival or
irreversible morbidity. As a condition of approval, the FDA may
require that a sponsor of a pharmaceutical product receiving
accelerated approval perform adequate and well-controlled
post-marketing clinical studies. 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,
priority review and accelerated approval do not change the
standards for approval but may expedite the development or approval
process.
17
Breakthrough Therapy Designation
The
FDA is also required to expedite the development and review of the
application for approval of drugs that are intended to treat a
serious or life-threatening disease or condition where preliminary
clinical evidence indicates that the drug may demonstrate
substantial improvement over existing therapies on one or more
clinically significant endpoints. Under the breakthrough therapy
program, the sponsor of a new product candidate may request that
the FDA designate the product candidate for a specific indication
as a breakthrough therapy concurrent with, or after, the filing of
the IND for the product candidate. The FDA must determine if the
product candidate qualifies for breakthrough therapy designation
within 60 days of receipt of the sponsor’s request. Validive,
camsirubicin and MNPR-101 may all be eligible for breakthrough
therapy designation pending additional data.
European Union Drug Review and Approval
In
the European Economic Area (“EEA”) (which is comprised
of the 28 Member States of the European Union plus Norway, Iceland
and Liechtenstein), medicinal products can only be commercialized
after obtaining a Marketing Authorization (“MA”). There
are two types of MA:
The
Community MA, which is issued by the European Commission through
the Centralized Procedure, based on the opinion of the CHMP, or
Committee for Medicinal Products for Human Use, of the European
Medicines Agency (“EMA”), is valid throughout the
entire territory of the EEA. The Centralized Procedure is mandatory
for certain types of products, such as biotechnology medicinal
products, orphan medicinal products, and medicinal products
containing a new active substance indicated for the treatment of
AIDS, cancer, neurodegenerative disorders, diabetes and auto-immune
and viral diseases. The Centralized Procedure is optional for
products containing a new active substance not yet authorized in
the EEA, or for products that constitute a significant therapeutic,
scientific or technical innovation or which are in the interest of
public health in the EU.
National
MAs, which are issued by the competent authorities of the Member
States of the EEA and only cover their respective territory, are
available for products not falling within the mandatory scope of
the Centralized Procedure. Where a product has already been
authorized for marketing in a Member State of the EEA, this
National MA can be recognized in other Member States through the
Mutual Recognition Procedure. If the product has not received a
National MA in any Member State at the time of application, it can
be approved simultaneously in various Member States through the
Decentralized Procedure. Under the above described procedures,
before granting the MA, the EMA or the competent authorities of the
Member States of the EEA make an assessment of the risk-benefit
balance of the product on the basis of scientific criteria
concerning its quality, safety and efficacy.
PRIME Designation
The
EMA launched its PRIME regulatory initiative to enhance support for
the development of therapies that target an unmet medical need. The
initiative focuses on drugs that may offer a major therapeutic
advantage over existing treatments, or benefit patients with no
treatment options. These therapies are considered priority
medicines within the EU. Through PRIME, the EMA offers early,
proactive and enhanced support to drug developers to optimize the
generation of robust data on a therapy’s benefits and risks
and enable accelerated assessment of drug applications. MNPR-101
may be eligible for PRIME designation.
Post-Approval Requirements
Any
pharmaceutical products for which a sponsor receives FDA approvals
are subject to continuing regulation by the FDA, including, among
other things, record-keeping requirements, reporting of adverse
experiences with the product, providing the FDA with updated safety
and efficacy information, product sampling and distribution
requirements, complying with certain electronic records and
signature requirements and complying with FDA and FTC promotion and
advertising requirements, which include, among others, standards
for direct-to-consumer advertising, prohibitions on promoting
pharmaceutical products for uses or in patient populations that are
not described in the pharmaceutical product’s approved
labeling (known as “off-label use”), industry-sponsored
scientific and educational activities and promotional activities
involving the internet. Failure to comply with FDA requirements can
have negative consequences, including adverse publicity,
enforcement letters from the FDA, actions by the U.S. Department of
Justice and/or U.S. Department of Health and Human Services Office
of Inspector General, mandated corrective advertising or
communications with doctors, and civil or criminal penalties.
Although physicians may prescribe legally available pharmaceutical
products for off-label uses, manufacturers may not directly or
indirectly market or promote such off-label uses.
Manufacturers
of FDA approved products are required to comply with applicable FDA
manufacturing requirements contained in the FDA’s cGMP
regulations. cGMP regulations require, among other things, quality
control and quality assurance, as well as the corresponding
maintenance of records and documentation. Pharmaceutical product
manufacturers and other entities involved in the manufacture and
distribution of approved pharmaceutical products are required to
register their establishments with the FDA and certain state
agencies, and are subject to periodic unannounced inspections by
the FDA and certain state agencies for compliance with cGMP and
other laws. Accordingly, manufacturers must continue to expend
time, money and effort in the area of production and quality
control to maintain cGMP compliance. Discovery of problems with a
product after approval may result in restrictions on a product,
manufacturer or holder of an approved NDA or BLA, including
withdrawal of the product from the market. In addition, changes to
the manufacturing process generally require prior FDA approval
before being implemented and other types of changes to the approved
product, such as adding new indications and additional labeling
claims, are also subject to further FDA review and approval. The
FDA also may require post-marketing testing, known as Phase 4
testing, risk minimization action plans and surveillance to monitor
the effects of an approved product or place conditions on an
approval that could restrict the distribution or use of the
product.
U.S. Foreign Corrupt Practices Act
The
FCPA prohibits certain individuals and entities from promising,
paying, offering to pay, or authorizing the payment of anything of
value to any foreign government official, directly or indirectly,
to obtain or retain business or an improper advantage. The U.S.
Department of Justice and the SEC have increased their enforcement
efforts with respect to the FCPA. Violations of the FCPA may result
in large civil and criminal penalties and could result in an
adverse effect on a company’s reputation, operations, and
financial condition. A company may also face collateral
consequences such as debarment and the loss of export
privileges.
18
Federal and State Pharmaceutical Legislation
In
addition to FDA restrictions on marketing of pharmaceutical
products, several other types of state and federal laws have been
applied to restrict certain business practices in the
biopharmaceutical industry.
Anti-Kickback Statute of 1972
The
federal Anti-Kickback Statute prohibits, among other things,
knowingly and willfully offering, paying, soliciting, or receiving
remuneration to induce or in return for purchasing, leasing,
ordering, or arranging for the purchase, lease, or order of any
healthcare item or service reimbursable under Medicare, Medicaid,
or other federally financed healthcare programs. The term
“remuneration” has been broadly interpreted to include
anything of value, including for example, gifts, discounts, the
furnishing of supplies or equipment, credit arrangements, payments
of cash, waivers of payment, ownership interests and providing
anything at less than its fair market value. The Anti-Kickback
Statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on one hand and prescribers,
purchasers, and formulary managers on the other. Although there are
a number of statutory exemptions and regulatory safe harbors
protecting certain common activities from prosecution, the
exemptions and safe harbors are drawn narrowly, and a
company’s practices may not in all cases meet all of the
criteria for statutory exemptions or safe harbor protection.
Practices that involve remuneration that may be alleged to be
intended to induce prescribing, purchases, or recommendations may
be subject to scrutiny if they do not qualify for an exemption or
safe harbor. Several courts have interpreted the statute’s
intent requirement to mean that if any one purpose of an
arrangement involving remuneration is to induce referrals of
federal healthcare covered business, the statute has been violated.
The reach of the Anti-Kickback Statute was also broadened by the
PPACA, which, among other things, amends the intent requirement of
the federal Anti-Kickback Statute. Pursuant to the statutory
amendment, a person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it in order
to have committed a violation. In addition, the PPACA provides that
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 (discussed below) or the civil monetary penalties
statute, which imposes penalties against any person who is
determined to have presented or caused to be presented a claim to a
federal health program that the person knows or should know is for
an item or service that was not provided as claimed or is false or
fraudulent.
False Claims Act of 1986
The
federal False Claims Act prohibits any person from knowingly
presenting, or causing to be presented, a false claim for payment
to the federal government. Recently, several pharmaceutical and
other healthcare companies have been prosecuted under these laws
for allegedly providing free product to customers with the
expectation that the customers would bill federal programs for the
product. Other companies have been prosecuted for causing false
claims to be submitted because of the companies’ marketing of
the product for unapproved, and thus non-reimbursable, uses. Many
states also have statutes or regulations similar to the federal
Anti-Kickback Statute and False Claims Act, which state laws apply
to items and services reimbursed under Medicaid and other state
programs, or, in several states, apply regardless of the
payer.
Health Insurance Portability and Accountability Act of
1996
HIPAA
created new federal criminal statutes that prohibit knowingly and
willfully executing a scheme to defraud any healthcare benefit
program, including private third-party payers and knowingly and
willfully falsifying, concealing or covering up a material fact or
making any materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for healthcare benefits,
items or services. Because of the breadth of these laws and the
narrowness of the federal Anti-Kickback Statute’s safe
harbors, it is possible that some of a company’s business
activities could be subject to challenge under one or more of such
laws. Such a challenge could have a material adverse effect on a
company’s business, financial condition and results of
operations. See “Risk Factors – Risks Related to
Commercialization of Our Product Candidates”.
Health Information Technology for Economic and Clinical Health Act
of 2009
HIPAA, as
amended by HITECH and its implementing regulations, imposes certain
requirements relating to the privacy, security and transmission of
individually identifiable health information. Among other things,
HITECH makes HIPAA’s privacy and security standards directly
applicable to “business associates”—independent
contractors or agents of covered entities that receive or obtain
protected health information in connection with providing a service
on behalf of a covered entity. HITECH also increased the civil and
criminal penalties that may be imposed against covered entities,
business associates and possibly other persons, and gave state
attorneys general new authority to file civil actions for damages
or injunctions in federal courts to enforce the federal HIPAA laws
and seek attorney’s fees and costs associated with pursuing
federal civil actions. In addition, state laws govern the privacy
and security of health information in certain circumstances, many
of which differ from each other in significant ways and may not
have the same effect, complicating compliance efforts. See
“Risk Factors – Risks Related to Commercialization of
Our Product Candidates”.
The Medicare Prescription Drug, Improvement and Modernization Act
of 2003 (“MMA”)
In the
U.S. and foreign jurisdictions, there have been a number of
legislative and regulatory changes to the healthcare system, 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. The MMA imposed new requirements for the
distribution and pricing of prescription drugs for Medicare
beneficiaries. Under Part D, Medicare beneficiaries may enroll in
prescription drug plans offered by private entities, which will
provide coverage of outpatient prescription drugs. Part D plans
include both stand-alone prescription drug benefit plans and
prescription drug coverage as a supplement to Medicare Advantage
plans. Unlike Medicare Part A and B, Part D coverage is not
standardized. Part D prescription drug plan sponsors are not
required to pay for all covered Part D drugs, and each drug plan
can develop its own drug formulary that identifies which drugs it
will cover and at what tier or level. However, Part D prescription
drug formularies must include drugs within each therapeutic
category and class of covered Part D drugs, though not necessarily
all the drugs in each category or class. Any formulary used by a
Part D prescription drug plan must be developed and reviewed by a
pharmacy and therapeutic committee. Moreover, while the MMA applies
only to drug benefits for Medicare beneficiaries, private payers
often follow Medicare coverage policy and payment limitations in
setting their own payment rates. Any reduction in payment that
results from Medicare Part D may result in a similar reduction in
payments from non-governmental payers.
The American Recovery and Reinvestment Act of 2009
The
American Recovery and Reinvestment Act of 2009 provides funding for
the federal government to compare the effectiveness of different
treatments for the same illness. A plan for the research will be
developed by the Department of Health and Human Services, the
Agency for Healthcare Research and Quality and the National
Institutes for Health, and periodic reports on the status of the
research and related expenditures will be made to Congress.
Although the results of the comparative effectiveness studies are
not intended to mandate coverage policies for public or private
payers, it is not clear what effect, if any, the research will have
on the sales of any product, if any such product or the condition
that it is intended to treat is the subject of a
study.
19
Physician Payments Sunshine Act of 2010
The
federal Physician Payments Sunshine Act 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 specific
exceptions, to report annually to the Centers for Medicare &
Medicaid Services (“CMS”) information related to
payments or other transfers of value made to physicians and
teaching hospitals, and applicable manufacturers and applicable
group purchasing organizations to report annually to CMS ownership
and investment interests held by the physicians and their immediate
family members.
Patent Protection and Affordable Care Act of 2010
In
March 2010, the PPACA was enacted, which includes measures to
significantly change the way healthcare is financed by both
governmental and private insurers. Among the provisions of the
PPACA of importance to the pharmaceutical and biotechnology
industry are the following:
●
extension
of manufacturers’ Medicaid rebate liability to covered drugs
dispensed to individuals who are enrolled in Medicaid managed care
organizations;
●
expansion
of eligibility criteria for Medicaid programs by, among other
things, allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for
certain individuals with income at or below 133% of the Federal
Poverty Level beginning in 2014, thereby potentially increasing
manufacturers’ Medicaid rebate liability;
●
expansion
of the entities eligible for discounts under the Public Health
Service pharmaceutical pricing program;
●
new
requirements under the federal Open Payments program, created under
Section 6002 of the PPACA and its implementing regulations, that
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)
report annually to the U.S. Department of Health and Human Services
(“HHS”), information related to “payments or
other transfers of value” made or distributed to physicians
(defined to include doctors, dentists, optometrists, podiatrists
and chiropractors) and teaching hospitals, and that applicable
manufacturers and applicable group purchasing organizations report
annually to HHS ownership and investment interests held by
physicians (as defined above) and their immediate family members,
with data collection required beginning August 1, 2013 and
reporting to CMS, required by March 31, 2014 and by the 90th day of
each subsequent calendar year;
●
a
requirement to annually report drug samples that manufacturers and
distributors provide to physicians, effective April 1,
2012;
●
expansion
of health care fraud and abuse laws, including the False Claims Act
and the Anti-Kickback Statute, new government investigative powers,
and enhanced penalties for noncompliance;
●
a
licensure framework for follow-on biologic products;
●
a
new Patient-Centered Outcomes Research Institute to oversee,
identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such
research;
●
creation
of the Independent Payment Advisory Board which, beginning in 2014,
will have authority to recommend certain changes to the Medicare
program that could result in reduced payments for prescription
drugs and those recommendations could have the effect of law even
if Congress does not act on the recommendations; and
●
establishment
of a Center for Medicare Innovation at CMS to test innovative
payment and service delivery models to lower Medicare and Medicaid
spending, potentially including prescription drug spending that
began on January 1, 2011.
Budget Control Act of 2011
In August
2011, the President signed into law the Budget Control Act of 2011,
which, among other things, created the Joint Select Committee on
Deficit Reduction, or joint committee, to recommend proposals in
spending reductions to Congress. The joint committee did not
achieve its targeted deficit reduction of at least $1.2 trillion
and for the years 2013 through 2021, triggering automatic
reductions to several government programs. These reductions include
aggregate reductions to Medicare payments to providers of up to 2%
per fiscal year, starting in 2013.
American Taxpayer Relief Act of 2012
In
January 2013, the President signed into law the American Taxpayer
Relief Act of 2012, which, among other things, reduced Medicare
payments to several providers and increased the statute of
limitations period for the government to recover overpayments to
providers from three to five years. These new laws may result in
additional reductions in Medicare and other healthcare
funding.
Proposals in Congress to repeal or replace parts of the
PPACA
There have
been a number of proposals in the U.S. Congress to repeal or
replace parts of the PPACA. On December 22, 2017, the Tax Cuts and
Jobs Act became law. One of its provisions repealed what is known
as the individual mandate under PPACA, which could have the effect
of negating such law. Other proposals include the repeal of the tax
on prescription medications, repeal of the medical device excise
tax for sales, and repeal of the elimination of a deduction for
expenses allocable to Medicare Part D subsidy. It is uncertain
whether any repeal or replace legislation will be passed and signed
into law or what effect any such legislation may have on our
commercialization strategy. See “Risk Factors - Future
Legislation or Executive or Private Sector Action May Increase the
Difficulty and Cost for us to Commercialize our Products and Affect
the Prices Obtained for Such Products”.
20
Patent Term Restoration and Marketing Exclusivity
Depending
upon the timing, duration and specifics of the FDA approval of the
use of our pharmaceutical product candidates, some of our products
to be licensed under U.S. patents may be eligible for limited
patent term extension under the Drug Price Competition and Patent
Term Restoration Act of 1984, commonly referred to as the
Hatch-Waxman Amendments. The Hatch-Waxman Amendments permits a
patent restoration term of up to five years as compensation for
patent term lost during product development and the FDA regulatory
review process. However, patent term restoration cannot extend the
remaining term of a patent beyond a total of 14 years from the
product’s approval date. The patent term restoration period
is generally one-half the time between the effective date of an IND
and the submission date of an NDA or BLA plus the time between the
submission date of an NDA or BLA and the approval of that
application. Only one patent applicable to an approved
pharmaceutical product is eligible for the extension and the
application for the extension must be submitted prior to the
expiration of the patent. The U.S. Patent and Trademark Office
(“USPTO”), in consultation with the FDA, reviews and
approves the application for any patent term extension or
restoration.
Market
exclusivity provisions under the U.S. Food, Drug, and Cosmetic Act
can also delay the submission or the approval of certain
applications of other companies seeking to reference another
company’s NDA or BLA.
The Biologics Price Competition and Innovation Act (“BPCI
Act”)
The
Biologics Price Competition and Innovation Act, (“BPCI
Act”), authorizes the FDA to license a biological product
that is biosimilar to an FDA-licensed biologic through an
abbreviated pathway. The BPCI Act establishes criteria for
determining that a product is biosimilar to an already-licensed
biologic, or reference product, and establishes a process by which
an abbreviated BLA for a biosimilar product is submitted, reviewed
and approved. The BPCI Act provides periods of exclusivity that
protect a reference product from biosimilars competition. Under the
BPCI Act, the FDA may not accept a biosimilar application for
review until four years after the date of first licensure of the
reference product, and the biosimilar may not be licensed until at
least 12 years after the reference product’s approval.
Additionally, the BPCI Act establishes procedures by which the
biosimilar applicant provides information about its application and
product to the reference product sponsor, and by which information
about potentially relevant patents may be shared and litigation
over patents may proceed in advance of approval. The BPCI Act also
provides a period of exclusivity for the first biosimilar
determined by the FDA to be interchangeable with the reference
product.
We
anticipate that the contours of the BPCI Act will continue to be
defined as the statute is implemented over a period of years. This
likely will be accomplished by a variety of means, including
decisions related to the statute by the relevant federal courts,
FDA issuance of guidance documents, and FDA decisions in the course
of considering specific applications. The FDA has to date issued
various guidance documents and other materials indicating the
agency’s thinking regarding a number of issues implicated by
the BPCI Act. Additionally, the FDA’s approval of several
biosimilar applications in recent years has helped define the
agency’s approach to certain issues.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement
status of any pharmaceutical product candidates for which we obtain
regulatory approval. In the U.S. and markets in other countries,
sales of any products for which we receive regulatory approval for
commercial sale will depend in part upon the availability of
reimbursement from third-party payers. Third-party payers include
government payers such as Medicare and Medicaid, managed care
providers, private health insurers and other organizations. The
process for determining whether a payer will provide coverage for a
pharmaceutical product may be separate from the process for setting
the price or reimbursement rate that the payer will pay for the
pharmaceutical product. Third-party payers may limit coverage to
specific pharmaceutical products on an approved list, or formulary,
which might not include all of the FDA-approved pharmaceutical
products for a particular indication. Third-party payers are
increasingly challenging the price and examining the medical
necessity and cost-effectiveness of medical products and services,
in addition to their safety and efficacy. We may need to conduct
expensive pharmaco-economic studies in order to demonstrate the
medical necessity and cost-effectiveness of its products, in
addition to the costs required to obtain the FDA approvals. A
payer’s decision to provide coverage for a pharmaceutical
product does not imply that an adequate reimbursement rate will be
approved.
In 2003,
the federal government enacted legislation providing a partial
prescription drug benefit for Medicare recipients, which became
effective at the beginning of 2006. However, to obtain payments
under this program, a company would be required to sell products to
Medicare recipients through prescription drug plans operating
pursuant to this legislation. As part of their participation in the
Medicare prescription drug program, these plans negotiate
discounted prices for prescription drugs. Federal, state and local
governments in the U.S. continue to consider legislation to limit
the growth of health care costs, including the cost of prescription
drugs. Future legislation and regulations could limit payments for
pharmaceuticals such as the product candidates that we are
developing.
Different
pricing and reimbursement schemes exist in other countries. In the
European Community, governments influence the price of
pharmaceutical products through their pricing and reimbursement
rules and control of national health care systems that fund a large
part of the cost of those products to consumers. Some jurisdictions
operate positive and negative list systems under which products may
only be marketed once a reimbursement price has been agreed upon.
To obtain reimbursement or pricing approval, some of these
countries may require the completion of clinical studies that
compare the cost-effectiveness of a particular pharmaceutical
product candidate to currently available therapies. Other member
states allow companies to fix their own prices for medicines, but
monitor and control company profits. The downward pressure on
health care costs in general, particularly prescription drugs, has
become very intense. As a result, increasingly high barriers are
being erected to the entry of new products. In addition, in some
countries, cross-border imports from low-priced markets exert a
commercial pressure on pricing within a country.
International Regulation
In
addition to regulations in the U.S., there are a variety of foreign
regulations governing clinical studies and commercial sales and
distribution of our future product candidates. Whether or not FDA
approval is obtained for a product, approval of a product must be
obtained by the comparable regulatory authorities of foreign
countries before clinical studies or marketing of the product can
commence in those countries. The approval process varies from
country to country, and the time may be longer or shorter than that
required for FDA approval. The requirements governing the conduct
of clinical studies, product licensing, pricing and reimbursement
vary greatly from country to country. In addition, certain
regulatory authorities in select countries may require us to repeat
previously conducted preclinical and/or clinical studies under
specific criteria for approval in their respective country which
may delay and/or greatly increase the cost of approval in certain
markets targeted for approval by us.
Under E.U.
regulatory systems, marketing applications for pharmaceutical
products must be submitted under a centralized procedure to the
EMA. The centralized procedure provides for the granting of a
single marketing authorization that is valid for all E.U. member
states. The EMA also has designations for Orphan Drugs, which, if
applicable, can provide for faster review, lower fees and more
access to advice during drug development. While the marketing
authorization in the European Union is centralized, the system for
clinical studies (application, review and requirements) is handled
by each individual country. Approval to run a clinical study in one
country does not guarantee approval in any other country. The
pharmaceutical industry in Canada is regulated by Health Canada. A
New Drug Submission (“NDS”) is the equivalent of a U.S.
NDA and must be filed to obtain approval to market a pharmaceutical
product in Canada. Marketing regulations and reimbursement are
subject to national and provincial laws. In Japan, applications for
approval to manufacture and market new drugs must be approved by
the Ministry of Health, Labor and Welfare. Nonclinical and clinical
studies must meet the requirements of Japanese laws. Results from
clinical studies conducted outside of Japan must be supplemented
with at least a bridging clinical study conducted in Japanese
patients.
In
addition to regulations in Europe, Canada, Japan and the U.S.,
there are a variety of foreign regulations governing clinical
studies, commercial distribution and reimbursement of future
product candidates which we may be subject to as we pursue
regulatory approval and commercialization of
Validive, camsirubicin, MNPR-101, or any future product
candidates internationally.
Compliance with Environmental Laws
Since
we do not have our own laboratory facilities, we do not estimate
any annual costs of compliance with environmental
laws.
Employees
Our
operations are currently managed by five individuals (including our
executive chairman and Acting Chief Medical Officer), of whom three
have a PhD, two have an MD, one has an MBA, one has an MSc in
health economics and policy, and one is a former CPA. They have
worked at industry leading companies such as BioMarin
Pharmaceutical Inc., Raptor Pharmaceuticals, Abbott Laboratories,
and Onyx Pharmaceuticals. As of March 13, 2020, we had seven employees; six
of whom were full-time. We anticipate hiring additional employees
in clinical operations and regulatory affairs to help manage our
clinical studies, regulatory submissions, and manufacturing to
support camsirubicin and Validive program development. In addition,
to complement our internal expertise, we have contracts with
medical and scientific consultants, manufacturers, laboratories,
and contract research organizations that specialize in various
aspects of drug development including clinical development,
preclinical development, manufacturing and regulatory
affairs.
21
Item 1A. Risk Factors
RISK FACTORS
An investment in our common stock
involves a high degree of risk. A prospective investor should
carefully consider the following information about these risks,
together with other information appearing elsewhere in this Annual
Report on Form 10-K, before deciding to invest in our common stock.
The occurrence of any of the following risks could have a material
adverse effect on our business, financial condition, results of
operations and future prospects and prospective investors could
lose all or part of their investment. The risk factors discussed
below and elsewhere in this Annual Report on Form 10-K are not
exhaustive; other significant risks may exist that are not
identified in this Annual Report on Form 10-K, but that might still
materially and adversely affect our business, prospects, financial
condition, and results of operations were any of such risks to
occur.
Risks Related to Our Financial Condition and Capital
Requirements
We have a limited operating history, expect to incur significant
operating losses, and have a high risk of never being
profitable.
We
commenced operations in December 2014 and have a limited operating
history of five years. Therefore, there is limited historical
financial or operational information upon which to evaluate our
performance. Our prospects must be considered in light of the
uncertainties, risks, expenses, and difficulties frequently
encountered by companies in their early stages of operations. Many,
if not most, companies in our industry at our stage of development
never become profitable and are acquired, sell major product assets
or go out of business before successfully developing any product
that generates revenue from commercial sales and enables
profitability.
From
inception in December 2014 through December 31, 2019, we have
incurred losses of approximately $25.9 million, which includes
$13.5 million of non-cash in-process research and development,
which was incurred in connection with our acquisition of
camsirubicin. We expect to continue to incur substantial operating
losses over the next several years for the clinical development of
our current and future licensed or purchased product
candidates.
The
amount of future losses and when, if ever, we will become
profitable are uncertain. We do not have any products that have
generated any revenues from commercial sales, and do not expect to
generate revenues from the commercial sale of products in the near
future, if ever. Our ability to generate revenue and achieve
profitability will depend on, among other things, successful
completion of the development of our product candidates; obtaining
necessary regulatory approvals from the FDA and international
regulatory agencies; establishing manufacturing/quality, sales, and
marketing arrangements with third parties; obtaining adequate
reimbursement by third-party payers; and raising sufficient funds
to finance our activities. If we are unsuccessful at some or all of
these undertakings, our business, financial condition, and results
of operations are expected to be materially and adversely
affected.
As a
recently established publicly traded reporting company, we are
subject to SEC reporting and other requirements, which will lead to
increased operating costs in order to meet these
requirements.
The funds raised from the recent initial public offering of our
common stock should enable us to obtain topline results for the
camsirubicin Phase 2 clinical trial and ramp up the initiation of
Validive’s Phase 3 clinical program, but will not be
sufficient for us to start our Validive Phase 3 clinical program,
which will require that we raise significant additional funds or
find a suitable pharmaceutical partner. If we are able to raise
additional funds in the coming months, to start our Phase 3
clinical trial for Validive, it may not be on favorable terms. If
we are unable to raise enough funds in the future, or find a
suitable pharmaceutical partner, we may have to discontinue or
delay our Validive clinical development.
In order to be commercially viable, we must
successfully research, develop, obtain regulatory approval for,
manufacture, introduce, market and distribute camsirubicin,
Validive and, if applicable, any current and future product
candidates we may develop. The estimated required capital and
time-frames necessary to achieve these developmental milestones as
described in this Annual Report on Form 10-K or as we may state
from time to time is subject to inherent risks, many of which may
be beyond our control. Clinical development of camsirubicin and
Validive will require significant funds. Proceeds from the recent
initial public offering of our common stock should enable us to
obtain topline results for the camsirubicin Phase 2 clinical trial
and ramp up the initiation of Validive’s Phase 3 clinical
program, however, these funds will not be sufficient to start our
Validive Phase 3 clinical program. As such, we will be required to
raise significant additional funds or find a suitable
pharmaceutical partner in the coming months to start our Validive
Phase 3 clinical program and
thereafter in order to complete Validive’s Phase 3 clinical
trial, support further development of camsirubicin beyond Phase 2
and generally to support our current and any future product
candidates through completion of trials, approval processes and, if
applicable, commercialization, If we are able to raise financing,
it may be on terms that are unfavorable to us and if we are unable
to raise sufficient funds or find a suitable pharmaceutical
partner, we may have to discontinue or delay clinical development
of Validive and/or any other of our current or future product
candidates.
Our operations and financial results could be adversely impacted by
the global outbreak of the 2019 Novel Coronavirus (COVID-19), which
could negatively impact our stock price, our ability to raise
substantial funds in the near-term, our ability to manufacture our
product candidates for our clinical trials, and our ability to
accrue and conduct our planned clinical trials. Any such impact
will negatively impact our financial condition and could require us
to delay our clinical development programs.
In December 2019, a novel
strain of coronavirus (“COVID-19”) was reported to have
surfaced in Wuhan, China, resulting in significant disruptions to
Chinese manufacturing and supply chain, as well as travel
restrictions in many countries. In March 2020, COVID-19 was
designated a global pandemic and many countries, including the
United States, have declared national emergencies and have
implemented preventive measures by limiting large public gatherings
(social distancing). Many employers are restricting non-essential
work travel and are requiring that employees work from their homes
to limit personal interaction. Many businesses are closed or are
operating in a substantially reduced fashion and many employees
have been laid off. While the extent of the impact of the COVID-19
pandemic on our business and financial results is uncertain, a
continued and prolonged public health crisis such as the COVID-19
pandemic would have a negative impact on our business, financial
condition and operating results. The COVID-19 pandemic has resulted
in significant volatility and substantial declines in the stock
markets, which has negatively impacted our stock price and could
negatively impact our ability to raise significant funds in the
near-term or the long-term in the event of a prolonged disruption
or recession. In addition, the COVID-19 pandemic could result in
delays in the manufacturing of our product candidates for our
clinical trials due to supply chain disruptions, and delays in the
initiation and enrollment of patients in our planned clinical
trials, which would negatively impact our financial condition and
could require us to delay our clinical development programs. Given
the dynamic nature of these circumstances, the duration of any
business disruption or potential impact of the COVID-19 pandemic to
our business is difficult to predict.
22
If we continue to incur operating losses and fail to obtain the
capital necessary to fund our operations, we will be unable to
advance our development programs, complete our clinical trials, or
bring products to market, or may be forced to reduce or cease
operations entirely. In addition, any capital obtained by us may be
obtained on terms that are unfavorable to us, our investors, or
both.
Developing a new
drug and conducting clinical trials and the regulatory review
processes for one or more disease indications involves substantial
costs. We have projected cash requirements for the near term based
on a variety of assumptions, but some or all of such assumptions
are likely to be incorrect and/or incomplete, possibly materially
in an adverse direction. Our actual cash needs may deviate
materially from those projections, changes in market conditions or
other factors may increase our cash requirements, or we may not be
successful even in raising the amount of cash we currently project
will be required for the near term. We will need to raise
additional capital in the future; the amount of additional capital
needed will vary as a result of a number of factors, including
without limitation the following:
●
receiving less
funding than we require;
●
higher than
expected costs to manufacture our active pharmaceutical ingredient
and our product candidates;
●
higher than
expected costs for preclinical testing;
●
an increase in the
number, size, duration, and/or complexity of our clinical
trials;
●
slower than
expected progress in developing Validive, camsirubicin, MNPR-101,
or other product candidates, including without limitation,
additional costs caused by program delays;
●
higher than
expected costs associated with attempting to obtain regulatory
approvals, including without limitation additional costs caused by
additional regulatory requirements or larger clinical trial
requirements;
●
higher than
expected personnel, consulting or other costs, such as adding
personnel or industry expert consultants or pursuing the
licensing/acquisition of additional assets; and
●
higher than
expected costs to protect our intellectual property portfolio or
otherwise pursue our intellectual property strategy.
When we
attempt to raise additional financing, there can be no assurance
that we will be able to secure such additional financing in
sufficient quantities or at all. We may be unable to raise
additional capital for reasons including, without limitation, our
operational and/or financial performance, investor confidence in us
and the biopharmaceutical industry, credit availability from banks
and other financial institutions, the status of current projects,
and our prospects for obtaining any necessary regulatory approvals.
Potential investors’ capital investments may have shifted to
other opportunities with perceived greater returns and/or lower
risk thereby reducing capital available to us, if available at
all.
In
addition, any additional financing might not be available, and even
if available, may not be available on terms favorable to us or our
then-existing investors. We will seek to raise funds through public
or private equity offerings, debt financings, corporate
collaboration or licensing arrangements, mergers, acquisitions,
sales of intellectual property, or other financing vehicles or
arrangements. To the extent that we raise additional capital by
issuing equity securities or other securities, our then-existing
investors will experience dilution. If we raise funds through debt
financings or bank loans, we may become subject to restrictive
covenants, our assets may be pledged as collateral for the debt,
and the interests of our then-existing investors would be
subordinated to the debt holders or banks. In addition, our use of
and ability to exploit assets pledged as collateral for debt or
loans may be restricted or forfeited. To the extent that we raise
additional funds through collaboration or licensing arrangements,
we may be required to relinquish significant rights (including
without limitation intellectual property rights) to our
technologies or product candidates, or grant licenses on terms that
are not favorable to us. If we are not able to raise needed funding
under acceptable terms or at all, then we will have to reduce
expenses, including the possible options of curtailing operations,
abandoning opportunities, licensing or selling off assets, reducing
costs to a point where clinical development or other progress is
impaired, or ceasing operations entirely.
Unstable market and economic conditions may have serious adverse
consequences on our ability to raise funds, which may cause us to
cease or delay our operations.
From
time to time, global and domestic credit and financial markets have
experienced extreme disruptions, including severely diminished
liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in unemployment rates, and
uncertainty about economic stability. Our financing strategy will
be adversely affected by any such economic downturn, volatile
business environment and continued unpredictable and unstable
market conditions. If the equity and credit markets deteriorate, it
may make a debt or equity financing more difficult to complete,
costlier, and more dilutive. Failure to secure any necessary
financing in a timely manner and on favorable terms will have a
material adverse effect on our business strategy and financial
performance, and could require us to cease or delay our
operations.
23
Risks Related to Clinical Development and Regulatory
Approval
We do not have and may never have any approved products on the
market. Our business is highly dependent upon receiving approvals
from various U.S. and international governmental agencies and will
be severely harmed if we are not granted approval to manufacture
and sell our product candidates.
In
order for us to commercialize any treatment for
chemoradiation-induced SOM or for any other disease indication, we
must obtain regulatory approvals of such treatment for that
indication. Satisfying regulatory requirements is an expensive
process that typically takes many years and involves compliance
with requirements covering research and development, testing,
manufacturing, quality control, labeling, and promotion of drugs
for human use. To obtain necessary regulatory approvals, we must,
among other requirements, complete clinical trials demonstrating
that our products are safe and effective for a particular
indication. There can be no assurance that our products will prove
to be safe and effective, that our clinical trials will demonstrate
the necessary safety and effectiveness of our product candidates,
or that we will succeed in obtaining regulatory approval for any
treatment we develop even if such safety and effectiveness are
demonstrated.
Any
delays or difficulties we encounter in our clinical trials may
delay or preclude regulatory approval from the FDA or from
international regulatory organizations. Any delay or preclusion of
regulatory approval would be expected to delay or preclude the
commercialization of our products. Examples of delays or
difficulties that we may encounter in our clinical trials include
without limitation the following:
●
Clinical trials may
not yield sufficiently conclusive results for regulatory agencies
to approve the use of our products.
●
Our products may
fail to be more effective than current therapies, or to be
effective at all.
●
We may discover
that our products have adverse side effects, which could cause our
products to be delayed or precluded from receiving regulatory
approval or otherwise expose us to significant commercial and legal
risks.
●
It may take longer
than expected to determine whether or not a treatment is safe and
effective.
●
Patients involved
in our clinical trials may suffer severe adverse side effects even
up to death, whether as a result of treatment with our products,
the withholding of such treatment, or other reasons (whether within
or outside of our control).
●
We may fail to be
able to enroll a sufficient number of patients in our clinical
trials, or it may take
longer than expected to enroll.
●
Patients enrolled
in our clinical trials may not have the characteristics necessary
to obtain regulatory approval for a particular indication or
patient population.
●
We may be unable to
produce sufficient quantities of product to complete the clinical
trials.
●
Even if we are
successful in our clinical trials, any required governmental
approvals may still not be obtained or, if obtained, may not be
maintained.
●
If approval for
commercialization is granted, it is possible the authorized use
will be more limited than is necessary for commercial success, or
that approval may be conditioned on completion of further clinical
trials or other activities, which will cause a substantial increase
in costs and which we might not succeed in performing or
completing.
●
If granted,
approval may be withdrawn or limited if problems with our products
emerge or are suggested by the data arising from their use or if
there is a change in law or regulation.
Any
success we may achieve at a given stage of our clinical trials does
not guarantee that we will achieve success at any subsequent stage,
including without limitation final FDA or other regulatory
organizations approval.
We
may encounter delays or rejections in the regulatory approval
process because of additional government regulation resulting from
future legislation or administrative action, or from changes in the
policies of the FDA or other regulatory bodies during the period of
product development, clinical trials, or regulatory review. Failure
to comply with applicable regulatory requirements may result in
criminal prosecution, civil penalties, recall or seizure of
products, total or partial suspension of production, or an
injunction preventing certain activity, as well as other regulatory
action against our product candidates or us. As a company, we have
no experience in successfully obtaining regulatory approval for a
product and thus may be poorly equipped to gauge, and may prove
unable to manage, risks relating to obtaining such
approval.
Outside
the U.S., our ability to market a product is contingent upon
receiving clearances from appropriate non-U.S. regulatory
authorities. Non-U.S. regulatory approval typically includes all of
the risks associated with FDA clearance discussed above as well as
geopolitical uncertainties and the additional uncertainties and
potential prejudices faced by U.S. pharmaceutical companies
conducting business abroad. In certain cases, pricing restrictions
and practices can make achieving even limited profitability very
difficult.
Even if we complete the clinical trials we discussed with the FDA,
there is no guarantee that at the time of submission the FDA will
accept our new drug application (“NDA”).
The
FDA provided helpful guidance on our proposed Validive adaptive
design trial and confirmatory second trial, informing us it might
be an acceptable pathway for NDA submission, but the FDA is not
bound by the guidance they give, and can change their position in
the future. Any future decision by the FDA will be driven largely
by the data generated from the Validive clinical
trials.
24
As a company, we have never completed a clinical trial and have
limited experience in completing regulatory filings and any delays
in regulatory filings could materially affect our financial
condition.
While
members of our team have conducted numerous clinical trials at
previous companies, and have launched and marketed innovative
pharmaceutical products in the US and internationally, as a
company, we have not yet completed any clinical trials of our
product candidates, nor have we demonstrated the ability to obtain
marketing approvals, manufacture product candidates at a commercial
scale, or conduct sales and marketing activities necessary for the
successful commercialization of a product. Consequently, we have no
historical basis as a company by which one can evaluate or predict
reliably our future success or viability.
Additionally,
while our team has experience at prior companies with regulatory
filings, as a company, we have limited experience with regulatory
filings with agencies such as the FDA or EMA. Any delay in our
regulatory filings for our product candidates, and any adverse
development or perceived adverse development with respect to the
applicable regulatory authority’s review of such filings,
including, without limitation, the FDA’s issuance of a
“refuse to file” letter or a request for additional
information, could materially affect our financial
condition.
We may seek fast track designation for one or more of our current
and future product candidates, but we might not receive such
designation, and even if we do, such designation may not actually
lead to a faster development or regulatory review or approval
process.
Our
lead product candidate, Validive, has been given fast track
designation from the FDA. Fast track designation does not ensure
that we will receive marketing approval or that approval will be
granted within any particular timeframe. We may not experience a
faster development, regulatory review or approval process with fast
track designation compared to conventional FDA procedures.
Additionally, the FDA may withdraw fast track designation, for
reasons such as it comes to believe a drug candidate no longer
adequately addresses an unmet medical need. Fast track designation
alone does not guarantee qualification for the FDA’s priority
review procedures. If we seek fast track designation for other
product candidates, we may not receive such a designation from the
FDA.
We, or any future collaborators, may not be able to obtain and
maintain orphan drug exclusivity for our product candidates in the
U.S. and Europe.
Validive
has been granted orphan drug designation for the treatment of SOM
in the EU. Camsirubicin has been granted orphan drug designation
for the treatment of soft tissue sarcoma in the U.S. and in the EU.
We may seek additional orphan drug designations or regulatory
incentives for our pipeline product candidates, for other
indications or for future product candidates. There can be no
assurances that we will be able to obtain such
designations.
Even
if we obtain orphan drug designation for a product candidate, we
may not be able to maintain orphan drug exclusivity for that drug.
For example, orphan drug designation may be removed if the
prevalence of an indication increases beyond the patient number
limit required to maintain designation. Generally, if a drug with
an orphan drug designation subsequently receives the first
marketing approval for the indication for which it has such
designation, the drug is entitled to a period of marketing
exclusivity, which precludes the EMA or the FDA from approving
another marketing application for the same product in the same
indication for that time period. Orphan drug exclusivity may be
lost if the FDA or EMA determines that the request for designation
was materially defective or if the manufacturer is unable to assure
sufficient quantity of the product to meet the needs of patients
with the rare disease or condition. Moreover, even after an orphan
drug is approved, the FDA can subsequently approve a different drug
for the same condition if the FDA concludes that the later drug is
clinically superior in that it is shown to be safer, more effective
or makes a major contribution to patient care compared to our
product.
The
FDA may reevaluate the Orphan Drug Act and its regulations and
policies, and similarly the EMA may reevaluate its policies and
regulations. We do not know if, when, or how the FDA or EMA may
change their orphan drug regulations and policies in the future,
and it is uncertain how any changes might affect our business.
Depending on what changes the FDA and/or EMA may make to their
orphan drug regulations and policies, our business could be
adversely impacted.
If serious adverse or undesirable side effects are identified
during the development of our product candidates, we may abandon or
limit our development or commercialization of such product
candidates.
If
our product candidates are associated with undesirable side effects
or have unexpected characteristics, we may need to abandon their
development or limit development to certain 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.
If
we elect or are forced to suspend or terminate any clinical trial
with one of our product candidates, the commercial prospects of
such product candidate will be harmed, and our ability to generate
revenue from such product candidate will be delayed or eliminated.
Any of these occurrences may harm our business, financial condition
and prospects significantly.
With
regard to our lead product candidate, unforeseen side effects from
Validive could arise either during clinical development or, if
approved, after Validive has been marketed. This could cause
regulatory approvals for, or market acceptance of, Validive harder
and costlier to obtain.
To
date, no difference in the frequency of serious adverse events
(“SAEs”) has been observed in patients treated with
Validive compared to placebo. In the Phase 2 clinical trial, two
patients in the placebo group and 2 patients in the Validive 50
µg group experienced SAEs that were assessed as treatment
related. No patients in the Validive treated cohorts were
discontinued due to study drug. Clonidine, the active ingredient of
Validive, has been used for over 50 years as an orally swallowed
systemic treatment for high blood pressure. Validive administration
leads to very low, but still detectable exposure of clonidine
outside the oral cavity. Thus, there is some risk that patients may
experience side effects due to this systemic exposure, which could
include a reduction in blood pressure, irregular heartbeat,
drowsiness or dry mouth.
The
results of our planned or any future clinical trials may show that
the side effects of Validive are unacceptable or intolerable, which
could interrupt, delay or halt clinical trials, and result in delay
of, or failure to obtain, marketing approval from the FDA or EMA
and other regulatory authorities, or result in marketing approval
from the FDA or EMA and other regulatory authorities with
restrictive label warnings.
If
Validive receives marketing approval and we or others later
identify undesirable or unacceptable side effects caused by the use
of Validive:
●
regulatory
authorities may withdraw their approval of the product, which would
force us to remove Validive from the market;
●
regulatory
authorities may require the addition of labeling statements,
specific warnings, a contraindication, or field alerts to
physicians and pharmacies;
●
we
may be required to change instructions regarding the way the
product is administered, conduct additional clinical trials or
change the labeling of the product;
●
we
may be subject to limitations on how we may promote the
product;
●
sales
of the product may decrease significantly;
●
we
may be subject to litigation or product liability claims;
and
●
our
reputation may suffer.
Any
of these events could prevent us or our potential future
collaborators from achieving or maintaining market acceptance of
Validive and/or could substantially increase commercialization
costs and expenses, which in turn could delay or prevent us from
generating significant revenues from the sale of
Validive.
25
As with any clinical trial, our Phase 3 development program
for Validive entails significant risk of not meeting clinical
endpoints. If our Phase 3 clinical trial results are not
statistically significant, the FDA will likely not approve Validive
for marketing which will result in a decrease in our stock price
and market value.
The Phase 3
development program for Validive has been designed based on an
analysis of the 64 oropharyngeal cancer (“OPC”)
patients included in the Phase 2 trial (n= 24 in the placebo group,
n= 21 Validive 50 µg group, and n= 19 Validive 100 µg
group). While a dose response was observed in the Validive treated
OPC cohorts compared to placebo across multiple clinically
meaningful endpoints, the ability to establish statistical
significance was limited by the relatively small sample size. This
increases the risk that the Phase 3 trials may not achieve their
prospectively defined endpoints. Given the large unmet medical need
for the prevention of radiotherapy-induced SOM in OPC patients, we
have decided to pursue an adaptive design Phase 3 clinical
development strategy in an effort to mitigate this risk. Our
adaptive design approach will allow us to confirm or reject our
hypothesis based off the Phase 2 data that the optimal patient
population for Validive is likely either all OPC patients or HPV+
OPC patients, and then run a confirmatory second trial should it be
warranted. However, if our Phase 3 clinical trial results are
not statistically significant, the FDA will likely not approve
Validive for marketing which will result in a decrease in our stock
price and market value.
If we experience delays or difficulties in the enrollment of
subjects to our clinical trials, our receipt of necessary
regulatory approvals could be delayed or prevented, which could
materially affect our financial condition.
Identifying,
screening and enrolling patients to participate in clinical trials
of our product candidates is critical to our success, and we may
not be able to identify, recruit, enroll and dose a sufficient
number of patients with the required or desired characteristics to
complete our clinical trials in a timely manner. The timing of our
clinical trials depends on our ability to recruit patients to
participate as well as to subsequently dose these patients and
complete required follow-up periods. In particular, because our
planned clinical trials of Validive and camsirubicin are focused on
indications with relatively small patient populations, our ability
to enroll eligible patients may be limited or may result in slower
enrollment than we anticipate.
In
addition, we may experience enrollment delays related to increased
or unforeseen regulatory, legal and logistical requirements at
certain clinical trial sites. These delays could be caused by
reviews by regulatory authorities and contractual discussions with
individual clinical trial sites. Any delays in enrolling and/or
dosing patients in our planned clinical trials could result in
increased costs, delays in advancing our product candidates, delays
in testing the effectiveness of our product candidates or in
termination of the clinical trials altogether.
Patient
enrollment may be affected if our competitors have ongoing clinical
trials with products for the same indications as our product
candidates, and patients who would otherwise be eligible for our
clinical trials instead enroll in our competitors’ clinical
trials. Patient enrollment may also be affected by other factors,
including:
●
coordination
with clinical research organizations to enroll and administer the
clinical trials;
●
coordination
and recruitment of collaborators and investigators at individual
sites;
●
size
of the patient population and process for identifying
patients;
●
design
of the clinical trial protocol;
●
eligibility
and exclusion criteria;
●
perceived
risks and benefits of the product candidates under
study;
●
availability
of competing commercially available therapies and other competing
products’ clinical trials;
●
time
of year in which the trials are initiated or
conducted;
●
severity
of the diseases under investigation;
●
ability
to obtain and maintain subject consents;
●
ability
to enroll and treat patients in a timely manner;
●
risk
that enrolled subjects will drop out before completion of the
trials;
●
proximity
and availability of clinical trial sites for prospective
patients;
●
ability
to monitor subjects adequately during and after treatment;
and
●
patient
referral practices of physicians.
Our
inability to enroll a sufficient number of patients for clinical
trials would result in significant delays and could require us to
abandon one or more clinical trials altogether. Enrollment delays
in these clinical trials may result in increased development costs
for our product candidates, which could materially affect our
financial condition.
26
If we or our licensees, development collaborators, or suppliers are
unable to manufacture our products in sufficient quantities or at
defined quality specifications, or are unable to obtain regulatory
approvals for the manufacturing facility, we may be unable to
develop and/or meet demand for our products and lose time to market
and potential revenues.
Completion
of our clinical trials and commercialization of our product
candidates require access to, or development of, facilities to
manufacture a sufficient supply of our product candidates. We will
utilize third parties to manufacture Validive, camsirubicin, and
MNPR-101. We currently have manufacturing arrangements for Validive
and camsirubicin. We are in negotiations with contract
manufacturers for MNPR-101.
In
the future we may become unable, for various reasons, to rely on
our sources for the manufacture of our product candidates, either
for clinical trials or, at some future date, for commercial
distribution. We may not be successful in identifying additional or
replacement third-party manufacturers, or in negotiating acceptable
terms with any we do identify. We may face competition for access
to these manufacturers’ facilities and may be subject to
manufacturing delays if the manufacturers give other clients higher
priority than they give to us. Even if we are able to identify an
additional or replacement third-party manufacturer, the delays and
costs associated with establishing and maintaining a relationship
with such manufacturer may have a material adverse effect on
us.
Before
we can begin to commercially manufacture Validive, camsirubicin,
MNPR-101, or any other product candidate, we must obtain regulatory
approval of the manufacturing facility and process. Manufacturing
of drugs for clinical and commercial purposes must comply with
current Good Manufacturing Practices requirements, commonly known
as “cGMP.” The cGMP requirements govern quality control
and documentation policies and procedures. Complying with cGMP and
non-U.S. regulatory requirements will require that we expend time,
money, and effort in production, recordkeeping, and quality control
to ensure that the product meets applicable specifications and
other requirements. We, or our contracted manufacturing facility,
must also pass a pre-approval inspection prior to FDA approval.
Failure to pass a pre-approval inspection may significantly delay
or prevent FDA approval of our products. If we fail to comply with
these requirements, we would be subject to possible regulatory
action and may be limited in the jurisdictions in which we are
permitted to sell our products and will lose time to market and
potential revenues.
It is uncertain whether product liability insurance will be
adequate to address product liability claims, or that insurance
against such claims will be affordable or available on acceptable
terms in the future.
Clinical
research involves the testing of new drugs on human volunteers
pursuant to a clinical trial protocol. Such testing involves a risk
of liability for personal injury to or death of patients due to,
among other causes, adverse side effects, improper administration
of the new drug, or improper volunteer behavior. Claims may arise
from patients, clinical trial volunteers, consumers, physicians,
hospitals, companies, institutions, researchers, or others using,
selling, or buying our products, as well as from governmental
bodies. In addition, product liability and related risks are likely
to increase over time, in particular upon the commercialization or
marketing of any products by us or parties with which we enter into
development, marketing, or distribution collaborations. Although we
are contracting for general liability insurance in connection with
our ongoing business, there can be no assurance that the amount and
scope of such insurance coverage will be appropriate and sufficient
in the event any claims arise, that we will be able to secure
additional coverage should we attempt to do so, or that our
insurers would not contest or refuse any attempt by us to collect
on such insurance policies. Furthermore, there can be no assurance
that suitable product liability insurance (at the clinical stage
and/or commercial stage) will continue to be available on terms
acceptable to us or at all, or that, if obtained, the insurance
coverage will be appropriate and sufficient to cover any potential
claims or liabilities.
If the market opportunities for our current and potential future
drug candidates are smaller than we believe they are, our ability
to generate product revenues will be adversely affected and our
business may suffer.
Our
understanding of the number of people who suffer from SOM resulting
from chemoradiotherapy for the treatment of OPC, whom Validive may
have the potential to treat, is based upon estimates and on various
reports from governments or medical institutions. These estimates
or reports may prove to be incorrect, and new studies may
demonstrate or suggest a lower estimated incidence or prevalence of
this condition. The number of patients in the U.S. or elsewhere may
turn out to be lower than expected, may not be otherwise amenable
to Validive treatment, or treatment-amenable patients may become
increasingly difficult to identify and access, all of which would
adversely affect our business prospects and financial condition. In
particular, the treatable population for Validive may further be
reduced if our estimates of addressable populations are erroneous
or sub-populations of patients within the addressable population do
not derive benefit from Validive.
Risks Related to Our Reliance on Third Parties
Corporate, non-profit, and academic collaborators may take actions
(including lack of effective actions) to delay, prevent, or
undermine the success of our products.
Our
operating and financial strategy for the development, clinical
testing, manufacture, and commercialization of product candidates
is heavily dependent on us entering into collaborations with
corporations, non-profit organizations, academic institutions,
licensors, licensees, and other parties. There can be no assurance
that we will be successful in establishing such collaborations.
Current and future collaborations are and may be terminable at the
sole discretion of the collaborator. The activities of any
collaborator will not be within our direct control and may not be
in our power to influence. There can be no assurance that any
collaborator will perform its obligations to our satisfaction or at
all; that we will derive any revenue, profits, or benefit from such
collaborations; or that any collaborator will not compete with us.
If any collaboration is not pursued, we may require substantially
greater capital to undertake development and commercialization of
our proposed products, and may not be able to develop and
commercialize such products effectively, if at all. In addition, a
lack of development and commercialization collaborations may lead
to significant delays in introducing proposed products into certain
markets and/or reduced sales of proposed products in such markets.
Furthermore, current and future collaborators may act deliberately
or inadvertently in ways detrimental to our interests.
The termination of third-party licenses could adversely affect our
rights to important compounds or technologies.
We
have exercised our option to license Validive; as such, Onxeo has
the ability to terminate the license if we breach our obligations
under the license agreement. A termination of the license agreement
might force us to cease developing and/or selling Validive, if it
gets to market. We rely on certain rights to MNPR-101 that we have
secured through a non-exclusive license agreement with XOMA. XOMA,
as licensor, has the ability to terminate the license if we breach
our obligations under the license agreement and do not remedy any
such breach within a set time after receiving written notice of
such breach from XOMA. A termination of the license agreement might
force us to cease developing and/or selling MNPR-101, if it gets to
market.
27
Data provided by collaborators and other parties upon which we rely
have not been independently verified and could turn out to be
inaccurate, misleading, or incomplete.
We
rely on third-party vendors, scientists, and collaborators to
provide us with significant data and other information related to
our projects, clinical trials, and business. We do not
independently verify or audit all of such data (including possibly
material portions thereof). As a result, such data may be
inaccurate, misleading, or incomplete.
In certain cases, we may need to rely on a single supplier for a
particular manufacturing material or service, and any interruption
in or termination of service by such supplier could delay or
disrupt the commercialization of our products.
We
rely on third-party suppliers for the materials used to manufacture
our compounds. Some of these materials may at times only be
available from one supplier. Any interruption in or termination of
service by such single source suppliers could result in a delay or
disruption in manufacturing until we locate an alternative source
of supply. There can be no assurance that we would be successful in
locating an alternative source of supply or in negotiating
acceptable terms with such prospective supplier.
Our Validive manufacturer is in the United Kingdom
(“UK”), and it is unknown how they will be impacted by
Brexit; however, if they are negatively impacted, this could
increase our manufacturing costs and adversely impact our financial
condition.
The
UK’s referendum to leave the EU (or “Brexit”), is
now in force and may cause disruptions to capital and currency
markets worldwide. The full impact of Brexit, however, remains
uncertain. A process of negotiation will determine the future
terms of the UK’s relationship with the EU. During this
period of negotiation and afterwards, our Validive manufacturer may
be negatively affected by interest rate, exchange rate and other
market and economic volatility, as well as regulatory and political
uncertainty. The tax consequences of the UK’s withdrawal
from the EU are uncertain as well. If Brexit has a detrimental
effect on our Validive manufacturer, it could, in turn, adversely
impact our manufacturing costs and financial
condition.
Our contracted camsirubicin manufacturing plant is in Ukraine, and
is currently being affected by regional geopolitical factors
outside of its control. If we are unable to retain a manufacturing
site outside of this region with our current contract manufacturer,
we will need to enlist a new contract manufacturer and it will
delay our camsirubicin clinical program with GEIS and may increase
our cost in supporting the GEIS Phase 2 clinical
trial.
Our
contracted camsirubicin manufacturing partner is one of the
world’s leading providers of commercial anthracycline active
pharmaceutical ingredients. Their manufacturing plant making
camsirubicin is in Eastern Ukraine and is currently being affected
by regional geopolitical factors outside of its control. The
manufacturing plant is being affected by restrictions in the region
on the import and export of raw materials and finished products. We
are currently working to resolve the situation either by having our
current contract manufacturer utilize one of their plants in
another country, or by us contracting with another manufacturer
elsewhere. If we need to retain another contract manufacturer, it
will cause a further delay to our GEIS-sponsored Phase 2 clinical
program and may increase our manufacturing costs.
We rely on third parties to conduct our non-clinical studies and
our clinical trials. If these third parties do not successfully
carry out their contractual duties or meet expected deadlines, we
may be unable to obtain regulatory approval for or commercialize
our current product candidates or any future products, on a timely
basis or at all, and our financial condition will be adversely
affected.
We
do not have the ability to independently conduct non-clinical
studies and clinical trials. We rely on medical institutions,
clinical investigators, contract laboratories, collaborative
partners and other third parties, such as contract research
organizations or clinical research organizations, to conduct
non-clinical studies and clinical trials on our product candidates.
The third parties with whom we contract for execution of our
non-clinical studies and clinical trials play a significant role in
the conduct of these studies and trials and the subsequent
collection and analysis of data. However, these third parties are
not our employees, and except for contractual duties and
obligations, we have limited ability to control the amount or
timing of resources that they devote to our programs.
Although
we rely on third parties to conduct our non-clinical studies and
clinical trials, we remain responsible for ensuring that each of
our non-clinical studies and clinical trials is conducted in
accordance with its investigational plan and protocol. Moreover,
the FDA, EMA and other foreign regulatory authorities require us to
comply with regulations and standards, including some regulations
commonly referred to as good clinical practices
(“GCPs”), for conducting, monitoring, recording and
reporting the results of clinical trials to ensure that the data
and results are scientifically credible and accurate, and that the
trial subjects are adequately informed of the potential risks of
participating in clinical trials.
In
addition, the execution of non-clinical studies and clinical
trials, and the subsequent compilation and analyses of the data
produced, requires coordination among various parties. In order for
these functions to be carried out effectively and efficiently, it
is imperative that these parties communicate and coordinate with
one another. Moreover, these third parties may also have
relationships with other commercial entities, some of which may
compete with us. Under certain circumstances, these third parties
may be able to terminate their agreements with us upon short
notice. If the third parties conducting our clinical trials do not
perform their contractual duties or obligations, experience work
stoppages, do not meet expected deadlines, terminate their
agreements with us or need to be replaced, or if the quality or
accuracy of the clinical data they obtain is compromised due to the
failure to adhere to our clinical trial protocols or GCPs, or for
any other reason, we may need to enter into new arrangements with
alternative third parties, which could be difficult, costly or
impossible, and our clinical trials may be extended, delayed or
terminated or may need to be repeated. If any of the foregoing were
to occur, we may not be able to obtain, on a timely basis or at
all, regulatory approval for or to commercialize the product
candidate being tested in such trials, and as a result, our
financial condition will be adversely affected.
28
Risks Related to Commercialization of Our Product
Candidates
We have no experience as a company in commercializing any product.
If we fail to obtain commercial expertise, upon product approval by
regulatory agencies, our product launch and revenues could be
delayed.
As
a company, we have never obtained regulatory approval for, or
commercialized, any product. Accordingly, we have not yet begun to
build out any sales or marketing or distribution capabilities. If
we are unable to establish, or contract for, effective sales and
marketing and distribution capabilities, or if we are unable to
enter into agreements with third parties to commercialize our
product candidates on favorable terms or on any reasonable terms at
all, we may not be able to effectively generate product revenues
once our product candidates are approved for marketing. If we fail
to obtain commercial expertise or capabilities, upon drug approval,
our product launch and subsequent revenues could be delayed and /or
fail to reach their commercial potential.
Our product development efforts are at an early stage. We have not
yet undertaken any marketing efforts, and there can be no assurance
that future anticipated market testing and analyses will validate
our marketing strategy. We may need to modify the products, or we
may not be successful in either developing or marketing those
products.
As
a company, we have not completed the development or clinical trials
of any product candidates and, accordingly, have not yet begun to
market or generate revenue from the commercialization of any
products. Obtaining approvals of these product candidates will
require substantial additional research and development as well as
costly clinical trials. There can be no assurance that we will
successfully complete development of our product candidates or
successfully market them. We may encounter problems and delays
relating to research and development, regulatory approval,
intellectual property rights of product candidates, or other
factors. There can be no assurance that our development programs
will be successful, that our product candidates will prove to be
safe and effective in or after clinical trials, that the necessary
regulatory approvals for any product candidates will be obtained,
or, even if obtained, will be as broad as sought or will be
maintained for any period thereafter, that patents will issue on
our patent applications, that any intellectual property protections
we secure will be adequate, or that our collaboration arrangements
will not diminish the value of our intellectual property through
licensing or other arrangements. Furthermore, there can be no
assurance that any product we might market will be received
favorably by customers (whether physicians, payers, patients, or
all three), adequately reimbursed by third-party payers, or that
competitive products will not perform better and/or be marketed
more successfully. Additionally, there can be no assurances that
any future market testing and analyses will validate our marketing
strategies. We may need to seek to modify the product labels
through additional studies in order to be able to market them
successfully to reach their commercial potential.
If we are unable to establish relationships with licensees or
collaborators to carry out sales, marketing, and distribution
functions or to create effective marketing, sales, and distribution
capabilities, we will be unable to market our products
successfully.
Our
business strategy may include out-licensing product candidates to
or collaborating with larger firms with experience in marketing and
selling pharmaceutical products. There can be no assurance that we
will successfully be able to establish marketing, sales, or
distribution relationships with any third-party, that such
relationships, if established, will be successful, or that we will
be successful in gaining market acceptance for any products we
might develop. To the extent that we enter into any marketing,
sales, or distribution arrangements with third parties, our product
revenues per unit sold are expected to be lower than if we
marketed, sold, and distributed our products directly, and any
revenues we receive will depend upon the efforts of such third
parties.
If
we are unable to establish such third-party marketing and sales
relationships, or choose not to do so, we would have to establish
in-house marketing and sales capabilities. We have no experience in
marketing or selling oncology pharmaceutical products, and
currently have no marketing, sales, or distribution infrastructure
and no experience developing or managing such infrastructure for an
oncology related product. To market any products directly, we would
have to establish a marketing, sales, and distribution force that
has technical expertise and could support a distribution
capability. Competition in the biopharmaceutical industry for
technically proficient marketing, sales, and distribution personnel
is intense and attracting and retaining such personnel may
significantly increase our costs. There can be no assurance that we
will be able to establish internal marketing, sales, or
distribution capabilities or that these capabilities will be
sufficient to meet our needs.
Commercial success of our product candidates will depend on the
acceptance of these products by physicians, payers, and
patients.
Any
product candidate that we may develop may not gain market
acceptance among physicians, payers and patients. Market acceptance
of and demand for any product that we may develop will depend on
many factors, including without limitation:
●
Comparative
superiority of the efficacy and safety in the treatment of the
disease indication compared to alternative treatments;
●
Less
incidence, prevalence and severity of adverse side
effects;
●
Potential
advantages over alternative treatments;
●
Cost
effectiveness;
●
Convenience
and ease of administration;
●
Sufficient
third-party coverage and/or reimbursement;
●
Strength
of sales, marketing and distribution support; and
●
Our
ability to provide acceptable evidence of safety and
efficacy.
If
any product candidate developed by us receives regulatory approval
but does not achieve an adequate level of market acceptance by
physicians, payers, and patients, we may generate insufficient,
little, or no product revenue or earn appropriate returns on
the investment of product development costs and may not become
profitable.
Our products may not be accepted for reimbursement or properly
reimbursed by third-party payers.
The
successful commercialization of any products we might develop will
depend substantially on whether the costs of our products and
related treatments are reimbursed at acceptable levels by
government authorities, private healthcare insurers, and other
third-party payers, such as health maintenance organizations.
Reimbursement rates may vary, depending upon the third-party payer,
the type of insurance plan, and other similar or dissimilar
factors. If our products do not achieve adequate reimbursement,
then the number of physician prescriptions of our products may not
be sufficient to make our products profitable.
Comparative
effectiveness research demonstrating benefits of a
competitor’s product could adversely affect the sales of our
product candidates. If third-party payers do not consider our
products to be cost-effective compared to other available
therapies, they may not cover our products as a benefit under their
plans or, if they do, the level of payment may not be sufficient to
allow us to sell our products on a profitable basis.
Adequate
third-party reimbursement may not be available to enable us to
maintain price levels sufficient to realize an appropriate return
on our investment in the product development of that product. In
addition, in the U.S. there is a growing emphasis on comparative
effectiveness research, both by private payers and by government
agencies. To the extent other drugs or therapies are found to be
more effective than our products, payers may elect to cover such
therapies in lieu of our products or reimburse our products at a
lower rate.
29
The effects of economic and political pressure to lower
pharmaceutical prices are a major threat to the economic viability
of new research-based pharmaceutical products, and any development
along these lines could materially and adversely affect our
prospects.
Emphasis
on managed care and government price controls in the U.S. has
increased and we expect this will continue to increase the pressure
on pharmaceutical pricing. Coverage policies and third-party
reimbursement rates may change at any time. Even if favorable
coverage and reimbursement status is attained for one or more
products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the
future.
Any
development along these lines could materially and adversely affect
our prospects. We are unable to predict what legislative or
regulatory changes relating to the healthcare industry, including
without limitation any changes affecting governmental and/or
private or third-party coverage and reimbursement, may be enacted
in the future, or what effect such legislative or regulatory
changes would have on our business.
If we obtain FDA approval for any of our product candidates, we
will be subject to various federal and state fraud and abuse laws;
these laws may impact, among other things, our proposed sales,
marketing and education programs. Fraud and abuse laws are expected
to increase in breadth and in detail, which will likely increase
our operating costs and the complexity of our programs to ensure
compliance with such enhanced laws.
If
we obtain FDA approval for any of our product candidates and begin
commercializing those products in the U.S., our operations may be
directly, or indirectly through our customers, distributors, or
other business partners, subject to various federal and state fraud
and abuse laws, including, without limitation, anti-kickback
statutes and false claims statutes which may increase our operating
costs. These laws may impact, among other things, our proposed
sales, marketing and education programs. In addition, we may be
subject to data privacy and security regulation by both the federal
government and the states in which we conduct
business.
If our operations are found to be in violation of any of the
federal and state fraud and abuse laws or any other governmental
regulations that apply to us, we may be subject to criminal actions
and significant civil monetary penalties, which would adversely
affect our ability to operate our business and our results of
operations.
If
our operations are found to be in violation,
even inadvertently, of any of the federal and state fraud
and abuse laws, including, without limitation, anti-kickback
statutes and false claims statutes or any other governmental
regulations that apply to us, we may be subject to penalties,
including criminal and significant civil monetary penalties,
damages, fines, imprisonment, exclusion from participation in
government healthcare programs, and the curtailment or
restructuring of our operations, any of which could adversely
affect our ability to operate our business and our results of
operations. To the extent that any of our product candidates are
ultimately sold in a foreign country, we may be subject to similar
foreign laws and regulations, which may include, for instance,
applicable post-marketing requirements, including safety
surveillance, anti-fraud and abuse laws, and implementation of
corporate compliance programs and reporting of payments or
transfers of value to healthcare professionals.
Negotiated prices for our products covered by a Part D prescription
drug plan and other government programs will be lower than the
prices we might otherwise obtain.
Government
payment for some of the costs of prescription drugs may increase
demand for our products for which we receive marketing approval;
however, any negotiated prices for our products covered by a Part D
prescription drug plan and other government programs will be lower
than the prices we might otherwise obtain. We anticipate that the
number and type of products that will be subject to federal pricing
will increase over time. There may be rules to demand that the
government and medical institutions, which are in part supported by
government funding, will be granted access to medicines at the same
highly favorable prices given to the governmental direct medical
care programs.
Risks Related to Our Intellectual Property
If we and our third-party licensors do not obtain and preserve
protection for our respective intellectual property rights, our
competitors may be able to take advantage of our (and our
licensors’) development efforts to develop competing
drugs.
Our
commercial success will depend in part on obtaining patent
protection for any products and other technologies we might
develop, and successfully defending any patents we obtain against
third-party challenges. We have licensed all intellectual property
related to Validive from Onxeo S.A., a French public company. See
“Business - Partnerships, Licensing and Acquisition”.
The assignment and transfer of the camsirubicin (formerly
GPX-150) patent portfolio from TacticGem, LLC
(“TacticGem”) to us has been completed. We filed and
have been granted in the U.S. and various countries around the
world patents for antibodies that target uPAR for our MNPR-101
program. We have also been granted in the U.S. and various
countries around the world patents to a specific sequence of amino
acids on uPAR, to which our MNPR-101 antibody binds. We are
currently prosecuting this patent in other countries around the
world to further protect MNPR-101. The patent process is subject to
numerous risks and uncertainties, and there can be no assurance
that we will be successful in obtaining and defending patents. See
“Business - Intellectual Property Portfolio and
Exclusivity”. These risks and uncertainties include without
limitation the following:
●
Patents
that may be issued or licensed may be challenged, invalidated, or
circumvented; or may not provide any competitive advantage for
other reasons.
●
Our
licensors may terminate or breach our existing or future license
agreements, thereby reducing or preventing our ability to exclude
competition; termination of such license agreements may also
subject us to risk of patent infringement of patents to which we no
longer have a license.
●
Our
competitors, many of which have substantially greater resources
than us and have made significant investments in competing
technologies, may seek, or may already have obtained, patents that
will limit, interfere with, or eliminate our ability to make, use,
and sell our potential products either in the U.S. or in
international markets.
●
As
a matter of public policy regarding worldwide health concerns,
there may be significant pressure on the U.S. government and other
international governmental bodies to limit the scope of domestic
and international patent protection for cancer treatments that
prove successful.
●
Countries
other than the U.S. may have less restrictive patent laws than
those upheld by the U.S. courts; therefore, non-U.S. competitors
could exploit these laws to create, develop, and market competing
products. In some countries, the legal compliance with
pharmaceutical patents, patent applications and other intellectual
property regulations is very weak or actively evaded in some cases
with government aid.
In
addition, the U.S. Patent and Trademark Office
(“USPTO”) and patent offices in other jurisdictions
have often required that patent applications concerning
pharmaceutical and/or biotechnology-related inventions be limited
or narrowed substantially to cover only the specific innovations
exemplified in the patent application, thereby limiting their scope
of protection against competitive challenges. Thus, even if we or
our licensors are able to obtain patents, the scope of the patents
may be substantially narrower than anticipated.
If
we permit our patents to lapse or expire, we will not be protected
and will have less of a competitive advantage. The value of our
products may be greatly reduced if this occurs. Our patents expire
at different times and are subject to the laws of multiple
countries. Some of our patents are currently near expiration and we
may pursue patent term extensions for these where appropriate. See
“Business - Intellectual Property Portfolio and
Exclusivity”.
In
addition to patents, we also rely on trade secrets and proprietary
know-how. While we take measures to protect this information by
entering into confidentiality and invention agreements with our
consultants and collaborators, we cannot provide any assurances
that these agreements will be fully enforceable and will not be
breached, that we will be able to protect ourselves from the
harmful effects of disclosure if they are not fully enforceable or
are breached, that any remedy for a breach will adequately
compensate us, that these agreements will achieve their intended
aims, or that our trade secrets will not otherwise become known or
be independently discovered by competitors. If any of these events
for which we cannot provide assurances occurs, or we otherwise lose
protection for our trade secrets or proprietary know-how, the value
of this information may be greatly reduced.
30
The patent protection we obtain and preserve for our product
candidates may not be sufficient to provide us with any material
competitive advantage.
We
may be subject to competition despite the existence of intellectual
property we license or own. We can give no assurances that our
intellectual property claims will be sufficient to prevent third
parties from designing around patents we own or license and
developing and commercializing competitive products. The existence
of competitive products that avoid our intellectual property could
materially adversely affect our operating results and financial
condition. Furthermore, limitations, or perceived limitations, in
our intellectual property may limit the interest of third parties
to partner, collaborate or otherwise transact with us, if third
parties perceive a higher than acceptable risk to commercialization
of our products or future products. When looking at our Validive
patents’ ability to block competition, the protection offered
by our patents may be, to some extent, more limited than the
protection provided by patents claiming the composition of matter
of entirely new chemical structures previously unknown. If a
competitor were able to successfully design around any method of
use and formulation patents we may have now or in the future, our
business and competitive advantage could be adversely
affected.
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. In the U.S., 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. Various
extensions may be available, but the life of a patent, and the
protection it affords, is limited. Even if patents covering our
product candidates are obtained, once the patent life has expired
for a product candidate, we may be open to competition from
competitive medications, including generic medications. 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. As a result, our owned and licensed
patent portfolio may not provide us with sufficient rights to
exclude others from commercializing product candidates similar or
identical to ours.
Depending
upon the timing, duration and conditions of any FDA marketing
approval of our product candidates, one or more of our U.S. patents
may be eligible for limited patent term extension under the Drug
Price Competition and Patent Term Restoration Act of 1984, referred
to as the Hatch-Waxman Amendments, and similar legislation in the
European Union. The Hatch-Waxman Amendments permit a patent term
extension of up to five years for a patent covering an approved
product as compensation for effective patent term lost during
product development and the FDA regulatory review process. However,
we may not receive an extension if we fail to exercise due
diligence during the testing phase or regulatory review process,
fail to apply within applicable deadlines, fail to apply prior to
expiration of relevant patents or otherwise fail to satisfy
applicable requirements. Moreover, the length of the extension
could be less than we request. Only one patent per approved product
can be extended, the extension cannot extend the total patent term
beyond 14 years from approval and only those claims covering the
approved drug, a method for using it or a method for manufacturing
it may be extended. If we are unable to obtain patent term
extension or the term of any such extension is less than we
request, the period during which we can enforce our patent rights
for the applicable product candidate will be shortened and our
competitors may obtain approval to market competing products
sooner. As a result, our revenue from applicable products could be
reduced. Further, if this occurs, our competitors may take
advantage of our investment in development and trials by
referencing our clinical and preclinical data and launch their
product earlier than might otherwise be the case, and our
competitive position, business, financial condition, results of
operations, and prospects could be materially harmed.
Intellectual property disputes could require us to spend time and
money to address such disputes and could limit our intellectual
property rights.
The
biopharmaceutical industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights, and companies have employed intellectual property
litigation and USPTO post-grant proceedings to gain a competitive
advantage. We may become subject to infringement claims or
litigation arising out of patents and pending applications of our
competitors, or additional interference proceedings declared by the
USPTO to determine the priority and patentability of inventions.
The defense and prosecution of intellectual property suits, USPTO
proceedings, and related legal and administrative proceedings are
costly and time-consuming to pursue, and their outcome is
uncertain. Litigation may be necessary to enforce our issued
patents, to protect our trade secrets and know-how, or to determine
the enforceability, scope, and validity of the proprietary rights
of others. An adverse determination in litigation or USPTO
post-grant and interference proceedings to which we may become a
party could subject us to significant liabilities, require us to
obtain licenses from third parties, or restrict or prevent us from
selling our products in certain markets. Even if a given patent or
intellectual property dispute were settled through licensing or
similar arrangements, our costs associated with such arrangements
may be substantial and could include the payment by us of large
fixed payments and ongoing royalties. Furthermore, the necessary
licenses may not be available on satisfactory terms or at all. Even
where we have meritorious claims or defenses, the costs of
litigation may prevent us from pursuing these claims or defenses
and/or may require extensive financial and personnel resources to
pursue these claims or defenses. In addition, it is possible there
may be defects of form in our current and future patents that could
result in our inability to defend the intended claims. Intellectual
property disputes arising from the aforementioned factors, or other
factors, may materially harm our business.
We may not be able to enforce our intellectual property rights
throughout the world.
The
laws of some foreign countries do not protect intellectual property
rights to the same extent as the laws of the U.S. Companies have
encountered significant problems in protecting and defending
intellectual property rights in certain foreign jurisdictions. The
legal systems of some countries, particularly developing countries,
do not favor the enforcement of patents and other intellectual
property protection, especially those relating to life sciences.
This could make it difficult for us to stop the infringement of our
patents or the misappropriation of our other intellectual property
rights. For example, many foreign countries have compulsory
licensing laws under which a patent owner must grant licenses to
third parties. In addition, many countries limit the enforceability
of patents against third parties, including government agencies or
government contractors. In these countries, patents may provide
limited or no benefit.
Proceedings
to enforce our patent rights in foreign jurisdictions, whether or
not successful, could result in substantial costs and divert our
efforts and attention from other aspects of our business.
Furthermore, while we intend to protect our intellectual property
rights in our expected significant markets, we cannot ensure that
we will be able to initiate or maintain similar efforts in all
jurisdictions in which we may wish to market Validive or any future
products. Accordingly, our efforts to protect our intellectual
property rights in such countries may be inadequate. In addition,
changes in the law and legal decisions by courts in the U.S. and
foreign countries may affect our ability to obtain and enforce
adequate intellectual property protection for our products and
technology.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
In
addition to seeking patent protection, we also rely on trade
secrets, including unpatented know-how, technology and other
proprietary information, to maintain our competitive position. We
seek to protect these trade secrets, in part, by entering into
non-disclosure and confidentiality agreements with parties who have
access to them. Despite these efforts, these parties may breach the
agreements and disclose our proprietary information, including our
trade secrets, and we may not be able to obtain adequate remedies
for such breaches. Enforcing a claim that a party illegally
disclosed or misappropriated a trade secret is difficult, expensive
and time-consuming, and the outcome is unpredictable. In addition,
some courts inside and outside the U.S., including in foreign
jurisdictions, are less willing or unwilling to protect trade
secrets. If any of our trade secrets were to be lawfully obtained
or independently developed by a competitor, we would have no right
to prevent them from using that technology or information to
compete with us. If any of our trade secrets were to be disclosed
to or independently developed by a competitor, our competitive
position would be harmed.
31
Changes to the patent law in the U.S. and other jurisdictions could
diminish the value of patents in general, thereby impairing our
ability to protect our product candidates.
As
is the case with other biopharmaceutical companies, our success is
heavily dependent on intellectual property, particularly patents.
Obtaining and enforcing patents in the biopharmaceutical industry
involves both technological and legal complexity. Therefore,
obtaining and enforcing biopharmaceutical patents is costly, time
consuming and inherently uncertain. In addition, the U.S. has
recently enacted and is currently implementing wide ranging patent
reform legislation. 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
future actions by the U.S. Congress, the federal courts and the
USPTO, as well as other jurisdictions around the world, the laws
and regulations governing patents could change in unpredictable
ways that would weaken our ability to obtain new patents or to
enforce our existing patents and patents that we might obtain in
the future.
Obtaining and maintaining our patent protection depends on
compliance with various procedural, document submission, fee
payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated
for non-compliance with these requirements.
The
USPTO and various foreign governmental patent agencies require
compliance with a number of procedural, documentary, fee payment
and other provisions during the patent process. There are
situations in which noncompliance can result in abandonment or
lapse of a patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. In
such an event, competitors might be able to enter the market
earlier than would otherwise have been the case.
If we fail to comply with our obligations under any license,
collaboration or other intellectual property-related agreements, we
may be required to pay damages and could lose intellectual property
rights that may be necessary for developing, commercializing and
protecting our current or future technologies or drug candidates or
we could lose certain rights to grant sublicenses.
Any
license, collaboration or other intellectual property-related
agreements impose, and any future license, collaboration or other
intellectual property-related agreements we enter into are likely
to impose, various development, commercialization, funding,
milestone, royalty, diligence, sublicensing, insurance, patent
prosecution and enforcement or other obligations on us. If we
breach any of these obligations, or use the intellectual property
licensed to us in an unauthorized manner, we may be required to pay
damages and the licensor may have the right to terminate the
license. In spite of our best efforts, any of our future licensors
might conclude that we have materially breached our license
agreements and might therefore terminate the license agreements,
thereby removing our ability to develop and commercialize products
and technologies covered by these license agreements. Any license
agreements we enter into may be complex, and certain provisions in
such agreements may be susceptible to multiple interpretations. The
resolution of any contract interpretation disagreement that may
arise could narrow what we believe to be the scope our rights to
the relevant intellectual property or technology, or increase what
we believe to be our financial or other obligations under the
relevant agreement, either of which could have a material adverse
effect on our business, financial condition, results of operations,
and prospects.
We
may seek to obtain licenses from licensors in the future, however,
we may be unable to obtain any such licenses at a reasonable cost
or on reasonable terms, if at all. In addition, if any of our
future licensors terminate any such license agreements, such
license termination could result in our inability to develop,
manufacture and sell products that are covered by the licensed
technology or could enable a competitor to gain access to the
licensed technology. Any of these events could have a material
adverse effect on our competitive position, business, financial
condition, results of operations, and ability to achieve
profitability.
Furthermore,
we may not have the right to control the preparation, filing,
prosecution, maintenance, enforcement and defense of patents and
patent applications that we license from third parties. Therefore,
we cannot be certain that these patents and patent applications
will be prepared, filed, prosecuted, maintained, enforced and
defended in a manner consistent with the best interests of our
business. If our future licensors fail to prosecute, maintain,
enforce and defend patents we may in-license, or lose rights to
licensed patents or patent applications, our license rights may be
reduced or eliminated. In such circumstances, our right to develop
and commercialize any of our products or drug candidates that is
the subject of such licensed rights could be materially adversely
affected. In certain circumstances, our licensed patent rights are
subject to our reimbursing our licensors for their patent
prosecution and maintenance costs.
Moreover,
our licensors may own or control intellectual property that has not
been licensed to us and, as a result, we may be subject to claims,
regardless of their merit, that we are infringing, misappropriating
or otherwise violating the licensor’s intellectual property
rights and the amount of any damages or future royalty obligations
that would result, if any such claims were successful, would depend
on the technology and intellectual property we use in products that
we successfully develop and commercialize, if any. Therefore, even
if we successfully develop and commercialize products, due to such
obligations, we may be unable to achieve or maintain
profitability.
Third parties may initiate legal proceedings alleging that we are
infringing, misappropriating or otherwise violating their
intellectual property rights, the outcome of which would be
uncertain and could have a material adverse impact on the success
of our business.
Our
commercial success depends, in part, upon our ability or the
ability of any of our future collaborators to develop, manufacture,
market and sell our current or any future drug candidates and to
use our proprietary technologies without infringing,
misappropriating or otherwise violating the proprietary and
intellectual property rights of third parties. The biotechnology
and pharmaceutical industries are characterized by extensive and
complex litigation regarding patents and other intellectual
property rights.
We
or any of our future licensors or strategic partners, may be party
to, or be threatened with, adversarial proceedings or litigation
regarding intellectual property rights with respect to our current
or any potential future drug candidates and technologies, including
derivation, reexamination, inter partes review, post-grant review
or interference proceedings before the USPTO and similar
proceedings in jurisdictions outside of the U.S. such as opposition
proceedings. If we or our licensors or strategic partners are
unsuccessful in any interference proceedings or other priority or
validity disputes (including through any patent oppositions) to
which we or they are subject, we may lose valuable intellectual
property rights through the loss of one or more patents or our
patent claims may be narrowed, invalidated, or held unenforceable.
In some instances, we may be required to indemnify our licensors or
strategic partners for the costs associated with any such
adversarial proceedings or litigation. Third parties may also
assert infringement, misappropriation or other claims against us,
our licensors or our strategic partners based on existing patents
or patents that may be granted in the future, as well as other
intellectual property rights, regardless of their merit. There is a
risk that third parties may choose to engage in litigation or other
adversarial proceedings with us, our licensors or our strategic
partners to enforce or otherwise assert their patent rights or
other intellectual property rights. Even if we believe such claims
are without merit, a court of competent jurisdiction could hold
that these third-party patents and other intellectual property
rights are valid, enforceable and infringed, which could have a
material adverse impact on our ability to utilize our developed
technologies or to commercialize our current or any future drug
candidates deemed to be infringing. In order to successfully
challenge the validity of any such U.S. patent in federal court, we
would need to overcome a presumption of validity by presenting
clear and convincing evidence of invalidity. There is no assurance
that a court of competent jurisdiction, even if presented with
evidence we believe to be clear and convincing, would invalidate
the claims of any such U.S. patent.
32
Further,
we cannot guarantee that we will be able to successfully settle or
otherwise resolve such adversarial proceedings or litigation. If we
are unable to successfully settle future claims on terms acceptable
to us, we may be required to engage in or to continue costly,
unpredictable and time-consuming litigation and may be prevented
from or experience substantial delays in marketing our drug
candidates. If we or any of our licensors or strategic partners are
found to infringe, misappropriate or violate a third-party patent
or other intellectual property rights, we could be required to pay
damages, including treble damages and attorney’s fees, if we
are found to have willfully infringed. In addition, we, or any of
our licensors or strategic partners may choose to seek, or be
required to seek, a license from a third-party, which may not be
available on commercially reasonable terms, if at all. Even if a
license can be obtained on commercially reasonable terms, the
rights may be non-exclusive, which could give our competitors
access to the same technology or intellectual property rights
licensed to us, and we could be required to make substantial
licensing and royalty payments. We also could be forced, including
by court order, to cease utilizing, developing, manufacturing and
commercializing our developed technologies or drug candidates
deemed to be infringing. We may be forced to redesign current or
future technologies or products. Any of the foregoing could have a
material adverse effect on our ability to generate revenue or
achieve profitability and possibly prevent us from generating
revenue sufficient to sustain our operations.
In
addition, we or our licensors or strategic partners may find it
necessary to pursue claims or to initiate lawsuits to protect or
enforce our patent or other intellectual property rights. If we or
our licensors or strategic partners were to initiate legal
proceedings against a third-party to enforce a patent covering one
of our drug candidates or our developed technology, the defendant
could counterclaim that such patent is invalid or unenforceable. In
patent litigation in the U.S., defendant counterclaims alleging
invalidity or unenforceability are commonplace. Grounds for a
validity challenge could be an alleged failure to meet any of
several statutory requirements, for example, claiming
patent-ineligible subject matter, lack of novelty, indefiniteness,
lack of written description, non-enablement, anticipation or
obviousness. Grounds for an unenforceability assertion could be an
allegation that someone connected with prosecution of the patent
withheld relevant information from the USPTO or made a misleading
statement during prosecution. The outcome of such invalidity and
unenforceability claims is unpredictable. With respect to the
validity question, for example, we cannot be certain that there is
no invalidating prior art of which we or our licensors or strategic
partners and the patent examiner were unaware during prosecution.
If a defendant were to prevail on a legal assertion of invalidity
or unenforceability, we could lose at least part, and perhaps all,
of the patent protection for one or more of our drug candidates.
The narrowing or loss of our owned and licensed patent claims could
limit our ability to stop others from using or commercializing
similar or identical technologies and products. All of these events
could have a material adverse effect on our business, financial
condition, results of operations and prospects. Patent and other
intellectual property rights also will not protect our drug
candidates and technologies if competitors or third parties design
around such drug candidates and technologies without legally
infringing, misappropriating or violating our patent or other
intellectual property rights.
The
cost to us in defending or initiating any litigation or other
proceedings relating to our patent or other intellectual property
rights, even if resolved in our favor, could be substantial, and
any litigation or other proceedings would divert our
management’s attention and distract our personnel from their
normal responsibilities. Such litigation or proceedings could
materially increase our operating losses and reduce the resources
available for development activities or any future sales, marketing
or distribution activities. We may not have sufficient financial or
other resources to conduct such litigation or proceedings
adequately. Some of our competitors may be able to more effectively
sustain the costs of complex patent litigation because they have
substantially greater resources. Uncertainties resulting from the
initiation and continuation of patent litigation or other
proceedings could delay our research and development efforts and
materially limit our ability to continue our operations.
Furthermore, because of the substantial amount of discovery
required in connection with certain such proceedings, there is a
risk that some of our confidential information could be compromised
by disclosure. In addition, there could be public announcements of
the results of hearings, motions or other interim proceedings or
developments and if securities analysts or investors perceive these
results to be negative, such announcements could have a material
adverse effect on the price of our common stock.
Intellectual property rights of third parties could adversely
affect our ability to commercialize our current or future
technologies or drug candidates, and we might be required to
litigate or obtain licenses from third parties to develop or market
our current or future technologies or drug candidates, which may
not be available on commercially reasonable terms, or at
all.
There
are numerous companies that have pending patent applications and
issued patents broadly covering immune-therapies generally or
covering small molecules directed against the same targets as, or
targets similar to, those we are pursuing. Our competitive position
may materially suffer if patents issued to third parties or other
third-party intellectual property rights cover our current or
future technologies, drug candidates or elements thereof, or our
manufacture or uses relevant to our development plans. In such
cases, we may not be in a position to develop or commercialize
current or future technologies or drug candidates unless we
successfully pursue litigation to nullify or invalidate the
third-party intellectual property rights concerned, or enter into a
license agreement with the intellectual property rights holder, if
available on commercially reasonable terms. There may be issued
patents of which we are not aware, held by third parties that, if
found to be valid and enforceable, could be alleged to be infringed
by our current or future technologies or drug candidates. There
also may be pending patent applications of which we are not aware
that may result in issued patents, which could be alleged to be
infringed by our current or future technologies or drug candidates.
Should such an infringement claim be successfully brought, we may
be required to pay substantial damages or be forced to abandon our
current or future technologies or drug candidates or to seek a
license from any patent holders. No assurances can be given that a
license will be available on commercially reasonable terms, if at
all.
Third-party
intellectual property rights holders may also actively bring
infringement, misappropriation or other claims alleging violations
of intellectual property rights against us. We cannot guarantee
that we will be able to successfully settle or otherwise resolve
such claims. If we are unable to successfully settle future claims
on terms acceptable to us, we may be required to engage in or to
continue costly, unpredictable and time-consuming litigation and
may be prevented from, or experience substantial delays in,
marketing our drug candidates. If we fail in any such dispute, in
addition to being forced to pay damages, we may be temporarily or
permanently prohibited from commercializing any of our current or
future technologies or drug candidates that are held to be
infringing, misappropriating or otherwise violating third-party
intellectual property rights. We might, if possible, also be forced
to redesign current or future technologies or drug candidates so
that we no longer infringe, misappropriate or violate the
third-party intellectual property rights. Any of these events, even
if we were ultimately to prevail, could require us to divert
substantial financial and management resources that we would
otherwise be able to devote to our business, which could have a
material adverse effect on our financial condition and results of
operations.
Risks Related to Our Business Operations and Industry
As a recently established entity, we have a limited operating
history.
To
date, we have engaged exclusively in acquiring pharmaceutical
product candidates, licensing rights to product candidates and
entering into collaboration agreements with respect to key services
or technologies for our drug product development, and have not
completed any clinical trials, received any governmental approvals,
brought any product to market, manufactured products in clinical or
commercial quantities or sold any pharmaceutical products. As a
company we have limited experience in negotiating, establishing,
and maintaining strategic relationships, conducting clinical
trials, and managing the regulatory approval process, all of which
will be necessary if we are to be successful. Our lack of
experience in these critical areas makes it difficult for a
prospective investor to evaluate our abilities and increases the
risk that we will fail to successfully execute our
strategies.
Furthermore,
if our business grows rapidly, our operational, managerial, legal,
and financial resources will be strained. Our development will
require continued improvement and expansion of our management team
and our operational, managerial, legal, and financial systems and
controls.
In
the normal course of business, we have evaluated and expect to
evaluate potential acquisitions and/or licenses of patents,
compounds, and technologies that our management believes could
complement or expand our business. We have limited history of
conducting acquisitions and negotiating and acquiring licenses. In
the event that we identify an acquisition or license candidate we
find attractive, there is no assurance that we will be successful
in negotiating an agreement to acquire or license, or in financing
or profitably exploiting, such patents, compounds, or technologies.
Furthermore, such an acquisition or license could divert management
time and resources away from other activities that would further
our current business development.
33
If we lose key management leadership, and/or scientific personnel,
and if we cannot recruit qualified employees, managers, directors,
officers, or other significant personnel, we may experience program
delays and increases in compensation costs, and our business will
be materially disrupted.
Our
future success is highly dependent on the continued service of
principal members of our management, leadership, and scientific
personnel, who are able to terminate their employment with us at
any time and may be able to compete with us. The loss of any of our
key management, leadership, or scientific personnel including, in
particular, Christopher M. Starr, our Executive Chairman of the
Board of Directors (referred to as the “Board”),
Chandler D. Robinson, our President and CEO, and Andrew P. Mazar,
our Executive Vice President of Research and Development and Chief
Scientific Officer, could materially disrupt our business and
materially delay or prevent the successful product development and
commercialization of our product candidates. We have employment
agreements with Dr. Robinson and Dr. Mazar which have no term but
are for at-will employment, meaning the executives have the ability
to terminate their employment at any time. We do not have an
employment agreement with Dr. Starr.
Our
future success will also depend on our continuing ability to
identify, hire, and retain highly skilled personnel for all areas
of the organization. Competition in the biopharmaceutical industry
for scientifically and technically qualified personnel is intense,
and we may be unsuccessful in identifying, hiring, and retaining
qualified personnel. Our continued requirement to identify, hire,
and retain highly competent personnel may cause our compensation
costs to increase materially.
We will incur increased costs as a result of operating as a stock
trading public company, and our management will be required to
devote substantial time to investor
relations, information and communication to the public, and related
compliance initiatives and corporate governance
practices.
As
a stock trading public company, and particularly after we are no
longer an emerging growth company, we will incur significant legal,
accounting and other expenses that we did not incur as a private
company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the listing requirements of the Nasdaq
Capital Market and other applicable securities rules and
regulations impose various requirements on stock trading public
companies, including establishment and maintenance of effective
disclosure and financial controls and corporate governance
practices. Our management and other personnel will need to devote a
substantial amount of time to these compliance initiatives.
Moreover, these rules and regulations will increase our legal and
financial compliance costs and will make some activities more
time-consuming and costly. For example, we expect that these rules
and regulations may make it more difficult and more expensive for
us to obtain director and officer liability insurance, which in
turn could make it more difficult for us to attract and retain
qualified members of our board of directors. However, these rules
and regulations are often subject to varying interpretations, in
many cases due to their lack of specificity, and, as a result,
their application in practice may evolve over time as new guidance
is provided by regulatory and governing bodies. This could result
in continuing uncertainty regarding compliance matters and higher
costs necessitated by ongoing revisions to disclosure and
governance practices.
Despite ongoing compliance training and periodic education, our
employees and consultants may engage in misconduct or other
improper activities, including noncompliance with regulatory
standards and requirements, which could result in delays or
terminations of our development programs and adversely affect our
business.
Although
we regularly train our employees on compliance and we are aware of
no misconduct or improper activities to date, we are exposed to the
risk of employee or consultant fraud or other misconduct.
Misconduct by our employees or consultants could include
intentional failures to: comply with FDA regulations; provide
accurate information to the FDA; comply with manufacturing
standards; comply with federal and state healthcare fraud and abuse
laws and regulations; report financial information or data
accurately or disclose unauthorized activities to us. In
particular, sales, marketing and business arrangements in the
healthcare industry are subject to extensive laws and regulations
intended to prevent fraud, kickbacks, self-dealing and other
abusive practices. These laws and regulations may restrict or
prohibit a wide range of pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other
business arrangements. Employee and consultant misconduct could
also involve the improper use of information obtained in the course
of clinical trials, which could result in regulatory sanctions and
serious harm to our reputation. It is not always possible to
identify and deter such misconduct, and the precautions we take to
detect and prevent this activity may not be effective in
controlling unknown or unmanaged risks or losses or in protecting
us from governmental investigations or other actions or lawsuits
stemming from a failure to be in compliance with such laws or
regulations. If any such actions are instituted against us, and we
are not successful in defending ourselves or asserting our rights,
those actions could have a significant impact on our business,
including the imposition of significant fines or other sanctions.
Such actions could adversely affect our business including delaying
or terminating one or more of our development
programs.
We are an emerging growth company and we cannot be certain if the
reduced disclosure requirements applicable to emerging growth
companies will make our common stock less attractive to
investors.
We
are an emerging growth company. Under the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), emerging growth
companies can delay adopting new or revised accounting standards
until such time as those standards apply to private
companies. We have irrevocably elected to opt out of this
provision and, as a result, we will comply with new or revised
accounting standards when they are required to be adopted by public
companies that are not emerging growth companies.
For
as long as we continue to be an emerging growth company, we also
intend to take advantage of certain other exemptions from various
reporting requirements that are applicable to other public
companies including, but not limited to, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, exemptions from the requirements of
holding a nonbinding advisory stockholder vote on executive
compensation and any golden parachute payments not previously
approved, exemption from the requirement of auditor attestation in
the assessment of our internal control over financial reporting and
exemption from any requirement that may be adopted by the Public
Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial statements
(auditor discussion and analysis). If we do take advantage of these
exemptions, the information that we provide stockholders will be
different than what is available with respect to other public
companies. We cannot predict if investors will find our common
stock less attractive because we will rely on these exemptions. If
investors find our common stock less attractive as a result of our
status as an emerging growth company, there may be less liquidity
for our common stock and our stock price may be more
volatile.
We
will remain an emerging growth company until the earliest of (1)
the last day of the year (a) following the fifth anniversary of the
completion of our initial public offering, (b) in which we have
total annual gross revenue of at least $1.07 billion or (c) in
which we are deemed to be a large accelerated filer, which means
the market value of our common stock that is held by non-affiliates
exceeds $700 million as of the prior June 30th, and (2) the date on
which we have issued more than $1.0 billion in non-convertible debt
securities during the prior three-year period.
Competition and technological change may make our product
candidates less competitive or obsolete.
The
biopharmaceutical industry is subject to rapid technological
change. We have many potential competitors, including major drug
and chemical companies, specialized biopharmaceutical firms,
universities and other research institutions. These companies,
firms, and other institutions may develop products that are more
effective than our product candidates or that would make our
product candidates less competitive or obsolete. Many of these
companies, firms, and other institutions have greater financial
resources than us and may be better able to withstand and respond
to adverse market conditions within the biopharmaceutical industry,
including without limitation the lengthy regulatory approval
process for product candidates.
34
We face significant competition from other biotechnology and
pharmaceutical companies, and our operating results will suffer if
we fail to compete effectively.
The
biotechnology and pharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong
emphasis on proprietary products. While we believe we have
significant competitive advantages with our expertise in small
molecules and biologics, and rare disease clinical development,
along with a strong intellectual property portfolio, we currently
face and will continue to face competition for our drug development
programs from companies that target SOM, are developing doxorubicin
analogs/replacement, and are targeting uPAR. The competition is
likely to come from multiple sources, including larger
pharmaceutical companies, biotechnology companies and academia.
Accordingly, our competitors may have more resources and be more
successful than us in obtaining approval for treatments and
achieving widespread market acceptance. For any products that we
may ultimately commercialize, not only will we compete with any
existing therapies and those therapies currently in development, we
will have to compete with new therapies that may become available
in the future.
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 will 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 operations and
financial results. 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 acquisitions;
●
higher-than-expected
acquisition and integration costs;
●
write-downs
of assets, goodwill or impairment charges;
●
increased
amortization expenses;
●
difficulty
and cost in combining the operations and personnel of any acquired
businesses with our operations and personnel;
●
impairment
of relationships with key suppliers or customers of any acquired
businesses due to changes in management and ownership;
and
●
inability
to retain key employees of any acquired businesses or for our
current business based on changed circumstances.
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, results of operations, financial condition and
prospects.
If product liability lawsuits are brought against us, we may incur
substantial costs to defend them and address any damages awarded,
and demand for our products could be reduced as a result of such
lawsuits.
The
testing and marketing of medical products is subject to an inherent
risk of product liability claims, including a possibility in some
states for product liability claims being made based on generic
copies of our drugs. Since we currently are not sponsoring any
clinical trials, we do not have product liability insurance
coverage, but plan to obtain appropriate coverage when we enroll
patients in a Validive or other clinical trial, assuming the
coverage is available at a commercially reasonable cost, if
available at all. Regardless of their merit or eventual outcome,
product liability claims may result in:
●
withdrawal
of clinical trial volunteers;
●
decreased
demand for our products when approved;
●
injury
to our reputation and significant, adverse media attention;
and
●
potentially
significant litigation costs, including without limitation, any
damages awarded to the plaintiffs if we lose or settle
claims.
Our business and operations are vulnerable to computer system
failures, cyber-attacks or deficiencies in our cyber-security,
which could increase our expenses, divert the attention of our
management and key personnel away from our business operations and
adversely affect our results of operations.
Despite
the implementation of security measures, our internal computer
systems, and those of third parties on which we rely, are
vulnerable to damage from: computer viruses; malware; natural
disasters; terrorism; war; telecommunication and electrical
failures; cyber-attacks or cyber-intrusions over the Internet;
attachments to emails; persons inside our organization; or persons
with access to systems inside our organization. The risk of a
security breach or disruption, particularly through cyber-attacks
or cyber intrusion, including by computer hackers, foreign
governments, and cyber terrorists, has generally increased as the
number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased. If such an event
were to occur and cause interruptions in our operations, it could
result in a material disruption of our product development
programs. For example, the loss of clinical trial data from
completed or ongoing or planned clinical trials could result in
delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach was to result in a loss of
or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur material
legal claims and liability, and damage to our reputation, and the
further development of our product candidates could be delayed. We
could be forced to expend significant resources in response to a
cyber security breach, including repairing system damage,
increasing cyber security protection costs by deploying additional
personnel and protection technologies, paying regulatory fines and
resolving legal claims and regulatory actions, all of which would
increase our expenses, divert the attention of our management and
key personnel away from our business operations and adversely
affect our results of operations.
35
Failure to comply with health and data protection laws and
regulations could lead to government enforcement actions (which
could include civil or criminal penalties), private litigation or
adverse publicity and could negatively affect our operating results
and business.
We
and our current and any of our future collaborators may be subject
to federal, state and foreign data protection laws and regulations
(i.e., laws and regulations that address privacy and data
security). In the U.S., numerous federal and state laws and
regulations, including federal health information privacy laws
(e.g., the Health Insurance Portability and Accountability Act
(“HIPAA”), as amended by the Health Information
Technology for Economic and Clinical Health Act
(“HITECH”)), state data breach notification laws, state
health information privacy laws and federal and state consumer
protection laws (e.g., Section 5 of the Federal Trade Commission
Act), that govern the collection, use, disclosure and protection of
health-related and other personal information could apply to our
operations or the operations of our collaborators. In addition, we
may obtain health information from third parties (including
research institutions from which we obtain clinical trial data)
that are subject to privacy and security requirements under HIPAA,
as amended by HITECH, or other privacy and data security laws.
Depending on the facts and circumstances, we could be subject to
criminal penalties if we knowingly obtain, use, or disclose
individually identifiable health information maintained by a
HIPAA-covered entity in a manner that is not authorized or
permitted by HIPAA.
International
data protection laws, including Regulation 2016/679, known as the
General Data Protection Regulation (“GDPR”) may also
apply to health-related and other personal information obtained
outside of the U.S. The GDPR went into effect on May 25, 2018. The
GDPR introduced new data protection requirements in the EU, as well
as potential fines for non-compliant companies of up to the greater
of €20 million or 4% of annual global revenue. The regulation
imposes numerous new requirements for the collection, use, storage
and disclosure of personal information, including more stringent
requirements relating to consent and the information that must be
shared with data subjects about how their personal information is
used, the obligation to notify regulators and affected individuals
of personal data breaches, extensive new internal privacy
governance obligations and obligations to honor expanded rights of
individuals in relation to their personal information (e.g., the
right to access, correct and delete their data). In addition, the
GDPR includes restrictions on cross-border data transfers. The GDPR
increased our responsibility and liability in relation to personal
data that we process where such processing is subject to the GDPR,
and we may be required to put in place additional mechanisms to
ensure compliance with the GDPR, including as implemented by
individual countries. Further, the United Kingdom’s vote in
favor of exiting the EU, often referred to as Brexit, has created
uncertainty with regard to data protection regulation in the United
Kingdom. In particular, it is unclear how data transfers to and
from the United Kingdom will be regulated.
In
addition, California recently enacted the California Consumer
Privacy Act (“CCPA”), which creates new individual
privacy rights for California consumers (as defined in the law) and
places increased privacy and security obligations on entities
handling personal data of consumers or households. The CCPA will
require covered companies to provide new disclosure to consumers
about such companies’ data collection, use and sharing
practices, provide such consumers new ways to opt-out of certain
sales or transfers of personal information, and provide consumers
with additional causes of action. The CCPA went into effect on
January 1, 2020, and the California Attorney General may bring
enforcement actions for violations beginning July 1, 2020. The CCPA
was amended on September 23, 2018, and it remains unclear what, if
any, further modifications will be made to this legislation or how
it will be interpreted. As currently written, the CCPA may impact
our business activities and exemplifies the vulnerability of our
business to the evolving regulatory environment related to personal
data and protected health information.
Compliance
with U.S. and international data protection laws and regulations
could require us to take on more onerous obligations in our
contracts, restrict our ability to collect, use and disclose data,
or in some cases, impact our ability to operate in certain
jurisdictions. Failure to comply with U.S. and international data
protection laws and regulations could result in government
enforcement actions (which could include civil or criminal
penalties), private litigation or adverse publicity and could
negatively affect our operating results and business.
If we, our CROs or our IT vendors experience security or data
privacy breaches or other unauthorized or improper access to, use
of, or destruction of personal data, we may face costs, significant
liabilities, harm to our brand and business
disruption.
In
connection with our drug research and development efforts, we or
our CROs may collect and use a variety of personal data, such as
names, mailing addresses, email addresses, phone numbers and
clinical trial information. Although we have extensive measures in
place to prevent the sharing and loss of patient data in our
clinical trial processes associated with our developed technologies
and drug candidates, any failure to prevent or mitigate security
breaches or improper access to, use of, or disclosure of our
clinical data or patients’ personal data could result in
significant liability under state (e.g., state breach notification
laws), federal (e.g., HIPAA, as amended by HITECH), and
international laws (e.g., the GDPR). Any failure to prevent or
mitigate security breaches or improper access to, use of, or
disclosure of our clinical data or patients’ personal data
may cause a material adverse impact to our reputation, affect our
ability to conduct new studies and potentially disrupt our
business. We may also rely on third-party IT vendors to host or
otherwise process some of our data and that of users, and any
failure by such IT vendor to prevent or mitigate security breaches
or improper access to or disclosure of such information could have
similarly adverse consequences for us. If we are unable to prevent
or mitigate the impact of such security or data privacy breaches,
we could be exposed to litigation and governmental investigations,
which could lead to a potential disruption to our
business.
If we do not comply with laws regulating the protection of the
environment and health and human safety, our business could be
adversely affected.
Our
research and development and drug candidates and future commercial
manufacturing may involve the use of hazardous materials and
various chemicals. We currently do not maintain a research
laboratory, but we engage third-party research organizations and
manufacturers to conduct our preclinical studies, clinical trials
and manufacturing. These third-party laboratories and manufacturers
are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of
these hazardous materials. We must rely on the third parties’
procedures for storing, handling and disposing of these materials
in their facilities to comply with the relevant guidelines of the
states in which they operate and the Occupational Safety and Health
Administration of the U.S. Department of Labor. Although we believe
that their safety procedures for handling and disposing of these
materials comply with the standards mandated by applicable
regulations, the risk of accidental contamination or injury from
these materials cannot be eliminated. If an accident occurs, this
could result in significant delays in our development. We are also
subject to numerous environmental, health and workplace safety laws
and regulations. Although we maintain workers’ compensation
insurance to cover us for costs and expenses, we may incur due to
injuries to our employees, this insurance may not provide adequate
coverage against potential liabilities. Additional federal, state
and local laws and regulations affecting our operations may be
adopted in the future. We may incur substantial costs to comply
with, and substantial fines or penalties if we violate, any of
these laws or regulations.
36
We have limited the liability of and indemnified our directors and
officers.
Although
our directors and officers are accountable to us and must exercise
good faith, good business judgement, and integrity in handling our
affairs, our Second Amended and Restated Certificate of
Incorporation (the “Certificate of Incorporation”),
provides that our directors will be indemnified to the fullest
extent permitted under Delaware law. As a result, our stockholders
may have fewer rights against our directors than they would have
absent such provisions in our Certificate of Incorporation, and a
stockholder’s ability to seek and recover damages for a
breach of fiduciary duties may be reduced or restricted. Delaware
law allows indemnification of members of our Board (each a
“Member”), if such Board Member (a) has acted in good
faith, in a manner the Board Member reasonably believes to be in or
not opposed to our best interests, and (b) with respect to any
criminal action or proceeding, if the Board Member had no
reasonable cause to believe the conduct was unlawful.
Pursuant
to the Certificate of Incorporation, each director and (to the
extent approved by our Board) each of our officers who is made a
party to a legal proceeding because he or she is or was a Board
Member or officer, is indemnified by us from and against any and
all liability, except that we may not indemnify a Board Member or
officer: (a) for any liability incurred in a proceeding in which
such person is adjudged liable to Monopar or is subjected to
injunctive relief in favor of Monopar; (b) for acts or omissions
that involve intentional misconduct or a knowing violation of law,
fraud or gross negligence; (c) for unlawful distributions; (d) for
any transaction for which such Board Member or officer received a
personal benefit or as otherwise prohibited by or as may be
disallowed under Delaware law; or (e) with respect to any dispute
or proceeding between us and such Board Member or officer unless
such indemnification has been approved by a disinterested majority
of Board Members or by a majority in interest of disinterested
stockholders. We are required to pay or reimburse attorney’s
fees and expenses of a Board Member seeking indemnification as they
are incurred, provided the director executes an agreement to repay
the amount to be paid or reimbursed if there is a final
determination by a court of competent jurisdiction that such person
is not entitled to indemnification.
Future legislation or executive or private sector actions may
increase the difficulty and cost for us to commercialize our
products and adversely affect the prices obtained for such
products.
In
the U.S., there have been and continue to be a number of
legislative initiatives to contain healthcare costs. For example,
in March 2010, the Patient Protection and Affordable Care Act (the
“PPACA”), was enacted, which substantially changed the
way healthcare is financed by both governmental and private
insurers, and significantly impacted the U.S. pharmaceutical
industry.
Some
of the provisions of the ACA have yet to be fully implemented, and
there have been legal and political challenges to certain aspects
of the ACA. Since January 2017, President Trump has signed two
executive orders and other directives designed to delay,
circumvent, or loosen certain requirements mandated by the ACA.
Concurrently, Congress has considered legislation that would repeal
or repeal and replace all or part of the ACA. While Congress has
not passed comprehensive repeal legislation, two bills affecting
the implementation of certain taxes under the ACA have been signed
into law. The Tax Cuts and Jobs Act of 2017 (the “Tax
Act”), includes a provision that repealed, effective January
1, 2019, the tax-based shared responsibility payment imposed by the
ACA on certain individuals who fail to maintain qualifying
healthcare coverage for all or part of a year, that is commonly
referred to as the “individual mandate.” Additionally,
on January 22, 2018, President Trump signed a continuing resolution
on appropriations for fiscal year 2018 that delayed the
implementation of certain ACA-mandated fees, including the
so-called “Cadillac” tax on certain high cost
employer-sponsored insurance plans, the annual fee imposed on
certain health insurance providers based on market share, and the
medical device excise tax on non-exempt medical devices. Further,
the Bipartisan Budget Act of 2018 (“BBA”), among other
things, amended the ACA, effective January 1, 2019, to close the
coverage gap in most Medicare drug plans, commonly referred to as
the “donut hole.” In July 2018, Centers for Medicare
& Medicaid Services (“CMS”) published a final rule
permitting further collections and payments to and from certain
ACA-qualified healthcare plans and healthcare insurance issuers
under the ACA risk adjustment program in response to the outcome of
federal district court litigation regarding the method CMS uses to
determine this risk adjustment. On December 14, 2018, a U.S.
District Court Judge in the Northern District of Texas ruled that
the individual mandate is an inseverable feature of the ACA, and
therefore, because it was repealed as part of the Tax Act, the
remaining provisions of the ACA are invalid as well. While the
Texas U.S. District Court Judge, as well as the Trump
Administration and CMS have stated that the ruling will have no
immediate effect, it is unclear how this decision, subsequent
appeals, and other efforts to repeal and replace the ACA will
impact the ACA and our business.
The
increasing cost of healthcare as a percentage of GDP and the
massive and increasing deferred liabilities behind most
governmental healthcare programs (such as Medicare and Medicaid and
state and local healthcare programs especially for retirement
benefits) continue to be an economic challenge which threatens the
overall economic health of the U.S. High cost healthcare products
and therapies that are early in their life cycle are attractive
targets for parties that believe that the cost of healthcare must
be better controlled and significantly reduced. Pharmaceutical
prices and healthcare reform have been debated and acted upon by
legislators for many years. Future legislation or executive or
private sector actions related to healthcare reform could
materially and adversely affect our business by reducing our
ability to generate revenue at prices sufficient to reward for the
risks and costs of pharmaceutical development, to raise capital,
and to market our products.
There
is no assurance that federal or state healthcare reform will not
adversely affect our future business and financial results, and we
cannot predict how future federal or state legislative, judicial or
administrative changes relating to healthcare reform and
third-party payers will affect the pharmaceutical industry in
general and our business in particular.
Even if we are able to commercialize any drug candidate, such drug
candidate may become subject to unfavorable pricing regulations or
third-party coverage and reimbursement policies, which would harm
our business.
Our
ability to commercialize any products successfully will depend, in
part, on the extent to which coverage and adequate reimbursement
for these products and related treatments will be available from
third-party payors, such as government authorities, private
healthcare insurers and health maintenance organizations. Patients
who are prescribed medications for the treatment of their
conditions generally rely on third-party payors to reimburse all or
part of the costs associated with their prescription drugs.
Coverage and adequate reimbursement from government healthcare
programs, such as Medicare and Medicaid, and private healthcare
insurers are critical to new product acceptance. Patients are
unlikely to use our future products, if any, unless coverage is
provided and reimbursement is adequate to cover a significant
portion of the cost.
Cost-containment
is a priority in the U.S. healthcare industry and elsewhere. As a
result, government authorities and other third-party payors have
attempted to control costs by limiting coverage and the amount of
reimbursement for particular medications. Increasingly, third-party
payors are requiring that drug companies provide them with
predetermined discounts from list prices and are challenging the
prices charged for medical products. Third-party payors also may
request additional clinical evidence beyond the data required to
obtain marketing approval, requiring a company to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of its products. Commercial
third-party payors often rely upon Medicare coverage policy and
payment limitations in setting their reimbursement rates, but also
have their own methods and approval process apart from Medicare
determinations. Therefore, coverage and reimbursement for
pharmaceutical products in the U.S. can differ significantly from
payor to payor. We cannot be sure that coverage and adequate
reimbursement will be available for any product that we
commercialize and, if reimbursement is available, that the level of
reimbursement will be adequate. Coverage and reimbursement may
impact the demand for, or the price of, any drug candidate for
which we obtain marketing approval. If coverage and reimbursement
are not available or are available only at limited levels, we may
not be able to successfully commercialize any drug candidate for
which we obtain marketing approval.
Additionally,
the regulations that govern regulatory approvals, pricing and
reimbursement for new drugs and therapeutic biologics vary widely
from country to country. Some countries require approval of the
sale price of a drug or therapeutic biologic before it can be
marketed. In many countries, the pricing review period begins after
marketing approval is granted. In some foreign markets,
prescription pharmaceutical pricing remains subject to continuing
governmental control even after initial approval is granted. As a
result, we might obtain regulatory approval for a product in a
particular country, but then be subject to price regulations that
delay our commercial launch of the product, possibly for lengthy
time periods, and negatively impact the revenues we are able to
generate from the sale of the product in that country. Adverse
pricing limitations may hinder our ability to recoup our investment
in one or more drug candidates, even if our drug candidates obtain
regulatory approval.
37
Politically divided governmental actions and related political
actions outside of government can impact the FDA’s role in
the timely and effective review of new pharmaceutical products in
the U.S. and our business may be adversely impacted.
A
relevant example of dysfunctional government was the 35-day
government shutdown that ended February 15, 2019 which limited the
FDA to activities necessary to address imminent threats to human
life and to activities funded by carry-over user fees. Future
government shutdowns or other activities which limit the financial
resources available to the FDA (and in particular to the Center for
Drug Evaluation and Research) will delay the processing of new
product drug development submissions, reviews, and approvals and
other required regulatory actions. Such delays will adversely
impact our business and financial condition.
Effective collaboration with the FDA’s Center for Drug
Evaluation and Research (“CDER”) for the approval of
drug candidates is a highly demanding process which can result in
increased time and expense to gain approvals.
Our
lead drug development program, Validive, will be reviewed by CDER.
Efficient and professional collaboration with the FDA’s CDER
is essential for the timely clinical testing, test evaluations,
analysis and approval of our drug candidates. CDER has an
outstanding record of drug approvals and substantial funds to
operate a highly professional organization, but is also very
demanding as to the quality of clinical research and applications
for marketing approvals for drug candidates.
Our
Company has in-house expertise and experience in the management of
drug approvals. Qualified consultants and drug research
organizations are also available to aid in our drug approval
process; however, there is a meaningful risk that discussions and
interactions inherent in the drug approval process and future
developments or new improvements will result in delays, added
expenses and new scientific/medical requirements which will cause
adverse financial results and will likely impact the price of the
Company’s stock.
Future tax reform measures may negatively impact our financial
position.
Tax
reform measures are unpredictable and can change as the U.S.
congress and executive leadership changes. For example, on December
22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law
that significantly revised the Internal Revenue Code of 1986, as
amended (the “Code”). It is difficult to predict what
future tax reform measures, if any, could be implemented and the
extent to which they will impact our financial condition and our
business.
Foreign currency exchange rates may adversely affect our
consolidated financial statements.
Sales
and purchases in currencies other than the U.S. Dollar expose us to
fluctuations in foreign currencies relative to the U.S. Dollar and
may adversely affect our consolidated financial statements.
Increased strength of the U.S. Dollar increases the effective price
of our future drug products sold in U.S. Dollars into other
countries, which may require us to lower our prices or adversely
affect sales to the extent we do not increase local currency
prices. Decreased strength of the U.S. Dollar could adversely
affect the cost of materials, products and services we purchase
overseas. Sales and expenses of our non-U.S. businesses are also
translated into U.S. Dollars for reporting purposes and the
strengthening or weakening of the U.S. Dollar could result in
unfavorable foreign currency translation and transaction effects.
In addition, certain of our businesses may in the future invoice
customers in a currency other than the business’ functional
currency, and movements in the invoiced currency relative to the
functional currency could also result in unfavorable foreign
currency translation and transaction effects. We also face exchange
rate risk from our investments in subsidiaries owned and operated
in foreign countries.
Our anticipated operating expenses and capital expenditures over
the next year are based upon our management’s estimates of
possible future events. Actual amounts and the cost of new
conditions could differ materially from those estimated by our
management.
Development
of pharmaceuticals and cancer drugs is extremely risky and
unpredictable. We have estimated operating expenses and capital
expenditures over the next year based on certain assumptions. Any
change in the assumptions could cause the actual results to vary
substantially from the anticipated expenses and expenditures and
could result in material differences in actual versus forecasted
expenses or expenditures. Furthermore, all of the factors are
subject to the effect of unforeseeable future events. The estimates
of capital expenditures and operating expenses represent
forward-looking statements within the meaning of the federal
securities laws. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance
and involve risks and uncertainties. Actual events or results may
differ materially from those discussed in the forward-looking
statements as a result of various factors, including the risk
factors set forth under this “Risk Factors” section in
this Annual Report on Form 10-K.
The financial and operational projections that we may make from
time to time are subject to inherent risks.
The projections that we provide herein or our
management may provide from time to time (including, but not
limited to, our
success in raising strategic and substantial financial resources,
the cost and timing of our Phase 3 clinical trials, clinical and
regulatory timelines, production and supply matters, commercial
launch dates, and other financial or operational matters) reflect
numerous assumptions made by our management, including assumptions
with respect to our specific as well as general business,
regulatory, economic, market and financial conditions and other
matters, all of which are difficult to predict and many of which
are beyond our control. Accordingly, there is a risk that the
assumptions made in preparing the projections, or the projections
themselves, will prove inaccurate. There may be differences between
actual and projected results, and actual results may be materially
different from those contained in the projections. The inclusion of
the projections in this Annual
Report on Form 10-K should not be regarded as an indication
that we, our management, the underwriters or their respective
representatives considered or consider the projections to be a
guaranteed prediction of future events, and the projections should
not be relied upon as such. See “Cautionary Statement
Concerning Forward-Looking Statements.”
38
Our present and potential future international operations may
expose us to business, political, operational, and financial risks
associated with doing business outside of the United
States.
Our
business is subject to risks associated with conducting business
internationally. Some of our suppliers and clinical research
organizations and clinical trial sites are located outside of the
U.S. Furthermore, if we or any future collaborator succeeds in
developing any products, we anticipate marketing them in the EU,
the
United Kingdom and other jurisdictions in addition to the
U.S. If approved, we or our collaborator may hire sales
representatives and conduct physician and patient association
outreach activities outside of the U.S. Doing business
internationally involves a number of risks, including but not
limited to:
●
multiple,
conflicting and changing laws and regulations such as privacy
regulations, tax laws, export and import restrictions, employment
laws, regulatory requirements, and other governmental approvals,
permits and licenses;
●
failure
by us to obtain and maintain regulatory approvals for the use of
our products in various countries;
●
rejection
or qualification of foreign clinical trial data by the competent
authorities of other countries;
●
additional
potentially relevant third-party patent and other intellectual
property rights that may be necessary to develop and commercialize
our products and drug candidates;
●
complexities
and difficulties in obtaining, maintaining, enforcing and defending
our patent and other intellectual property rights;
●
difficulties
in staffing and managing foreign operations;
●
complexities
associated with managing multiple payor reimbursement regimes,
government payors or patient self-pay systems;
●
limits
in our ability to penetrate international markets;
●
financial
risks, such as longer payment cycles, difficulty collecting
accounts receivable, the impact of local and regional financial
crises on demand and payment for our products and exposure to
foreign currency exchange rate fluctuations;
●
natural
disasters, political and economic instability, including wars,
terrorism and political unrest, outbreak of disease, boycotts,
curtailment of trade and other business restrictions,
implementation of tariffs;
●
certain
expenses including, among others, expenses for travel, translation
and insurance; and
●
regulatory
and compliance risks that relate to anti-corruption compliance and
record-keeping that may fall within the purview of the U.S. Foreign
Corrupt Practices Act, its accounting provisions or its
anti-bribery provisions or provisions of anti-corruption or
anti-bribery laws in other countries.
Any of these factors could harm our ongoing
international clinical operations and supply chain, as well as any
future international expansion and operations and, consequently,
our business, financial condition, prospects and results of
operations.
Our future growth may depend, in part, on our ability to operate in
foreign markets, where we would be subject to additional regulatory
burdens and other risks and uncertainties.
Our
future growth may depend, in part, on our ability to develop and
commercialize drug candidates in foreign markets for which we may
rely on partnering with third parties. We will not be permitted to
market or promote any drug candidate before we receive regulatory
approval from the applicable regulatory authority in a foreign
market, and we may never receive such regulatory approval for any
drug candidate. To obtain separate regulatory approval in foreign
countries, we generally must comply with numerous and varying
regulatory requirements of such countries regarding safety and
efficacy and governing, among other things, clinical trials and
commercial sales, pricing and distribution of a drug candidate, and
we cannot predict success in these jurisdictions. If we obtain
approval of any of our current or potential future drug candidates
and ultimately commercialize any such drug candidate in foreign
markets, we would be subject to risks and uncertainties, including
the burden of complying with complex and changing foreign
regulatory, tax, accounting and legal requirements and the reduced
protection of intellectual property rights in some foreign
countries.
We are subject to U.S. and foreign anti-corruption and anti-money
laundering laws with respect to our operations and non-compliance
with such laws can subject us to criminal or civil liability and
harm our business.
We
are subject to the U.S. Foreign Corrupt Practices Act of 1977, as
amended (“the FCPA”), the U.S. domestic bribery statute
contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA
PATRIOT Act, and possibly other state and national anti-bribery and
anti-money laundering laws in countries in which we conduct
activities. Anti-corruption laws are interpreted broadly and
prohibit companies and their employees, agents, third-party
intermediaries, joint venture partners and collaborators from
authorizing, promising, offering or providing, directly or
indirectly, improper payments or benefits to recipients in the
public or private sector. We interact with officials and employees
of government agencies and government-affiliated hospitals,
universities and other organizations. In addition, we may engage
third-party intermediaries to promote our clinical research
activities abroad or to obtain necessary permits, licenses and
other regulatory approvals. We can be held liable for the corrupt
or other illegal activities of these third-party intermediaries,
our employees, representatives, contractors, partners and agents,
even if we do not explicitly authorize or have actual knowledge of
such activities.
We
have a Code of Business Conduct and Ethics which mandates
compliance with the FCPA and other anti-corruption laws applicable
to our business throughout the world. However, we cannot assure you
that our employees and third-party intermediaries will comply with
this code or such anti-corruption laws. Noncompliance with
anti-corruption and anti-money laundering laws could subject us to
whistleblower complaints, investigations, sanctions, settlements,
prosecution, other enforcement actions, disgorgement of profits,
significant fines, damages, other civil and criminal penalties or
injunctions, suspension or debarment from contracting with certain
persons, the loss of export privileges, reputational harm, adverse
media coverage and other collateral consequences. If any subpoenas,
investigations or other enforcement actions are launched, or
governmental or other sanctions are imposed, or if we do not
prevail in any possible civil or criminal litigation, our business,
results of operations and financial condition could be materially
harmed. In addition, responding to any action will likely result in
a materially significant diversion of management’s attention
and resources and significant defense and compliance costs and
other professional fees. In certain cases, enforcement authorities
may even cause us to appoint an independent compliance monitor
which can result in added costs and administrative
burdens.
39
Risks Associated to our Common Stock
Existing and new investors will experience dilution as a result of
future sales or issuances of our common stock and future option
exercises under our stock option plan and any amendments to the
plan.
Our Board Members, employees, and certain of our
consultants have been and will be issued equity and/or granted
options that vest with the passage of time. Up to a total of
1,600,000 shares of our common stock may be issued as stock options
or restricted stock under the Amended and Restated Monopar
Therapeutics Inc. 2016 Stock Incentive Plan, and stock options for
the purchase of up to 1,292,573 shares of our common stock
have already been granted (786,063 stock options are
exercisable) and are
outstanding along with 45,722 restricted stock units have been
granted to Board members and employees as of March 13,
2020. The issuance of such equity and/or the exercise of such
options will dilute both our existing and our new investors. As
of March 13,
2020, 18,433 stock options have
been exercised.
Our existing and our new investors will likely
also experience substantial dilution resulting from the issuance by
us of equity securities in connection with certain transactions,
including without limitation, future offering of shares under our
Capital on DemandTM
Sales Agreement or other fundraising
efforts, intellectual property licensing, acquisition, or
commercialization arrangements.
Holders of the shares of our common stock will have no control of
our operations or of decisions on major transactions.
Our failure to meet the continued listing requirements of The
Nasdaq Capital Market could result in a de-listing of our common
stock.
The stock price of our common stock may be volatile or may decline
regardless of our operating performance.
The
market price of our common stock is likely to remain highly
volatile and may fluctuate substantially due to many factors,
including:
●
announcements
concerning the progress and success of our clinical trials, our
ability to obtain regulatory approval for and commercialize our
product candidates, including any requests we receive from the FDA
for additional studies or data that result in delays in obtaining
regulatory approval or launching our product candidates, if
approved;
●
market
conditions in the pharmaceutical and biotechnology sectors or the
economy as a whole;
●
price
and volume fluctuations in the overall stock market;
●
the
failure of our product candidates, if approved, to achieve
anticipated commercial success;
●
announcements
of the clinical success, NDA approval or introduction of new
products by us or our competitors;
●
developments
concerning product development results or intellectual property
rights of others;
●
litigation
or public concern about the safety of our potential
products;
●
actual
fluctuations in our quarterly or annual operating results, and
concerns by investors that such fluctuations may occur in the
future and are symbolic of internal problems;
●
deviations
in our operating results from the estimates of securities analysts
or other analyst comments;
●
additions
or departures of key personnel;
●
healthcare
reform legislation, including measures directed at controlling the
pricing of pharmaceutical products, and third-party coverage and
reimbursement policies;
●
developments
concerning current or future strategic
collaborations;
●
discussion
of our Company, our stock price or our potential future market
value by the financial and scientific press and online investor
communities; and
●
market
response to the COVID-19 pandemic.
.
40
We may become involved in securities class action litigation that
could divert management’s attention and harm our
business.
The
stock markets have from time to time experienced significant price
and volume fluctuations that have affected the market prices for
the common stock of biotechnology and pharmaceutical companies. Our
stock price has experienced such fluctuations since our initial
public offering. These broad market fluctuations may cause the
market price of our stock to decline. In the past, securities class
action litigation has often been brought against a company
following a decline in the market price of its securities. This
risk is especially relevant for us because biotechnology and
biopharmaceutical companies have experienced significant stock
price volatility in recent years. We may become involved in this
type of litigation in the future. Litigation often is expensive and
diverts management’s attention and resources, which could
adversely affect our business.
Substantial amounts of our outstanding shares may be sold into the
market when lock-up or market standoff periods end. If there are
substantial sales of shares of our common stock, the price of our
common stock could decline.
The price of our common stock could decline if
there are substantial sales of our common stock, particularly sales
by our directors, executive officers and significant stockholders,
or if there is a large number of shares of our common stock
available for sale and the market perceives that sales will occur.
We have 10,621,535
outstanding shares of our common stock
as of March 13, 2020. A
substantial majority of all of our outstanding shares of
common stock are currently restricted from resale as a result of
market standoff and “lock-up” agreements. These shares
will become available to be sold after June 16, 2020. Unless sold
pursuant to a registration statement, shares held by
directors, executive officers and other affiliates will be subject
to volume limitations under Rule 144 under the Securities Act of
1933, as amended (Securities Act), and various vesting
agreements.
Stockholders
holding a substantial majority of our outstanding shares have
rights, subject to some conditions, to require us to file
registration statements covering their shares or to include their
shares in registration statements that we may file for ourselves or
our stockholders, subject to market standoff and lock-up
agreements. We have also registered shares of common stock that we
have issued and may issue under our employee equity incentive
plans. These shares are able to be sold freely in the public market
upon issuance, subject to existing market standoff or lock-up
agreements or internal practices which prohibit sales under certain
circumstances. The market price of the shares of our common stock
could decline as a result of the sale of a substantial number of
our shares of common stock in the public market or the perception
in the market that the holders of a large number of shares intend
to sell their shares.
Our ability to use our net operating loss carry-forwards and
certain other tax attributes may be limited.
Under
Section 382 of the Code, if a corporation undergoes an
“ownership change” (generally defined as a greater than
50% change, by value, in its equity ownership over a three-year
period), the corporation’s ability to use its pre-change net
operating loss carry-forwards and other pre-change tax attributes
(such as research tax credits) to offset its post-change income may
be limited. We believe that additional fundraising efforts in the
next three years, may trigger an “ownership change”
limitation in the near future. As a result, if we earn net taxable
income, our ability to use our pre-change net operating loss
carry-forwards to offset U.S. federal taxable income will be
subject to limitations, which could result in increased future
tax liability to us had we not been subject to such
limitations.
If securities or industry analysts do not publish research or
publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The
trading market for our common stock will depend in part on the
research and reports that securities or industry analysts publish
about us or our business. Securities and industry analysts do not
currently, and may never, publish research on our Company. If
securities or industry analysts do not commence coverage of our
Company, the trading price for our stock would likely be negatively
impacted. In the event securities or industry analysts initiate
coverage, if one or more of the analysts who covers us downgrades
our stock or publishes inaccurate or unfavorable research about our
business, our stock price may decline. If one or more of these
analysts ceases coverage of our Company or fails to publish reports
on us regularly, demand for our stock could decrease, which might
cause our stock price and trading volume to decline.
We do not intend to pay dividends for the foreseeable future and,
as a result, your ability to achieve a return on your investment
will depend on appreciation in the price of our common
stock.
We
have never declared or paid any cash dividends on our capital stock
and we do not intend to pay any cash dividends in the foreseeable
future. Any determination to pay dividends in the future will be at
the discretion of our Board. Accordingly, investors must rely on
sales of their common stock after price appreciation, which may
never occur, as the only way to realize any future gains as a
return on their investments.
There can be no assurance that we will ever provide liquidity to
our investors through a sale of our Company.
While
acquisitions of pharmaceutical companies like ours are not
uncommon, potential investors are cautioned that no assurances can
be given that any form of merger, combination, or sale of our
Company will take place or that any merger, combination, or sale,
even if consummated, would provide liquidity or a profit for our
investors. You should not invest in our Company with the
expectation that we will be able to sell the business in order to
provide liquidity or a profit for our investors.
41
Delaware law and provisions in our amended and restated bylaws
could make a merger, tender offer or proxy contest difficult,
thereby depressing the potential trading price of our common
stock.
Anti-takeover
provisions in our charter documents and under Delaware law could
make an acquisition of us difficult, limit attempts by our
stockholders to replace or remove our current management or Board
and adversely affect our stock price.
Provisions
of our amended and restated bylaws may delay or discourage
transactions involving an actual or potential change in our control
or change in our management, including transactions in which
stockholders might otherwise receive a premium for their shares, or
transactions that our stockholders might otherwise deem to be in
their best interests. Therefore, these provisions could adversely
affect the price of our stock. Among other things, our amended and
restated bylaws:
●
provide
that all vacancies on our Board may only be filled by our Board and
not by stockholders;
●
allow
the holders of a plurality of the shares of common stock entitled
to vote in any election of directors to elect all of the directors
standing for election, if they should so choose; and
●
provide
that special meetings of our stockholders may be called only by our
Board.
In
addition, because we are incorporated in Delaware, we are governed
by the provisions of Section 203 of the Delaware General
Corporation Law, which generally prohibits a Delaware corporation
from engaging in any of a broad range of business combinations with
any “interested” stockholder for a period of three
years following the date on which the stockholder became an
“interested” stockholder.
Item
2. Properties
We lease
approximately 1,202 square feet of space in the Village of
Wilmette, Illinois for our corporate offices. Our original two-year
lease ended on December 31, 2019, at which time we agreed to lease
the space on a month-to-month basis. In February 2019, also on a
month-to-month basis, we leased additional office space at our
corporate headquarters. We believe that we will lease additional
office space within the next 12 months as we begin to hire
additional personnel.
Item
3. Legal Proceedings
We are
currently not, and to date have never been, a party to any material
legal proceedings.
42
PART II
Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our
common stock is listed under the symbol “MNPR” on the
Nasdaq Capital Market.
Holders
As of
March 13, 2020, there were 10,621,535 shares of our common stock
outstanding held by 38 holders of record.
Dividends
We have
never paid cash dividends on any of our capital stock and we
currently intend to retain our future earnings, if any, to fund the
development and growth of our business. We do not intend to pay
cash dividends to holders of our common stock in the foreseeable
future.
Registration Rights
We are subject to
an agreement with TacticGem (pursuant to the Gem Transaction as
discussed elsewhere in this document), which obligates us to file
Form S-3 or other appropriate form of registration statement
covering the resale of any of our common stock by TacticGem, Gem,
or Tactic, upon direction by TacticGem at any time after we have
been subject to the reporting requirements of the 1934 Act for at
least twelve months (the “Initial Holding Period”). We
are required to use our best efforts to have such registration
statement declared effective as soon as practical after it is
filed. In the event that such registration statement for resale is
not approved by the SEC, and TacticGem submits a written request,
we are required to prepare and file a registration statement on
Form S-1 registering such common stock for resale and to use our
best efforts to have such registration statement declared effective
as soon as practical thereafter. Additionally, if we propose to
register our common stock for sale for cash, we are required to
notify TacticGem, Gem and Tactic Pharma of our intention to do so
and they have the right to cause shares of stock owned by them to
be included in such registration, subject to registration rights of
other holders of restricted stock and the ability of the
underwriter to limit the number of shares to be included. After
registration, pursuant to these rights, these shares will become
freely tradable without restriction under the Securities Act other
than pursuant to restrictions on affiliates under Rule
144. TacticGem has
entered into a lock-up agreement and agreed to not exercise any
rights of resale for 180 days after the date of our initial public
offering which was December 18, 2019.
Recent
Sales of Unregistered Securities.
Set
forth below is information regarding shares of common stock issued
and options granted by us in the year ended December 31, 2019, that
were not registered under the Securities Act. Also included is the
consideration, if any, received by us, for such shares and options
and information relating to the Securities Act, or rule of the SEC,
under which exemption from registration was claimed. No
underwriters were involved in the foregoing issuances of
securities. Below this description of recent sales of unregistered
securities is a description of the exemptions from registration
which were applicable to each sale or grant.
(a)
the issuance of 18,433 shares of
common stock pursuant to a stock option exercise on
November 25, 2019 for $109,998
The
offers, sales and issuances of the securities described in
paragraphs (a) were deemed to be exempt from registration under the
Securities Act in reliance on both Section 4(a)(2) of the Act
and/or Rule 701 in that the transactions were under compensatory
benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of such securities were a limited number
of our employees, officers, non-employee directors, bona
fide consultants and advisors and received the securities under our
Plan. Appropriate legends were affixed to the securities issued in
these transactions. Each of the recipients of securities in these
transactions had adequate access, through employment, business or
other relationships, to information about us and had knowledge and
experience to make the decision to accept the stock
options.
43
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
You
should read the following discussion and analysis of our financial
condition and results of operations together with our financial
statements and related notes appearing at the end of this Annual
Report on Form 10-K. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual
Report on Form 10-K, including information with respect to our
plans and strategy for our business and related financing, includes
forward-looking statements that involve risks and uncertainties.
You should read the "Risk Factors" section of this Annual Report on
Form 10-K, Item 1A, for a discussion of important factors that
could cause actual results to differ materially from the results
described in or implied by the forward-looking statements contained
in the following discussion and analysis.
Overview
We are
a clinical stage biopharmaceutical company focused on developing
proprietary therapeutics designed to extend life or improve quality
of life for cancer patients. We are building a drug development
pipeline through the licensing and acquisition of oncology
therapeutics in late preclinical and clinical development stages.
We leverage our scientific and clinical experience to help reduce
the risk and accelerate the clinical development of our drug
product candidates.
On
December 23, 2019, we completed our initial public offering. We
sold 1,277,778 shares of our common stock at a public offering
price of $8.00 per share. Net proceeds were approximately $9.4
million, after deducting underwriting discounts and accrued, unpaid
offering expenses. Our common stock began trading on the Nasdaq
Capital Market on December 19, 2019.
On
January 13, 2020, we entered into a Capital on DemandTM Sales Agreement
with JonesTrading Institutional Services, LLC
(“JonesTrading”), as sales agent, pursuant to which we
may offer and sell (at our discretion), from time to time, through
or to JonesTrading shares of our common stock, having an aggregate
offering price of up to $19.7 million. Pursuant to this agreement,
as of March 13, 2020, we sold 33,903 shares of our common stock at
an average gross price of $15.9994 for net proceeds of $526,143,
after fees and commissions of $16,284.
We are devoting a
significant portion of the net proceeds from our initial public
offering to fund our camsirubicin Phase 2 clinical trial for which
we recently signed a collaboration agreement with Grupo
Español de Investigación en Sarcomas
(“GEIS”), discussed in further detail below.
We believe the net proceeds
from our initial public offering will be sufficient to enable us to
obtain topline results for that camsirubicin Phase 2 clinical
trial. We are aiming to enroll the first patient in a Phase 3
clinical development program for our lead product candidate,
Validive (clonidine mucobuccal tablet; clonidine MBT) within a few
months of raising sufficient funds. To do so, we will require
additional funding in the millions or tens of millions of dollars
(depending on if we have consummated a collaboration or partnership
or neither for Validive), or find a suitable pharmaceutical
partner, both of which we are planning to pursue in the coming
months.
Our Product Candidates
Validive is
designed to be used prophylactically to reduce the incidence, delay
the time to onset, and decrease the duration of severe oral
mucositis (“SOM”) in patients undergoing
chemoradiotherapy (“CRT”) for oropharyngeal cancer
(“OPC”). SOM is a painful and debilitating inflammation
and ulceration of the mucous membranes lining the oral cavity and
oropharynx in response to chemoradiation. The majority of patients
receiving CRT to treat their OPC develop SOM, which remains one of
the most common and devastating side effects of treatment in this
indication. The potential clinical benefits to patients of reducing
or delaying the incidence of SOM, or reducing the duration of SOM,
include: reduced treatment discontinuations leading to potentially
improved overall survival outcomes; reduced mouth and throat pain
avoiding the need to receive parenteral nutrition; and decreased
long-term and often permanent debilitation arising from swallowing
difficulties, neck and throat spasms, and lung complications due to
food aspiration. Our mucobuccal tablet (“MBT”)
formulation is a novel delivery system for clonidine that allows
for prolonged and enhanced local delivery of drug in the regions of
mucosal radiation damage in patients with OPC. Validive has been
granted fast track designation in the U.S., orphan drug designation
in the EU, and has global intellectual property patent protection
through mid-2029 not accounting for possible
extensions.
In
September 2017, we exercised an option to license Validive from
Onxeo S.A., the company that developed Validive through its Phase 2
clinical trial. In the completed Phase 2 clinical trial, Validive
demonstrated clinically meaningful efficacy signals within the
64-patient OPC population randomized to placebo, Validive 50
µg dose and Validive 100 µg dose. The absolute incidence
of SOM in OPC patients who received a dose of Validive 100 µg
once per day was reduced by 26.3% (incidence rate of 65.2% in
placebo, 45.0% in Validive 50 µg group, and 38.9% in Validive
100 µg group). The median time to onset of SOM was 37 days in
the placebo cohort; 45 days in the Validive 50 µg cohort and
no median time of onset was reached in the Validive 100 µg
group since fewer than half of this cohort of patients developed
SOM. There was also a 37.8% reduction in the median duration of the
SOM for the Validive 100 µg group versus placebo (41.0 days
placebo group, 34.0 days Validive 50 µg group, and 25.5 days
Validive 100 µg group) in patients that developed SOM. Median
duration of SOM across all patients, inclusive of both those that
did and did not develop SOM, was 17 days in the placebo group and 0
days in each of the Validive 50 and 100 µg groups. A positive
dose response was seen in each of these three clinical endpoints.
Additionally, patients in the Validive cohorts in the Phase 2
clinical trial demonstrated a safety profile similar to that of
placebo. While not designed by us, Onxeo’s promising
preclinical studies and Phase 2 clinical trial have informed the
design and conduct of what we believe will be an effective Phase 3
clinical program.
SOM
typically arises in the immune tissue at the back of the tongue and
throat, which comprise the oropharynx, and consists of acute severe
tissue damage and pain that prevents patients from swallowing,
eating and drinking. Validive stimulates the alpha-2 adrenergic
receptor on macrophages (white blood cells present in the immune
tissues of the oropharynx) suppressing pro-inflammatory cytokine
expression. Validive exerts its effects locally in the oral cavity
and oropharynx over a prolonged period of time through its unique
MBT formulation. Patients who develop SOM are also at increased
risk of developing late onset toxicities, including trismus (jaw,
neck, and throat spasms), dysphagia, and lung complications, which
are often irreversible and lead to increased hospitalization and
the need for further interventions sometimes years after completion
of chemoradiotherapy. We believe that a reduction in the incidence
and duration of SOM by Validive will have the potential to reduce
treatment discontinuation and/or treatment delays potentially
leading to improved survival outcomes, and reducing or eliminating
these long-term morbidities.
The OPC
target population for Validive is the most rapidly growing segment
of head and neck cancer (“HNC”) patients, with an
estimated 40,000 new cases of OPC in the alone in 2019. The growth
in OPC is driven by the increasing prevalence of oral human
papilloma virus (“HPV”) infections in the U.S. and
around the world. Despite the availability of a
pediatric/adolescent HPV vaccine, the rate of OPC incidence in
adults is not anticipated to be materially reduced for many decades
due to low adoption of the vaccine to date. As a result, the
incidence of HPV-driven OPC is projected to increase for many years
to come and will continue to support a clinical need for Validive
for the prevention of CRT-induced SOM in patients with OPC since
CRT is the standard of care treatment.
44
A
pre-Phase 3 meeting with the FDA was held and based on the meeting
discussion, a Phase 3 clinical protocol and accompanying
statistical analysis plan (“SAP”) was submitted to the
FDA for review and comments. We have also received protocol
assistance and advice on our Phase 3 protocol and SAP from the
European Medicines Agency Committee on Human Medicinal Products
(EMA/CHMP/SAWP). Based on comments and guidance provided by FDA and
EMA, we are aiming to enroll the first patient in our Phase 3
randomized trial for our lead product candidate, Validive, within a
few months of raising sufficient funds. The Validive program will
consist of an adaptive design trial with an interim analysis
planned for approximately twelve months after the first patient is
dosed, and a confirmatory second trial planned to commence shortly
after completion of this interim analysis.
Our
second product candidate, camsirubicin, is a novel analog of
doxorubicin which has been designed to reduce the cardiotoxic side
effects generated by doxorubicin while retaining anti-cancer
activity. Camsirubicin is not metabolized to the derivatives that
are believed to be responsible for doxorubicin’s cardiotoxic
effects. A Phase 2 clinical trial for camsirubicin has been
completed in patients with advanced (e.g. unresectable or
metastatic) soft tissue sarcoma (“ASTS”). Average life
expectancy for these patients is 12-15 months. In this study, 52.6%
of patients evaluable for tumor progression demonstrated clinical
benefit (partial response or stable disease), which was
proportional to dose and consistently observed at higher cumulative
doses of camsirubicin (>1000 mg/m2). Camsirubicin was very well tolerated
in this study and underscored the ability to potentially administer
camsirubicin without restriction for cumulative dose in patients
with ASTS. Doxorubicin is limited to a lifetime cumulative dose
maximum of 450 mg/m2. Even if
a patient is responding, they are pulled off of doxorubicin
treatment once this cumulative dose has been reached.
Based
on encouraging clinical results to date, we plan to continue the
development of camsirubicin as 1st-line treatment in
patients with ASTS, where the current 1st-line treatment is
doxorubicin. The aim is to administer camsirubicin without
restricting cumulative dose, thereby potentially improving efficacy
by keeping patients on treatment who are responding. In June 2019,
we entered into a clinical collaboration with Grupo Español de
Investigación en Sarcomas (“GEIS”). GEIS will lead
a multi-country, randomized, open-label Phase 2 clinical trial
evaluating camsirubicin head-to-head against doxorubicin in
patients with ASTS. GEIS is an internationally renowned non-profit
organization focused on the research, development and management of
clinical trials for sarcoma that has worked with many of the
leading biotech and global pharmaceutical companies. Enrollment of
the trial is currently anticipated to begin in the second half of
2020 and to include approximately 170 ASTS patients, an interim
analysis, and take around two years to enroll. The primary endpoint
of the trial will be progression-free survival, with secondary
endpoints including overall survival and incidence of
treatment-emergent adverse events. In November 2019, the European
Commission granted orphan drug designation for camsirubicin for the
treatment of soft tissue sarcoma in the EU.
Our
third program, MNPR-101, is a novel first-in-class humanized
monoclonal antibody to the urokinase plasminogen activator receptor
(“uPAR”) for the treatment of advanced cancers. The
IND-enabling work is nearly completed.
Our
management team has extensive experience in developing therapeutics
through regulatory approval and commercialization. In aggregate,
companies they co-founded have achieved four drug approvals in the
U.S. and the EU, successfully sold an asset developed by management
which is currently in Phase 3 clinical trials, and completed the
sale of a biopharmaceutical company for over $800 million in cash.
Understanding the preclinical, clinical, regulatory and commercial
development processes and hurdles are key factors in successful
drug development and the expertise demonstrated by our management
team across all of these areas increases the probability of success
in advancing the product candidates in our product
pipeline.
Our Product Pipeline
45
Validive (clonidine mucobuccal tablet; clonidine MBT)
Validive is an MBT
of clonidine. The MBT formulation was developed to enhance the oral
mucosal drug delivery and significantly increase the salivary
concentrations of the active ingredient while minimizing systemic
absorption. The Validive tablet is tasteless and administered once
daily by affixing it to the outside of the patient’s upper
gum where it dissolves slowly over the period of several hours,
resulting in the extended release of clonidine into the oral cavity
and oropharynx, the site of SOM following chemoradiation treatment
for OPC. Validive therapy is designed to begin on the first day of
chemoradiation treatment and continue daily through the last day of
treatment.
SOM is
a painful and debilitating inflammation and ulceration of the
mucous membranes lining the oral cavity and oropharynx in response
to chemoradiation therapy. Patients receiving CRT to treat their
OPC often develop SOM, which remains one of the most common and
devastating side effects of treatment in this indication. We
believe Validive has the potential to address several critical
elements that affect SOM patients, including:
Reduction in the incidence of SOM. SOM
can increase the risk of acute and chronic comorbidities, including
dysphagia, trismus and lung complications, which are often
irreversible and lead to increased hospitalization and the need for
additional interventions. In a Phase 2 clinical trial, the OPC
patient cohort treated with Validive 100 µg demonstrated a
reduction in the absolute incidence of SOM compared to placebo of
26.3% (incidence rate of 65.2% in placebo, 45.0% in Validive 50
µg group, 38.9% in Validive 100 µg group). A reduced
incidence of SOM in OPC patients may lower the risk of acute and
chronic comorbidities and improve quality of life.
Delay in the time to onset of SOM. SOM
can cause cancer treatment delay and/or discontinuation, which may
impact overall survival outcomes. In a Phase 2 clinical trial, the
OPC patients had a time to onset of SOM of 37 days in the placebo
cohort; 45-day time to onset of SOM in the Validive 50 µg
cohort; and median was not reached as fewer than half of the
patients developed SOM in the Validive 100 µg group.
Prolonging time to onset of SOM may lead to fewer missed
chemoradiotherapy treatments, resulting in improved overall
survival outcomes.
Decrease in the duration of SOM. Longer
duration of SOM leads to a higher risk of the need for parenteral
nutrition and lower quality of life. SOM patients experience
inability to drink and/or eat, and difficulty swallowing often
resulting in malnourishment and feeding tube intervention. The
Phase 2 clinical trial data demonstrated a 15.5-day reduction (by
37.8%) in the duration of SOM for patients treated with Validive
100 µg (41 day median duration with placebo, 34 days with the
Validive 50 µg group, and 25.5 days for the Validive 100
µg group) in patients that developed SOM. Median duration
across all patients, inclusive of both those that did and did not
develop SOM, was 17 days in the placebo group and 0 days in each of
the Validive 50 and 100 µg groups. Reduced duration of SOM may
result in lower risk of malnourishment and feeding tube
intervention, and fewer treatment terminations/delays
Camsirubicin (5-imino-13-deoxydoxorubicin; formerly MNPR-201,
GPX-150)
Camsirubicin is a
proprietary doxorubicin analog that is selective for topoisomerase
II-alpha. Doxorubicin is used to treat adult and pediatric solid
and blood (hematologic) cancers, including soft tissue sarcomas,
breast, gastric, ovarian and bladder cancers, leukemias and
lymphomas. The clinical efficacy of doxorubicin has historically
been limited by the risk of patients developing irreversible,
potentially life-threatening cardiotoxicity, despite clinical
studies demonstrating the anti-cancer benefit of higher doses of
doxorubicin administered for longer periods of time. For example,
several clinical studies completed in the 1990’s demonstrated
that concurrent doxorubicin (60 mg/m2, 8 cycles) and paclitaxel gave a 94%
overall response rate in patients with metastatic breast cancer but
led to 18% of these patients developing congestive heart failure.
Reduction of doxorubicin to 4-6 cycles of treatment decreased the
incidence of congestive heart failure, but also reduced response
rates to 45-55%.
Camsirubicin has
been engineered specifically to retain the anticancer activity of
doxorubicin while minimizing the toxic effects on the heart.
Similar to doxorubicin, the antitumor effects of camsirubicin are
mediated through the stabilization of the topoisomerase II complex
after a DNA strand break and DNA intercalation leading to tumor
cell apoptosis (cell death). Inhibiting the topoisomerase II-alpha
isoform is desired for the anti-cancer effect, while inhibiting the
topoisomerase II-beta isoform has been demonstrated to mediate, at
least in part, the cardiotoxicity associated with doxorubicin.
Camsirubicin is more selective than doxorubicin for inhibiting
topoisomerase II-alpha versus topoisomerase II-beta. This
selectivity may at least partly explain the minimal cardiotoxicity
that has been observed for camsirubicin in preclinical and clinical
studies to date. We believe these attributes provide a strong
rationale to develop camsirubicin without restriction on cumulative
dose, in a broad spectrum of cancer types.
Development of
camsirubicin is being pursued initially in patients with advanced
soft tissue sarcoma (ASTS). Currently, these patients receive
doxorubicin in the 1st-line and
camsirubicin will be evaluated in a randomized Phase 2 trial head
to head against doxorubicin. Although doxorubicin has been the
standard of care treatment for over 40 years for patients with
ASTS, patients are pulled off treatment to limit irreversible heart
failure once the cumulative dose reaches 450 mg/m2, even if they are experiencing clinical
benefit. As a result, median progression free survival for ASTS
patients is approximately 6 months, with median overall survival of
12-15 months. Thus, there is a significant unmet opportunity to
develop a replacement for doxorubicin that retains anti-cancer
activity while reducing or eliminating the risk for irreversible
heart damage.
MNPR-101 (formerly huATN-658)
MNPR-101 is a
novel, preclinical stage drug candidate. It is a first-in-class
humanized monoclonal antibody to the urokinase plasminogen
activator receptor (“uPAR”), a well-credentialed cancer
therapeutic target. uPAR is a protein receptor that sits on the
cell surface of, and is overexpressed in, many deadly cancers, but
has little to no expression in healthy tissue; several Phase 1
imaging studies in human advanced cancer patients show that uPAR is
detected selectively in the tumor.
In
normal cells, uPAR is transiently expressed as part of a highly
regulated process required for the breakdown of the extracellular
matrix during normal tissue remodeling. In cancer, however, uPAR is
constitutively overexpressed by the tumor cell, and the uPAR
extracellular matrix degrading function is hijacked by the tumor to
support tissue invasion, metastasis, and angiogenesis. It is
important to tumor cell survival, and uPAR expression increases in
high grade and metastatic disease.
MNPR-101 has
demonstrated significant antitumor activity in numerous preclinical
models of tumor growth, both as a monotherapy and in combination
with other therapeutics and is being advanced toward an IND. Based
on the selective expression of uPAR in numerous tumor types, we
anticipate MNPR-101 will be well-tolerated and amenable to a
variety of combination treatment approaches in the
clinic.
46
Our Strategy
Leveraging the
experience and the demonstrated competencies of our management
team, our strategic goal is to acquire, develop and commercialize
promising oncology product candidates that address the unmet
medical needs of cancer patients. The five key elements of our
strategy to achieve this goal are to:
●
Advance the clinical development of
camsirubicin, by pursuing clinical indications where doxorubicin
has demonstrated efficacy. ASTS will be the first
indication, which will allow camsirubicin to go head-to-head
against doxorubicin, the current 1st-line treatment. In
this indication, camsirubicin previously demonstrated clinical
benefit (stable disease or partial response) in 52.6% of patients
evaluable for tumor progression in a single arm Phase 2 study.
Clinical benefit was proportional to dose and consistently observed
at higher cumulative doses of camsirubicin (>1000
mg/m2). Camsirubicin was very
well tolerated in this Phase 2 study and underscored the ability to
potentially administer camsirubicin without restriction for
cumulative dose (doxorubicin is limited to 450 mg/m2 cumulative dose due to heart
toxicity).
●
Leverage data generated from the Phase 2
Validive clinical trial to position us well for a successful Phase
3 clinical program for Validive for SOM in OPC. In a Phase 2
clinical trial the absolute incidence of SOM in OPC patients was
reduced by 26.3%, the time to onset was delayed, and the duration
in patients that developed SOM was decreased by 15.5 days in the
Validive 100 µg cohort versus placebo. In addition to the data
from the Phase 2 clinical trial, we believe the guidance from our
key opinion leaders (“KOLs”) as well as from the FDA
and EMA, and our own internal clinical trial design expertise,
position us well for a successful Phase 3 clinical trial
program.
●
Obtain FDA approval of Validive and maximize
the commercial potential of Validive in the U.S. and the EU,
seeking partnerships outside these markets. Following a
potentially successful Phase 3 clinical program of Validive and
potential FDA approval, we currently intend to commercialize
Validive in the U.S. and the EU which may include establishing our
own specialty sales force and seeking partnerships outside of these
territories for regulatory approval and drug sales and
distribution.
●
Continue the development of MNPR-101 and expand
our drug development pipeline through in-license and acquisition of
oncology product candidates. We plan to continue the
development of MNPR-101 and the expansion of our drug development
pipeline through acquiring or in-licensing additional oncology
product candidates, particularly those that leverage existing
scientific and clinical data that helps de-risk the next steps in
clinical development.
●
Utilize the expertise and prior experience of
our team in the areas of asset acquisition, drug development and
commercialization to establish ourselves as a leading
biopharmaceutical company. Our senior executive team has
relevant experience in biopharmaceutical in-licensing and
acquisitions as well as developing product candidates through
approval and commercialization. In aggregate, our team has
co-founded BioMarin Pharmaceutical (Nasdaq: BMRN), Raptor
Pharmaceuticals ($800 million sale to Horizon Pharma), and Tactic
Pharma, LLC (“Tactic Pharma”) (sale of lead asset,
choline tetrathiomolybdate, which was ultimately acquired by
Alexion in June 2018 for $764 million).
Risks Associated with our Business
Our
business is subject to numerous risks and uncertainties, including
those highlighted in “Item 1A - Risk Factors”. These
risks include, among others, the following:
●
We are a clinical
stage biopharmaceutical company with a history of losses. We expect
to continue to incur significant losses for the foreseeable future
and may never achieve or maintain profitability, which could result
in a decline in the market value of our common stock.
●
Funds raised in our
recent initial public offering of our common stock are not
sufficient to start our Phase 3 clinical development of Validive,
and require that we raise significant additional funds in the coming
months and thereafter in order to complete Validive’s Phase 3
clinical trial, support further development of camsirubicin beyond
Phase 2 and generally to support our current and any future product
candidates through completion of trials, approval processes and, if
applicable, commercialization. If we are unable to
raise enough funds in the coming months from the sale of our common
stock or other financing efforts, we may have to consider strategic
options such as out-licensing Validive or other product candidates,
entering into a clinical partnership, or terminating one or more
programs. There can be no assurance that we can find
a suitable partner on satisfactory terms.
●
We have a limited
operating history, no revenues from operations, and are dependent
upon raising capital to continue our drug development
programs.
●
We do not have and
may never have any approved products on the market. Our business is
highly dependent upon receiving approvals from various U.S. and
international governmental agencies and will be severely harmed if
we are not granted approval to manufacture and sell our product
candidates.
●
Our clinical trials
may not yield sufficiently conclusive results for regulatory
agencies to approve the use of our products.
●
If we experience
delays or difficulties in the enrollment of subjects in clinical
trials, our receipt of necessary regulatory approvals could be
delayed or prevented, which would materially affect our financial
condition.
●
We rely on third
parties to conduct our manufacturing, non-clinical studies, and our
clinical trials. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, the
initiation or conduct of our clinical trials may be delayed and we
may be unable to obtain regulatory approval for, or commercialize
our, current product candidates or any future products, and our
financial condition will be adversely affected.
●
We face significant
competition from other biotechnology and pharmaceutical companies,
and our operating results will suffer if we fail to compete
effectively. Competition and technological change may make our
product candidates obsolete or non-competitive.
●
The termination of
third-party licenses could adversely affect our rights to important
compounds or technologies.
●
If we and our
third-party licensors do not obtain and preserve protection for our
respective intellectual property rights, our competitors may be
able to take advantage of our development efforts to develop
competing drugs.
●
If we lose key
management leadership, and/or scientific personnel, and if we
cannot recruit qualified employees or other significant personnel,
we may experience program delays and increased compensation costs,
and our business may be materially disrupted.
●
The COVID-19
pandemic could have a substantial negative impact on our business,
financial condition, operating results, stock price and ability
raise additional funds.
47
Implications of Being an Emerging Growth Company
We
qualify as an “emerging growth company” as defined in
the Jumpstart our Business Startups Act of 2012 (“JOBS
Act”). An emerging growth company may take advantage of
specified reduced reporting and other burdens that are otherwise
applicable generally to public companies. These provisions include,
but are not limited to:
●
inclusion of only
two years, as compared to three years, of audited financial
statements in addition to any required unaudited interim financial
statements with correspondingly reduced “Management’s
discussion and analysis of financial condition and results of
operations” disclosures;
●
an exemption from
the auditor attestation requirement in the assessment of our
internal control over financial reporting pursuant to the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley
Act”);
●
an exemption from
compliance with any new requirements adopted by the Public Company
Accounting Oversight Board (“PCAOB”) requiring
mandatory audit firm rotation;
●
reduced disclosure
about executive compensation arrangements; and
●
an exemption from
the requirement to seek non-binding advisory votes on executive
compensation or golden parachute arrangements.
We may
take advantage of these provisions until we are no longer an
emerging growth company. We will remain an emerging growth company
until the earliest of (1) the last day of the year (a) following
the fifth anniversary of the completion of our initial public
offering, (b) in which we have total annual gross revenue of at
least $1.07 billion or (c) in which we are deemed to be a large
accelerated filer, which means the market value of our common stock
that is held by non-affiliates exceeds $700 million as of the prior
June 30th, and (2) the date on which we have issued more than $1.0
billion in non-convertible debt during the prior three-year
period.
We have
elected to take advantage of certain of the reduced disclosure
obligations in this Annual Report on
Form 10-K, and may elect to take advantage of other reduced
reporting requirements in future filings. As a result, the
information that we provide to our stockholders may be different
than what you might find from other public reporting
companies.
The
JOBS Act permits an emerging growth company such as us to take
advantage of an extended transition period to comply with new or
revised accounting standards applicable to public companies until
those standards would otherwise apply to private companies. We have
irrevocably elected to opt out of this provision and, as a result,
we will comply with new or revised accounting standards when they
are required to be adopted by public companies that are not
emerging growth companies. In addition, we are also a
“smaller reporting company” as defined in Rule 12b-2 of
the Exchange Act and have elected to take advantage of certain of
the scaled disclosure requirements available to smaller reporting
companies such as avoiding the extensive narrative disclosure
required of other reporting companies, particularly in the
description of executive compensation.
Corporate Information
We were
formed as a Delaware limited liability company in December 2014,
with the name Monopar Therapeutics, LLC. In December 2015, we
converted to a Delaware C corporation. Our principal executive
offices are located at 1000 Skokie Blvd, Suite 350, Wilmette, IL
60091. Our telephone number is (847) 388-0349. Our corporate
website is located at www.monopartx.com.
Any information contained in, or that can be accessed through our
website, is not incorporated by reference in this Annual Report on
Form 10-K.
Trademark notice
We have
registered trademarks with the U.S. Patent and Trademark Office
(“USPTO”), for the following trademarks:
“Validive”, “Baxefyn”,
“Vidarys”, “Cotilix”, “Arvita”
and “Clonidol”. All other trademarks, service marks and
trade names in this Annual Report on
Form 10-K are the property of their respective owners. We
have omitted the ® and ™ designations, as applicable,
for the trademarks used herein.
48
Revenues
We are
an emerging growth company, have no approved drugs and have not
generated any revenues. To date, we have engaged in acquiring
pharmaceutical drug product candidates, licensing rights to drug
product candidates, entering into collaboration agreements for
testing and clinical development of our drug product candidates and
providing the infrastructure to support the clinical development of
our drug product candidates. We do not anticipate commercial
revenues from operations until we complete testing and development
of one of our drug product candidates and obtain marketing approval
or we sell, enter into a collaborative marketing arrangement, or
out-license one of our drug product candidates to another party.
See “Liquidity and Capital Resources”.
Critical
Accounting Policies and Use of Estimates
While
our significant accounting policies are described in more detail in
Note 2 of our consolidated financial statements included elsewhere
in this Annual Report on Form 10-K, we believe the following
accounting policies to be critical to the judgments and estimates
used in the preparation of our consolidated financial
statements.
Recently
Issued and Adopted Accounting Pronouncements
A description of recently issued accounting
pronouncements that may potentially impact our financial position
and consolidated results of operations is disclosed in Note 2 to
our consolidated financial statements appearing elsewhere in this
Annual Report on Form 10-K.
Research
and Development Expenses
Research and
development (“R&D”) costs are expensed as incurred.
Major components of R&D expenses include salaries and benefits
of R&D staff, stock-based compensation expense related to stock
options granted to our R&D team, fees paid to consultants and
to the entities that conduct certain development activities on our
behalf, and materials and supplies used in R&D
activities.
We
accrue and expense the costs for clinical trial activities
performed by third parties based upon estimates of the percentage
of work completed over the life of the individual study in
accordance with agreements established with contract research
organizations and clinical trial sites. We determine the estimates
through discussions with internal clinical personnel and external
service providers as to progress or stage of completion of trials
or services and the agreed upon fee to be paid for such services.
Costs of setting up clinical trial sites for participation in the
trials are expensed immediately as R&D expenses. Clinical trial
site costs related to patient enrollment are accrued and expensed
as patients are entered into the trial. During the years ended
December 31, 2019 and 2018, we had no clinical trials in
progress.The successful development of our product pipeline is
uncertain. We cannot precisely or accurately estimate the nature,
timing or costs of the efforts that will be necessary to complete
the remainder of the development of any of our drug product
candidates or the period, if any, in which material net cash
inflows from our drug product candidates may commence. This is due
to the numerous risks and uncertainties associated with developing
drug product candidates, including:
●
receiving less
funding than the product programs require;
●
slower than
expected progress in developing Validive, camsirubicin, MNPR-101 or
other drug product candidates;
●
higher than
expected costs to produce, test, package, warehouse, and distribute
our current and future drug product candidates;
●
higher than
expected costs for preclinical testing of our current or future
acquired and/or in-licensed programs;
●
increased future
clinical trial costs, including requirements for increases in the
number of patients, clinical sites, size, duration, testing
requirements, or complexity of future clinical trials;
●
future clinical
trial results;
●
higher than
expected costs associated with attempting to obtain regulatory
approvals, including without limitation additional costs caused by
delays and additional clinical testing mandated by regulatory
authorities;
●
higher than
expected personnel or other costs, such as adding personnel and
engaging consultants;
●
higher than
expected costs in pursuing the acquisition or licensing of
additional assets;
●
higher than
expected costs to protect our intellectual property portfolio or
otherwise pursue our intellectual property strategy;
●
lower benefits of
our drug product candidates compared to other competitive
therapies;
●
our ability to
market, commercialize and achieve market acceptance sufficient to
provide financial returns acceptable for future requirements and
financial returns for our investors for any of our drug product
candidates that we are developing or may develop in the future;
and
●
the effects of the
COVID-19 pandemic.
There
are other risks described in “Item 1-A - Risk Factors”.
A change in the outcome of any of these and other additional
variables with respect to the development of a drug product
candidate could mean a significant change in the costs and timing
associated with the development of that drug product candidate. We
expect that R&D expenses will increase in future periods as a
result of current product candidates entering more expensive stages
of development and additional current and future product candidate
programs under development which will require increased personnel,
increased consulting, future preclinical studies and clinical trial
costs, including clinical drug product manufacturing and related
costs.
49
General
and Administrative Expenses
General
and administrative expenses consist primarily of compensation and
expenses for our executive personnel who perform corporate and
administrative functions, stock-based compensation expense related
to stock options granted to our executive team, legal and audit
expenses, general and administrative consulting, board fees and
expenses, patent legal and application fees, and facilities and
related expenses. Future general and administrative expenses may
also include: compensation and expenses related to the employment
of personnel or the engagement of consultants in the areas of
finance, human resources, information technology, business
development, legal, compliance, investor relations and others,
depreciation and amortization of general and administrative fixed
assets, investor relations and annual meeting expense, and
stock-based compensation granted to personnel who perform corporate
and administrative functions. We expect that our general and
administrative expenses will increase in future periods as a result
of increased personnel, expanded infrastructure, increased
consulting, legal, accounting/auditing, investor relations and
other expenses associated with being a public reporting company,
costs incurred to seek and establish collaborations with respect to
any of our drug product candidates, and costs required to find and
acquire or license additional product candidates to expand our
product pipeline.
Stock-Based
Compensation
We
account for stock-based compensation arrangements with employees,
non-employee directors and consultants using a fair value method,
which requires the recognition of compensation expense for costs
related to all stock-based awards, including stock option grants.
The fair value method requires us to estimate the fair value of
stock-based payment awards on the date of grant using an option
pricing model.
Stock-based
compensation costs for stock options granted to our employees and
non-employee directors are based on the fair value of the
underlying option calculated using the Black-Scholes option-pricing
model on the date of grant for stock options and recognized as
expense on a straight-line basis over the requisite service period,
which is the vesting period. Determining the appropriate fair value
model and related assumptions requires judgment, including
selecting methods for estimating the Company’s future stock
price volatility, forfeiture rates and expected term. The expected
volatility rates are estimated based on the actual volatility of
comparable public companies over recent historical periods of the
same length as the expected term. We generally selected these
companies based on reasonably comparable characteristics, including
market capitalization, risk profiles, stage of corporate
development and with historical share price information sufficient
to meet the expected term of the stock-based awards. The expected
term for stock options granted during the years ended December 31,
2019 and 2018 was estimated using the simplified method.
Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from
those estimates. We have not paid dividends and do not anticipate
paying a cash dividend in future vesting periods and, accordingly,
use an expected dividend yield of zero. The risk-free interest rate
is based on the rate of U.S. Treasury securities with maturities
consistent with the estimated expected term of the awards. Prior to
January 1, 2019, the measurement of consultant stock-based
compensation was subject to periodic adjustments as the underlying
equity instruments vest. Since January 1, 2019, consultant
stock-based compensation is valued on the grant date and is
recognized as an expense over the period during which services are
rendered.
Stock
Incentive Plan
In
April 2016, our Board and the preferred stockholders representing a
majority in interest of our outstanding stock approved the Amended
and Restated Monopar Therapeutics Inc. 2016 Stock Incentive Plan,
as subsequently amended (the “Plan”), allowing us to
grant up to an aggregate 700,000 shares of stock awards, stock
options, stock appreciation rights and other stock-based awards to
our employees, non-employee directors and consultants. In October
2017, our Board voted to increase the stock option pool to
1,600,000 shares, which subsequently was approved by our
stockholders. Through February 2017, our Board granted to Board
Members, our then acting chief financial officer, and our acting
chief medical officer stock options to purchase up to an aggregate
555,520 shares of our common stock at an exercise price of $0.001
par value based upon third party valuations of our common
stock.
In
September 2017, we granted stock options to purchase up to 21,024
shares of our common stock to each of the three new Board Members
and in November 2017, we granted options to purchase up to 40,000
shares of our common stock to an employee. These Board and employee
stock options have an exercise price of $6 per share based on the
price per share at which our common stock was sold in our most
recent private offering prior to such
grant.
In
January 2018, we granted stock options to purchase up to 32,004
shares of our common stock to our acting chief medical officer at
an exercise price of $6 per share based on the price per share at
which our common stock was sold in our most recent private offering
prior
to such grant. In May 2018 and August 2018, we granted stock
options to purchase up to 5,000 shares of our common stock each to
two employees at an exercise price of $6 per share based on the
price per share at which common stock was sold in the
Company’s most recent private offering prior to such
grant.
In
August 2018, we granted stock options to all four of our
non-employee Board members, our chief executive officer, our chief
scientific officer, and our chief financial officer to purchase up
to an aggregate 425,300 shares of our common stock at an exercise
price of $6 per share based on the price per share at which our
common stock was sold in our most recent private offering
prior
to such grant. Vesting of such stock options commenced on
October 1, 2018.
In
December 2018, we granted stock options to purchase up to 20,000
shares of our common stock to our acting chief medical officer, at
an exercise price of $6 per share based on the price per share at
which our common stock was sold in our most recent private offering
prior
to such grant. Vesting of such stock options commenced on
January 1, 2019.
On
January 4, January 31 and February 11, 2020, our Plan Administrator
Committee (with regards to non-officer employees) and our
Compensation Committee, as ratified by the full Board (in the case
of officers and non-employee directors) granted an aggregate of
205,110 stock options with exercise prices ranging from $12.93 to
$17.75 for an aggregate grant date fair value of approximately $2.1
million which will be expensed over the vesting period. All stock
options have a 10-year term and vest from 1 to 4 years. We also
granted an aggregate 45,722 restricted stock units on January 31,
2020 and February 11, 2020, with an aggregate value of
approximately $0.7 million which vest from 1 to 4
years.
Under
the Plan, the per share exercise price for the shares to be issued
upon exercise of an option is determined by a committee of our
Board, except that the per share exercise price cannot be less than
100% of the fair market value per share on the grant date. In
connection with our stock options issued in April 2016, December
2016, and February 2017, fair market value was established by our
Plan Administrator using recently obtained third party valuation
reports. In connection with our stock options issued in September
2017, November 2017, January 2018, May 2018, August 2018 and
December 2018, fair market value was established by our Plan
Administrator Committee based on the price per share at which
common stock was sold in our most recent private offering
prior
to such grants. Options generally expire after ten
years.
During
the years ended December 31, 2019 and 2018, we recognized $653,997
and $232,625 of employee and non-employee director stock-based
compensation expense as general and administrative expenses,
respectively, and $274,345 and $171,238 as research and development
expenses, respectively. The stock-based compensation expense is
allocated on a departmental basis, based on the classification of
the option holder. No income tax benefits have been recognized in
the consolidated statements of operations and comprehensive loss
for stock-based compensation arrangements.
50
We
recognize as an expense the fair value of options granted to
persons (currently consultants) who are neither employees nor
non-employee directors. Stock-based compensation expense for
consultants which were recorded as research and development expense
for the years ended December 31, 2019 and 2018 was $82,829 and
$125,469, respectively.
The
fair value of options granted from inception to December 31, 2019
was based on the Black-Scholes option-pricing model assuming the
following factors: 4.7 to 6.2 years expected term, 55% to 85%
volatility, 1.2% to 2.9% risk free interest rate and zero
dividends. The expected term for options granted to date is
estimated using the simplified method. There were no stock option
grants during the year ended December 31, 2019. For the year ended
December 31, 2018, the weighted-average grant date fair value was
$2.05 per share. For the years ended December 31, 2019 and 2018 the
fair value of shares vested was $0.8 million and $0.4 million,
respectively. At December 31, 2019, the aggregate intrinsic value
was approximately $14.9 million, of which approximately $10.7
million was vested and approximately $4.2 million is expected to
vest (representing
options to purchase up to 350,200 shares of our common
stock), and the weighted-average exercise price in aggregate
was $2.94 which includes $2.13 for fully vested stock options and
$4.62 for stock options expected to vest. At December 31, 2019,
unamortized unvested balance of stock based compensation was
approximately $1.3 million, to be amortized over 2.4
years.
Stock
option activity under the Plan for the year ended December 31, 2019
was as follows:
|
|
|
|
|
Options Outstanding
|
||
|
|
|
Options Available
|
|
Number of Options
|
|
Weighted-Average Exercise Price
|
|
Balances at January 1, 2018
|
|
941,408
|
|
658,592
|
|
$ 0.94
|
|
Granted(1)
|
|
(487,304)
|
|
487,304
|
|
6.00
|
|
Forfeited(2)
|
|
40,000
|
|
(40,000)
|
|
6.00
|
|
Balances at December 31, 2018
|
|
494,104
|
|
1,105,896
|
|
2.99
|
|
Exercised
|
|
-
|
|
(18,433)
|
|
5.97
|
|
Balances at December 31, 2019
|
|
494,104
|
|
1,087,463
|
|
2.94
|
(1)
32,004 options vest
as follows: options to purchase up to 12,000 shares of common stock
vest on the grant date, options to purchase up to 1,667 shares of
common stock vest on the 1st of each month thereafter. 5,000
options vest 6/48ths on the grant date and 1/48th per month
thereafter. 5,000 options vest 6/48ths on the six- month
anniversary of grant date and 1/48th per month thereafter. 320,900
options vest 6/51 at the six-month anniversary of vesting
commencement date and 1/51 per month thereafter, with vesting
commencing on October 1, 2018. 104,400 options vest quarterly over
5 quarters, with the first quarter commenced October 1, 2018.
20,000 options vest as follows: options to purchase up to 1,667
shares of common stock vest on January 31, 2019 and the last day of
each month thereafter.
(2)
Forfeited options
resulted from an employee termination.
A
summary of options outstanding as of December 31, 2019 is shown
below:
|
Exercise Prices
|
|
Number of Shares Subject to Options Outstanding
|
|
Weighted-Average Contractual Term in Years
|
|
Number of Shares Subject to Options Fully Vested and
Exercisable
|
|
Weighted-Average Remaining Contractual Term
|
|
$0.001
|
|
555,420
|
|
6.7 years
|
|
475,060
|
|
6.6 years
|
|
$6.00
|
|
532,043
|
|
8.6 years
|
|
283,521
|
|
8.5 years
|
|
|
|
1,087,463
|
|
|
|
758,581
|
|
|
51
Comparison of the Years Ended December 31, 2019 and December 31,
2018
The
following table summarizes the results of our operations for the
years ended December 31, 2019 and 2018:
|
|
Year Ended December 31,
|
||||
|
(in thousands)
|
2019
|
|
2018
|
|
Variance
|
|
|
|
|
|
|
|
|
Revenue
|
$
-
|
|
$
-
|
|
$
-
|
|
|
|
|
|
|
|
|
Research
and development expenses
|
1,969
|
|
1,774
|
|
195
|
|
General
and administrative expenses
|
2,355
|
|
1,557
|
|
798
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
4,324
|
|
3,331
|
|
993
|
|
|
|
|
|
|
|
|
Operating
loss
|
(4,324)
|
|
(3,331)
|
|
(993)
|
|
Interest
and other income
|
99
|
|
103
|
|
(4)
|
|
Net
loss
|
$
(4,225)
|
|
$
(3,228)
|
|
$
(997)
|
R&D Expenses
|
|
|
Year ended December 31, 2019 versus Year ended December 31,
2018
|
|
R&D Expenses (in thousands)
|
|
|
|
Increase in CRO and related fees in 2019 in preparation for
Validive Phase 3 clinical trial
|
|
$ 206
|
|
Increase in collaboration fees, database management fees and
clinical material development in Q4 2019 in preparation
for
the camsirubicin Phase 2 clinical trial sponsored by
GEIS
|
|
126
|
|
Increase in employee stock-based compensation (non-cash) due to
August 2018 stock option grant to officer
|
|
103
|
|
Increase in R&D employee bonuses in 2019
|
|
60
|
|
Decrease in stock-based compensation (non-cash) to the Acting Chief
Medical Officer
|
|
(43)
|
|
Decrease in R&D base salaries and benefits primarily due to the
departure of our VP of Clinical Development in June
2018
|
|
(124)
|
|
Decrease in consulting fees for regulatory consultants utilized in
2018 in preparation for our meeting with the FDA
regarding Validive planning not repeated in
2019
|
|
(140)
|
|
Other, net
|
|
7
|
|
Net increase in R&D expenses
|
|
$ 195
|
52
General and Administrative Expenses
General and
administrative (“G&A”) expenses for the year ended
December 31, 2019 were approximately $2,355,000, compared to
approximately $1,557,000 for the year ended December 31, 2018, an
increase of approximately $798,000. This increase was primarily
attributed to:
|
|
|
Year ended December 31, 2019 versus year ended December 31,
2018
|
|
G&A Expenses (in thousands)
|
|
|
|
Increase in Board stock-based compensation (non-cash) due to August
2018 stock option grants to Board Members
|
|
$ 263
|
|
Increase in G&A salaries due to 2019 cost of living adjustments
and 2018 bonuses paid in March 2019 and 2019
accrued bonuses
|
|
184
|
|
Increase in employee stock-based compensation (non-cash) due to
August 2018 stock option grants to officers
|
|
158
|
|
Increase in audit fees due to increased scope and accounting
complexity
|
|
113
|
|
Increase in Board fees for 2019 committee services
|
|
66
|
|
Other
|
|
14
|
|
Net increase in G&A expenses
|
|
$ 798
|
Interest
Income
Interest income for
the year ended December 31, 2019 decreased by approximately $4,000
versus the year ended December 31, 2018 due to the decrease in bank
balances resulting from the use of cash in operating activities,
partly offset by higher bank interest rates on our money market
account. Note that the funds received from the initial public
offering of our common stock were received on December 23, 2019,
therefore it did not have a significant impact on interest income
for the year ended December 31, 2019.
Liquidity
and Capital Resources
Sources of Liquidity
We have
incurred losses and cumulative negative cash flows from operations
since our inception in December 2014 resulting in an accumulated
deficit of approximately $25.9 million as of December 31, 2019. We
anticipate that we will continue to incur losses for the
foreseeable future. We expect that our research and development and
general and administrative expenses will increase to enable the
execution of our strategic plan. As a result, we anticipate that we
will need to raise additional capital in 2020 to fund our
operations. We will seek to obtain needed capital through a
combination of equity offerings, debt financings, strategic
collaborations and grant funding. To date, we have funded our
operations through private placements of our preferred and common
stock, the net receipt of funds related to the Gem Transaction
(described below), net proceeds from the initial public offering of
our common stock and net proceeds from sales under our Capital on
DemandTM
Sales Agreement. We anticipate that the currently available funds
as of March 13, 2020, will fund our minimal required operations
through March 2021.
We
invest our cash equivalents in a money market account.
Contribution to Capital
In
August 2017, our largest stockholder at that time, Tactic Pharma,
surrendered 2,888,727 shares of common stock back to us as a
contribution to the capital of the Company. This resulted in
reducing Tactic Pharma’s ownership in us at that time from
80% to 70%. As of March 13, 2020, Tactic Pharma owns 42% of
us.
The Gem Transaction
On
August 25, 2017, Tactic Pharma and Gem formed a limited liability
company, TacticGem, LLC (“TacticGem”) with Tactic
Pharma contributing 4,111,273 shares of our common stock and Gem
contributing assets and $5 million in cash before transaction
costs. TacticGem then contributed the Gem assets, including the
intellectual property rights to camsirubicin, (the “Gem
Assets”) and cash to us in exchange for 3,055,394 shares of
our common stock (the “Gem Transaction”). This has
resulted in TacticGem owning 68% of our outstanding common stock as
of March 13, 2020. The contribution by TacticGem, made in
conjunction with contributions from outside investors in a private
offering, was intended to qualify for tax-free
treatment.
It is
anticipated that future cash burn will increase by approximately $2
million to $3 million per year in support of the GEIS-sponsored
Phase 2 clinical trial for camsirubicin.
53
Cash Flows
The following table provides information regarding our cash flows
for the years ended December 31, 2019 and 2018.
|
|
|
Year ended December 31,
|
|
Year ended December 31, 2019 versus
|
||
|
(in thousands)
|
|
2019
|
|
2018
|
|
Year ended December 31, 2018
|
|
Net cash used in operating activities
|
|
$ (3,018)
|
|
$ (2,681)
|
|
$ ( 337)
|
|
Net cash provided by (used in) financing activities
|
|
9,347
|
|
(206)
|
|
9,553
|
|
Effect of exchange rates on cash and cash equivalents
|
|
(8)
|
|
(2)
|
|
(6)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$ 6,321
|
|
$ (2,889)
|
|
$ 9,210
|
During the
years ended December 31, 2019 and 2018, we had net cash inflows of
approximately $6,321,000 and net cash outflows of approximately
$(2,889,000), respectively, a change of approximately $9,210,000
due primarily to cash raised in our initial public offering in
December 2019 offset by higher net cash used in operating
activities in 2019.
Cash
Flow Used in Operating Activities
The increase
to cash used in operating activities during the year ended December
31, 2019 compared to the year ended December 31, 2018 of
approximately $337,000 was
primarily due the increase in clinical development expenses related
to planning our Phase 3 clinical trial for Validive, collaboration
fees to GEIS related to planning the Phase 2 clinical trial for
camsirubicin, board and audit fees and employee compensation. Cash
used in operating activities of approximately $(3,018,000) for the
year ended December 31, 2019 was primarily a result of our
approximately $(4,225,000) net loss offset by approximately
$1,011,000 of non-cash stock-based compensation and changes in
operating assets and liabilities of approximately $196,000. Cash
used in operating activities of approximately $(2,681,000) for the
year ended December 31, 2018 was primarily a result of our
approximately $(3,228,000) net loss offset by approximately
$529,000 of non-cash stock-based compensation plus changes in
operating assets and liabilities of approximately
$18,000.
Cash
Flow Used in Investing Activities
Cash
Flow Provided by (Used In) Financing Activities
Future
Funding Requirements
To
date, we have not generated any revenue from product sales. We do
not know when, or if, we will generate any revenue from product
sales. We do not expect to generate any revenue from product sales
unless and until we obtain regulatory approval of and commercialize
any of our current or future drug product candidates or we
out-license or sell a drug product candidate to another party. At
the same time, we expect our expenses to increase in connection
with our ongoing development activities, particularly as we
continue the research, development, future preclinical studies and
clinical trials of, and seek regulatory approval for, our current
and future drug product candidates. We expect to incur additional
costs associated with operating as a listed stock trading public
company. In addition, if we obtain regulatory approval of any of
our current or future drug product candidates, we will need
substantial additional funding for commercialization requirements
and our continuing drug product development
operations.
54
As a
company, we have not completed development through marketing
approvals of any therapeutic products. We expect to continue to
incur significant increases in expenses and increasing operating
losses for the foreseeable future. We anticipate that our expenses
will increase substantially as we:
●
advance the
clinical development and execute the regulatory strategy for
Validive;
●
continue the
clinical development of camsirubicin;
●
continue the
preclinical activities and potentially enter clinical development
of MNPR-101;
●
acquire and/or
license additional pipeline drug product candidates and pursue the
future preclinical and/or clinical development of such drug product
candidates;
●
seek regulatory
approvals for any of our current and future drug product candidates
that successfully complete registration clinical
trials;
●
establish or
purchase the services of a sales, marketing and distribution
infrastructure to commercialize any products for which we may
obtain marketing approval;
●
develop our
manufacturing/quality capabilities or establish a reliable, high
quality supply chain sufficient to support our clinical
requirements and to provide sufficient capacity to launch and grow
the sales of any product for which we obtain marketing approval;
and
●
add or contract for
required operational, financial and management information systems
and capabilities and other specialized expert personnel to support
our drug product candidate development and planned
commercialization efforts.
We
anticipate that the funds available as of March 13, 2020, will fund
our minimal operations through March 2021. We have based this
estimate on assumptions that may prove to be wrong, and we could
use our available capital resources sooner than we currently
expect. Because of the numerous risks and uncertainties associated
with the development and commercialization of our drug product
candidates, and the extent to which we enter into collaborations
with third parties to participate in the development and
commercialization of our drug product candidates, we are unable to
accurately estimate with high reliability the amounts and timing
required for increased capital outlays and operating expenditures
associated with our current and anticipated drug product candidate
development programs. Our future capital requirements will depend
on many factors, including:
●
the progress of
regulatory interactions and clinical development of
Validive;
●
the progress of
clinical development and regulatory outcomes of
camsirubicin;
●
the progress of
preclinical and clinical development of MNPR-101;
●
the number and
characteristics of other drug product candidates that we may
license, acquire or otherwise pursue;
●
the scope,
progress, timing, cost and results of research, preclinical
development and clinical trials of current and future drug product
candidates;
●
the costs, timing
and outcomes of seeking and obtaining FDA and international
regulatory approvals;
●
the costs
associated with manufacturing/quality requirements and establishing
sales, marketing and distribution capabilities;
●
our ability to
maintain, expand and defend the scope of our intellectual property
portfolio, including the amount and timing of any payments we may
be required to make in connection with the licensing, filing,
defense and enforcement of any patents or other intellectual
property rights;
●
our need and
ability to hire or contract for additional management,
administrative, scientific, medical, sales and marketing, and
manufacturing/quality and other specialized personnel or external
expertise;
●
the effect of
competing products or new therapies that may limit market
penetration or prevent the introduction of our drug product
candidates or reduce the commercial potential of our product
portfolio;
●
our need to
implement additional internal systems and infrastructure;
and
●
the economic and
other terms, timing and success of our existing collaboration and
licensing arrangements and any collaboration, licensing or other
arrangements into which we may enter in the future, including the
timing of receipt of or payment to or from others of any milestone
or royalty payments under these arrangements.
55
See Item 1A –
“Risk Factors”. Expenditures are expected to increase
in the second quarter of 2020 onward for: CRO and clinical site
fees for the Validive Phase 3 clinical trial (if we raise
sufficient financing to start the Phase 3 trial); process
development and manufacturing costs of camsirubicin in connection
with the GEIS Phase 2 clinical trial; collaboration milestone fees;
employee compensation and consulting fees as a result of hiring
additional employees and consultants to support the planning and
initiation of our Validive Phase 3 clinical development program;
and in adjusting employee compensation to align with comparable
public companies. We are aiming to enroll the first patient in a
Phase 3 clinical development program for Validive within a few
months of raising sufficient funds. To do so, we will require
additional funding in the millions or tens of millions of dollars
(depending on if we have consummated a collaboration or partnership
or neither for Validive), or find a suitable pharmaceutical
partner, both of which we are planning to pursue in the coming
months. There can be no assurance that any such events will occur.
We intend to continue evaluating drug product candidates for the
purpose of growing our pipeline. Identifying and securing high
quality compounds usually takes time and related expenses; however,
our spending could be significantly accelerated in the second
quarter of 2020 and onward if additional drug product candidates
are acquired and enter clinical development. In this event, we may
be required to expand our management team, and pay much higher
contract manufacturing costs, contract research organization fees,
other clinical development costs or insurance costs that are not
currently projected. The anticipated operating cost increases in
the second quarter of 2020 onward are expected to be primarily
driven by the funding of our planned Validive Phase 3 clinical
development program and in support of the GEIS Phase 2 clinical
trial of camsirubicin. Beyond our need to raise additional funding
in the coming months to start the Validive Phase 3 clinical trial,
we will also need significant additional funding thereafter in
order to complete Validive’s Phase 3 clinical trial, support
further development of camsirubicin beyond Phase 2 and generally to
support our current and any future product candidates through
completion of trials, approval processes and, if applicable,
commercialization.
Until
we can generate a sufficient amount of product revenue to finance
our cash requirements, we expect to finance our future cash needs
primarily through a combination of equity offerings, debt
financings, strategic collaborations and grant funding. To the
extent that we raise additional capital through the sale of equity
or convertible debt securities, the ownership interest of our
current stockholders will be diluted, and the terms of these
securities may include liquidation or other preferences that
adversely affect our current stockholders’ rights. See Item
1A - “Risk Factors – Existing and new investors will
experience dilution as a result of our option plan and potential
future stock sales.” Debt financing, if available, may
involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends. If we
raise additional funds through marketing and distribution
arrangements or other collaborations, strategic alliances or
licensing arrangements with other parties, we may have to
relinquish valuable rights to our technologies, future revenue
streams, research programs or drug product candidates or grant
licenses on terms that may not be favorable to us, which will
reduce our future returns and affect our future operating
flexibility. If we are unable to raise additional funds through
equity or debt financings when needed, we may be required to delay,
limit, reduce or terminate our pipeline product development or
commercialization efforts or grant rights to others to develop and
market drug product candidates that we would otherwise prefer to
develop and market ourselves.
Contractual Obligations and Commitments
Development and
Collaboration Agreements Onxeo S.A.
In June
2016, we executed an agreement with Onxeo S.A., a French public
company, which gave us the exclusive option to license (on a
world-wide exclusive basis) Validive (clonidine mucobuccal tablet;
clonidine MBT a mucoadhesive tablet of clonidine based on the
Lauriad mucoadhesive technology) to pursue treating severe oral
mucositis in patients undergoing chemoradiation treatment for head
and neck cancers. The agreement includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if we achieve all milestones, and escalating royalties from
5% to 10% on net sales. In September 2017, we exercised the option
to license Validive from Onxeo for $1 million, but as of March 13,
2020, we have not been required to pay Onxeo any other funds under
the agreement. We anticipate the need to raise significant funds to
support the completion of clinical development and marketing
approval of Validive.
Under
the agreement, we are required to pay royalties to Onxeo on a
product-by-product and country-by-country basis until the later of
(1) the date when a given product is no longer within the scope of
a patent claim in the country of sale or manufacture, (2) the
expiry of any extended exclusivity period in the relevant country
(such as orphan drug exclusivity, pediatric exclusivity, new
chemical entity exclusivity, or other exclusivity granted beyond
the expiry of the relevant patent), or (3) a specific time period
after the first commercial sale of the product in such country. In
most countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date of a non-provisional
patent application in the applicable country, not taking into
consideration any potential patent term adjustment that may be
filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever our royalty payment obligations with respect
to such product have expired. The agreement may also be terminated
early for cause if either we or Onxeo materially breach the
agreement, or if either we or Onxeo become insolvent. We may also
choose to terminate the agreement, either in its entirety or as to
a certain product and a certain country, by providing Onxeo with
advance notice.
Grupo
Español de Investigación en Sarcomas
(“GEIS”)
In June
2019, we executed a clinical collaboration with GEIS for the
development of camsirubicin in patients with advanced soft tissue
sarcoma (“ASTS”). GEIS will be the study sponsor and
will lead a multi-country, randomized, open-label Phase 2 clinical
trial to evaluate camsirubicin head-to-head against doxorubicin in
patients with ASTS. Enrollment of the trial is anticipated to begin
in the second half of 2020 and will include approximately 170 ASTS
patients. We will provide study drug and supplemental financial
support for the clinical trial averaging approximately $2 million
to $3 million per year. As of March 13, 2020, we have paid a
nominal amount of financial support and incurred a nominal amount
of drug manufacturing costs. We can terminate the agreement by
providing GEIS with advance notice, and without affecting the
Company’s rights and ownership to any intellectual property
or clinical data.
56
XOMA
Ltd.
The
intellectual property rights contributed by Tactic Pharma, LLC to
us included the non-exclusive license agreement with XOMA Ltd. for
the humanization technology used in the development of MNPR-101.
Pursuant to such license agreement, we are obligated to pay XOMA
Ltd. clinical, regulatory and sales milestones which could reach up
to $14.925 million if we achieve all milestones for MNPR-101 The
agreement does not require the payment of sales royalties. There
can be no assurance that we will achieve any milestones. As of
March 13, 2020, we had not reached any milestones and had not been
required to pay XOMA Ltd. any funds under this license
agreement.
Service
Providers
In the
normal course of business, we contract with service providers to
assist in the performance of research and development, financial
strategy, audit, tax and legal support. We can elect to discontinue
the work under these agreements at any time. We could also enter
into collaborative research, contract research, manufacturing and
supplier agreements in the future, which may require upfront
payments and/or long-term commitments of cash.
Office
Lease
Effective January
1, 2018, we leased office space in the Village of Wilmette,
Illinois for $2,519.50 per month for 24 months. This office space
houses our current headquarters. On December 31, 2019, the office
lease expired and we continued to lease on a month-to-month basis.
In February 2019, we leased additional office spaces on a month-to
month basis at our headquarters and we anticipate that we will
lease additional space in the future as we hire additional
personnel.
Legal
Contingencies
We are currently
not, and to date have never been, a party to any material legal
proceedings.
Indemnification
In the
normal course of business, we enter into contracts and agreements
that contain a variety of representations and warranties and
provide for general indemnification. Our exposure under these
agreements is unknown because it involves claims that may be made
against us in the future, but that have not yet been made. To date,
we have not paid any claims or been required to defend any action
related to our indemnification obligations. However, we may record
charges in the future as a result of these indemnification
obligations.
In
accordance with our Second Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws we have
indemnification obligations to our officers and Board Members for
certain events or occurrences, subject to certain limits, while
they are serving at our request in such capacity. There have been
no claims to date. See Item 1A - “Risk Factors - We have
limited the liability of and indemnified our directors and
officers.”
Off-Balance
Sheet Arrangements
To
date, we have not had any off-balance sheet arrangements, as
defined under the SEC rules.
57
Item 8. Financial Statements and Supplementary
Data
The
information required to be filed in this item appears on pages F-1
to F-22 of this Annual Report on Form 10-K. Documents filed as part
of this Annual Report on Form 10-K:
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Balance Sheets as of December 31, 2019 and 2018
|
F-3
|
|
Consolidated
Statements of Operations and Comprehensive Loss for the Years Ended
December 31, 2019 and 2018
|
F-4
|
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended
December 31, 2019 and 2018
|
F-5
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2019 and
2018
|
F-6
|
|
Notes to
Consolidated Financial Statements
|
F-7 to
F-19
|
58
PART II – FINANCIAL INFORMATION
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
Item 9a. Controls and Procedures
Our
Chief Executive Officer and Chief Financial Officer have provided
certifications filed as Exhibits 31.1 and 32.1, and 31.2,
respectively. Such certifications should be read in conjunction
with the information contained in this Item 9A for a more complete
understanding of the matters covered by those
certifications.
(a)
Management’s
Annual Report on Internal Control over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rule
13a15(f) of the Securities Exchange Act of 1934 (the
“Exchange Act”). Our internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of the financial reporting and the
preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles. This
process includes those policies and procedures (i) that pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of our assets.
(ii) that receipts and expenditures are being made only in
accordance with authorizations of our management and directors.
(iii) that provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition
of our assets that could have a material effect on our financial
statements. and (iv) that provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP. Because of its
inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any
evaluation of the internal control over financial reporting to
future periods are subject to risk that the internal control may
become inadequate because of changes in conditions, or that the
degree of compliance with policies or procedures may
deteriorate.
Our management has
assessed the effectiveness of our internal control over financial
reporting as of December 31, 2019. Management based this assessment
on the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control
– Integrated Framework (2013). Management’s assessment
included an evaluation of the design of our internal control over
financial reporting and testing of the operational effectiveness of
our internal control over financial reporting. Based on
management’s assessment, management has concluded that, as of
December 31, 2019, our internal control over financial reporting
was effective.
(b)
Disclosure
Controls and Procedures
We
carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as of December 31, 2019,
pursuant to Rules 13a15(e) and 15d15(e) under the Exchange Act.
Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and
procedures, as of such date, were effective.
(c)
Changes
in Internal Control over Financial Reporting
We have
concluded that the consolidated financial statements and other
financial information included in this Annual Report on Form 10-K
fairly present in all material respects our financial condition,
results of operations and comprehensive loss and cash flows as of,
and for, the periods presented.
There
have been no changes in our internal control over financial
reporting during the quarter ended December 31, 2019 that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
59
PART III
Item 10. Directors, Executive
Officers and Corporate Governance
The
information required by this Item regarding our directors,
executive officers and corporate governance is incorporated into
this section by reference to the sections captioned “Election
of Directors” and “Executive Officers” in the
proxy statement for our 2020 annual meeting of
stockholders.
Item 11. Executive
Compensation
The
information required by this Item regarding executive compensation
is incorporated into this section by reference to the section
captioned “Executive Compensation” in the proxy
statement for our 2020 annual meeting of stockholders.
Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters
The
information required by this Item regarding security ownership of
our beneficial owners, management and related stockholder matters
is incorporated into this section by reference to the section
captioned “Security Ownership of Certain Beneficial Owners
and Management” in the proxy statement for our 2020 annual
meeting of stockholders.
The
information required by this Item regarding the securities
authorized for issuance under our equity compensation plans is
incorporated into this section by reference to the section
captioned “Equity Compensation Plan Information” in the
proxy statement for our 2020 annual meeting of
stockholders.
Item 13. Certain Relationships and
Related Transactions and Director Independence
The
information required by this Item regarding certain relationships,
related transactions and director independence is incorporated into
this section by reference to the sections captioned
“Transactions with Related Persons, Promoters and Certain
Control Persons,” “Review, Approval and Ratification of
Transactions with Related Parties” and “Director
Independence” in the proxy statement for our 2020 annual
meeting of stockholders.
Item 14. Principal Accounting Fees
and Services
The
information required by this Item regarding our principal
accountant fees and services is incorporated into this section by
reference to the section captioned “Independent Registered
Public Accounting Firm” in the proxy statement for our 2020
annual meeting of stockholders.
60
PART IV
Item 15. Exhibits, Financial Statement
Schedule
1.
Financial
Statements
INDEX TO FINANCIAL STATEMENTS
|
|
|
Page
|
|
Report of Independent Registered Public Accounting
Firm
|
|
F-2
|
|
Consolidated
Balance Sheets as of December 31, 2019 and 2018
|
|
F-3
|
|
Consolidated
Statements of Operations and Comprehensive Loss for the Years Ended
December 31, 2019 and 2018
|
|
F-4
|
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended
December 31, 2019 and 2018
|
|
F-5
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2019 and
2018
|
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
|
F-7 to
F-19
|
2.
Financial
Statements Schedules
|
|
|
Page
|
|
Schedule
II – Valuation and Qualifying Accounts, Valuation Allowance
for Deferred Tax Assets
|
|
F-20
|
|
|
|
|
Other
financial statements schedules are not included because they are
not required, or the information is otherwise shown in the
Consolidated Financial Statements or notes
thereto
61
(b)
Exhibits
The following exhibits are filed as
part of this Annual Report on Form 10-K.
|
Exhibit
|
|
Document
|
|
Incorporated by
Reference From:
|
|
3.1
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
3.2
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
4.1
|
|
Description of Registered
Securities
|
|
|
|
10.1*
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.2*
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.3*
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.4
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.5
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.6
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.7
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.8
|
|
Form 10-K filed on March 26,
2018
|
||
|
10.9
|
|
|
Form 10-K filed on March 26,
2018
|
|
|
10.10
|
|
|
|
|
|
10.11
|
|
|
|
|
|
10.12
|
|
|
|
|
|
21.1
|
|
|
|
|
|
23.1
|
|
Consent of
Independent Public Accounting
Firm
|
|
|
|
24.1
|
|
Power of Attorney (included in the
signature page hereto)
|
|
|
|
31.1
|
|
Certification of Chandler D.
Robinson, Chief Executive Officer
|
|
|
|
31.2
|
|
Certification of Kim R. Tsuchimoto,
Chief Financial Officer
|
|
|
|
32.1
|
|
Certification of Chandler D.
Robinson, Chief Executive Officer and Kim R. Tsuchimoto, Chief
Financial Officer
|
|
|
|
101.INS
|
|
XBRL Instance
Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension
Schema
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation
Linkbase
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition
Linkbase
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label
Linkbase
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension
Presentation Linkbase
|
|
|
Confidential Information has been
omitted and filed separately with the Securities and Exchange
Commission on exhibits marked with (*). Confidential treatment has
been approved with respect to the omitted information, pursuant to
an Order dated January 8, 2018.
62
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
|
|
MONOPAR THERAPEUTICS INC
|
|
|
|
|
|
Dated:
March 27, 2020
|
By:
|
/s/ Kim
R. Tsuchimoto
|
|
|
|
Name:
Kim Tsuchimoto
|
|
|
|
Title:
Chief Financial Officer
|
|
|
|
(Principal
Financial Officer)
|
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Chandler Robinson and Kim
Tsuchimoto, his attorney-in-fact, with the power of substitution,
for him in any and all capacities, to sign any amendments to this
Annual Report on Form 10K and to file the same, with exhibits
thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated:
|
Signatures
|
|
Title
|
|
Date
|
|
/s/
Chandler D. Robinson
|
|
|
|
March
27, 2020
|
|
Chandler
D. Robinson
|
|
Chief
Executive Officer and Director (Principal Executive
Officer)
|
|
|
|
/s/ Kim
R. Tsuchimoto
|
|
|
|
March
27, 2020
|
|
Kim R.
Tsuchimoto
|
|
Chief
Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
|
|
|
|
/s/
Andrew P. Mazar
|
|
|
|
March
27, 2020
|
|
Andrew
P. Mazar
|
|
Chief
Scientific Officer and Director
|
|
|
|
/s/
Christopher M. Starr
|
|
|
|
March
27, 2020
|
|
Christopher
M. Starr
|
|
Executive Chairman
of the Board and Director
|
|
|
|
/s/
Raymond W. Anderson
|
|
|
|
March
27, 2020
|
|
Raymond
W. Anderson
|
|
Director
|
|
|
|
/s/
Michael J. Brown
|
|
|
|
March
27, 2020
|
|
Michael
J. Brown
|
|
Director
|
|
|
|
/s/
Arthur J. Klausner
|
|
|
|
March
27, 2020
|
|
Arthur
J. Klausner
|
|
Director
|
|
|
63
INDEX TO FINANCIAL STATEMENTS
|
|
|
Page
|
|
Report of Independent Registered Public Accounting
Firm
|
|
F-2
|
|
Consolidated
Balance Sheets as of December 31, 2019 and 2018
|
|
F-3
|
|
Consolidated
Statements of Operations and Comprehensive Loss for the Years Ended
December 31, 2019 and 2018
|
|
F-4
|
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended
December 31, 2019 and 2018
|
|
F-5
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2019 and
2018
|
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
|
F-7 to
F-19
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Stockholders and Board of Directors of Monopar Therapeutics
Inc.
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of Monopar
Therapeutics Inc. and its subsidiaries (the “Company”)
as of December 31, 2019 and 2018, the related consolidated
statements of operations and comprehensive loss,
stockholders’ equity and cash flows, for each of the two
years in the period ended December 31, 2019, and the related notes
and the financial statement schedule listed in the Index to this
Annual Report on Form 10-K at Part IV Item 15.2 (collectively
referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the
results of its operations and its cash flows for each of the two
years in the period ended December 31, 2019, in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s 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 audit 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.
/s/ BPM
LLP
We have
served as the Company’s auditor since 2015.
San
Francisco, California
March
27, 2020
F-2
Monopar Therapeutics
Inc.
Consolidated Balance
Sheets
|
|
|
December 31
|
||
|
|
|
2019
|
|
2018
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
13,213,929
|
|
$
6,892,772
|
|
Deferred offering
cost
|
|
10,335
|
|
344,936
|
|
Other current assets
|
|
5,376
|
|
14,516
|
|
Total
current assets
|
|
13,229,640
|
|
7,252,224
|
|
|
|
|
|
|
|
Other
non-current assets
|
|
122,381
|
|
65,731
|
|
|
|
|
|
|
|
Total
assets
|
|
$
13,352,021
|
|
$
7,317,955
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable
and accrued expenses
|
|
$
724,165
|
|
$
399,551
|
|
Total
current liabilities
|
|
724,165
|
|
399,551
|
|
|
|
|
|
|
|
Total
liabilities
|
|
724,165
|
|
399,551
|
|
Commitments
and contingencies (Note 8)
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common
stock, par value of $0.001 per share, 40,000,000 authorized,
10,587,632 and 9,291,421 shares issued and outstanding at December
31, 2019
and December 31, 2018,
respectively
|
|
10,587
|
|
9,291
|
|
Additional paid-in
capital
|
|
38,508,825
|
|
28,567,221
|
|
Accumulated other
comprehensive loss
|
|
(10,970)
|
|
(2,396)
|
|
Accumulated
deficit
|
|
(25,880,586)
|
|
(21,655,712)
|
|
Total
stockholders' equity
|
|
12,627,856
|
|
6,918,404
|
|
Total
liabilities and stockholders' equity
|
|
$
13,352,021
|
|
$
7,317,955
|
F-3
Monopar Therapeutics Inc.
Consolidated Statements of Operations and Comprehensive
Loss
|
|
For the Years Ended December 31,
|
||
|
|
2019
|
|
2018
|
|
Revenues
|
$
—
|
|
$
—
|
|
|
—
|
|
—
|
|
Operating
expenses:
|
|
|
|
|
Research and
development
|
1,968,518
|
|
1,774,454
|
|
General
and administrative
|
2,355,243
|
|
1,556,693
|
|
Total
operating expenses
|
4,323,761
|
|
3,331,147
|
|
Loss
from operations
|
(4,323,761)
|
|
(3,331,147)
|
|
Other
income:
|
|
|
|
|
Interest
income
|
98,887
|
|
103,215
|
|
Net loss
|
(4,224,874)
|
|
(3,227,932)
|
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
|
Foreign currency translation loss
|
(8,574)
|
|
(2,396)
|
|
Comprehensive
loss
|
$
(4,233,448)
|
|
$
(3,230,328)
|
|
Net
loss per share:
|
|
|
|
|
Basic
and diluted
|
$
(0.45)
|
|
$
(0.35)
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
Basic
and diluted
|
9,321,195
|
|
9,291,421
|
The accompanying notes are an
integral part of these consolidated financial
statements.
F-4
Monopar Therapeutics Inc.
Consolidated Statements of Stockholders’ Equity
|
|
|
Common Stock
|
|
|
|
Accumulated
|
|
|
|
|
||
|
|
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Other Comprehensive Loss
|
|
Accumulated
Deficit
|
|
Total
Stockholders' Equity
|
|
Balance at January 1, 2018
|
|
9,291,421
|
|
$ 9,291
|
|
$ 28,037,889
|
|
$ —
|
|
$ (18,427,780)
|
|
$ 9,619,400
|
|
Non-cash
stock-based compensation
|
|
—
|
|
—
|
|
529,332
|
|
—
|
|
—
|
|
529,332
|
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3,227,932)
|
|
(3,227,932)
|
|
Accumulated
other comprehensive loss
|
|
—
|
|
—
|
|
—
|
|
(2,396)
|
|
—
|
|
(2,396)
|
|
Balance at December 31, 2018
|
|
9,291,421
|
|
9,291
|
|
28,567,221
|
|
(2,396)
|
|
(21,655,712)
|
|
6,918,404
|
|
Issuance
of common stock at $8 per share for cash, net of
$1,400,492
issuance costs
|
|
1,277,778
|
|
1,278
|
|
8,820,454
|
|
—
|
|
—
|
|
8,821,732
|
|
Issuance
of common stock upon exercise of stock options
|
|
18,433
|
|
18
|
|
109,980
|
|
—
|
|
—
|
|
109,998
|
|
Non-cash
stock-based compensation
|
|
—
|
|
—
|
|
1,011,170
|
|
—
|
|
—
|
|
1,011,170
|
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4,224,874)
|
|
(4,224,874)
|
|
Accumulated
other comprehensive loss
|
|
—
|
|
—
|
|
—
|
|
(8,574)
|
|
—
|
|
(8,574)
|
|
Balance at December 31, 2019
|
|
10,587,632
|
|
$ 10,587
|
|
$ 38,508,825
|
|
$ (10,970)
|
|
$ (25,880,586)
|
|
$ 12,627,856
|
The
accompanying notes are an integral part of these
consolidated financial statements.
F-5
Monopar
Therapeutics Inc.
Consolidated Statements of Cash Flows
|
|
For
the Years Ended December 31,
|
|
|
|
2019
|
2018
|
|
Cash flows from operating activities:
|
|
|
|
Net
loss
|
$(4,224,874)
|
$(3,227,932)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Stock compensation
expense (non-cash)
|
1,011,170
|
529,332
|
|
Changes
in operating assets and liabilities, net
|
|
|
|
Other current
assets
|
9,140
|
(3,840)
|
|
Other non-current
assets
|
(56,650)
|
(65,731)
|
|
Accounts payable
and accrued expenses
|
243,534
|
87,684
|
|
Net cash used in
operating activities
|
(3,017,680)
|
(2,680,487)
|
|
Cash
flows from financing activities:
|
|
|
|
Proceeds from the initial public offering of common
stock
|
10,222,224
|
—
|
|
Issuance
costs for the initial public offering, net of deferred offering
costs paid in previous
periods
and accrued at year-end
|
(974,476)
|
(206,270)
|
|
Proceeds
from the exercise of stock options
|
109,998
|
—
|
|
Deferred
offering costs for shelf registration
|
(10,335)
|
—
|
|
Net
cash provided by (used in) financing activities
|
9,347,411
|
(206,270)
|
|
Effect
of exchange rates on cash and cash equivalents
|
(8,574)
|
(2,396)
|
|
Net
change in cash and cash equivalents
|
6,321,157
|
(2,889,153)
|
|
Cash and cash equivalents at beginning of year
|
6,892,772
|
9,781,925
|
|
Cash and cash equivalents at end of year
|
$13,213,929
|
$6,892,772
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
Accrued but unpaid issuance costs for the initial
public offering
|
$81,080
|
$—
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-6
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL
STATEMENTS
December 31, 2019
Note
1 - Nature of Business and Liquidity
Nature of Business
Monopar
Therapeutics Inc. (“Monopar” or the “Company”)
is a clinical-stage biopharmaceutical company focused on developing
proprietary therapeutics designed to extend life or improve quality
of life for cancer patients. Monopar currently has three compounds
in development: Validive® (clonidine mucobuccal tablet;
clonidine MBT), a Phase 3-ready, first-in-class mucoadhesive buccal
anti-inflammatory tablet for the prevention and treatment of
radiation induced severe oral mucositis (“SOM”) in
oropharyngeal cancer patients; camsirubicin (generic name for
MNPR-201, GPX-150; 5-imino-13-deoxydoxorubicin), a proprietary
Phase 2 clinical stage topoisomerase II-alpha targeted analog of
doxorubicin engineered specifically to retain anticancer activity
while minimizing toxic effects on the heart; and MNPR-101 (formerly
huATN-658), a pre-IND stage humanized monoclonal antibody, which
targets the urokinase plasminogen activator receptor
(“uPAR”), for the treatment of advanced solid
cancers.
The
Company was originally formed in the State of Delaware on December
5, 2014 as a limited liability company (“LLC”) and on
December 16, 2015 converted to a C Corporation in a tax-free
exchange.
Liquidity
The
Company has incurred an accumulated deficit of approximately $25.9
million as of December 31, 2019. To date, the Company has primarily
funded its operations with the net proceeds from private placements
of convertible preferred stock and of common stock and from the
cash provided in the camsirubicin asset purchase transaction and
the Company’s initial public offering of its common stock on
Nasdaq. Management believes that currently available resources will
provide sufficient funds to enable the Company to meet its minimum
obligations through March 2021. The Company’s ability to fund
its future operations, including the clinical development of
Validive and camsirubicin, is dependent primarily upon its ability
to execute its business strategy, to obtain additional funding
and/or to execute collaboration research transactions. There can be
no certainty that future financing or collaborative research
transactions will occur.
Note
2 - Significant Accounting Policies
Basis of Presentation
These
consolidated financial statements include the financial results of
Monopar Therapeutics Inc., its wholly-owned French subsidiary,
Monopar Therapeutics, SARL, and its wholly-owned Australian
subsidiary, Monopar Therapeutics Australia Pty Ltd and have been
prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”) and include all
disclosures required by GAAP for financial reporting. All
intercompany accounts have been eliminated. The principal
accounting policies applied in the preparation of these
consolidated financial statements are set out below and have been
consistently applied in all periods presented. The Company has been
primarily involved in performing research activities, developing
product candidates, and raising capital to support and expand these
activities.
Certain
reclassifications have been made to the Company’s
consolidated financial statements for the year ended December 31,
2018 to conform to the year ended December 31, 2019 presentation.
In order to properly classify the Company's federal research and
development credit that the Company applied towards federal payroll
tax expense, the Company has reclassified income tax benefit of
$71,615 to a reduction in payroll tax expense in general and
administrative expenses on the statement of operations and
comprehensive loss for the year ended December 31, 2018. In
addition, the Company has reclassified $71,615 of deferred tax
asset as follows: $5,884 to other current assets; and $65,731 to
other non-current assets on the Company's balance sheet as of
December 31, 2018. The reclassifications had no impact on the
Company’s comprehensive loss, total assets, or
stockholders’ equity.
Functional Currency
The
Company's consolidated functional currency is the U.S. Dollar. The
Company's Australian subsidiary and French subsidiary use the
Australian Dollar and European Euro, respectively, as their
functional currency. At each quarter-end, each foreign subsidiary's
balance sheets are translated into U.S. Dollars based upon the
quarter-end exchange rate, while their statements of operations and
comprehensive loss are translated into U.S. Dollars based upon an
average exchange rate during the period.
F-7
MONOPAR THERAPEUTICS
INC.
NOTES TO FINANCIAL
STATEMENTS
December 31, 2019
Comprehensive Loss
Comprehensive loss
represents net loss plus any gains or losses not reported in the
statements of operations, such as foreign currency translations
gains and losses that are typically reflected on the
Company’s statements of stockholders’
equity.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities, and reported amounts of revenues
and expenses in the consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates.
Going Concern Assessment
The
Company adopted Accounting Standards Updates (“ASU”)
2014-15, Disclosure of
Uncertainties about an Entity’s Ability to Continue as a
Going Concern, which the Financial Accounting Standards
Board (“FASB”) issued to provide guidance on
determining when and how reporting companies must disclose going
concern uncertainties in their financial statements. The ASU
requires management to perform interim and annual assessments of an
entity’s ability to continue as a going concern within one
year of the date of issuance of the entity’s financial
statements (or within one year after the date on which the
financial statements are available to be issued, when applicable).
Further, a company must provide certain disclosures if there is
“substantial doubt about the entity’s ability to
continue as a going concern.” In January 2020, the Company
analyzed its minimum cash requirements through March 2021 and has
determined that, based upon the Company’s current available
cash, the Company has no substantial doubt about its ability to
continue as a going concern.
Cash Equivalents
The
Company considers all highly liquid investments purchased with an
original maturity of 90 days or less to be cash equivalents. Cash
equivalents as of December 31, 2019 and 2018 consist entirely of
money market accounts.
Deferred Offering Costs
Deferred offering
costs represent legal, auditing, travel and filing fees related to
fundraising efforts that have not yet been concluded.
Prepaid Expenses
Prepayments are
expenditures for goods or services before the goods are used or the
services are received and are charged to operations as the benefits
are realized. Prepaid expenses include insurance premiums and
software costs that are expensed monthly over the life of the
contract. Prepaid expenses are reflected on the Company’s
balance sheets as other current assets.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration
of credit risk consist of cash and cash equivalents. The Company
maintains cash and cash equivalents at two financial institutions.
As of December 31, 2019, balances at one financial institution was
in excess of the $250,000 Federal Deposit Insurance Corporation
(“FDIC”) insurable limit.
F-8
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2019
Fair Value of Financial Instruments
For
financial instruments consisting of cash and cash equivalents,
prepaid expenses, deferred offering costs, other current assets,
accounts payable, accrued expenses, and other current liabilities,
the carrying amounts are reasonable estimates of fair value due to
their relatively short maturities.
The
Company adopted Accounting Standard Codification
(“ASC”) 820, Fair
Value Measurements and Disclosures, as amended, addressing
the measurement of the fair value of financial assets and financial
liabilities. Under this standard, fair value is defined as the
price that would be received to sell an asset or paid to transfer a
liability (i.e., the “exit price”) in an orderly
transaction between market participants at the measurement
date.
In
determining fair values of all reported assets and liabilities that
represent financial instruments, the Company uses the carrying
market values of such amounts. The standard establishes a hierarchy
for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available.
Observable inputs reflect assumptions market participants would use
in pricing an asset or liability based on market data obtained from
independent sources. Unobservable inputs reflect a reporting
entity’s pricing an asset or liability developed based on the
best information available under the circumstances. The fair value
hierarchy consists of the following three levels:
Level 1 - instrument valuations are
obtained from real-time quotes for transactions in active exchange
markets involving identical assets.
Level 2 - instrument valuations are
obtained from readily available pricing sources for comparable
instruments.
Level 3 - instrument valuations are
obtained without observable market values and require a high-level
of judgment to determine the fair value.
Determining which
category an asset or liability falls within the hierarchy requires
significant judgment. The Company evaluates its hierarchy
disclosures each reporting period. There were no transfers between
Level 1, 2 or 3 of the fair value hierarchy during the years ended
December 31, 2019 and 2018. The following table presents the assets
and liabilities recorded that are reported at fair value on our
consolidated balance sheets on a recurring basis. No values were
recorded in Level 2 or Level 3 at December 31, 2019 and
2018.
Assets and Liabilities Measured at Fair Value on a Recurring
Basis
|
December 31, 2019
|
Level
1
|
|
Total
|
|
Assets
|
|
|
|
|
Cash
equivalents(1)
|
$
13,083,536
|
|
$
13,083,536
|
|
Total
|
$
13,083,536
|
|
$
13,083,536
|
|
December 31, 2018
|
Level
1
|
|
Total
|
|
Assets
|
|
|
|
|
Cash
equivalents(1)
|
$
6,788,333
|
|
$
6,788,333
|
|
Total
|
$
6,788,333
|
|
$
6,788,333
|
(1)
Cash equivalents
represent the fair value of the Company’s investment in a
money market account at year-end.
F-9
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
Net Loss per Share
Net
loss per share for the years ended December 31, 2019 and 2018 is
calculated by dividing net loss by the weighted-average shares of
common stock outstanding during the period. Diluted net loss per
share for the years ended December 31, 2019 and 2018 is calculated
by dividing net loss by the weighted-average shares of the sum of
a) common stock outstanding (10,587,632 shares as of December 31,
2019; 9,291,421 shares as of December 31, 2018) and b) potentially
dilutive shares of common stock (such as stock options and
warrants) outstanding during the period. As of December 31, 2019
and 2018, potentially dilutive securities included stock options to
purchase up to 1,087,463 and 1,105,896 shares of the
Company’s common stock, respectively. For the years ended
December 31, 2019 and 2018, potentially dilutive securities are
excluded from the computation of fully diluted net loss per share
as their effect is anti-dilutive.
Research and Development Expenses
Research and
development (“R&D”) costs are expensed as incurred.
Major components of R&D expenses include salaries and benefits
paid to the Company’s R&D staff, fees paid to consultants
and to the entities that conduct certain R&D activities on the
Company’s behalf and materials and supplies which are used in
R&D activities during the reporting period.
The
Company accrues and expenses the costs for clinical trial
activities performed by third parties based upon estimates of the
percentage of work completed over the life of the individual study
in accordance with agreements established with contract research
organizations and clinical trial sites. The Company determines the
estimates through discussions with internal clinical personnel and
external service providers as to progress or stage of completion of
trials or services and the agreed upon fee to be paid for such
services. Costs of setting up clinical trial sites for
participation in the trials are expensed immediately as R&D
expenses. Clinical trial site costs related to patient screening
and enrollment are accrued as patients are screened/entered into
the trial. During the years ended December 31, 2019 and 2018, the
Company had no clinical trials in progress.
Collaborative Arrangements
The
Company and its future collaborative partners would be active
participants in collaborative arrangements and all parties would be
exposed to significant risks and rewards depending on the technical
and commercial success of the activities. Contractual payments to
the other parties in collaboration agreements and costs incurred by
the Company when the Company is deemed to be the principal
participant for a given transaction are recognized on a gross basis
in R&D expenses. Royalties and license payments are recorded as
earned.
During
the years ended December 31, 2019 and 2018, no milestones were met
and no royalties were earned, therefore, the Company did not pay or
accrue/expense any license or royalty payments.
Licensing Agreements
The
Company has various agreements licensing technology utilized in the
development of its product or technology programs. The licenses
contain success milestone obligations and royalties on future
sales. During the years ended December 31, 2019 and 2018, no
milestones were met and no royalties were earned, therefore, the
Company did not pay or accrue/expense any license or royalty
payments under any of its license agreements.
Patent Costs
The
Company expenses costs relating to issued patents and patent
applications, including costs relating to legal, renewal and
application fees, as a component of general and administrative
expenses in its consolidated statements of operations and
comprehensive loss.
F-10
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
Income Taxes
From
December 2014 to December 16, 2015, the Company was an LLC taxed as
a partnership under the Internal Revenue Code, during which period
the members separately accounted for their pro-rata share of
income, deductions, losses, and credits of the Company. On December
16, 2015, the Company converted from an LLC to a C Corporation. On
December 16, 2015, the Company began using an asset and liability
approach for accounting for deferred income taxes, which requires
recognition of deferred income tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in its financial statements, but have not been reflected
in its taxable income. Estimates and judgments are required in the
calculation of certain tax liabilities and in the determination of
the recoverability of certain deferred income tax assets, which
arise from temporary differences and carryforwards. Deferred income
tax assets and liabilities are measured using the currently enacted
tax rates that apply to taxable income in effect for the years in
which those tax assets and liabilities are expected to be realized
or settled.
The
Company regularly assesses the likelihood that its deferred income
tax assets will be realized from recoverable income taxes or
recovered from future taxable income. To the extent that the
Company believes any amounts are more likely than not to be
realized, the Company records a valuation allowance to reduce the
deferred income tax assets. In the event the Company determines
that all or part of the net deferred tax assets are not realizable
in the future, an adjustment to the valuation allowance would be
charged to earnings in the period such determination is made.
Similarly, if the Company subsequently realizes deferred income tax
assets that were previously determined to be unrealizable are now
realizable, the respective valuation allowance would be reversed,
resulting in an adjustment to earnings in the period such
determination is made.
Internal Revenue
Code Section 382 provides that, after an ownership change, the
amount of a loss corporation’s net operating loss
(“NOL”) for any post-change year that may be offset by
pre-change losses shall not exceed the section 382 limitation for
that year. Because the Company will continue to raise equity in the
coming years, section 382 will limit the Company’s usage of
NOLs in the future.
Accounting
Standards Codification (“ASC”) 740, Income Taxes, 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 period.
The Company has reviewed the positive and negative evidence
relating to the realizability of the deferred tax assets and has
concluded that the deferred tax assets are not more likely than not
to be realized with the exception of its U.S. Federal R&D tax
credits which will be utilized to reduce payroll taxes in future
periods. As a result, the
Company recorded a full valuation allowance as of December 31, 2019
and 2018. The Company intends to maintain the valuation allowance
until sufficient evidence exists to support its reversal. The
Company regularly reviews its tax positions. For a tax benefit to
be recognized, the related tax position must be more likely than
not to be sustained upon examination. Any amount recognized is
generally the largest benefit that is more likely than not to be
realized upon settlement. The Company’s policy is to
recognize interest and penalties related to income tax matters as
an income tax expense. For the years ended December 31, 2019 and
2018, the Company did not have any interest or penalties associated
with unrecognized tax benefits.
The
Company is subject to U.S. Federal, Illinois and California income
taxes. In addition, due to
the new operations in certain foreign countries, the Company became
subject to local tax laws of such countries. Tax regulations
within each jurisdiction are subject to the interpretation of the
related tax laws and regulations and require significant judgment
to apply. The Company was incorporated on December 16, 2015 and is
subject to U.S. Federal, state and local tax examinations by tax
authorities for the years ended December 31, 2019, 2018, 2017 and
2016, and for the short tax period December 16, 2015 to December
31, 2015. The Company does not anticipate significant changes to
its current uncertain tax positions through December 31, 2019. The
Company plans on filing its tax returns for the year ending
December 31, 2019 prior to the extended filing deadlines in all
jurisdictions.
F-11
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
Stock-Based Compensation
The
Company accounts for stock-based compensation arrangements with
employees, non-employee directors and consultants using a fair
value method, which requires the recognition of compensation
expense for costs related to all stock-based awards, including
stock option grants. The fair value method requires the Company to
estimate the fair value of stock-based payment awards on the date
of grant using an option pricing model.
Stock-based
compensation costs for options granted to employees and
non-employee directors are based on the fair value of the
underlying option calculated using the Black-Scholes option-pricing
model on the date of grant for stock options and recognized as
expense on a straight-line basis over the requisite service period,
which is the vesting period. Determining the appropriate fair value
model and related assumptions requires judgment, including
estimating the future stock price volatility, forfeiture rates and
expected terms. The expected volatility rates are estimated based
on the actual volatility of comparable public companies over recent
historical periods of the same length as the expected term. The
Company selected these companies based on reasonably comparable
characteristics, including market capitalization, stage of
corporate development and with historical share price information
sufficient to meet the expected term (life) of the stock-based
awards. The expected term for options granted to date is estimated
using the simplified method. Forfeitures are estimated at the time
of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The Company has not paid
dividends and does not anticipate paying a cash dividend in the
future vesting period and, accordingly, uses an expected dividend
yield of zero. The risk-free interest rate is based on the rate of
U.S. Treasury securities with maturities consistent with the
estimated expected term of the awards. Prior to January 1, 2019,
the measurement of consultant stock-based compensation was subject
to periodic adjustments as the underlying equity instruments vested
and was recognized as an expense over the period in which services
were rendered. Since January 1, 2019, consultant stock-based
compensation is valued on the grant date and is recognized as an
expense over the period in which services are
rendered.
Recent Accounting Pronouncements
In
August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair
Value Measurement. The ASU modifies, and in certain cases
eliminates, the disclosure requirements on fair value measurements
in Topic 820. The amendments in ASU No. 2018-13 are effective for
all entities for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019. Early adoption is
permitted. An entity is permitted to early adopt any removed or
modified disclosures upon issuance of ASU No. 2018-13 and delay
adoption of the additional disclosures until their effective date.
The Company is currently assessing the impact that adopting this
new accounting standard will have on its consolidated financial
statements and footnote disclosures.
F-12
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
Note
3 - Capital Stock
Holders
of the common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally
available therefor. Upon dissolution and liquidation of the
Company, holders of the common stock are entitled to a ratable
share of the net assets of the Company remaining after payments to
creditors of the Company. The holders of shares of common stock are
entitled to one vote per share for the election of directors and on
all other matters submitted to a vote of stockholders.
The
Company’s amended and restated certificate of incorporation
authorizes the Company to issue 40,000,000 shares of common stock
with a par value of $0.001 per share.
Contribution to Capital
In
August 2017, the Company’s then largest stockholder, Tactic
Pharma, LLC (“Tactic Pharma”), surrendered 2,888,727
shares of common stock back to the Company as a contribution to the
capital of the Company. This resulted at that time in reducing
Tactic Pharma’s ownership in Monopar from 79.5% to 69.9%. As
of December 31, 2019, Tactic Pharma owned 41.6% of
Monopar.
Issuance of Common Stock in Camsirubicin Purchase
In
August 2017, the Company issued 3,055,394 shares of its common
stock in exchange for cash and intellectual property related to
camsirubicin (formerly known as MNPR-201 or GPX-150).
Sales of Common Stock
On
December 23, 2019, the Company completed the initial public
offering of its common stock. The Company sold 1,277,778 shares of
its common stock at a public offering price of $8.00 per share
pursuant to an underwriting agreement with JonesTrading
Institutional Services, LLC (“JonesTrading”). The
Company paid JonesTrading a customary commission and reimbursement
of a portion of their legal fees incurred in connection with the
offering, which in aggregate totaled approximately $0.7 million.
Net proceeds were approximately $9.4 million, after deducting
underwriting discounts and accrued, unpaid offering expenses. The
Company had incurred and paid prior to the initial public offering
approximately $0.6 million of fundraising expenses which were
capitalized on the Company’s balance sheet as deferred
offering costs and were reclassified as fundraising expenses (a
contra-equity balance sheet account) upon the closing of the
Company’s initial public offering. The Company’s common
stock began trading on the Nasdaq Capital Market on December 19,
2019.
As of
December 31, 2019, the Company had 10,587,632 shares of common
stock issued and outstanding.
In
April 2016, the Company adopted the 2016 Stock Incentive Plan and
the Company’s Board of Directors reserved 700,000 shares of
common stock for issuances under the plan. In October 2017, the
Company’s Board of Directors voted to increase the stock
award pool to 1,600,000 shares of common stock, which subsequently
was approved by the Company’s stockholders.
F-13
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
Note
4 - Stock Incentive Plan
In
April 2016, the Company’s Board of Directors and stockholders
representing a majority of the Company’s outstanding stock at
that time, approved the Monopar Therapeutics Inc. 2016 Stock
Incentive Plan, as amended (the “Plan”), allowing the
Company to grant up to an aggregate 700,000 shares of stock awards,
stock options, stock appreciation rights and other stock-based
awards to employees, non-employee directors and consultants.
In
October 2017, the Company’s Board of Directors voted to
increase the stock award pool to 1,600,000 shares of common stock,
which subsequently was approved by the Company’s
stockholders.
In
January 2018, the Company granted stock options to purchase up to
32,004 shares of common stock to its acting chief medical officer,
at an exercise price of $6 per share based on the price per share
at which common stock was sold in the Company’s most recent
private offering prior to such
grant. In May 2018 and August 2018, the Company granted
stock options to two employees each to purchase up to 5,000 shares
of common stock, at an exercise price of $6 per share based on the
price per share at which common stock was sold in the
Company’s most recent private offering prior to such
grant. Also in August 2018, the Company granted stock
options to all four of its non-employee directors, the
Company’s chief executive officer, chief scientific officer,
and chief financial officer to purchase up to an aggregate 425,300
shares of the Company’s common stock at an exercise price of
$6 per share based on the price per share at which common stock was
sold in the Company’s most recent private offering
prior
to such grant; vesting of such stock options commenced on
October 1, 2018.
In
December 2018, the Company granted stock options to purchase up to
20,000 shares of common stock to its acting chief medical officer,
at an exercise price of $6 per share based on the price per share
at which common stock was sold in the Company’s most recent
private offering prior to such
grant. Vesting of such stock options commenced on
January 1, 2019.
Under
the Plan, the per share exercise price for the shares to be issued
upon exercise of an option shall be determined by the Plan
Administrator, except that the per share exercise price shall be no
less than 100% of the fair market value per share on the grant
date. Fair market value is established by the Company’s Board
of Directors, using third party valuation reports, recent
financings and the Company’s closing prices on Nasdaq since
the Company’s listing on December 19, 2019. Stock options
generally expire after ten years.
F-14
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
Stock
option activity under the Plan was as follows:
|
|
|
|
|
Options Outstanding
|
||
|
|
|
Options Available
|
|
Number ofOptions
|
|
Weighted-Average Exercise Price
|
|
Balances at January 1, 2018
|
|
941,408
|
|
658,592
|
|
$ 0.94
|
|
Granted(1)
|
|
(487,304)
|
|
487,304
|
|
6.00
|
|
Forfeited(2)
|
|
40,000
|
|
(40,000)
|
|
6.00
|
|
Balances at December 31, 2018
|
|
494,104
|
|
1,105,896
|
|
2.99
|
|
Exercised
|
|
-
|
|
(18,433)
|
|
5.97
|
|
Balances at December 31, 2019
|
|
494,104
|
|
1,087,463
|
|
2.94
|
(1)
32,004
options vest as follows: options to purchase up to 12,000 shares of
common stock vest on the grant date, options to purchase up to
1,667 shares of common stock vest on the 1st of each month
thereafter. 5,000 options vest 6/48ths on the grant date and
1/48th per month thereafter. 5,000 options vest 6/48ths on the
six-month anniversary of grant date and 1/48th per month
thereafter. 320,900 options vest 6/51 at the six-month anniversary
of vesting commencement date and 1/51 per month thereafter, with
vesting commenced on October 1, 2018. 104,400 options vest
quarterly over 5 quarters, with the first quarter commenced on
October 1, 2018. 20,000 options vest as follows: options to
purchase up to 1,667 shares of common stock vest on January 31,
2019 and the last day of each month thereafter.
(2)
Forfeited
options resulted from an employee termination.
A
summary of options outstanding as of December 31, 2019 is shown
below:
|
Exercise Prices
|
|
Number of Shares Subject to Options Outstanding
|
|
Weighted-Average Contractual Term in Years
|
|
Number of Shares Subject to Options Fully Vested and
Exercisable
|
|
Weighted-Average Remaining Contractual Term
|
|
$0.001
|
|
555,420
|
|
6.7 years
|
|
475,060
|
|
6.6 years
|
|
$6.00
|
|
532,043
|
|
8.6 years
|
|
283,521
|
|
8.4 years
|
|
|
|
1,087,463
|
|
|
|
758,581
|
|
|
During
the years ended December 31, 2019 and 2018, the Company recognized
$653,997 and $232,625 of employee and non-employee director
stock-based compensation expense as general and administrative
expenses, respectively, and $274,345 and $171,238 as research and
development expenses, respectively. The stock-based compensation
expense is allocated on a departmental basis, based on the
classification of the stock-based award holder. No income tax
benefits have been recognized in the consolidated statements of
operations and comprehensive loss for stock-based compensation
awards.
F-15
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
The
Company recognizes as an expense the fair value of options granted
to persons (currently consultants) who are neither employees nor
non-employee directors. Stock-based compensation expense for
consultants for the years ended December 31, 2019 and 2018 was
$82,828 and $125,469, respectively, which was recorded as research
and development expenses.
The
fair value of options granted from inception to December 31, 2019
was based on the Black-Scholes option-pricing model assuming the
following factors: 4.7 to 6.2 years expected term, 55% to 85%
volatility, 1.2% to 2.9% risk free interest rate and zero
dividends. The expected term for options granted to date was
estimated using the simplified method. There were no stock option
grants during the year ended December 31, 2019. For the year ended
December 31, 2018, the weighted-average grant date fair value was
$2.05 per share. For the years ended December 31, 2019 and 2018 the
fair value of shares vested was $0.8 million and $0.4 million,
respectively. At December 31, 2019, the aggregate intrinsic value
of outstanding stock options was approximately $14.9 million of
which approximately $10.7 million was vested and approximately $4.2
million is expected to vest (representing
options to purchase up to 350,200 shares of the Company's common
stock), and the weighted-average exercise price in aggregate
was $2.94 which includes $2.13 for fully vested stock options and
$4.62 for stock options expected to vest, representing 1,087,463
shares of common stock. At December 31, 2019, unamortized unvested
balance of stock-based compensation was $1.3 million, to be
amortized over 2.4 years.
Note
5 - Development and Collaboration Agreements
In June
2016, the Company executed an option and license agreement with
Onxeo S.A. (“Onxeo”), a public French company, which
gave Monopar the exclusive option to license (on a world-wide
exclusive basis) Validive to pursue treating severe oral mucositis
in patients undergoing chemoradiation treatment for head and neck
cancers. The pre-negotiated Onxeo license agreement for Validive as
part of the option agreement includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if the Company achieves all milestones, and escalating
royalties on net sales from 5% to 10%. On September 8, 2017, the
Company exercised the license option, and therefore paid Onxeo the
$1 million fee under the option and license agreement.
Under
the agreement, the Company is required to pay royalties to Onxeo on
a product-by-product and country-by-country basis until the later
of (1) the date when a given product is no longer within the scope
of a patent claim in the country of sale or manufacture, (2) the
expiry of any extended exclusivity period in the relevant country
(such as orphan drug exclusivity, pediatric exclusivity, new
chemical entity exclusivity, or other exclusivity granted beyond
the expiry of the relevant patent), or (3) a specific time period
after the first commercial sale of the product in such country. In
most countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date of a non-provisional
patent application in the applicable country, not taking into
consideration any potential patent term adjustment that may be
filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever the Company’s royalty payment
obligations with respect to such product have expired. The
agreement may also be terminated early for cause if either the
Company or Onxeo materially breach the agreement, or if either the
Company or Onxeo become insolvent. The Company may also choose to
terminate the agreement, either in its entirety or as to a certain
product and a certain country, by providing Onxeo with advance
notice.
The
Company plans to internally develop Validive with the near-term
goal of commencing a Phase 3 clinical development program, which,
if successful, may allow the Company to apply for marketing
approval within the next several years. The Company will need to
raise significant funds to support the further development of
Validive. As of December 31, 2019, the Company had not reached any
of the pre-specified milestones and has not been required to pay
Onxeo any funds under this license agreement other than the
one-time license fee.
F-16
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma to the
Company included the non-exclusive license agreement with XOMA Ltd.
for the humanization technology used in the development of
MNPR-101. Pursuant to such license agreement, the Company is
obligated to pay XOMA Ltd. clinical, regulatory and sales
milestones for MNPR-101 that could reach up to $14.925 million if
the Company achieves all milestones. The agreement does not require
the payment of sales royalties. There can be no assurance that the
Company will reach any milestones under the XOMA agreement. As of
December 31, 2019, the Company had not reached any milestones and
has not been required to pay XOMA Ltd. any funds under this license
agreement.
Note
6 - Related Party Transactions
In
March 2017, Tactic Pharma, the Company’s largest shareholder
at that time, wired $1 million to the Company in advance of the
sale of the Company’s common stock at $6 per share under a
private placement memorandum. In April, the Company issued to
Tactic Pharma 166,667 shares in exchange for the $1 million at $6
per share once the Company began selling stock to unaffiliated
parties under the private placement memorandum.
In
August 2017, Tactic Pharma surrendered 2,888,727 shares of common
stock back to the Company as a contribution to the capital of the
Company. This resulted in reducing Tactic Pharma’s ownership
in Monopar at that time from 79.5% to 69.9%.
In
August 2017, the Company executed definitive agreements with Gem
Pharmaceuticals, LLC (“Gem”), pursuant to which Tactic
Pharma and Gem formed a limited liability company, TacticGem, LLC
(“TacticGem”). Tactic Pharma contributed 4,111,273
shares of its holdings in Monopar’s common stock to TacticGem
and Gem contributed cash and assets to TacticGem. TacticGem then
contributed cash and assets to the Company in exchange for stock.
The Gem transaction is discussed in detail in the Company’s
Annual Report on Form 10-K filed with the SEC on February 26, 2019.
As of December 31, 2019, Tactic Pharma beneficially owned 41.6% of
Monopar’s common stock, and TacticGem owned 67.7% of
Monopar’s common stock.
During
the years ended December 31, 2019 and 2018, the Company was
governed by six members of its Board of Directors, of which four
Board members were also Managers of the LLC prior to the
Company’s conversion to a C Corporation (“Related
Parties”). The Related Parties are also current common
stockholders (owning approximately an aggregate 3% of the common
stock outstanding as of December 31, 2019). None of the Related
Parties received compensation other than market-based salary and
benefits or cash and stock-based compensation as non-employee
directors. Three of the former Managers are also Managing Members
of Tactic Pharma as of December 31, 2019. Chandler D. Robinson is
the Company’s Co-Founder, Chief Executive Officer, common
stockholder, Managing Member of Tactic Pharma, former Manager of
the predecessor LLC, Manager of CDR Pharma, LLC and Board member of
Monopar as a C Corporation. Andrew P. Mazar is the Company’s
Co-Founder, Chief Scientific Officer, common stockholder, Managing
Member of Tactic Pharma, former Manager of the predecessor LLC and
Board member of Monopar as a C Corporation. Michael Brown is a
Managing Member of Tactic Pharma (as of February 1, 2019 with no
voting power as it relates to the Company), a previous managing
member of Monopar as an LLC, common stockholder and Board member of
Monopar as a C Corporation. Christopher M. Starr is the
Company’s Co-Founder, Executive Chairman of the Board of
Directors, common stockholder, former Manager of the predecessor
LLC and Board member of Monopar as a C Corporation.
During the years ended December 31, 2019 and 2018,
the Company paid or accrued legal fees to a large national law
firm, in which a family member of the Company’s Chief
Executive Officer was a law partner through January 31, 2019,
approximately $33,725 (first quarter of 2019) and $152,094
(year ended December 31, 2018). The
family member personally billed a de minimis amount of time on the Company’s legal
engagement with the law firm in these periods.
Note
7 – Income Taxes
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 period. The Company has reviewed the
positive and negative evidence relating to the realizability of the
deferred tax assets and has concluded that the deferred tax assets
are not more likely than not to be realized. The valuation
allowance increased by approximately $877,000 and $690,000 during
the years ended December 31, 2019 and 2018,
respectively.
F-17
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
The
difference between the effective tax rate and the U.S. federal tax
rate is as follows:
|
|
%
|
|
Federal
income tax
|
21.00%
|
|
State
income taxes, less federal benefit
|
1.12%
|
|
Permanent
differences
|
(1.75%)
|
|
Change
in valuation allowances
|
(20.38%)
|
|
Other
|
0.01%
|
|
Effective
Tax Rate Benefit (expense)
|
0.00%
|
Deferred tax assets
and liabilities consist of the following:
|
|
|
As of December 31,
|
||
|
|
|
2019
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$ 741,547
|
|
$ 467,186
|
|
Tax
credits carryforwards
|
|
80,162
|
|
31,997
|
|
Stock
compensation
|
|
308,171
|
|
138,111
|
|
Intangible
asset basis differences
|
|
1,438,051
|
|
1,053,518
|
|
Gross
deferred tax assets
|
|
2,567,931
|
|
1,690,812
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
(2,567,931)
|
|
(1,690,812)
|
|
Income
tax expense
|
|
$
—
|
|
$
—
|
As of
December 31, 2019, Company had total federal net operating loss
carryforwards of approximately $3,438,000, which will begin to
expire in 2035. Losses generated after 2017 will be carried forward
indefinitely. At December 31, 2019, the Company had state net
operating loss carryforwards of approximately $259,000 which will
begin to expire in 2027. The net operating loss related deferred
tax assets do not include excess tax benefits from employee stock
option exercises.
As of
December 31, 2019, Company had R&D credit carryforwards of
approximately $101,000 available to reduce future taxable income,
if any, for state income tax purposes. Federal R&D credits are
currently used to offset payroll taxes. The state R&D credit
carryforwards expire beginning 2020.
The Tax
Reform Act of 1986 limits the use of net operating carryforwards in
certain situations where changes occur in the stock ownership of a
company. In the event the Company has had a change in ownership,
utilization of the carryforwards could be limited. The Company has
not performed a net operating
loss utilization study to date.
On
January 1, 2015, the Company adopted the provisions of FASB
Accounting Standards Codification (ASC 740-10), "Accounting for Uncertainty in Income
Taxes." ASC 740-10 prescribes a comprehensive model for the
recognition, measurement, presentation and disclosure in financial
statements of any uncertain tax positions that have been taken or
are expected to be taken on a tax return. The cumulative effect of
adopting ASC 740-10 resulted in no adjustment to retained earnings
as of December 31, 2019. It is Company's policy to include
penalties and interest expense related to income taxes as a
component of other expense and interest expense, respectively, as
necessary.
No
liability related to uncertain tax positions is recorded on the
financial statements related to uncertain tax positions. There are
no unrecognized tax benefits as of December 31, 2019. The Company
does not expect that uncertain tax benefits will materially change
in the next 12 months.
The Company files
U.S. federal, California and Illinois State tax returns. Company is
subject to California State minimum franchise taxes. All tax
returns will remain open for examination by the federal and state
taxing authorities for three and four years, respectively, from the
date of utilization of any net operating loss carryforwards or
R&D credits. In addition, due to the new operations in certain
foreign countries, the Company became subject to local tax laws of
such countries. Nonetheless, as of December 31, 2019, due to the
insignificant expenditures in such countries, there was no material
tax effect to the Company’s 2019 consolidated financial
statements.
F-18
MONOPAR
THERAPEUTICS INC.
NOTES
TO FINANCIAL STATEMENTS
December 31, 2019
Note
8 – Commitments and Contingencies Development and
Collaboration Agreements Onxeo
S.A.
The
Onxeo license agreement for Validive includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if the Company achieves all milestones, and escalating
royalties on net sales from 5% to 10%. During the year ended
December 31, 2019, the Company had not reached any of these
milestones and has not been required to pay Onxeo any funds under
this license agreement other than the $1 million one-time license
fee.
Grupo Español de Investigación en Sarcomas
(“GEIS”)
In June 2019, the Company executed a clinical
collaboration agreement with GEIS for the development of
camsirubicin in patients with advanced soft tissue sarcoma
(“ASTS”). GEIS will be the study sponsor and will lead
a multi-country, randomized, open-label Phase 2 clinical trial to
evaluate camsirubicin head-to-head against the current
1st-line
treatment for ASTS, doxorubicin. Enrollment of the trial is
anticipated to begin in the second half of 2020 and will include
approximately 170 ASTS patients. The Company will provide study
drug and supplemental financial support for the clinical trial
averaging approximately $2 million to $3 million per year. During
the year ended December 31, 2019, the Company provided a nominal
amount of financial support and incurred a nominal amount of drug
manufacturing costs. The Company can terminate the agreement by
providing GEIS with advance notice, and without affecting the
Company’s rights and ownership to any intellectual property
or clinical data.
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma to the
Company included the non-exclusive license agreement with XOMA Ltd.
for the humanization technology used in the development of
MNPR-101. Pursuant to such license agreement, the Company is
obligated to pay XOMA Ltd. clinical, regulatory and sales
milestones for MNPR-101 but is not required to pay royalties on
product sales. During the year ended December 31, 2019, the Company
had not reached any milestones and has not been required to pay
XOMA Ltd. any funds under this license agreement.
Operating Leases
Commencing
January 1, 2018, the Company entered into a lease for its executive
headquarters at 1000 Skokie Blvd., Suite 350, Wilmette, Illinois.
The lease term is January 1, 2018 through December 31, 2019, at
which time the lease was on a month-to-month basis. In addition,
effective February 2019, the Company leases additional office space
in the same building on a month-to-month basis.
During
the years ended December 31, 2019 and 2018, the Company recognized
operating lease expenses of $51,888 and $40,594,
respectively.
Effective
January 1, 2019, the Company adopted ASU 2016-02, as amended by ASU
2018-10, which requires the Company to record leases on its
consolidated balance sheet (a) a lease liability and (b) a
right-of-use asset. Due to the adoption of the standard using the
retrospective cumulative-effect adjustment method, there are no
changes to our previously reported results prior to January 1,
2019. The effect on the operating lease expense was nominal as a
result of the adoption of ASU 2016-02, as amended by ASU 2018-10.
Because the Company had no lease obligation (other than on a
month-to-month basis) past December 31, 2019, the Company had no
lease liability and right-of-use asset on its consolidated balance
sheet as of December 31, 2019.
Legal Contingencies
The
Company is subject to claims and assessments from time to time in
the ordinary course of business. No claims have been asserted to
date.
Indemnification
In
the normal course of business, the Company enters into contracts
and agreements that contain a variety of representations and
warranties and provide for general indemnification. The
Company’s exposure under these agreements is unknown because
it involves claims that may be made against the Company in the
future, but that have not yet been made. To date, the Company has
not paid any claims nor been required to defend any action related
to its indemnification obligations. However, the Company may record
charges in the future as a result of future claims against these
indemnification obligations.
In
accordance with its amended and restated certificate of
incorporation and bylaws, the Company has indemnification
obligations to its officers and directors for certain events or
occurrences, subject to certain limits, while they are serving at
the Company’s request in such capacities. There have been no
claims to date.
Note 9 – Subsequent Events
On
January 13, 2020, the Company entered into a Capital on
DemandTM
Sales Agreement with JonesTrading, as sales agent, pursuant to
which Monopar may offer and sell (at its discretion), from time to
time, through or to JonesTrading shares of its common stock, having
an aggregate offering price of up to $19.7 million. Pursuant to
this agreement, as of March 13, 2020, the Company sold 33,903
shares of its common stock at an average gross price of $15.9994
for net proceeds of $526,143,
after fees and commissions of $16,284.
On
January 4, January 31 and February 11, 2020, the Company's Plan
Administrator Committee (with regards to non-officer employees) and
the Company's Compensation Committee, as ratified by the full Board
(in the case of officers and non-employee direrectors) granted an
aggregate of 205,110 stock options with exercise prices ranging
from $12.93 to $17.75 for an aggregate grant date fair value of
approximately $2.1 million which will be expensed over the vesting
period. All stock options have a 10 year term and vest from 1 to 4
years. The Company also granted an aggregate 45,722 restricted
stock units on January 31, 2020 and February 11, 2020, with an
aggregate value of approximately $0.7 million which vest from 1 to
4 years.
In
December 2019, a novel strain of coronavirus
(“Covid-19”) surfaced in China and by March 2020
Covid-19 was designated a global pandemic, resulting in travel
restrictions and temporary shut-downs of non-essential businesses
in many states in the United States. The Company is able to remain
open but has required their employees work from home. Due to the
volatility of the stock markets resulting from the travel
restrictions and temporary business shut-downs, the Company may
face challenges in raising substantial cash in the near-term. Due
to many uncertainties, the Company is unable to estimate the
pandemic’s financial impact or duration at this time, or its
potential impact on the Company’s planned clinical
trials.
F-19
Schedule
II: Valuation and Qualifying Accounts Valuation Allowance for
Deferred Tax Assets
|
|
As of December 31,
|
||
|
|
2019
|
|
2018
|
|
Balance at beginning of year
|
$1,690,812
|
|
$1,000,988
|
|
Additions to charged to expenses/other accounts
|
877,119
|
|
689,824
|
|
Balance at end of year
|
$2,567,931
|
|
$1,690,812
|
F-20
Exhibit
4.1
DESCRIPTION OF REGISTERED SECURITIES
We
have the authority to issue 40,000,000 shares of Common Stock,
$0.001 par value. As of March 13, 2020, there were 10,621,535
shares of our common stock issued and outstanding.
We
have reserved 1,600,000 shares of our common stock for issuance
under our 2016 Stock Incentive Plan, as subsequently amended (the
“Plan”), and as of March 13, 2020, we have outstanding
stock options to purchase up to 1,292,573 shares of our common
stock, 45,722 restricted stock units and 243,272 shares of our
common stock available for future stock awards under the
Plan.
Common Stock
Voting Rights
The
holders of shares of our common stock are entitled to one vote per
share for the election of directors and on all other matters
submitted to a vote of stockholders. Shares of our common stock do
not have cumulative voting rights. The election of our Board of
Directors (“Board”) is decided by a plurality of the
votes cast at a meeting of our stockholders by the holders of stock
entitled to vote in the election.
Dividends
Holders of our common stock are
entitled to receive such dividends as may be declared by our Board
out of funds legally available therefor.
Liquidation
Upon our dissolution and
liquidation, holders of our common stock are entitled to a ratable
share of our net assets remaining after payments to our
creditors.
Rights and Preferences
Our stockholders have no preemptive
rights to acquire additional shares of our common stock or other
securities. The shares of our common stock are not subject to
redemption.
Preferred Stock
We have no preferred stock
authorized or outstanding.
Anti-Takeover Provisions
Delaware Law
Authorized but Unissued Shares
The authorized but unissued shares
of our common stock are available for future issuance without
stockholder approval, subject to any limitations imposed by the
listing standards of any exchange on which our shares are listed.
These additional shares may be used for a variety of corporate
finance transactions, acquisitions and employee benefit plans. The
existence of authorized but unissued and unreserved common stock
could make more difficult or discourage an attempt to obtain
control of us by means of a proxy contest, tender offer, merger or
otherwise.
Election of Director by Plurality of Shares; Vacancies
Our
Amended and Restated By-laws also provide that vacancies occurring
on our Board may be filled by the affirmative votes of a majority
of the remaining members of our Board or by the sole remaining
director, and not by our stockholders. Such provisions in our
corporate organizational documents and under Delaware law may
prevent or frustrate attempts by our stockholders to change our
management or hinder efforts to acquire a controlling interest in
us. The inability to make changes to our Board could prevent or
discourage an attempt to take control of the Company by means of a
proxy contest, tender offer, merger or otherwise.
Special Meeting of Stockholders; Advance Notice Requirements for
Stockholder Proposals and Director Nominations; Stockholder
Action
Our
Amended and Restated By-laws provide that, except as otherwise
required by law, special meetings of the stockholders can only be
called by our Board. Stockholders at a special meeting may only
consider matters set forth in the notice of the meeting. These
provisions could have the effect of delaying until the next
stockholder meeting stockholder actions that may be favored by the
holders of a majority of our outstanding voting
securities.
Super Majority Voting
The
General Corporation Law of the State of Delaware provides generally
that the affirmative vote of a majority of the shares entitled to
vote on any matter is required to amend a corporation's certificate
of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater
percentage. Our Amended and Restated By-laws may be amended or
repealed by a majority vote of our Board or the affirmative vote of
the holders of at least a majority of the votes that all our
stockholders would be entitled to cast in any election of
Directors.
Registration Rights
Listing
Our common stock is listed on
the Nasdaq Capital Market under the symbol
“MNPR.”
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is VStock
Transfer, LLC (“VStock”). VStock’s address is 18
Lafayette Place, Woodmere, NY 11598
Exhibit 10.10
MONOPAR THERAPEUTICS INC.
2016 Stock Incentive Plan
NONQUALIFIED STOCK OPTION AGREEMENT
THIS
NONQUALIFIED STOCK OPTION AGREEMENT (this “Agreement”)
is made as of _______________ (the “Grant Date”)
between MONOPAR THERAPEUTICS INC. (the “Company”) and
__________________ (referred to herein as
“Participant”). Terms used in this Agreement with
initial capital letters without definitions are defined in the
Monopar Therapeutics Inc. 2016 Stock Incentive Plan (the
“Plan”) and have the same meaning in this
Agreement.
The
Participant and the Company are entering into this Agreement with
the understanding that the options granted hereunder are granted in
full satisfaction of any and all prior oral and/or written
commitments from the Company, either as Monopar Therapeutics LLC or
Monopar Therapeutics Inc., to grant to Participant options to
purchase shares of the Company.
1. Option Shares. On the Grant
Date, the Company hereby grants to Participant the option (the
“Option”) to purchase up to ____________ shares of the
Company’s common stock, par value $0.001 per share (the
“Shares”), pursuant and subject to the terms of the
Plan, a copy of which has been delivered or made available to
Participant and is incorporated herein by reference. The Option
granted hereby is a Nonqualified Stock Option.
2. Exercise Price. The purchase
price per Share upon exercise of the Option is $_____.
3. Vesting. Subject to the terms
of the Plan, the Option shall vest and be exercisable only during
the period beginning at the Grant Date and ending 10 years after
the Grant Date (the “Grant Expiration Date”). During
such period, provided that Participant continues to be a Director,
Consultant or Employee of the Company or a Subsidiary, the Option
shall vest and become exercisable (i.e., Shares may be purchased)
according to the following schedule:
______________________________.
The
number of Shares, the exercise price thereof and the rights granted
under this Agreement are subject to adjustment and modification as
provided in the Plan. The total number of Shares referred to in
this Section means, at any relevant time, the number of shares
stated in Section 1 hereof as such number shall then have been
adjusted pursuant to the Plan. Notwithstanding the foregoing, in
the event of a Change of Control prior to Participant’s
Termination of Directorship, Consultancy or Employment, the Option
becomes fully vested and exercisable.
4. Termination of Directorship,
Consultancy or Employment.
(a) in
cases other than a Change of Control, any portion of the Option
that has not vested as of the date of Termination of Directorship,
Consultancy or Employment will automatically be canceled and
forfeited and Participant shall not be entitled to any further
rights in respect thereof; and
(b) Participant
will have one (1) year from the date of Termination of
Directorship, Consultancy or Employment or until the Grant
Expiration Date, whichever period is shorter, to exercise any
portion of the Option that is vested and exercisable as of the date
of Termination of Directorship, Consultancy or
Employment.
5. Method of Exercise and Payment of
Price.
(a) Method of Exercise. At any time
when all or a portion of the Option is exercisable under the Plan
and this Agreement, some or all of the exercisable portion of the
Option may be exercised from time to time by written notice to the
Company in the form attached as Exhibit A hereto, or such other
method of exercise as may be specified by the Company, including
without limitation, exercise by electronic means on the website of
the Company’s third-party equity plan administrator, which
will:
(i) state
the number of Shares with respect to which the Option is being
exercised; and
(ii) if
the Option is being exercised by anyone other than Participant, if
not already provided, be accompanied by proof satisfactory to
counsel for the Company of the right of such person or persons to
exercise the Option under the Plan and all applicable laws and
regulations.
(b) Payment of Price. The full
exercise price for the portion of the Option being exercised shall
be paid to the Company as provided below:
(i) in
cash;
(ii) by
check or wire transfer (denominated in U.S. Dollars);
(iii) subject
to any conditions or limitations established by the Administrator,
other Shares which:
(A) have
been owned by Participant for more than six months on the date of
surrender (unless this condition is waived by the Administrator);
and
(B) have
a Fair Market Value on the date of surrender equal to or greater
than the aggregate exercise price of the Shares as to which said
Option shall be exercised (it being agreed that the excess of the
Fair Market Value over the aggregate exercise price shall be
refunded to Participant in cash);
(iv) subject
to any conditions or limitations established by the Administrator,
by the Company’s retention of the number of Shares otherwise
issuable upon exercise of the Option at least equal to the exercise
price (it being agreed that any excess of the Fair Market Value of
the retained Shares over the aggregate exercise price shall be
refunded to Participant in cash);
(v) consideration
received by the Company under a broker-assisted sale and remittance
program acceptable to the Administrator; or
(vi) any
combination of the foregoing methods of payment.
6. Transfer. Unless a transfer is
approved by the Plan Administrator, which approval may be withheld
at the Administrator’s sole discretion, the Option shall be
transferable only at Participant’s death, by
Participant’s will or pursuant to the laws of descent and
distribution. During Participant’s lifetime, the Option may
not be exercised by anyone other than Participant or, in the event
of Participant’s incapacity, Participant’s legal
representative. The terms of this Agreement shall be binding upon
the executors, administrators, successors and assigns of
Participant.
7. Restrictions on Exercise. The
Option is subject to all restrictions in this Agreement and/or in
the Plan. As a condition of any exercise of the Option, the Company
may require Participant or his or her successor to make any
representation and warranty to comply with any applicable law or
regulation or to confirm any factual matters reasonably requested
by the Company.
THE
OPTION SHALL NOT BE EXERCISABLE UNLESS AND UNTIL THE SHARES OF
STOCK TO BE ISSUED UPON EXERCISE OF THE OPTION HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE
ACT”) AND APPLICABLE STATE SECURITIES LAWS OR THE COMPANY HAS
DETERMINED THAT THE ISSUANCE OF SUCH SHARES OF STOCK ARE EXEMPT
FROM SUCH REGISTRATIONS.
8. Privileges of Stock Ownership.
Participant shall not have any of the rights of a shareholder with
respect to any of the Shares (e.g., the rights to vote and receive
dividends) until the Shares are issued to Participant following the
exercise of all or part of the Option.
9. Right of Set-Off. By accepting
this Option, Participant consents to a deduction from, and set-off
against, any amounts owed to Participant by the Company or any
Subsidiary from time to time (including, but not limited to,
amounts owed to Participant as Board or Committee meeting fees,
stipends, etc.) to the extent of the amounts owed to the Company or
Subsidiary under this Agreement.
10. Withholding Tax.
(a) Generally.
Participant is liable and responsible for all taxes owed in
connection with the exercise of the Option, regardless of any
action the Company takes with respect to any tax withholding
obligations that arise in connection with the Option. The Company
does not make any representation or undertaking regarding the tax
treatment or the treatment of any tax withholding in connection
with the exercise of the Option. The Company does not commit and is
under no obligation to structure the Option or the exercise of the
Option to reduce or eliminate Participant's tax
liability.
(b) Payment
of Withholding Taxes.
Concurrently with the payment of the exercise price pursuant to
Section 5 hereof, Participant is required to arrange for the
satisfaction of the minimum amount of any domestic or foreign tax
withholding obligation, whether national, federal, state or local,
including any employment tax obligation (the “Tax Withholding
Obligation”) in a manner acceptable to the Company. Any
manner provided for in Section 5(b) hereof shall be deemed an
acceptable manner to satisfy the Tax Withholding Obligation unless
otherwise determined by the Company.
11. Holding Period Requirement. If
the Company is subject to the
reporting requirements of Section 13 of the Securities and
Exchange Act of 1934, then Shares
purchased upon exercise of an Option by an Eligible Person who is
an officer (as defined in §240.16a-1 of the Code of Federal
Regulations) or a director of the Company may not be sold before at
least six months have elapsed from the date the Option was
granted.
12. Governing Law/Venue. This
Agreement shall be governed by the laws of the State of Delaware,
without regard to principles of conflicts of law, except to the
extent superseded by the laws of the United States of America. The
parties agree and acknowledge that the laws of the State of
Delaware bear a substantial relationship to the parties and/or this
Agreement and that the Option and benefits granted herein would not
be granted without the governance of this Agreement by the laws of
the State of Delaware. In addition, all legal actions or
proceedings relating to this Agreement shall be brought exclusively
in state or federal courts located in the State of Delaware and the
parties executing this Agreement hereby consent to the personal
jurisdiction of such courts. In the event that it becomes necessary
for the Company to institute legal proceedings under this
Agreement, Participant shall be responsible to the Company for all
costs and reasonable legal fees incurred by the Company with regard
to such proceedings. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be invalid or
unenforceable should be construed or limited in a manner that is
valid and enforceable and that comes closest to the business
objectives intended by such provision, without invalidating or
rendering unenforceable the remaining provisions of this
Agreement.
13. Interpretation and
Administration. The parties agree that the interpretation of
this Agreement shall rest exclusively and completely within the
sole discretion of the Administrator. The parties agree to be bound
by the decisions of the Administrator with regard to the
interpretation of this Agreement and with regard to any and all
matters set forth in this Agreement. The Administrator may delegate
its functions under this Agreement to an officer of the Company
designated by the Administrator (hereinafter the
“designee”). In fulfilling its responsibilities
hereunder, the Administrator or its designee may rely upon
documents, written statements of the parties or such other material
as the Administrator or its designee deems appropriate. The parties
agree that there is no right to be heard or to appear before the
Administrator or its designee and that any decision of the
Administrator or its designee relating to this Agreement shall be
final and binding unless such decision is arbitrary and
capricious.
14. Electronic Delivery and Consent to
Electronic Participation. The Company may, in its sole
discretion, decide to deliver any documents related to the Option
grant hereunder and participation in the Plan or future Options
that may be granted under the Plan by electronic means. Participant
hereby consents to receive such documents by electronic delivery
and to participate in the Plan through an on-line or electronic
system established and maintained by the Company or another third
party designated by the Company, including the acceptance of option
grants and the execution of option agreements through electronic
signature.
15. Notices. All notices requests,
consents and other communications required or provided hereunder
shall be in writing and, if to the Company, shall be delivered or
mailed to its principal office, and, if to Participant, shall be
delivered either personally or mailed to the address of Participant
appearing on the books and records of the Company.
16. Prompt Acceptance of Agreement.
The Option grant evidenced by this Agreement shall, at the
discretion of the Administrator, be forfeited if this Agreement is
not manually executed and returned to the Company, or
electronically executed by Participant by indicating
Participant’s acceptance of this Agreement in accordance with
the acceptance procedures set forth on the Company’s
third-party equity plan administrator’s website, within 90
days of the Grant Date.
17. Entire Agreement. This
Agreement, together with the Plan, contains the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect
thereto. In the event of any conflict between the provisions of
this Agreement and the Plan, the provisions of the Plan shall
control.
18. Amendment. This Agreement may
not be modified, supplemented or otherwise amended other than
pursuant to a written agreement between Company and
Participant.
19. No Third-Party Beneficiary.
This Agreement is made for the benefit of the Company and any
Subsidiary of which Participant is a Director, Consultant or
Employee during the term hereof.
20. Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
21. Directorship, Consultancy/At-Will
Employment. This Agreement does not constitute a contract of
employment or guarantee of employment of Participant for any length
of time and nothing in the Plan or this Agreement confers upon
Participant any right to continue as a Director, Consultant of,
Employee of, or other relationship with, the Company or any
Subsidiary, or limit or interfere in any way with the right of the
Company or Subsidiary to terminate Participant’s
directorship, consultancy or employment any time with or without
Cause.
22. No Representations Regarding Tax
Consequences. Participant acknowledges and agrees that the
Company has made no warranties or representations to Participant
with respect to the tax consequences (including, but not limited
to, income tax consequences) related to the Option granted under
this Agreement, and Participant is in no manner relying on the
Company or its representatives for an assessment of such tax
consequences. Participant further acknowledges that there may be
adverse tax consequences upon disposition of the Shares acquired
pursuant to the exercise of the Option and that Participant has
been advised that he should consult with his own attorney,
accountant and/or tax advisor regarding the consequences thereof.
Participant also acknowledges that the Company has no
responsibility to take or refrain from taking any actions in order
to achieve a certain tax result for Participant.
23. Headings. Section and
subsection headings contained in this Agreement are inserted for
the convenience of reference only. Section and subsection headings
shall not be deemed to be a part of this Agreement for any purpose,
and they shall not in any way define or affect the meaning,
construction or scope of any of the provisions hereof.
MONOPAR
THERAPEUTICS INC.
By:
Name:
Title:
Attest:
Name:
Title:
Accepted
by:
Exhibit
A
Form of
Notice of Exercise
Monopar Therapeutics inc.
1000
Skokie Blvd., Ste 350
Wilmette,
IL 60091
Attention:
Chandler D. Robinson
Date of
Exercise:________________
Chandler
D. Robinson:
This
constitutes notice under my stock option described below (the
“Option”) that
I hereby exercise my option and elect to purchase the number of
shares for the price set forth below.
|
Type of
option (check one):
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Incentive
[ ]
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Nonstatutory
[ ]
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Stock
option dated:
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________________
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Number
of shares as to which option is exercised:
|
________________
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Total
exercise price:
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$_______________
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Cash
payment delivered herewith:
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$_______________
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By this
exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Monopar Therapeutics
Inc. 2016 Stock Incentive Plan, (ii) to provide for the
payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this
option, and (iii) if this exercise relates to an incentive
stock option, to notify you in writing within fifteen (15) days
after the date of any disposition of any of the shares of Common
Stock issued upon exercise of this option that occurs within two
(2) years after the date of grant of the Option or within one (1)
year after such shares of Common Stock are issued upon exercise of
this option.
I
hereby make the following certifications and representations with
respect to the shares of Common Stock of the Company listed above
(the “Shares”),
which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I
acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the “Securities
Act”), and are deemed to constitute “restricted
securities” under Rule 701 and may be deemed to be
“control securities” under Rule 144 promulgated under
the Securities Act. I warrant and represent to the Company that I
have no present intention of distributing or selling said Shares,
except as permitted under the Securities Act and any applicable
state securities laws.
I
further acknowledge that I will not be able to resell the Shares
for at least ninety days (90) after the stock of the Company
becomes publicly traded (i.e., subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934) under Rule 701, or for at least six months from the date
the Option was granted, if I am an officer as defined in
§ 240.16a-1 of the Code of Federal Regulations or a
Director of the Company, and that more restrictive conditions apply
to affiliates of the Company under Rule 144.
I
further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed
thereon appropriate legends reflecting the foregoing limitations,
as well as any legends reflecting restrictions pursuant to the
Company’s Certificate of Incorporation, Bylaws and/or
applicable securities laws.
I
further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten
registration of the offering of any securities of the Company under
the Securities Act, I will not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into
any hedging or similar transaction with the same economic effect as
a sale, any Shares or other securities of the Company held by me,
for a period of time specified by the underwriter(s) (not to exceed
one hundred eighty (180) days) following the effective date of the
registration statement of the Company filed under the Securities
Act. I further agree to execute and deliver such other agreements
as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are
necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer
instructions with respect to my Shares until the end of such
period.
Very
truly yours,
By:
___________________________________
Name:
_________________________________
*Must
be signed by Option holder exactly as name appears on Option
Agreement. If signed by a legal representative, executor, or other
authorized individual, please set forth the individual’s full
title and submit proper evidence of such individual’s
authority to sign this Notice of Exercise.
Exhibit 10.11
MONOPAR THERAPEUTICS INC.
2016 Stock Incentive Plan
INCENTIVE STOCK OPTION AGREEMENT
THIS
INCENTIVE STOCK OPTION AGREEMENT (this “Agreement”) is
made as of _____________
(the “Grant Date”) between MONOPAR THERAPEUTICS INC.
(the “Company”) and ________________ (referred to herein as
“Participant”). Terms used in this Agreement with
initial capital letters without definitions are defined in the
Monopar Therapeutics Inc. 2016 Stock Incentive Plan (the
“Plan”) and have the same meaning in this
Agreement.
1. Option Shares. On the Grant
Date, the Company hereby grants to Participant the option (the
“Option”) to purchase _________ shares of the Company’s
common stock, par value $0.001 per share (the
“Shares”), pursuant and subject to the terms of the
Plan, a copy of which has been delivered or made available to
Participant and is incorporated herein by reference. The Option
granted hereby is an Incentive Stock Option.
2. Exercise Price. The purchase
price per Share upon exercise of the Option is $_______.
3. Vesting. Subject to the terms
of the Plan, the Option shall vest and be exercisable only during
the period beginning one year after the Grant Date and ending 10
years after the Grant Date (the “Grant Expiration
Date”). During such period, provided that Participant
continues to be an Employee of the Company or a Subsidiary, the
Option shall vest and become exercisable (i.e., Shares may be
purchased) according to the following schedule:
___________________________.
The
number of Shares, the exercise price thereof and the rights granted
under this Agreement are subject to adjustment and modification as
provided in the Plan. The total number of Shares referred to in
this Section means, at any relevant time, the number of shares
stated in Section 1 hereof as such number shall then have been
adjusted pursuant to the Plan. Notwithstanding the foregoing, in
the event of a Change of Control prior to Participant’s
Termination of Employment, the Option becomes fully vested and
exercisable.
4. Termination of
Employment.
(a) In
General. If Participant’s Termination of Employment
occurs for a reason other than Participant’s death,
Disability or Retirement:
(i) In
cases other than a Change of Control, any portion of the Option
that has not vested as of the date of Termination of Employment
will automatically be canceled and forfeited and Participant shall
not be entitled to any further rights in respect thereof;
and
(ii) Participant
will have 90 days from the date of Termination of Employment or
until the Grant Expiration Date, whichever period is shorter, to
exercise any portion of the Option that is vested and exercisable
as of the date of Termination of Employment.
Notwithstanding the
above, if the Termination of Employment is a Termination for Cause,
as determined by the Administrator, any outstanding and unexercised
portion of the Option shall be immediately canceled as of the date
of the Termination of Employment.
(b) Death
or Disability. If Participant’s Termination of
Employment occurs due to Participant’s death or
Disability:
(i) any
unvested portion of the Option shall vest in full as of the date of
Participant’s death or Disability;
(ii) if
Participant’s Termination of Employment occurs due to
Participant’s Disability, the Option (including any portion
that vested pursuant to subsection (b)(i)) may be exercised after
the date of the Termination of Employment by the Participant or by
the legal representative of Participant’s estate or by the
legatee(s) of Participant under Participant’s will for a
period of one year after such Termination of Employment or until
the Grant Expiration Date, whichever period is shorter;
and
(iii) if
Participant’s Termination of Employment occurs due to
Participant’s death, the Option (including any portion that
vested pursuant to subsection (b)(i)) may be exercised after the
date of the Termination of Employment by the legal representative
of Participant’s estate or by the legatee(s) of Participant
under Participant’s will until the Grant Expiration
Date.
(c) Retirement.
If Participant’s Termination of Employment occurs due to
Participant’s Retirement:
(i) any
portion of the Option that has not vested as of the date of
Termination of Employment will become ratably vested (rounded up or
down to the nearest whole Share) based upon the full months of the
total vesting period elapsed from the Grant Date to the end of the
month in which the Termination of Employment due to Retirement
occurs over the total number of months in such period; provided,
however, that, in the case of a Retirement due to a voluntary
Termination of Employment, the terms of this subsection (c)(i)
shall not apply with respect to any Option granted less than six
months prior to the effective date of such Termination of
Employment; and
(ii) the
Option, to the extent vested and exercisable as of the date of
Termination of Employment (including any portion of the Option that
is ratably vested pursuant to subsection (c)(i)), shall remain
exercisable for five years after the date of the Termination of
Employment or until the Grant Expiration Date, whichever period is
shorter; provided, however, that any exercise beyond 90 days after
Participant’s Termination of Employment is deemed to be the
exercise of a Nonqualified Stock Option.
5. Method of Exercise and Payment of
Price.
(a) Method of Exercise. At any time
when all or a portion of the Option is exercisable under the Plan
and this Agreement, some or all of the exercisable portion of the
Option may be exercised from time to time by written notice to the
Company in the form attached as Exhibit A hereto, or such other
method of exercise as may be specified by the Company, including
without limitation, exercise by electronic means on the website of
the Company’s third-party equity plan administrator if any,
which will:
(i) state
the number of Shares with respect to which the Option is being
exercised; and
(ii) if
the Option is being exercised by anyone other than Participant, if
not already provided, be accompanied by proof satisfactory to
counsel for the Company of the right of such person or persons to
exercise the Option under the Plan and all applicable laws and
regulations.
(b) Payment of Price. The full
exercise price for the portion of the Option being exercised shall
be paid to the Company as provided below:
(i) in
cash;
(ii) by
check or wire transfer (denominated in U.S. Dollars);
(iii) subject
to any conditions or limitations established by the Administrator,
other Shares which:
(A)
have been owned by Participant for more than six months on the date
of surrender (unless this condition is waived by the
Administrator); and
(B)
have a Fair Market Value on the date of surrender equal to or
greater than the aggregate exercise price of the Shares as to which
said Option shall be exercised (it being agreed that the excess of
the Fair Market Value over the aggregate exercise price shall be
refunded to Participant in cash);
(iv)
subject to any conditions or limitations established by the
Administrator, by the Company’s retention of the number of
Shares otherwise issuable upon exercise of the Option at least
equal to the exercise price (it being agreed that any excess of the
Fair Market Value of the retained Shares over the aggregate
exercise price shall be refunded to Participant in
cash);
(v) consideration
received by the Company under a broker-assisted sale and remittance
program acceptable to the Administrator; or
(vi) any
combination of the foregoing methods of payment.
6. Transfer. Unless a transfer is
approved by the Plan Administrator, which approval may be withheld
at the Administrator’s sole discretion (and which transfer
could result in the option no longer qualifying as an incentive
stock option), the Option shall be transferable only at
Participant’s death, by Participant’s will or pursuant
to the laws of descent and distribution. During Participant’s
lifetime, the Option may not be exercised by anyone other than
Participant or, in the event of Participant’s incapacity,
Participant’s legal representative. The terms of this
Agreement shall be binding upon the executors, administrators,
successors and assigns of Participant.
7. Restrictions on Exercise. The
Option is subject to all restrictions in this Agreement and/or in
the Plan. As a condition of any exercise of the Option, the Company
may require Participant or his or her successor to make any
representation and warranty to comply with any applicable law or
regulation or to confirm any factual matters reasonably requested
by the Company.
8. Notice of Disqualifying Disposition of
Shares. If Participant sells or otherwise disposes of any of
the Options (pursuant to Section 6), or any of the Shares acquired
pursuant to the Option on or before the later of (i) the date two
years after the Grant Date, and (ii) the date one year after
transfer of such Shares to Participant upon exercise of the Option,
Participant shall immediately notify the Company in writing of such
disposition. Participant agrees that Participant shall be subject
to applicable income tax withholding by the Company on the
compensation income recognized by Participant from the early
disposition payment in cash or out of the current wages or other
compensation payable to Participant.
9. Privileges of Stock Ownership.
Participant shall not have any of the rights of a shareholder with
respect to any of the Shares (e.g., the rights to vote and receive
dividends) until the Shares are issued to Participant following the
exercise of all or part of the Option.
10. Right of Set-Off. By accepting
this Option, Participant consents to a deduction from, and set-off
against, any amounts owed to Participant by the Company or any
Subsidiary from time to time (including, but not limited to,
amounts owed to Participant as wages, severance payments or other
fringe benefits) to the extent of the amounts owed to the Company
or Subsidiary under this Agreement.
11. Holding Period Requirement. If
Participant is classified as an “officer” of the Company within
the meaning of Rule 16a-1(f) under the Securities Exchange Act of
1934, as amended, on the Grant Date, then, as a condition to
receipt of the Option, Participant hereby agrees to hold his or her
After-Tax Net Profit in Shares until the sixth month anniversary of
the exercise of all or a portion of the Option (or, if earlier, the
date of Participant’s Termination of Employment).
“After-Tax Net Profit” means the total dollar value of
the Shares that Participant elects to exercise under this Option at
the time of exercise, minus the total of (i) the exercise price to
purchase these Shares, and (ii) the amount of all applicable
federal, state, local or foreign income, employment or other tax
and other similar fees that are withheld in connection with the
exercise.
12. Governing Law/Venue. This
Agreement shall be governed by the laws of the State of Delaware,
without regard to principles of conflicts of law, except to the
extent superseded by the laws of the United States of America. The
parties agree and acknowledge that the laws of the State of
Delaware bear a substantial relationship to the parties and/or this
Agreement and that the Option and benefits granted herein would not
be granted without the governance of this Agreement by the laws of
the State of Delaware. In addition, all legal actions or
proceedings relating to this Agreement shall be brought exclusively
in state or federal courts located in the State of Delaware and the
parties executing this Agreement hereby consent to the personal
jurisdiction of such courts. In the event that it becomes necessary
for the Company to institute legal proceedings under this
Agreement, Participant shall be responsible to the Company for all
costs and reasonable legal fees incurred by the Company with regard
to such proceedings. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be invalid or
unenforceable should be construed or limited in a manner that is
valid and enforceable and that comes closest to the business
objectives intended by such provision, without invalidating or
rendering unenforceable the remaining provisions of this
Agreement.
13. Interpretation and
Administration. The parties agree that the interpretation of
this Agreement shall rest exclusively and completely within the
sole discretion of the Administrator. The parties agree to be bound
by the decisions of the Administrator with regard to the
interpretation of this Agreement and with regard to any and all
matters set forth in this Agreement. The Administrator may delegate
its functions under this Agreement to an officer of the Company
designated by the Administrator (hereinafter the
“designee”). In fulfilling its responsibilities
hereunder, the Administrator or its designee may rely upon
documents, written statements of the parties or such other material
as the Administrator or its designee deems appropriate. The parties
agree that there is no right to be heard or to appear before the
Administrator or its designee and that any decision of the
Administrator or its designee relating to this Agreement shall be
final and binding unless such decision is arbitrary and
capricious.
14. Electronic Delivery and Consent to
Electronic Participation. The Company may, in its sole
discretion, decide to deliver any documents related to the Option
grant hereunder and participation in the Plan or future Options
that may be granted under the Plan by electronic means. Participant
hereby consents to receive such documents by electronic delivery
and to participate in the Plan through an on-line or electronic
system established and maintained by the Company or another third
party designated by the Company, including the acceptance of option
grants and the execution of option agreements through electronic
signature.
15. Notices. All notices requests,
consents and other communications required or provided hereunder
shall be in writing and, if to the Company, shall be delivered or
mailed to its principal office, and, if to Participant, shall be
delivered either personally or mailed to the address of Participant
appearing on the books and records of the Company.
16. Prompt Acceptance of Agreement.
The Option grant evidenced by this Agreement shall, at the
discretion of the Administrator, be forfeited if this Agreement is
not manually executed and returned to the Company, or
electronically executed by Participant by indicating
Participant’s acceptance of this Agreement in accordance with
the acceptance procedures set forth on the Company’s
third-party equity plan administrator’s website, within 90
days of the Grant Date.
17. Entire Agreement. This
Agreement, together with the Plan, contains the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect
thereto. In the event of any conflict between the provisions of
this Agreement and the Plan, the provisions of the Plan shall
control.
18. Amendment. This Agreement may
not be modified, supplemented or otherwise amended other than
pursuant to a written agreement between Company and
Participant.
19. No Third-Party Beneficiary.
This Agreement is made for the benefit of the Company and any
Subsidiary employing Participant during the term
hereof.
20. Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
21. Employment. This Agreement does
not constitute a contract of employment or guarantee of employment
of Participant for any length of time and nothing in the Plan or
this Agreement confers upon Participant any right to continue in
the employ of, or other relationship with, the Company or any
Subsidiary, or limit or interfere in any way with the right of the
Company or Subsidiary to terminate Participant’s employment
any time with or without Cause.
22. No Representations Regarding Tax
Consequences. Participant acknowledges and agrees that the
Company has made no warranties or representations to Participant
with respect to the tax consequences (including, but not limited
to, income tax consequences) related to the Option granted under
this Agreement, and Participant is in no manner relying on the
Company or its representatives for an assessment of such tax
consequences. Participant further acknowledges that there may be
adverse tax consequences upon disposition of the Shares acquired
pursuant to the exercise of the Option and that Participant has
been advised that he or she should consult with his or her own
attorney, accountant and/or tax advisor regarding the consequences
thereof. Participant also acknowledges that the Company has no
responsibility to take or refrain from taking any actions in order
to achieve a certain tax result for Participant.
23. Headings. Section and
subsection headings contained in this Agreement are inserted for
the convenience of reference only. Section and subsection headings
shall not be deemed to be a part of this Agreement for any purpose,
and they shall not in any way define or affect the meaning,
construction or scope of any of the provisions hereof.
MONOPAR
THERAPEUTICS INC.
By:
Name:
Title:
Attest:
Name:
Title:
Accepted
by:
X
Participant:
Exhibit A
Form of
Notice of Exercise
Monopar Therapeutics Inc.
1000
Skokie Blvd., Suite 350
Wilmette,
IL 60091
Attention:
Chandler D. Robinson
Date of
Exercise:________________
Chandler
D. Robinson:
This
constitutes notice under my stock option described below (the
“Option”) that
I hereby exercise my option and elect to purchase the number of
shares for the price set forth below.
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Type of
option (check one):
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Incentive
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Nonstatutory
[ ]
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Stock
option dated:
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________________
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Number
of shares as to which option is exercised:
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________________
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Total
exercise price:
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$_______________
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Cash
payment delivered herewith:
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$_______________
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By this
exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Monopar Therapeutics
Inc. 2016 Stock Incentive Plan, (ii) to provide for the
payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this
option, and (iii) if this exercise relates to an incentive
stock option, to notify you in writing within fifteen (15) days
after the date of any disposition of any of the shares of Common
Stock issued upon exercise of this option that occurs within two
(2) years after the date of grant of the Option or within one (1)
year after such shares of Common Stock are issued upon exercise of
this option.
I
hereby make the following certifications and representations with
respect to the shares of Common Stock of the Company listed above
(the “Shares”),
which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I
acknowledge that I will not be able to resell the Shares for at
least ninety days (90) after the stock of the Company becomes
publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934) under Rule 701, or for at least
six months from the date the Option was granted, if I am an officer
as defined in § 240.16a-1 of the Code of Federal
Regulations or a Director of the Company, and that more restrictive
conditions apply to affiliates of the Company under Rule
144.
I
further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed
thereon appropriate legends reflecting the foregoing limitations,
as well as any legends reflecting restrictions pursuant to the
Company’s Certificate of Incorporation, Bylaws and/or
applicable securities laws.
I
further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten
registration of the offering of any securities of the Company under
the Securities Act, I will not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into
any hedging or similar transaction with the same economic effect as
a sale, any Shares or other securities of the Company held by me,
for a period of time specified by the underwriter(s) (not to exceed
one hundred eighty (180) days) following the effective date of the
registration statement of the Company filed under the Securities
Act. I further agree to execute and deliver such other agreements
as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are
necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer
instructions with respect to my Shares until the end of such
period.
Very
truly yours,
By:
___________________________________
Name:
_________________________________
*Must
be signed by Option holder exactly as name appears on Option
Agreement. If signed by a legal representative, executor, or other
authorized individual, please set forth the individual’s full
title and submit proper evidence of such individual’s
authority to sign this Notice of Exercise.
CONSULTING AGREEMENT
This
Consulting Agreement (herein referred to as “Agreement”) is made and entered
into on January 2, 2019, effective as of January 1, 2019 (the
“Effective
Date”), by and between Monopar Therapeutics, Inc.
(herein referred to as “Monopar”), a Delaware corporation,
located at 1000 Skokie Blvd., Suite 350, Wilmette, IL 60091, and
pRx Consulting, LLC (herein referred to as pRx), a Delaware
corporation located at #
(each herein referred to as
“Party” and collectively as
“Parties”).
RECITALS
WHEREAS, pRx
specializes in the field of clinical development, including but not
limited to: clinical trial design, statistical modeling, clinical
operations, regulatory strategy, investor due diligence, and the
duties of a Chief Medical Officer.
WHEREAS, Monopar
desires to contract with pRx to provide certain consultation
services as requested by Monopar, and pRx wishes to provide such
services to Monopar, upon the terms and conditions set forth
below.
NOW,
THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties agree as follows:
1.
Consulting Arrangement. pRx
agrees to perform consulting services as described herein upon the
terms and conditions herein set forth.
2.
Term of Agreement. Subject to
the provision for early termination set forth below and in
Section 5 of this Agreement,
this Agreement shall commence as of the Effective Date and shall
continue for a period of twelve (12) months from the Effective
Date (the “Term”). Either Party may
terminate this Agreement without cause with 10-days’ prior
written notice.
3.
Duties of pRx.
3.1
Specific Duties. pRx shall
provide consulting services to Monopar, such duties to include the
general duties of a Chief Medical Officer, clinical trial design,
statistical modeling, clinical operations oversight, regulatory
strategy, and investor due diligence, with such other specific
requirements as Monopar may specify from time to time during the
Term (herein referred to as the “Services”).
3.2
pRx’s Obligations. The
president of pRx, Dr. P. Rioux, shall spend on the average over the
course of the Term one-and-a-half (1.5) work days per week working
on Monopar matters, be diligent in the performance of Services, and
be professional in its commitment to meeting its obligations
hereunder. pRx represents and warrants that pRx is not party to any
other existing agreement, which any of them would prevent pRx from
entering into this Agreement or which would adversely affect this
Agreement. pRx shall not perform Services for any other individuals
or entities in direct competition with Monopar, except as provided
for by mutual written agreement of the Parties. pRx shall not
perform services for any party which would require or facilitate
the unauthorized disclosure of any confidential or proprietary
information of Monopar.
3.3
Reporting. pRx will report to
and liaise with Andrew P. Mazar, Ph.D., Chandler Robinson, M.D.,
and/or any other assigned Monopar employee or consultant as may be
designated in writing by Monopar.
3.4
Compensation.
Monopar shall pay pRx as follows:
a. Four
thousand dollars ($4,000) per month payable within thirty (30) days
of the end of each month.
b. Upon
Board approval, Dr. P. Rioux, president of pRx Consulting, LLC
shall be granted stock options to purchase up to 20,000 shares of
Monopar’s common stock at an exercise price of $6.00. Such
stock option shall vest as follows: options to purchase up to 1,667
shares per month commencing on January 31, 2019 and on the last day
of each subsequent month thereafter. Such vesting shall terminate
upon the termination of this Agreement. The number of shares, the
exercise price thereof and the rights granted under this Agreement
are subject to adjustment and modification as provided in the
Monopar Therapeutics Inc. 2016 Stock Incentive Plan.
pRx
shall not be reimbursed, and is responsible for the facilities and
equipment necessary to perform Services required under this
Agreement.
4.
Reimbursement of Other
Expenses. So long as Monopar’s prior approval has been
obtained, Monopar shall promptly reimburse pRx for all direct
expenses incurred in providing the Services to Monopar pursuant to
this Agreement, including travel, meals and lodging. The invoice
submitted by pRx pursuant to this Section 4 shall also include a detail of
all reimbursable expenses incurred during the period covered by
such invoice.
5.
Termination of Agreement - Failure to
perform. In the event that pRx ceases to perform the
Services or breaches its obligations as required hereunder for any
reason, Monopar shall have the right to immediately terminate this
Agreement upon notice to pRx and to enforce such other rights and
remedies as it may have as a result of said breach.
6.
Certain Liabilities. It is
understood and agreed that pRx shall be acting as an independent
contractor and not as an agent or employee of, or partner, joint
venturer or in any other relationship with Monopar. pRx will be
solely responsible for all insurance, employment taxes, FICA taxes
and all obligations to governments or other organizations for it
and its employees arising out of this consulting assignment. pRx
acknowledges that no income, social security or other taxes shall
be withheld or accrued by Monopar for pRx’s or its
employees’ benefit. pRx assumes all risks and hazards
encountered in the performance of duties by it or its employees
under this Agreement. Unless Monopar has provided prior written
approval, pRx shall not use any sub-contractors to perform
pRx’s obligations hereunder. pRx shall be solely responsible
for any and all injuries, including death, to all persons and any
and all loss or damage to property, which may result from
performance under this Agreement.
7.
Indemnities. pRx hereby agrees
to indemnify Monopar and hold Monopar harmless from and against all
claims (whether asserted by a person, firm, entity or governmental
unit or otherwise), liabilities, losses, damages, expenses, charges
and fees which Monopar may sustain or incur arising out of or
attributable to any breach, gross negligence or willful misconduct
by pRx or its employees or contractors, as applicable, in the
performance under this Agreement. Monopar hereby agrees to
indemnify pRx and hold pRx harmless from and against all
liabilities, losses, damages, expenses, charges and fees which pRx
may sustain or incur by reason of any claim which may be asserted
against pRx by any person, firm, corporation or governmental unit
and which may arise out of or be attributable to any gross
negligence or willful misconduct by Monopar or its employees or
contractors, as applicable, in the performance of this
Agreement.
8.
Warranties. The Services shall
be performed in a professional manner, consistent with industry
standards. In performing the Services, neither pRx nor any of its
employees shall make any unauthorized use of any confidential or
proprietary information of any other party or infringe the
intellectual property rights of any other party.
9.
Arbitration. Any controversy or
claim between Monopar and pRx arising out of or relating to this
Agreement, or the breach thereof, shall be submitted to arbitration
in accordance with the rules of the American Arbitration
Association. The site of the arbitration shall be Chicago, IL, and
except as provided herein the arbitration shall be conducted in
accordance with the Rules of the American Arbitration Association
prevailing at the time the demand for arbitration is made
hereunder. At least one member of the arbitration panel shall be an
expert knowledgeable in the area of biopharmaceutical clinical
development. Judgment upon any award rendered by the arbitrator(s)
may be entered in any court of competent jurisdiction and shall be
binding and final. The cost of arbitration shall be borne by the
losing Party, as determined by the arbitrator(s).
10.
Confidential Information. pRx
has executed a confidential disclosure agreement with Monopar on
November 5, 2016. pRx hereby represents and warrants that the
obligations thereunder shall be binding upon it and its employees,
and that it shall obtain written commitments from such employees
thereto.
11.
Inventions. pRx agrees that all
ideas, developments, suggestions and inventions which an employee
or other parties contracted conceive or reduce to practice arising
out of or during the course of performance under this Agreement
shall be the exclusive property of Monopar and shall be promptly
communicated and assigned to Monopar. pRx shall require any
employees of or other parties contracted by pRx to disclose the
same to pRx and to be bound by the provisions of this paragraph.
During the period of this Agreement and thereafter at any
reasonable time when called upon to do so by Monopar, pRx shall
require any employees of or other parties contracted by pRx to
execute patent applications, assignments to Monopar (or any
designee of Monopar ) and other papers and to perform acts which
Monopar believes necessary to secure to Monopar full protection and
ownership of the rights in and to the services performed by pRx
and/or for the preparation, filing and prosecution of applications
for patents or inventions made by any employees of or other parties
contracted by pRx hereunder. The decision to file patent
applications on inventions made by any employees of or other
parties contracted by pRx shall be made by Monopar and shall be for
such countries as Monopar shall elect. Monopar agrees to bear all
the expense in connection with the preparation, filing and
prosecution of applications for patents and for all matters
provided in this paragraph requiring the time and/or assistance of
pRx as to such inventions.
12.
Miscellaneous.
12.1
Notice. Any notices to be given
hereunder by either Party to the other may be effectuated, in
writing, by personal delivery or by mail, registered or certified,
postage prepaid, with return receipt requested, or by electronic
mail. Mailed notices shall be addressed to the Parties at the
following addresses:
If to
Monopar:
Monopar Therapeutics Inc.
1000
Skokie Blvd., Suite 350
Wilmette, IL
60091
Attention: Chandler
Robinson, MD MBA MSc
Email:
#
If to
pRx:
pRx Consulting, LLC
#
Attention: Patrice
Rioux, MD, PhD
Email:
#
or at
such other addresses as either Monopar or pRx may designate by
written notice to each other. Notices delivered personally shall be
deemed duly given on the date of actual receipt; mailed notices
shall be deemed duly given as of the fourth day after the date so
mailed. If sent by electronic mail, such notice will be deemed
given upon confirmation of receipt by recipient.
12.2
Waiver of Breach. The waiver by
either Party to a breach of any provision in this Agreement cannot
operate or be construed as a waiver of any subsequent breach by
either Party.
12.3
Severability. If any provision
of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable, that provision shall
be deemed modified to the extent necessary to make it valid or
enforceable, or if it cannot be so modified, then severed, and the
remainder of the Agreement shall continue in full force and effect
as if the Agreement had been signed with the invalid portion so
modified or severed.
12.4
Choice of Law. This Agreement
has been made and entered into in the State of Illinois, and the
laws of such state, excluding its choice of law rules, shall govern the validity and
interpretation of this Agreement and the performance due hereunder.
The losing party in any dispute hereunder shall pay the
attorneys’ fees and disbursements of the prevailing
party.
12.5
Integration. The drafting,
execution and delivery of this Agreement by the Parties have been
induced by no representations, statements, warranties or agreements
other than those expressed herein. This Agreement embodies the
entire understanding of the Parties, and there are no further or
other agreements or understandings, written or oral, in effect
between the Parties relating to the subject matter hereof unless
expressly referred to herein.
12.6
Modification. This Agreement
may not be modified unless such is in writing and signed by both
Parties to this Agreement.
12.7
Assignment. pRx shall not be
permitted to assign this Agreement to any other person or entity
without the prior written consent of Monopar. pRx hereby agrees
that Monopar shall be permitted to assign this Agreement to any
affiliate of Monopar. This Agreement shall be binding upon and
shall inure to the benefit of the successors and permitted assigns
of the parties.
12.8
Survival. The provisions of
Sections 7, 8, 9, 10, and
11 shall survive expiration
or termination of this Agreement for any reason. Expiration or
termination of this Agreement shall not affect Monopar’s
obligations to pay any amounts that may then be due to
pRx.
IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.
ACCEPTED
AND AGREED TO:
|
pRx Consulting, LLC
|
|
Monopar Therapeutics Inc.
|
|
/s/ Patrice Rioux
|
|
/s/ Chandler Robinson
|
|
By: Patrice Rioux, MD, PhD
Its: President
|
|
By: Chandler Robinson
Its: Chief Executive Officer
|
Exhibit 21.1
Subsidiaries of Monopar Therapeutics Inc. as of December 31,
2019
|
Name
|
|
Direct Parent
|
|
Ownership
|
|
Jurisdiction of
Incorporation
|
|
Monopar
Therapeutics Australia Ltd Pty
|
|
Monopar
Therapeutics Inc.
|
|
100%
|
|
Australia
|
|
Monopar
Therapeutics, SARL
|
|
Monopar
Therapeutics Inc.
|
|
100%
|
|
France
|
Exhibit
23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We
hereby consent to the incorporation by reference in the
Registration Statements on Form S-1 (333-233303), on Form S-3
(333-235791) and on Form S-8 (333-235790) of our report dated March
27, 2020, relating to the consolidated financial statements of
Monopar Therapeutics Inc. as of December 31, 2019, which appears in
this Annual Report on Form 10-K.
We also
consent to the reference to us under the caption
“Experts” in such Registration Statements.
/s/ BPM
LLP
San
Francisco, California
March
27, 2020
Exhibit
31.1
CERTIFICATION
I,
Chandler D. Robinson, certify that:
1. I have reviewed
this Annual Report on Form 10-K of Monopar Therapeutics
Inc.;
2. Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3. Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's
other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the
effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(d) Disclosed in this
report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's
other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
(b) Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant's internal control over
financial reporting.
Date:
March 27, 2020
/s/ Chandler D.
Robinson
Chandler D.
Robinson
Chief
Executive Officer
Exhibit
31.2
CERTIFICATION
I, Kim
R. Tsuchimoto, certify that:
1. I have reviewed
this Annual Report on Form 10-K of Monopar Therapeutics
Inc.;
2. Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3. Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's
other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the
effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(d) Disclosed in this
report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's
other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
(b) Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant's internal control over
financial reporting.
Date:
March 27, 2020
/s/ Kim R.
Tsuchimoto
Kim R.
Tsuchimoto
Chief
Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-K of Monopar
Therapeutics Inc. (the Company) for the year ended December 31,
2019, as filed with the Securities and Exchange Commission on the
date hereof (the Report), we, Chandler D. Robinson, and Kim R.
Tsuchimoto, hereby certify, pursuant to 18 U.S.C. §1350, as
adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002,
that:
(1)
the Report
fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
the
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Chandler D.
Robinson
Chandler D.
Robinson
Chief
Executive Officer
March
27, 2020
/s/ Kim R.
Tsuchimoto
Kim R.
Tsuchimoto
Chief
Financial Officer
March
27, 2020
This certification accompanies the Form 10-K to which it relates,
is not deemed filed with the Securities and Exchange Commission and
is not to be incorporated by reference into any filing of Monopar
Therapeutics Inc. under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended (whether made
before or after the date of the Form 10-K), irrespective of any
general incorporation language contained in such
filing.