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EX-32.1 - EX-32.1 - TYME TECHNOLOGIES, INC.tyme-ex321_6.htm
EX-31.2 - EX-31.2 - TYME TECHNOLOGIES, INC.tyme-ex312_7.htm
EX-31.1 - EX-31.1 - TYME TECHNOLOGIES, INC.tyme-ex311_13.htm
EX-23.1 - EX-23.1 - TYME TECHNOLOGIES, INC.tyme-ex231_9.htm
EX-21.1 - EX-21.1 - TYME TECHNOLOGIES, INC.tyme-ex211_8.htm
EX-10.20 - EX-10.20 - TYME TECHNOLOGIES, INC.tyme-ex1020_227.htm
EX-10.18 - EX-10.18 - TYME TECHNOLOGIES, INC.tyme-ex1018_228.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2020

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 001-38169

 

TYME TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

45-3864597

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

17 State Street – 7th Floor, New York, NY

 

10004

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (212) 461-2315

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

TYME

Nasdaq Capital Market

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 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 an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller Reporting Company

 

Emerging Growth Company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

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, was approximately $101,558,184.

The number of shares outstanding of the registrant’s common stock on May 18, 2020 was 123,312,252.

 

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Items 10, 11, 12, 13 and 14 is incorporated by reference into Part III hereof from portions of the Proxy Statement for the registrant’s 2020 Annual Meeting of Stockholders.

 

 

 


Table of Contents

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

PART I

 

 

 

 

 

 

 

 

 

ITEM 1.

 

BUSINESS

 

5

 

 

 

 

 

ITEM 1A.

 

RISK FACTORS

 

26

 

 

 

 

 

ITEM 1B.

 

UNRESOLVED STAFF COMMENTS

 

71

 

 

 

 

 

ITEM 2.

 

PROPERTIES

 

71

 

 

 

 

 

ITEM 3.

 

LEGAL PROCEEDINGS

 

72

 

 

 

 

 

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

72

 

 

 

 

 

PART II

 

 

 

 

 

 

 

 

 

ITEM 5.

 

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

73

 

 

 

 

 

ITEM 6.

 

SELECTED FINANCIAL DATA

 

73

 

 

 

 

 

ITEM 7.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

74

 

 

 

 

 

ITEM 7A.

 

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

 

84

 

 

 

 

 

ITEM 8.

 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

84

 

 

 

 

 

ITEM 9.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

110

 

 

 

 

 

ITEM 9A.

 

CONTROLS AND PROCEDURES

 

110

 

 

 

 

 

ITEM 9B.

 

OTHER INFORMATION

 

112

 

 

 

 

 

PART III

 

 

 

 

 

 

 

 

 

ITEM 10.

 

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

112

 

 

 

 

 

ITEM 11.

 

EXECUTIVE COMPENSATION

 

112

 

 

 

 

 

ITEM 12.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

112

 

 

 

 

 

ITEM 13.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

113

 

 

 

 

 

ITEM 14.

 

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

113

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

 

 

ITEM 15.

 

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

114

 

 

 

 

 

ITEM 16.

 

FORM 10-K SUMMARY

 

115

 

 

 

 

 

SIGNATURES

 

 

 

118

 

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Annual Report on Form 10-K other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. Such forward-looking statements within this report include, without limitation, statements regarding our drug candidates (including SM-88 and TYME- 18) and their clinical potential and non-toxic safety profiles, our drug development plans and strategies, ongoing and planned clinical trials, preliminary data results and the therapeutic design and mechanisms of our drug candidates. The words “believes,” “expects,” “hopes,” “may,” “will,” “plan,” “intends,” “estimates,” “could,” “should,” “would,” “continue,” “seeks,” “anticipates,” and similar expressions (including their use in the negative), are intended to identify forward-looking statements. Forward-looking statements can also be identified by discussions of future matters such as: the effect of the novel coronavirus (COVID-19) pandemic and the associated economic downturn and impacts on the Company's ongoing clinical trials; the cost of development and potential commercialization of our lead drug candidate and of other new products; expected releases of interim or final data from our clinical trials; possible collaborations; and the timing, scope and objectives of our ongoing and planned clinical trials and other statements that are not historical. The forward-looking statements contained in this report are based on management’s current expectations and projections which are subject to uncertainty, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. These statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any historical results and future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to: the severity, duration, and economic impact of the coronavirus pandemic; that the information is of a preliminary nature and may be subject to change; uncertainties inherent in the cost and outcomes of research and development, including the cost and availability of acceptable-quality clinical supply and the ability to achieve adequate clinical study design and start and completion dates; the possibility of unfavorable study results, including unfavorable new clinical data and additional analyses of existing data; risks associated with early, initial data, including the risk that the final data from any clinical trials may differ from prior or preliminary study data; final results of additional clinical trials that may be different from the preliminary data analysis and may not support further clinical development; that past reported data are not necessarily predictive of future patient or clinical data outcomes; whether and when any applications or other submissions for SM-88 may be filed with regulatory authorities; whether and when regulatory authorities may approve any applications or submissions; decisions by regulatory authorities regarding labeling and other matters that could affect commercial availability of SM-88; the ability of TYME and its collaborators to develop and realize collaborative synergies; competitive developments; and the factors described in the section captioned “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K, as well as subsequent reports we file from time to time with the U.S. Securities and Exchange Commission (available at www.sec.gov).

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. Moreover, we operate in a competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from any forward-looking statements we make. We cannot assure you that forward-looking statements in this report or therein will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us to any other person that we will achieve our objectives and plans in any specified time frame, or at all. We disclaim any intent or duty to update any of these forward-looking statements after completion of this Annual Report on Form 10-K to conform these statements to actual results or revised expectations.

The cautionary statements made in this report are intended to be applicable to all related forward-looking statements wherever they may appear in this report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except as required by law, we assume no obligation to update our forward-looking statements, even if new information becomes available in the future.

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GENERAL

Unless the context otherwise requires, all references in this Annual Report on Form 10-K to the “Company,” “TYME,” “we,” “us” or “our” refer to Tyme Technologies, Inc., together with its subsidiaries.

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PART I

ITEM 1.

BUSINESS

Executive Summary of Our Business  

TYME is an emerging biotechnology company developing cancer metabolism-based therapies (CMBTsTM) that are intended to be effective across a broad range of solid tumors and hematologic cancers, while also maintaining patients’ quality of life through relatively low toxicity profiles. Unlike targeted therapies that attempt to regulate specific pathways within cancer, TYME’s therapeutic approach is designed to take advantage of a cancer cell’s innate metabolic requirements to cause cancer cell death. Our first-in-class CMBT compounds include SM-88 and TYME-18. These compounds are structurally and mechanistically different, and we believe they offer the potential for better and safer medicines. Early clinical results demonstrated by SM-88 in multiple advanced cancers, including pancreatic, prostate, sarcomas and breast, reinforce the potential of our emerging CMBT pipeline. Moreover, this pipeline offers hope to patients for a new future in long-term management of advanced cancers.

Our lead clinical CMBT compound, SM-88, is an oral investigational modified proprietary tyrosine derivative that is hypothesized to interrupt the metabolic processes of cancer cells by breaking down the cells’ key defenses and leading to cell death through oxidative stress and exposure to the body’s natural immune system. To date, clinical trial data have shown that SM-88 has achieved confirmed tumor responses across 15 different cancers, both solid and liquid tumors, including pancreatic, lung, breast, prostate, sarcoma and lymphoma cancers with minimal serious Grade 3 or higher adverse events, which we believe is rare for investigational compounds. Our lead compound SM-88 is now in a pivotal trial and an adaptive randomized Phase II/III clinical trial with registration intent for patients with second- and third-line pancreatic cancer. Patients are also being enrolled in a Phase II study evaluating SM-88 in high-risk sarcomas, and we presented final SM-88 Phase II clinical data at European Society for Medical Oncology’s ESMO 2019 conference showing encouraging clinical benefit in patients with bio-marker recurrent prostate cancer.

Our Pipeline


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TYME-18 is a CMBT compound under development that is delivered intratumorally. Like SM-88, TYME-18 leverages the unique metabolism of cancer to create a treatment for inoperable tumors. Preliminary observations of the local administration of TYME-18, an amphiphilic steroid acid, suggested its potential as an important regulator of energy metabolism that may impede the ability of tumors to increase in size which could prove useful in difficult-to-treat cancers. In initial preclinical xenograft mouse studies, TYME-18 was able to completely resolve over 90 percent (11/12 mice) of established colorectal tumors within 12 days versus an average of over 600 percent growth in the control animals. We plan to continue with the development of TYME-18 in solid tumors and to provide details of an IND (Initial New Drug Application) enabling program this calendar year.

 

TYME has multiple cancer metabolism-based assets and other formulations for SM-88 in development, including injectable, intranasal, and transdermal, which are in pre-clinical stages.

 

TYME has an expanding patent portfolio broadly covering compositions, methods, manufacturing and use of its pipeline to 2032, and beyond. To date, TYME has 194 issued patents and patent applications worldwide, including 10 issued patents and an additional 12 patent applications in the United States.

Our Guiding Principles

 

TYME is committed to improving the lives of cancer patients worldwide through a workplace culture that empowers, engages, enriches and inspires employees who come to work every day to change the course of metastatic cancers through bold and creative pursuits in science, and a promise to put patients first.  We are passionate about the people we serve - the patients. We are bold and courageous in our approach to turn the impossible into the possible. We hold trustworthiness in the highest regard. We aspire to always do better, and we work to exceed expectations through excellence in all we say and do.

 

SM-88 Mechanism of Action

 

SM-88 (racemetyrosine) is an orally administered cancer metabolism-based therapy that is chemically altered to be non-functional for fundamental tumor cell processes, including protein synthesis. Scientific literature has broadly published that normal healthy cells do not regularly take up certain non-essential amino acids, specifically tyrosine, while a wide range of cancer cells upregulate methods to consume these metabolites. We believe that, when taken up by a cancer cell, our proprietary modified dysfunctional tyrosine interrupts protein synthesis, reduces key cellular defenses, and ultimately leads to an oxidative stress-related apoptosis or cell death. We also believe this selective cancer uptake of non-essential amino acids is supported by the current safety profile showing minimal observed drug-related serious adverse events (each, an “SAE”) in approximately 180 cancer patients treated with SM-88 to date, which includes patients of the Compassionate Use Program (discussed below) for whom we have safety results, but limited information regarding efficacy.

 

SM-88 is currently administered with the conditioning agents Methoxsalen, Phenytoin and Sirolimus (“MPS”). The conditioning agents are administered at doses between 5% and 25% of their U.S. Food and Drug Administration (“FDA”) approved doses in non-cancer indications. We believe, based on scientific literature of their respective biologic functions, the physiologic, but sub-therapeutic doses of these agents may augment either the uptake of SM-88 or destabilize cancer cells. 

 

The Company has established pre-clinical research collaborations with academic institutions, as well as internal pre-clinical initiatives, to broaden the detailed understanding of the mechanisms associated with SM-88.  The overall goals of these efforts are to potentially identify patient or disease biomarkers that could be applied to patient selection in clinical trials, as well as identify potential combinations with other anti-cancer mechanisms that could aid future clinical development. We currently have a research collaboration with Mayo Clinic and NYU Langone Health and could establish additional collaborations in the future.

 

 

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Development Strategy and Key Product Properties

 

Our goal is to develop CMBTs that may help patients live longer and better lives through next-generation medicines that are both better and safer treatments than current cancer treatment options. Key elements of our strategy to achieve this goal are:

 

 

Successfully advance SM-88 across a broad range of cancers through clinical development, regulatory approvals and commercial launch globally.

 

Continue to invest in our technology platform and expand the breadth and depth of our IP portfolio. We plan to expand our research and development (“R&D”) efforts to encompass multiple cancer indications in both solid tumors and hematologic cancers. We have undertaken early development programs for additional delivery systems of our lead oral candidate, SM-88, as well as new investigational CMBTs to treat cancer patients with high unmet medical needs.

 

Build a balanced portfolio of proprietary and partnered programs. We plan to independently develop and commercialize multiple drug candidates for human indications within the oncology field. For targets outside our core areas of interest or where a partner can contribute specific expertise, we intend to evaluate potential collaborations with strategic partners and/or potential acquisitions of other companies and/or their assets that can augment our expertise and technology, as well as a means to acquire rights or ownership of additional intellectual property (“IP”). We also contemplate exploring global development partners and arrangements, where appropriate.

By using SM-88 to disrupt key aspects of cancer’s unique metabolism, our intention is to create an innovative therapeutic approach that is:

 

 

Broadly effective across different cancer types – Because a vast majority of cancers use the same metabolic process, known as the Warburg Effect, we believe that they likely also have the same susceptibilities to SM-88 treatment, regardless of physiologic origin;

 

Highly specific to cancer – As supported by the current safety data reported for approximately 180 patients, together with recent advances in radiographic imaging that use tyrosine-based agents to selectively image cancer cells, cancer appears to have a high affinity for tyrosine uptake compared to normal cells;

 

Well-tolerated/ broad therapeutic margin – Safety findings are available for approximately 180 patients, and only two patients (1%) have reported any drug-related serious adverse events; 

 

Suitable for monotherapy or combination therapy – Although most of TYME’s clinical and compassionate use experience has been in monotherapy, SM-88’s differentiated mechanism of action and safety profile may also allow it to be effective in combination with other cancer therapeutics; and

 

Potentially effective treatment for patients who have failed other therapeutic options – Current cancer therapies are often intended to inhibit or change a particular aspect of cancer’s cellular function, known as selective pressure. However, cancers typically develop resistance mechanisms that can make them less responsive to subsequent selective pressure treatments, while at the same time patients also accumulate treatment-related toxicities that can make them ineligible for subsequent therapies. SM-88 is designed to avoid selective pressure and this fundamental limitation of traditional therapies by utilizing cancer’s innate metabolic weaknesses to compromise its defenses, leading to cell death through oxidative stress and exposure to the body’s natural immune system. We believe this novel mechanism of action may allow SM-88 to be used in traditional treatment-resistant patients and also limit development of resistance.

 

We believe we can become a leader in developing and delivering CMBTs with our platform technology for the following reasons:

 

 

Members of our management team have extensive experience with scientific research and clinical development in the field of cancer metabolism-based therapies.

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Oral SM-88 has demonstrated meaningful clinical benefit and well tolerated safety profile, in metastatic cancer patients across 15 different types of solid tumors and hematologic cancers.

 

To date, SM-88 has shown a favorable safety profile and we believe the unique mechanism of action increases prospects for evaluation of the potential of SM-88 as a preferred therapy in combination with existing treatment modalities.

 

We currently retain all commercial rights for SM-88 and new pipeline candidates through a strong and growing patent estate of over 65 issued patents and 129 pending patent applications in various countries broadly covering compositions, methods, manufacturing and use in connection with the treatment of cancers.

 

We have a technology base and patent portfolio supporting SM-88 and have filed patents applications for additional drug candidates to provide a pipeline of oncology drug development programs based on our CMBT technology platform.

SM-88: Completed Studies  

 

First in Human Study

 

The initial clinical trial with SM-88, known as the First in Human Study (“FHS”), began in 2012 and was conducted in 30 actively progressing metastatic cancer patients who had failed or refused all available treatments options. The Phase I study was designed to assess the safety of monotherapy SM-88, although the trial was extended beyond the initial six-week period based on reported treatment efficacy, with several patients remaining on treatment for over 12 months. Patients were given SM-88 with conditioning agents melanin, melanotan II, phenytoin, and sirolimus (these conditioning agents will hereafter be referred to as “M2PS”).

 

The results of the FHS were published in the journal, Investigational New Drugs, in March 2019, including data from the trial’s initiation in January 2012 through September 2017. Patients were treated with monotherapy SM-88 and achieved median overall survival (“OS”) of 29.8 months, median progression free survival (“PFS”) of 13 months, and a 33% objective response rate (“ORR”). The ORR consisted of four complete responses (“CR”) and six partial responses (“PR”), based on Response Evaluation Criteria In Solid Tumors 1.1 (“RECIST”).  In addition, 57% of patients (17/30) achieved RECIST stable disease (“SD”) with a median SD duration of 11 months. Five FHS patients with metastatic cancer survived for over five years after commencing SM-88 treatment. All FHS patients improved or maintained Eastern Cooperative Oncology Group Performance Status (“ECOG PS”), a measure of quality of life, after initiating SM-88 therapy, and OS was comparable for patients who entered the trial with ECOG PS ranging from 0 (asymptomatic) to 2 (unable to perform any work-related activities).

 

We also reported multiple subgroup analyses of FHS patients. As of September 2017, 67% of FHS patients were reported to have had no additional systemic therapies since their initial enrollment in FHS in 2012, including all five of the surviving FHS patients. Patients without any further treatment beyond SM-88 showed greater mean and median OS (37 and 38 months, respectively) than patients who received subsequent treatments beyond SM-88 (30 and 28 months, respectively). Regarding therapies prior to SM-88, patients with two or more prior systemic therapies experienced a median OS of 23 months, including two CRs and three PRs, after beginning SM-88 therapy. For the three most common cancer types in the FHS, we reported median and mean OS for the following patients by cancer type: breast cancer, 35 and 36 months (n=14); lung cancer, 25 and 30 months (n=5); and pancreatic cancer, 24 and 24 months (n=3). In the breast cancer subgroup, median OS of 35 months was achieved despite patients having an average of 2.5 prior lines of systemic drug therapy and 4.5 prior therapeutic lines, including systemic, surgical or radiation therapy. 43% of patients in the breast cancer subgroup achieved CR or PR while on SM-88 monotherapy and ECOG PS average baseline improved from 1.8 to 0.6 after six weeks of SM-88 therapy. Additionally, after having stopped SM-88 treatment in the FHS, three breast cancer patients received additional treatment with SM-88 at a later time and all three of such patients were alive as of the last reported data in October 2017. One of the re-treated patients experienced a second objective tumor response from SM-88 monotherapy as measured by RECIST criteria.

 

We believe that traditional RECIST response criteria, a commonly used clinical endpoint based primarily on computerized tomography (“CT”) images, may not fully reflect the therapeutic benefit from SM-88. This is based on the observation in the First in Human Study where a total of 17 of the 30 patients achieved SD with median OS of 29.0 months. Because we believe many patients on SM-88 experience therapeutic benefit without necessarily

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achieving a CR or PR under RECIST criteria, we commonly refer to “Clinical Benefit,” which includes CR, PR and SD designations.

 

SM-88 used with M2PS demonstrated a favorable safety profile and was well tolerated. All related adverse events (AEs) for SM-88 were classified as mild or moderate. The most common treatment AEs experienced included hyperpigmentation by 100% of patients (30/30), fatigue by 56.7% of patients (17/30) and pain by 10% of patients (3/30). No dose limiting toxicities were observed.

 

Compassionate Use Program

 

In parallel with and following the First in Human Study, we also allowed advanced cancer patients’ access to SM-88 through a compassionate use program under Institutional Review Board (“IRB”) supervision (the “Compassionate Use Patients”). In early 2018, we performed a retrospective analysis on 53 Compassionate Use Patients who had available data and received at least six weeks of treatment. These patients had their scans reviewed by independent radiologists to determine response under RECIST, and 75% of these patients (40 of 53) were deemed to have experienced Clinical Benefit, consisting of 8 CRs, 16 PRs and 16 SD designations.

 

Through these two programs, patients being treated with SM-88 have achieved confirmed responses across 15 different cancer types, including some of the most common and difficult to treat cancers, such as pancreatic, prostate, breast, lung, glioma, ovarian, sarcoma and colon cancer. Based on preliminary data from the FHS and the Compassionate Use Patients suggesting SM-88 may have broad potential applicability and acceptable toxicity, we believe that SM-88 may ultimately be utilized as a treatment for a wide range of cancers prior to the end-stage setting.

 

SM-88 Ongoing Studies

 

Pancreatic Cancer Trial (“TYME-88-Panc”)

 

TYME-88-Panc was initially designed as a two-part, open-label clinical trial evaluating SM-88 as an oral monotherapy in late-stage patients with advanced pancreatic cancer. Part 1 was designed to determine optimal dose for pivotal testing and patients were given either a high or low dose of SM-88. Preliminary data from Part 1 was released at the ESMO World Congress on Gastrointestinal Cancer on July 4, 2019. Based on the encouraging efficacy data and the well tolerated safety profiles, the TYME-88-Panc protocol was amended in 2019 and is now intended as a pivotal registration trial. The amended protocol is a 1:1 randomized study of SM-88 versus an investigator’s choice of three pre-determined single agent therapies.

 

Part 1 of TYME-88-Panc included 49 heavily pretreated patients with radiographically progressive metastatic pancreatic cancer, who had received a median of two prior systemic therapies and had significant disease related morbidity before receiving SM-88 used with MPS. Of the 49 patients, 38 patients were evaluable for efficacy, as defined in the protocol. Preliminary results from Part 1 of TYME-88-Panc, using information available as of April 25, 2019, demonstrated 6.4 months median OS of evaluable patients (n=38). The reported survival of patients progressing after second line therapy was 3 months, based on an analysis of 19 published trials with patients who had progressed after second line treatment (Manax, et al J Clin Oncol 37, 2019 (suppl 4; abstr 226)). In addition, there is an approximate 2 to 4-week transition between second and third line treatments. Thus, based on these considerations, the expected survival for this patient population at the start of treatment would be 2 to 2.5 months.

 

As a result of the encouraging results demonstrated in Part 1 of the TYME-88-Panc study of SM-88, TYME has launched Part 2 of TYME-88-Panc study designed as a multi-center randomized (1:1), controlled pivotal trial that will evaluate the efficacy and safety of SM-88 used with MPS in patients with metastatic adenocarcinoma of the pancreas whose disease has progressed or recurred and have received two lines of prior systemic therapy. Approximately 250 patients will be randomized to receive 920 mg of SM-88 with MPS (Arm A n=125) or one of three pre-defined single agent therapies (Arm B n=125). Patients will be treated until there is unacceptable toxicity or disease progression or if any treatment discontinuation criteria are met. The primary endpoint is OS. Key exploratory endpoints include PFS, clinical benefit response rate (“CBR”), defined as patients achieving SD or better, circulating tumor cells (“CTCs”) and quality of life. The study will include leading pancreatic cancer research sites across the United States.

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Based on information available on April 25, 2019, certain efficacy indicators correlated with greater OS, including the achievement of SD or better under RECIST and decreases in CTCs. Clinical benefit rates of SD or better under RECIST were achieved by 44% (11/25) of patients with available imaging as of April 25, 2019. Notably, patients achieving SD or better demonstrated a statistically significant (p=0.02) improvement in survival with a 92% reduction in risk of death (hazard ratio=0.08 (95% CI 0.01 – 0.63)). The CBR was durable, with a majority of these patients remaining in SD or better at more than seven months after receiving treatment with SM-88.

 

In TYME-88-Panc, based on information available as of April 25, 2019, a median reduction of 63% in CTC burden was observed in evaluable patients. Importantly, patients (10 of 24) with available results reaching an 80% reduction or greater in CTCs demonstrated a 60% decrease in risk of death (p=0.18, hazard ratio: 0.4 (95%CI (0.11 – 1.5)).

 

As of April 25, 2019, the study reported that SM-88 was well tolerated with only 4.0% of patients (2 of 49) who experienced serious adverse events (“SAEs”) deemed at least possibly related to SM-88 (abdominal pain, arthralgia, and hypotension). One patient with reported SAEs continued on treatment.  

The amended pivotal protocol for TYME-88-Panc (“Part 2”) is enrolling and, in early January 2020 the Company announced the first patient was dosed.

PanCAN Precision PromiseSM Adaptive Phase II/III Trial Platform

 

We have entered into an agreement for SM-88 to be included in an experimental arm in the novel Precision Promise adaptive randomized Phase II/III trial platform with registration intent sponsored by the Pancreatic Cancer Action Network (“PanCAN”). The objective of Precision Promise is to expedite the study and approval of promising therapies for pancreatic cancer by bringing multiple stakeholders together, including academic, industry and regulatory entities.

 

The primary goal of SM-88’s inclusion is to study SM-88 as a monotherapy treatment arm for patients who have failed one prior line of chemotherapy. Additionally, it is planned that SM-88 will be evaluated in combination with gemcitabine (Gemzar ®) and nab-paclitaxel (Abraxane ®) for first-line patients. The second-line monotherapy arm initiated in January 2020.

 

PanCAN is sponsoring Precision Promise and providing funding and other support. While TYME’s SM-88 is included in the trial, we will not oversee, conduct or control the trial.

 

Phase II Prostate Cancer Trial

 

We presented final data from our Phase II trial of SM-88 in patients with non-metastatic, biochemical-recurrent prostate cancer at the ESMO Congress 2019 on September 30, 2019. Twenty-three (23) patients were enrolled in the trial and entered with rising prostate-specific antigen levels, detectable CTCs and no radiographically detectable metastases. The study duration was six months, per the study protocol, although some patients were granted a waiver to remain on treatment for longer periods. Seventy-four percent (74%) of patients (17/23) had previously received androgen deprivation therapy as treatment for prostate cancer. All enrolled patients were given daily oral SM-88 with MPS for the duration of treatment.

 

Based on data as of September 2019, 100% of patients (23/23) on trial remained free of metastatic progression and 87% of patients (20/23) maintained radiographic progression-free survival (“rPFS”) with a median duration of 6.5 months from the initial diagnoses of prostate specific antigen (“PSA”) rise. All patients who maintained rPFS also exhibited meaningful reductions in CTCs.

 

All patients with available CTC results for at least 3 cycles (n=19) achieved a decrease from baseline, with a median decrease of 65.3% at the end of 3 cycles. The median baseline PSA for patients with radiographic progression was 13.4 compared to 5.6 for patients with no radiographic progression (p=0.02). 13% of patients experienced a PSA progression after commencing therapy and 52% of patients (12/23) experienced an improvement in median PSA doubling time, a positive prognostic indicator.  

 

Patients without local progression (20/23) had slightly higher testosterone levels at baseline and throughout treatment on SM-88 as compared to those who experienced local radiographic progression (3/23), based on data as of September 2019. According to the European Organization for Research and Treatment of Cancer Quality of Life

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Questionnaire, patients generally reported stable cognitive and sexual function domain measures, with no detectable worsening in any domain. Patient weight, EKG QT interval, glucose and hematocrit and other measures, which are often side effects of androgen deprivation therapy, did not appear affected while receiving SM-88.

 

The SM-88 therapy was well tolerated in all patients in the trial. There were no treatment-related SAEs. No adverse events resulted in dose delay, discontinuation, or reduction. The majority of Grade 1 adverse events deemed possibly or probably related to the SM-88 investigational therapy were gastrointestinal in nature.

 

Enrollment in our Phase II prostate cancer trial has been completed and final results are expected to be published in the second half of calendar year 2020.

 

Investigator-Initiated Phase II Sarcoma Trial

 

The HopES trial, an investigator-initiated prospective open-label Phase II trial evaluating the efficacy and safety of SM-88 with MPS for the treatment of poor prognosis sarcomas, began dosing patients in January 2020. Up to 24 evaluable patients will be enrolled in the HopES trial through two patient cohorts. The first cohort will evaluate oral SM-88 as maintenance monotherapy following primary or palliative treatments for Ewing's sarcoma patients with a high risk of relapse or disease progression. The second cohort will determine the clinical benefits of SM-88 as salvage monotherapy for patients with clinically advanced sarcomas. The primary objectives are to measure ORR and PFS. Secondary objectives include duration of response, OS, CBR using RECIST v1.1, and incidence of treatment-emergent adverse events.  The Joseph Ahmed Foundation is providing funding and patient support for this trial and the trial is being conducted by principal investigator Dr. Chawla at the Sarcoma Oncology Center in Santa Monica, CA.

 

Upcoming Studies and Developments

 

TYME-18 Preclinical Studies

 

TYME-18 is a cancer metabolism-based investigational therapy designed for the intra-tumoral delivery of the treatment and increase the permeability of cancer cells while delivering a therapy that will have a selective cytotoxic effect on the tumor. TYME-18 is distinct in composition from SM-88. However, like SM-88, it aims to enhance the susceptibility of a cancer to the highly acidic and toxic tumor microenvironment, while minimizing the impact to normal tissues. 

 

In initial preclinical xenograft mouse studies, TYME-18 was able to completely resolve over 90 percent (11/12 mice) of established colorectal tumors within 12 days versus an average of over 600 percent growth in the control animals. Additionally, there was no detected necrosis of the normal tissue surrounding the tumor site or other identified toxicities in the animals treated with TYME-18. A subsequent study repeated the same efficacy results, with 11 of 12 TYME-18 treated mice showing complete resolution of targeted lesions. We plan to continue with the development of TYME-18 in solid tumors and to provide details of an IND-enabling program this calendar year.

 

Animal Health

 

Our co-founder, Steve Hoffman, holds substantially all intellectual property rights with respect to the treatment of cancer in non-humans. Following interest from third parties in creating health partnerships, a committee of independent members of our board of directors (the “Board”) has held discussions with our co-founders to obtain intellectual property rights such that the Company could have the ability to pursue cancer therapies in animal health.

 

Competition

Our business strategy is intended to effectively position SM-88 for competition with products manufactured by other companies in the highly fragmented and competitive cancer treatment market. Our competition comes from other commercial and research enterprises working in the field of cancer research. This includes pharmaceutical and biotechnology companies, academic institutions, patient advocacy groups and hospitals and government private research institutes around the globe.

The TYME-88-Panc study was amended to study SM-88 in third-line pancreatic patients.  There are no FDA approved third-line pancreatic treatments and there are no active therapies recommended in the ASCO or National

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Comprehensive Cancer Network guidelines.  If commercialized for third-line pancreatic treatment, the competition for SM-88 would be physician choice of therapy, supportive care and/or clinical trials.

Important competitive factors include patient safety, effectiveness, quality-of-life and ease of use of products; price and demonstrated cost-effectiveness; marketing effectiveness; payor access and research and development of new products and processes. Most new products we intend to market, assuming regulatory approval, will and must compete with other products already on the market as well as products that are later developed by existing or new competitors. If competitors introduce new products or delivery systems with therapeutic or cost advantages, our products would be subject to progressive price reductions, decreased volume of sales or both. Increasingly, to obtain favorable reimbursement and formulary positioning with government payers, managed care organizations and pharmacy benefits managers, we would be required to demonstrate that our products offer not only medical benefits, but also more value as compared with other treatment regimens.

The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, development and regulatory plans in addition to proprietary scientific knowledge provide us with certain competitive advantages, we currently have limited financial resources and no revenue source and face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions, each of which has significantly greater financial resources than us. Any drugs that we successfully develop and commercialize will compete with existing therapies and new potential therapies that may become available in the future.

Our products, if approved for sale, would eventually be subject to competition from generic drug manufacturers. Manufacturers of generic biopharmaceuticals generally invest far less in R&D and marketing than R&D companies such as us. We anticipate that any manufacturer of a generic version of our drugs will invest far less than we have in the past and intend to do in the future. They therefore, have the advantage in that they can price their drugs much lower than the brand-name drugs for which we obtain approval. Additionally, in many countries outside the United States, IP protection is weak or nonexistent and we would be forced to compete with generic or counterfeit versions of our products in such countries whether or not we hold legal exclusivity.

The most common methods of treating patients with cancer are surgery, radiation and drug therapy, including chemotherapy, hormone therapy and targeted drug therapy. Our products once approved, would compete not only with other drugs, but also with such other types of therapies and treatments.

There are a variety of available drug therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. Some of the currently approved drug therapies are branded and subject to patent protection and others are available on a generic basis. Many of these approved drugs are well-established therapies and widely accepted by physicians, patients and third-party payers. In general, although there has been considerable progress over the past few decades in the treatment of cancer with currently marketed therapies providing benefits to many patients, these therapies often are limited to some extent by a lack of efficacy and/or the significance or frequency of AEs.

In addition to currently marketed therapies, there are also a number of medicines in late-stage clinical development to treat cancer. These medicines in development may provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant, additional competition for SM-88.

Intellectual Property

We will strive to protect and enhance our proprietary technology, inventions and improvements that are commercially important to the development of our business, including through seeking, maintaining and defending patent rights (when required), whether developed internally or licensed from third parties. We also intend to rely on trade secrets related to our proprietary technology platform and our know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of cancer treatment, which may be important for the development of our business. We additionally may rely on regulatory protection afforded through data exclusivity, market exclusivity and patent term extensions, where available.

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Our commercial success may depend, in part, on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable licenses, patents or trade secrets that cover these activities. With respect to both our owned and licensed IP, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing such products, as well as being held valid if challenged.

Tyme maintains a broad intellectual property portfolio of 194 patent applications granted and/or pending worldwide. The patents encompass SM-88 as well as inventions that fight cancer and aid in the creation of novel mechanisms to further that effort. Our policy is to file patent applications to protect technology, inventions and improvements to inventions that are commercially important to the development of our business. We have and will continue to seek U.S. and international patent protection for a variety of technologies, including: pharmaceutical compositions, methods for treating diseases of interest, methods for manufacturing the pharmaceutical compositions and research tools and methods. We also intend to seek patent protection or rely upon trade secret rights to protect other technologies that may be used to discover and validate targets and that may be used to identify and develop novel products. We will also seek protection, in part, through confidentiality and proprietary information agreements.

We believe we have no need to license any technologies for SM-88 to be commercially viable. We believe our Company owns all the IP necessary for SM-88 to perform as intended and to be commercially marketed, once all applicable regulatory requirements have been obtained. Additionally, we believe the drug substances utilized in SM-88 are not covered by any patents that would impede our use of such drug substances.

We also rely on trademark laws to protect our proprietary rights. Our trademark portfolio currently consists of one domestic trademark: CMBTs (cancer metabolism-based therapies).

FDA Approval Process

SM-88 is subject to regulation in the U.S. by the FDA as a drug product. The FDA subjects drug products to extensive pre- and post-market regulation. The Public Health Service Act (“PHSA”), the Federal Food, Drug and Cosmetic Act and other federal and state statutes and regulations govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling and the import and export of drugs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications (“NDAs”), withdrawal of approvals, clinical holds, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or fines or civil or criminal penalties.

The drug development process required by the FDA before a new drug may be marketed in the U.S. is long, expensive and inherently uncertain. Drug development in the U.S. typically involves preclinical laboratory and animal testing, the submission to the FDA of an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Developing the data to satisfy FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.

Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conducting of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices (“GLP”). The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls (“CMC”) and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

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An IND must become effective before U.S. clinical trials may begin. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND submission within this 30-day period, the clinical trial proposed in the IND may begin.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or subjects with the condition under investigation, all under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practices (“GCP”), an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors; and (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the ongoing IND file.

The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to clinical trial subjects. The study protocol and informed consent information for subjects in clinical trials must be submitted to an IRB for review and approval. An IRB may also require the clinical trial at a clinical site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements or may impose other conditions to assure subject safety. The study sponsor may also suspend a clinical trial at any time on various grounds, including a determination that the subjects are being exposed to an unacceptable health risk.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap or be combined. In Phase I, the drug is initially introduced into healthy human subjects and is tested to assess pharmacokinetics, pharmacological actions, AEs associated with increasing doses and, if possible, early evidence of effectiveness. In the case of some products targeted for severe or life-threatening diseases, such as cancer treatments, initial human testing may be conducted in the intended patient population. Phase II usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance and optimum dosage, as well as identification of common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase II, Phase III trials are initiated to obtain additional information about clinical efficacy and safety in a larger number of subjects, typically at geographically dispersed clinical trial sites. Phase III clinical trials are intended to establish data sufficient to demonstrate substantial evidence of the efficacy and safety of the product to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. Trials conducted outside of the U.S. under similar, GCP-compliant conditions in accordance with local applicable laws may also be acceptable to the FDA in support of product licensing.

Sponsors of clinical trials for investigational drugs must publicly disclose certain clinical trial information, including detailed trial design and trial results, in FDA public databases. These requirements are subject to specific timelines and apply to most controlled clinical trials of FDA-regulated products.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. The FDA review and approval of the NDA is required before marketing of the product may begin in the U.S. The NDA must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology and CMC and must demonstrate the safety and efficacy of the product based on these results. The NDA must also contain extensive manufacturing information. The cost of preparing and submitting an NDA is substantial and is in addition to the costs of conducting clinical trials. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, as well as annual product and establishment user fees, which may total several million dollars and are typically increased annually.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that the NDA is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of NDAs. Most such applications for standard review drugs are reviewed within 10 months from the date the application is accepted for filing. Although the FDA often meets its user fee performance goals, it can extend these timelines if necessary and its review may not occur on a timely basis at all. The FDA usually refers applications for novel drugs, which present complex questions of safety or efficacy, to an advisory committee - typically a panel that includes clinicians and other experts - for review, evaluation and a

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recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the drug product unless it verifies that compliance with current good manufacturing practice (“cGMP”) standards is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication(s) being studied.

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional nonclinical or clinical testing or supplemental information for the FDA to reconsider the application. If or when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two to six months depending on the type of information that was included. The FDA approval is never guaranteed, and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. The approval for a drug may be significantly more limited than requested in the application, including limitations on the specific diseases and dosages or the indications for use, which could restrict the commercial value of the product. The FDA may also require that certain contraindications, warnings or precautions be included in the product labeling. In addition, as a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy (“REMS”) to further ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals and elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. The requirement for a REMS or use of a companion diagnostic with a drug can materially affect the potential market and profitability of the drug. Moreover, product approval may require, as a condition of approval, substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

As of March 31, 2020, we have two active INDs with the FDA, both of which are associated with SM-88. The two INDs are active with the relevant FDA departments that oversee our two ongoing clinical trials, the Department of Oncology Products 1 (“DOP1”) for our prostate cancer trial, and the Department of Oncology Products 2 (“DOP2”) for our pancreatic cancer trial.  In addition, clinical investigators have previously and may in the future request their own INDs in order to use SM-88 or other products in Investigator Initiated Trials (“IITs”).  For example, the HopES trial for sarcoma is an IIT where the IND for SM-88 use is held directly by the clinical trial site.

In February 2019 and July 2019, we participated in Type C meetings with the FDA. During those meetings we received guidance on our pivotal trial for SM-88 in third line pancreatic cancer.  The trial is a randomized study comparing SM-88 to the control arm. The control arm consists of physician’s choice of therapies. The primary end point is overall survival.

Priority Review/Standard Review (U.S.) and Related Requirements

The FDA may grant an NDA a priority review designation based both upon the request of an applicant and the results of the Phase III clinical trial(s) submitted in the NDA. This designation sets the target date at six months for FDA action on the application. Priority review is granted where preliminary trial results indicate that a product, if approved, has the potential to provide a safe and effective therapy for a situation where no satisfactory alternative therapy exists or where the product is possibly a significant improvement over existing marketed products. If these criteria are not met for priority review, the NDA is subject to the standard FDA review period of ten months. However, priority review designation does not change the scientific/medical standard for regulatory approval or the quality of evidence necessary to support approval. There can be no assurance that we would be able to satisfy the eligibility criteria for priority review or to receive regulatory approval under either standard review.

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Breakthrough Therapy Approvals

The Food and Drug Administration Safety and Innovation Act provides another designation for an expedited FDA review process called Breakthrough Therapy Designation. A breakthrough therapy is a drug that is intended alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If an investigational drug is designated as a breakthrough therapy, the drug will be eligible for all fast track designation features, including expedited development and review of such drug for trial and market approval. All requests for Breakthrough Therapy Designation are to be reviewed within 60 days of receipt and FDA will either grant or deny the request.

Fast Track Program

The fast track program, a provision of the Food and Drug Administration Modernization Act of 1997 (“FDAMA”), is designed to facilitate interactions between a sponsor and the FDA before and during submission of an NDA for an investigational agent that, alone or in combination with one or more drugs, that is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need for that disease or condition. Under the fast track program, the FDA may consider reviewing portions of a marketing application before the sponsor submits the complete application, if the FDA determines, after a preliminary evaluation of the clinical data, that a fast track drug may be effective. A fast track designation provides the opportunity for more frequent interactions with the FDA and could make the drug eligible for and accelerated approval priority review if supported by clinical data at the time of submission of the NDA.

The Hatch-Waxman Act

Under the Hatch-Waxman Act, newly approved drugs and indications may benefit from a statutory period of non-patent marketing exclusivity. The Hatch-Waxman Act provides five-year marketing exclusivity to the first applicant to gain approval of an NDA for a new chemical entity, meaning that the FDA has not previously approved any other new drug containing the same active moiety. The Hatch-Waxman Act prohibits having an effective approval date for an Abbreviated New Drug Application (“ANDA”) or a Section 505(b)(2) NDA for another version of such drug during the five-year exclusive period; however, submission of an ANDA or Section 505(b)(2) NDA containing a paragraph IV certification is permitted after four years, which may trigger a 30-month stay of approval of the ANDA or Section 505(b)(2) NDA. Protection under the Hatch-Waxman Act will not prevent the submission or approval of another “full” NDA; however, the applicant for the “full” NDA would be required to conduct its own preclinical studies and adequate and well-controlled clinical trials to demonstrate safety and effectiveness. The Hatch-Waxman Act also provides three years of marketing exclusivity for the approval of new and supplemental NDAs, including Section 505(b)(2) NDAs, for, among other things, new indications, dosages or strengths of a currently approved drug, if new clinical investigations conducted or sponsored by the applicant are determined by the FDA to be essential to the approval of the new or supplemental NDA.

In addition to non-patent marketing exclusivity, the Hatch-Waxman Act amended the Food, Drug and Cosmetic Act to require each NDA sponsor to submit with its application information on any patent that claims the active pharmaceutical ingredient, drug product (formulation and composition) and method-of-use for which the applicant submitted the NDA and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use or sale of the drug. Generic applicants that wish to rely on the approval of a drug listed in the Orange Book must certify to each listed patent. The Orange Book is a listing of all drug products that have been approved by the FDA and their generic equivalences. We intend to submit for Orange Book listing all relevant patents for SM-88 and to vigorously defend any Orange Book-listed patents for our approved products.

The Hatch-Waxman Act also permits a patent term extension of up to five years as compensation for the patent term lost during product development and the FDA regulatory review process. However, a patent term extension cannot extend the remaining term of a patent beyond a total of 14 years after the FDA approves a marketing application. The patent term extension period is generally equal to the sum of one-half the time between the effective date of an IND and the submission date of an NDA and all the time between the submission date of an NDA and the approval of that application, up to a total of five years. Only one patent applicable to a regulatory review period that

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represents the first commercial marketing of that drug is eligible for the extension and it must be applied for prior to expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for patent term extension. We will consider applying for a patent term extension for some of our patents, to add patent life beyond the expiration date, depending on our ability to meet certain legal requirements permitting such extension and the expected length of clinical trials and other factors involved in the submission of an NDA. There can be no assurance that such an extension, if applied for, will be granted.

Advertising and Promotion

The FDA prohibits the pre-approved marketing and promotion of drugs and closely regulates the post-approval marketing and promotion of drugs, including through standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. Failure to comply with these regulations can result in significant penalties, including the issuance of warning letters directing a company to correct deviations from FDA standards, a requirement that future advertising and promotional materials are pre-cleared by the FDA and federal and state civil and criminal investigations and prosecutions.

Drugs may be marketed only after initial approval and only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes to indications, labeling or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing original and resubmitted NDAs.

AE Reporting and cGMP Compliance

AE reporting and submission of periodic reports are required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase IV testing, REMS and surveillance to monitor the effects of an approved product or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, manufacturing, packaging, labeling, storage and distribution procedures must continue to conform to cGMPs after approval. Drug manufacturers and certain manufacturing subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects’ entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals, request product recalls or impose marketing restrictions through labeling changes or product removals if a company fails to comply with regulatory standards, if the product encounters problems following initial marketing or if previously unrecognized problems are subsequently discovered.

Orphan Drug

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition; generally, a disease or condition that affects fewer than 200,000 individuals in the U.S. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not necessarily convey any advantage in or shorten the duration of the regulatory review and approval process. The first NDA applicant to receive FDA approval for a product to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the U.S. for the product for treatment of the specified indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee. When appropriate, we intend to hold discussions with the FDA regarding pursuing orphan drug designation for SM-88. There can be no assurance given that such discussions, if commenced, would result in our pursuing orphan drug designation for SM-88 or that, if pursued, the FDA would grant SM-88 an orphan drug designation.

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Other Healthcare Laws and Compliance Requirements

In the U.S., our activities are potentially subject to regulation by federal, state and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human Services (for example, the Office of Inspector General), the U.S. Department of Justice and individual U.S. Attorney offices within the Department of Justice and state and local governments.

United States Adopted Names (USAN) Council

 

In the first calendar quarter of 2019, we were notified that United States Adopted Names (USAN) Council has approved the use of the nonproprietary generic name, racemetyrosine, for SM-88.  

European Regulation and Review

EU Approval Process

The European Medicines Agency (“EMA”) is a decentralized scientific agency of the European Union (“EU”). It coordinates the evaluation and monitoring of centrally authorized medicinal products. It is responsible for the scientific evaluation of applications for EU marketing authorizations, as well as the development of technical guidance and the provision of scientific advice to sponsors. The EMA decentralizes its scientific assessment of medicines by working through a network of about 4,500 experts throughout the EU, nominated by the Member States. The EMA draws on resources of over 40 National Competent Authorities of European Member States.

The process regarding regulatory approval of medicinal products in the EU is similar to the U.S. and likewise generally involves satisfactorily completing each of the following:

 

preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the applicable European GLP regulations;

 

submission to the relevant national authorities of a clinical trial application (“CTA”) for each trial in humans, which must be approved before the trial may begin;

 

performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication;

 

submission to the relevant competent authorities of a Marketing Authorization Application (“MAA”), which includes the data supporting safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labeling;

 

satisfactory completion of an inspection by the relevant national authorities of the manufacturing facility or facilities, including those of third parties, at which the product is produced to assess compliance with strictly enforced cGMPs;

 

potential audits of the nonclinical and clinical trial sites that generated the data in support of the MAA; and

 

review and approval by the relevant competent authority of the MAA before any commercial marketing, sale or shipment of the product.

Preclinical Studies

The conduct of the preclinical tests and formulation of the compounds for testing must comply with the relevant European regulations and requirements. Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animal studies in order to assess the potential safety and efficacy of the product. The results of the preclinical tests, together with relevant manufacturing information and analytical data, are submitted as part of the CTA.

Clinical Trial Approval

Pursuant to the Clinical Trials Directive 2001/20/EC, as amended, a system for the approval of clinical trials in the EU has been implemented through national legislation of the Member States. Under this system, approval must be

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obtained from the competent national authority of each European Member State in which a study is planned to be conducted. To this end, a CTA is submitted, which must be supported by an investigational medicinal product dossier (“IMPD”) and further supporting information prescribed by the Clinical Trials Directive and other applicable guidance documents. Furthermore, a clinical trial may only be started after a competent ethics committee has issued a favorable opinion on the clinical trial application in that country.

An EU regulation on clinical trials was adopted by the European Parliament and the Council of Ministers in 2014. The new regulation aims to simplify consent rules, streamline application procedures by creating a centralized process for approval, provide more transparency and harmonize performance of clinical trials throughout the EU Member States. The new regulations are anticipated to take effect in 2020, with one-year transition period during which a new CTA can be authorized either according to the old Clinical Trials Directive 2001/20/EC or the new 536/2014 Regulation, as requested by the sponsor.

Manufacturing and import into the EU of investigational medicinal products is subject to the holding of appropriate authorizations and must be carried out in accordance with cGMPs.

Health Authority Interactions

During the development of a medicinal product, frequent interactions with the EU regulators are vital to make sure all relevant input and guidelines/regulations are taken into account in the overall program.

Pediatric Studies

Regulation (EC) 1901/2006, which came into force in the EU on January 26, 2007, aims to facilitate the development and accessibility of medical products for use in children without subjecting children to unnecessary trials or delaying the authorization of medicinal products for use in adults. The regulation established the Pediatric Committee (“PDCO”), which is responsible for coordinating the EMA’s activities regarding medicines for children. The PDCO’s main role is to determine which studies that marketing authorization applicants need to complete in the pediatric population as part of the so-called Pediatric Investigation Plans (“PIP”). All applications for marketing authorization for new medicines that were not authorized in the EU before January 26, 2007 have to include either the results of studies carried out in children of different ages (as agreed with the PDCO) or proof that a waiver or a deferral of these studies has been obtained from the PDCO. As indicated, the PDCO determines what pediatric studies are necessary and describes them in a PIP. This requirement for pediatric studies also applies when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized. The PDCO can grant deferrals for some medicines, allowing a company to delay development of the medicine in children until there is enough information to demonstrate its effectiveness and safety in adults and can also grant waivers when development of a medicine in children is not needed or is not appropriate, such as for diseases that only affect the elderly population.

Before an MAA can be filed or an existing marketing authorization can be varied, the EMA checks that companies are in compliance with the agreed studies and measures listed in each relevant PIP.

Regulation (EC) 1901/2006 also introduced several incentives for the development of medicines for children in the EU:

 

medicines that have been authorized across the EU in compliance with an agreed PIP are eligible for an extension of their patent protection by six months (this is the case even when the pediatric studies’ results are negative);

 

for orphan medicines, the incentive is an additional two years of market exclusivity, extending the typical 10-year period to 12 years;

 

scientific advice and protocol assistance at the EMA are free of charge for questions relating to the development of medicines for children; and

 

medicines developed specifically for children that are already authorized but are not protected by a patent or supplementary protection certificate, may be eligible for a pediatric use marketing authorization (“PUMA”); and

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if a PUMA is granted, the product will benefit from 10 years of market protection as an incentive for the development of the product for use in children.

MAA

Authorization to market a product in the EU member states proceeds under one of three procedures: (i) a centralized authorization procedure, (ii) a mutual recognition procedure, (iii) a decentralized national procedure.

Centralized Authorization Procedure

Certain drugs, including medicinal products developed by means of biotechnological processes, must be approved via the centralized authorization procedure for marketing authorization. A successful application under the centralized authorization procedure results in a marketing authorization from the European Commission, which is automatically valid in all EU member states. The other European Economic Area member states (namely Norway, Iceland and Liechtenstein) are also obligated to recognize the Commission decision. The EMA and the European Commission administer the centralized authorization procedure.

Under the centralized authorization procedure, the Committee for Medicinal Products for Human Use (“CHMP”) serves as the scientific committee that renders opinions about the safety, efficacy and quality of human products on behalf of the EMA. The CHMP is composed of experts nominated by each member state’s national drug authority, with one of them appointed to act as Rapporteur for the coordination of the evaluation with the possible assistance of a further member of the Committee acting as a Co-Rapporteur. After approval, the Rapporteur(s) continue to monitor the product throughout its life cycle. The CHMP is required to issue an opinion within 210 days of receipt of a valid application, though the clock is stopped if it is necessary to ask the applicant for clarification or further supporting data. The process is complex and involves extensive consultation with the regulatory authorities of member states and a number of experts. Once the procedure is completed, a European Public Assessment Report is produced. If the CHMP concludes that the quality, safety and efficacy of the medicinal product are sufficiently proven, it adopts a positive opinion. The CHMP’s opinion is sent to the European Commission, which uses the opinion as the basis for its decision whether or not to grant a marketing authorization. If the opinion is negative, information is given as to the grounds on which this conclusion was reached. After a drug has been authorized and launched, it is a condition of maintaining the marketing authorization that all aspects relating to its quality, safety and efficacy must be kept under review. Sanctions may be imposed for failure to adhere to the conditions of the marketing authorization. In extreme cases, the authorization may be revoked, resulting in withdrawal of the product from sale.

Mutual Recognition Procedure and Decentralized National Procedure

Under a Mutual Recognition Procedure (“MRP”) or a Decentralized Procedure (“DCP”), the applicant must select which and how many EU member states in which to seek approval. In the case of an MRP, the applicant must initially receive national approval in one EU member state. This will be the so-called reference member state (“RMS”) for the MRP. Then, the applicant seeks approval for the product in other EU member states, the so-called concerned member states (“CMS”) in a second step.

For the DCP, the applicant will approach all chosen Member States at the same time. To do so, the applicant will identify the RMS that will assess the submitted MAA and provide the other selected Member States with the conclusions and results of the assessment. In principle, the applicant can choose any EU Member State as the RMS; however, in almost all Member States, the applicant needs to send a request for a time slot when the applicant will be allowed to submit the application. Depending on the Member State selected as RMS, the interval between submission of the request to the actual submission date can be two years or longer.

Accelerated Assessment Procedure

Under the Centralized Procedure in the European Union, the maximum timeframe for the evaluation of a marketing authorization application is 210 days, which excludes clock stops when additional written or oral information needs to be provided by the applicant in response to questions asked by the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, such as when a medicinal product is expected to be a major public health interest, as defined by three cumulative criteria: the seriousness of the disease to be treated (e.g. heavily disabling or life-threatening); the absence or insufficiency of an appropriate alternative therapeutic approach; and an anticipation of high therapeutic benefit. Under these circumstances, the European Medicines Agency ensures that the opinion of

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the CHMP is delivered within 150 days, excluding clock stops. There can be no assurance however, that we would be able to satisfy any of these requirements or receive any approval or accelerated evaluation.

Conditional Approval

Under EU regulations, a medicine that would fulfill an unmet medical need may, if its immediate availability is in the interest of public health, be granted a conditional marketing authorization on the basis of less complete clinical data than are normally required, subject to specific obligations being imposed on the authorization holder. These specific obligations are to be reviewed annually by the EMA. The list of these obligations is to be made publicly accessible. Such an authorization is valid for one year, on a renewable basis.

Period of Authorization and Renewals

A marketing authorization is initially valid for five years and may then be renewed on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state. To this end, the marketing authorization holder is to provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variants introduced since the marketing authorization was granted, at least nine months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization shall be valid for an unlimited period, unless the European Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Any authorization that is not followed by the actual placing of the drug on the European market (in case of centralized procedure) or on the market of the authorizing Member State within three years after authorization ceases to be valid (the so-called “sunset” clause).

Orphan Drug Designation

EU regulations also provide for an orphan drug designation. This designation is granted if its sponsor can establish:

 

(a)

(i) that the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU when the application is made; or

(ii) that the product is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it is unlikely that the marketing of the drug in the EU would generate sufficient return to justify the necessary investment; and

 

(b)

that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the drug will be of significant benefit to those affected by that condition.

An application for designation as an orphan product can be made any time before the filing of an application for approval to market the product. Marketing authorization for an orphan drug leads to a ten-year period of market exclusivity. However, this period may be reduced to six years if at the end of the fifth year it is established that the product no longer meets the criteria for orphan drug designation, for example because the product is sufficiently profitable not to justify continued market exclusivity. Market exclusivity can be revoked only in very selected cases, such as consent from the marketing authorization holder, inability to supply sufficient quantities of the product, demonstration of “clinically relevant superiority” by a similar medicinal product or, after a review by the Committee for Orphan Medicinal Products, requested by a Member State in the fifth year of the marketing exclusivity period (if the designation criteria are believed to no longer apply). Medicinal products designated as orphan drugs are eligible for incentives made available by the EU and by its Member States to support research into and the development and availability of orphan drugs. It is not our current intention to pursue orphan drug designation for SM-88.

Regulatory Data Protection

Without prejudice to the law on the protection of industrial and commercial property, marketing authorizations for new medicinal products in the EU benefit from an 8+2+1 year period of regulatory protection.

This regime consists of a regulatory data protection period of eight years plus a concurrent market exclusivity of ten years plus an additional market exclusivity of one additional year if, during the first eight years of those ten years, the marketing approval holder obtains an approval for one or more new therapeutic indications that, during the

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scientific evaluation prior to their approval, are determined to bring a significant clinical benefit in comparison with existing therapies. Under the current rules, a third party may reference the preclinical and clinical data of the reference product beginning eight years after first approval, but the third party may market a generic version only after ten (or eleven) years have lapsed. Additional regulatory data protection can be applied for when an applicant has complied with all requirements as set forth in an approved PIP.

International Conference on Harmonization (ICH)

The International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (“ICH”) is a project that brings together the regulatory authorities of Europe, Japan and the U.S. and experts from the pharmaceutical industry in the three regions to discuss scientific and technical aspects of pharmaceutical product registration. The purpose of ICH is to reduce or obviate the need to duplicate the testing carried out during the research and development of new medicines by recommending ways to achieve greater harmonization in the interpretation and application of technical guidelines and requirements for product registration. Harmonization would lead to a more economical use of human, animal and material resources, the elimination of unnecessary delay in the global development and availability of new medicines, while maintaining safeguards on quality, safety, efficacy and regulatory obligations to protect public health.

ICH guidelines have been adopted as law in many countries, but are only used as guidance in the U.S. by the FDA. In many areas of drug regulation, ICH has resulted in comparable requirements, for instance with respect to the Common Technical Document, which has become the core document for filings for market authorization in several jurisdictions. In this manner, ICH has facilitated a more efficient path to markets.

Pharmaceutical Coverage, Pricing and Reimbursement

As previously noted, in the U.S. and other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payers, including government health administrative authorities, managed care providers, private health insurers and other organizations. The division of competences within the EU leaves to its Member States the power to organize their own social security systems, including health care policies to promote the financial stability of their health care insurance systems.

In this context, each of the Member States’ national authorities is free to set the prices of medicinal products and to designate the treatments that they wish to reimburse under their social security system. However, the EU has defined a common procedural framework through the adoption what is generally known as the “Transparency Directive.” This directive aims to ensure that national pricing and reimbursement decisions are made in a transparent manner and do not disrupt the operation of the internal market.

The pharmaceutical pricing and reimbursement systems established by Member States are usually quite complex. Each country uses different schemes and policies, adapted to its own economic and health needs. We would have to develop or access special expertise in this field to prepare health economic dossiers on our medicinal products if we would market our products, if and when approved, in the EU.

Manufacturing

We do not own or operate, and currently have no near-term plans to establish, any manufacturing facilities. We currently rely on and expect to continue to rely on, third party contract manufacturers for supplies of SM-88 for preclinical and clinical testing, as well as for the initial commercial manufacture of any products that we may market following regulatory approval.

We currently purchase all our drug substance and drug products from contract manufacturers and intend to continue to do so on an as-needed purchase order basis. We have entered into limited term supply arrangements for certain SM-88 components related to supply for our clinical activities in order to secure favorable pricing terms. We intend to identify and qualify any further necessary contract manufacturers to provide all active pharmaceutical ingredients (“API”) and finished drug product services during the IND stages and before submission of an NDA to the FDA.

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Our current intention is that, during the ongoing development of SM-88, we will transition the needed manufacturing, CMC and GMP programs towards commercial manufacturing. The overall manufacturing program includes, but is not limited to, the development of product and process specifications, producing and validating standards and the development of suitable analytical methods for test and release, as well as stability testing. Before and during the use of contract manufacturers, we (or qualified designee) will conduct audits to ensure compliance with the mutually agreed process descriptions and cGMP regulations. Our manufacturers themselves must comply with their in-house quality assurance programs and be available for inspections by regulatory agencies, including the FDA and European drug regulatory agencies. During the development of our drug candidates, we anticipate scaling the manufacturing process to a suitable size. Increasing scale involves several steps and may involve modification of the process, in which case modifications to our CMC sections will occur, with continuous submissions to the FDA and EU regulatory authorities.

As we progress through the regulatory approval process, there is a possibility that our intended manufacturing process will undergo modifications, primarily based on initial manufacturing results and data generated during the manufacture of drug substance and product to be used in our clinical trials. Modifications could cause delays in obtaining regulatory approval of SM-88, if at all, as well increase our research and development and manufacturing costs and potentially make such product costs prohibitive to our intended end users and their medical insurance providers.

SM-88 is currently administered with the conditioning agents methoxsalen, phenytoin, and sirolimus (“MPS”). Methoxsalen, phenytoin, and sirolimus each previously received regulatory approval in areas other than cancer treatment. SM-88 and the three agents within MPS are organic compounds of low molecular weight, generally called small molecules. They can be manufactured in reliable and reproducible synthetic processes from readily available starting materials. The chemistry is amenable to scale-up and we do not believe unusual equipment could be required in the manufacturing process.

Our tyrosine-based component is a derivative product that has been modified by a proprietary process to modify its functionality. This drug substance is being manufactured on an exclusive basis by a leading, FDA-audited contract manufacturer that has previously manufactured tyrosine-based products on a commercial scale. This manufacturer currently is our sole supplier of this drug substance. To our knowledge, the current manufacturer of this drug substance is the only FDA-approved supplier of this drug. We believe this cGMP contract manufacturer has sufficient capacity to meet our projected needs into the near future and we maintain inventory on hand to meet our immediate clinical needs. In the event of a catastrophic event or if this contract manufacturer is unable to meet our needs, we will need to find an alternative source. This will likely result in delays for the clinical development program. It is not impossible to find a substitute for this supplier in the event that it becomes necessary, but it may be costly, including in terms of development time. We do not currently have arrangements in place for a redundant supply of the drug substance.

To date, we have, through an FDA-audited contract manufacturer, produced cGMP drug substance for use in our planned clinical trials. In addition, we have produced cGMP clinical trial materials utilizing such drug substance, through an FDA-audited contract manufacturer. Such newly produced drug substance and clinical trial materials are currently undergoing long term regulatory testing. We believe we have produced enough drug substance to create an inventory to meet our immediate needs regarding our planned clinical trials.

For future work involving the drug product, it is anticipated that manufacture process development work will continue, with focus of manufacturing improvements, and increasing scale. It is anticipated that future manufacturing of clinical trial materials may be required to fill clinical trial needs. Additional tyrosine derivative drug product variations have also been developed for research purposes and some are being validated and tested for clinical purposes.

The three APIs for MPS are available from several contract manufacturers, each holding Drug Master Files at the FDA for their respective APIs. We believe that the loss of or the inability of, any of single source to provide our required ingredients would not have any substantive delaying effect on our research program, clinical trials or future commercial sale of SM-88, as we believe other sources are readily available.

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Employees

As of March 31, 2020, we had a total of 18 employees, all full-time and all located in the United States. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good. Of the 18 employees, eight perform research and development activities and ten perform general and administrative functions. Our Chief Executive Officer, Steve Hoffman, is also our Chief Science Officer and, as such, may be considered engaged in R&D activities, for purposes of the immediately preceding sentence, as well as his being categorized as serving in an administrative capacity. Based upon their roles and activities with us, certain other employees may also be categorized as serving in more than one role. Where necessary, we have entered into consulting contracts to provide us with subject matter expertise. We believe there is a sufficient number of available contractors with appropriate subject matter expertise for our current and near-term needs.

Collaboration with Eagle  

On January 7, 2020, TYME and Eagle Pharmaceuticals, Inc. (“Eagle”) entered into a Securities Purchase Agreement (the “Eagle SPA”), pursuant to which the Company issued and sold to Eagle 10,000,000 shares of common stock, at a price of $2.00 per share. The Eagle SPA provides that Eagle will, subject to certain conditions, make an additional payment of $20 million upon the occurrence of a milestone event, which is defined as the earlier of (i) achievement of the primary endpoint of overall survival in the TYME-88-Panc pivotal trial; or (ii) achievement of the primary endpoint of overall survival in the PanCAN Precision Promise SM-88 registration arm; or (iii) FDA approval of SM-88 in any cancer indication. This payment would be split into a $10 million milestone cash payment and a $10 million investment in TYME at a 15% premium to the then prevailing market price. Eagle’s shares will be restricted from sale until the earlier of three months following the milestone event or the three-year anniversary of the agreement.

Also, on January 7, 2020, we entered into a Co-Promotion Agreement with Eagle (the “Co-Promote”), whereby Eagle agreed to provide sales representatives to cover 25% of the Company’s sales force requirements and will receive 15% of the net sales of all SM-88 products in the U.S. during the term of the Co-Promote. TYME will also be responsible for clinical development, regulatory approval, commercial strategy, marketing, reimbursement and manufacturing of SM-88. TYME retains the remaining 85% of net U.S. revenues and reserves the right to repurchase Eagle’s rights under the Co-Promote for $200 million.

Corporate Information

We were reincorporated on September 18, 2014 under the laws of the State of Delaware, after being incorporated in Florida as Global Group Enterprises Corp. on November 22, 2011, as discussed further below under Corporate History; Significant Organizational Events. Our principal executive office is located at 17 State Street, 7th floor, New York, NY 10004. We also have another office located at One Pluckemin Way, Bedminster, NJ 07921. Our telephone number is 212-461-2315. Our website address is www.tymeinc.com.

Corporate History; Significant Organizational Events

We were originally incorporated in Florida as Global Group Enterprises Corp. on November 22, 2011. Effective as of September 18, 2014, we reincorporated in the State of Delaware and later engaged in a merger and certain other transactions. As a result of these events and related transactions, among other things, we (i) changed our jurisdiction of incorporation from Florida to Delaware; (ii) changed our name from Global Group Enterprises Corp. to Tyme Technologies, Inc., and (iii) acquired our current clinical-stage pharmaceutical business.

At-the-Market Sales of Common Stock

In November 2017, we entered into an equity distribution agreement with Canaccord Genuity Inc. (“Canaccord”), pursuant to which we were able to sell shares of our common stock having an aggregate offering price of up to $30,000,000 through Canaccord, as our sales agent, in an at-the-market offering (the “ATM”). In total, we sold 3,927,248 shares of our common stock under this equity distribution agreement for net proceeds of $11,492,261 after commissions of $359,866 and other transaction expenses.

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In October 2019, TYME terminated the equity distribution agreement with Canaccord and entered into an Open Market Sale AgreementSM (the “Sale Agreement”) with Jefferies LLC (“Jefferies”) as sales agent, pursuant to which the Company may, from time to time, sell shares of Common Stock through Jefferies having an aggregate offering price of up to $30.0 million (the “Jefferies ATM”). Since initiation, we have raised approximately $1.5 million in net proceeds after commissions and other transaction expenses and have sold 1,361,315 shares of Common Stock.

Underwritten Securities Offering

On March 6, 2018, TYME closed an underwritten public offering of 10.4 million shares of its Common Stock, at a public offering price of $2.25 per share and received net proceeds, after deducting underwriting discounts and commissions, but before our expenses of the offering, of approximately $21.89 million. 

On April 2, 2019, the Company closed an underwritten registered offering of 8,000,000 shares of its common stock, par value $0.0001 per share (“Common Stock”), and warrants to purchase up to 8,000,000 shares of its common stock with an exercise price of $2.00 per share at a combined purchase price of $1.50 per share of common stock and accompanying warrant (the “Existing Warrants”). The net proceeds to the Company, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, were approximately $11 million.

Exchange Agreements

 

On May 20, 2020, the Company entered into exchange agreements with holders (the “Holders”) of the Existing Warrants. The Existing Warrants were offered and issued pursuant to the Company’s Registration Statement on Form S-3 (Registration No. 333-211489), which was declared effective by the Securities and Exchange Commission on August 16, 2017, a base prospectus dated August 16, 2017 and a prospectus supplement dated March 28, 2019.

Pursuant to exchange agreements (the “Share Exchange Agreements”) with Holders of Existing Warrants to purchase 5,833,333 shares of Common Stock in the aggregate, the Company issued an aggregate of 2,406,250 shares of Common stock (the “Exchange Shares”) in exchange for such Existing Warrants. Concurrently therewith, each such Holder executed and delivered to the Company a leak-out agreement  (a “Share Leak-Out Agreement”) that contains trading restrictions with respect to the Exchange Shares, which (i) for the first 90 days, prohibit any sales of Exchange Shares, (ii) for the subsequent 90 days, limit sales of Exchange Shares on any day to 2.5% of that day’s trading volume of Common Stock, and (iii) prohibit new short positions or short sales on Common Stock for the combined 180 day period.

The Company also entered into an exchange agreement (the “Warrant Exchange Agreement”) with another Holder of Existing Warrants to purchase 2,166,667 shares of Common Stock in the aggregate.  Pursuant to the Warrant Exchange Agreement, the Company issued such Holder a new warrant (the “New Warrant”) to purchase the same number of shares of Common Stock. The New Warrant has the same expiration date, April 2, 2024, as the Existing Warrants, but has an exercise price of $1.80 and does not include the price protection, anti-dilution provisions or other restrictions on Company action from the Existing Warrants. Concurrently therewith, such Holder executed and delivered to the Company a leak-out agreement that contains trading restrictions on sales of Common Stock issued upon exercise of the New Warrant that are substantially similar to the restrictions on Exchange Shares in the Share Leak-Out Agreement, provided that the leak-out restrictions will only apply to the first 893,750 shares of Common Stock issued pursuant to the New Warrant.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the United States Securities and Exchange Commission, or the SEC, and all amendments to these filings, are available, free of charge, on our website at www.tymeinc.com as soon as reasonably practicable following our filing of any of these reports with the SEC. You can also obtain copies free of charge by contacting our Investor Relations department at our office address listed above. The SEC also maintains a website that contains all the materials we file with, or furnish to, the SEC. Its website is www.sec.gov.

The contents of our website are not incorporated by reference into this Annual Report on Form 10-K or any other document we file with the SEC, and any reference to our website is intended to be an inactive textual reference only.

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ITEM 1A.

RISK FACTORS

Our business is subject to numerous risks. You should carefully consider the following risks and all other information contained in this Annual Report, as well as general economic and business risks, together with any other documents we file with the SEC. If any of the following events actually occur or risks actually materialize, it could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline.

 

INDEX TO RISK FACTORS

 

Risks Related to Owning Our Stock 26

 

Risks Related to Our Business and the Development, Regulatory Approval, and
Commercialization of Our Product Candidates
31

 

Risks Related to our Financial Condition and Need for Additional Capital 48

 

Risks Related to our Reliance on Third Parties 51

 

Risks Related to the Operation of our Company 54

 

Risks Related to Intellectual Property 58

 

Risks Related to Government Regulations and Agencies 63

Risks Related to Owning Our Stock

Each of our co-founders holds a substantial ownership interest in our Company, which gives them the ability to influence certain decision making and these individuals have certain rights to our intellectual property that may allow them to use our IP in ways that could be inconsistent with our use.

Steve Hoffman, our Chief Executive Officer, Chief Science Officer and a director, owned more than 21.5% of our outstanding common stock as of March 31, 2020. Additionally, Michael Demurjian, our former Chief Operating Officer, also owned more than 19.4% of our outstanding common stock as of  March 31, 2020.  As such, Mr. Hoffman and Mr. Demurjian will each be positioned to exercise significant influence over our Company’s affairs, including, but not limited to, electing members of our Board of directors and exercising influence and voting rights in connection with structural defenses and anti-takeover measures, and fundamental corporate transactions, and they may seek action that may not reflect the best interests of all of the stockholders of our Company.

Additionally, the Company has granted Mr. Hoffman perpetual, exclusive non-royalty bearing license rights with respect to certain patents and patent applications that the Company uses for SM-88 in all fields other than in connection with the treatment of cancer. Further, in their employment agreements, Mr. Hoffman and Mr. Demurjian agreed that all intellectual property (“IP”) they develop or had developed during their employment with us is the property of the Company, but only with respect to the treatment of cancer in humans. We have been considering expanding into cancer therapeutics in certain animals and obtaining the relevant IP rights from them. We have had discussions with Mr. Hoffman and Mr. Demurjian about the financial and other terms to reach an agreement such that the Company would have the ability to pursue cancer therapeutics in dogs, cats and horses, but no assurance can be provided that we will obtain such rights.

This license to Mr. Hoffman may limit the Company’s ability to profit from alternative uses of SM-88, were such uses to be discovered. Further, the use of the patents or patent applications that are used for SM-88 or that otherwise overlap with our IP could be associated with a negative event outside of the control of the Company and outside the treatment of cancer in humans, which, in either case, may have an adverse effect on our business.

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Our share price is likely to be volatile due to factors beyond our control and may drop below prices paid by investors; investors could lose all of their investment in our Company.

All readers of this report should consider an investment in our common stock as speculative, involving a high degree of risk, and invest in our common stock only if the purchaser can withstand a significant loss and wide fluctuations in the market value of an investment. Potential investors should be aware that the value of an investment in our Company may go down as well as up. In addition, there can be no certainty that the market value of an investment in our Company will fully reflect its underlying value.

Investors may be unable to sell their shares of our common stock at or above the price they paid for their shares due to fluctuations in the market price of our common stock arising from factors affecting our drug discovery and development objectives as well as changes in our operating performance or prospects. In addition, the stock market has recently experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life sciences company stocks, as a result of, among other reasons, the ongoing COVID-19 pandemic and related government and economic reactions, which are further described in this section. The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate to the operating performance of the companies represented by the stock. Some of the factors that may cause the market price of our common stock to fluctuate include, but are not limited to:

 

results and timing of our clinical trials and clinical trials of our competitors’ products;

 

the failure or discontinuation of any of our development programs;

 

limitations on the availability of acceptable-quality clinical supply or issues in manufacturing SM-88, the MPS components or any future drugs we may develop and receive governmental approval to market;

 

 

regulatory developments or enforcement in the United States and non-U.S. countries with respect to our or our competitors’ products;

 

 

failure to achieve pricing and reimbursement levels expected by us or the market;

 

competition from existing products or new products that may emerge;

 

developments or disputes concerning patents or other proprietary rights;

 

introduction of technological innovations or new commercial products by us or our competitors;

 

 

announcements by us, our collaborators or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

 

 

changes in estimates or recommendations by securities analysts, to the extent any cover our common stock;

 

 

fluctuations in the valuation of companies perceived by investors to be comparable to us;

 

public concern over SM-88 or any future drugs we may develop and receive governmental approval to market;

 

 

litigation or the threat of litigation;

 

future issuances and sales of our common stock;

 

share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

 

 

additions or departures of key personnel;

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changes in the structure of healthcare payment systems in the United States or overseas;

 

the failure of SM-88, if approved, or any other approved drug product we may develop, to achieve commercial success;

 

 

economic and other external factors or disasters or widespread health or other crises;

 

period-to-period fluctuations in our financial condition and results of operations, including the timing of receipt of any milestone or other payments under commercialization or licensing agreements, if any;

 

 

general market conditions and market conditions for biopharmaceutical stocks; and

 

overall fluctuations in U.S. equity markets.

Due to these risks and the other risks described in this report, investors could lose their entire investment in our Company.

Our common stock has historically been characterized by low and/or erratic trading volume, and the intraday per share price of our common stock has fluctuated from $0.86 to $2.04 between April 1, 2019 and March 31, 2020, the date of our last completed fiscal year.

As of July 31, 2017, our common stock became quoted on the Nasdaq Capital Market under the symbol “TYME.” Even though recently listed on the Nasdaq Capital Market, the market for our stock may be impaired because of the limited number of investors, the significant ownership stakes of Messrs. Demurjian and Hoffman, and our small market public float and small capitalization, which is less than that authorized for investment by many institutional investors. Historically, the public market for our common stock has been characterized by low and/or erratic trading volume, often resulting in price volatility. For the fiscal year ended March 31, 2020, the average daily trading volume for our common stock was approximately 551,961 shares. In addition, the price of our common stock has been volatile. Our common stock had a closing price of $1.89 on April 1, 2019, and ended fiscal year 2020 at a closing price of $1.10. During the fiscal year 2020, our common stock had a low closing price of $0.90, which occurred on March 18, 2020, and had a high closing price of $1.95, which occurred on January 16, 2020.

 

The market price of our common stock is subject to wide fluctuations due to factors that we cannot control, including the results of preclinical and clinical testing of our products under development, decisions by collaborators regarding product development, regulatory developments, market conditions in the pharmaceutical and biotechnology industries, future announcements concerning our competitors, adverse developments concerning proprietary rights, public concern as to the safety or commercial value of any products, impacts of public health crises, including the ongoing COVID-19 pandemic, and general economic conditions.

 

Furthermore, the stock market has experienced significant price and volume fluctuation unrelated to the operating performance of particular companies. These market fluctuations can adversely affect the market price and volatility of our common stock.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish substantial rights.

Until such time, if ever, as we can generate substantial revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants and licensing and development agreements in connection with any collaborations. We do not have any committed external source of funds and no revenue source. To the extent that we raise additional capital through the sale of equity, equity-linked securities or convertible debt securities, as we expect we will, then outstanding stockholders’ ownership interests in our Company will be diluted and the terms of these new securities may include liquidation or other preferences that adversely affect rights of holders of our common stock. For example, in January 2020, we entered into a securities purchase agreement with Eagle Pharmaceuticals, Inc. (“Eagle”), pursuant to which Eagle would be required, upon the Company’s achievement of certain milestone events, to purchase Series A Preferred Stock of the Company that is convertible

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into common stock, which, upon conversion, if any, would result in additional dilution. Debt financing, if available at all, 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. We cannot give any assurance that we will be able to obtain additional funding if and when necessary or on satisfactory terms. If we are unable to obtain adequate financing on a timely basis, we could be required to delay, scale back or eliminate one or more of our development programs or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Future issuances of our common stock or rights to purchase our common stock pursuant to our equity incentive plan or outstanding options and warrants could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.

We are authorized to grant equity awards, including stock grants and stock options, to our employees, directors and consultants, covering up to 12.5% of our shares of common stock outstanding from time to time pursuant to our 2015 Equity Incentive Plan, as amended (the “2015 Plan”) and up to 2,750,000 shares of our common stock, pursuant to our amended and restated 2016 Director Plan (the “2016 Director Plan”). Future issuances, as well as the possibility of future issuances, under our 2015 Plan or 2016 Director Plan or other equity incentive plans could cause the market price of our common stock to decrease.

Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.

In the future, to raise needed financing, we are likely to issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our stockholders at the time of such issuances. We are authorized to issue an aggregate of 300,000,000 shares of common stock and 10,000,000 shares of “blank check” preferred stock. We also have an effective “shelf” registration statement on Form S-3 that allows us to issue securities in registered offerings as well as an available ATM Financing Facility that allows us to sell shares of our common stock through a placement agent at market prices. We may issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of our common stock. We will need to raise additional capital in the near future to meet our working capital needs, and we regularly evaluate our capital needs and available sources of financing. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts, including at a price (or exercise prices) below the price a stockholder at the time of such securities issuance paid for such stockholder’s stock.

The ability of our Board to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of our Company. Our Board is authorized to issue up to 10,000,000 shares of preferred stock with powers, rights and preferences designated by it. On January 7, 2020, the Board designated and reserved 10,000 shares as Series A Preferred in connection with the Eagle SPA (See Item 8. Note 9). Shares of Series A Preferred or other voting or convertible preferred stock could be issued or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to affect a takeover or otherwise gain control of our Company. The ability of our Board to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of our Company by tender offer or other means. Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price that such an attempt could cause. Moreover, the issuance of such additional shares of preferred stock to persons friendly to our Board could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally.

We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms.

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We regularly evaluate our capital needs and available sources of financing. When we elect to raise additional funds or additional funds are required, we may raise such funds from time to time through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives. Additional equity or debt financing or corporate collaboration and licensing arrangements may not be available on advantageous or reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms advantageous or reasonable to us, we will be prevented from our ability to generate revenues and achieve or sustain profitability will be substantially harmed.

If we raise additional funds by issuing equity securities as we expect we will, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, product candidates or future revenue streams or have to grant licenses on terms that are not favorable to us. For example, in January 2020, as part of a strategic investment in our Company, we entered into a co-promotion agreement with Eagle, whereby Eagle agreed to provide sales representatives to cover 25% of the Company’s sales force requirements and will receive 15% of the net sales of all SM-88 products in the U.S. during the term of the agreement. The transactions with Eagle are further discussed under the heading “Collaboration with Eagle” in Item 1 of this Annual Report on Form 10-K. In addition, general market conditions, as well as market conditions for companies in our financial and business position, as well as the ongoing issues arising from the COVID-19 epidemic, may make it difficult for us to seek financing from the capital markets, and the terms of any financing may adversely affect the holdings or the rights of our stockholders. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected, and we may be unable to continue our operations.

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 and our business. Securities and industry analysts may choose not to publish research on our Company. If an insufficient number of securities or industry analysts provide coverage of our Company, the trading price for our stock would likely be negatively impacted. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. Further, if one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board. Because our board is responsible for appointing the members of our management team, these provisions could, in turn, affect any attempt by our stockholders to replace current members of our management team. Among others, these provisions:

 

establish a board of directors having three classes of directors with a three-year term of office that expires as to one class each year, commonly referred to as a “staggered board”;

 

limit the manner in which stockholders can remove directors from our Board;

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exclusively empower the Board to fill any and all vacancies on the Board;

 

authorize the board of directors to exclusively have the power to change and set the size of the board of directors;

 

limit who may call stockholder meetings;

 

include advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and for nominations to our Board, which include, among other things, requirements for proposing stockholders to disclose information about derivative or short positions; and

 

authorize our Board to issue, without stockholder approval, shares of preferred stock; such ability to issue previously undesignated preferred stock makes it possible for our Board to establish a “poison pill” and issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. However, in connection with entering into a securities purchase agreement between the Company and Eagle in January 2020, the Board agreed to waive the provisions of Section 203 to the extent it is or could become applicable to Eagle.

We do not anticipate paying dividends on our common stock.

Cash dividends have never been declared or paid on our common stock and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, our stockholders will likely not receive any funds absent a sale of their shares of our common stock. If we do not pay dividends, our common stock may be less valuable because a return on an investment in shares of our common stock will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

Risks Related to Our Business and the Development, Regulatory Approval, and Commercialization of Our Product Candidates.

The outbreak of the novel coronavirus (COVID-19) and its impact on business and economic conditions could adversely affect our business, results of operations and financial condition, and the extent and duration of those effects will be uncertain.

 

The outbreak of the novel coronavirus (COVID-19) has evolved into a global pandemic. COVID-19 has spread to many regions of the world. The pandemic, including the fear of exposure to and the actual effects of the illness, together with the measures implemented to reduce its spread, which include restrictions on travel and large gatherings and requirements to shelter-in-place, have significantly impacted the global economy. It has disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. The extent to which COVID-19 impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the virus and the actions to contain it or treat its impact, among others.

 

The spread of COVID-19 and efforts to contain the virus may have the following effects, which become more likely to occur or may be exacerbated the longer the crisis continues:

 

 

Our clinical trials may be affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. In general, the pandemic has made it very difficult to recruit subjects and

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patients and to conduct clinical trials. The FDA issued guidance to be implemented without the normal prior public comment period as the FDA had concluded that public participation would not be feasible or appropriate. Guidance is not legally enforceable, but the FDA recommends the following of its guidance and guidance is particularly instructive during public health emergencies as the most efficient way for FDA to communicate broadly. Challenges are expected to arise from quarantines, site closures, travel limitations, interruptions to the supply chain for investigational products, or other considerations if site personnel or trial subjects become infected with or quarantined due to COVID-19. These challenges may lead to difficulties in meeting protocol requirements, including protocol-specified procedures. The FDA emphasized that safety of trial participants is critically important. Decisions to continue or discontinue individual patients or a trial are expected to be made by trial sponsors in consultation with clinical investigators and Institutional Review Boards. COVID-19 screening procedures may need to be implemented. As challenging as the clinical trial process is during normal times, the risks, strategic and operational challenges and the costs of conducting such trials has increased substantially during the pandemic. The full impact of COVID-19 on our clinical development and clinical trials is currently unknown.

 

 

Infections and deaths related to the pandemic have disrupted the American and global healthcare and healthcare regulatory systems. Such disruptions may divert healthcare resources away from our clinical trials and have the potential to materially delay the review and/or approval of regulatory submissions and regulatory communications with the FDA and global regulators. It is unknown how long these disruptions could continue were they to occur. The elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.

 

 

Major international medical conferences have been disrupted, impacting the dissemination and review of scientific/medical information, including presentations, papers and abstracts that would have been presented about our products.

 

 

While we have not had material disruptions in our operations to date, shelter-in-place orders or other mandated local travel restrictions could result in our employees or other personnel conducting research and development or manufacturing activities for the Company having no or limited access their laboratories or other facilities. A greater number of these personnel working remotely may also expose us to greater risks related to cybersecurity and cyber-liability.

 

Should COVID-19 continue to spread or government countermeasures become stricter, our business operations, results of operations and financial condition may further be affected as follows:

 

 

Some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our clinical trials. Further, if the spread of the coronavirus pandemic continues and our operations are adversely impacted, we risk a delay, default and/or nonperformance under existing agreements, which may increase our costs. These cost increases may not be fully recoverable or adequately covered by insurance.

 

 

We currently utilize third parties to, among other things, manufacture raw materials. If any third parties in the supply chain for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the coronavirus outbreak, our supply chain may be disrupted, limiting our ability to manufacture our product candidates for our clinical trials and research and development operations.

 

 

Our business may experience a material economic effect due to the additional work and resource demands for our employees and vendors, particularly those who continue to be involved in handling the current operational challenges of clinical trial administration and business disrupted by the pandemic.  

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It may adversely impact our ability to file on a routine and timely basis our periodic reports or other filings under federal securities or other laws and regulations.

 

 

Our business may experience a material economic effect. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock.

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. The extent to which the coronavirus further impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the coronavirus and the actions to contain the coronavirus or treat its impact, among others. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole. However, the likelihood of material impact on the Company and its operations increases the longer the virus impacts activity levels in the United States and across the world. Management will continue to monitor the situation closely and implement business continuity and emergency response plans as needed.

Our proprietary lead drug product, SM-88, is in clinical development in two principal areas. We are currently participating in the advancement of Phase II, Phase II/III and/or pivotal clinical trials for pancreatic cancer and sarcoma. We are considering additional clinical trials in other solid tumors and/or hematologic malignancies. Clinical drug development is expensive, time-consuming and uncertain, and we may ultimately not be able to obtain regulatory approval for the commercialization of our lead candidate.

The risk of failure for drugs in clinical development is high and it is impossible to predict when our lead drug candidate for the treatment of cancer, SM-88, will prove effective or safe in humans or will receive regulatory approval. The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation by the FDA, the European Medicines Agency (the “EMA”), national competent authorities in Europe and other non-U.S. regulatory authorities, which establish regulations that differ from country to country. We are not permitted to market SM-88 and any other drug product we may develop in the United States or in other countries until we receive approval of a New Drug Application (an “NDA”) from the FDA or marketing approval from applicable regulatory authorities outside the United States. Since SM-88 is in clinical development, it is subject to the risk of failure inherent in the drug development process. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA or EMA. Obtaining approval of an NDA or a Marketing Authorization Application (“MAA”) can be a lengthy, expensive and uncertain process, and we may experience delays as an impact of COVID-19. In addition, failure to comply with the FDA, EMA and/or other non-U.S. regulatory requirements prior to or following regulatory approval, could subject our Company to administrative or judicially imposed sanctions, which include, but are not limited to:

 

restrictions on our ability to conduct clinical trials, including issuing full or partial clinical holds or other regulatory objections to ongoing or planned trials;

 

recalls;

 

restrictions on the use of drugs, manufacturers or our planned manufacturing process;

 

warning letters;

 

clinical investigator disqualification;

 

civil and criminal penalties;

 

injunctions;

 

suspension or withdrawal of regulatory approvals;

 

drug seizures, detentions or import/export bans or restrictions;

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voluntary or mandatory drug recalls and publicity requirements;

 

total or partial suspension of drug manufacturing;

 

imposition of restrictions on operations, including costly new manufacturing requirements; and

 

refusal to approve pending NDAs or supplements to approved NDAs in the United States and refusal to grant marketing approvals in other jurisdictions, such as a MAA in the EU.

The FDA, EMA and other non-U.S. regulatory authorities also have substantial discretion in the drug approval process. Generally, the number of nonclinical and clinical trials that will be required for regulatory approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address and the regulations applicable to any particular drug candidate. Regulatory agencies can delay, limit or deny approval of a drug for many reasons, which include, but are not limited to:

 

the drug candidate may be deemed unsafe or ineffective;

 

future results may not continue to confirm any or all of the positive results from earlier nonclinical or clinical trials;

 

failure to select optimal drug doses and suitable trial endpoints;

 

populations studied did not reflect populations likely to use the drug;

 

mortality rates in clinical trials for drug candidates such as SM-88 are shown to be numerically higher given the fact that subjects are being treated for late stage cancer than participants in other clinical trial programs;

 

regulatory agencies may not find the data from nonclinical and clinical trials sufficient or well-controlled;

 

regulatory agencies might not approve or might require changes to manufacturing processes or facilities; and

 

regulatory agencies may change their approval policies or adopt new regulations.

Any delay in obtaining or failure to obtain, required approvals could materially adversely affect our ability to generate revenue from SM-88, which would likely result in significant harm to our financial position and adversely impact our share price. Furthermore, any regulatory approval to market SM-88 may be subject to limitations on the indicated uses for which we may market the drug. These limitations may limit the size of the market for SM-88 and any other drug product we may develop.

We have limited experience with completing large-scale or pivotal Phase II or III clinical trials or commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability.

Our operations to date have been limited to financing and staffing our Company, developing our technology platform, SM-88 and other potential drug candidates, conducting our small-scale completed Phase I or Phase II clinical trials, and initiating or partnering to initiate pivotal trials for SM-88. We have initiated our commercialization strategy and marketing plan. In addition, our executive team does not all have prior experience in obtaining regulatory approval for a drug or commercializing an approved drug. Accordingly, we have not had experience completing a large-scale or pivotal clinical trial at TYME (whether Phase II, III, or otherwise), obtaining marketing approval, manufacturing product on a commercial scale or conducting sales and marketing activities. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.

If we are unable to identify and recruit enough qualified patients for our clinical trials, it could delay or prevent development of SM-88 and adversely affect our future business prospects.

The timing and length of our clinical trials depends in part on the speed at which we can identify and recruit patients to participate in clinical trials of our product candidates. Difficulties with enrollment or finding eligible patients may

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cause delays in current and future clinical trials. If patients are unwilling or unable to participate in our clinical trials due to any negative publicity in the industry, interest in trials for other third-party product candidates, or for other reasons, including fears or restrictions related to the COVID-19 pandemic, our clinical trials could be delayed or terminated.

We or our clinical trial sites may not be able to identify, recruit and enroll enough patients, or those with the required or desired characteristics in a clinical trial, to complete our clinical trials in a timely manner. Patient enrollment is affected by factors including the design of clinical trial protocols, size of patient populations, eligibility criteria, proximity and availability of clinical trial sites, and other factors. If we have difficulty enrolling enough patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business.

If clinical trials for SM-88 are prolonged, delayed or stopped, we may be unable to obtain regulatory approval and commercialize our drug on a timely basis, which would require us to incur additional costs and delay revenue.

SM-88 is in clinical development. We conducted several Phase I or Phase II trials and have initiated our pivotal trial for SM-88 in pancreatic cancer. We have also partnered with PanCAN to study SM-88 in an adaptive randomized Phase II/III trial with registration intent known as Precision Promise. The successful completion of these trials will be subject to numerous factors that can cause interruptions or delays, many of which may be beyond our control. Should we experience any interruption or delay, our plans and expected future revenue could be adversely affected and could result in our inability to continue our operations.

Many factors could substantially delay or prevent the timely completion of our planned clinical trials due to several factors, which include, but are not limited to the following:

 

slower than expected rate of subject recruitment and enrollment;

 

slower than projected IRB or Independent Ethics Committee (“IEC”) review and approval;

 

the Data Monitoring Committee (“DMC”) for a clinical trial requires the clinical trial be delayed or stopped or requests major or minor modifications to the clinical trial;

 

failure of subjects to complete their full participation in clinical trial or return for post-treatment follow-up;

 

unforeseen safety issues, including severe or unexpected drug-related adverse effects experienced by subjects, including the possibility of death;

 

lack of SM-88 efficacy during the clinical trials;

 

poor trial design for one or more of our clinical trials;

 

withdrawal of participation by a Principal Investigator (“PI”) in one or more of our clinical trials;

 

withdrawal of participation by one of our Clinical Research Organizations (“CRO”);

 

inability or unwillingness of subjects or clinical investigators to comply with clinical trial procedures;

 

resolution of data discrepancies;

 

inadequate CRO management and/or monitoring in one or more of our clinical trials;

 

the need to repeat, reconstruct or terminate a clinical trial due to inconclusive or negative results or unforeseen complications in testing; and

 

a request by the FDA to suspend or terminate our current drug development programs.

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Changes in regulatory requirements and guidance may also occur and we may need to significantly amend ongoing clinical trial protocols or revise planned prospective clinical trial protocols to reflect such changes mandated by regulatory authorities. Amendments may require us to renegotiate terms with CROs or clinical trial sites or to resubmit clinical trial protocols and other documents to IRBs or IECs for re-review, which may impact the costs, timing or successful completion of a clinical trial. Our clinical trials may be suspended or terminated at any time by the FDA, the EMA, other regulatory authorities or the IRB/IEC overseeing the clinical trial, due to a number of factors, which include, but are not limited to:

 

failure to conduct the clinical trial in accordance with regulatory requirements or compliance with the clinical protocol;

 

unforeseen safety issues or any determination that a clinical trial presents unacceptable health risks to subjects;

 

lack of adequate funding to continue the clinical trial due to higher or additional unforeseen costs or other business decisions; and

 

upon a breach or pursuant to the terms of any agreement with or for any other reason by, current or future collaborators that have responsibility for the clinical development of SM-88.

Any failure or significant delay in clinical and regulatory development plans for SM-88 or any other product candidate we may pursue would likely adversely affect our ability to obtain regulatory approval for the drug and would diminish our ability to generate revenue.

The results of previous studies may not be predictive of future results, our progress in future trials for one drug candidate may not be indicative of progress in trials for other drug candidates and the results of our current and planned clinical trials may not satisfy the requirements of the FDA, the EMA or other non-U.S. regulatory authorities.

We currently have no products approved for sale and we cannot guarantee that we will ever have marketable products. Before obtaining marketing approval from regulatory authorities any sale of SM-88, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our drug in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and has a risk of uncertainty as to its outcome.

Clinical failure can occur at any stage of clinical development and the outcome of early clinical trials may not be predictive of the success of later clinical trials. Additionally, interim results of a clinical trial do not necessarily predict final trial results. In addition, nonclinical and clinical data are often susceptible to varying interpretations and analyses. In this regard, many companies that have believed their drug performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products from regulatory organizations.

Drug candidates that have shown promising results in early clinical trials (such as our First in Human Study) and compassionate use programs (such as our Compassionate Use Patients) may still suffer significant setbacks in subsequent clinical trials. Many companies in the pharmaceutical industry, including those with greater resources and experience than TYME, as well as those that have conducted large-scale clinical trials under an IND (in contrast to our limited number of First in Human Study patients and Compassionate Use Patients, all of whom were treated outside of an IND approved clinical trial) have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials. In light of these factors, and the fact that our dosage and method of delivery from our First in Human Study and Compassionate Use Patients differ from our current clinical trials, and may differ from future clinical trials, no assurance can be given that our ongoing or future clinical trials may produce results similar to our First in Human Study or those experienced by Compassionate Use Patients.

We may, from time to time, publish interim or preliminary data from our clinical trials. Adverse changes from the published data from our First in Human Study, Compassionate Use Patients, and interim data to the final data obtained from our future clinical trials could harm our business prospects. In the 30 patients who received SM-88 in our First in Human Study, treatment-related AEs were reported in all participating patients, of which hyperpigmentation was the only consistent, lasting AE. The most common treatment-related AEs were hyperpigmentation (100%), mild transient fatigue (57%), and mild transient pain (13%). Many of these patients who were treated with SM-88 were late-stage cancer patients with one or more previous treatments or existing medical

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conditions, which can cause AEs unrelated to SM-88. Patients may also report additional AEs that have not yet been previously experienced or otherwise predicted. Patients who will be administered SM-88 in our clinical trials are, or may be, seriously ill and as more patient data becomes available, there is a risk that future clinical outcomes may materially differ from interim or preliminary data, First in Human Study data or Compassionate Use Patient data. Any negative material changes could have an adverse effect on our business and product development efforts.

Clinical trials may also produce negative or inconclusive results and we may decide to, or regulators may require us to, conduct additional clinical or nonclinical testing. We will be required to demonstrate with substantial evidence through well-controlled clinical trials that SM-88 is safe and effective for use in diverse populations before we can seek regulatory approvals for its commercial sale.

In addition, the design of a clinical trial can determine whether its results will support approval of a drug. Flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support regulatory approval in general, or in an efficient manner given our limited resources.

In some instances, there may be significant variability in safety and/or efficacy results between different trials of the same drug due to numerous factors, including amendment to trial protocols, variability in size and type of the patient populations, adherence to the dosing regimen and other trial procedures and the rate of dropout among clinical trial subjects. We do not know whether any of the clinical trials in our current development plans will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market SM-88, and we may need to further refine or redesign our combination drug candidate formula or modify production methodology based on such clinical trials, each of which could result in delays in the regulatory approval process.

There is always the possibility that SM-88 may not gain regulatory approval if it does not achieve its primary endpoints in its Phase II/III pancreatic clinical trials, and other factors, such as product safety or nonclinical registration requirements, may prevent SM-88 from gaining regulatory approval even if it achieves its primary endpoints. The FDA, the EMA or other global regulatory authorities may disagree with our trial design and/or our interpretation of data from nonclinical and clinical trials. In addition, any of these regulatory authorities may change requirements for the approval of a drug even after reviewing and providing comments or advice on a protocol for a clinical trial. In addition, any of these regulatory authorities may also approve a drug for fewer or more limited indications than requested or may grant approval that is contingent on the performance of costly post-marketing clinical trials. Further, the FDA, the EMA or other non-U.S. regulatory authorities may not accept the labeling claims that we believe would be necessary or desirable for the successful commercialization of SM-88.

Preclinical development programs and preclinical mechanism research activities are uncertain. Our preclinical programs and activities may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all.

We are conducting a range of preclinical experiments with external CROs and academic partners to more fully illustrate the mechanism of action of SM-88 in oncology. However it is unknown if the impact of SM-88 on processes studied in cultured cells or animal models would be replicated in humans or provide a clinical benefit. The FDA is interested in understanding the general biologic properties of SM-88, and there is a risk that the results produced by our planned preclinical activities might not satisfy their requirements to support a regulatory approval. Therefore, additional activity may be required to address the FDA’s questions, or we might not be able to effectively address these questions.    

In addition to SM-88, we are researching other drug platforms, such as TYME-18. Before we can commence human clinical trials for a product candidate, we must complete extensive preclinical testing. Results of preclinical studies and early-stage clinical trials may not be predictive of future results. Preclinical studies and early-stage clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics, to understand the side effects of product candidates at various doses and schedules, and may not advance to later-stage clinical trials. Furthermore, the results of an early-stage clinical trial may not be predictive of the results of later-stage, large scale efficacy clinical trials.

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We may not be successful in our efforts to use and expand our technology platform to build a pipeline of product candidates.

A key element of our business strategy is to further develop and expand our technology platform so that we can build a steady pipeline that we ultimately hope will be successful in the treatment of a variety of cancers, as well as other diseases that affect health and quality-of-life. However, we may not be able to develop and obtain approval to market our drugs if regulators do not conclude that they are safe and effective. Furthermore, the potential product candidates that we discover may not be suitable for further clinical development, whether due to the potential that they produce harmful adverse effects or possess other characteristics that indicate that they are unlikely to receive marketing approval and/or market acceptance. In addition, unexpected technical issues involving such product candidates could be encountered that could cause the products to be prohibitively too expensive to manufacture and market. If we do not continue the steady development and commercialization of products utilizing our technology platform, we will face difficulty in achieving increased revenues in future periods, which could result in significant harm to our financial position and adversely affect our share price.

We have filed patent applications relating to additional product candidates based on our technology platform. However, to date, the FDA and other regulatory authorities have not approved products that utilize this technology platform.

In the future, we plan to develop additional product candidates based on our technology platform. This platform incorporates novel technologies and methods and actions. Since regulators have not yet approved such a platform, the approval of the product candidates in our pipeline is less certain than approval of drugs that do not employ such novel technologies or methods of action. We intend to work closely with the FDA, the EMA and other non-U.S. regulatory authorities to perform the requisite scientific analyses and evaluation of our methods to obtain regulatory approval for these future product candidates. It is possible that the validation process may take time and significant expenditures of resources, require independent third-party analyses or not be accepted by the FDA, the EMA and other non-U.S. regulatory authorities. Delays or failure to obtain regulatory approval of any of our future product candidates could adversely affect our business prospects and the value of our share price.

Even if we obtain marketing approval for SM-88 in a major pharmaceutical market such as the United States or Europe, we may never obtain approval or commercialize in other major markets, which would limit our ability to realize the drug’s full market potential.

In order to market any products in a country or territory, we must establish and comply with numerous and varying regulatory requirements of such countries or territories regarding safety and efficacy. Clinical trials conducted in one country may not be acceptable for review by regulatory authorities in other countries and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures differ among countries and can involve additional testing and validation as well as varying administrative review periods. Seeking regulatory approvals in multiple countries could result in significant delays, difficulties and costs and may require additional nonclinical or clinical trials, which would be costly and time-consuming or even delay or prevent the introduction of SM-88 in those countries. In addition, our failure to obtain regulatory approval in one country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any drug candidates approved for sale in any jurisdiction, including international markets and we therefore do not have experience in obtaining regulatory approval. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our target market will be reduced and our ability to create stockholder value for SM-88 will be harmed.

In the United States, we may seek fast track or breakthrough designation for SM-88. There is no assurance that the FDA will grant either designation and even if it does, such designation may not actually lead to a faster development process, regulatory review or ultimate approval compared to conventional FDA procedure. Any achievement of fast track or breakthrough designation for SM-88 would not increase the likelihood that SM-88 will receive marketing approval in the United States.

The fast track program, a provision of the FDAMA, is designed to facilitate interactions between a sponsor and the FDA before and during submission of an NDA for an investigational agent that, alone or in combination with one or more drugs, that is intended to treat a serious or life-threatening disease or condition and demonstrates the potential

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to address an unmet medical need for that disease or condition. Under the fast track program, the FDA may consider reviewing portions of a marketing application before the sponsor submits the complete application, if the FDA determines, after a preliminary evaluation of the clinical data, that a fast track drug may be effective. A fast track designation provides the opportunity for more frequent interactions with the FDA and could make the drug eligible for priority review if supported by clinical data at the time of submission of the NDA.

The FDA is authorized to designate an investigational drug as a breakthrough therapy if it finds that the drug is intended, alone or in combination with one or more drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For products designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Products designated as breakthrough therapies by the FDA are also eligible for all fast track designation features.

The FDA has broad discretion whether or not to grant fast track or breakthrough designation. Accordingly, even if we believe SM-88 meets the criteria for fast track or breakthrough designation, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of fast track or breakthrough designation for a drug candidate may not result in a faster development process, review or approval compared to drug candidates considered for approval under conventional FDA procedures and, in any event, does not assure ultimate approval by the FDA. The FDA may even withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program. Further, in connection with fast track designation, we may be required to provide government regulators with additional manufacturing and production information, some of which we may not be able to provide in a timely manner and to the extent required by such regulators.

Should we choose to pursue orphan drug designation, we may be unable to obtain orphan drug designation or exclusivity for SM-88 or any other drug candidate we may develop. If our competitors instead can obtain orphan drug exclusivity for their products in the same indications for which we are developing SM-88 or any other drug candidate we may develop, we may be at a competitive disadvantage and may not be able to have our products approved by the applicable regulatory authority for a significant period of time, if at all. Conversely, if we obtain orphan drug exclusivity for SM-88 or any other drug we may develop, we may not be able to fully benefit from the associated marketing exclusivity.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate SM-88 as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. In the EU, the European Commission may designate a drug candidate as an orphan medicinal drug if it is a medicine for the diagnosis, prevention or treatment of life-threatening or very serious conditions that affects not more than five in 10,000 persons in the EU or it is unlikely that marketing of the medicine would generate sufficient returns to justify the investment needed for its development. If SM-88 or any other drug candidate we may develop were to receive orphan drug designation, we still may not have market exclusivity in particular markets. There is no assurance we will be able to receive orphan drug designation for SM-88 or any other drug candidate we may develop. Further, the granting of a request for orphan drug designation does not alter the standard regulatory requirements and process for obtaining marketing approval.

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Generally, if a drug candidate with an orphan drug designation 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, subject to certain exceptions, precludes the FDA from approving the marketing application of another drug for the same indication for that time period or precludes the EMA and other national drug regulators in the EU, from accepting the marketing application for another medicinal drug for the same indication. The applicable period is seven years in the United States and ten years in the EU. The EU period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. In the EU, orphan exclusivity may also be extended for an additional two years (i.e., a maximum of 12 years’ orphan exclusivity) if the drug is approved based on a dossier that includes pediatric clinical trial data generated in accordance with an approved pediatric investigation plan. Orphan drug exclusivity may be lost in the United States if the FDA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

Even if we obtain orphan drug exclusivity for SM-88 or any other drug candidate we may develop, that exclusivity may not effectively protect the drug from competition because exclusivity can be suspended under certain circumstances. In the United States, even after an orphan drug is approved, the FDA can subsequently approve another 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. In the EU, orphan exclusivity will not prevent a marketing authorization from being granted for a similar drug in the same indication if the new drug is safer, more effective or otherwise clinically superior to the first drug or if the marketing authorization holder of the first drug is unable to supply sufficient quantities of the drug.

SM-88 or any other drug product we may develop may have serious adverse, undesirable or unacceptable side effects, which may delay or prevent marketing approval. If such side effects are identified during the development of SM-88 or any other product candidate we may develop or following such candidate’s approval, if any, we may need to abandon our development of SM-88 or such other candidate, the commercial profile of any approved label may be limited and/or we may be subject to other significant negative consequences following marketing approval, if any.

Although SM-88 and any other drug products we may develop will undergo safety testing to the extent possible and agreed to with regulatory authorities, not all adverse effects of drugs can be predicted or anticipated. SM-88, our proprietary drug product is based on a mechanism designed to utilize oxidative stress, among other techniques, to selectively kill cancer cells, yet is powerful and could lead to serious side effects that we only discover in clinical trials. Unforeseen side effects from SM-88 or any other drug product we may develop could arise either during clinical development or, if such side effects are sporadic, after it has been approved by regulatory authorities and the approved drug has been marketed, resulting in the exposure of additional patients. While our proof-of-concept clinical trial for SM-88 demonstrated a favorable safety profile, the results from future trials of SM-88 may not confirm these results. Any new therapy to kill cancer tumors is risky and may have unintended consequences. We have not fully demonstrated that SM-88 is safe in humans and we may not be able to do so.

Furthermore, we are initially developing SM-88 for patients with cancer for whom no other therapies have succeeded and survival times are frequently short. Therefore, we expect that certain subjects may die during the clinical trials and it may be difficult to ascertain whether such deaths are attributable to the underlying disease, complications from the disease, SM-88 or a combination of such factors.

The results of future clinical trials may show that SM-88 causes undesirable or unacceptable side effects, which could interrupt, delay or halt our clinical trials and result in delay of or failure to obtain, marketing approval from the FDA, the European Commission and other non-U.S. regulatory authorities or result in marketing approval from the FDA, the European Commission and other non-U.S. regulatory authorities with restrictive label warnings or potential drug liability claims.

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If SM-88 or any other product candidate we may develop receives marketing approval and it is later identified as undesirable or has unacceptable side effects, we are at risk for the following actions:

 

regulatory authorities may require us to take SM-88 or such other drug product off the market;

 

regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;

 

regulatory authorities may require post-market clinical trials to assess possible serious risks associated with SM-88 or such other drug product, which will require us to provide the FDA or other regulatory authorities with additional data;

 

we may be required to change the way SM-88 or such other drug product is administered, conduct additional clinical trials or change the labeling of the drug;

 

we may be subject to limitations on how we may promote SM-88 or such other drug product;

 

sales of SM-88 or such other drug product may never gain traction or could decrease significantly;

 

we may be subject to litigation or drug liability claims; and

 

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of SM-88 or such other drug product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of SM-88 or such other drug product.

Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval and commercialization of SM-88 or any other product candidate we may develop and may affect the prices we obtain. Our successful commercialization will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement and pricing policies.

In the United States, the EU, its member states and other foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes that affect the healthcare industry. These changes could prevent or delay marketing approval of SM-88 or other drug products we may develop, restrict or regulate post-approval activities and affect our ability to sell and recognize revenue. Among policy makers and payors in the United States and elsewhere, there is continued interest in promoting changes in the healthcare industry, with stated goals that include containing health care costs, improving quality and/or expanding access to health care.

In the United States, there have been a number of proposals for increased federal and state government regulation of, or involvement in, the pricing and/or purchasing of drugs. For example, the Prescription Drug Price Relief Act, introduced in the Senate in January 2019, would require the HHS Secretary to assure that Americans do not pay more for prescription drugs than the median price of five countries (Canada, UK, France, Germany and Japan). There have also been state legislative efforts to address drug costs, which generally have focused on increasing transparency about drug costs and limiting drug prices. Some such legislation has been subject to legal challenges.

In addition, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Modernization Act”) established the Medicare Part D program and provided authority for limiting the number of drugs that will be covered in any therapeutic class thereunder. The Medicare Modernization Act, including its cost reduction initiatives, could limit the coverage and reimbursement rate that we receive for any of our approved products. Private payors may follow Medicare coverage policies and payment limitations in setting their own reimbursement rates resulting in similar limits in payments from private payors.

Further, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, adopted in March 2010 (together, the “Health Care Reform Law”), is a far-reaching law intended to broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The law has continued the downward pressure on the pricing of medical items and services, especially under the Medicare program, and increased the industry’s regulatory burdens and operating costs. Since its enactment, there have been

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executive, judicial and Congressional challenges to certain aspects of the Health Care Reform Law, which are further described in this section, and we expect there will be additional challenges and amendments to the Health Care Reform Law in the future.

Other legislative changes have been proposed and adopted since the Health Care Reform Law was enacted. In August 2011, President Obama signed into law the Budget Control Act of 2011 (the “BBA”), which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of 2% per fiscal year through 2025. These reductions were extended through 2027 under the BBA. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers (including hospitals and cancer treatment centers), and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Additionally, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The U.S. Department of Health and Human Services, or HHS, has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its existing authority. For example, in September 2018, CMS announced that it will allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January 1, 2019, and in October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs and biological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product. Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. On December 18, 2019, the FDA issued a notice of proposed rulemaking that, if finalized, would allow for the importation of certain prescription drugs from Canada. The FDA also issued a draft guidance document outlining a potential pathway for manufacturers to obtain an additional National Drug Code, or NDC, for an FDA-approved drug that was originally intended to be marketed in a foreign country and that was authorized for sale in that foreign country. The regulatory and market implications of the notice of proposed rulemaking and draft guidance are unknown at this time. We cannot be sure whether additional legislative changes will be enacted or what the impact of such changes on the marketing approvals of SM-88 or any other drug product we may develop, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent labeling and post-marketing testing and other requirements.

The Health Care Reform Law and other healthcare reform measures adopted in the future  may result in more rigorous coverage criteria new payment methodologies and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints,

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discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products to purchase and which suppliers will be included in their prescription drug and other healthcare programs. Furthermore, there has been increased interest by third party payors and governmental authorities in reference pricing systems and publication of discounts and list prices. These reforms could also reduce the ultimate demand for our product candidates or put pressure on our product pricing.

In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize our product candidates, if approved. In markets outside of the United States and European Union, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

Recently, several important multinational organizations, including the United Nations (UN), World Health Organization (WHO) and Organization for Economic Cooperation and Development (OECD), have issued reports and policy recommendations relating to international pharmaceutical pricing (e.g., 2016 UN High Level Panel Report on Access to Medicines).  Late in 2018, reports critical of the pharmaceutical industry’s pricing practices were published by the OECD and WHO; these will exert additional pricing pressures.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product. Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to new requirements or policies, or if we are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.

We currently have very limited marketing, sales or distribution infrastructure. If we are unable to develop full sales, marketing and distribution capabilities on our own or through collaborations or if we fail to achieve adequate pricing and/or reimbursement, we will not be successful in commercializing SM-88 and any other drug product we may develop.

We currently have very limited marketing, sales and distribution capabilities because our lead drug candidate, SM-88, is still in clinical development and initial trials and our other drug candidates are only in the initial stages of development. If SM-88 is approved, we intend either to have established a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize our drug or to have outsourced this function or portions, to one or more experienced third parties. Either of these options is expensive and time-consuming. Some of these costs may be incurred well in advance of any regulatory approvals for SM-88. In addition, we may not be able to hire a sales force that is sufficient in size or has adequate expertise in the medical markets that we intend to target. Any failure or delay in the development of our internal sales, marketing and

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distribution capabilities or to outsource these functions, in whole or part, would adversely affect the commercialization of our products.

To the extent that we enter into collaborative agreements for marketing, sales and/or distribution, our revenue may be lower than if we directly marketed and sold SM-88. For example, in January 2020, we entered into a co-promotion agreement with Eagle, whereby Eagle agreed to provide sales representatives to cover 25% of the Company’s sales force requirements and will receive 15% of the net sales of all SM-88 products in the U.S. during the term of the agreement. In addition, any revenue we receive will depend in whole or in part upon the efforts and success of these third-party collaborators, which are likely not to be entirely within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize SM-88. If we are not successful in commercializing SM-88, either on our own or through collaborations with one or more third parties, our future revenues will suffer, we may incur significant and additional losses and we may be forced to curtail operations. These factors would have an adverse effect on our share price.

Even if SM-88 obtains regulatory approval, it will remain subject to ongoing regulatory requirements and oversight.

If marketing authorization is obtained for our lead drug candidate, SM-88, it will continue to be under review by regulatory authorities and be subject to regulatory requirements. As a result, authorization could be subsequently withdrawn or restricted at any time for many reasons, including safety issues. We will be subject to ongoing obligations and oversight by regulatory authorities, including AE reporting requirements, marketing restrictions and, potentially, other post-marketing obligations, all of which may result in significant expense and limit our ability to successfully commercialize our drug product.

If there are changes in the application of legislation or regulatory policies or if problems are discovered with SM-88 or our manufacturer(s) or if we or one of our distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take various actions. These include imposing fines on us, imposing restrictions on the drug or its manufacture and requiring us to recall or remove the drug from the market. The regulators could also suspend or withdraw our marketing authorizations, requiring us to conduct additional clinical trials, change our drug labeling or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell SM-88 may be impaired and we may incur substantial additional expense to comply with regulatory requirements, which could adversely affect our business, financial condition and the results of operations and the value of our share price.

Even if approved, if SM-88 does not achieve broad market acceptance among physicians, patients, the medical community and third-party payors, our revenue generated from its sales will be limited.

The commercial success of our SM-88 and any other drug product we may develop will depend upon its acceptance among physicians, patients and the overall medical community. The degree of market acceptance of SM-88, which would be applicable to any other drug product we may develop, will depend on a number of factors, which include, but are not limited to:

 

limitations or warnings contained in the approved labeling for SM-88;

 

changes in the standard of care for the targeted therapy;

 

limitations in the approved clinical indications for SM-88;

 

demonstrated clinical safety and efficacy of SM-88 compared to other drugs;

 

lack of significant adverse effects;

 

limitations on how we promote SM-88;

 

sales, marketing and distribution support;

 

availability and extent of reimbursement from managed care plans and other third-party payors;

 

timing of market introduction and perceived effectiveness of competitive drugs;

 

the degree of cost-effectiveness of SM-88;

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availability of alternative therapies, whether or not at a similar or lower cost, including generic and over-the-counter drugs;

 

the extent to which SM-88 is approved for inclusion on formularies of hospitals and managed care organizations;

 

whether SM-88 is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy;

 

adverse publicity about SM-88 or favorable publicity about competitive drugs;

 

convenience and ease of administration; and

 

potential drug liability claims.

If SM-88 or any other product candidate we may develop is approved but does not achieve an adequate level of acceptance by physicians, patients and the overall medical community, we may not generate sufficient revenue to become profitable or to sustain operations. In addition, efforts to educate the medical community and third-party payors on the benefits of SM-88 or any other product candidate we may develop may require significant resources and may never be successful.

We are subject to manufacturing risks that could substantially increase our costs and limit the supply of SM-88 and any other drug product we may develop.

As is likely to be common with any other product candidate we may develop, the process of manufacturing SM-88 is complex, highly regulated and subject to several risks, which include, but are not limited to the following risks:

 

We do not have experience in manufacturing SM-88 in bulk quantity or at commercial scale. We plan to contract with external manufacturers to develop a larger scale process for manufacturing SM-88 in parallel with our involvement in Phase II/III trials of SM-88. We may not succeed in the scaling up of our process or we may need a larger manufacturing process for SM-88 than what we have planned. Any changes to our manufacturing processes may result in the need to obtain additional regulatory approvals. Difficulties in achieving commercial-scale production or the need for additional regulatory approvals could delay the development and regulatory approval of SM-88 and ultimately affect our success.

 

The process of manufacturing drugs, such as SM-88, is extremely susceptible to loss due to contamination, equipment failure or improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in drug characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, drug defects and other supply disruptions. If microbial, viral or other contaminations are discovered in SM-88 or in the manufacturing facilities in which SM-88 is made, such manufacturing facilities may need to be closed for an extended time to investigate and remedy the contamination.

 

A shortage of SM-88 drug product and/or the agents used with SM-88.

 

The manufacturing facilities in which SM-88 is made could have delays in manufacturing due to delays created by other sponsor company drug manufacturing runs, which could affect our manufacturing runs.

 

An unforeseen increase in ingredients procurement or other manufacturing costs.

 

An unforeseen production shortage resulting from any events, including interruptions to business operations as a result of widespread health crises, such as the COVID-19 pandemic, affecting raw material and or intermediate supply or manufacturing capabilities abroad and domestic.

 

The manufacturing facilities in which SM-88 is made could be adversely affected by equipment failures, labor shortages, labor strikes, natural disasters, widespread disease and other public health crises, including COVID-19, power failures, lack of phone or internet services, riots, crime, act of foreign enemies, war, nationalization, government sanction, blockage, embargo, any extraordinary event or circumstance beyond control and numerous other factors.

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We and our manufacturing partners must comply with applicable cGMP and local and state regulations and guidelines. Compliance with cGMP can be time consuming and expensive. Further, cGMP may not be flexible in situations where business pressures would normally call for immediate ingenuity. We or our manufacturing partners may encounter difficulties in achieving quality controls and quality assurance and may experience shortages in qualified personnel. We and our manufacturing partners will be subject to inspections by the FDA and comparable agencies in other jurisdictions to confirm compliance with applicable regulatory requirements. Any failure to follow cGMPs or other regulatory requirements or delay, interruption or other issues that arise in the manufacture, fill-finish, packaging or storage of SM-88 that result from a failure at the facilities or the facilities or operations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and commercialize SM-88. This could lead to significant delays in the availability of our drug for clinical trials or the termination or clinical hold on a trial or the delay or prevention of a filing or approval of marketing applications for SM-88. Significant noncompliance could also result in the imposition of sanctions, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for SM-88, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could damage our reputation. If we and/or our manufacturing partners are not able to maintain regulatory compliance, we may not be permitted to market SM-88 and/or may be subject to drug recalls, seizures, injunctions or criminal prosecution.

 

Any adverse developments affecting manufacturing operations for SM-88, if approved for marketing by the FDA, may result in shipment delays, inventory shortages, lot inspection failures, drug withdrawals or recalls or other interruptions in the supply of SM-88. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet regulator-approved manufacturing specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.

 

Drug products that have been produced and stored for later use may degrade, become contaminated or suffer other quality defects, which could cause the affected products to no longer be suitable for its intended use in clinical trials or other development activities. If the defective drug cannot be replaced in a timely fashion, we may incur significant delays in our development programs that could adversely affect the value of SM-88.

 

SM-88 drug substance is being manufactured by a FDA-approved, third party and to date that manufacturer is our sole supplier of this drug substance. To our knowledge, the current manufacturer of this drug substance is the only FDA-approved supplier of the existing drug in the United States. We believe this cGMP manufacturer has sufficient capacity to meet our projected needs into the near future. In the event of a catastrophic event or this manufacturer is unable to meet our needs, we will, due to the nature of the drug substance and the modifications required for this drug substance, need to find an alternative source of supply, which will likely result in time delays in the clinical development process. We believe that replacement for this supplier, in the event it becomes necessary, is not impossible, but would cause us to lose time that could otherwise be devoted to development. Currently, we do not have an arrangement in place for a secondary supplier for this drug substance.

 

Third parties may hold IP rights that impact, restrict or inhibit manufacturing or sale of a commercial version of SM-88.

SM-88 and any other drug product we may develop will face significant competition and, if competitors develop and market products that are more effective, safer or less expensive than our drug, our commercial opportunity will be negatively impacted.

The anticancer treatment industry is highly competitive and subject to rapid and significant technological changes. We are currently developing SM-88 to compete with other drugs that currently exist or are being developed. Drugs we may develop in the future are also likely to face competition from other drugs, some of which we may not be currently be aware of. In marketing our products, we will have domestic and international competitors, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical

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companies, universities and other research institutions. Many of our competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, patient recruitment and manufacturing pharmaceutical products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in more advanced stages of development or collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies also may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make SM-88 and any other drug product we may develop obsolete. Some or all of these factors may contribute to our competitors succeeding in obtaining patent protection and/or marketing approval or developing and commercializing products in our field before we do.

There are a large number of companies working to develop and/or market various types of anticancer treatments. These treatments consist both of small molecule drugs, as well as biological drugs that work by using next-generation technology platforms to address specific cancer targets. These treatments are often combined with one another in an attempt to maximize a response rate. In addition, several companies are developing drugs that work by targeting additional specificities using a single recombinant molecule.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe effects, are more convenient or are less expensive than SM-88. Our competitors also may obtain FDA, EU or other non-U.S. regulatory approval for their products more rapidly than we may, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if SM-88 achieves marketing approval, it may be priced at a significant premium over competitive products, if any have been approved by then, resulting in our product’s reduced competitiveness. In addition, the costs and restrictions effected by the Health Care Reform Law may impact our competitiveness or availability opportunity.

Further, our future ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of similar or biosimilar products.

Smaller and other early-stage companies also may prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, recruiting clinical trial sites and recruiting subjects for clinical trials, as well as in acquiring technologies complementary to or necessary for, SM-88. In addition, the biopharmaceutical industry is characterized by rapid technological changes. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical.

If any drug liability lawsuits are successfully brought against us or any of our collaborators, we may incur substantial liabilities and may be required to limit commercialization of SM-88 and any other drug product we may develop.

We face an inherent risk of drug liability lawsuits related to the testing of SM-88 and any other product candidate we may develop that is intended to treat seriously ill patients. In addition, we face risk of liability lawsuits if SM-88 or any of other drug product of ours is approved by regulatory authorities and introduced commercially. Drug liability claims may be brought against us or our collaborators, if any, by subjects enrolled in our clinical trials, patients, health care providers or others using, administering or selling SM-88 or such other drug product. If we cannot successfully defend ourselves against any such claims, we may incur substantial liabilities. Regardless of their merit or eventual outcome, liability claims may result in, but are not limited to:

 

decreased demand for SM-88 or any other product candidate we may develop;

 

injury to our reputation;

 

withdrawal of subjects in our clinical trials;

 

withdrawal of clinical trial sites or entire trial programs;

 

increased regulatory scrutiny;

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significant litigation costs;

 

substantial monetary awards to or costly settlements with patients or other claimants;

 

drug recalls or a change in the indications for which they may be used;

 

loss of revenue;

 

diversion of management and scientific resources from our business operations; and

 

the inability to commercialize SM-88 or such other drug product.

If SM-88 is approved for commercial sale, we will be highly dependent upon consumer perception and the safety and quality of SM-88. We could be adversely affected if we are subject to negative publicity or if SM-88 proves to be or is asserted to be, harmful to patients. Because of our dependence upon consumer perceptions, any adverse publicity associated with illness or other adverse effects resulting from patients’ use or misuse of SM-88 could have a material adverse impact on our financial condition or results of operations. This would also be true with respect to any other drug product we may develop, receive regulatory approval of and, thereafter, seek to market.

We hold clinical trial insurance for our ongoing SM-88 clinical trials. We also intend to obtain drug liability insurance coverage at appropriate levels for our operations, which will vary as the level of our operations vary during our growth from a R&D company to a company manufacturing and/or marketing drugs to the public. Our current and planned insurance coverage may not be adequate to cover all liabilities that we may incur. We also may need to increase our insurance coverage when we begin the commercialization of SM-88. Insurance coverage can be expensive for pharmaceutical products and candidates. As a result, we may be unable to obtain or maintain sufficient liability insurance at a reasonable cost to protect us against losses, which could have a material adverse effect on our business. A successful drug liability claim or series of claims brought against us, particularly if judgments exceed any insurance coverage we may have, could decrease our cash resources and adversely affect our business, financial condition and results of operations and could possibly cause us to cease our operations in their entirety.

Our management lacks experience in obtaining FDA approval of products, which could result in delays or the failure to obtain required regulatory approval of our products.

Although some of our management team has experience in creating and marketing various products, most members of our executive team have not previously organized, managed or completed FDA-required submissions and clinical trials concerning new drug products. While we intend to retain employees, advisors and consultants with experience in the FDA approval process and have retained and utilized a number of such employees, advisors and consultants currently and in the past, this lack of experience by our chief executive and some operating officers could result in delays in obtaining necessary regulatory approvals, both in conducting clinical trials and final marketing approvals; additional costs; and the possibility that approvals will not be obtained due to the failure to comply with the regulatory approval process. Such delays, costs and/or failure would likely adversely affect our business, financial condition and results of operations and could possibly cause us to cease our operations in their entirety

Risks Related to our Financial Condition and Need for Additional Capital

We have incurred significant losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We have no products approved for commercial sale and to date we have not generated any revenue or profit from drug sales. We may never realize revenue or profitability.

We are a clinical-stage pharmaceutical company with a limited operating history. We have incurred significant losses since our inception. As of March 31, 2020, our accumulated deficit was $107,815,252. Our losses have resulted principally from expenses incurred in the discovery and development of SM-88 and from general and administrative expenses incurred while building our business infrastructure. We expect to continue to incur losses for the near future. Furthermore, we expect these losses to increase as we continue our research and development of and seek regulatory approval for our drug candidate SM-88 and any other product candidates we may develop, prepare for and begin to commercialize SM-88 or any other regulatory-approved products and add infrastructure and personnel to support our drug development efforts and operations as a public company. The net losses and negative cash flows from operations incurred to date, together with expected future losses, have had and likely will continue

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to have, an adverse effect on our stockholders’ equity and working capital. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.

To become and remain profitable, we must succeed in the development and commercialization of drug products with significant market potential. This will require us to be successful in a range of challenging activities for which we are only in the preliminary stages, including, with respect to the near term, developing SM-88, obtaining regulatory approval and manufacturing, marketing and selling SM-88. We may never succeed with these activities or generate revenue from drug sales that is significant enough to achieve profitability. Our ability to generate future revenue from drug sales depends heavily on our success in many areas, which include, but are not limited to:

 

completing research and clinical development of SM-88, including successful completion of required clinical trials;

 

obtaining marketing approval for SM-88;

 

developing a sustainable and scalable manufacturing process for SM-88 and maintaining supply and manufacturing relationships with third parties that can conduct the process and provide adequate (in amount and quality) drugs to support clinical development and the market demand for SM-88, if approved;

 

launching and commercializing SM-88, either directly or with a collaborator or distributor;

 

establishing sales, marketing and distribution capabilities in the United States and in other markets, such as the EU;

 

obtaining market acceptance of SM-88 as a viable treatment option;

 

addressing any competing technological and market developments;

 

identifying, assessing, acquiring and/or developing new product candidates;

 

negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;

 

maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and

 

attracting, hiring and retaining qualified personnel.

These factors applicable to SM-88 would be applicable to any other product candidate we may develop. Even if SM-88 or another product candidate that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercialization. Because of the numerous risks and uncertainties with drug development, we are unable to accurately predict the timing or amount of increased expenses and when or if we will be able to achieve profitability. For example, our expenses could increase if the FDA or EMA require us to conduct supplemental clinical trials not included in our current development plan or if there are any delays in completing our planned clinical trials or in the development of SM-88 or any other drug product we may pursue. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to realize revenue or become or remain profitable could depress our market value and could impair our ability to raise capital, expand our business, develop other product candidates or continue our operations. A decline in the value of our shares could also cause investors in our common stock (or other securities we may issue in the future) to lose all or part of their investment.

To achieve on our long-term business objectives, we will require substantial additional funding, which may require us to agree to restrictions on our operations or may not be available to us on acceptable terms or at all and, if not available, may require us to delay, scale back or cease our drug development programs or operations.

In addition to SM-88, we seek to advance multiple product candidates through our research and clinical development process. The completion of the development, regulatory approval and the potential commercialization of SM-88 or any other product candidate will require substantial funds. Our future financing requirements will depend on many factors, some of which are beyond our control, which include, but are not limited to:

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the number and characteristics of product candidates that we pursue;

 

 

the scope, progress, timing, cost and results of nonclinical and clinical development and research;

 

 

the costs, timing and outcome of our seeking and obtaining FDA, EMA and other non-U.S. regulatory approvals;

 

 

the costs associated with manufacturing SM-88, as well as other potential product candidates, and establishing sales, marketing and distribution capabilities, including in collaboration with others;

 

 

our ability to maintain, expand and defend the scope of our IP 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 IP rights;

 

 

the extent to which we acquire or in-license other products or technologies;

 

 

our need and ability to increase our overall capacity and hire additional administrative, managerial, scientific, operational and medical personnel

 

 

the effect of competing products that may limit market penetration of SM-88 and any other product candidates we may develop;

 

 

the amount and timing of revenues, if any, we receive from commercial sales of SM-88 or any other product candidates for which we receive marketing approval in the future, which is expected to be offset by revenues we must share with collaborators; and

 

 

our need to implement additional internal systems and infrastructure, including financial and reporting systems; and

 

 

the economic and other terms, timing of and ultimate success of any future collaboration, licensing or other arrangements, including the timing of achievement of milestones and receipt of any milestone or royalty payments under such agreements.

Until we can generate sufficient drug and royalty revenue to finance our cash requirements, which we may never achieve, we expect to finance future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements and other marketing and distribution arrangements. The demand for the equity and debt of biotechnology companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Any additional fundraising efforts may divert management’s attention from day-to-day activities and financing may not be available to us when we need it or financings may not be available on favorable terms. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances, royalty rights or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs and/or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, as we expect to do, the ownership interests of our then existing stockholders could be diluted and the terms of these securities may include liquidation or other preferences that adversely affect stockholders’ rights.

While we regularly consider options and opportunities to raise additional capital and obtain financing and will continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used. Additionally, if we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain adequate financing when needed and on favorable terms, we may have to delay, reduce the scope of or suspend one or more of our clinical trials or research and

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development programs or our commercialization efforts.

We may expend our limited resources to pursue SM-88 for certain indications that may not be the most profitable or do not have the greatest likelihood of success.

Because we have limited financial and managerial resources, we currently are focusing our research programs on SM-88 for the treatment of specified cancer therapies. As a result, we may forego or delay pursuit of opportunities with other product candidates or other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products.

If we do not accurately evaluate the commercial potential or target market for SM-88 or any other product candidate, we may relinquish valuable rights through collaboration, licensing or other royalty arrangements in cases where it would have been advantageous for us to retain sole development and commercialization rights.

If we do not achieve our projected development goals in the periods we announce and expect, the commercialization of our products may be delayed and, as a result, our stock price may decline.

Over the course of our development efforts, we will estimate the successful completion of various scientific, clinical, regulatory and other drug development goals, which we refer to as milestones. These milestones may include the commencement or completion of clinical trials and the submission of planned regulatory filings. Occasionally, we may publicly announce the expected timing of some of these milestones. All of these projected milestone timelines will be based on a variety of assumptions. The actual timing of achieving these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control. If we do not meet these milestones as publicly announced, the commercialization of our products may be delayed and, as a result, our stock price may decline.

Risks Related to our Reliance on Third Parties

We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of these trials.

We currently rely on, and will likely continue to rely on, third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators to study our product candidates in clinical trials. We may independently conduct future clinical trials for any drug product we may develop, including SM-88, but will continue to collaborate with such parties to study SM-88 in their clinical trials of SM-88 or other drug candidates. For example, we partnered with PanCAN to study SM-88 in its adaptive randomized Phase II/III trial with registration intent known as Precision Promise. Also, HopES is a Phase II investigator-initiated trial evaluating SM-88 monotherapy in late-stage sarcomas, under the direction of principal investigator Dr. Sant Chawla and in collaboration with The Joseph Ahmed Foundation. Our reliance on these third parties for clinical development activities reduces our control over these activities, relieves us of certain rights we otherwise would have and puts us at risk for the acts or omissions of these third parties, but it does not relieve us of our responsibilities. For example, the FDA requires us to comply with standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of subjects in clinical trials are protected even though we are not in control of these processes. These third parties also may have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, regulatory approvals for SM-88 or other products we may develop and will not be able to, or may be delayed in our efforts to, successfully commercialize SM-88 and any other drug product we may develop.

We also will rely on other third parties to store and distribute supplies for our clinical trials. Any performance failure on the part of our existing or future distributors could delay clinical development or regulatory approval of SM-88,

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producing additional losses and depriving us of potential revenue.

We intend to rely on third-party contract manufacturing organizations to manufacture and supply SM-88 for us. If one of our suppliers or manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers. We may also face delays in the development and commercialization of SM-88 and any other drug product we may develop.

We currently have limited experience in and we do not own facilities for, clinical-scale manufacturing of SM-88, and we will rely upon third-party contract manufacturing organizations to manufacture and supply drug for our clinical trials. The manufacture of pharmaceutical products in compliance with the FDA’s cGMP requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including drug stability, quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced cGMP requirements and other federal and state regulatory requirements and foreign regulations. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, it would jeopardize our ability to supply investigational drug for our clinical trials. Any delay or interruption in the supply of clinical trial materials, including as a result of restrictions put in place because of the COVID-19 pandemic, could delay the completion of our clinical trials, increase the costs associated with maintaining our clinical development programs and, depending upon the period of delay, require us to commence new trials at significant additional expense or terminate the ongoing trials.

All manufacturers used to formulate the components of SM-88 must comply with cGMP requirements, which are enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the documentation and maintenance of records. Manufacturers of our product candidates may be unable to comply with cGMP requirements and/or with other FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time or change their interpretation and enforcement of existing standards for the manufacture, packaging or testing of drug products. We have little control over our manufacturers’ compliance with these regulations and standards and a failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in drug approval, drug seizure or recall or withdrawal of a drug approval. If the safety of any drug supplied is compromised due to a manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize SM-88 and as a result, may be held liable for any injuries sustained. Any of these factors could cause a delay of clinical trial completion, regulatory submission, approval or commercialization of SM-88, increase our costs or impair our reputation.

We currently rely on third party suppliers for SM-88 and for the components of MPS used with SM-88. Supplies are obtained through limited term supply agreements under individual purchase orders. At this time, no supply agreements in place exceed 18 months. Although we believe alternative sources of supplies exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise and facilities is limited, could be more expensive and it could take a significant amount of time to source, any of which would adversely affect our business. New suppliers of SM-88 would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable IP laws to the method of manufacturing the drug candidate. Obtaining the necessary FDA approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party IP rights could result in a significant interruption of supplies and could require the new manufacturer(s) to bear significant additional costs which may be passed on to us.

Our reliance on third parties may require us to share our trade secrets, which increase the possibility that a competitor could discover them or that our trade secrets could be misappropriated or disclosed.

Because we rely on third parties to assist in the research, development and manufacture of SM-88 and may do so with any other product candidate we may develop, we must, at times, share trade secrets with such third parties. We will seek to protect our proprietary technology in part by initially entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees and third-party contractors prior to disclosing any proprietary information. These agreements typically limit the rights of third parties to use or disclose our confidential information, which include our trade secrets.

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Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets could become known by our competitors, are inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s independent discovery of our trade secrets or other unauthorized use or disclosure could impair our competitive position and could have a material adverse effect on our business.

In addition, these agreements would typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data that could potentially relate to our trade secrets, even though our agreements may contain certain limited publication rights. For example, any academic institution that we may collaborate with in the future can be, based on customary practice, expected to be granted rights to publish data arising out of such collaboration, provided that we are notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patent protection of IP rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication. In the future, we may also conduct joint research and develop programs that may require us to share trade secrets under the terms of such research. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development, publication of information by any of our third-party collaborators or otherwise. A competitor’s discovery of our trade secrets could impair our competitive position and could have an adverse impact on our business.

We have entered into a co-promotion agreement and may enter into additional license or collaboration agreements with third parties with respect to SM-88 and any other product candidates we may develop that may place the development or promotion of our product candidates partially or entirely outside of our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us. If such collaborations are not successful, SM-88 and any other product candidates we may choose to develop may not reach their full market potential.

 

In January 2020, we entered into a co-promotion agreement with Eagle Pharmaceuticals, Inc. (“Eagle”), whereby Eagle agreed to provide sales representatives to cover 25% of the Company’s sales force requirements and will receive 15% of the net sales of all SM-88 products in the U.S. during the term of the agreement. TYME remains responsible for the remaining promotional effort. The co-promotion of SM-88 in the United States will be supervised by a joint sales operations committee composed of representatives from the Company and Eagle. Under the agreement, the Company will remain responsible for clinical development and commercial strategy and for the costs of seeking regulatory approval, manufacturing and distribution of SM-88. TYME has the ability to purchase back the Eagle 15% share of the net U.S. sales for $200 million.

 

The co-promotion agreement provides parameters and sales requirements, but certain specific requirements related to promotional activities and requirements will be defined in more detail and finalized as any product nears commercialization. If we and Eagle disagree on these matters, it could lead to disputes or be disruptive to sales efforts. Additionally, Eagle may change its strategic focus or pursue alternative technologies or treatments in a manner that results in reduced or delayed revenue to us. If Eagle fails to effectively promote and assist in the commercialization of our SM-88 products, our business, financial condition, results of operations and prospects could be harmed. In addition, any material alteration of the collaboration agreements, or dispute or litigation proceedings we may have with Eagle in the future could delay development programs, distract management from other business activities and generate substantial expense.

 

We may in the future enter into additional license or collaboration arrangements with other third parties with respect to SM-88 and any other product candidates we may develop that may place the development or promotion of our product candidates partially or entirely outside of our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us, and could be subject to similar types of risks as described above. In addition, any collaborations are and will be subject to numerous risks, which may include, but are not limited to:

 

 

collaborators may have significant discretion in determining the efforts and resources that they will apply to collaborations;

 

 

collaborators may not perform their obligations as expected;

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collaborators may not pursue development and commercialization of SM-88 or any other product candidate we may choose to develop or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

 

 

collaborators may delay clinical trials, provide insufficient funding for a clinical program, stop a clinical trial, abandon SM-88 or other product candidate, repeat or conduct new clinical trials or require a new formulation of SM-88 or other product candidate;

 

 

collaborators may be more established companies with a competitive advantage due to their larger size and cash resources or greater clinical development and commercialization capabilities and, as a result, we may not be able to obtain favorable terms for our arrangements;

 

 

collaborators could independently develop or develop with third parties, products that compete directly or indirectly with SM-88;

 

 

a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;

 

 

we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;

 

 

collaborators may not properly maintain or defend our IP rights or may use our IP or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our IP or proprietary information or expose us to potential liability;

 

 

collaborators may not aggressively or adequately pursue litigation against Abbreviated New Drug Application (“ANDA”) filers or may settle such litigation on unfavorable terms;

 

 

collaborations may be terminated, sometimes at-will, without penalty;

 

 

collaborators may own or co-own IP covering our products that results from our collaborating with them and, in such cases, we would not have the exclusive right to commercialize such IP;

 

 

a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws and could result in civil or criminal proceedings; and

 

 

disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of SM-88 or any other product candidate we may develop or results in costly litigation or arbitration that diverts management attention and resources.

If our collaborations are not successful, or we are unable to reach agreement with a collaboration partner or disputes arise under collaboration arrangements, SM-88 and any other product candidates we may choose to develop may not reach their full market potential, and our business, financial condition, results of operations and prospects could be harmed.

Risks Related to the Operation of our Company

Our future operational success depends on our ability to retain our key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on our chief executive officer, chief operating officer, chief financial officer and the other members of our executive and scientific teams. Our executives may terminate their employment with us at any time.

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The loss of the services of any of these people could impede the achievement of our research, development and commercialization objectives.

Recruiting and retaining qualified scientific, clinical, administrative, operations, manufacturing and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development, preparing filings and communicating with the FDA and other regulatory authorities, preparing for and the conducting of clinical trials and formulating commercialization strategies. Our consultants and advisors may be employed or contracted by other businesses in addition to ours and may have commitments with other entities that may limit their availability to us.

To date, our drug discovery process and development program has been led by Steve Hoffman, our chief executive and science officer. He has been instrumental in providing scientific, technical and business expertise. We do not currently maintain “key person” insurance on Mr. Hoffman or any of our other executives or employees. While we may, in the future, seek to obtain key man insurance on Mr. Hoffman and/or such other executives and employees, we may not be able to obtain the insurance at favorable rates or at all. Any insurance proceeds we may receive under such “key person” insurance may not adequately compensate us for the loss of Mr. Hoffman’s or other insured’s services. Development of SM-88 could ultimately continue without Mr. Hoffman’s or others’ contributions, but future development of SM-88 and all other drug products in our pipeline would be adversely affected without his continued involvement.

We are highly reliant on our executives, but certain of them, including our chief executive and science officer, Steven Hoffman, our president and chief financial officer, Ben Taylor, and our chief medical officer, Giuseppe Del Priore, have other business interests to which they devote their attention. From time to time, these other interests may distract their attention from our company, generate reputational risk for our company or give rise to conflicts of interest that must be resolved through the exercise of sound judgment consistent with their fiduciary duties to us. Our ability to attract and retain investors, collaborators, and employees could be adversely affected by damage to our reputation resulting from various sources, such as our executives’ other business interests, employee misconduct, litigation, or regulatory outcomes.

We expect to expand our development, regulatory and marketing capabilities and, as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

As of March 31, 2020, we had 18 full-time employees. Over the next several years, we expect to experience significant growth in the number of our employees and the scope of our operations. To manage our anticipated future growth, including the potential development of new products, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and recruit and train additional qualified personnel. Future growth would impose significant added responsibilities on management. Due to our limited financial resources and the limited experience of our management team in managing a life sciences company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. Some members of our current management have limited experience in managing a company that had the life sciences research and development and operational growth we anticipate for our Company. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

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Business disruptions (domestic and/or international) could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations could be subject to equipment failures, labor shortages, labor strikes, earthquakes, power shortages, telecommunications failures, floods, hurricanes, typhoons, fires, extreme weather conditions, terrorist activities, medical epidemics, riots, crime, acts of foreign enemies, war, nationalization, government sanction, blockage, embargo, widespread public health crises, and other natural or manmade disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and could increase our costs and expenses. For example, our corporate headquarters is located in New York, New York, and we have another office in Bedminster, New Jersey. Both of these states are currently under shelter-in-place order because of the ongoing COVID-19 pandemic.

Our current and future, third-party collaborators, future partners, supplies, CROs and investigational sites are or will be, located throughout the United States or internationally and may be located near major high-risk terrorist targets, earthquake faults, flood and fire zones. The ultimate impact on us, our significant partners and suppliers as well as our and their general infrastructures being located near major high-risk terrorist targets, earthquake faults, flood and fire zones and being consolidated in certain geographical areas is unknown, but our operations and financial condition could suffer in the event of a major terrorist attack, earthquake, fire, flood or other natural or manmade disaster.

Our business is also subject to risks associated with conducting international business. If we pursue and/or obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business. Some of our third-party collaborators, future partners, suppliers, CROs and investigational sites could be located outside the United States. Accordingly, our future success could be harmed by a variety of factors, which include, but are not limited to:

 

economic weakness, including inflation or political instability in particular non-U.S. economies and markets;

 

differing regulatory requirements for drug approvals in non-U.S. countries;

 

differing, and in some cases, more stringent data protection requirements in non-U.S. countries, such as the EU General Data Protection Regulation;

 

potentially reduced protection for IP rights;

 

difficulties in compliance with non-U.S. laws and regulations;

 

changes in non-U.S. regulations and customs, tariffs and trade barriers;

 

changes in non-U.S. currency exchange rates and currency controls;

 

changes in a specific country’s or region’s political or economic environment;

 

trade protection measures, import/export licensing requirements or other restrictive actions by U.S. or non-U.S. governments;

 

negative consequences from changes in tax laws;

 

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

 

workforce uncertainty in countries where labor unrest is more common than in the United States;

 

difficulties associated with staffing and managing international operations, including differing labor relations;

 

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

 

business interruptions resulting from geo-political actions, including war and terrorism, widespread public health crises or pandemics, such as COVID-19, and related government responses, or natural disasters including earthquakes, typhoons, floods and fires.

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We may seek approvals of our product candidates in the EU and United Kingdom. On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the EU, commonly referred to as Brexit. Following the formation of a majority Conservative government in December 2019, the United Kingdom approved the withdrawal agreement and left the EU on January 31, 2020. The terms of the United Kingdom’s final withdrawal remain subject to ongoing negotiation until December 31, 2020, during which current EU regulations will continue to apply in the United Kingdom. The United Kingdom Parliament banned extensions to the transition period, so the United Kingdom must finalize new trading agreements with the EU by December 31, 2020. Trade negotiations are expected to begin in early March 2020, but the nature of the economic relationship between the EU and United Kingdom remains uncertain, and there is no guarantee that both parties will be able to reach an agreement before the transition period expires. The impact of Brexit on the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the EU is uncertain, and could prevent or delay us from commercializing our product candidates in the United Kingdom or the EU and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or EU for our product candidates, which could significantly and materially harm our business.

We may be party to legal proceedings that could have a material adverse effect on the Company’s liquidity, financial position, and results of operations, as well as its reputation.

 

The Company has limited experience in litigation and other legal proceedings, but any lawsuit brought against us or legal proceeding that we may bring to enforce our rights could result in substantial costs, divert the time and attention of our management, result in counterclaims (whether meritorious or as a litigation tactic), result in substantial monetary judgments or settlement costs and harm our reputation, any of which could seriously harm our business. For example, during the fourth quarter of fiscal year 2019, we, along with our CEO and CFO, were named in a securities lawsuit by a purported stockholder, in which the plaintiff alleged to represent a class of stockholders and asserted claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Though such complaint was voluntarily dismissed by the plaintiff, we could be subject to lawsuits in the future and any litigation or claim against us, even without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, and harm our reputation.  

 

In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. Any lawsuit brought against us by one or more of our stockholders, could result in substantial costs to defend the lawsuit, divert the time and attention of our management, result in substantial monetary judgments or settlement costs and harm our reputation, any of which could seriously harm our business.

 

Further, as we continue to seek to expand, raise capital, and develop and commercialize products, we have entered into, and expect to enter into in the future, agreements and instruments, such as our outstanding warrants and co-promotion agreement, which are subject to interpretation and the potential for dispute. If we and the counterparty to any such agreements or holders of such instruments are unable to resolve our disagreements, such disagreements may result in lawsuits, other legal proceedings and/or protracted negotiations, including those whereby we seek to enforce our rights. Even if successful, litigation, other legal proceedings or protracted negotiations could be expensive and time consuming and could divert management’s attention from managing our business and could result in significant adverse judgments or costs of settlement, amendments to agreements or adjustments to instruments, any of which may have a material adverse effect on our liquidity, financial position, business, reputation or prospects.  

 

Our internal computer systems or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our drug development program.

 

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent

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that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.

Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cybersecurity incidents resulting in the failure of our systems to operate effectively or to integrate with other systems, including those of third-parties with whom we rely on for research, clinical trial services or other business and administrative services, or a breach in security or other unauthorized access of these systems, may affect our ability to manage and maintain our operations. A breach in security, unauthorized access resulting in misappropriation, theft, or sabotage with respect to our proprietary and confidential information, including research or clinical data, could require significant investments of capital and time to remediate and could adversely affect our business, financial condition and results of operations. For example, any such event that leads to unauthorized access, use or disclosure of personal information, including personal information regarding patients in our clinical trials or other studies or our employees, could harm our reputation, require us to comply with federal and/or state breach notification laws, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information. Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. There can be no assurance that the security measures we have implemented to protect our information technology systems and infrastructure will prevent service interruptions or security breaches that could adversely affect our business.

Use of social media could give rise to liability, breaches of data security, or reputational harm.

 

We and our employees use social media to communicate externally. There is risk that the use of social media by us or our employees to communicate about our product candidates or business may give rise to liability, lead to the loss of trade secrets or other intellectual property, or result in public exposure of personal information of our employees, clinical trial patients, customers, and others. Furthermore, negative posts or comments about us or our product candidates in social media could seriously damage our reputation, brand image, and goodwill. Any of these events could have a material adverse effect on our business, prospects, operating results, and financial condition and could adversely affect the price of our common stock.

Risks Related to Intellectual Property

Our ability to successfully commercialize our technology and drug candidate may be materially adversely affected if we are unable to obtain and maintain effective IP.

Our success is largely dependent on our ability to obtain and maintain patent and other IP protection in the United States and in other countries with respect to our proprietary technology and drug candidates. In some circumstances, we may not have the right or ability to control the preparation, filing and prosecution of patent applications or to maintain or enforce the patents, covering technology or products that we license to third parties or, conversely, that we may license from third parties. Therefore, if we become aware of any patent infringement, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. In addition, if third parties who license patents to us or from us fail to maintain such patents or lose rights to those patents, licensing rights or the protection afforded by those patents may be reduced or eliminated.

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and products that are important to our business. This process is expensive and time-consuming and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is also possible that we fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Our pending and future patent applications may be insufficient to protect our technology or products, completely or in part. In addition, existing and any future patents we obtain may not be extensive enough to prevent others from using our technologies or from developing competing drugs and technologies.

The patent position of specialty pharmaceutical and biotechnology companies generally is highly uncertain and involves complex legal and factual questions for which many legal principles remain unresolved. In recent years,

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patent rights have been the subject of significant litigation and, as a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may result in patents not being issued to us in the United States or in other countries. Changes in either the patent laws or interpretation of patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in scientific literature often lag behind the actual discoveries and patent applications in the United States and other countries are typically not published until 18 months after filing or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications or that we were the first to file for patent protection of such inventions. In addition, the United States Patent and Trademark Office (the “USPTO”), might require that the term of a patent issuing from a pending patent application be disclaimed and limited to the term of another patent that is commonly owned or names a common inventor. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights is highly uncertain.

Recent or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. We may become involved in opposition, interference, derivation, inter partes review or other proceedings that challenge our patent rights or the patent rights of others and the outcome of any proceedings are highly uncertain. An adverse determination in any such proceeding could reduce the scope of or invalidate our patent rights, allowing third parties to commercialize our technology or drug products and compete directly with us, without payment to us or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or drugs in a non-infringing manner. The issuance of a patent is not conclusive as to its scope, validity or enforceability and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in the patent claims of our owned or licensed patents being narrowed, invalidated or held unenforceable and may cost significant time and resources to defend. This could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and drugs or limit the duration of the patent protection of our technology and drugs. Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting use of our drug might expire before or shortly after SM-88 or any other drug product we develop is commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to our drug products or otherwise provide us with a competitive advantage.

We may not be able to protect our IP rights throughout the world.

Filing, prosecuting and defending patents for SM-88 or any other drug product we may develop throughout the world would be prohibitively expensive. Competitors may use our technologies in countries where we have not obtained patent protection to develop their own drugs and, further, may export otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as in the United States. These products may compete with our drug products in countries where we do not have any issued patents and our patent claims or other IP rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending IP rights in foreign countries. The legal systems of a number of countries, particularly a number of developing countries, do not favor the enforcement of patents and other IP protection, including those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products against third parties in violation of our proprietary rights. Further, the initiation of proceedings to enforce or protect our patent rights in foreign countries could result in substantial cost and divert our efforts and attention from other aspects of our business.

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Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies. Our patent protection could be reduced or eliminated for noncompliance with these requirements.

The USPTO and various non-U.S. patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during and following the patent prosecution process. Our failure to comply with such requirements could result in abandonment or lapse of a patent or patent application, which would result 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 have been the case if our patents were in force.

We may become involved in lawsuits or other proceedings to protect or enforce our patents or other IP, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe or otherwise violate our patents, trademarks, copyrights or other IP. To counter infringement or unauthorized use, we or our licensees may be required to file infringement claims, which can be expensive and time-consuming. For example, if we need to file patent infringement lawsuits in the future against manufacturers of generic pharmaceuticals that have filed ANDAs with the FDA seeking approval to manufacture and sell generic versions of SM-88 or any other drug product we may develop, we anticipate that the prosecution of such lawsuits will require a significant amount of time and attention from our chief executive officer, chief financial officer and other senior executives. In addition, in a patent infringement proceeding, a court may decide that our patent is invalid or unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in the litigation or proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Such a result could limit our ability to prevent others from using or commercializing similar or identical technology and drugs, limit our ability to prevent others from launching generic versions of our drug products and could limit the duration of patent protection for our products, all of which could have a material adverse effect on our business. A successful challenge to our patents could reduce or eliminate our right to receive royalties. Furthermore, because of the substantial amount of discovery required in connection with IP litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties.

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. Other entities may have or obtain patents or proprietary rights that could limit our ability to make, use, sell, offer for sale or import/export SM-88, or any other approved drug, or impair our competitive position.

Patents could be issued to third parties that we may ultimately be found to infringe. Third parties may have or obtain valid and enforceable patents or proprietary rights that could block us from developing product candidates using our technology. Our failure to obtain a license to any technology that we require may materially harm our business, financial condition and results of operations. Moreover, our failure to maintain a license to any technology that we require for our drug products or their manufacture may also materially harm our business, financial condition and results of operations. Furthermore, we would be exposed to a threat of litigation.

In the pharmaceutical industry, significant litigation and other proceedings regarding patents, patent applications, trademarks and other IP rights have become commonplace. The types of situations in which we may become a party to such litigation or proceedings include:

 

we or our collaborators may initiate litigation or other proceedings against third parties seeking to invalidate the patents held by those third parties or to obtain a judgment that our drugs or processes do not infringe those third parties’ patents;

 

if our competitors file patent applications that claim technology also claimed by us or our licensors or collaborators, we or our licensors or collaborators may be required to participate in interference or opposition proceedings to determine the priority of invention, which could jeopardize our patent rights and potentially provide a third-party with a dominant patent position;

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if third parties initiate litigation claiming that our processes or products infringe their patent or other IP rights, we and our licensors or collaborators will need to defend against such proceedings; and

 

if a license to necessary drug technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe or misappropriate their patent or other IP rights and/or that we breached our obligations under the license agreement and we and our collaborators would need to defend against such proceedings.

These lawsuits would likely be costly and could affect our results of operations and divert the attention of our management and scientific personnel. There is a risk that a court would decide that we or our collaborators are infringing the third party’s patents and would order us or our collaborators to stop the activities covered by the patents. In that event, we or our collaborators may not have a viable alternative to the technology protected by the patent and may need to halt work on the affected product candidate or cease commercialization of an approved product. In addition, there is a risk that a court will order us or our collaborators to pay the other party damages. An adverse outcome in any litigation or other proceeding could subject us to significant liabilities to third parties and require us to cease using the technology that is at issue or to license the technology from third parties. We may not be able to obtain any required licenses on commercially acceptable terms or at all. Any of these outcomes could have a material adverse effect on our business.

The pharmaceutical and biotechnology industries have produced a significant number of patents and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts and the interpretation is not always uniform or predictable. If we are sued for patent infringement, we would need to demonstrate that our products or methods do not infringe the patent claims of the relevant patent or that the patent claims are invalid. We may not be able to do this because proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and divert management’s time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may incur substantial monetary damages, encounter significant delays in bringing SM-88 or any other product candidate to market and be precluded from manufacturing or selling one or more of our drug products.

As noted previously, the cost of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the cost of such litigation and proceedings more effectively than we can because of their substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. For example:

 

patent litigation and other proceedings initiated by or against us may also absorb significant management time;

 

if proceedings are initiated by or against the Company to determine the priority of invention, they could jeopardize our patent rights and potentially provide a third-party with a dominant patent position;

 

if third parties initiate litigation claiming that our processes or products infringe their patent or other IP rights, we and our licensors or collaborators will need to defend against such proceedings; and

 

if a license to necessary drug technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe or misappropriate their patent or other IP rights and/or that we breached our obligations under the license agreement and we and our collaborators would need to defend against such proceedings.

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For example, we may sometimes need to collaborate with U.S. and non-U.S. academic institutions to accelerate our nonclinical research or development under written agreements with these institutions. Typically, these institutions could provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from our collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the IP rights to other parties, potentially blocking our ability to pursue the applicable drug candidate or program.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party IP rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain a license to third-party IP rights necessary for the development of our drug products, we may have to abandon its development and therefore, our business and financial condition could suffer.

We may be unable to protect the confidentiality of our trade secrets, thus harming our business and competitive position.

In addition to our patented technology, we rely upon trade secrets, including unpatented know-how, technology and other proprietary information to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our current and future employees, as well as our collaborators and consultants. We also have agreements with our employees and selected consultants that obligate them to assign their inventions to us. However, while it is our policy to require our employees and contractors who may be involved in the conception or development of IP to execute such agreements, we may be unsuccessful in executing such an agreement with each party who in fact conceives or develops IP that we regard as our own. In addition, it is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. While to our knowledge the confidentiality of our trade secrets has not been compromised, if the employees, consultants or collaborators that are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could be disclosed, misappropriated or otherwise become known or be independently discovered by our competitors. In addition, IP laws in foreign countries may not protect our IP to the same extent as the laws of the United States. If our trade secrets are disclosed or misappropriated, it would harm our ability to protect our rights and adversely affect our business.

We may be subject to claims that our employees and outside contractors have wrongfully used or disclosed IP from their former employers and clients. IP litigation or proceedings could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Although we will try to ensure that our employees and outside contractors do not use the proprietary information or the know-how of others in their work for us and we have no knowledge of any instances of wrongful use or disclosure by our employees and outside contractors to date, we may be subject to claims that we or these employees and outside contractors have used or disclosed IP, including trade secrets or other proprietary information from their former employers or clients. Litigation may be necessary to defend our Company against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable IP rights, personnel or consulting services. Even if we are successful in defending against such claims, litigation or other legal proceedings relating to IP claims may cause us to incur significant expenses and could distract our scientific and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. Should this occur and securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. This type of litigation or proceeding could substantially increase our operating losses and reduce resources available to us for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other IP-related proceedings could adversely affect our ability to compete in the marketplace.

If we do not obtain protection under the Hatch-Waxman Amendments and similar non-U.S. legislation for extending the term of patents covering SM-88 and any other drug product we may develop, our business may be

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materially harmed.

Depending upon the timing, duration and conditions of FDA marketing approval of SM-88 and any other drug product we may develop in the future, 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 (the “Hatch-Waxman Amendments”) and similar legislation in the EU. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved drug as compensation for effective patent term lost during drug development and the FDA regulatory review process. However, we may not receive an extension if we 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. 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 that drug will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue could be materially reduced.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our registered or unregistered trademarks or trade names, to the extent we obtain and use them, may be challenged, infringed, circumvented, declared generic, unregisterable or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion or trademark dilution. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other IP may be ineffective and could result in substantial costs and a diversion of resources and could adversely affect our financial condition or results of operations.

Risks Related to Government Regulations and Agencies

Health care reform measures could hinder or prevent the commercial success of SM-88 any other product we may develop.

In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system that could affect our future revenue and profitability and the future revenue and profitability of our potential customers. Federal and state lawmakers regularly propose and, at times, enact legislation that would result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. For example, the Health Care Reform Law contains a number of provisions, including those governing enrollments in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which have affected existing government healthcare programs and resulted in the development of new programs. Among the provisions of the Health Care Reform Law of importance to our current and potential product candidates are the following:

 

an annual, nondeductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents;

 

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

 

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

 

extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations;

 

expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, which include, among other things, new government investigative powers and enhanced penalties for non-compliance;

 

expansion of eligibility criteria for Medicaid programs in certain states;

 

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

 

a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;

 

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and

 

an independent payment advisory board that will submit recommendations to Congress to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate.

Additionally, various initiatives continue to increase pathways for patients to seek treatment of investigational products outside of clinical trials, including the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, state right to try laws, and the FDA’s Expanded Access program.  These initiatives could potentially impact patient enrollment in clinical trials. These pathways do not currently include any obligations for a manufacturer to make its investigational products available to patients. The future direction and impact of these initiatives is unknown.  

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare, including initiatives designed to control or influence product pricing. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care services to contain or reduce costs of health care may, among other things, adversely affect:

 

our ability to set a price we believe is fair for our drug products;

 

our ability to generate revenue and achieve or maintain profitability; and

 

the availability of capital.

Judicial challenges, executive orders and legislative repeal measures relating to the Health Care Reform Law may create regulatory uncertainty with respect to the pharmaceutical, biotechnology and other life sciences industries and may materially harm our business, financial condition and results of operations.

Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the Health Care Reform Law.

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On January 20, 2017, President Trump signed an executive order directing federal agencies with authorities and responsibilities under the Health Care Reform Law to exercise all available authority and discretion to waive, defer, grant exemptions from or delay the implementation of any provision of the Health Care Reform Law that would impose a fiscal burden on any U.S. state or a cost, fee, tax, penalty or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance or makers of medical devices, products or medications (the “January 2017 Executive Order”). The January 2017 Executive Order does not describe specific federal rules that it applies to but it appears to contemplate discretion for federal agencies to delay or stop the implementation of certain Health Care Reform Law taxes and requirements. As a result, the practical effect of the January 2017 Executive Order is unclear.

On October 12, 2017, President Trump signed an executive order directing federal agencies to take certain steps intended to make it easier for individuals and small businesses to collectively buy health insurance through association health plans, which are not subject to all of the requirements under the Health Care Reform Law (the “October 2017 Executive Order”). On the same date, he announced that cost-sharing reduction payments from the U.S. government for low-income health insurance enrollees’ copayments and deductibles (the “CSR Payments”) would cease effective immediately. Cessation of the CSR Payments and other changes ordered could have significant adverse impacts, including, but not limited to, insurance premium increases and increased uncertainty in the health insurance markets.

On December 12, 2017, President Trump signed the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) into law, revoking the tax penalty that applied to individuals who did not comply with the Health Care Reform Law’s requirement to have health insurance coverage (known as the “individual mandate”). On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the Health Care Reform Law, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the Health Care Reform Law are invalid as well. While the Trump administration and CMS have both stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, if any, and other efforts to repeal and replace the Health Care Reform Law will impact the Health Care Reform Law and our business. On March 2, 2020 the Supreme Court of the United States announced that it would hear an appeal brought by Democratic-led states seeking to affirm the constitutionality of the Health Care Reform Law.

Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain Health Care Reform Law-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.

Judicial challenges to the Health Care Reform Act, the January 2017 and October 2017 Executive Orders, the Tax Act, cessation of the CSR Payments and other executive action and legislation, could result in increased uncertainty with respect to the pharmaceutical, biotechnology and other life science industries and may materially harm our business, financial condition and results of operations. Further, we can provide no assurance that the Health Care Reform Law, as currently enacted or as amended in the future, or other related laws will not adversely affect our business, financial condition or results of operations. Nor can we predict how future federal or state legislative or administrative changes relating to health care reform will affect our business, financial condition or results of operations.

If we fail to comply with healthcare and privacy laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

Certain federal and state healthcare laws and regulations pertaining to fraud and abuse patients’ rights are, and other healthcare issues and will be, applicable to our business. We could be subject to healthcare fraud and abuse, privacy and security, and transparency regulation by both the federal government and the states in which we conduct our business. The regulations that may affect our ability to operate include, but are not limited to:

 

the federal healthcare program Anti-Kickback Statute, which prohibits knowingly and willfully offering, soliciting, receiving or providing any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in exchange for or to induce either the referral of an individual for or the purchase order, lease or recommendation of any good,

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facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs, such as the Medicare and Medicaid programs;

 

the federal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting or causing to be presented, false or fraudulent claims for payment or approval or knowingly using false statements, to obtain payment from the federal government and which may apply to entities like us which provide coding and billing advice to customers;

 

the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which created new federal criminal statutes that prohibit knowingly and willfully executing or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of or payment for, healthcare benefits, items or services relating to healthcare matters;

 

the federal physician self-referral law, commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services reimbursed by Medicare or Medicaid if the physician or a member of the physician’s family has a financial relationship with the entity and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral;

 

the federal transparency requirements under the Health Care Reform Law, which require manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the HHS information related to physician payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as certain ownership and investment interests held by physicians and their immediate family members;

 

HIPAA, the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their respective implementing regulations, which govern the conduct of certain electronic healthcare transactions and are designed to protect the security and privacy of protected health information; and

 

state, local and foreign law equivalents of each of the above federal laws, such as anti-kickback, false claims and transparency laws, which may be broader in scope and apply to items or services reimbursed by any third-party payor, including commercial insurers; for example, California has recently passed the California Consumer Privacy Act (the “CCPA”), which we may become subject to in the future. The CCPA introduces strict compliance regulations on organizations doing business in California that collect personal information about California residents.  The CCPA defines personal information broadly and allows for fines as well as a private right of action from individuals in relation to certain security breaches involving personal information. The CCPA is also prompting similar legislative developments in other U.S. states , which could lead to a series of overlapping but varying laws. These developments, as we become subject to such laws, are likely to increase our compliance burden and our risk, including risks of regulatory fines, litigation and associated reputational harm.  Further, as our operations expand, we may become subject to the EU General Data Protection Regulation (“GDPR”). The GDPR, together with the national legislation of the EU member states governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting.

The Health Care Reform Law, among other things, amended the intent standard of the federal Anti-Kickback Statute and criminal healthcare fraud statutes to a stricter standard such that a person or entity no longer needs to have actual knowledge of a violation of this statute or specific intent to violate it to be convicted. In addition, the Health Care Reform Law codified case law held that a claim including items or services resulting from a violation of the

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federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil, criminal and/or administrative penalties, damages, fines, disgorgement and possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these or other laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, fraud and abuse, and transparency laws may prove costly.

The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.

 

The Tax Act among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is unknown if and to what extent various states will conform to the newly enacted federal tax law. The impact of this tax reform on holders of our common stock is likewise uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.

 

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.

Our operations are subject to anti-corruption laws, including the Foreign Corrupt Practices Act (“FCPA”) and other anti-corruption laws that apply in countries where we operate or may do business in the future. The FCPA and these other laws generally prohibit us, our officers and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We may in the future operate in jurisdictions that pose a high risk of potential FCPA violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

Because our business is heavily regulated, it therefore involves significant interaction with public officials. We have or will have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals are employed by their government and the purchasers of pharmaceuticals are government entities; therefore, any dealings with these prescribers and purchasers are subject to regulation under the FCPA.

We are also subject to other laws and regulations, including regulations administered by the governments of the United States, United Kingdom, and authorities in the EU, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, which we collectively refer to as Trade Control Laws.

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There is no assurance that we will be completely effective in ensuring our compliance, or the compliance of our employees, agents, suppliers, manufacturers, contractors, or collaborators, with all applicable anti-corruption laws, including the FCPA or other legal requirements, including Trade Control Laws. If we are not in compliance with the FCPA, the Bribery Act and other anti-corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions. Any of the foregoing could have an adverse impact on our reputation in the industry as well as our business, financial condition, results of operations and liquidity.

Because we and our suppliers are subject to environmental, health and safety laws and regulations, we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities, which may adversely affect our business and financial condition.

Our operations, including our discovery, development, testing, research and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.

As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to release of or exposure to, hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, our production and development efforts may be interrupted or delayed and our financial condition and results of operations may be materially adversely affected.

The third parties with whom we contract to manufacture SM-88 or any other drug products we may develop are also subject to these and other environmental, health and safety laws and regulations. Liabilities they incur pursuant to these laws and regulations could result in significant costs or, in certain circumstances, an interruption in operations, any of which could adversely affect our business and financial condition if we are unable to find an alternate supplier in a timely manner.

Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

 

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. FDA review time and communications with the FDA may be delayed, prolonged and otherwise negatively impacted by the FDA’s response to the COVID-19 pandemic. With many FDA staff working on COVID-19 activities, it is possible the FDA may need to reprioritize work in order to appropriately address the ongoing pandemic. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including most recently beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets

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and obtain necessary capital in order to properly capitalize and continue our operations.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA or EMA regulations, to provide accurate information to the FDA or EMA or intentional failures to report financial information or data accurately or to disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation and subjects. 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 comply with these 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.

If generic manufacturers use litigation and regulatory means to obtain approval for generic versions of products on which our future revenue depends, our business will suffer.

Under the Federal Food, Drug, and Cosmetic Act (the “FDCA”), the FDA can approve an ANDA for a generic version of a branded drug without the ANDA applicant undertaking the clinical testing necessary to obtain approval to market a new drug. In place of such clinical trials, an ANDA applicant usually needs only to submit data demonstrating that its drug has the same active ingredient(s) and is bioequivalent to the branded product, in addition to any data necessary to establish that any difference in strength, dosage form, inactive ingredients or delivery mechanism does not result in different safety or efficacy profiles, as compared to the reference drug.

The FDCA requires that an applicant for approval of a generic form of a branded drug certify either that its generic drug does not infringe any of the patents listed by the owner of the branded drug in the Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book, or that those patents are not enforceable. This process is known as a Paragraph IV Challenge. Upon receipt of the Paragraph IV notice, the owner has 45 days to bring a patent infringement suit in federal district court against the company seeking ANDA approval of a drug covered by one of the owner’s patents. The discovery, trial and appeals process in such suits can take several years. If this type of suit is commenced, the FDCA provides a 30-month stay on the FDA’s approval of the competitor’s application. This type of litigation is often time-consuming, costly and may result in generic competition if the patents at issue are not upheld or if the generic competitor is found not to infringe upon the owner’s patents. If the litigation is resolved in favor of the ANDA applicant or the challenged patent expires during the 30-month stay period, the stay is lifted and the FDA may thereafter approve the application based on the usual standards for approval of ANDAs.

For various strategic and commercial reasons, manufacturers of generic medications frequently file ANDAs shortly after FDA approval of a branded drug regardless of the perceived strength and validity of the patents associated with such products. Based on these past practices, we believe it is likely that one or more such generic manufacturers will file ANDAs with respect to SM-88, if approved by the FDA, prior to the expiration of the patents related to those compounds.

The filing of an ANDA as described above with respect to any of our products could have an adverse impact on our stock price. Moreover, if any such ANDAs were to be approved and the patents covering the relevant products were not upheld in litigation or if a generic competitor were found not to infringe these patents, the resulting generic competition would negatively affect our business, financial condition and results of operations.

If approved, the marketing for SM-88, will be limited to the specific approved cancer indications and, if we want to expand the indications for which these drug candidates may be marketed, additional regulatory approvals will need to be obtained, which may not be granted.

In addition to other areas of regulatory oversight, we will also need to comply with a variety of laws and regulations concerning the advertising and promotion of our products. For instance, the FDA closely regulates the post-approval

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labeling, marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, product-specific risk evaluation mitigation strategies (REMS), industry-sponsored scientific and educational activities and promotional activities involving the internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. If we desire to market additional indications for SM-88, we will need to seek additional regulatory approvals requiring additional clinical trials to support the new indications, which would be time-consuming and expensive and may produce results that do not support regulatory approvals. If we do not obtain additional regulatory approvals, our ability to expand our business will be limited.

If we are found to have promoted our products for off-label uses after FDA approval for the applicable indication(s) or to have engaged in inappropriate pre-approval promotion of SM-88, we may receive warning letters and become subject to significant liability, which would materially harm our business. The federal government and states’ attorneys general have levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would materially harm our business. In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred and our reputation could be damaged. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we are deemed by the FDA to have engaged in the promotion of our products for off-label use or engage in improper pre-approval promotion, we could be subject to FDA prohibitions on the sale or marketing of our products or significant fines and penalties and the imposition of these sanctions could also affect our reputation and position within the industry.

Adverse results, side effects or injuries may happen and may lead to product liability claims. Liability claims could divert management’s attention from our core business, be expensive to defend, result in sizable damage awards against us that may not be covered by liability insurance, and could harm our reputation in the marketplace among physicians and patients. Any of these events could harm our business and results of operations and cause our stock price to decline.

Additionally, as with an existing number of previously approved oncology products, the FDA will likely require us to educate health care providers and patients about the proper use and administration of SM-88 or any other drug products we develop in the future and obtain FDA approval to market.

Being a public company is expensive and administratively burdensome.

As a public reporting company, we are subject to the information and reporting requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act of 2002 (“SOX”). Complying with these laws and regulations requires the time and attention of our Board and management and increases our expenses. Among other things, we must:

 

maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of SOX and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

 

maintain policies relating to disclosure controls and procedures;

 

prepare and distribute periodic reports, proxy statements, Forms 8-K and other reports and filings in compliance with our obligations under applicable federal securities laws;

 

institute a more comprehensive compliance function, including with respect to corporate governance; and

 

involve, to a greater degree, our outside legal counsel and accountants in the above activities and incur additional expenses relating to such involvement.

The cost of preparing and filing annual, quarterly and current reports, proxy statements and other information with the SEC and furnishing annual reports containing audited financial statements to stockholders is expensive and

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much greater than that of a privately-held company. Compliance with these rules and regulations may require us to hire additional financial reporting, internal controls and other finance personnel and will involve significant regulatory, legal and accounting expenses and the attention of management. There can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all. In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance. Premiums for director and officer insurance can vary substantially from year-to-year and have recently been increasing due to the growth in threatened and actual suits across public companies, which is even more pronounced in biotechnology. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our Board, particularly directors willing to serve on our audit committee.

We will continue to incur relatively outsized costs as a result of recently becoming a public company and in the administration of our organizational structure, including compliance with changing regulations of corporate governance and public disclosure, which will pose challenges for our management.

As a public company, we will incur significant legal, accounting, insurance and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with federal securities law, SOX, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and other laws and related rules and regulations promulgated thereunder. We will continue to incur ongoing periodic expenses in connection with the administration of our organizational structure. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing, as changing laws and regulations and standards relating to corporate governance and public disclosure have created uncertainty and increased the costs and risks of accessing the U.S. public markets. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. Our management team will need to continue to devote significant time and financial resources to comply with both existing and evolving standards for public companies, and, as a result, we will continue to incur costs with compliance activities and require that management dedicate significant time and attention to compliance activities, which may impact their ability to focus on operations and normal business activities.

Additionally, there continues to be public interest and increased legislative pressure related to environmental, social and governance (“ESG”) activities of public companies. We risk negative stockholder reaction, including from proxy advisory services, as well as damage to our brand and reputation, if we do not act responsibly in a number of key areas, including diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency and considering ESG factors in our operations. There is a growing number of states requiring organizations to report their board composition as well or mandating gender diversity, including New York and California.

Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation. For example, Nasdaq’s quantitative listing standards require, among other things, that listed companies maintain a minimum closing bid price of $1.00 per share. Given the increased volatility and market reaction to the COVID-19 pandemic, we may be unable to maintain such a bid price and could face delisting proceedings.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

We are a smaller reporting company as defined in Regulation S-K of the Securities Act, and are not required to provide the information under this item.

ITEM 2.

PROPERTIES

Our principal executive offices are located at 17 State Street, 7th Floor, New York, New York 10004, where we lease and occupy approximately 4,752 square feet of office space, with a lease term expiring August 30, 2020. Our costs for this space are approximately $250,000 per year plus certain tax, utilities and other expenses.

We also maintain a two year lease for an office in Bedminster, New Jersey, where we lease and occupy approximately 1,962 square feet of office space. We estimate our total annual costs for this office at approximately $42,000 per year.

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We believe that our existing facilities are adequate for our current and near-term growth of our administrative operations. We will rely on clinical research centers, hospitals, contract research organizations and other parties for suitable space and facilities to conduct our clinical trials. We will explore, in the future, establishing a dedicated technical facility, when we believe the need for such a facility has arisen. No assurance can be given that such a facility can be located without difficulty or at a cost favorable to us.

ITEM 3.

LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on us, our business, operating results or financial condition.

 

ITEM 4.MINE SAFETY DISCLOSURES

Not  applicable.

ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and their positions as of May 22, 2020 were:

 

 

 

 

 

 

 

 

Title and Business Experience

 

Age

Steve Hoffman

 

Mr. Hoffman has served as Chief Executive Officer of our wholly-owned subsidiary, Tyme, Inc. since its formation in July 2013, and a manager of our wholly-owned subsidiary, Luminant Biosciences, LLC, since its formation in September 2011. In such roles and continuing with his current position as Chief Executive Officer and Chief Science Officer of the Company, which commenced in March 2015, he supervises the development of our product candidates.

 

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Ben R. Taylor

 

Mr. Taylor has served as President and Chief Financial Officer since April 2017.

 

43

 

 

 

Dr. Giuseppe Del Priore

 

Dr. Del Priore has served as Chief Medical Officer since November 2015. Dr. Del Priore also served on our Advisory Board from April 2015 to November 2015.

 

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Dr. Jonathan Eckard

 

Dr. Eckard has served as Chief Scientific Affairs Officer since August 2017 and assumed the role of Chief Business Officer in March 2019.

 

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Michele Korfin

 

Ms. Korfin has served as our Chief Commercial Officer since October 2018 and assumed the role of Chief Operating Officer in March 2019.

 

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James Biehl

 

Mr. Biehl has served as our Chief Legal Officer and Secretary since September 2018 and served on our Board from 2017 until September 2018.

 

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Barbara C. Galaini

 

Ms. Galaini has served as our Principal Accounting Officer since August 2018 and our Corporate Controller since April 2018.

 

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PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Public market for our common stock

Our common stock has been traded on the Nasdaq Capital Market under the symbol “TYME” since July 27, 2017. Prior to July 27, 2017, our common stock was quoted on the over-the counter market, QB Tier, under the symbol “TYME.” Our transfer agent is Continental Stock and Transfer and Trust Company.

 

The closing price of TYME stock as of May 18, 2020 was $1.70.

Holders; Shares Outstanding

We had a total of 123,312,252 shares of our common stock outstanding on May 18, 2020, held by approximately 180 stockholders of record. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in “street name” by brokers and other nominees.

Dividend Policy

We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon financial condition, results of operations, capital requirements and such other factors as our Board deems relevant. Further, in the event that we issue any shares of a class or series of our preferred stock, the designation of such class or series could limit our ability to pay dividends on our common stock.

Securities Authorized for Issuance Under Equity Compensation Plan

Reference is made to the information in Item 12 of this report under the caption “Equity Compensation Plans in effect as of March 31, 2020,” which is incorporated herein by this reference.

 

Share Repurchases

During the twelve months ended March 31, 2020, we did not repurchase any shares of common stock.

 

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined in Regulation S-K of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.

 

 

 

 

 

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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 in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. As used in this report, unless the context suggests otherwise, “we,” “us,” “our,” “the Company,” “TYME” or “Tyme Technologies” refer to Tyme Technologies, Inc., together with its subsidiaries.

 

Overview

 

TYME is an emerging biotechnology company developing cancer metabolism-based therapies (CMBTsTM) that are intended to be effective across a broad range of solid tumors and hematologic cancers, while also maintaining patients’ quality of life through relatively low toxicity profiles. Unlike targeted therapies that attempt to regulate specific pathways within cancer, TYME’s therapeutic approach is designed to take advantage of a cancer cell’s innate metabolic requirements to cause cancer cell death. Our first-in-class CMBT compounds include SM-88 and TYME-18. These compounds are structurally and mechanistically different, and we believe they offer the potential for better and safer medicines. Early clinical results demonstrated by SM-88 in multiple advanced cancers, including pancreatic, prostate, sarcomas and breast, reinforce the potential of our emerging CMBT pipeline. Moreover, we believe our pipeline offers hope to patients for a new future in long-term management of advanced cancers.

 

Our lead clinical CMBT compound, SM-88, is an oral investigational modified proprietary tyrosine derivative that is hypothesized to interrupt the metabolic processes of cancer cells by breaking down the cells’ key defenses and leading to cell death through oxidative stress and exposure to the body’s natural immune system. To date, clinical trial data have shown that SM-88 has achieved confirmed tumor responses across 15 different cancers, both solid and liquid tumors, including pancreatic, lung, breast, prostate, sarcoma and lymphoma cancers with minimal serious Grade 3 or higher adverse events, which we believe is rare for investigational compounds. Our lead compound SM-88 is now in a pivotal trial and a Phase II/III adaptive randomized trial with registration intent for patients with second- and third-line pancreatic cancer. In fiscal year 2020, we launched our pivotal study for SM-88 in the third-line treatment of pancreatic cancer through an amendment to our ongoing TYME-88-Panc trial (Part 2); with the first patient dosed in the third quarter of the fiscal year. We anticipate the trial to be fully enrolled by the end of calendar year 2020 or early calendar year 2021. We currently estimate the cost of the TYME-88-Panc trial (Part 2) to be approximately $15 million, with such costs anticipated to extend through calendar year 2021. We have partnered with the Pancreatic Cancer Action Network (“PanCAN”) to study SM-88 in an adaptive randomized Phase II/III trial with registration intent known as Precision PromiseSM. In Precision Promise, SM-88 is initially being studied as second-line monotherapy and the study of SM-88 could expand to first-line combination therapy with standard of care. The remaining estimated cost for Precision Promise Stage 1 is approximately $7.5 million. Patients are also being enrolled in a Phase II study evaluating SM-88 in high-risk sarcomas and we presented final SM-88 Phase II clinical data at the European Society for Medical Oncology’s ESMO 2019 conference showing encouraging clinical benefit in patients with bio-marker recurrent prostate cancer. The Company is actively evaluating the expansion of our clinical program to hematological, breast, prostate and other cancers.  

 

TYME-18 is a CMBT compound under development that is delivered intratumorally. Like SM-88, TYME-18 leverages the unique metabolism of cancer to create a treatment for inoperable tumors. Preliminary observations of the local administration of TYME-18, an amphiphilic steroid acid, suggested its potential as an important regulator of energy metabolism that may impede the ability of tumors to increase in size which could prove useful in difficult-to-treat cancers. In initial preclinical xenograft mouse studies, TYME-18 was able to completely resolve over 90 percent (11/12 mice) of established colorectal tumors within 12 days versus an average of over 600 percent growth in the control animals. The Company plans to continue with the development of TYME-18 in solid tumors and to provide details of an IND-enabling program this calendar year.

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COVID-19 Update

In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. The COVID-19 pandemic, and actions taken by governments and others in response thereto, has negatively impacted the global economy, financial markets, and the industries in which we operate and has disrupted day-to-day life. We are

closely monitoring the impact of COVID-19 on all aspects of our business, our clinical trials, and the safety of

patients. We have worked closely with our clinical trial sites during the pandemic. At this time, all trials for SM-88 are still actively enrolling patients and we believe we have sufficient clinical supply to complete all of our trials. We are targeting full enrollment for the TYME-88-Panc pivotal trial by late-2020 to early 2021. We are committed to working with the clinical trial sites to assure appropriate access for patients who are seeking clinical trial options for these advanced cancers for which the patients have limited or no other treatment options. However, the extent to which COVID-19 impacts our product candidates and business, including our access to capital markets and financing sources, depends on numerous evolving factors that that are highly uncertain and cannot be accurately predicted, including those identified under “Risk Factors” in this Annual Report on Form 10-K, many of which are beyond our control. Management continues to monitor the situation closely and intends to implement business continuity and emergency response plans as needed.

Critical Accounting Policies and Recent Accounting Pronouncements

While our significant accounting policies are more fully described in Note 2 to the Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are critical to the preparation of our financial statements. The financial information presented in this section is in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Research and Development Expenses

Research and development costs are expensed as incurred and are primarily comprised of, but not limited to, external research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”) and consultants that conduct clinical and preclinical studies, costs associated with preclinical and development activities, costs associated with regulatory operations, depreciation expense for assets used in research and development activities and employee related expenses, including salaries and benefits for research and development personnel. Costs for certain development activities, such as clinical studies, are accrued, over the service period specified in the contract and recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the patterns of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued expense.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to federal income taxes in the United States, as well as in various U.S. state jurisdictions. Significant judgments and estimates are required in the determination of the income tax expense.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).

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A valuation allowance is provided when, after consideration of available positive and negative evidence, that it is not more likely than not that the benefit from deferred tax assets will be realizable. In recognition of this risk, we have provided a full valuation allowance against the net deferred tax assets.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various jurisdictions. ASC 740 “Income Taxes” states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

 

As of March 31, 2020, the Company had gross U.S. federal net operating loss carryforwards of approximately $69.3 million, which may be available to offset future income tax liabilities and will begin to expire at various dates starting in 2033. As of March 31, 2020, the Company had gross federal research and development tax credit carryforwards of $2.1 million available to reduce future tax liabilities which will begin to expire at various dates starting in 2030. As of March 31, 2020, none of the Company’s state net operating losses have value due to the apportionment rule in the states where state income tax returns are currently filed. We had unrecognized tax benefits of $318,000 and $127,000 at March 31, 2020 and 2019, respectively. Increases or decreases would not have an effect on the effective tax rate.

The Company files federal income tax returns in the United States, and various state jurisdictions. The federal and state income tax returns are generally subject to tax examinations for the period January 1, 2016 through March 31, 2019. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period. In addition, we had no income tax related penalties or interest for periods presented in these consolidated financial statements. When and if we were to recognize interest and penalties related to unrecognized tax benefits, they would be reported in tax expense.

Stock-Based Compensation

We follow the authoritative guidance for accounting for stock-based compensation in ASC 718, “Compensation-Stock Compensation.” The guidance requires that stock-based payment transactions be recognized in the financial statements based on their fair value at the grant date and recognized as compensation expense over the vesting period as services are being provided.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected term of the option, risk-free interest rates, the value of the common stock and expected dividend yield of the common stock. For awards subject to time-based vesting conditions, we recognize stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. The Company accounts for forfeitures as they occur, rather than estimating forfeitures as of an award’s grant date.

The Company adopted ASU 2018-07 and, as such, the fair value of options granted to non-employees is estimated at the date of grant only, and the expected term is determined using the simplified method for options granted to non-employees and consultants.

Derivative Warrant Liability

Certain freestanding common stock warrants that are related to the issuance of common stock are classified as liabilities and recorded at fair value due to characteristics that require liability accounting, primarily the obligation to issue registered shares of common stock upon notification of exercise and certain price protection provisions. Warrants of this type are subject to re-measurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense) in the consolidated statement of operations.

As noted in Note 9, Stockholders’ Equity, the Company classifies a warrant to purchase shares of its Common Stock as a liability on its consolidated balance sheet if the warrant is a free-standing financial instrument that contains

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certain price protection features that cause the warrants to be treated as derivatives. Each warrant of this type is initially recorded at fair value on date of grant using the Monte Carlo simulation model and is subsequently re-measured to fair value at each subsequent balance sheet date. Changes in fair value of the warrant are recognized as a component of other income (expense) in the consolidated statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant. The Company utilizes Level 3 fair value criteria to measure the fair value of the warrants.

Refer to Note 2 to our Consolidated Financial Statements for a discussion of Recent Accounting Pronouncements.

Results of Operations

Year ended March 31, 2020 Compared to Year Ended March 31, 2019

Net loss for the year ended March 31, 2020 was $22,001,000 compared to $32,983,000 for the year ended March 31, 2019. The decrease in the net loss compared to the prior year is due to decreased operating costs and expenses and income from change in fair value of warrant liability in 2020, as highlighted below.

Cash used in operating activities for the year ended March 31, 2020 was $19,560,000 compared to $20,116,000 for the year ended March 31, 2019. See “Cash Flows” section below for further details.

Revenue

During the years ended March 31, 2020 and March 31, 2019, we did not realize any revenues from operations. We do not anticipate recognizing any revenues until such time as one of our products has been approved for marketing by appropriate regulatory authorities or we enter into collaboration or licensing arrangements, none of which is anticipated to occur in the near future.

Operating Expenses

For the year ended March 31, 2020, operating costs and expenses totaled $25,760,000, compared to $31,777,000 for the year ended March 31, 2019, representing a decrease of $6,017,000, of which $2,471,000  relates to  severance expense recorded in the year ended  March 31, 2019. Operating costs and expenses by function were comprised of the following:

 

Research and development expenses were $12,956,000 for the year ended March 31, 2020, compared to $14,719,000 for the year ended March 31, 2019, representing a decrease of $1,763,000. Substantially all research and development expenditures have been incurred in respect of our lead drug candidate SM-88 and its technology platform. Research and development activities primarily consist of the following:

 

Study and consulting expenses were $7,713,000 for the year ended March 31, 2020, compared to $9,554,000 for the year ended March 31, 2019, representing a decrease of $1,841,000 between the comparable periods. The decrease is mainly attributable to the timing of activity related to Part 1 of our Tyme-88-Panc Phase II trial and our recently completed Phase II prostate clinical trial that was completed in fiscal year 2020. Study costs are anticipated to vary between future accounting periods as we continue to develop our drug candidates and seek governmental approval of such drug candidates.

 

Salary and salary related expenses for research and development personnel was $2,697,000 for the year ended March 31, 2020, compared to $2,307,000 for the year ended March 31, 2019, representing an increase of $390,000 between comparable periods, primarily due to costs associated with an increased employee base.

 

Included in research and development expense for the year ended March 31, 2020 is $2,537,000 of stock based compensation related to stock options granted to research and development personnel compared to $2,844,000 for the year ended March 31, 2019, representing a decrease of $307,000 between the comparable periods, primarily due to reduction in expense for grants that fully amortized partially offset by the amortization of expense related to options granted to employees during fiscal year 2020.

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General and administrative expenses were $12,804,000 for the year ended March 31, 2020, compared to $14,587,000 for the year ended March 31, 2019, representing a decrease of $1,783,000. The general and administrative expenses include:

 

Stock based compensation related to stock options granted was $3,549,000 for the year ended March 31, 2020, compared to $5,719,000 for the year ended March 31, 2019, representing a decrease of $2,170,000, primarily attributable to grants that fully amortized, partially offset by amortization of grants granted to employees, board members and consultants during fiscal year 2020.

 

Legal, professional services, accounting and auditing expenses for the year ended March 31, 2020, was $3,205,000, compared to $3,834,000 for the year ended March 31, 2019, representing a decrease of $629,000, primarily related to decreases in legal and accounting fees, partially offset by increases in investor relations and communications activity in fiscal year 2020.

 

Salary and salary related expenses for non-research and development personnel was $3,741,000 for the year ended March 31, 2020, compared to $3,245,000 for the year ended March 31, 2019, representing an increase of $496,000 between the comparable periods due to costs associated with an increased employee base.

 

Other general and administrative expenses for the year ended March 31, 2020 was $2,309,000, compared to $1,789,000 for the year ended March 31, 2019, representing an increase of $520,000 between the comparable periods due to higher costs in fiscal year 2020 related to warrant issuances, insurance and other administrative costs.

 

There was no severance expense for the year ended March 31, 2020. For the year ended March 31, 2019, severance expense was $2,471,000. On March 15, 2019, we entered into a Release Agreement related to the separation of employment of our former Chief Operating Officer. The Release Agreement provides for salary continuance for five years, reimbursement of health benefits for three years and a modification to his outstanding stock options to extend the post-termination exercise period for his vested options from three months to five years. The severance expense was recorded at its present value and included $0.4 million relating to stock option modification.

Other Income/Expenses

 

For the year ended March 31, 2020, the Company had $3,645,000 of income related to the change in fair value of warrant liability.  The warrant liability was established in connection with the issuance of  warrants from the underwritten registered offering that closed on April 2, 2019.

For the year ended March 31, 2020, the Company incurred $114,000 of interest expense as compared to $7,000 in the year ended March 31, 2019 related to the severance and insurance note payables.

Interest income for the year ended March 31, 2020 was $229,000 as compared to $90,000 in the year ended March 31, 2019, which represents interest income earned on bank deposits.

 

Warrant Modification

There was no warrant modification expense for the year ended March 31, 2020. Warrant modification expense for the year ended March 31, 2019 was $1,289,000, representing the incremental value of the maturity extension of the 3,483,521 outstanding March and April 2017 Private Placement (see Note 9 to the Consolidated Financial Statements) warrants as compared to the original warrants, both valued on the modification dates which is reflected in warrant modification expense in the consolidated statement of operations.

Income Tax

Our effective income tax rate for the years ended March 31, 2020 and 2019 was zero percent.

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Adjusted Net Loss and Adjusted Net Loss per Share

 

Adjusted net loss for the year ended March 31, 2020, was $19,560,000 or $0.17 per share compared to $22,743,000 or $0.23 per share for the year ended March 31, 2019 after adjusting for change in fair value of warrant liability, warrant modification expense, severance stock based compensation and amortization of employees, directors and consultants stock options. Adjusted net loss and adjusted net loss per share are non-GAAP measures. See “Use of Non-GAAP Measures” below for a reconciliation to the comparable GAAP measures.

 

Use of Non-GAAP Measures

 

Adjusted net loss and adjusted net loss per share as presented in this report are non-GAAP measures. The adjustments relate to the change in fair value of warrant liability, warrant modification expenses, severance stock based compensation and amortization of employees, directors and consultants stock options. These financial measures are presented on a basis other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). In the reconciliation tables that follow, we present adjusted net loss and adjusted net loss per share, reconciled to their comparable GAAP measures, net loss and net loss per share. These items are adjusted because they are not operational or because they are significant noncash charges and management believes these adjustments are meaningful to understanding the Company's performance during the periods presented. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP. Our definitions of adjusted net loss and adjusted loss per share may not be comparable to similar measures reported by other companies.

 

Reconciliation of Net Loss to Adjusted Net Loss

 

 

 

 

 

 

 

 

 

 

For the Year Ended March 31,

 

 

 

2020

 

 

2019

 

Net loss (GAAP)

 

$

(22,001,000

)

 

$

(32,983,000

)

Adjustments:

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

(3,645,000

)

 

 

 

Warrant modification expense

 

 

 

 

 

1,289,000

 

Severance stock based compensation

 

 

 

 

 

388,000

 

Amortization of employees, directors and consultants stock options

 

 

6,086,000

 

 

 

8,563,000

 

Adjusted net loss (non-GAAP)

 

$

(19,560,000

)

 

$

(22,743,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Loss Per Share to Adjusted Basic and Diluted Net Loss Per Share

 

 

 

 

 

 

 

 

 

 

For the Year Ended March 31,

 

 

 

2020

 

 

2019

 

Net loss per share (GAAP)

 

$

(0.19

)

 

$

(0.32

)

Adjustments:

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

(0.03

)

 

 

 

Warrant modification expense

 

 

 

 

 

0.01

 

Severance stock based compensation

 

 

 

 

*

 

Amortization of employees, directors and consultants stock options

 

 

0.05

 

 

 

0.08

 

Adjusted basic and diluted net loss per share (non-GAAP)

 

$

(0.17

)

 

$

(0.23

)

* The effect of the change was negligible to the adjusted basic and diluted net loss per share.

 

The Non-GAAP Measures for the year ended March 31, 2020 and 2019 provide management with additional insight into the Company’s results of operations from period to period by excluding certain non-operational and non-cash charges, and are calculated using the following adjustments to net loss:

 

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a)

The warrants issued as part of an equity offering on April 2, 2019 are measured at fair value using a Monte Carlo model which takes into account, as of the valuation date, factors including the current exercise price, the remaining contractual term of the warrant, the current price of the underlying stock, its expected volatility, the risk-free interest rate for the term of the warrant and the estimates of the probability of fundamental transactions occurring. The warrant liability is revalued at each reporting period or upon exercise. Changes in fair value are recognized in the consolidated statements of operations and are excluded from adjusted net loss and adjusted net loss per share.

 

 

b)

The Company uses the Black-Scholes option pricing model to determine fair value of stock options granted. For employees and non-employees, the compensation expense is amortized over the requisite service period which approximates the vesting period. The expense is excluded from adjusted net loss and adjusted net loss per share.

 

 

c)

The Company uses the Black-Scholes option pricing model to determine the expense associated with the modification of warrants and stock based compensation grants.

 

Adjusted basic net loss per share is computed by dividing adjusted net loss by the weighted average number of shares of Company common stock outstanding for the period, and adjusted diluted loss per share is computed by also including common stock equivalents outstanding for the period. During the periods presented, the calculation excludes any potential dilutive common shares and any equivalents as they would have been anti-dilutive as the Company incurred losses for the periods then ended.

Liquidity and Capital Resources

Liquidity and Capital Requirements Outlook

 

We anticipate requiring additional capital to further fund the development of our product candidates, as well as to engage in potential partnerships or collaborations. The most significant funding needs are in connection with (i) conducting Part 2 of TYME-88-Panc, our pivotal trial, and participating in Precision Promise, an adaptive randomized Phase II/III trial with registration intent, which examine our lead compound SM-88 for patients with second- and third-line pancreatic cancer, (ii) participating in an investigator-initiated clinical trial of SM-88 in sarcoma, and (iii) conducting additional or related studies and investigations, including small-scale pre-clinical studies related to the mechanism of action of our lead clinical program SM-88 and other potential drug candidates. The greater scale of these trials is expected to lead to increased costs, including providing SM-88 for patient use. If we determine to move beyond the pre-clinical stage for any of our pre-clinical trials or if we pursue studies in other cancer types, our liquidity requirements will be increased. As discussed elsewhere in this Annual Report on Form 10-K, we are actively evaluating the expansion of our clinical program to hematological, breast, prostate and other cancers.

 

Primarily as a result of its active clinical trials, as well as other business developments, the Company currently anticipates that its quarterly cash usage, or “cash burn rate”, will increase in fiscal 2021 compared to fiscal 2020 and is expected to approximate $7.0 million to $8.0 million per quarter.

 

As of March 31, 2020, the Company had cash on hand of approximately $26.7 million and a working capital of approximately $22.5 million.

Management has concluded that substantial doubt does not exist regarding the Company’s ability to satisfy its obligations as they come due during the twelve-month period following the issuance of these financial statements. This conclusion is based on the Company’s assessment of qualitative and quantitative conditions and events, considered in aggregate as of the date of issuance of these financial statements that are known and reasonably knowable. Among other relevant conditions and events, including the ongoing COVID-19 pandemic and related government and economic reactions, the Company has considered its operational plans, liquidity sources, obligations due or expected, funds necessary to maintain the Company’s operations, and potential adverse conditions or events as of the issuance date of these financial statements.

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The Company has historically funded its operations primarily through equity offerings of its common stock. We regularly evaluate opportunities to raise capital and obtain necessary, as well as opportunistic financing. To meet our short and long-term liquidity needs, we currently expect to use existing cash balances and a variety of other means, including potential issuances of debt or equity securities in public or private financings, option exercises, and partnerships and/or collaborations. The demand for the equity and debt of biopharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations.

While we will continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used.

Additional equity financing, which we expect to raise, may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; and our stock price may not reach levels necessary to induce option exercises. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may have to delay or discontinue the development of certain or all of our drug candidates or raise funds on terms that we currently consider unfavorable.

 

From time to time, we may also restructure our outstanding securities or seek to repurchase or redeem them if we

believe doing so would provide us with additional flexibility to raise capital or is otherwise in the best interests of the Company.

 

Historical Financings

 

On January 7, 2020, the Company and Eagle Pharmaceuticals, Inc. (“Eagle”) entered into a Securities Purchase Agreement (the “Eagle SPA”), pursuant to which the Company issued and sold to Eagle 10,000,000 shares of common stock, at a price of $2.00 per share. The Eagle SPA provides that Eagle will, subject to certain conditions, make an additional payment of $20 million upon the occurrence of a milestone event, which is defined as the earlier of (i) achievement of the primary endpoint of overall survival in the TYME-88-Panc pivotal trial; (ii) achievement of the primary endpoint of overall survival in the PanCAN Precision PromiseSM SM-88 registration arm; or (iii) U.S. Food and Drug Administration (“FDA”) approval of SM-88 in any cancer indication. This payment would be split into a $10 million milestone cash payment and a $10 million investment in TYME at a 15% premium to the then prevailing market price. Eagle’s shares will be restricted from sale until the earlier of three months following the milestone event or the three-year anniversary of the agreement.

 

On October 18, 2019, the Company entered into an Open Market Sale AgreementSM (the “Sale Agreement”) with Jefferies LLC (“Jefferies”), pursuant to which the Company may, from time to time, sell shares of Common Stock, having an aggregate offering price of up to $30,000,000 through Jefferies, as the Company’s sales agent (the “Jefferies ATM”). The shares will be offered and sold by the Company pursuant to its previously filed and currently effective Registr