UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2019
or
For the Transition Period from to .
Commission File Number 001-38128
CHECKPOINT THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
47-2568632
(I.R.S. Employer Identification No.)
2 Gansevoort Street, 9th Floor
New York, New York 10014
(Address of Principal Executive Offices)
10014
(Zip Code)
Registrant’s telephone number, including area code: (781) 652-4500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.0001 per
Trading Symbol(s)
CKPT
Name of each exchange on which registered
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 x
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 x
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 x 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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act:
Large accelerated filer
Non-accelerated filer
¨
¨
Emerging growth company x
Accelerated filer
x
Smaller reporting company x
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. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
As of June 28, 2019, the last business day of the registrant’s mostly recently completed second fiscal quarter, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $68,543,036 based upon the closing sale price of our common stock of $3.03 on that date. Common stock held by each
officer and director and by each person known to own in excess of 5% of outstanding shares of our common stock has been excluded in that such persons may be
deemed to be affiliates. The determination of affiliate status in not necessarily a conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class of Common Stock
Class A Common Stock, $0.0001 par value
Common Stock, $0.0001 par value
Outstanding Shares as of March 6, 2020
7,000,000
48,038,506
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2020 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form
10-K.
CHECKPOINT THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”)
and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and involve known and unknown risks, uncertainties and other factors that may cause
our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such
forward-looking statements. The words “anticipate,” “believe,” “estimate,” “may,” “expect” and similar expressions are generally intended to identify forward-
looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including,
without limitation, those discussed under the captions “Risk Factors,” and elsewhere in this report. All written or oral forward-looking statements attributable to us
are expressly qualified in their entirety by these cautionary statements. Such forward-looking statements include, but are not limited to, statements about our:
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expectations for increases or decreases in expenses;
expectations for the clinical and preclinical development, manufacturing, regulatory approval, and commercialization of our pharmaceutical product
candidates or any other products we may acquire or in-license;
use of clinical research centers and other contractors;
expectations as to the timing of commencing or completing preclinical and clinical trials and the expected outcomes of those trials;
intention to use data from our ongoing Phase 1 clinical trial of cosibelimab to support the submissions of one or more U.S. Biologics License
Applications and relatedly, our assumption that exclusively foreign clinical data may be acceptable to support marketing approval under Food and
Drug Administration regulations;
expectations for incurring capital expenditures to expand our research and development and manufacturing capabilities;
expectations for generating revenue or becoming profitable on a sustained basis;
expectations or ability to enter into marketing and other partnership agreements;
expectations or ability to enter into product acquisition and in-licensing transactions;
expectations or ability to build our own commercial infrastructure to manufacture, market and sell our product candidates;
expectations for the acceptance of our products by doctors, patients or payors;
ability to compete against other companies and research institutions;
ability to secure adequate protection for our intellectual property;
ability to attract and retain key personnel;
ability to obtain reimbursement for our products;
estimates of the sufficiency of our existing cash and cash equivalents and investments to finance our operating requirements, including expectations
regarding the value and liquidity of our investments;
stock price and the volatility of the equity markets;
expected losses; and
expectations for future capital requirements.
The forward-looking statements contained in this report reflect our views and assumptions as of the effective date of this report. Except as required by law, we
assume no responsibility for updating any forward-looking statements.
We qualify all of our forward-looking statements by these cautionary statements.
Item 1.
Business
OVERVIEW
PART I
We are a clinical-stage immunotherapy and targeted oncology company focused on the acquisition, development and commercialization of novel treatments for
patients with solid tumor cancers. We are evaluating our lead antibody product candidate, cosibelimab, a potentially differentiated anti-Programmed Death Ligand-
1 (“PD-L1”) antibody licensed from the Dana-Farber Cancer Institute (“Dana-Farber”), in an ongoing Phase 1 clinical trial in checkpoint therapy-naïve patients
with selected recurrent or metastatic cancers, including ongoing cohorts intended to support one or more Biologics License Application (“BLA”) submissions. In
addition, we are evaluating our lead small-molecule, targeted anti-cancer agent, CK-101, a third-generation epidermal growth factor receptor (“EGFR”) inhibitor,
in a Phase 1 clinical trial for the treatment of patients with EGFR mutation-positive non-small cell lung cancer (“NSCLC”).
We have also entered into various collaboration agreements with TG Therapeutics, Inc. (“TGTX”), a related party, to develop and commercialize certain assets in
connection with our licenses in the field of hematological malignancies, while we retain the right to develop and commercialize these assets in solid tumors.
In September 2018, we announced preliminary interim data from our ongoing Phase 1 clinical trial of CK-101. The data were presented in an oral presentation at
the International Association for the Study of Lung Cancer (“IASLC”) 19th World Conference on Lung Cancer in Toronto.
In September 2019, we announced updated interim results from our ongoing multicenter Phase 1 clinical trial of anti-PD-L1 antibody cosibelimab. The data were
presented in a poster presentation at the European Society for Medical Oncology (“ESMO”) Congress 2019 in Barcelona, Spain. We continue to enroll cutaneous
squamous cell carcinoma (“CSCC”) patients to support an initial BLA submission for cosibelimab based on this ongoing clinical trial.
To date, we have not received approval for the sale of any product candidate in any market and, therefore, have not generated any product sales from any product
candidates. In addition, we have incurred substantial operating losses since our inception, and expect to continue to incur significant operating losses for the
foreseeable future and may never become profitable. As of December 31, 2019, we have an accumulated deficit of $120.1 million.
We are a majority-controlled subsidiary of Fortress Biotech, Inc. (“Fortress”).
CORPORATE INFORMATION
Checkpoint Therapeutics, Inc. was incorporated in Delaware on November 10, 2014 and commenced principal operations in March 2015. Our executive offices are
located at 2 Gansevoort Street, 9th Floor, New York, NY 10014. Our telephone number is (781) 652-4500 and our email address is ir@checkpointtx.com.
We maintain a website with the address www.checkpointtx.com. We make available free of charge through our Internet website our annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically
file such material with, or furnish such material to, the Securities and Exchange Commission (“SEC”). We are not including the information on our website as a
part of, nor incorporating it by reference into, this report. You may read and copy any such reports and amendments thereto at the SEC’s Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of 10:00 a.m. to 3:00 p.m. Please call the SEC at 1-800-SEC-0330 for
information on the Public Reference Room. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and
other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov.
PRODUCTS UNDER DEVELOPMENT
Immuno-Oncology Agents
Cosibelimab (Anti-PD-L1) Program
Cosibelimab (formerly referred to as CK-301) is a fully-human monoclonal antibody of IgG1 subtype that directly binds to PD-L1 and blocks the PD-L1
interaction with the Programmed Death Receptor-1 (“PD-1”) and B7.1 receptors. PD-L1 is an immune-inhibitory checkpoint molecule expressed on epithelial and
vascular endothelial cells, as well as by a number of immune cells, and is utilized by tumor cells as an immune escape mechanism. Cosibelimab’s primary
mechanism of action is based on the inhibition of the interaction between PD-L1 and its receptors PD-1 and B7.1, which removes the suppressive effects of PD-L1
on anti-tumor CD8+ T-cells to restore the cytotoxic T cell response.
2
Numerous preclinical and clinical studies of third-parties have demonstrated that antibodies that block the interaction of PD-1 with its ligands, PD-L1 and PD-L2,
or those that block only the interaction of PD-L1 with PD-1 can augment anti-tumor T-cell responses and lead to complete and lasting tumor eradication in a
certain proportion of patients. Confirmed overall response rates (“ORRs”) in the labels for the FDA approved PD-1 and PD-L1 blocking antibodies were cited in
the 20-45% range based on clinical trials in patients with CSCC and NSCLC. Potent therapeutic anti-tumor responses due to blocking of PD-1/PD-L1 interaction
have been demonstrated by these approved products in patients with various solid tumors including, but not limited to, CSCC, NSCLC, melanoma, RCC, head and
neck cancer and urothelial carcinoma.
We are developing cosibelimab in solid tumor oncology indications where studies of other PD-1/PD-L1 antibodies have shown to be effective. We licensed the
exclusive worldwide rights to certain anti-PD-L1 antibodies from Dana-Farber in March 2015. Also in March 2015, we entered into a Global Collaboration
Agreement with TGTX, a related party, to develop and commercialize anti-PD-L1 antibodies in the field of hematological malignancies. We retain the right to
develop and commercialize our anti-PD-L1 antibodies in solid tumors. We believe that cosibelimab has the potential to be effective in many oncological
indications as a monotherapy or in combination with other anti-tumor immune response potentiating compounds and targeted therapies.
We commenced a Phase 1 multi-center, multi-cohort clinical study for cosibelimab in October 2017. The study is evaluating the safety and tolerability of
ascending doses of cosibelimab in checkpoint therapy-naïve patients with selected recurrent or metastatic cancers. Following completion of dose escalation in
March 2018, multiple dose expansion cohorts were initiated. In September 2019, we announced updated interim results from our ongoing Phase 1 clinical trial of
anti-PD-L1 antibody cosibelimab. The data were presented in a poster presentation at the ESMO Congress 2019 in Barcelona, Spain. We continue to enroll CSCC
patients to support an initial BLA submission to the Food and Drug Administration (“FDA”) for cosibelimab based on this ongoing clinical trial. The primary
endpoint is ORR, and secondary endpoints include duration of response, progression-free survival (“PFS”), and overall survival.
CK-302 (Anti-GITR) Program
Our anti-GITR monoclonal antibody, CK-302, is a fully human agonistic antibody that is designed to bind and trigger signaling in GITR expressing cells.
Scientific literature indicates that GITR is a co-stimulatory molecule of the TNF receptor family and is expressed on activated T cells, B cells, natural killer (“NK”)
and regulatory T-cells (“Treg”). As a co-stimulatory molecule, GITR engagement increases proliferation, activation, and cytokine production of CD4+ and CD8+
T-cells. We believe our anti-GITR monoclonal antibody abrogates immunosuppressive activity of natural Treg on expansion of T-effector cells. GITR-specific
agonistic monoclonal antibodies under development by third parties have been shown to induce tumor regression in vivo through the activation of CD4+ T-cells,
CD8+ T-cells and NK cells in a number of tumor models.
We are developing CK-302 for oncology indications where scientific literature supports the potential for an anti-GITR to be effective. We licensed the exclusive
worldwide rights to anti-GITR antibodies from Dana-Farber in March 2015. Also in March 2015, we entered into a Global Collaboration Agreement with TGTX to
develop and commercialize anti-GITR antibodies in the field of hematological malignancies. We retain the right to develop and commercialize anti-GITR
antibodies in solid tumors. We believe that an anti-GITR antibody has the potential to be effective in many oncological indications as a monotherapy or in
combination with an anti-PD-L1 or anti-CAIX antibody as well as other anti-tumor immune response potentiating compounds and targeted therapies.
Currently, we are in preclinical development for this program. In late 2016, we commenced chemistry, manufacturing and controls (“CMC”) development
activities, which include the construction and testing of a production cell line, the development of a manufacturing process for production of the antibody, as well
as the development of suitable analytical methods to characterize the antibody. We plan to develop control mechanisms to satisfy good manufacturing practice
(“GMP”) requirements and scale-up manufacturing in order to conduct the required pharmacology and toxicology studies to support a potential investigational new
drug (“IND”) application.
Targeted Anti-Cancer Agents
CK-101 (also known as RX518) EGFR Inhibitor Program
We are developing CK-101 as an oral, third-generation, irreversible kinase inhibitor against selective mutations of EGFR. Activating mutations in the tyrosine
kinase domain of EGFR such as L858R and exon 19 deletion are found in approximately 20% of patients with advanced NSCLC. Compared to chemotherapy,
first-generation EGFR inhibitors significantly improved ORR and progression-free survival in previously untreated NSCLC patients carrying EGFR
mutations. However, tumor progression could develop due to resistance mutations, often within months of treatment with first-generation EGFR inhibitors.
The EGFR T790M “gatekeeper” mutation is the most common resistance mutation found in patients treated with first-generation EGFR inhibitors. The mutation
decreases the affinity of first-generation inhibitors to EGFR kinase domain, rendering the drugs ineffective. Second-generation EGFR inhibitors have improved in
vitro potency against the T790M mutation, but have not provided meaningful benefits in NSCLC patients due to toxicity from also inhibiting wild-type EGFR.
3
Third-generation EGFR inhibitors are designed to be highly selective against the EGFR T790M mutation while sparing wild-type EGFR, thereby improving
tolerability and safety profiles. In November 2015, Tagrisso ® (osimertinib), a third-generation EGFR tyrosine kinase inhibitor ("TKI") developed by AstraZeneca
that specifically targets the EGFR activating and T790M resistance mutations, received accelerated FDA approval for the treatment of patients with metastatic
EGFR T790M mutation-positive NSCLC who have progressed on or after EGFR TKI therapy. Tagrisso received full approval from the FDA in 2017 based on data
from a randomized, Phase 3 trial, in which Tagrisso significantly improved PFS versus platinum-based doublet chemotherapy, providing 10.1 months of median
PFS compared to 4.4 months from chemotherapy.
In addition, third-generation inhibitors are also active against activating EGFR mutations seen in first-line NSCLC patients and have shown efficacy in
monotherapy studies. In April 2018, Tagrisso received FDA approval for the first-line treatment of NSCLC patients with EGFR mutations based on data from a
randomized, Phase 3 trial, in which Tagrisso significantly improved PFS versus first-generation EGFR inhibitors, providing 18.9 months of median PFS compared
to 10.2 months.
We are developing CK-101 for the treatment of NSCLC patients carrying the susceptible EGFR mutations. These include EGFR L858R and exon 19 deletion
mutations in first-line NSCLC patients as well as the EGFR T790M mutation in second-line NSCLC patients. We believe that CK-101 has the potential to be
effective in these oncological indications as a monotherapy or in combination with other anti-tumor immune response potentiating compounds. Existing preclinical
and clinical data from other programs support the potential combination of third-generation EGFR inhibitors with checkpoint inhibitors (anti-PD-1 or anti-PD-L1).
In March 2015, Fortress entered into an exclusive license agreement with NeuPharma, Inc. (“NeuPharma”), which agreement was assigned to us by Fortress on the
same date, to develop and commercialize novel covalent third-generation EGFR inhibitors on a worldwide basis outside of certain Asian countries. In August
2016, the FDA accepted our IND application and we initiated a Phase 1/2 clinical study in September 2016. The study is evaluating the safety and tolerability of
ascending doses of CK-101 in patients with advanced solid tumors to determine the maximum tolerated dose and the safety and efficacy of CK-101 in patients with
EGFR mutation-positive NSCLC. In September 2018, we announced preliminary interim safety and efficacy data from our ongoing clinical trial of CK-101. The
data were presented in an oral presentation at the IASLC 19th World Conference on Lung Cancer in Toronto. The trial is ongoing to identify the optimal dose to
maximize therapeutic effect, following which a Phase 3 trial is planned to initiate in treatment-naïve EGFR mutation-positive NSCLC patients.
CK-103 BET Inhibitor Program
We are developing CK-103, a novel, selective and potent small molecule inhibitor of bromodomain and extra-terminal (“BET”) bromodomains. CK-103 binds to
the first and second bromodomains (BD1, BD2) of the BET protein family, BRD2, BRD3, BRD4, and BRDT. A bromodomain is an amino acid protein domain
that recognizes acetylated-lysine. The binding of the drug prevents interaction between BET proteins and both acetylated histones and transcription factors.
Therefore, BET proteins, such as BRD4, are considered potential therapeutic targets in cancer, as they may play a pivotal role in regulating the transcription of key
regulators of cancer cell growth and survival, including the c-Myc oncogene. BRD4 is often required for expression of c-Myc. Scientific literature has shown that
small molecule inhibition of BET bromodomains may lead to selective killing of tumor cells across a broad range of hematologic malignancies and certain targeted
solid tumors. We plan to develop CK-103 for the treatment of various advanced and metastatic solid tumor cancers, including, but not limited to, those associated
with elevated c-Myc expression.
In May 2016, we entered into an exclusive license agreement with Jubilant Biosys Limited (“Jubilant”) to develop and commercialize novel compounds that inhibit
BET bromodomains on a worldwide basis. Also in May 2016, we entered into a Sublicense Agreement with TGTX to develop and commercialize CK-103 in the
field of hematological malignancies. We retain the right to develop and commercialize CK-103 in solid tumors. We have completed the required CMC,
pharmacology and toxicology activities to support a potential IND application filing.
Anti-CAIX Research Program
Our anti-CAIX is a fully human preclinical antibody designed to recognize CAIX expressing cells and kill them via antibody-dependent cell-mediated cytotoxicity
(“ADCC”) and complement-dependent cytotoxicity (“CDC”). Scientific literature indicates that CAIX is a well characterized tumor associated antigen with
expression almost exclusively limited to the cells of renal cell carcinoma (“RCC”). More than 85% of RCC cases have been demonstrated to express high levels of
CAIX expression. There is very limited expression of this antigen on healthy tissue which we believe will limit reactivity of this antibody against healthy tissues.
In 2015, preclinical data were published in the peer-reviewed journal, Molecular Cancer, that demonstrated that our anti-CAIX antibodies could trigger killing of
CAIX-positive human RCC cell lines in tissue culture via ADCC and CDC. The killing activity correlated positively with the level of CAIX expression on RCC
tumor cell lines. In addition, the study demonstrated that our anti-CAIX antibodies inhibited growth of CAIX-positive tumors in a mouse xenograft model as well
as led to the activation of T-cells and NK cells.
We plan to develop an anti-CAIX antibody for the treatment of patients with RCC in combination with an anti-PD-L1 and/or anti-GITR antibody as well as
potentially other anti-tumor immune response potentiating compounds and/or targeted therapies.
4
We licensed the exclusive worldwide rights to certain anti-CAIX antibodies from Dana-Farber in March 2015. Currently, we are in preclinical development for this
program. We will need to identify and optimize a lead anti-CAIX antibody to select as a clinical candidate, following which we plan to commence CMC
development, pharmacology and toxicology activities in order to potentially submit an IND application in the future.
COSTS AND TIME TO COMPLETE PRODUCT DEVELOPMENT
The information below provides estimates regarding the costs associated with the completion of the current development phase and our current estimated range of
the time that will be necessary to complete that development phase for our key product candidates. For a description of the risk factors that could significantly
affect our ability to meet these cost and time estimates, see Item 1A of this report.
Product Candidate
Target Indication(s)
Cosibelimab
CK-101
Cutaneous squamous cell
carcinoma
EGFR mutation-positive
NSCLC
Phase 1
Phase 1
Development
Status
Estimated
Completion
of Phase
Estimated Cost to
Complete Phase
2021*
2020
$7 to $9 million
$1 to $2 million
*Completion of phase for this study indicates completion of the portion of study, which, if successful, could support a potential marketing approval application.
Completion dates and costs in the above table are estimates due to the uncertainties associated with preclinical testing and clinical trials and the related
requirements of development. In the cases where the requirements for preclinical testing and clinical trials and development programs have not been fully defined,
or are dependent on the success of other trials, we cannot estimate trial completion or cost with any certainty. The actual spending on each trial during the year is
also dependent on funding.
INTELLECTUAL PROPERTY AND PATENTS
General
Our goal is to obtain, maintain and enforce patent protection for our products, formulations, processes, methods and other proprietary technologies, preserve our
trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and in other countries. Our policy is to actively seek
to obtain, where appropriate, the broad intellectual property protection for our product candidates, proprietary information and proprietary technology through a
combination of contractual arrangements and patents, both in the U.S. and elsewhere in the world.
We also depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other
contractors (“know-how”). To help protect our proprietary know-how which is not patentable, and for inventions for which patents may be difficult to enforce, we
rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all employees, consultants, advisors and other
contractors to enter into confidentiality agreements which prohibit the disclosure of confidential information and, where applicable, require disclosure and
assignment to us of the ideas, developments, discoveries and inventions important to our business.
Patents and other proprietary rights are crucial to the development of our business. We will be able to protect our proprietary technologies from unauthorized use
by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents, supported by regulatory exclusivity or are effectively
maintained as trade secrets. We cannot guarantee the scope of protection of the issued patents, or that such patents will survive a validity or enforceability
challenge, or that any of the pending patent applications will issue as patents.
Generally, patent applications in the U.S. are maintained in secrecy for a period of 18 months or more. The patent positions of biotechnology and pharmaceutical
companies are highly uncertain and involve complex legal and factual questions. Therefore, we cannot predict the breadth of claims allowed in biotechnology and
pharmaceutical patents, the continued patent eligibility of certain subject matter, or their enforceability. To date, there has been no consistent policy regarding the
breadth of claims allowed in biotechnology patents. Third parties or competitors may challenge or circumvent our patents or patent applications, if issued. If our
competitors prepare and file patent applications in the U.S. that claim technology also claimed by us, we may have to participate in interference or derivation
proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention or inventorship, which could result in substantial cost, even if the
eventual outcome is favorable to us. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that
before we commercialize any of our products, any related patent may expire or remain in existence for only a short period following commercialization, thus
reducing any advantage of the patent. However, the life of a patent covering a product that has been subject to regulatory approval may have the ability to be
extended through the patent restoration program, although any such extension could still be minimal and, in any case, is limited to a maximum of five additional
years of patent term.
5
In March 2015, we licensed intellectual property related to certain antibodies from Dana-Farber. The intellectual property includes issued patents in a number of
countries, including the United States and Europe, as well as pending patent applications in several countries elsewhere. The issued patents and pending patent
applications relate generally to compositions and methods of treatment involving antibodies against CAIX, PD-L1 and GITR. Regarding CAIX antibodies, the in-
licensed IP portfolio includes two granted U.S. patents (U.S. Patent Nos. 8,466,263 and 10,450,383) and one pending U.S. application (U.S. Appl. No.
16/658,867). The ‘263 patent is directed to isolated human monoclonal antibodies and scFv antibodies that bind to CAIX (G250) protein, and compositions and
kits comprising such antibodies. The term of the ‘263 patent runs to July 9, 2029. The ‘383 patent is directed to methods of treating cancer with anti-CAIX
antibodies, and its term runs until April 28, 2027. The ‘263 patent, the ‘383 patent, and any patent issuing from the ‘867 application may be entitled to any patent
term restorations that might become available under the provisions of U.S. patent laws, based on regulatory delays associated with obtaining marketing
approval. The European counterpart is in force in Switzerland, Liechtenstein, Germany, France and the United Kingdom. A Canadian counterpart patent has also
been issued. Both the European and Canadian counterpart patents, as well as any pending applications outside the United States, are scheduled to expire no sooner
than December 2026. The PD-L1 segment of the portfolio includes a granted U.S. patent (U.S. Patent No. 9,828,434) directed to antibodies that bind to PD-L1 and
a pending U.S. application (U.S. Appl. No. 15/821,087) directed to methods of augmenting a patient’s immune response by administering an anti-PD-L1 antibody.
The ‘434 patent is scheduled to expire October 4, 2033, not including any patent term restorations, which might become available under the provisions of U.S.
patent laws, based on regulatory delays associated with obtaining marketing approval. Australian, Japanese, South Korean, and Chinese counterpart applications
have issued, and additional international counterpart applications are pending in Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, Colombia, and
Mexico. The issued international patents and any patents maturing from these pending applications will expire no sooner than October 2033. In June 2016, we filed
a U.S. provisional application (U.S. 62/356,105) directed to antibodies and functional fragments thereof that bind to human PD-L1, and methods of inhibiting
tumor cell proliferation in patients using such antibodies or functional fragments. The provisional application was converted into a PCT application
(PCT/US2017/039810) in June 2017, and a U.S. non-provisional application (U.S. Appl. No. 15/636,610) was filed at the same time. Additional national stage
applications have since been filed in Australia, Brazil, Canada, China, Europe, Israel, India, Japan, South Korea, Mexico, New Zealand, Russia, Singapore, and
Thailand. Any patents maturing from these pending applications will expire no sooner than June 2037. The GITR segment of the portfolio includes an
International Application No. PCT/US2015/054010, filed in October 2015, and International Application No. PCT/US2017/043504. National stage applications
claiming priority to PCT/US2015/054010 are pending in Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, Japan, South Korea, and Mexico. In the
U.S., the original there is one granted patent (U.S. Patent No. 10,463,732) and one pending application (U.S. Appl. No. 16/672,763) that correspond with
PCT/US2015.054010. Any of these national stage applications that issue or grant as patents, would expire no earlier than October 2035. National stage
applications claiming priority to PCT/US2017/043504 are pending in the U.S. (U.S. Appl. No. 16/319,590), Australia, Brazil, Canada, China, Europe, Israel, Japan,
South Korea, Singapore, Russian, and Mexico. Any of these national stage applications that issue or grant as patents (including U.S. Application No. 16/319,590),
would expire no earlier than July 2037.
In March 2015, Fortress in-licensed intellectual property from NeuPharma, assigned to us by Fortress on the same date, which is directed to technology involving
small molecules that are inhibitors of EGFR and kinase mutants, including the compound CK-101. EGFR is a receptor tyrosine kinase of the ErbB family and is
also known as “Her1” and “ErbB1.” The in-licensed patent estate includes three granted U.S. patents, a granted European patent, a granted Japanese patent, a
granted Australian patent, and a granted New Zealand patent. U.S. Patent No. 9,559,770 is directed to a generic formula of small molecules, as well as a specific
claim directed to the compound, CK-101. The granted claims also cover pharmaceutically acceptable salts, pharmaceutical compositions, particular dosage forms
and packaged goods. U.S. Patent No. 9,849,139 is directed to methods of inhibiting EGFR or an EGFR mutant in a subject in need thereof, comprising
administering a therapeutically effective amount of the compounds of the ‘770 patent, including the compound, CK-101. U.S. Patent No. 10,172,868 is directed to
methods of treating non-small cell lung cancer with the compound. Additionally, there is a pending U.S. application in this family (U.S. Appl. No. 16/188,852).
The granted foreign patents cover the compound, CK-101, and a broad range of related compounds, salts, pharmaceutical compositions, including various dosage
forms of such pharmaceutical compositions and certain uses of such compounds or salts thereof in treating cancer, a disorder mediated by EGFR, or NSCLC, either
alone or in combination with an additional anti-cancer and/or cytotoxic agent. The term of granted U.S. and foreign patents runs to August 22, 2034, not including
any patent term restorations in the U.S., which might become available under the provisions of U.S. patent laws, based on regulatory delays associated with
obtaining marketing approval. Additional counterpart applications exist in jurisdictions around the world, including, Australia, Canada, Hong Kong, Israel, the
Philippines, Russia, Singapore, South Korea, Myanmar, Mexico, Brazil, India, China, and Europe. Any patents maturing from these pending applications would be
scheduled to expire no sooner than August 2034. Checkpoint has also licensed from NeuPharma an additional international application, PCT/US2019/017117,
which was filed on February 7, 2019, and it directed to additional EGFR inhibitors and methods of using the same. This international application has not yet enter
national stage prosecution.
In May 2016, we in-licensed intellectual property from Jubilant. Under the terms of the license agreement, Jubilant granted us exclusive, worldwide rights under
Jubilant’s patents and know-how covering small molecule inhibitors of BET, specifically targeting BRD4, a member of the BET family which is often required for
the expression of c-Myc. The in-licensed patent estate includes two international (PCT) applications filed in March 2016 (PCT/IN2016/050098) and September
2016 (PCT/IN2016/050300), respectively, claiming the benefit of two earlier-filed Indian provisional applications. Any patents maturing from this patent estate are
expected to expire no sooner than March 2036.
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Other Intellectual Property Rights
We depend upon trademarks, trade secrets, know-how and continuing technological advances to develop and maintain our competitive position. To maintain the
confidentiality of trade secrets and proprietary information, we require our employees, scientific advisors, consultants and collaborators, upon commencement of a
relationship with us, to execute confidentiality agreements and, in the case of parties other than our research and development collaborators, to agree to assign their
inventions to us. These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection
with their relationship with us. These agreements may not, however, provide protection for our trade secrets in the event of unauthorized disclosure of such
information.
In addition to patent protection, we may utilize orphan drug regulations or other provisions of the Food, Drug and Cosmetic Act of 1938, as amended (“FDCA”), to
provide market exclusivity for certain of our product candidates. Orphan drug regulations provide incentives to pharmaceutical and biotechnology companies to
develop and manufacture drugs for the treatment of rare diseases, currently defined as diseases that exist in fewer than 200,000 individuals in the U.S., or, diseases
that affect more than 200,000 individuals in the U.S. but that the sponsor does not realistically anticipate will generate a net profit. Under these provisions, a
manufacturer of a designated orphan-drug can seek tax benefits, and the holder of the first FDA approval of a designated orphan product will be granted a seven-
year period of marketing exclusivity for such FDA-approved orphan product. In September 2017, we received FDA Orphan Drug Designation for CK-101 for the
treatment of EGFR mutation-positive NSCLC.
LICENSING AGREEMENTS AND COLLABORATIONS
Dana-Farber Cancer Institute, Inc.
In March 2015, we entered into a license agreement with Dana-Farber, which license was amended effective on October 5, 2015, April 12, 2016, and October 24,
2016, for an exclusive, worldwide license to Dana-Farber’s patents for a portfolio of fully human immuno-oncology targeted antibodies. The field of use license
includes all prophylactic, therapeutic or diagnostic uses in humans or animals excluding use in chimeric antigen receptor technology. The Dana-Farber antibodies
were generated in the laboratory of Dr. Wayne Marasco, MD, PhD, a Professor in the Department of Cancer Immunology and AIDS at Dana-Farber. Under the
terms of the agreement, we paid Dana-Farber an up-front licensing fee of $1.0 million and, on May 11, 2015, granted Dana-Farber five percent of our common
stock on a fully-diluted basis, equal to 500,000 shares valued at $32,500 or $0.065 per share. The agreement included an anti-dilution clause that maintained Dana-
Farber’s ownership at 5% until such time that we raised $10 million in cash in exchange for common shares. Pursuant to this provision, on September 30, 2015, we
granted to Dana-Farber an additional 136,830 shares of common stock valued at approximately $0.6 million and the anti-dilution clause thereafter expired. Dana-
Farber is eligible to receive payments of up to an aggregate of approximately $21.5 million for each licensed product upon our successful achievement of certain
clinical development, regulatory and first commercial sale milestones. In addition, Dana-Farber is eligible to receive up to an aggregate of $60.0 million upon our
successful achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit
percentage of net sales. Dana-Farber also receives an annual license maintenance fee of $50,000, which is creditable against milestone payments or royalties due to
Dana-Farber. The portfolio of antibodies licensed from Dana-Farber include antibodies targeting PD-L1, GITR and CAIX. The license will terminate on a country-
by-country and product-by-product basis until the royalty term in such country with respect to such product expires, at which time the agreement will expire in its
entirety with respect to such product in such country. The royalty term, on a product-by-product and country-by-country basis, is the later of (i) ten years after first
commercial sale of a given product in such country, or (ii) the expiration of the last-to-expire Dana-Farber patent containing a valid claim to the product in such
country. To date, we have incurred $2.2 million of upfront licensing and milestone payments under this license agreement.
In connection with the license agreement with Dana-Farber, in March 2015 we entered into a collaboration agreement with TGTX, which was amended and
restated in June 2019, to develop and commercialize the anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies. We
retain the right to develop and commercialize these antibodies in solid tumors. Michael Weiss, Chairman of the Board of Directors of Checkpoint and Fortress’
Executive Vice Chairman, Strategic Development, is also the Executive Chairman, President and Chief Executive Officer and a stockholder of TGTX. Under the
terms of the original collaboration agreement, TGTX paid us $0.5 million, representing an upfront licensing fee. Upon the signing of the amended and restated
collaboration agreement in June 2019, TGTX paid us an additional $1.0 million upfront licensing fee. We are eligible to receive substantive potential milestone
payments for the anti-PD-L1 program of up to an aggregate of approximately $28.6 million upon TGTX’s successful achievement of certain clinical development,
regulatory and first commercial sale milestones. This is comprised of up to approximately $9.4 million upon TGTX’s successful completion of clinical
development milestones, and up to approximately $19.2 million upon regulatory filings and first commercial sales in specified territories. We are also eligible to
receive substantive potential milestone payments for the anti-GITR antibody program of up to an aggregate of approximately $21.5 million upon TGTX’s
successful achievement of certain clinical development, regulatory and first commercial sale milestones. This is comprised of up to approximately $7.0 million
upon TGTX’s successful completion of clinical development milestones, and up to approximately $14.5 million upon first commercial sales in specified territories.
In addition, we are eligible to receive up to an aggregate of $60.0 million upon TGTX’s successful achievement of certain sales milestones based on aggregate net
sales for both programs, in addition to royalty payments based on a tiered low double-digit percentage of net sales. We also receive an annual license maintenance
fee, which is creditable against milestone payments or royalties due to us. TGTX also pays us for our out-of-pocket costs of material used by TGTX for their
development activities. The collaboration agreement will terminate on a product-by-product and country-by-country basis upon the expiration of the last licensed
patent right, unless the agreement is earlier terminated. For the years ended December 31, 2019 and 2018, we recognized approximately $1.6 million and $3.0
million respectively, in revenue from our collaboration agreement with TGTX in the Statements of Operations.
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Adimab, LLC
In October 2015, Fortress entered into a collaboration agreement with Adimab to discover and optimize antibodies using their proprietary core technology
platform. Under this agreement, Adimab optimized cosibelimab (formerly referred to as CK-301), our anti-PD-L1 antibody which we originally licensed from
Dana-Farber. In January 2019, Fortress transferred the rights to the optimized antibody to us, and we entered into a collaboration agreement directly with Adimab
on the same day. Under the terms of the agreement, Adimab is eligible to receive payments up to an aggregate of approximately $7.1 million upon our successful
achievement of certain clinical development and regulatory milestones, of which $4.8 million are due upon various filings for regulatory approvals to
commercialize the product. In addition, Adimab is eligible to receive royalty payments based on a tiered low single digit percentage of net sales. The license will
terminate on a country-by-country and product-by-product basis until the royalty term in such country with respect to such product expires, at which time the
agreement will expire in its entirety with respect to such licensed product in such country. The royalty term, on a product-by-product and country-by-country basis,
begins on the first commercial sale of a product in a country and ends on the later of (a) expiry of the last-to-expire licensor patent containing a valid claim to the
compound in such country; or (b) twelve years after the first commercial sale of such licensed product in such country. To date, we have not incurred any costs
under our collaboration agreement with Adimab. We previously incurred $1.3 million in option and milestone payments under Fortress’ collaboration agreement
with Adimab.
NeuPharma, Inc.
In March 2015, Fortress entered into an exclusive license agreement with NeuPharma to develop and commercialize novel irreversible, 3rd generation EGFR
inhibitors, including CK-101, on a worldwide basis other than certain Asian countries. On the same date, Fortress assigned all of its right and interest in the EGFR
inhibitors to us. The license agreement was amended on February 21, 2017. Under the terms of the license agreement, we paid NeuPharma an up-front licensing
fee of $1.0 million, and NeuPharma is eligible to receive payments of up to an aggregate of approximately $40.0 million upon our successful achievement of
certain clinical development and regulatory milestones in up to three indications, of which $22.5 million are due upon various regulatory approvals to
commercialize the products. In addition, NeuPharma is eligible to receive payments of up to an aggregate of $40.0 million upon our successful achievement of
certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered mid to high-single digit percentage of net sales. The license
will terminate on a country-by-country and product-by-product basis until the royalty term in such country with respect to such product expires, at which time the
agreement will expire in its entirety with respect to such product in such country. Royalty term means, on a licensed product-by-licensed product and country-by-
country basis, the period from the first commercial sale of a given licensed product in such country until the later of (a) expiry of the last-to-expire licensor patent
containing a valid claim to the compound in such country; or (b) the 10th anniversary of the first commercial sale of such licensed product in such country. In a
country where no licensor patent containing a valid claim with respect to the compound has ever existed nor ever exists, the royalty term means on a product-by-
product and country-by-country basis, the period from the first commercial sale of such product in such country until the 10th anniversary of such first commercial
sale of such product in such country. To date, we have incurred $2.0 million of upfront licensing and milestone payments under the license agreement.
Also, in connection with the license agreement with NeuPharma, we entered into a sponsored research agreement with NeuPharma for certain research and
development activities. Effective January 11, 2016, TGTX agreed to assume all costs associated with this sponsored research agreement and paid us for all
amounts we paid NeuPharma previously. For the years ended December 31, 2019 and 2018, we recognized approximately $0 and $35,000, respectively, in revenue
related to the sponsored research agreement in the Statements of Operations.
Teva Pharmaceutical Industries Ltd. (through its subsidiary, Cephalon, Inc.)
In December 2015, Fortress entered into a license agreement with Teva Pharmaceutical Industries Ltd. through its subsidiary, Cephalon, Inc. (“Cephalon”). This
agreement was assigned to us by Fortress on the same date. Under the terms of the license agreement, we obtained an exclusive, worldwide license to Cephalon’s
patents relating to CEP-8983 and its small molecule prodrug, CEP-9722, a PARP inhibitor, which we referred to as CK-102. Under the terms of the agreement, we
paid Cephalon an up-front licensing fee of $0.5 million. In August 2018, we gave notice to Cephalon of our intention to terminate the license agreement, which
became effective in February 2019. We incurred $0.5 million of upfront licensing and milestone payments under the license agreement.
Jubilant Biosys Limited
In May 2016, we entered into a license agreement with Jubilant for an exclusive, worldwide license to Jubilant’s family of patents covering compounds that inhibit
BET proteins such as BRD4, including CK-103. The license agreement was amended on December 13, 2016 and March 31, 2017. Under the terms of the license
agreement, we paid Jubilant an up-front licensing fee of $2.0 million, and Jubilant is eligible to receive payments up to an aggregate of approximately $89.0
million upon our successful achievement of certain clinical development and regulatory milestones, of which $59.5 million are due upon various regulatory
approvals to commercialize the products. In addition, Jubilant is eligible to receive payments up to an aggregate of $89.0 million upon our successful achievement
of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales. The
license will terminate on a country-by-country and product-by-product basis until the royalty term in such country with respect to such product expires, at which
time the agreement will expire in its entirety with respect to such licensed product in such country. The royalty term, on a product-by-product and country-by-
country basis, begins on the first commercial sale of a product in a country and ends on the expiration of the last-to-expire Jubilant patent containing a valid claim
to the product in such country. To date, we have incurred $2.4 million of upfront licensing and milestone payments under the license agreement.
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In connection with the license agreement with Jubilant, we entered into a sublicense agreement with TGTX, a related party, to develop and commercialize the
compounds licensed in the field of hematological malignancies, while we retain the right to develop and commercialize these compounds in the field of solid
tumors. Under the terms of the sublicense agreement, TGTX paid us $1.0 million, representing an upfront licensing fee, and we are eligible to receive substantive
potential milestone payments up to an aggregate of approximately $87.2 million upon TGTX’s successful achievement of clinical development and regulatory
milestones. This is comprised of up to approximately $25.5 million upon TGTX’s successful completion of three clinical development milestones for two licensed
products, and up to approximately $61.7 million upon the achievement of five regulatory approvals and first commercial sales in specified territories for two
licensed products. In addition, we are eligible to receive potential milestone payments up to an aggregate of $89.0 million upon TGTX’s successful achievement of
certain sales milestones based on aggregate net sales by TGTX, for two licensed products, in addition to royalty payments based on a mid-single digit percentage
of net sales by TGTX. TGTX also pays us for 50% of IND enabling costs and patent expenses. For the years ended December 31, 2019 and 2018, we recognized
approximately $0.1 million and $0.4 million, respectively, in revenue related to the sublicense agreement in the Statements of Operations.
COMPETITION
Competition in the pharmaceutical and biotechnology industries is intense. Our competitors include pharmaceutical companies and biotechnology companies, as
well as universities and public and private research institutions. In addition, companies that are active in different but related fields represent substantial
competition for us. Many of our competitors have significantly greater capital resources, larger research and development staffs and facilities and greater
experience in drug development, regulation, manufacturing and marketing than we do. These organizations also compete with us to recruit qualified personnel,
attract partners for joint ventures or other collaborations, and license technologies that are competitive with ours. To compete successfully in this industry, we must
identify novel and unique drugs or methods of treatment and then complete the development of those drugs as treatments.
The drugs that we are attempting to develop will have to compete with existing therapies. In addition, a large number of companies are pursuing the development
of pharmaceuticals that target the same conditions that we are targeting. Other companies have products or product candidates in various stages of pre-clinical or
clinical development, or with marketing approvals, to treat conditions for which we are also seeking to discover and develop product candidates. Some of these
potential competing drugs are further advanced in development than our product candidates and may be commercialized earlier.
In the targeted anti-cancer agent area, there are several companies with marketing approvals or in development with EGFR inhibitors that are targeting mutations
similar to our programs. There are also a number of early stage programs developing BET inhibitors which could overlap with our upcoming programs.
In the EGFR inhibitor space, Tarceva®, Iressa®, Gilotrif®, Tagrisso® and Vizimpro ® are currently approved drugs for the treatment of first-line EGFR-mutant
NSCLC. AstraZeneca’s Tagrisso® is also approved by the FDA for the treatment of patients with metastatic EGFR T790M mutation-positive NSCLC who have
progressed on or after EGFR tyrosine kinase inhibitor therapy. In addition, we are aware of a number of products in development targeting cancer-causing mutant
forms of EGFR for the treatment of NSCLC patients, including, Novartis’ EGF816, Janssen’s lazertinib and Acea Bio (Hangzhou)’s avitinib.
In the BET inhibitor space, there are a number of companies which have advanced to early stage clinical trials, including Merck & Co’s MK-8628, Roche’s
RG6146, Constellation Pharmaceuticals’ CPI-0610, Bristol-Myers Squibb’s BMS-986158, GlaxoSmithKline’s molibresib, Abbvie’s Mivebresib , Incyte’s
INCB57643, Celgene Corporation’s FT-1101 and Gilead Sciences’ GS-5829.
In the Immuno-Oncology area, almost every major pharmaceutical company has a PD-1 and/or PD-L1 antibody in clinical development or on the market,
including, without limitation, Merck & Co. (approved drug PD-1 with the brand name Keytruda ®), Bristol-Myers Squibb (approved PD-1 with the brand name
Opdivo ®), Roche (approved PD-L1 with the brand name Tecentriq ®), AstraZeneca (approved PD-L1 with the brand name Imfinzi ®), Pfizer/Merck KGA
(approved PD-L1 with the brand name Bavencio ®) and Regeneron (approved PD-1 with the brand name Libtayo ®). We are aware of several anti-GITR antibody
development programs in preclinical or early clinical studies, including, without limitation, by Merck & Co., Leap Therapeutics, Inc. and Astellas Pharma Inc., and
an anti-CAIX antibody in clinical studies by Telix Pharmaceuticals.
Additional information can be found under Item 1A - Risk Factors - Risks Related to Our Business and Industry.
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EMPLOYEES
As of December 31, 2019, we had eight full and part-time employees. None of our employees are represented by a labor union and we consider our employee
relations to be good.
SUPPLY AND MANUFACTURING
We have limited experience in manufacturing products for clinical or commercial purposes. We currently do not have any manufacturing capabilities. We have
established, or intend to establish, contract manufacturing relationships for the supplies of our product candidates, in each case with a single manufacturer. As with
any supply program, obtaining raw materials of the correct quality cannot be guaranteed and we cannot ensure that we will be successful in this endeavor.
At the time of commercial sale, if not prior, and to the extent possible and commercially practicable, we would seek to engage a back-up supplier for each of our
product candidates. Until such time, we expect that we will rely on a single contract manufacturer to produce each of our product candidates under current GMP
(“cGMP”) regulations. Our third-party manufacturers have a limited number of facilities in which our product candidates can be produced and will have limited
experience in manufacturing our product candidates in quantities sufficient for commercialization. Our third-party manufacturers will have other clients and may
have other priorities that could affect their ability to perform the work satisfactorily and/or on a timely basis. Both of these occurrences would be beyond our
control.
We expect to similarly rely on contract manufacturing relationships for any products that we may in-license or acquire in the future. However, there can be no
assurance that we will be able to successfully contract with such manufacturers on terms acceptable to us, or at all.
Contract manufacturers are subject to ongoing periodic and unannounced inspections by the FDA, the Drug Enforcement Administration (“DEA”) and
corresponding state agencies to ensure strict compliance with cGMP and other state and federal regulations. Our contractors, if any, in Europe face similar
challenges from the numerous European Union and member state regulatory agencies and authorized bodies. We do not have control over third-party
manufacturers’ compliance with these regulations and standards, other than through contractual obligations. If they are deemed out of compliance with cGMPs,
product recalls could result, inventory could be destroyed, production could be stopped and supplies could be delayed or otherwise disrupted.
If we need to change manufacturers after commercialization, the FDA and corresponding foreign regulatory agencies must approve these new manufacturers in
advance, which will involve testing and additional inspections to ensure compliance with FDA regulations and standards and may require significant lead times
and delay. Furthermore, switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us
to find a replacement manufacturer quickly or on terms acceptable to us, or at all.
GOVERNMENT AND INDUSTRY REGULATIONS
Numerous governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies, impose substantial regulations upon the clinical
development, manufacture and marketing of our product candidates, as well as our ongoing research and development activities. None of our product candidates
have been approved for sale in any market in which we have marketing rights. Before marketing in the U.S., any drug that we develop must undergo rigorous
preclinical testing and clinical trials and an extensive regulatory approval process implemented by the FDA under the FDCA. The FDA regulates, among other
things, the pre-clinical and clinical testing, safety, efficacy, approval, manufacturing, record keeping, adverse event reporting, packaging, labeling, storage,
advertising, promotion, export, sale and distribution of biopharmaceutical products.
The regulatory review and approval process is lengthy, expensive and uncertain. We are required to submit extensive pre-clinical and clinical data and supporting
information to the FDA for each indication or use to establish a product candidate’s safety and efficacy before we can secure FDA approval to market or sell a
product in the U.S. The approval process takes many years, requires the expenditure of substantial resources and may involve ongoing requirements for post-
marketing studies or surveillance. Before commencing clinical trials in humans, we must submit an IND to the FDA, or comparable filing outside the U.S.,
containing, among other things, pre-clinical data, chemistry, manufacturing and control information, and an investigative plan. Our submission of an IND may not
result in FDA authorization to commence a clinical trial.
The FDA may permit expedited development, evaluation, and marketing of new therapies intended to treat persons with serious or life-threatening conditions for
which there is an unmet medical need under its fast track drug development programs. A sponsor can apply for fast track designation at the time of submission of
an IND, or at any time prior to receiving marketing approval of the new drug application (“NDA”). To receive fast track designation, an applicant must
demonstrate:
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that the drug is intended to treat a serious or life-threatening condition;
that the drug is intended to treat a serious aspect of the condition; and
that the drug has the potential to address unmet medical needs, and this potential is being evaluated in the planned drug development program.
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The FDA must respond to a request for fast track designation within 60 calendar days of receipt of the request. Over the course of drug development, a product in a
fast track development program must continue to meet the criteria for fast track designation. Sponsors of products in fast track drug development programs must be
in regular contact with the reviewing division of the FDA to ensure that the evidence necessary to support marketing approval will be developed and presented in a
format conducive to an efficient review. Sponsors of products in fast track drug development programs ordinarily are eligible for priority review of a completed
application in six months or less and also may be permitted to submit portions of an NDA to the FDA for review before the complete application is submitted.
Sponsors of drugs designated as fast track also may seek approval under the FDA’s accelerated approval regulations. Under this authority, the FDA may grant
marketing approval for a new drug product on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate
endpoint that is reasonably likely, based on epidemiologic, therapeutic, pathophysiologic, or other evidence, to predict clinical benefit or on the basis of an effect
on a clinical endpoint other than survival or irreversible morbidity. Approval will be subject to the requirement that the applicant study the drug further to verify
and describe its clinical benefit where there is uncertainty as to the relation of the surrogate endpoint to clinical benefit or uncertainty as to the relation of the
observed clinical benefit to ultimate outcome. Post-marketing studies are usually underway at the time an applicant files the NDA. When required to be conducted,
such post-marketing studies must also be adequate and well-controlled. The applicant must carry out any such post-marketing studies with due diligence. Many
companies who have been granted the right to utilize an accelerated approval approach have failed to obtain approval. Moreover, negative or inconclusive results
from the clinical trials we may conduct or adverse medical events could cause us to have to repeat or terminate the clinical trials. Accordingly, we may not be able
to complete the clinical trials within an acceptable time frame, if at all, and, therefore, could not submit the NDA to the FDA or foreign regulatory authorities for
marketing approval.
Clinical testing must meet requirements for institutional review board oversight, informed consent and good clinical practices, and must be conducted pursuant to
an IND, unless exempted.
For purposes of NDA approval, clinical trials are typically conducted in the following sequential phases:
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Phase 1: The drug is administered to a small group of humans, either healthy volunteers or patients, to test for safety, dosage tolerance, absorption,
metabolism, excretion and clinical pharmacology.
Phase 2: Studies are conducted on a larger number of patients to assess the efficacy of the product, to ascertain dose tolerance and the optimal dose
range, and to gather additional data relating to safety and potential adverse events.
Phase 3: Studies establish safety and efficacy in an expanded patient population.
Phase 4: The FDA may require Phase 4 post-marketing studies to find out more about the drug’s long-term risks, benefits, and optimal use, or to test
the drug in different populations.
The length of time necessary to complete clinical trials varies significantly and may be difficult to predict. Clinical results are frequently susceptible to varying
interpretations that may delay, limit or prevent regulatory approvals. Additional factors that can cause delay or termination of our clinical trials, or that may
increase the costs of these trials, include:
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slow patient enrollment due to the nature of the clinical trial plan, the proximity of patients to clinical sites, the eligibility criteria for participation in
the study or other factors;
inadequately trained or insufficient personnel at the study site to assist in overseeing and monitoring clinical trials or delays in approvals from a study
site’s review board;
longer treatment time required to demonstrate efficacy or determine the appropriate product dose;
insufficient supply of the product candidates;
adverse medical events or side effects in treated patients; and
ineffectiveness of the product candidates.
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In addition, the FDA, equivalent foreign regulatory authority, or a data safety monitoring committee for a trial may place a clinical trial on hold or terminate it if it
concludes that subjects are being exposed to an unacceptable health risk, or for futility. Any drug is likely to produce some toxicity or undesirable side effects in
animals and in humans when administered at sufficiently high doses and/or for a sufficiently long period of time. Unacceptable toxicity or side effects may occur at
any dose level at any time in the course of studies in animals designed to identify unacceptable effects of a product candidate, known as toxicological studies, or
clinical trials of product candidates. The appearance of any unacceptable toxicity or side effect could cause us or regulatory authorities to interrupt, limit, delay or
abort the development of any of our product candidates and could ultimately prevent approval by the FDA or foreign regulatory authorities for any or all targeted
indications.
Sponsors of drugs may apply for a special protocol assessment (“SPA”) from the FDA. The SPA process is a procedure by which the FDA provides official
evaluation and written guidance on the design and size of proposed protocols that are intended to form the basis for a new drug application. However, final
marketing approval depends on the results of efficacy, the adverse event profile and an evaluation of the benefit/risk of treatment demonstrated in the Phase 3 trial.
The SPA agreement may only be changed through a written agreement between the sponsor and the FDA, or if the FDA becomes aware of a substantial scientific
issue essential to product safety or efficacy.
Before receiving FDA approval to market a product, we must demonstrate that the product is safe and effective for its intended use by submitting to the FDA an
NDA or BLA containing the pre-clinical and clinical data that have been accumulated, together with chemistry and manufacturing and controls specifications and
information, and proposed labeling, among other things. The FDA may refuse to accept an NDA or BLA for filing if certain content criteria are not met and, even
after accepting an NDA or BLA, the FDA may often require additional information, including clinical data, before approval of marketing a product.
It is also becoming more common for the FDA to request a Risk Evaluation and Mitigation Strategy (“REMS”), as part of an NDA or BLA. The REMS plan
contains post-market obligations of the sponsor to train prescribing physicians, monitor off-label drug use, and conduct sufficient Phase 4 follow-up studies and
registries to ensure the continued safe use of the drug.
As part of the approval process, the FDA must inspect and approve each manufacturing facility. Among the conditions of approval is the requirement that a
manufacturer’s quality control and manufacturing procedures conform to cGMP. Manufacturers must expend significant time, money and effort to ensure
continued compliance, and the FDA conducts periodic inspections to certify compliance. It may be difficult for our manufacturers or us to comply with the
applicable cGMP, as interpreted by the FDA, and other FDA regulatory requirements. If we, or our contract manufacturers, fail to comply, then the FDA may not
allow us to market products that have been affected by the failure.
If the FDA grants approval, the approval will be limited to those conditions and patient populations for which the product is safe and effective, as demonstrated
through clinical studies. Further, a product may be marketed only in those dosage forms and for those indications approved in the NDA or BLA. Certain changes to
an approved NDA or BLA, including, with certain exceptions, any significant changes to labeling, require approval of a supplemental application before the drug
may be marketed as changed. Any products that we manufacture or distribute pursuant to FDA approvals are subject to continuing monitoring and regulation by
the FDA, including compliance with cGMP and the reporting of adverse experiences with the drugs. The nature of marketing claims that the FDA will permit us to
make in the labeling and advertising of our products will generally be limited to those specified in FDA approved labeling, and the advertising of our products will
be subject to comprehensive monitoring and regulation by the FDA. Drugs whose review was accelerated may carry additional restrictions on marketing activities,
including the requirement that all promotional materials are pre-submitted to the FDA. Claims exceeding those contained in approved labeling will constitute a
violation of the FDCA. Violations of the FDCA or regulatory requirements at any time during the product development process, approval process, or marketing
and sale following approval may result in agency enforcement actions, including withdrawal of approval, recall, seizure of products, warning letters, injunctions,
fines and/or civil or criminal penalties. Any agency enforcement action could have a material adverse effect on our business.
Failure to comply with applicable federal, state and foreign laws and regulations would likely have a material adverse effect on our business. In addition, federal,
state and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes.
Other Healthcare Laws and Compliance Requirements
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers
for Medicare and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the United States Department of Health and Human
Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States Attorney offices within the Department of
Justice, and state and local governments.
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Pharmaceutical Coverage, Pricing and Reimbursement
In the United States and markets in 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 payors, including government health administrative authorities, managed care providers, private health insurers and
other organizations. Third-party payors are increasingly examining the medical necessity and cost-effectiveness of medical products and services, in addition to
their safety and efficacy, and, accordingly, significant uncertainty exists as to the reimbursement status of newly approved therapeutics. Adequate third-party
reimbursement may not be available for our products to enable us to realize an appropriate return on our investment in research and product development. We are
unable to predict the future course of federal or state healthcare legislation and regulations, including regulations that will be issued to implement provisions of the
healthcare reform legislation enacted in 2010, known as the Affordable Care Act. The Affordable Care Act and further changes in the law or regulatory framework
could have a material adverse effect on our business.
International Regulation
In addition to regulations in the United States, there are a variety of foreign regulations governing clinical trials and commercial sales and distribution of any
product candidates. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.
Item 1A. Risk Factors
The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we
have made in this report and those we may make from time to time. You should carefully consider the risks described below, in addition to the other information
contained in this report and our other public filings, before making an investment decision. Our business, financial condition or results of operations could be
harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors
not perceived by us to present significant risks to our business at this time also may impair our business operations.
Risks Related to Our Business and Industry
We currently have no drug products for sale. We are completely dependent on the success of our product candidates, and we cannot give any assurances that
any of our product candidates will receive regulatory approval or be successfully commercialized.
To date, we have invested a significant portion of our efforts and financial resources in the acquisition and development of our product candidates. As an early
stage company, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently
encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. Our future success is substantially dependent on our
ability to successfully develop, obtain regulatory approval for, and then successfully commercialize such product candidates. Our product candidates are currently
in preclinical development or in clinical trials. Our business depends entirely on the successful development and commercialization of our product candidates,
which may never occur. We currently have no drug products for sale, currently generate no revenues from sales of any drug products, and may never be able to
develop or commercialize a marketable drug.
The successful development, and any commercialization of our technologies and any product candidates that may occur, would require us to successfully perform a
variety of functions, including:
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developing our technology platform;
identifying, developing, formulating, manufacturing and commercializing product candidates;
entering into successful licensing and other arrangements with product development partners;
achieving clinical endpoints to support preparation of approval applications;
participating in regulatory approval processes, including ultimately gaining approval to market a drug product, which may not occur;
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obtaining sufficient quantities of our product candidates from our third-party manufacturers to meet clinical trial needs and, if approved, to meet
commercial demand at launch and thereafter;
establishing and maintaining agreements with wholesalers, distributors and group purchasing organizations on commercially reasonable terms;
conducting sales and marketing activities including hiring, training, deploying and supporting a sales force and creating market demand for our
product candidates through our own marketing and sales activities, and any other arrangements to promote our product candidates that we may
establish;
· maintaining patent protection and regulatory exclusivity for our product candidates; and
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obtaining market acceptance for our product candidates.
Each of these requirements will require substantial time, effort and financial resources.
We intend to use data from our ongoing Phase 1 clinical trial of cosibelimab, conducted outside the United States, to support one or more U.S. BLAs in checkpoint
therapy-naïve patients with selected recurrent or metastatic cancers, including CSCC. In January 2020, we announced that we had discussed with the FDA this
strategy in CSCC. We believe, based on published FDA guidance documents, public statements of companies with comparable product candidates, public
statements by the director of the FDA’s Oncology Center of Excellence, and recent interactions with the FDA, that exclusively foreign clinical data from a single
study may be acceptable to support marketing approval(s) under FDA regulations.
Our operations have been limited to organizing our company, acquiring, developing and securing our proprietary technology and identifying and obtaining
preclinical data or clinical data for various product candidates. These operations provide a limited basis for you to assess our ability to continue to develop our
technology, identify product candidates, develop and commercialize any product candidates we are able to identify and enter into successful collaborative
arrangements with other companies, as well as for you to assess the advisability of investing in our securities.
Each of our product candidates will require additional preclinical or clinical development, management of preclinical, clinical and manufacturing activities,
regulatory approval in the jurisdictions in which we plan to market the product, obtaining manufacturing supply, building of a commercial organization, and
significant marketing efforts before we generate any revenues from product sales, which may not occur. We are not permitted to market or promote any of our
product candidates in the U.S. or any other jurisdiction before we receive regulatory approval from the FDA or comparable foreign regulatory authority,
respectively, and we may never receive such regulatory approval for any of our product candidates.
Preclinical development is highly speculative and has a high risk of failure.
Three of our five current product candidates are in preclinical development, and, thus, have never been used in humans. Preclinical development is highly
speculative and carries a high risk of failure. We can provide no assurances that preclinical toxicology and/or other preclinical activity of our product candidates
will support moving any of these product candidates into clinical development. If we are unsuccessful in our preclinical development efforts for any of these
product candidates and/or they fail to reach clinical development, it would have a material adverse effect on our business and financial condition.
Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.
Although we are planning for certain clinical trials relating to our product candidates, there can be no assurance that the FDA, or any comparable foreign
regulatory authority, will accept our proposed trial designs. We may experience delays in our clinical trials and we do not know whether current or planned clinical
trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons,
including delays related to:
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obtaining regulatory approval to commence a trial;
reaching agreement on acceptable terms with prospective contract research organizations (“CROs”), and clinical trial sites, the terms of which can be
subject to extensive negotiation and may vary significantly among different CROs and trial sites;
obtaining institutional review board (“IRB”), or ethics committee, as applicable, approval at each site;
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recruiting a sufficient number of suitable patients to participate in a trial;
clinical sites deviating from trial protocol or dropping out of a trial;
having patients complete a trial or return for post-treatment follow-up;
developing and validating companion diagnostics on a timely basis, if required;
obtaining resolution for any clinical holds that arise from the FDA or any comparable foreign regulatory authority;
adding new clinical trial sites; or
availability of raw materials or manufacturing sufficient quantities of product candidate for use in clinical trials.
Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the
proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’
perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the
indications we are investigating. Furthermore, we intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we
intend to have agreements governing their committed activities, however, we will have limited influence over their actual performance.
We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or ethics committees of the institutions in which such trials are being
conducted, by the Data Safety Monitoring Board, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or
termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols,
inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety
issues or adverse side effects, failure to demonstrate a benefit from using a drug candidate, changes in governmental regulations or administrative actions or lack of
adequate funding to continue the clinical trial.
If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will
be harmed, and our ability to generate product revenues from any of these product candidates will be delayed, or such revenues may not be generated at all. In
addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize
our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In
addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory
approval of our product candidates.
We may not receive regulatory approval for our product candidates, or their approval may be delayed, which would have a material adverse effect on our
business and financial condition.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, by other regulatory
agencies in the United States, by the European Medicines Agency and by comparable foreign regulatory authorities outside the United States. Failure to obtain
marketing approval for one or more of our product candidates or any future product candidate will prevent us from commercializing the product candidate. We
have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and
supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs and other third-party vendors to assist us in this process.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each
therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the
product manufacturing process to, and inspection of manufacturing facilities by, regulatory authorities. One or more of our product candidates or any future
product candidate may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other
characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. If any of our product candidates or any future product
candidate receives marketing approval, the accompanying label may limit the approved use of our drug by severity of disease, patient group, or include
contraindications, interactions, or warnings, which could limit sales of the product.
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The process of obtaining marketing approval, both in the United States and abroad, is expensive, may take many years if approval is obtained at all, and can vary
substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval
policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted
product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and
may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical studies or clinical trials. In addition,
varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any
marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially
viable.
Under the FDA’s accelerated approval regulations, which only apply to certain drug products, the FDA may grant marketing approval for a new drug product on
the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely, based on
epidemiologic, therapeutic, pathophysiologic, or other evidence, to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or
irreversible morbidity. While we may undertake development programs for one or more of our product candidates that we believe, if successful, could support a
submission for marketing approval under the accelerated approval regulations, we may ultimately fail to meet the criteria to do so, which may cause delays in the
approval or rejection of an application.
If we experience delays in obtaining approval or if we fail to obtain approval of one or more of our product candidates or any future product candidate, the
commercial prospects for our product candidates may be harmed and our ability to generate revenue will be materially impaired.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates or any future product candidate for fewer or more
limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly
post-marketing studies, including clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for
the successful commercialization of that product candidate. The regulatory authority may also require the label to contain warnings, contraindications, or
precautions that limit the commercialization of that product. Any of these scenarios could compromise the commercial prospects for one or more of our product
candidates or any future product candidate.
In all interactions with regulatory authorities, the company is exposed to liability risks under the Foreign Corrupt Practices Act or similar anti-bribery laws.
If any of our product candidates are approved and our contract manufacturer fails to produce the product in the volumes that we require on a timely basis, or
fails to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the commercialization of our product
candidates or be unable to meet market demand, and may lose potential revenues.
The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing
techniques and process controls, and the use of specialized processing equipment. We intend to enter into development and supply agreements with contract
manufacturers for the completion of pre-commercialization manufacturing development activities and the manufacture of commercial supplies for each of our
product candidates. Any termination or disruption of our relationships with our contract manufacturers may materially harm our business and financial condition,
and frustrate any commercialization efforts for each respective product candidate.
All of our contract manufacturers must comply with strictly enforced federal, state and foreign regulations, including cGMP requirements enforced by the FDA
through its establishment inspection program. We are required by law to establish adequate oversight and control over raw materials, components and finished
products furnished by our third-party suppliers and contract manufacturers, but we have little control over their compliance with these regulations. Any failure to
comply with applicable regulations may result in fines and civil penalties, suspension of production, restrictions on imports and exports, suspension or delay in
product approval, product seizure or recall, or withdrawal of product approval, and would limit the availability of our product and customer confidence in our
product. Any manufacturing defect or error discovered after products have been produced and distributed could result in even more significant consequences,
including costly recall procedures, re-stocking costs, potential for breach of contract claims, damage to our reputation and potential for product liability claims.
If the contract manufacturers upon whom we rely to manufacture one or more of our product candidates, and any future product candidate we may in-license, fails
to deliver the required commercial quantities on a timely basis at commercially reasonable prices, we would likely be unable to meet demand for our products and
we would lose potential revenues.
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If serious adverse or unacceptable side effects are identified during the development of one or more of our product candidates or any future product candidate,
we may need to abandon or limit our development of some of our product candidates.
If one or more of our product candidates or any future product candidate are associated with undesirable side effects or adverse events in clinical trials or have
characteristics that are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the adverse
events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In our industry, many
compounds that initially showed promise in early stage testing have later been found to cause serious adverse events that prevented further development of the
compound. In the event that our clinical trials reveal a high or unacceptable severity and prevalence of adverse events, our trials could be suspended or terminated
and the FDA or comparable foreign regulatory authorities could order us to cease further development or deny approval of one or more of our product candidates
or any future product candidate for any or all targeted indications. The FDA could also issue a letter requesting additional data or information prior to making a
final decision regarding whether or not to approve a product candidate. The number of requests for additional data or information issued by the FDA in recent
years has increased, and resulted in substantial delays in the approval of several new drugs. Adverse events or undesirable side effects caused by one or more of
our product candidates or any future product candidate could also result in the inclusion of unfavorable information in our product labeling, denial of regulatory
approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing and generating revenues from
the sale of that product candidate. Adverse events or drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial
and could result in potential product liability claims.
Additionally, if one or more of our product candidates or any future product candidate receives marketing approval and we or others later identify undesirable side
effects caused by this product, a number of potentially significant negative consequences could result, including:
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regulatory authorities may require the addition of unfavorable labeling statements, including specific warnings, black box warnings, adverse
reactions, precautions, and/or contraindications;
regulatory authorities may suspend or withdraw their approval of the product, and/or require it to be removed from the market;
· we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; or
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our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of any of our product candidates or any future product candidate or could
substantially increase our commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues, or any revenues,
from its sale.
Even if one or more of our product candidates receives regulatory approval, it and any other products we may market will remain subject to substantial
regulatory scrutiny.
If one or more of our product candidates that we may license or acquire is approved, the approved product candidate will be subject to ongoing requirements and
review by the FDA and other regulatory authorities. These requirements include labeling, packaging, storage, advertising, promotion, record-keeping and
submission of safety and other post-market information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality
control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and
recordkeeping of the drug, and requirements regarding company presentations and interactions with health care professionals.
The FDA, or other regulatory authorities, may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or
efficacy of the product. The FDA and other applicable regulatory authorities closely regulate the post-approval marketing and promotion of drugs to ensure drugs
are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other applicable regulatory
authorities impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market our products for only their approved
indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug and Cosmetic Act relating to the promotion of
prescription drugs may lead to investigations, civil claims, and/or criminal charges alleging violations of federal and state health care fraud and abuse laws, as well
as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to
comply with regulatory requirements, may yield various results, including:
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restrictions on such products, operations, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
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restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
· warning letters, untitled letters, import alerts, and/or inspection observations;
· withdrawal of the products from the market;
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refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
fines, restitution or disgorgement of profits;
suspension or withdrawal of marketing or regulatory approvals;
suspension of any ongoing clinical trials;
refusal to permit the import or export of our products;
product seizure; or
Injunctions, consent decrees, and/or the imposition of civil or criminal penalties.
The FDA’s policies, or the policies of other applicable regulatory authorities, may change and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product candidates, or negatively affect those products for which we may have already received regulatory
approval, if any. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to
maintain regulatory compliance, we may be subject to the various actions listed above, including losing any marketing approval that we may have obtained.
We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our
business.
A pharmaceutical product cannot be marketed in the U.S. or other countries until we have completed a rigorous and extensive regulatory review process, including
approval of a brand name. Any brand names we intend to use for our product candidates will require approval from the FDA regardless of whether we have
secured a formal trademark registration from the United States Patent and Trademark Office (“USPTO”). The FDA typically conducts a review of proposed
product brand names, including an evaluation of the potential for confusion with other product names. The FDA may also object to a product brand name if it
believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an
alternative brand name for our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existing trademark applications for such
product candidate and may be required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under
applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for
a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.
Our current and future relationships with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to
applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and regulations,
which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future
earnings.
Healthcare providers, physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any
product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable
fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, which
may constrain the business or financial arrangements and relationships through which we sell, market and distribute any product candidates for which we obtain
marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by U.S. federal and state governments and by governments
in foreign jurisdictions in which we conduct our business. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to
operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the
purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs, such as
Medicare and Medicaid;
federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil
penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the
federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to
avoid, decrease or conceal an obligation to pay money to the federal government; the federal Health Insurance Portability and Accountability Act of
1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false
statements relating to healthcare matters;
· HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective
implementing regulations, which impose obligations on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their
business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with
respect to safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal Open Payments program, which requires manufacturers of certain approved drugs, devices, biologics and medical supplies for which
payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the
Centers for Medicare & Medicaid Services (“CMS”), information related to “payments or other transfers of value” made to physicians, which is
defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and teaching hospitals and applicable manufacturers and applicable
group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians and their immediate family
members. Data collection began on August 1, 2013 with requirements for manufacturers to submit reports to CMS by March 31, 2014 and 90 days
after the end each subsequent calendar year. Disclosure of such information was made by CMS on a publicly available website beginning in
September 2014; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third- party payors, including private insurers; state
and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state
and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance
efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is
possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental
regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines,
imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our
operations, which could have a material adverse effect on our business. If any of the physicians or other healthcare providers or entities with whom we expect to do
business, including our collaborators, is found not to be in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions,
including exclusions from participation in government healthcare programs, which could also materially affect our business.
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Regulatory approval by the FDA, or any similar regulatory authorities outside the United States, is limited to those specific indications and conditions for
which clinical safety and efficacy have been demonstrated.
Any regulatory approval is limited to those specific diseases and indications for which a product is deemed to be safe and effective by the FDA, or other similar
regulatory authorities outside the United States. In addition to the regulatory approval required for new drug products, new formulations or indications for an
approved product also require regulatory approval. If we are not able to obtain regulatory approval for any desired future indications for our products, our ability to
effectively market and sell our products may be prevented or reduced, and our business may be adversely affected.
While physicians may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical studies
and approved by the regulatory authorities, our ability to promote products is limited to those indications that are specifically approved by the FDA, or similar
regulatory authorities outside the United States. These “off-label” uses are common across medical specialties and may constitute an appropriate treatment
for some patients in certain circumstances. Regulatory authorities in the U.S. generally do not regulate the behavior of physicians in their choice of treatments.
Regulatory authorities do, however, restrict promotion by pharmaceutical companies on the subject of off-label use. If our promotional activities fail to comply
with these regulations or guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In addition, our failure to follow FDA, or any
applicable foreign regulatory authority, rules and guidelines relating to promotion and advertising may cause the FDA, or such applicable foreign regulatory
authority, to suspend or withdraw an approved product from the market, require a recall or institute fines or penalties, or could result in disgorgement of money,
operating restrictions, injunctions or criminal prosecution, any of which could harm our business.
We are subject to new legislation, regulatory proposals and managed care initiatives that may increase our costs of compliance and adversely affect our ability
to market our products, obtain collaborators and raise capital.
In the U.S. and some foreign jurisdictions, there have been a number of proposed and enacted legislative and regulatory changes regarding the healthcare system
that could prevent or delay marketing approval of one or more of our product candidates, restrict or regulate post-approval activities and affect our ability to
profitably sell any of our product candidates for which we obtain marketing approval.
Among policy makers and payors in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of
containing healthcare costs, improving quality and expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has
been significantly affected by major legislative initiatives.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), was enacted
in 2010 and made significant changes to the United States’ healthcare system. The ACA and any revisions or replacements of that Act, any substitute legislation,
and other changes in the law or regulatory framework could have a material adverse effect on our business.
Among the provisions of the ACA of importance to our potential product candidates are:
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an annual, nondeductible fee on any entity that manufactures, or imports specified branded prescription drugs and biologic agents, apportioned
among these entities according to their market share in certain government healthcare programs;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average
manufacturer price for branded and generic drugs, respectively;
expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, new government
investigative powers and enhanced penalties for non-compliance;
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 a manufacturer’s outpatient drugs to be covered
under Medicare Part D;
extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals
and by adding new mandatory eligibility categories for certain individuals with income at or below 138% of the federal poverty level, thereby
potentially increasing a manufacturer’s Medicaid rebate liability;
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expansion of the entities eligible to enroll in the 340B Drug Pricing Program to include certain critical access hospitals, freestanding cancer hospitals,
rural referral centers, and sole community hospitals, but exempting orphan drugs from the ceiling price requirements for these covered entities;
the new requirements under the federal Open Payments program and its implementing regulations;
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;
a new regulatory pathway for the approval of biosimilar biological products, all of which will impact existing government healthcare programs and
will result in the development of new programs; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along
with funding for such research.
The Supreme Court upheld the ACA in the main challenge to the constitutionality of the law in 2012. Specifically, the Supreme Court held that the individual
mandate and corresponding penalty was constitutional because it would be considered a tax by the federal government. The Supreme Court also upheld federal
subsidies for purchasers of insurance through federally facilitated exchanges in a decision released in June 2015.
President Trump ran for office on a platform that supported the repeal of the ACA, and one of his first actions after his inauguration was to sign an Executive Order
instructing federal agencies to waive or delay requirements of the ACA that impose economic or regulatory burdens on states, families, the health-care industry and
others. Modifications to or repeal of all or certain provisions of the ACA have been attempted in Congress as a result of the outcome of the recent presidential and
congressional elections, consistent with statements made by the incoming administration and members of Congress during the presidential and congressional
campaigns and following the election.
In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that
would repeal portions of the ACA. The Budget Resolution is not a law. However, it is widely viewed as the first step toward the passage of legislation that would
repeal certain aspects of the ACA. In March 2017, following the passage of the budget resolution for fiscal year 2017, the United States House of Representatives
passed legislation known as the American Health Care Act of 2017, which, if enacted, would amend or repeal significant portions of the ACA. Attempts in the
Senate in 2017 to pass ACA repeal legislation, including the Better Care Reconciliation Act of 2017, so far have been unsuccessful. At the end of 2017, Congress
passed the Tax Cuts and Jobs Act, which repealed the penalty for individuals who fail to maintain minimum essential health coverage as required by the ACA.
Following this legislation, Texas and 19 other states filed a lawsuit alleging that the ACA is unconstitutional as the individual mandate was repealed, undermining
the legal basis for the Supreme Court’s prior decision. On December 14, Texas federal district court judge Reed O’Connor issued a ruling declaring that the ACA
in it is entirety is unconstitutional. While this decision has no immediate legal effect on the ACA and its provisions, this lawsuit is ongoing and the outcome
through the appeals process may have a significant impact on our business.
The Bipartisan Budget Act of 2018 (“BBA”), which set government spending levels for Fiscal Years 2018 and 2019, revised certain provisions of the ACA.
Specifically, beginning in 2019, the BBA increased manufacturer point-of-sale discounts off negotiated prices of applicable brand drugs in the Medicare Part D
coverage gap from 50% to 70%, ultimately increasing the liability for brand drug manufacturers. Further, this mandatory manufacturer discount applied to
biosimilars beginning in 2019.
The 116th Congress has explored legislation intended to address the cost of prescription drugs. Notably, the major committees of jurisdiction in the Senate
(Finance Committee, Health, Education, Labor and Pensions Committee, and Judiciary Committee), have marked up legislation intended to address various
elements of the prescription drug supply chain. Proposals include a significant overhaul of the Medicare Part D benefit design, addressing patent “loopholes”, and
efforts to cap the increase in drug prices. The House Energy and Commerce Committee approved drug-related legislation intended to increase transparency of drug
prices and also curb anti-competitive behavior in the pharmaceutical supply chain. In addition, the House Ways & Means Committee approved legislation intended
to improve drug price transparency, including for drug manufacturers to justify certain price increases. On December 12, 2019, the House of Representatives
passed broad legislation that would, among other provisions, require the Department of Health and Human Services (“HHS”) to negotiate drug prices and impose
price caps calculated in part by international reference pricing. Failure by a manufacturer to reach an agreement with HHS on the negotiated price could result in
significant penalties for prescription drug manufacturers. While we cannot predict what proposals may ultimately become law, the proposals under consideration
could significantly change the landscape in which the pharmaceutical market operates.
The Trump Administration has also taken several regulatory steps to redirect ACA implementation. HHS finalized Medicare fee-for-service hospital payment
reductions for Part B drugs acquired through the 340B Drug Pricing Program, which remains subject to ongoing legal proceedings. HHS also has signaled its intent
to pursue reimbursement policy changes for Medicare Part B drugs as a whole that likely would reduce hospital and physician reimbursement for these drugs.
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HHS has made numerous other proposals aimed at lowering drug prices for Medicare beneficiaries and increasing price transparency. These proposals include
giving Medicare Advantage and Part D plans flexibility in the availability of drugs in “protected classes,” more transparency in the cost of drugs, including the
beneficiary’s financial liability, and less costly alternatives and permitting the use of step therapy as a means of prior authorization. HHS has also proposed
requiring pharmaceutical manufacturers disclose the prices of certain drugs in direct-to-consumer television advertisements. The proposal related to protected
classes has been withdrawn and the disclosure requirements have been rejected by the courts. In addition, a proposed rule that would have passed drug rebates to
consumers at the point of sale also has been withdrawn. However, it appears the Trump Administration will continue to explore its authority to make regulatory
changes to the pharmaceutical industry. For example, the Trump Administration released an Advance Notice of Proposed Rulemaking related to an international
price index model. It is unclear what eventually will be proposed, but the President has alluded to the concept of “most favored nation” pricing with regards to U.S.
drug purchasing. In addition, HHS, in conjunction with the FDA, released two pharmaceutical importation models in December 2019: (1) a Notice of Proposed
Rulemaking to permit importation of pharmaceuticals from Canada, and (2) draft FDA guidance permitting manufacturers to import their own pharmaceuticals that
were originally intended for marketing in other countries.
HHS also has taken steps to increase the availability of cheaper health insurance options, typically with fewer benefits and less generous coverage. The
Administration has also signaled its intention to address drug prices and to increase competition, including by increasing the availability of biosimilars and generic
drugs. As these are regulatory actions, a new administration could undo or modify these efforts.
We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in
additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government healthcare
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 drugs.
Legislative proposals such as expanding the Medicaid drug rebate program to the Medicare Part D program, providing authority for the government to negotiate
drug prices under the Medicare Part D program and lowering reimbursement for drugs covered under the Medicare Part B program have been raised in Congress,
but have been met with opposition and have not been enacted so far.
The administration can rely on its existing statutory authority to make policy changes that could have an impact on the drug industry. For example, the Medicare
program has in the past proposed to test alternative payment methodologies for drugs covered under the Part B program and currently is proposing to pay hospitals
less for Part B-covered drugs purchased through the 340B Drug Pricing Program.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for drugs. We cannot be
sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of
such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA’s approval process may
significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and
containing or lowering the cost of healthcare products and services. 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 healthcare services to contain or reduce costs of healthcare may adversely
affect:
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our ability to generate revenues and achieve or maintain profitability;
the demand for any products for which we may obtain regulatory approval;
our ability to set a price that we believe is fair for our products;
the level of taxes that we are required to pay; and
the availability of capital.
In addition, governments may impose price controls, which may adversely affect our future profitability.
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We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either
in the United States or abroad.
We cannot predict the likelihood, nature or extent of how government regulation that may arise from future legislation or administrative or executive action taken
by the U.S. presidential administration may impact our business and industry. In particular, the U.S. President has taken several executive actions, including the
issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine
regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.
Notably, on January 23, 2017, President Trump ordered a civilian hiring freeze for all executive departments and agencies, including the FDA, which prohibits the
FDA from filling employee vacancies or creating new positions. Under the terms of the order, the freeze was to remain in effect until implementation of a plan to
be recommended by the Director for the Office of Management and Budget (“OMB”) in consultation with the Director of the Office of Personnel Management, to
reduce the size of the federal workforce through attrition. An under-staffed FDA could result in delays in FDA’s responsiveness or in its ability to review
submissions or applications, issue regulations or guidance or implement or enforce regulatory requirements in a timely fashion or at all. This hiring freeze was
lifted later in 2017. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA, which
requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to
be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes a budget neutrality
provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in
limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new
regulation and approximate the total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the Office of
Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency
regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be implemented, and the extent to which they
will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the FDA’s ability to engage in oversight and
implementation activities in the normal course, our business may be negatively impacted.
In addition, on October 12, 2017, the President released an Executive Order intended to promote health care choices and competition and on June 24, 2019, the
President released an Executive Order intended to improve price transparency and quality transparency. These may push HHS, FDA, and other relevant agencies to
engage in rulemaking that may impact the pharmaceutical industry.
Public concern regarding the safety of drug products could delay or limit our ability to obtain regulatory approval, result in the inclusion of unfavorable
information in our labeling, or require us to undertake other activities that may entail additional costs.
In light of widely publicized events concerning the safety risk of certain drug products, the FDA, members of Congress, the Government Accountability Office,
medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug
products, revisions to drug labeling that further limit use of the drug products and the establishment of risk management programs. The Food and Drug
Administration Amendments Act of 2007 (“FDAAA”), grants significant expanded authority to the FDA, much of which is aimed at improving the safety of drug
products before and after approval. In particular, the new law authorizes the FDA to, among other things, require post-approval studies and clinical trials, mandate
changes to drug labeling to reflect new safety information and require risk evaluation and mitigation strategies for certain drugs, including certain currently
approved drugs. It also significantly expands the federal government’s clinical trial registry and results databank, which we expect will result in significantly
increased government oversight of clinical trials. Under the FDAAA, companies that violate these and other provisions of the new law are subject to substantial
civil monetary penalties, among other regulatory, civil and criminal penalties. The increased attention to drug safety issues may result in a more cautious approach
by the FDA in its review of data from our clinical trials. Data from clinical trials may receive greater scrutiny, particularly with respect to safety, which may make
the FDA or other regulatory authorities more likely to require additional preclinical studies or clinical trials. If the FDA requires us to conduct additional
preclinical studies or clinical trials prior to approving any of our product candidates, our ability to obtain approval of this product candidate will be delayed. If the
FDA requires us to provide additional clinical or preclinical data following the approval of any of our product candidates, the indications for which this product
candidate is approved may be limited or there may be specific warnings or limitations on dosing, and our efforts to commercialize our product candidates may be
otherwise adversely impacted.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or
prevented.
We may not be able to initiate or continue clinical trials for one or more of our product candidates if we are unable to locate and enroll a sufficient number of
eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Some of our competitors have
ongoing clinical trials for product candidates that treat the same indications that we are targeting for our product candidates, and patients who would otherwise be
eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Available therapies for the indications we are pursuing can
also affect enrollment in our clinical trials. Patient enrollment is affected by other factors including:
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the severity of the disease under investigation;
the eligibility criteria for the study in question;
the perceived risks and benefits of the product candidate under study;
the efforts to facilitate timely enrollment in clinical trials;
the patient referral practices of physicians;
the number of clinical trials sponsored by other companies for the same patient population;
the ability to monitor patients adequately during and after treatment; and
the proximity and availability of clinical trial sites for prospective patients.
Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical
trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates or future product candidates, which
would cause the value of our company to decline and limit our ability to obtain additional financing.
Our product candidates are in scientific areas of intense competition from many large pharmaceutical and biotechnology companies, many of which are
significantly further along in development or are already on the market with competing products. We expect competition for our product candidates will
intensify, and new products may emerge that provide different or better therapeutic alternatives for our targeted indications.
The biotechnology and pharmaceutical industries are subject to rapid and intense technological change. We face, and will continue to face, competition in the
development and, if approved, marketing of our product candidates from academic institutions, government agencies, research institutions and biotechnology and
pharmaceutical companies. There can be no assurance that developments by others will not render one or more of our product candidates obsolete or
noncompetitive. Furthermore, new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur
in the pharmaceutical industry at a rapid pace. These developments may render one or more of our product candidates obsolete or noncompetitive.
Our product candidates, if approved, will compete with other product candidates with similar indications.
Competitors may seek to develop alternative formulations that do not directly infringe on our in-licensed patent rights. The commercial opportunity for one or
more of our product candidates could be significantly harmed if competitors are able to develop alternative formulations outside the scope of our in-licensed
patents. Compared to us, many of our potential competitors have substantially greater:
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capital resources;
development resources, including personnel and technology;
clinical trial experience;
regulatory experience;
expertise in prosecution of intellectual property rights; and
· manufacturing, distribution and sales and marketing experience.
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As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection or
other intellectual property rights that limit our ability to develop or commercialize one or more of our product candidates. Our competitors may also develop drugs
that are more effective, safe, useful and less costly than ours and may be more successful than us in manufacturing and marketing their products.
Our commercial success depends upon us attaining significant market acceptance of our product candidates, if approved for sale, among physicians, patients,
healthcare payors and major operators of cancer and other clinics.
Even if we obtain regulatory approval for one or more of our product candidates, the product may not gain market acceptance among physicians, health care
payors, patients and the medical community, which are critical to commercial success. Market acceptance of any product candidate for which we receive approval
depends on a number of factors, including:
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the efficacy and safety as demonstrated in clinical trials;
any potential differentiation of the drug versus available therapies;
the timing of market introduction of such product candidates as well as competitive products;
the clinical indications for which the drug is approved;
acceptance by physicians, major operators of cancer clinics and patients of the drug as a safe and effective treatment;
the safety of such product candidates in a broader patient group (i.e. based on actual use);
the availability, cost and potential advantages of alternative treatments, including less expensive generic drugs;
the availability of adequate reimbursement and pricing by third-party payors and government authorities;
the relative convenience and ease of administration of the product candidate for clinical practices;
the product labeling or product insert required by the FDA or regulatory authority in other countries;
the approval, availability, market acceptance and reimbursement for a companion diagnostic, if any;
the prevalence and severity of adverse side effects; and
the effectiveness of our sales and marketing efforts.
If any product candidate that we develop does not provide a treatment regimen that is as beneficial as, or is perceived as being as beneficial as, the current standard
of care or otherwise does not provide patient benefit, that product candidate, if approved for commercial sale by the FDA or other regulatory authorities, likely will
not achieve market acceptance. Our ability to effectively promote and sell any approved products will also depend on pricing and cost-effectiveness, including our
ability to produce a product at a competitive price and our ability to obtain sufficient third-party coverage or reimbursement. If any product candidate is approved
but does not achieve an adequate level of acceptance by physicians, patients and third-party payors, our ability to generate revenues from that product would be
substantially reduced. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require
significant resources, may be constrained by FDA rules and policies on product promotion, and may never be successful.
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If approved, our product candidates may face competition from less expensive generic products of competitors and, if we are unable to differentiate the benefits
of our product candidates over these less expensive alternatives, we may never generate meaningful product revenues.
Generic therapies are typically sold at lower prices than branded therapies and are generally preferred by hospital formularies and managed care providers of health
services. We anticipate that, if approved, our product candidates will face increasing competition in the form of generic versions of branded products of
competitors, including those that have lost or will lose their patent exclusivity. In the future, we may face additional competition from a generic form of our own
candidates when the patents covering them begin to expire, or earlier if the patents are successfully challenged. If we are unable to demonstrate to physicians and
payers that the key differentiating features of our product candidates translate to overall clinical benefit or lower cost of care, we may not be able to compete with
generic alternatives.
Reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our products
profitably.
There is significant uncertainty related to the third-party coverage and reimbursement of newly approved drugs. Such third-party payors include government health
programs such as Medicare, managed care providers, private health insurers and other organizations. We intend to seek approval to market our product candidates
in the U.S., Europe and other selected foreign jurisdictions. Market acceptance and sales of our product candidates in both domestic and international markets will
depend significantly on the availability of adequate coverage and reimbursement from third-party payors for any of our product candidates and may be affected by
existing and future health care reform measures. Government and other third-party payors are increasingly attempting to contain healthcare costs by limiting both
coverage and the level of reimbursement for new drugs and, as a result, they may not cover or provide adequate payment for our product candidates. These payors
may conclude that our product candidates are less safe, less effective or less cost-effective than existing or future introduced products, and third-party payors may
not approve our product candidates for coverage and reimbursement or may cease providing coverage and reimbursement for these product candidates.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could
require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide data
sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement of our future products is unavailable or limited in scope or amount, or
if pricing is set at unsatisfactory levels, it may impact the market acceptance of our products and we may be unable to achieve or sustain profitability.
In some foreign countries, particularly in the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries,
pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. To obtain
reimbursement or pricing approval in some countries, we may be required to conduct additional clinical trials that compare the cost-effectiveness of our product
candidates to other available therapies. If reimbursement of our product candidates is unavailable or limited in scope or amount in a particular country, or if pricing
is set at unsatisfactory levels, we may be unable to achieve or sustain profitability of our products in such country.
If we are unable to establish sales, marketing and distribution capabilities or to enter into agreements with third parties to market and sell our product
candidates, we may not be successful in commercializing our product candidates if and when they are approved.
We currently do not have a marketing or sales organization for the marketing, sales and distribution of pharmaceutical products. In order to commercialize any
product candidate that receives marketing approval, we would need to build marketing, sales, distribution, managerial and other non-technical capabilities or make
arrangements with third parties to perform these services, and we may not be successful in doing so. In the event of successful development and regulatory
approval of one or more of our product candidates or any future product candidate, we expect to build a targeted specialist sales force to market or co-promote the
product. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is
expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and
establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization
expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:
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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products;
the lack of complementary or other products to be offered by sales personnel, which may put us at a competitive disadvantage from the perspective of
sales efficiency relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating our own sales and marketing organization.
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As an alternative to establishing our own sales force, we may choose to partner with third parties that have well-established direct sales forces to sell, market and
distribute our products.
We rely, and expect to continue to rely, on third parties to conduct our preclinical studies and clinical trials, and those third parties may not perform
satisfactorily, including failing to meet deadlines for the completion of such trials or complying with applicable regulatory requirements.
We rely on third-party CROs and site management organizations to conduct some of our preclinical studies and all of our clinical trials for our product candidates,
and plan to do the same for any future product candidate. We expect to continue to rely on third parties, such as CROs, site management organizations, clinical
data management organizations, medical institutions and clinical investigators, to conduct some of our preclinical studies and all of our clinical trials. The
agreements with these third parties might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative
arrangements, that could delay our product development activities.
Our reliance on these third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities.
For example, we remain responsible for ensuring that each of our preclinical studies and clinical trials are conducted in accordance with the general investigational
plan and protocols for the trial and for ensuring that our preclinical studies are conducted in accordance with good laboratory practices (“GLPs”) as appropriate.
Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices (“GCPs”), 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 trial participants are
protected. Regulatory authorities enforce these requirements through periodic inspections of trial sponsors, clinical investigators and trial sites. If we or any of our
clinical research organizations fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or
comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you
that upon inspection by a regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP regulations. In addition,
our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical
trials, which would delay the regulatory approval process. We also are required to register ongoing clinical trials and post the results of completed clinical trials on
a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal
sanctions.
The third parties with whom we have contracted to help perform our preclinical studies and/or clinical trials may also 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 preclinical
studies or clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing
approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.
If any of our relationships with these third-party CROs or site management organizations terminate, we may not be able to enter into arrangements with alternative
CROs or site management organizations or to do so on commercially reasonable terms. Switching or adding additional CROs or site management organizations
involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO or site management
organization commences work. As a result, delays could occur, which could compromise our ability to meet our desired development timelines. Though we
carefully manage our relationships with our CROs or site management organizations, there can be no assurance that we will not encounter similar challenges or
delays in the future. Forces beyond our control could disrupt the ability of our third-party CROs, site management organizations, clinical data management
organizations, medical institutions and clinical investigators to conduct our preclinical studies and our clinical trials for our product candidates and for any future
product candidate. For instance, the developing situation in China and globally regarding the coronavirus disease outbreak has the potential to adversely impact our
product development activities. At this time, the impact of the coronavirus disease outbreak is not having a material adverse effect on our business, but no
assurance can be given it will not in the future if the situation persists.
We contract with third parties for the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for
commercialization, if and when our product candidates are approved. This reliance on third parties increases the risk that we will not have sufficient quantities
of our product candidates or any future product candidate or such quantities at an acceptable cost, which could delay, prevent or impair our development or
commercialization efforts.
We do not have any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical
and clinical testing, and plan to do so for commercial manufacture of any of our product candidates that may receive marketing approval. This reliance on third
parties increases the risk that we will not have sufficient quantities of our product candidates or any future product candidate or such quantities at an acceptable
cost or quality, which could delay, prevent or impair our development or commercialization efforts.
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We also expect to rely on third-party manufacturers or third-party collaborators for the manufacture of commercial supply of any product candidates for which our
collaborators or we may obtain marketing approval. We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms.
Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
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reliance on the third party for regulatory compliance and quality assurance, while still being required by law to establish adequate oversight and
control over products furnished by that third party;
the possible breach of the manufacturing agreement by the third party;
· manufacturing delays if our third-party manufacturers are unable to obtain raw materials due to supply chain disruptions, give greater priority to the
supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreement between us;
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the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
We rely on our third-party manufacturers to produce or purchase from third-party suppliers the materials necessary to produce our product candidates for our
preclinical and clinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our drugs and there may be a need to assess
alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our preclinical and clinical
trials, and if approved, ultimately for commercial sale. We do not have any control over the process or timing of the acquisition of these raw materials by our third-
party manufacturers. Forces beyond our control could disrupt the global supply chain and impact our or our third-party manufacturers’ ability to obtain raw
materials or other products necessary to manufacture our product candidates. For instance, the developing situation in China and globally regarding the coronavirus
disease outbreak has the potential to adversely impact the supply of raw materials and other products. At this time, the impact of the coronavirus disease outbreak
is not having a material adverse effect on our business, but no assurance can be given it will not in the future if the situation persists. Any significant delay in the
supply of a product candidate, or the raw material components thereof, for an ongoing preclinical or clinical trial due to the need to replace a third-party
manufacturer could considerably delay completion of our preclinical or clinical trials, product testing and potential regulatory approval of our product candidates.
If our third-party manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for a product candidate, the
commercial launch of that product candidate would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from
the sale of our product candidates.
The facilities used by our third-party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be
conducted after we submit an NDA or BLA to the FDA. We are required by law to establish adequate oversight and control over raw materials, components and
finished products furnished by our third-party manufacturers, but we do not control the day-to-day manufacturing operations of, and are dependent on, our third-
party manufacturers for compliance with cGMP regulations for manufacture of our product candidates. Third-party manufacturers may not be able to comply with
the cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with
applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, restrictions on imports and exports, civil penalties,
delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal
prosecutions, any of which could significantly and adversely affect supplies of our products.
One or more of the product candidates that we may develop may compete with other product candidates and products for access to manufacturing facilities. There
are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any performance failure on the part
of our existing or future third-party manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for
redundant supply or a second source for bulk drug substance or the manufacture of drug product. If our current third-party manufacturers cannot perform as agreed,
we may be required to replace such manufacturers. We may incur added costs and delays in identifying and qualifying any replacement manufacturers. The U.S.
DEA restricts the importation of a controlled substance finished drug product when the same substance is commercially available in the United States, which could
reduce the number of potential alternative manufacturers for one or more of our product candidates.
Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit
margins and our ability to commercialize any products that may receive marketing approval on a timely and competitive basis.
We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could
delay clinical development or marketing approval of our product candidates or commercialization of our products, if approved, producing additional losses and
depriving us of potential product revenue.
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We rely on clinical data and results obtained by third parties that could ultimately prove to be inaccurate or unreliable.
As part of our strategy to mitigate development risk, we seek to develop product candidates with well-studied mechanisms of action and may utilize biomarkers to
assess potential clinical efficacy early in the development process. This strategy necessarily relies upon clinical data and other results obtained by third parties that
may ultimately prove to be inaccurate or unreliable. Further, such clinical data and results may be based on products or product candidates that are significantly
different from our product candidates or any future product candidate. If the third-party data and results we rely upon prove to be inaccurate, unreliable or not
applicable to our product candidates or future product candidate, we could make inaccurate assumptions and conclusions about our product candidates and our
research and development efforts could be compromised.
If we breach any of the agreements under which we license rights to one or more of product candidates from others, we could lose the ability to continue to
develop and, if approved, commercialize the product candidate.
Because we have in-licensed the rights to all of our product candidates from third parties, if there are any disputes between us and any of our licensors regarding
our rights under our license agreements, our ability to develop and commercialize these product candidates may be adversely affected. Any uncured, material
breach under any of our license agreements could result in our loss of exclusive rights to one or more of our product candidates and may lead to a complete
termination of our related product development efforts.
We may not be able to manage our business effectively if we are unable to attract and retain key personnel.
We may not be able to attract and/or retain qualified management and commercial, scientific and clinical personnel in the future due to the intense competition for
qualified personnel among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel to accomplish our
business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional
capital and our ability to implement our business strategy.
Our employees or third-party contractors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and
requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees or third-party contractors could include intentional failures to comply
with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established, comply with federal and state health-
care fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing
and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, bribery, self-dealing and
other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee or third-party contractors 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, as well as civil and criminal liability. The
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from
governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are
instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and
results of operations, including the imposition of significant fines and/or other civil and/or criminal sanctions.
We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for one or more of our product
candidates or a future product candidate we may license or acquire and may have to limit their commercialization.
The use of one or more of our product candidates and any future product candidate we may license or acquire in clinical trials and the sale of any products for
which we obtain marketing approval expose us to the risk of product liability claims. For example, we may be sued if any product we develop allegedly causes
injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of
defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Product
liability claims might be brought against us by consumers, health care providers or others using, administering or selling our products. If we cannot successfully
defend ourselves against these claims, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
· withdrawal of clinical trial participants;
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suspension or termination of clinical trial sites or entire trial programs;
decreased demand for any product candidates or products that we may develop;
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initiation of investigations by regulators;
impairment of our business reputation;
costs of related litigation;
substantial monetary awards to patients or other claimants;
loss of revenues;
reduced resources of our management to pursue our business strategy; and
the inability to commercialize our product candidate or future product candidates.
We have obtained, and will continue to obtain, limited product liability insurance coverage for any and all of our current and future clinical trials. However, our
insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is
becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us
against losses due to liability. When needed we intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing
approval for one or more of our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any
products approved for marketing. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A
successful product liability claim or series of claims brought against us could cause our stock price to fall and, if judgments exceed our insurance coverage, could
decrease our cash and adversely affect our business.
Our future growth depends on our ability to identify and acquire or in-license products and if we do not successfully identify and acquire or in-license related
product candidates or integrate them into our operations, we may have limited growth opportunities.
An important part of our business strategy is to continue to develop a pipeline of product candidates by acquiring or in-licensing products, businesses or
technologies that we believe are a strategic fit with our focus on novel combinations of immuno-oncology antibodies and small molecule targeted anti-cancer
agents. Future in-licenses or acquisitions, however, may entail numerous operational and financial risks, including:
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exposure to unknown liabilities;
disruption of our business and diversion of our management’s time and attention to develop acquired products or technologies;
difficulty or inability to secure financing to fund development activities for such acquired or in-licensed technologies in the current economic
environment;
incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;
higher than expected acquisition and integration costs;
increased amortization expenses;
difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
inability to retain key employees of any acquired businesses.
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We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our
current infrastructure. In particular, we may compete with larger pharmaceutical companies and other competitors in our efforts to establish new collaborations and
in-licensing opportunities. These competitors likely will have access to greater financial resources than us and may have greater expertise in identifying and
evaluating new opportunities. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to
realize the anticipated benefits of such efforts.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that
may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a
result, we may forego or delay pursuit of opportunities with other product candidates or for 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
and/or effectively evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate
through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and
commercialization rights to such product candidate.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm
our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage,
treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and
biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes.
We cannot eliminate the risk of contamination or injury from these materials. Although we believe that the safety procedures for handling and disposing of these
materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these
materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability
could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and
regulations.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of
hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or
toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future
laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in
substantial fines, penalties or other sanctions.
Our business and operations would suffer in the event of system failures.
Despite the implementation of security measures, our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural
disasters, terrorism, war and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions in our operations
could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed clinical trials for one or more of
our product conducts could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information,
we may incur liability and the further development of one or more of our product candidates may be delayed.
Risks Related to Intellectual Property
If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently
broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our
technology and products may be impaired.
Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection in the United States and other countries with
respect to our product candidates or any future product candidate that we may license or acquire and the methods we use to manufacture them, as well as
successfully defending these patents and trade secrets against third-party challenges. We seek to protect our proprietary position by filing patent applications in the
United States and abroad related to our novel technologies and product candidates, and by maintenance of our trade secrets through proper procedures. We will
only be able to protect our technologies from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover them in the
market they are being used or developed.
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The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner. It is also possible that we will fail to identify any patentable aspects of our research and development output and
methodology, and, even if we do, an opportunity to obtain patent protection may have passed. Given the uncertain and time-consuming process of filing patent
applications and prosecuting them, it is possible that our product(s) or process(es) originally covered by the scope of the patent application may have changed or
been modified, leaving our product(s) or process(es) without patent protection. If our licensors or we fail to obtain or maintain patent protection or trade secret
protection for one or more product candidates or any future product candidate we may license or acquire, third parties may be able to leverage our proprietary
information and products without risk of infringement, which could impair our ability to compete in the market and adversely affect our ability to generate
revenues and achieve profitability. Moreover, should we enter into other collaborations we may be required to consult with or cede control to collaborators
regarding the prosecution, maintenance and enforcement of licensed patents. Therefore, these patents and applications may not be prosecuted and enforced in a
manner consistent with the best interests of our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent
years been the subject of much litigation. In addition, no consistent policy regarding the breadth of claims allowed in pharmaceutical or biotechnology patents has
emerged to date in the U.S. The patent situation outside the U.S. is even more uncertain. The laws of foreign countries may not protect our rights to the same extent
as the laws of the United States, and we may fail to seek or obtain patent protection in all major markets. For example, European patent law restricts the
patentability of methods of treatment of the human body more than United States law does. Publications of discoveries in the scientific literature often lag behind
the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after a first filing, or in some
cases not at all. Therefore, we cannot know with certainty whether we or our licensors were the first to make the inventions claimed in patents or pending patent
applications that we own or licensed, or that we or our licensors were the first to file for patent protection of such inventions. In the event that a third party has also
filed a U.S. patent application relating to our product candidates or a similar invention, depending upon the priority dates claimed by the competing parties, we
may have to participate in interference proceedings declared by the USPTO to determine priority of invention in the U.S. The costs of these proceedings could be
substantial and it is possible that our efforts to establish priority of invention would be unsuccessful, resulting in a material adverse effect on our U.S. patent
position. As a result, the issuance, scope, validity, enforceability and commercial value of our or any of our respective licensors’ patent rights are highly uncertain.
Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which
effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the
United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. For example, the federal courts of the United
States have taken an increasingly dim view of the patent eligibility of certain subject matter, such as naturally occurring nucleic acid sequences, amino acid
sequences and certain methods of utilizing the same, which include their detection in a biological sample and diagnostic conclusions arising from their detection.
Such subject matter, which had long been a staple of the biotechnology and biopharmaceutical industry to protect their discoveries, is now considered, with few
exceptions, ineligible in the first instance for protection under the patent laws of the United States. Accordingly, we cannot predict the breadth of claims that may
be allowed or enforced in our patents or in those licensed from a third-party.
In addition, U.S. patent laws may change, which could prevent or limit us from filing patent applications or patent claims to protect products and/or technologies or
limit the exclusivity periods that are available to patent holders, as well as affect the validity, enforceability, or scope of issued patents. For example, on September
16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to
U.S. patent law. These include changes to transition from a “first-to-invent” system to a “first-to-file” system and to the way issued patents are challenged. The
formation of the Patent Trial and Appeal Board now provides a quicker and less expensive process for challenging issued patents. The USPTO recently developed
new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-
Smith Act, and in particular, the first inventor-to-file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the
Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on
our business and financial condition.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination,
inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. The costs of these proceedings could
be substantial and it is possible that our efforts to establish priority of invention would be unsuccessful, resulting in a material adverse effect on our U.S. patent
position. An adverse determination in any such submission, patent office trial, proceeding or litigation could reduce the scope of, render unenforceable, or
invalidate, our patent rights, allow third parties to commercialize our technology or 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. In addition, if the breadth or strength of protection provided by our
patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product
candidates.
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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 with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by
developing similar or alternative technologies or products in a non-infringing manner.
The issuance of a patent does not foreclose challenges to its inventorship, scope, validity or enforceability. Therefore, 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 loss of exclusivity or in patent claims being narrowed,
invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology
and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing and
regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are
commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products
similar or identical to ours.
We depend on our licensors for the maintenance and enforcement of intellectual property covering certain of our product candidates and have limited control,
if any, over the amount or timing of resources that our licensors devote on our behalf, or whether any financial difficulties experienced by our licensors could
result in their unwillingness or inability to secure, maintain and enforce patents protecting certain of our product candidates.
We depend on our licensors to protect the proprietary rights covering our antibody and certain of our small molecule product candidates and we have limited, if
any, control over the amount or timing of resources that they devote on our behalf, or the priority they place on, maintaining patent rights and prosecuting patent
applications to our advantage. Moreover, we have limited, if any, control over the strategies and arguments employed in the maintenance of patent rights and the
prosecution of patent applications to our advantage.
Our licensors, depending on the patent or application, are responsible for maintaining issued patents and prosecuting patent applications for our antibody and
certain of our small molecule product candidates. We cannot be sure that they will perform as required. Should they decide they no longer want to maintain any of
the patents licensed to us, they are required to afford us the opportunity to do so at our expense. If our licensors do not perform, and if we do not assume the
maintenance of the licensed patents in sufficient time to make required payments or filings with the appropriate governmental agencies, we risk losing the benefit
of all or some of those patent rights. Moreover, and possibly unbeknownst to us, our licensors may experience serious difficulties related to their overall business
or financial stability, and they may be unwilling or unable to continue to expend the financial resources required to maintain and prosecute these patents and patent
applications. While we intend to take actions reasonably necessary to enforce our patent rights, we depend, in part, on our licensors to protect a substantial portion
of our proprietary rights and to inform us of the status of those protections and efforts thereto.
Our licensors may also be notified of alleged infringement and be sued for infringement of third-party patents or other proprietary rights. We may have limited, if
any, control or involvement over the defense of these claims, and our licensors could be subject to injunctions and temporary or permanent exclusionary orders in
the U.S. or other countries. Our licensors are not obligated to defend or assist in our defense against third-party claims of infringement. We have limited, if any,
control over the amount or timing of resources, if any, that our licensors devote on our behalf or the priority they place on defense of such third-party claims of
infringement.
Because of the uncertainty inherent in any patent or other litigation involving proprietary rights, we or our licensors may not be successful in defending claims of
intellectual property infringement alleged by third parties, which could have a material adverse effect on our results of operations. Regardless of the outcome of
any litigation, defending the litigation may be expensive, time-consuming and distracting to management.
Because it is difficult and costly to protect our proprietary rights, we may not be able to ensure their protection.
The degree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights
or permit us to gain or keep our competitive advantage, in addition to being costly and time consuming to undertake. For example:
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our licensors might not have been the first to make the inventions covered by each of our pending patent applications and issued patents;
our licensors might not have been the first to file patent applications for these inventions;
others may independently develop similar or alternative technologies or duplicate our product candidates or any future product candidate
technologies;
it is possible that none of the pending patent applications licensed to us will result in issued patents;
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the scope of our issued patents may not extend to competitive products developed or produced by others;
the issued patents covering our product candidates or any future product candidate may not provide a basis for market exclusivity for active products,
may not provide us with any competitive advantages, or may be challenged by third parties;
· we may not develop additional proprietary technologies that are patentable; or
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intellectual property rights of others may have an adverse effect on our business.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and
unsuccessful.
Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to file one or more
actions for patent infringement, which can be expensive and time consuming. Any claims we assert against accused infringers could provoke these parties to assert
counterclaims against us alleging invalidity of our patents or that we infringe their patents; or provoke those parties to petition the USPTO to institute inter partes
review against the asserted patents, which may lead to a finding that all or some of the claims of the patent are invalid. In addition, in a patent infringement
proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other
party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding
could put one or more of our pending patents at risk of being invalidated, rendered unenforceable, or interpreted narrowly. Because of the substantial amount of
discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure
during this type of litigation. Furthermore, adverse results on U.S. patents may affect related patents in our global portfolio.
If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in any litigation
would harm our business.
Our ability to develop, manufacture, market and sell one or more of our product candidates or any future product candidate that we may license or acquire depends
upon our ability to avoid infringing the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are
owned by third parties, exist in the general fields of fully human immuno-oncology targeted antibodies and targeted anti-cancer agents and cover the use of
numerous compounds and formulations in our targeted markets. Because of the uncertainty inherent in any patent or other litigation involving proprietary rights,
we and our licensors may not be successful in defending intellectual property claims asserted by third parties, which could have a material adverse effect on our
results of operations. Regardless of the outcome of any litigation, defending the litigation may be expensive, time-consuming and distracting to management. In
addition, because patent applications can take many years to issue, there may be currently pending applications that are unknown to us, which may later result in
issued patents that one or more of our product candidates may infringe. There could also be existing patents of which we are not aware that one or more of our
product candidates may infringe, even if only inadvertently.
There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If
a third-party claims that we infringe their patents or misappropriated their technology, we could face a number of issues, including:
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infringement and other intellectual property claims which, with or without merit, can be expensive and time consuming to litigate and can divert
management’s attention from our core business;
substantial damages for past infringement which we may have to pay if a court decides that our product infringes a competitor’s patent;
a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it would not be required to do;
if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and
redesigning our processes so they do not infringe, which may not be possible or could require substantial funds, time, and may result in an inferior or
less-desirable process or product.
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Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could
distract our technical 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 and if securities analysts or investors perceive these results to be negative, it could have a substantial
adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available
for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation
or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their
greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to
compete in the marketplace.
We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially
reasonable terms.
A third party may hold intellectual property, including patent rights that are important or necessary to the development and commercialization of our products. It
may be necessary for us to use the patented or proprietary technology of third parties, whom may or may not be interested in granting such a license, to
commercialize our products, in which case we would be required to obtain a license from these third parties on commercially reasonable terms, or our business
could be harmed, possibly materially.
If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are
important to our business.
We are currently a party to license agreements with Dana-Farber, Adimab, NeuPharma and Jubilant. In the future, we may become party to additional licenses that
are important for product development and commercialization. If we fail to comply with our obligations under current or future license and funding agreements,
our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market any product or utilize
any technology that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could materially and adversely affect the
value of a product candidate being developed under any such agreement or could restrict our drug discovery activities. Termination of these agreements or
reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause
us to lose our rights under these agreements, including our rights to important intellectual property or technology.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical
companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that we or these
employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Even if frivolous or
unsubstantiated in nature, litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could
result in substantial costs and be a distraction to management and the implicated employee(s).
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent protection for our product candidates or any future product candidate, we also rely on trade secrets, including unpatented know-how,
technology and other proprietary information, to maintain our competitive position, particularly where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect. We limit disclosure of such trade secrets where possible but we also seek to protect these trade secrets, in
part, by entering into non-disclosure and confidentiality agreements with parties who do have access to them, such as our employees, our licensors, corporate
collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention
or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and may
unintentionally or willfully disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In
addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, if any of our trade secrets were to be
lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that
technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive
position would be harmed.
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Risks Related to Our Finances and Capital Requirements
We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future, and may never achieve or maintain profitability.
We are an emerging growth company with a limited operating history. We have focused primarily on in-licensing and developing our product candidates, with the
goal of supporting regulatory approval for these product candidates. We have incurred losses since our inception in November 2014 and have an accumulated
deficit of $120.1 million as of December 31, 2019. We expect to continue to incur significant operating losses for the foreseeable future. We also do not anticipate
that we will achieve profitability for a period of time after generating material revenues, if ever. If we are unable to generate revenues, we will not become
profitable and may be unable to continue operations without continued funding. Because of the numerous risks and uncertainties associated with developing
pharmaceutical products, we are unable to predict the timing or amount of increased expenses or when or if, we will be able to achieve profitability. Our net losses
may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if:
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one or more of our product candidates are approved for commercial sale, due to our ability to establish the necessary commercial infrastructure to
launch this product candidate without substantial delays, including hiring sales and marketing personnel and contracting with third parties for
warehousing, distribution, cash collection and related commercial activities;
· we are required by the FDA or foreign regulatory authorities, to perform studies in addition to those currently expected;
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there are any delays in completing our clinical trials or the development of any of our product candidates;
· we execute other collaborative, licensing or similar arrangements and the timing of payments we may make or receive under these arrangements;
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there are variations in the level of expenses related to our current and future development programs;
there are any product liability or intellectual property infringement lawsuits in which we may become involved;
there are any regulatory developments affecting product candidates of our competitors; and
one or more of our product candidate receives regulatory approval.
Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from our development stage products,
and we do not know when, or if, we will generate any revenue. Our ability to generate revenue depends on a number of factors, including, but not limited to, our
ability to:
·
obtain regulatory approval for one or more of our product candidates, or any future product candidate that we may license or acquire;
· manufacture commercial quantities of one or more of our product candidates or any future product candidate, if approved, at acceptable cost
levels; and
·
develop a commercial organization and the supporting infrastructure required to successfully market and sell one or more of our product candidates
or any future product candidate, if approved.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain
profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development
efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your
investment.
36
Our short operating history makes it difficult to evaluate our business and prospects.
We were incorporated in November 2014 and have only been conducting operations with respect to our product candidates since March 2015. Our operations to
date have been limited to preclinical and clinical operations and the in-licensing of our product candidates. We have not yet demonstrated an ability to successfully
complete clinical trials, obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales
and marketing activities necessary for successful product commercialization. Consequently, any predictions about our future performance may not be as accurate
as they could be if we had a history of successfully developing and commercializing pharmaceutical products.
In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need
to expand our capabilities to support increased clinical and manufacturing activities and future potential commercial activities. We may not be successful in adding
such capabilities.
We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors,
many of which are beyond our control. Accordingly, you should not rely upon the results of any past quarterly period as an indication of future operating
performance.
We do not have any products that are approved for commercial sale and therefore do not expect to generate any revenues from product sales in the foreseeable
future, if ever.
We have not generated any product related revenues to date, and do not expect to generate any such revenues for at least the next several years, if at all. To obtain
revenues from sales of our product candidates, we must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing
and marketing products with commercial potential. We may never succeed in these activities, and we may not generate sufficient revenues to continue our business
operations or achieve profitability.
We will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional
capital, we may be unable to complete the development and commercialization of our product candidates, or continue our development programs.
Our operations have consumed substantial amounts of cash since inception. We expect to significantly increase our spending to advance the preclinical and clinical
development of our product candidates and launch and commercialize any product candidates for which we may receive regulatory approval, including building
our own commercial organizations to address certain markets. We will require additional capital for the further development and, if approved, commercialization
of our product candidates, as well as to fund our other operating expenses and capital expenditures. We currently anticipate that our cash and cash equivalents
balances at December 31, 2019 are sufficient to fund our anticipated operating cash requirements for approximately the next 15 to 18 months from the date of this
Annual Report on Form 10-K.
We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on
terms acceptable to us we may have to significantly delay, scale back or discontinue the development or, if approved, commercialization of one or more of our
product candidates. We may also seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be
desirable or on terms that are less favorable than might otherwise be available. Any of these events could significantly harm our business, financial condition and
prospects.
Our future funding requirements will depend on many factors, including, but not limited to:
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·
the timing, design and conduct of, and results from, preclinical studies and clinical trials for our product candidates;
the potential for delays in our efforts to seek regulatory approval for our product candidates, and any costs associated with such delays;
the costs of establishing a commercial organization to sell, market and distribute our product candidates;
the rate of progress and costs of our efforts to prepare for the submission of an NDA or BLA for any of our product candidates or any product
candidates that we may in-license or acquire in the future, and the potential that we may need to conduct additional clinical trials to support
applications for regulatory approval;
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with our product
candidates, including any such costs we may be required to expend if our licensors are unwilling or unable to do so;
37
·
·
·
·
·
the cost and timing of securing sufficient supplies of our product candidates from our third-party manufacturers for clinical trials and in preparation
for commercialization;
the effect of competing technological and market developments;
the terms and timing of any collaborative, licensing, co-promotion or other arrangements that we may establish;
if one or more of our product candidates are approved, the potential that we may be required to file a lawsuit to defend our patent rights or regulatory
exclusivities from challenges by companies seeking to market generic versions of one or more of our product candidates; and
the success of the commercialization of one or more of our product candidates, if approved.
Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and technologies, but
we currently have no commitments or agreements relating to any of these types of transactions.
In order to carry out our business plan and implement our strategy, we anticipate that we will need to obtain additional financing from time to time and may choose
to raise additional funds through strategic collaborations, licensing arrangements, public or private equity or debt financing, bank lines of credit, asset sales,
government grants, or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all.
Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt or equity financing, if available, may subject us to
restrictive covenants and significant interest costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to
relinquish our rights to certain of our product candidates or marketing territories.
Our inability to raise capital when needed would harm our business, financial condition and results of operations, and could cause our stock price to decline or
require that we wind down our operations altogether.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt
financings, grants and license and development agreements in connection with any collaborations. To the extent that we raise additional capital through the sale of
equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that
adversely affect your rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or
restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable
to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product
development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market
ourselves.
We will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial
time to new compliance initiatives.
As a public company, we will continue to incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, as well as rules
subsequently implemented by the SEC. These rules impose various requirements on public companies, including requiring establishment and maintenance of
effective disclosure and financial controls and appropriate corporate governance practices. Our management and other personnel have devoted and will continue to
devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and
make some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director
and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive
officers.
38
The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and
procedures. As a result, we are required to periodically perform an evaluation of our internal controls over financial reporting to allow management to report on the
effectiveness of those controls, as required by Section 404 of the Sarbanes-Oxley Act. Additionally, our independent auditors will be required to perform a similar
evaluation and report on the effectiveness of our internal controls over financial reporting. These efforts to comply with Section 404 and related regulations have
required, and continue to require, the commitment of significant financial and managerial resources. While we anticipate maintaining the integrity of our internal
controls over financial reporting and all other aspects of Section 404, we cannot be certain that a material weakness will not be identified when we test the
effectiveness of our control systems in the future. If a material weakness is identified, we could be subject to sanctions or investigations by the SEC or other
regulatory authorities, which would require additional financial and management resources, costly litigation or a loss of public confidence in our internal controls,
which could have an adverse effect on the market price of our stock.
A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. The development of the
internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such
acquisition. Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over
our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls
could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities.
We are an “emerging growth company” and a "smaller reporting company," and the reduced disclosure requirements applicable to emerging growth
companies and smaller reporting companies may make our common stock less attractive to investors.
We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and may remain an emerging
growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the initial public offering of our
common stock, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means
the market value of our outstanding common stock that are held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have
issued more than $1.0 billion in non-convertible debt during the prior three year period. For so long as we remain an emerging growth company, we are permitted
and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These
exemptions include:
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being permitted to provide only two years of our audited financial statements, in addition to any required unaudited interim financial statements, with
correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this Annual
Report on Form 10-K;
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory
audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
disclosure obligations regarding executive compensation; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt
out is irrevocable. We have elected to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard. This may make comparison of our
financial statements with another public company which has opted into using the extended transition period difficult or impossible because of the potential
differences in accountant standards used.
We are also a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and
non-voting common shares held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues
are more than $100 million during the most recently completed fiscal year and our voting and non-voting common shares held by non-affiliates is more than $700
million measured on the last business day of our second fiscal quarter. Similar to emerging growth companies, smaller reporting companies are able to provide
simplified executive compensation disclosure, are exempt from the auditor attestation requirements of Section 404, and have certain other reduced disclosure
obligations, including, among other things, being required to provide only two years of audited financial statements and not being required to provide selected
financial data, supplemental financial information or risk factors.
39
We have elected to take advantage of certain of the reduced reporting obligations. We cannot predict whether investors will find our common stock less attractive
if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock
and our stock price may be reduced or more volatile.
Our results of operations and liquidity needs could be materially negatively affected by market fluctuations and economic downturns.
Our results of operations could be materially negatively affected by economic conditions generally, both in the U.S. and elsewhere around the world. Concerns
over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and residential real estate market in the U.S. could
contribute to increased volatility and diminished expectations for the economy and the markets going forward. These factors, potentially combined with volatile oil
prices, declining business and consumer confidence and increased unemployment, may precipitate an economic recession and fears of a possible depression.
Domestic and international equity markets may experience heightened volatility and turmoil. These events and any market upheavals may have an adverse effect
on us. In the event of a market downturn, our results of operations could be adversely affected by those factors in many ways, including making it more difficult
for us to raise funds if necessary, and our stock price may further decline.
Risks Relating to Securities Markets and Investment in Our Stock
The market price and trading volume of our common stock has been volatile. Our stock may continue to be subject to substantial price and volume fluctuations
due to a number of factors, many of which are beyond our control and may prevent our stockholders from reselling our common stock at a profit.
The market prices for securities of biotechnology and pharmaceutical companies have historically been highly volatile, and the market has from time to time
experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.
The market price and trading volume of our common stock has been highly volatile and is likely to continue to be highly volatile and may fluctuate substantially
due to many factors, including:
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announcements relating to the clinical development of our product candidates;
announcements concerning the progress of our efforts to obtain regulatory approval for and commercialize our product candidates or any future
product candidate, including any requests we receive from the FDA, or comparable regulatory authorities outside the United States, for additional
studies or data that result in delays or additional costs in obtaining regulatory approval or launching these product candidates, if approved;
the depth and liquidity of the market for our common stock;
investor perceptions about us and our business;
· market conditions in the pharmaceutical and biotechnology sectors or the economy as a whole;
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·
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price and volume fluctuations in the overall stock market;
the failure of one or more of our product candidates or any future product candidate, if approved, to achieve commercial success;
announcements of the introduction of new products by us or our competitors;
developments concerning product development results or intellectual property rights of others;
litigation or public concern about the safety of our potential products;
40
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actual fluctuations in our quarterly operating results, and concerns by investors that such fluctuations may occur in the future;
deviations in our operating results from the estimates of securities analysts or other analyst comments;
additions or departures of key personnel;
health care reform legislation, including measures directed at controlling the pricing of pharmaceutical products, and third-party coverage and
reimbursement policies;
developments concerning current or future strategic collaborations; and
discussion of us or our stock price by the financial and scientific press and in online investor communities.
Fortress controls a voting majority of our common stock.
Pursuant to the terms of the Class A common stock held by Fortress, Fortress is entitled to cast, for each share of Class A common stock held by Fortress, the
number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the sum of the shares of outstanding common stock and the
denominator of which is the number of shares of outstanding Class A common stock. Accordingly, as long as Fortress owns any shares of Class A common stock,
they will be able to control or significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of
mergers or other business combination transactions. The interests of Fortress may not always coincide with the interests of other stockholders, and Fortress may
take actions that advance its own interests and are contrary to the desires of our other stockholders. Moreover, this concentration of voting power may delay,
prevent or deter a change in control of us even when such a change may be in the best interests of all stockholders, could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of a sale of Checkpoint or our assets, and might affect the prevailing market price of our common
stock.
Fortress has the right to receive a significant grant of shares of our common stock annually which will result in the dilution of your holdings of common stock
upon each grant, which could reduce their value.
Under the terms of the Founders Agreement, Fortress has the right to receive an annual grant of shares of our common stock equal to 2.5% of the fully-diluted
outstanding equity at the time of issuance, on the anniversary of the date of the Founders Agreement, which became effective as of March 17, 2015 and was
amended and restated on July 11, 2016. This annual issuance of shares to Fortress will dilute your holdings in our common stock and, if the value of Checkpoint
has not grown over the prior year, would result in a reduction in the value of your shares.
In October 2017, the Founder’s Agreement was amended to change the issuance date of the annual grant of shares from the anniversary date of the Agreement to
January 1 of each year.
We might have received better terms from unaffiliated third parties than the terms we receive in our agreements with Fortress.
The agreements we entered into with Fortress in connection with the separation include a Management Services Agreement and the Founders Agreement. While
we believe the terms of these agreements are reasonable, they might not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated
third parties. The terms of the agreements relate to, among other things, payment of a royalty on product sales and the provision of employment and transition
services. We might have received better terms from third parties because, among other things, third parties might have competed with each other to win our
business.
The Chairman of our Board of Directors is also the Executive Chairman, President and Chief Executive Officer of TGTX, with whom we have a collaboration
agreement and a sublicense agreement, and as a result during the term of these agreements certain conflicts of interest may arise which will require the
attention of our officers and independent directors who are unaffiliated with TGTX.
In connection with our license agreement with Dana-Farber and Adimab, we entered into a collaboration agreement with TGTX to develop and commercialize the
anti-PD-L1 and anti-GITR antibody research programs, including cosibelimab (formerly referred to as CK-301), in the field of hematological malignancies.
Michael S. Weiss, our Chairman of the Board of Directors, is also the Executive Chairman, President and Chief Executive Officer of TGTX. As such, as the
collaboration agreement proceeds, certain conflicts of interest may arise between us and TGTX. Those conflicts will have to be resolved by our officers and
directors who are unaffiliated with TGTX, and also by officers and directors of TGTX who are unaffiliated with us. This may lead to less than desirable
complications and costs to both companies, which could harm our results of operations.
41
In connection with our license agreement with Jubilant, we entered into a sublicense agreement with TGTX to develop and commercialize the Jubilant family of
patents covering compounds that inhibit BET proteins such as BRD4, including CK-103, in the field of hematological malignancies. As such, as the sublicense
agreement proceeds, certain conflicts of interest may arise between us and TGTX. Those conflicts will have to be resolved by our officers and directors who are
unaffiliated with TGTX, and also by officers and directors of TGTX who are unaffiliated with us. This may lead to less than desirable complications and costs to
both companies, which could harm our results of operations.
The dual roles of our directors who also serve in similar roles with Fortress could create a conflict of interest and will require careful monitoring by our
independent directors.
We share some directors with Fortress which could create conflicts of interest between the two companies in the future. While we believe that the Founders
Agreement and the Management Services Agreement were negotiated by independent parties on both sides on arm’s length terms, and the fiduciary duties of both
parties were thereby satisfied, in the future situations may arise under the operation of both agreements that may create a conflict of interest. We will have to be
diligent to ensure that any such situation is resolved by independent parties. In particular, under the Management Services Agreement, Fortress and its affiliates are
free to pursue opportunities which could potentially be of interest to Checkpoint, and they are not required to notify Checkpoint prior to pursuing the opportunity.
Any such conflict of interest or pursuit by Fortress of a corporate opportunity independent of Checkpoint could expose us to claims by our investors and creditors
and could harm our results of operations.
We may become involved in securities class action litigation that could divert management’s attention and harm our business.
The market price and trading volume of our common stock has been highly volatile and is likely to continue to be highly volatile. In addition, the stock markets
have from time to time experienced significant price and volume fluctuations that have affected the market prices for the common stock of biotechnology and
pharmaceutical companies. These broad market fluctuations may cause the market price of our stock to decline. In the past, securities class action litigation has
often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and
biopharmaceutical companies have experienced significant stock price volatility in recent years. We may become involved in this type of litigation in the future.
Litigation often is expensive and diverts management’s attention and resources, which could adversely affect our business.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Our corporate and executive office is located at 2 Gansevoort Street, 9th Floor, New York, NY 10014. We are not currently under a lease agreement at 2
Gansevoort Street. We believe that our existing facilities are adequate to meet our current requirements. We do not own any real property.
Item 3.
Legal Proceedings
We are not involved in any litigation that we believe could have a material adverse effect on our financial position or results of operations. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of
our executive officers, threatened against or affecting our company or our officers or directors in their capacities as such.
Item 4.
Mine Safety Disclosures
Not applicable
42
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market information
PART II
Our common stock is listed on the NASDAQ Capital Market and trades under the symbol “CKPT.” We commenced trading on the NASDAQ Capital Market on
June 26, 2017. Prior to this, but only since December 19, 2016, our common stock was quoted on the OTCQX market. Prior to December 19, 2016 there was no
public market for our common stock.
Equity Compensation Plans
On March 21, 2017 and November 9, 2017, we filed registration statements on Form S-8 under the Securities Act registering the common stock issued, issuable or
reserved for issuance under our Amended and Restated 2015 Incentive Plan (“2015 Plan”). The registration statements became effective immediately upon filing,
and shares covered by the registration statements are eligible for sale in the public markets, subject to grant of the underlying awards, vesting provisions and Rule
144 limitations applicable to our affiliates.
Holders
As of March 6, 2020, there were approximately 102 holders of record for our common stock and 1 holder of record for our Class A common stock. The number of
beneficial holders of our common stock does not reflect shareholders who hold shares in street name through brokerage accounts or other nominees.
Dividends
We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings, if any, to fund the development and growth of our
business.
Securities Authorized for Issuance under Equity Compensation Plans
Subject to adjustment as provided in the 2015 Plan, the total aggregate number of shares of our common stock reserved and available for issuance pursuant to
awards granted under the 2015 Plan is 5,000,000, of which 1,465,805 shares remain available for future issuance as of December 31, 2019.
Item 6.
Selected Financial Data
Not applicable.
Item 7.
Management’s Discussion and Analysis of the Results of Operations
Forward-Looking Statements
Statements in the following discussion and throughout this report that are not historical in nature are “forward-looking statements.” You can identify forward-
looking statements by the use of words such as “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” and similar expressions.
Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give
no assurances that our expectations will prove to be correct. Actual results could differ from those described in this report because of numerous factors, many of
which are beyond our control. These factors include, without limitation, those described under Item 1A “Risk Factors.” We undertake no obligation to update
these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes. Please see “Forward-Looking
Statements” at the beginning of this Form 10-K.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes
thereto and other financial information appearing elsewhere in this Form 10-K. We undertake no obligation to update any forward-looking statements in the
discussion of our financial condition and results of operations to reflect events or circumstances after the date of this report or to reflect actual outcomes.
Overview
We are a clinical-stage immunotherapy and targeted oncology company focused on the acquisition, development and commercialization of novel treatments for
patients with solid tumor cancers. We are evaluating our lead antibody product candidate, cosibelimab, a potentially differentiated anti-PD-L1 antibody licensed
from Dana-Farber, in an ongoing Phase 1 clinical trial in checkpoint therapy-naïve patients with selected recurrent or metastatic cancers, including ongoing cohorts
intended to support one or more BLA submissions. In addition, we are evaluating our lead small-molecule, targeted anti-cancer agent, CK-101, a third-generation
EGFR inhibitor, in a Phase 1 clinical trial for the treatment of patients with EGFR mutation-positive non-small cell lung cancer NSCLC.
We have also entered into various collaboration agreements with TGTX, a related party, to develop and commercialize certain assets in connection with our
licenses in the field of hematological malignancies, while we retain the right to develop and commercialize these assets in solid tumors.
43
In September 2018, we announced preliminary interim data from our ongoing Phase 1 clinical trial of CK-101. The data were presented in an oral presentation at
the IASLC 19th World Conference on Lung Cancer in Toronto.
In September 2019, we announced updated interim results from our ongoing multicenter Phase 1 clinical trial of anti-PD-L1 antibody cosibelimab. The data were
presented in a poster presentation at the ESMO Congress 2019 in Barcelona, Spain. We continue to enroll CSCC patients to support an initial BLA submission for
cosibelimab based on this ongoing clinical trial.
To date, we have not received approval for the sale of any product candidate in any market and, therefore, have not generated any product sales from any product
candidates. In addition, we have incurred substantial operating losses since our inception, and expect to continue to incur significant operating losses for the
foreseeable future and may never become profitable. As of December 31, 2019, we have an accumulated deficit of $120.1 million.
We are a majority-controlled subsidiary of Fortress.
Checkpoint Therapeutics, Inc. was incorporated in Delaware on November 10, 2014 and commenced principal operations in March 2015. Our executive offices are
located at 2 Gansevoort Street, 9th Floor, New York, NY 10014. Our telephone number is (781) 652-4500 and our email address is ir@checkpointtx.com.
Critical Accounting Policies and Use of Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an
ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. We base our estimates on
historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Our significant accounting policies are described in the notes to our financial statements appearing elsewhere in this Form 10-K.
Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2019 compared to the year ended December 31, 2018. For a discussion of
the year ended December 31, 2018 compared to the year ended December 31, 2017, please refer to Part II, Item 7, “Management's Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018.
Comparison of the Years Ended December 31, 2019 and 2018
Revenue
For the year ended December 31, 2019, revenue was approximately $1.7 million compared to approximately $3.5 million for the year ended December 31, 2018, a
decrease of approximately $1.8 million. Revenue for the current period primarily consisted of $1.6 million from TGTX related to the collaboration agreement,
including a $1.0 million upfront licensing fee due upon the signing of an amendment to the agreement and approximately $0.6 million for the purchase of clinical
material of cosibelimab (formerly referred to as CK-301). Revenue for the year ended December 31, 2018 primarily consisted of $3.0 million from TGTX for the
purchase of clinical material of CK-301 in connection with the collaboration agreement and $0.4 million from TGTX related to the sublicense agreement for CK-
103.
Research and Development Expenses
Research and development expenses primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based
compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party CROs
for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated
with regulatory filings and patents, laboratory costs and other supplies.
For the year ended December 31, 2019, research and development expenses were approximately $19.3 million, compared to approximately $33.7 million for the
year ended December 31, 2018, a decrease of $14.4 million. The decrease is primarily attributable to costs for the manufacture of material of cosibelimab incurred
in 2018 and not replicated in 2019. The current period research and development expenses primarily consisted of $9.1 million related to clinical costs for our
product candidates, $5.4 million related to manufacturing and related costs of our product candidates, $2.5 million related to the non-cash annual equity fee in
connection with the Founders’ Agreement and $0.7 million related to stock compensation expense. For the year ended December 31, 2018, research and
development expenses primarily consisted of $23.2 million related to manufacturing costs of our product candidates, $0.7 million related to preclinical
development activities for our product candidates, $5.6 million related to clinical costs for our product candidates, $1.0 million related to a non-refundable
milestone payment upon the twelfth patient dosed in a Phase 1 clinical study of CK-301, $1.7 million related to the non-cash annual equity fee in connection with
the Founders’ Agreement, and $0.1 million related to stock compensation expense.
44
We anticipate research and development expenses in 2020 to remain relatively consistent as compared to 2019.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, for executives and other
administrative personnel, recruitment expenses, professional fees and other corporate expenses, including investor relations, legal activities, and facilities-related
expenses.
For the year ended December 31, 2019, general and administrative expenses were approximately $7.2 million, compared to approximately $6.6 million for the year
ended December 31, 2018, an increase of $0.6 million. The current period general and administrative expenses primarily consisted of stock compensation expense
of $2.4 million, $1.0 million related to salary expenses, $1.0 million related to legal and accounting fees, $0.7 million related to our issuance of shares to Fortress
pursuant to the Founders Agreement in connection with the sale of shares of our common stock under an At-the-Market Issuance Sales Agreement (the "ATM")
and $0.4 million related to investor relation fees. The prior period general and administrative expenses primarily consisted of stock compensation expense of $1.9
million, $0.8 million related to our issuance of shares to Fortress in connection with our March and September 2018 common stock offerings pursuant to the
Founders Agreement, $1.1 million related to salary expenses, $0.8 million related to legal and accounting fees and $0.6 million related to investor relation fees.
We anticipate general and administrative expenses in 2020 to remain relatively consistent as compared to 2019.
Liquidity and Capital Resources
We have incurred substantial operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future and may
never become profitable. As of December 31, 2019, we had an accumulated deficit of $120.1 million.
In November 2019, we completed an underwritten public offering, in which we sold 15,400,000 shares of our common stock at a price of $1.27 per share for gross
proceeds of approximately $19.6 million. Total net proceeds from the offering were approximately $17.6 million, net of underwriting discounts and offering
expenses of approximately $2.0 million. The shares were sold under a Registration Statement (No. 333-221493) on Form S-3, filed with the SEC.
During the year ended December 31, 2019, we sold a total of 2,273,189 shares of common stock under the ATM for aggregate total gross proceeds of
approximately $8.0 million at an average selling price of $3.52 per share, resulting in net proceeds of approximately $7.8 million after deducting commissions and
other transactions costs.
Our major sources of cash have been proceeds from the sale of equity securities. We expect to use these proceeds primarily for general corporate purposes, which
may include financing our growth, developing new or existing product candidates, and funding capital expenditures, acquisitions and investments. We currently
anticipate that our cash and cash equivalents balances at December 31, 2019 are sufficient to fund our anticipated operating cash requirements for approximately
the next 15 to 18 months from the date of this Annual Report on Form 10-K.
We will be required to expend significant funds in order to advance the development of our product candidates. Our estimate as to how long we expect our
existing cash to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources
sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital faster than we
currently anticipate, and we may need to seek additional funds sooner than planned. Accordingly, we will be required to obtain further funding through equity
offerings, debt financings, collaborations and licensing arrangements or other sources. Further financing may not be available to us on acceptable terms, or at all.
Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy and we may
be forced to curtail or cease operations.
Cash Flows for the Years Ended December 31, 2019 and 2018
Operating Activities
Net cash used in operating activities was $21.4 million for the year ended December 31, 2019, compared to $25.8 million for the year ended December 31, 2018.
The decrease in net cash used in operating activities was due primarily to a decrease in manufacturing of cosibelimab clinical supply in the current period.
45
Investing Activities
There were no investing activities for the years ended December 31, 2019 and 2018.
Financing Activities
Net cash provided by financing activities was $25.4 million for the year ended December 31, 2019. Cash provided by financing activities related to net proceeds of
$17.6 million from the issuance of common stock as part of our underwritten public offering in November 2019 and net proceeds of $7.8 million from the issuance
of common stock as part of our ATM offerings. Net cash provided by financing activities was $28.6 million for the year ended December 31, 2018. Cash provided
by financing activities related to net proceeds of $20.8 million from the issuance of common stock as part of our underwritten public offering in March 2018 and
net proceeds of $7.8 million from the issuance of common stock as part of our ATM offerings in September 2018.
Recently Issued Accounting Standards
See Note 2 to our Financial Statements.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risks
Market risk represents the risk of loss that may result from the change in value of financial instruments due to fluctuations in their market price. Market risk is
inherent in all financial instruments. Market risk may be exacerbated in times of trading illiquidity when market participants refrain from transacting in normal
quantities and/or at normal bid-offer spreads. The primary quantifiable market risk associated with our financial instruments is sensitivity to changes in interest
rates. Interest rate risk represents the potential loss from adverse changes in market interest rates. The primary objective of our investment activities is to preserve
principal while maximizing our income from investments and minimizing our market risk. As of December 31, 2019, our portfolio of financial instruments consists
of cash equivalents, including money market funds. Due to the short-term nature of these financial instruments, we believe there is no material exposure to interest
rate risk, and/or credit risk, arising from our portfolio of financial instruments.
Our assets and liabilities are denominated in U.S. dollars. Consequently, we have not considered it necessary to use foreign currency contracts or other derivative
instruments to manage changes in currency rates. We do not now, nor do we plan to, use derivative financial instruments for speculative or trading purposes.
However, these circumstances might change.
Item 8.
Financial Statements and Supplementary Data.
The information required by this Item is set forth in the financial statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. As of December 31, 2019, management carried out, under the supervision and with the participation of our
principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that
information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in applicable rules and forms. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of
December 31, 2019, our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control
over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission, known as COSO, in Internal Control-Integrated Framework (2013). Our management has concluded that, as of
December 31, 2019, our internal control over financial reporting was effective based on these criteria.
46
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the most recent fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls. Our management, including our principal executive officer and principal financial officer, does not expect that our
disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company
have been detected.
Item 9B.
Other Information
None.
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.
Item 11.
Executive Compensation
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.
Item 14.
Principal Accounting Fees and Services
The information required by this Item is incorporated by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a) Financial Statements.
The following financial statements are filed as part of this report:
Report of Independent Registered Public Accounting Firm
Financial Statements:
Balance Sheets as of December 31, 2019 and 2018
Statements of Operations for the Years Ended December 31, 2019 and 2018
Statements of Stockholders’ Equity for the Years Ended December 31, 2019 and 2018
Statements of Cash Flows for the Years Ended December 31, 2019 and 2018
Notes to Financial Statements
47
F-2
F-3
F-4
F-5
F-6
F-7 - F-19
(b) Exhibits.
Exhibit No.
Description
3.1
3.2
Amended and Restated Certificate of Incorporation of Checkpoint Therapeutics, Inc., filed as Exhibit 3.1 to Form 10-12G filed on July 11, 2016
(File No. 000-55506) and incorporated herein by reference.
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Checkpoint Therapeutics, Inc., filed as Exhibit 3.2 to Form 10-
12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
3.2.1
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Checkpoint Therapeutics, Inc., filed as Exhibit 10.1 to
Quarterly Report on Form 10-Q filed on August 7, 2018 (File No. 001-38128) and incorporated herein by reference.
3.3
4.1
4.2
4.3
Bylaws of Checkpoint Therapeutics, Inc., filed as Exhibit 3.3 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein
by reference.
Specimen certificate evidencing shares of common stock, filed as Exhibit 4.1 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and
incorporated herein by reference.
Form of warrant agreement, filed as Exhibit 4.2 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
Description of Securities of Checkpoint Therapeutics, Inc. *
10.1
Founders Agreement between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated March 17, 2015, filed as Exhibit 10.1 to Form 10-12G
filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
10.2
Amended and Restated Founders Agreement between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated July 11, 2016 and effective as
of March 17, 2015, filed as Exhibit 10.2 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
10.2.1
Amendment 1 to Amended and Restated Founders Agreement between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc., dated October 5,
2017 filed as Exhibit 10.1 to Quarterly Report on Form 10-Q filed on November 3, 2017 (File No. 001-38128) and incorporated herein by
reference.
10.3
Management Services Agreement between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated March 17, 2015, filed as Exhibit 10.3 to
Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
10.4
Promissory Note to NSC Biotech Venture Fund I, LLC dated February 27, 2015, filed as Exhibit 10.4 to Form 10-12G filed on July 11, 2016 (File
No. 000-55506) and incorporated herein by reference.
10.5
Common Stock Warrant issued by Checkpoint Therapeutics, Inc. to NSC Biotech Venture Fund I, LLC dated July 30, 2015, filed as Exhibit 10.5 to
Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
10.6
License Agreement by and between Checkpoint Therapeutics, Inc. and Dana-Farber Cancer Institute, Inc. dated March 2, 2015, filed as Exhibit
10.6 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference. **
10.7
Amendment 1 to License Agreement by and between Checkpoint Therapeutics, Inc. and Dana-Farber Cancer Institute dated October 5, 2015, filed
as Exhibit 10.7 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference. **
10.8
Amendment 2 to License Agreement by and between Checkpoint Therapeutics, Inc. and Dana-Farber Cancer Institute dated April 12, 2016, filed as
Exhibit 10.8 to Annual Report on Form 10-K filed on March 17, 2017 (File No. 000-55506) and incorporated herein by reference.
48
10.9
Amendment 3 to License Agreement by and between Checkpoint Therapeutics, Inc. and Dana-Farber Cancer Institute dated October 24, 2016, filed
as Exhibit 10.9 to Annual Report on Form 10-K filed on March 17, 2017 (File No. 000-55506) and incorporated herein by reference.
10.10
License Agreement by and between NeuPharma Inc. and Coronado Biosciences, Inc. (Fortress' predecessor) dated March 17, 2015 (assigned to
Checkpoint Therapeutics, Inc. under the Assignment and Assumption Agreement by and between Fortress Biotech, Inc. and Checkpoint
Therapeutics, Inc. dated March 17, 2015), filed as Exhibit 10.8 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated
herein by reference. **
10.11
Amendment 1 to License Agreement by and between NeuPharma Inc. and Checkpoint Therapeutics, Inc. dated February 21, 2017, filed as Exhibit
10.11 to Annual Report on Form 10-K filed on March 17, 2017 (File No. 000-55506) and incorporated herein by reference.
10.12
Collaboration Agreement by and between Checkpoint Therapeutics, Inc. and TG Therapeutics, Inc. dated March 3, 2015, filed as Exhibit 10.9 to
Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference. **
10.12.1
Amended and Restated Collaboration Agreement by and between Checkpoint Therapeutics, Inc. and TG Therapeutics, Inc. dated June 19, 2019,
filed as Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August 8, 2019 (File No. 001-38128) and incorporated herein by reference.**
10.13
Checkpoint Therapeutics, Inc. Amended and Restated 2015 Incentive Plan, filed as Exhibit 10.10 to Form 10-12G filed on July 11, 2016 (File No.
000-55506) and incorporated herein by reference. #
10.13.1
Checkpoint Therapeutics, Inc. Amended and Restated 2015 Incentive Plan, filed as Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August
9, 2017 (File No. 001-38128) and incorporated herein by reference. #
10.14
Executive Employment Agreement by and between James F. Oliviero III and Checkpoint Therapeutics, Inc. dated October 13, 2015, filed as
Exhibit 10.11 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference. #
10.15
Amendment to Executive Employment Agreement by and between James F. Oliviero III and Checkpoint Therapeutics, Inc. dated September 27,
2016, filed as Exhibit 10.1 to Form 8-K filed on October 3, 2016 (File No. 000-55506) and incorporated herein by reference. #
10.16
10.16.1
10.16.2
Amendment No. 2, dated December 15, 2016, to the Executive Employment Agreement dated October 13, 2015, by and between Checkpoint
Therapeutics, Inc. and James F. Oliviero III, filed as Exhibit 10.16 to Annual Report on Form 10-K filed on March 17, 2017 (File No. 000-55506)
and incorporated herein by reference. #
Amendment No. 3, dated January 30, 2018, to the Executive Employment Agreement dated October 13, 2015, by and between Checkpoint
Therapeutics, Inc. and James F. Oliviero III, filed as Exhibit 10.21 to Annual Report on Form 10-K filed on March 16, 2018 (File No. 001-38128)
and incorporated herein by reference. #
Amendment No. 4, dated October 7, 2019, to the Executive Employment Agreement dated October 13, 2015, by and between Checkpoint
Therapeutics, Inc. and James F. Oliviero III, filed as Exhibit 10.1 to Quarterly Report on Form 10-Q filed on November 12, 2019 (File No. 001-
38128) and incorporated herein by reference. #
10.18
Non-Employee Directors Compensation Plan, filed as Exhibit 10.13 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated
herein by reference. #
10.18.1
Amended and Restated Non-Employee Directors Compensation Plan, filed as Exhibit 10.2 to Quarterly Report on Form 10-Q filed on August 9,
2017 (File No. 001-38128) and incorporated herein by reference. #
10.19
Board Advisory Services Agreement by and between Caribe BioAdvisors, LLC and Checkpoint Therapeutics, Inc. dated January 1, 2017, filed as
Exhibit 10.19 to Annual Report on Form 10-K filed on March 17, 2017 (File No. 000-55506) and incorporated herein by reference. #
10.22
Research Agreement by and between Fortress Biotech, Inc. and NeuPharma, Inc., dated September 15, 2015 (assigned to Checkpoint Therapeutics,
Inc. under the Assignment and Assumption Agreement by and between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated September
15, 2015), filed as Exhibit 10.15 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
49
10.23
Assignment and Assumption Agreement by and between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated September 15, 2015, filed
as Exhibit 10.16 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
10.24
Assignment and Assumption Agreement by and between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated December 18, 2015, filed
as Exhibit 10.17 to Form 10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference.
10.25
License Agreement by and between Jubilant Biosys Limited and Checkpoint Therapeutics, Inc., dated May 26, 2016, filed as Exhibit 10.18 to Form
10-12G filed on July 11, 2016 (File No. 000-55506) and incorporated herein by reference. **
10.26
Amendment 1 to License Agreement by and between Jubilant Biosys Limited and Checkpoint Therapeutics, Inc. dated December 13, 2016, filed as
Exhibit 10.26 to Annual Report on Form 10-K filed on March 17, 2017 (File No. 000-55506) and incorporated herein by reference.
10.26.1
Amendment 2 to License Agreement by and between Jubilant Biosys Limited and Checkpoint Therapeutics, Inc. dated March 31, 2017, filed as
Exhibit 10.2 to Quarterly Report on Form 10-Q filed on May 10, 2017 (File No. 000-55506) and incorporated herein by reference.
10.27
Sublicense Agreement by and between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc., dated May 26, 2016, filed as Exhibit 10.19 to
Form 10-12G/A filed on August 19, 2016 (File No. 000-55506) and incorporated herein by reference. **
10.28
Amendment 1 to Sublicense Agreement by and between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc. dated December 13, 2016, filed
as Exhibit 10.28 to Annual Report on Form 10-K filed on March 17, 2017 (File No. 000-55506) and incorporated herein by reference.
10.28.1
Amendment 2 to Sublicense Agreement by and between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc. dated March 17, 2017, filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q filed on May 10, 2017 (File No. 000-55506) and incorporated herein by reference.
10.29
Assignment and Assumption Agreement by and between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated March 17, 2015, filed as
Exhibit 10.20 to Form 10-12G/A filed on August 19, 2016 (File No. 000-55506) and incorporated herein by reference.
10.30
Assignment and Assumption Agreement by and between Fortress Biotech, Inc. and Checkpoint Therapeutics, Inc. dated March 17, 2015, filed as
Exhibit 10.21 to Form 10-12G/A filed on August 19, 2016 (File No. 000-55506) and incorporated herein by reference.
10.31
Collaboration Agreement by and between Adimab, LLC and Checkpoint Therapeutics, Inc., dated January 22, 2019, filed as exhibit 10.31 to
Annual Report on Form 10-K filed on March 18, 2019 (File No. 001-38128) and incorporated herein by reference. **
23.1
24.1
31.1
31.2
32.1
32.2
101
Consent of Independent Registered Public Accounting Firm, BDO USA, LLP.*
Power of Attorney (included on signature page).*
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
The following financial information from the Company’s Quarterly Report on Form 10-K for the period ended December 31, 2019, formatted in
Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the
Consolidated Statement of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial
Statements.
*
Filed herewith.
** Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
# Management Compensation Arrangement.
50
Item 16.
Form 10-K Summary
None.
51
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Balance Sheets as of December 31, 2019 and 2018
Statements of Operations for the Years Ended December 31, 2019 and 2018
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2019 and 2018
Statements of Cash Flows for the Years Ended December 31, 2019 and 2018
Notes to Financial Statements
F-1
F-2
F-3
F-4
F-5
F-6
F-7 - F-19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
Checkpoint Therapeutics, Inc.
New York, NY
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Checkpoint Therapeutics, Inc. (the “Company”) as of December 31, 2019 and 2018, the related statements of
operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its
operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO USA, LLP
We have served as the Company's auditor since 2016.
New York, NY
March 11, 2020
F-2
CHECKPOINT THERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
2019
2018
ASSETS
Current Assets:
Cash and cash equivalents
Prepaid expenses and other assets
Other receivables - related party
Total current assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses
Accounts payable and accrued expenses - related party
Total current liabilities
Total Liabilities
Commitments and Contingencies
Stockholders' Equity
Common Stock ($0.0001 par value), 60,000,000 shares authorized
$
$
$
26,077 $
863
26
26,966
26,966 $
7,257 $
862
8,119
8,119
Class A common shares, 7,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018
Common shares, 47,004,764 and 27,076,154 shares issued and outstanding as of December 31, 2019 and December
31, 2018, respectively
Common stock issuable, 1,459,305 and 960,428 shares as of December 31, 2019 and December 31, 2018, respectively
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
$
1
5
2,510
136,442
(120,111)
18,847
26,966 $
The accompanying notes are an integral part of these financial statements.
F-3
21,995
1,372
1,532
24,899
24,899
12,317
776
13,093
13,093
1
3
1,748
105,451
(95,397)
11,806
24,899
CHECKPOINT THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Revenue - related party
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income
Interest income
Other income
Total other income
Net Loss
Loss per Share:
Basic and diluted net loss per common share outstanding
Basic and diluted weighted average number of common shares outstanding
The accompanying notes are an integral part of these financial statements.
F-4
For the year ended December 31,
2019
2018
$
1,708 $
3,506
19,325
7,233
26,558
(24,850)
136
-
136
(24,714) $
33,654
6,592
40,246
(36,740)
148
225
373
(36,367)
(0.70) $
(1.27)
35,303,955
28,553,711
$
$
CHECKPOINT THERAPEUTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Balances at December 31, 2017
7,000,000
$
1
18,512,429
$
2
$
2,296 $
71,772 $
(59,030) $
15,041
Class A Common Shares
Amount
Shares
Common Shares
Shares
Amount
Common
Shares
Issuable
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders'
Equity
Issuance of common shares, net of
offering costs - Public offering
Issuance of common shares, net of
offering costs - At-the-market
offering
Stock-based compensation expense
Issuance of common shares -
Founders Agreement
Common shares issuable -
Founders Agreement
Exercise of warrants
Net loss
Balances at December 31, 2018
Issuance of common shares, net of
offering costs - At-the-market
offering
Issuance of common shares, net of
offering costs - Public offering
Stock-based compensation expense
Issuance of common shares -
Founders Agreement
Common shares issuable -
Founders Agreement
Exercise of warrants
Net loss
Balances at December 31, 2019
-
-
-
-
-
-
-
7,000,000
$
-
-
-
-
-
-
-
7,000,000
$
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
1
5,290,000
1,841,774
616,240
770,128
-
45,583
-
27,076,154
$
2,273,189
15,400,000
779,652
1,402,244
-
73,525
-
47,004,764
$
1
-
-
-
-
-
-
3
-
2
-
-
-
-
-
5
$
$
-
20,827
-
20,828
-
-
7,747
1,994
(2,296)
3,111
-
-
-
1,748
-
-
1,748 $
-
-
-
105,451 $
-
-
(36,367)
(95,397) $
-
-
-
7,813
17,571
3,121
(1,748)
2,486
-
-
-
-
2,510
-
-
2,510 $
-
-
-
136,442 $
-
-
(24,714)
(120,111) $
7,747
1,994
815
1,748
-
(36,367)
11,806
7,813
17,573
3,121
738
2,510
-
(24,714)
18,847
The accompanying notes are an integral part of these financial statements.
F-5
CHECKPOINT THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Issuance of common shares - Founders Agreement
Common shares issuable - Founders Agreement
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Other receivables - related party
Accounts payable and accrued expenses
Net cash used in operating activities
Cash Flows from Financing Activities:
Proceeds from issuance of common stock - At-the-market offering
Offering costs for the issuance of common stock - At-the-market offering
Proceeds from issuance of common stock - Public offering
Offering costs for the issuance of common stock - Public offering
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of noncash investing and financing activities:
Issuance of common shares - Founders Agreement
Issuance of common shares - Public offering (offering costs incurred but not paid)
For the year ended December 31,
2019
2018
$
(24,714)
$
(36,367)
3,121
738
2,510
509
1,506
(5,043)
(21,373)
8,011
(198)
19,560
(1,918)
25,455
4,082
21,995
26,077
1,748
69
$
$
$
1,994
815
1,748
485
(1,201)
6,721
(25,805)
7,981
(234)
23,012
(2,184)
28,575
2,770
19,225
21,995
2,296
-
$
$
$
The accompanying notes are an integral part of these financial statements.
F-6
Note 1 - Organization and Description of Business Operations
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Checkpoint Therapeutics, Inc. (the “Company” or “Checkpoint”) was incorporated in Delaware on November 10, 2014. Checkpoint is a clinical-stage, immuno-
oncology biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for patients with solid tumor cancers.
The Company may acquire rights to these technologies by licensing the rights or otherwise acquiring an ownership interest in the technologies, funding their
research and development and eventually either out-licensing or bringing the technologies to market. The Company may also enter into collaboration agreements
with third and related parties including sponsored research agreements to develop these technologies for liquid tumors while retaining the rights in solid tumors.
The Company is a majority-controlled subsidiary of Fortress Biotech, Inc. (“Fortress”).
The Company’s common stock is listed on the NASDAQ Capital Market and trades under the symbol “CKPT.”
Liquidity and Capital Resources
The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future
and may never become profitable. As of December 31, 2019, the Company had an accumulated deficit of $120.1 million.
In November 2019, the Company completed an underwritten public offering in which it sold 15,400,000 shares of its common stock at a price of $1.27 per share
for gross proceeds of approximately $19.6 million. Total net proceeds from the offering were approximately $17.6 million, net of underwriting discounts and
offering expenses of approximately $2.0 million. The shares were sold under a Registration Statement (No. 333-221493) on Form S-3, filed with the Securities and
Exchange Commission (“SEC”).
During the year ended December 31, 2019, the Company sold a total of 2,273,189 shares of common stock under an At-the-Market Issuance Sales Agreement (the
"ATM") for aggregate total gross proceeds of approximately $8.0 million at an average selling price of $3.52 per share, resulting in net proceeds of approximately
$7.8 million after deducting commissions and other transactions costs.
The Company expects to continue to use the proceeds from previous financing transactions primarily for general corporate purposes, which may include financing
the Company’s growth, developing new or existing product candidates, and funding capital expenditures, acquisitions and investments. The Company currently
anticipates that its cash and cash equivalents balances at December 31, 2019 are sufficient to fund its anticipated operating cash requirements for approximately the
next 15 to 18 months from the date of this Annual Report on Form 10-K.
The Company will be required to expend significant funds in order to advance the development of its product candidates. The Company’s estimate as to how long
it expects its existing cash to be able to continue to fund its operations is based on assumptions that may prove to be wrong, and it could use its available capital
resources sooner than it currently expects. Further, changing circumstances, some of which may be beyond its control, could cause the Company to consume
capital faster than it currently anticipates, and it may need to seek additional funds sooner than planned. Accordingly, the Company will be required to obtain
further funding through equity offerings, debt financings, collaborations and licensing arrangements or other sources. Further financing may not be available to it
on acceptable terms, or at all. The Company’s failure to raise capital as and when needed would have a negative impact on its financial condition and its ability to
pursue its business strategy and may be forced to curtail or cease operations.
Note 2 - Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. The Company has no subsidiaries.
Segments
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision
maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business
in one operating and reporting segment.
F-7
Use of Estimates
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
Other Receivables - Related Party
Other receivables includes amounts due to the Company from TG Therapeutics, Inc. (“TGTX”), a related party, and are recorded at the invoiced amount.
Research and Development Costs
Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities
are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments
due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is
achieved.
Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based
compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract
research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial
materials, costs associated with regulatory filings, laboratory costs and other supplies.
In accordance with Accounting Standards Codification (“ASC”) 730-10-25-1, Research and Development, costs incurred in obtaining technology licenses are
charged to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use. Such licenses
purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial
feasibility and has no alternative future use.
Annual Equity Fee
Under the Founder’s Agreement with Checkpoint dated March 17, 2015, and amended and restated on July 11, 2016, Fortress is entitled to an annual equity fee on
each anniversary of the Agreement equal to 2.5% of fully diluted outstanding equity, payable in Checkpoint common shares (“Annual Equity Fee”). The Annual
Equity Fee was part of the consideration payable for formation of the Company, identification of certain assets, including the license contributed to Checkpoint by
Fortress (see Note 4).
The Company records the Annual Equity Fee in connection with the Founders Agreement with Fortress as contingent consideration. Contingent consideration is
recorded when probable and reasonably estimable. The Company’s future share prices and shares outstanding cannot be estimated prior to the issuance of the
Annual Equity Fee due to the nature of its assets and the Company’s stage of development. Due to these uncertainties, the Company has concluded that it is unable
to reasonably estimate the contingent consideration until shares are actually issued on January 1 of each year.
Pursuant to the Founders Agreement, the Company issued 960,428 shares of common stock to Fortress for the Annual Equity Fee, representing 2.5% of the fully-
diluted outstanding equity of Checkpoint on January 1, 2019. Because the issuance of shares on January 1, 2019 occurred prior to the issuance of the December 31,
2018 financial statements, the Company recorded approximately $1.7 million in research and development expense and a credit to Common shares issuable -
Founders Agreement during the year ended December 31, 2018.
Pursuant to the Founders Agreement, the Company will issue 1,459,305 shares of common stock to Fortress for the Annual Equity Fee, representing 2.5% of the
fully-diluted outstanding equity of Checkpoint on January 1, 2020. The Company did not have enough unreserved authorized shares under its Certificate of
Incorporation on January 1, 2020 to issue the shares for the Annual Equity Fee, therefore, in December 2019, Fortress and Checkpoint mutually agreed to defer the
issuance until such time as the Checkpoint Charter has been amended in order to increase the number of authorized that may be issued thereunder. Because the
number of outstanding shares issuable to Fortress was determinable on January 1, 2020 prior to the issuance of the December 31, 2019 financial statements, the
Company recorded approximately $2.5 million in research and development expense and a credit to Common shares issuable - Founders Agreement during the
year ended December 31, 2019.
F-8
Stock-Based Compensation Expenses
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value
of the awards and forfeiture rates. The Company accounts for forfeitures as they occur.
The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The assumptions used in calculating the fair value of
stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. All stock-based
compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the underlying
individual’s role at the Company.
Fair Value Measurement
The Company follows the accounting guidance in ASC 820 for its fair value measurements of financial assets and liabilities measured at fair value on a recurring
basis. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use in pricing an asset or a liability.
The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing
models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires
significant judgment or estimation.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Revenue from Contracts with Customers
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the new revenue standard is that a company
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
·
·
·
·
·
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation
F-9
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify
each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or
services) if both of the following criteria are met:
·
·
The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e.,
the good or service is capable of being distinct).
The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to
transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is
distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer,
excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed
amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
· Variable consideration
·
·
Constraining estimates of variable consideration
The existence of a significant financing component in the contract
· Noncash consideration
·
Consideration payable to a customer
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance
obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
Revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property is recognized only when (or as) the later of the
following events occurs:
a. The subsequent sale or usage occurs.
b. The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially
satisfied).
Incremental contract costs are expensed when incurred when the amortization period of the asset that would have been recognized is one year or less; otherwise,
incremental contract costs are recognized as an asset and amortized over time as services are provided to a customer.
F-10
Income Taxes
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax effects
attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and
operating loss and tax credit carryforwards. The Company establishes a valuation allowance if management believes it is more likely than not that the deferred tax
assets will not be recovered based on an evaluation of objective verifiable evidence. For tax positions that are more likely than not of being sustained upon audit,
the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized. For tax positions that are not more likely than not of
being sustained upon audit, the Company does not recognize any portion of the benefit.
Net Loss per Share
Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Since dividends are declared,
paid and set aside among the holders of shares of common stock and Class A common stock pro-rata on an as-if-converted basis, the two-class method of
computing net loss per share is not required. Diluted net loss per share does not reflect the effect of shares of common stock to be issued upon the exercise of stock
options and warrants, as their inclusion would be anti-dilutive. The following table summarizes potentially dilutive securities outstanding at December 31, 2019
and 2018 that were excluded from the computation of diluted net loss per share, as they would be anti-dilutive:
Warrants (Note 6)
Stock options (Note 6)
Unvested restricted stock (Note 6)
Total
Recently Issued Accounting Standards
December 31,
2019
2018
4,207,447
160,000
3,303,839
7,671,286
4,280,972
60,000
2,932,106
7,273,078
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2018-13, “Fair Value Measurement (Topic
820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify
or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value
measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is
permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is
intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and
also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial
statements and related disclosures.
Recently Adopted Accounting Standards
In June 2018, the FASB issued ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for share-
based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with
the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018,
including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and
interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The
Company adopted ASU No. 2018-07 as of January 1, 2019. The adoption of this update did not have a material impact on the Company’s financial statements.
In November 2018, the FASB issued ASU No. 2018-18, “Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606”. The
issuance of ASC 606 raised questions about the interaction between the guidance on collaborative arrangements and revenue recognition. ASU 2018-18 addresses
this uncertainty by (1) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when
the collaboration arrangement participant is a customer, (2) adding unit of account guidance to assess whether the collaboration arrangement or a part of the
arrangement is with a customer and (3) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related
to sales to third parties together with revenue from contracts with customers. The new standard is effective on January 1, 2020 with early adoption permitted. The
Company elected to adopt ASU 2018-18 in December 2018. The adoption of this update did not have a material impact on the Company’s financial statements.
F-11
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Note 3 - License Agreements
Dana-Farber Cancer Institute
In March 2015, the Company entered into an exclusive license agreement with Dana-Farber Cancer Institute (“Dana Farber”) to develop a portfolio of fully human
immuno-oncology targeted antibodies. Under the terms of the license agreement, the Company paid Dana-Farber an up-front licensing fee of $1.0 million and, on
May 11, 2015, granted Dana-Farber 500,000 shares, valued at $32,500 or $0.065 per share. The license agreement included an anti-dilution clause that maintained
Dana-Farber’s ownership at 5% until such time that the Company raised $10 million in cash in exchange for common shares. Pursuant to this provision, on
September 30, 2015, the Company granted to Dana-Farber an additional 136,830 shares of common stock valued at approximately $0.6 million and the anti-
dilution clause thereafter expired. Dana-Farber is eligible to receive payments of up to an aggregate of approximately $21.5 million for each licensed product upon
the Company’s successful achievement of certain clinical development, regulatory and first commercial sale milestones. In addition, Dana-Farber is eligible to
receive up to an aggregate of $60.0 million upon the Company’s successful achievement of certain sales milestones based on aggregate net sales, in addition to
royalty payments based on a tiered low to mid-single digit percentage of net sales. Following the second anniversary of the effective date of the license agreement,
Dana-Farber receives an annual license maintenance fee of $50,000, which is creditable against milestone payments or royalties due to Dana-Farber. The portfolio
of antibodies licensed from Dana-Farber include antibodies targeting PD-L1, GITR and CAIX.
In September 2018 the Company expensed a non-refundable milestone payment of $1.0 million upon the twelfth patient dosed in a Phase 1 clinical study of its
anti-PD-LI antibody, cosibelimab (formerly CK-301), which is included in the Statements of Operations for the year ended December 31, 2018.
In connection with the license agreement with Dana-Farber, the Company entered into a collaboration agreement with TGTX, which was amended and restated in
June 2019, to develop and commercialize the anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies, while the
Company retains the right to develop and commercialize these antibodies in solid tumors. Michael Weiss, Chairman of the Board of Directors of Checkpoint and
Fortress’ Executive Vice Chairman, Strategic Development, is also the Executive Chairman, President and Chief Executive Officer and a stockholder of TGTX.
Under the terms of the original collaboration agreement, TGTX paid the Company $0.5 million, representing an upfront licensing fee. Upon the signing of the
amended and restated collaboration agreement in June 2019, TGTX paid the Company an additional $1.0 million upfront licensing fee. The Company is eligible to
receive substantive potential milestone payments for the anti-PD-L1 program of up to an aggregate of approximately $28.6 million upon TGTX’s successful
achievement of certain clinical development, regulatory and first commercial sale milestones. This is comprised of up to approximately $9.4 million upon TGTX’s
successful completion of clinical development milestones, and up to approximately $19.2 million upon regulatory filings and first commercial sales in specified
territories. The Company is also eligible to receive substantive potential milestone payments for the anti-GITR antibody program of up to an aggregate of
approximately $21.5 million upon TGTX’s successful achievement of certain clinical development, regulatory and first commercial sale milestones. This is
comprised of up to approximately $7.0 million upon TGTX’s successful completion of clinical development milestones, and up to approximately $14.5 million
upon first commercial sales in specified territories. In addition, the Company is eligible to receive up to an aggregate of $60.0 million upon TGTX’s successful
achievement of certain sales milestones based on aggregate net sales for both programs, in addition to royalty payments based on a tiered low double-digit
percentage of net sales. Following the second anniversary of the effective date of the agreement, the Company receives an annual license maintenance fee, which is
creditable against milestone payments or royalties due to the Company. TGTX also pays the Company for its out-of-pocket costs of material used by TGTX for
their development activities. For the years ended December 31, 2019 and 2018, the Company recognized approximately $1.6 million and $3.0 million,
respectively, in revenue related to the collaboration agreement in the Statements of Operations.
Adimab, LLC
In October 2015, Fortress entered into a collaboration agreement with Adimab, LLC (“Adimab”) to discover and optimize antibodies using their proprietary core
technology platform. Under this agreement, Adimab optimized cosibelimab (formerly referred to as CK-301), the Company’s anti-PD-L1 antibody which it
originally licensed from Dana-Farber. In January 2019, Fortress transferred the rights to the optimized antibody to the Company, and Checkpoint entered into a
collaboration agreement directly with Adimab on the same day. Under the terms of the agreement, Adimab is eligible to receive payments up to an aggregate of
approximately $7.1 million upon the Company’s successful achievement of certain clinical development and regulatory milestones, of which $4.8 million are due
upon various filings for regulatory approvals to commercialize the product. In addition, Adimab is eligible to receive royalty payments based on a tiered low single
digit percentage of net sales.
F-12
NeuPharma, Inc.
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
In March 2015, Fortress entered into an exclusive license agreement with NeuPharma, Inc. (“NeuPharma”) to develop and commercialize novel irreversible, 3rd
generation EGFR inhibitors, including CK-101, on a worldwide basis other than certain Asian countries. On the same date, Fortress assigned all of its right and
interest in the EGFR inhibitors to the Company. Under the terms of the license agreement, the Company paid NeuPharma an up-front licensing fee of $1.0 million,
and NeuPharma is eligible to receive payments of up to an aggregate of approximately $40.0 million upon the Company’s successful achievement of certain
clinical development and regulatory milestones in up to three indications, of which $22.5 million are due upon various regulatory approvals to commercialize the
products. In addition, NeuPharma is eligible to receive payments of up to an aggregate of $40.0 million upon the Company’s successful achievement of certain
sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered mid to high-single digit percentage of net sales.
In September 2016, the Company dosed the first patient in a Phase 1 clinical study of CK-101, which is currently ongoing as of December 31, 2019.
In connection with the license agreement with NeuPharma, in March 2015, Fortress entered into an option agreement with TGTX, a related party, which was
assigned to the Company by Fortress on the same date, for a global collaboration of certain compounds licensed. The option agreement expired on December 31,
2018.
Also, in connection with the license agreement with NeuPharma, the Company entered into a sponsored research agreement with NeuPharma for certain research
and development activities. Effective January 11, 2016, TGTX agreed to assume all costs associated with this sponsored research agreement and paid the Company
for all amounts previously paid by the Company. This assumption of costs by TGTX survives any termination or expiration of the option agreement. For the year
ended December 31, 2018, the Company recognized approximately $35,000, in revenue in connection with the sponsored research agreement in the Statements of
Operations. There was no revenue recognized for the year ended December 31, 2019.
Teva Pharmaceutical Industries Ltd. (through its subsidiary, Cephalon, Inc.)
In December 2015, Fortress entered into a license agreement with Teva Pharmaceutical Industries Ltd. through its subsidiary, Cephalon, Inc. (“Cephalon”). This
agreement was assigned to the Company by Fortress on the same date. Under the terms of the license agreement, Checkpoint obtained an exclusive, worldwide
license to Cephalon’s patents relating to CEP-8983 and its small molecule prodrug, CEP-9722, a PARP inhibitor, which the Company referred to as CK-102. The
Company paid Cephalon an up-front licensing fee of $0.5 million. In August 2018, the Company gave notice to Cephalon of its intention to terminate the license
agreement, which became effective in February 2019.
Jubilant Biosys Limited
In May 2016, the Company entered into a license agreement with Jubilant Biosys Limited (“Jubilant”), whereby the Company obtained an exclusive, worldwide
license to Jubilant’s family of patents covering compounds that inhibit BET proteins such as BRD4, including CK-103. Under the terms of the license agreement,
the Company paid Jubilant an up-front licensing fee of $2.0 million, and Jubilant is eligible to receive payments up to an aggregate of approximately $89.0 million
upon the Company’s successful achievement of certain clinical development and regulatory milestones, of which $59.5 million are due upon various regulatory
approvals to commercialize the products. In addition, Jubilant is eligible to receive payments up to an aggregate of $89.0 million upon the Company’s successful
achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit percentage of net
sales.
In connection with the license agreement with Jubilant, the Company entered into a sublicense agreement with TGTX, a related party, to develop and
commercialize the compounds licensed in the field of hematological malignancies, while the Company retains the right to develop and commercialize these
compounds in the field of solid tumors. Under the terms of the sublicense agreement, TGTX paid the Company $1.0 million, representing an upfront licensing fee,
and the Company is eligible to receive substantive potential milestone payments up to an aggregate of approximately $87.2 million upon TGTX’s successful
achievement of clinical development and regulatory milestones. This is comprised of up to approximately $25.5 million upon TGTX’s successful completion of
three clinical development milestones for two licensed products, and up to approximately $61.7 million upon the achievement of five regulatory approvals and first
commercial sales in specified territories for two licensed products. In addition, the Company is eligible to receive potential milestone payments up to an aggregate
of $89.0 million upon TGTX’s successful achievement of certain sales milestones based on aggregate net sales by TGTX, for two licensed products, in addition to
royalty payments based on a mid-single digit percentage of net sales by TGTX. TGTX also pays the Company 50% of IND enabling costs and patent expenses. For
the years ended December 31, 2019 and 2018, the Company recognized approximately $0.1 million and $0.4 million, respectively, in revenue related to the
sublicense agreement in the Statements of Operations.
F-13
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The collaborations with TGTX each contain single material performance obligations under Topic 606, which is the granting of a license that is functional
intellectual property. The Company’s performance obligation was satisfied at the point in time when TGTX had the ability to use and benefit from the right to use
the intellectual property. The performance obligations of the original agreements were satisfied prior to the adoption of Topic 606. The performance obligation of
the amendment to the collaboration agreement was satisfied in June 2019.
The milestone payments are based on successful achievement of clinical development, regulatory, and sales milestones. Because these payments are contingent on
the occurrence of a future event, they represent variable consideration and are constrained and included in the transaction price only when it is probable that a
significant reversal in the amount of cumulative revenue recognized will not occur. The sales-based royalty payments are recognized as revenue when the
subsequent sales occur. The Company also receives variable consideration for certain research and development, out-of-pocket material costs and patent
maintenance related activities that are dependent upon the Company’s actual expenditures under the collaborations and are constrained and included in the
transaction price only when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Revenue is recognized
approximately when the amounts become due because it relates to an already satisfied performance obligation. For the year ended December 31, 2019, the
Company did not receive any milestone or royalty payments.
Note 4 - Related Party Agreements
Founders Agreement and Management Services Agreement with Fortress
Effective March 17, 2015, the Company entered into a Founders Agreement with Fortress, which was amended and restated on July 11, 2016 (the “Founders
Agreement”). The Founders Agreement provides, that in exchange for the time and capital expended in the formation of Checkpoint and the identification of
specific assets the acquisition of which resulted in the formation of a viable emerging growth life science company, the Company assumed $2.8 million in debt that
Fortress accumulated under a promissory note through National Securities Corporation for expenses and costs of forming Checkpoint, and the Company shall also:
(i) issue annually to Fortress, on the anniversary date of the Founders Agreement, shares of common stock equal to two and one-half percent (2.5%) of the fully-
diluted outstanding equity of Checkpoint at the time of issuance; (ii) pay an equity fee in shares of common stock, payable within five (5) business days of the
closing of any equity or debt financing for Checkpoint or any of its respective subsidiaries that occurs after the effective date of the Founders Agreement and
ending on the date when Fortress no longer has majority voting control in Checkpoint’s voting equity, equal to two and one-half percent (2.5%) of the gross
amount of any such equity or debt financing; and (iii) pay a cash fee equal to four and one half percent (4.5%) of Checkpoint’s annual net sales, payable on an
annual basis, within ninety (90) days of the end of each calendar year. In the event of a change in control (as it is defined in the Founders Agreement), Checkpoint
will pay a one-time change in control fee equal to five times (5x) the product of (i) monthly net sales for the twelve (12) months immediately preceding the change
in control and (ii) four and one-half percent (4.5%). The Founders Agreement has a term of fifteen years, after which it automatically renews for one-year periods
unless Fortress gives the Company notice of termination. The Founders Agreement will also automatically terminate upon a change of control.
In October 2017, the Founder’s Agreement was further amended to change the issuance date of the Annual Equity Fee from the anniversary date of the Agreement
to January 1 of each year beginning in 2018.
Effective March 17, 2015, the Company entered into a Management Services Agreement (the “MSA”) with Fortress. Pursuant to the terms of the MSA, for a
period of five (5) years, Fortress will render advisory and consulting services to the Company. Services provided under the MSA may include, without limitation,
(i) advice and assistance concerning any and all aspects of Checkpoint’s operations, clinical trials, financial planning and strategic transactions and financings and
(ii) conducting relations on behalf of the Company with accountants, attorneys, financial advisors and other professionals (collectively, the “Services”). The
Company is obligated to utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services
of companies or individuals designated by Fortress, provided those services are offered at market prices. However, the Company is not obligated to take or act
upon any advice rendered from Fortress and Fortress shall not be liable for any of the Company’s actions or inactions based upon their advice. Fortress and its
affiliates, including all members of its Board of Directors, have been contractually exempt from fiduciary duties to the Company relating to corporate
opportunities. In consideration for the Services, the Company will pay Fortress an annual consulting fee of $0.5 million (the “Annual Consulting Fee”), payable in
advance in equal quarterly installments on the first business day of each calendar quarter in each year, provided, however, that such Annual Consulting Fee shall be
increased to $1.0 million for each calendar year in which the Company has net assets in excess of $100 million at the beginning of the calendar year. For the years
ended December 31, 2019 and 2018, the Company recognized $0.5 million in expense on its Statements of Operations related to the MSA.
F-14
Caribe BioAdvisors, LLC
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
In December 2016, the Company entered into an advisory agreement effective January 1, 2017 with Caribe BioAdvisors, LLC (“Caribe”), owned by Michael
Weiss, to provide the advisory services of Mr. Weiss as Chairman of the Board. Pursuant to the agreement, Caribe will be paid an annual cash fee of $60,000, in
addition to any and all annual equity incentive grants paid to members of the board. For the years ended December 31, 2019 and 2018, the Company recognized
$104,000 and $87,000, respectively, in expense in its Statements of Operations related to the advisory agreement, including $44,000 and $27,000, respectively, in
expense related to annual equity incentive grants.
Note 5 - Commitments and Contingencies
Leases
The Company is not a party to any leases for office space or equipment.
License Agreements
The Company has undertaken to make contingent milestone payments to the licensors of its portfolio of product candidates. In addition, the Company would pay
royalties to such licensors based on a percentage of net sales of each product candidate following regulatory marketing approval (See Note 3).
Litigation
The Company recognizes a liability for a contingency when it is probable that liability has been incurred and when the amount of loss can be reasonably estimated.
When a range of probable loss can be estimated, the Company accrues the most likely amount of such loss, and if such amount is not determinable, then the
Company accrues the minimum of the range of probable loss. As of December 31, 2019 and 2018, there was no litigation against the Company.
Note 6 - Stockholders’ Equity
Common Stock
The Company is authorized to issue 60,000,000 common shares with a par value of $0.0001 per share, of which 7,000,000 shares are designated as “Class A
common stock.” As of December 31, 2019, there were 7,000,000 shares of Class A common stock issued and outstanding to Fortress. Dividends are to be
distributed pro-rata to the Class A and common stock-holders. The holders of common stock are entitled to one vote per share of common stock held. The Class A
common stock-holders are entitled to a number of votes per share equal to 1.1 times a fraction, the numerator of which is the sum of the shares of outstanding
common stock and the denominator of which is the number of shares of Class A common stock. Accordingly, the holder of shares of Class A common stock will
be able to control or significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or
other business combination transactions. Each share of Class A common stock is convertible, at the option of the holder thereof, into one (1) fully paid and non-
assessable share of common stock subject to adjustment for stock splits and combinations.
In November 2017, the Company filed a shelf registration statement (No. 333-221493) on Form S-3 (the "S-3"), which was declared effective in December 2017.
Under the S-3, the Company may sell up to a total of $100 million of its securities. In connection with the S-3, the Company entered into an ATM with Cantor
Fitzgerald & Co., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each an "Agent" and collectively, the "Agents"), relating to the sale of
shares of common stock. Under the ATM, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of
common stock.
Pursuant to the Founders Agreement, the Company issued 960,428 shares of common stock to Fortress for the Annual Equity Fee, representing 2.5% of the fully-
diluted outstanding equity of Checkpoint on January 1, 2019 (see Notes 2 and 4).
In November 2019, the Company completed an underwritten public offering, in which it sold 15,400,000 shares of its common stock at a price of $1.27 per share
for gross proceeds of approximately $19.6 million. Total net proceeds from the offering were approximately $17.6 million, net of underwriting discounts and
offering expenses of approximately $2.0 million. The shares were sold under the S-3.
During the year ended December 31, 2019, the Company sold a total of 2,273,189 shares of common stock under the ATM for aggregate total gross proceeds of
approximately $8.0 million at an average selling price of $3.52 per share, resulting in net proceeds of approximately $7.8 million after deducting commissions and
other transactions costs.
F-15
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
In March 2018, the Company completed an underwritten public offering, whereby it sold 5,290,000 shares of its common stock at a price of $4.35 per share for
gross proceeds of approximately $23.0 million. Total net proceeds from the offering were approximately $20.8 million, net of underwriting discounts and offering
expenses of approximately $2.2 million. The shares were sold under the S-3.
During the year ended December 31, 2018, the Company sold a total of 1,841,774 shares of common stock under the ATM for aggregate total gross proceeds of
approximately $8.0 million at an average selling price of $4.33 per share, resulting in net proceeds of approximately $7.7 million after deducting commissions and
other transactions costs.
Pursuant to the Founders Agreement, the Company issued to Fortress 2.5% of the aggregate number of shares of common stock issued in the offerings noted
above. Accordingly, the Company issued 441,816 shares and 178,292 shares to Fortress for the year ended December 31, 2019 and 2018, respectively, and
recorded expenses of approximately $738,000 and $815,000 related to these stock grants, which is included in general and administrative expenses in the
Company’s Statements of Operations for the years ended December 31, 2019 and 2018, respectively.
Pursuant to the Founders Agreement, the Company will issue 1,459,305 shares of common stock to Fortress for the Annual Equity Fee, representing 2.5% of the
fully-diluted outstanding equity of Checkpoint on January 1, 2020. The Company did not have enough unreserved authorized shares under its Certificate of
Incorporation on January 1, 2020 to issue the shares for the Annual Equity Fee, therefore, in December 2019, Fortress and Checkpoint mutually agreed to defer the
issuance until such time as the Checkpoint Charter has been amended in order to increase the number of authorized that may be issued thereunder (see Notes 2 and
4).
The S-3 is currently the Company’s only active shelf registration statement. Subsequent to the offerings noted above, approximately $41.4 million of the shelf
remains available for sale under the S-3. The Company may offer the securities under the S-3 from time to time in response to market conditions or other
circumstances if it believes such a plan of financing is in the best interests of its stockholders. The Company believes that the S-3 provides it with the flexibility to
raise additional capital to finance its operations as needed.
Equity Incentive Plan
The Company has in effect the Amended and Restated 2015 Incentive Plan (“2015 Incentive Plan”). The 2015 Incentive Plan was adopted in March 2015 by our
stockholders. Under the 2015 Incentive Plan, the compensation committee of the Company’s board of directors is authorized to grant stock-based awards to
directors, officers, employees and consultants. An amendment to the 2015 Incentive Plan was approved by stockholders in June 2017 to increase the shares
available for issuance to 5,000,000 shares. The plan expires 10 years from the effective date of the amendment and limits the term of each option to no more than
10 years from the date of grant.
As of December 31, 2019, 1,465,805 shares are available for issuance under the 2015 Incentive Plan.
Restricted Stock
Certain employees, directors and consultants have been awarded restricted stock. The restricted stock vesting consists of milestone and time-based vesting. The
following table summarizes restricted stock award activity for the year ended December 31, 2019 and 2018:
Nonvested at December 31, 2017
Granted
Vested
Nonvested at December 31, 2018
Granted
Forfeited
Vested
Nonvested at December 31, 2019
Number of
Shares
2,611,116
616,240
(295,250)
2,932,106
800,652
(21,000)
(407,919)
3,303,839
$
$
$
Weighted
Average
Grant Date
Fair Value
3.89
3.75
0.29
4.22
3.33
3.16
1.96
4.29
As of December 31, 2019, there was $2.8 million of total unrecognized compensation cost related to non-vested restricted stock, which is expected to be
recognized over a weighted-average period of 1.1 years. This amount does not include, as of December 31, 2019, 333,334 shares of restricted stock outstanding
which are performance-based and vest upon achievement of certain corporate milestones. The expense is recognized over the vesting period of the award. Stock-
based compensation for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved.
F-16
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Stock Options
The following table summarizes stock option award activity for the year ended December 31, 2019 and 2018.
Outstanding as of December 31, 2017
Granted
Outstanding as of December 31, 2018
Granted
Outstanding as of December 31, 2019
Upon the exercise of stock options, the Company will issue new shares of its common stock.
Warrants
A summary of warrant activities for year ended December 31, 2019 and 2018 is presented below:
Outstanding as of December 31, 2017
Exercised
Outstanding as of December 31, 2018
Exercised
Outstanding as of December 31, 2019
Stock Options
60,000
-
60,000
100,000
160,000
Weighted Average
Exercise Price
$
$
$
5.43
-
5.43
2.56
3.64
Warrants
Weighted Average
Exercise Price
4,326,555
(45,583)
4,280,972
(73,525)
4,207,447
$
$
$
6.62
-
6.69
-
6.81
Weighted
Average
Remaining
Contractual Life
(in years)
9.09
8.09
8.56
Weighted
Average
Remaining
Contractual Life
(in years)
3.67
2.33
1.25
Upon the exercise of warrants, the Company will issue new shares of its common stock.
Stock-Based Compensation
The following table summarizes stock-based compensation expense for the years ended December 31, 2019 and 2018 (in thousands).
Research and development
General and administrative
Total stock-based compensation expense
Note 7 - Income Taxes
For the year ended December 31,
2019
2018
$
$
707
2,414
3,121
$
$
95
1,899
1,994
The Company has accumulated net losses since inception and has not recorded an income tax provision or benefit during the years ended December 31, 2019 and
2018.
F-17
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Percentage of pre-tax income:
Statutory federal income tax rate
State taxes, net of federal tax benefit
Credits
Change in state tax rate
Provision to return
Stock based compensation shortfall
Other
Change in valuation allowance
Income taxes provision (benefit)
The components of the net deferred tax asset as of December 31, 2019 and 2018 are the following (in thousands):
Deferred tax assets:
Net operating loss carryovers
Stock compensation and other
Amortization of license
Accruals and reserves
Tax credits
Start Up Costs
Total deferred tax assets
Less valuation allowance
Deferred tax asset, net of valuation allowance
For the Year Ended December 31,
2019
2018
21%
6%
-%
2%
-%
(1)%
(1)%
(27)%
-%
21%
4%
3%
(6)%
(4)%
(1)%
-%
(17)%
-%
As of December 31,
2019
2018
$
$
23,051
2,057
4,878
184
1,532
31
31,733
(31,733)
-
$
$
17,056
1,674
4,346
6
1,938
32
25,052
(25,052)
-
The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax asset will not be realized and, accordingly, has
provided a full valuation allowance against its net deferred tax asset. A valuation allowance of approximately $31.7 million and $25.1 million was recorded for the
years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the Company had federal and state net operating loss carryforwards of
approximately $84.0 million and $81.1 million, respectively. The federal and state net operating loss carryforwards will begin to expire, if not utilized, by 2035 and
2035, respectively. The Company has $1.0 million of research and development credit carryforwards and $0.5 million of orphan drug credit carryforwards, which
will begin to expire, if not utilized, by 2035. Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the
ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended and similar state provisions.
There are no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740 “Income
Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the
Company’s financial statements for the year ended December 31, 2019. The Company does not anticipate a material change to unrecognized tax benefits in the
next twelve months.
Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income
taxes that have been accrued or recognized as of and for the period ended December 31, 2019. The Company would classify interest and penalties related to
uncertain tax positions as income tax expense, if applicable.
The federal and state tax returns for the periods ended December 31, 2016, 2017, 2018 and 2019 are currently open for examination under the applicable federal
and state income tax statues of limitations. The Company is currently under examination by the New York City Department Finance for the 2016, 2017 and 2018
tax years. While the outcomes of the examinations are unknown, the Company does not expect any material adjustments.
F-18
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Note 8 - Accounts Payable and Accrued Expenses
At December 31, 2019 and 2018, accounts payable and accrued expenses consisted of the following (in thousands):
Accounts payable
Accrued compensation
Research and development
Other
Accounts payable and accrued expenses - related party
Total accounts payable and accrued expenses
F-19
December 31,
2019
2018
3,079
414
3,496
268
862
8,119
$
$
9,750
439
1,751
377
776
13,093
$
$
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGNATURES
Checkpoint Therapeutics, Inc.
By: /s/ James F. Oliviero
Name: James F. Oliviero
Title: President, Chief Executive Officer and Director
March 11, 2020
POWER OF ATTORNEY
We, the undersigned directors and/or executive officers of Checkpoint Therapeutics, Inc., hereby severally constitute and appoint James F. Oliviero, acting singly,
his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her in any and all capacities, to sign this report
and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or appropriate to be done in connection therewith, as
fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature
Title
/s/ James F. Oliviero
James F. Oliviero
/s/ Garrett Gray
Garrett Gray
/s/ Michael S. Weiss
Michael S. Weiss
/s/ Lindsay A. Rosenwald
Lindsay A. Rosenwald, M.D.
/s/ Scott Boilen
Scott Boilen
/s/ Neil Herskowitz
Neil Herskowitz
/s/ Barry Salzman
Barry Salzman
/s/ Christian Bechon
Christian Bechon
President, Chief Executive Officer and Director
(Principal Executive Officer)
Vice President, Finance and Accounting
(Principal Financial Officer)
Date
March 11, 2020
March 11, 2020
Chairman of the Board
March 11, 2020
Director
Director
Director
Director
Director
March 11, 2020
March 11, 2020
March 11, 2020
March 11, 2020
March 11, 2020
Exhibit 4.3
When used herein, the terms “we,” “our,” and “us” refer to Checkpoint Therapeutics, Inc.
DESCRIPTION OF SECURITIES
DESCRIPTION OF CAPITAL STOCK
The following description summarizes the material terms of Checkpoint capital stock. Because it is only a summary, it does not contain all the
information that may be important to you. For a complete description of our capital stock, you should refer to our certificate of incorporation, our bylaws and to the
provisions of applicable Delaware law.
Common Stock
Our common stock is traded on The Nasdaq Capital Market, or the Exchange, under the symbol “CKPT.”
The authorized capital stock of Checkpoint consists of 60,000,000 shares of common stock, of which 7,000,000 shares have been designated as Class A
common stock. The description of our Class A Common Stock in this item is for information purposes only. All of the Class A common stock has been issued to
Fortress. Class A common stock is identical to common stock other than as to voting rights, the election of directors for a definite period, and conversion rights. On
any matter presented to our stockholders for their action or consideration at any meeting of our stockholders (or by written consent of stockholders in lieu of
meeting), each holder of outstanding shares of Class A common stock will be entitled to cast for each share of Class A common stock held by such holder as of the
record date for determining stockholders entitled to vote on such matter, the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator
of which is the sum of the shares of outstanding common stock and the denominator of which is the number of shares of outstanding Class A common stock. Thus,
the Class A common stock will at all times constitute a voting majority. For a period of ten (10) years from the date of the first issuance of shares of Class A
common stock (the “Class A Director Period”), the holders of record of the shares of Class A common stock (or other capital stock or securities issued upon
conversion of or in exchange for the Class A common stock), exclusively and as a separate class, will be entitled to appoint or elect the majority of the directors of
Checkpoint (the “Class A Directors”). Finally, each share of Class A common stock is convertible, at the option of the holder, into one fully paid and nonassessable
share of common stock (the “Conversion Ratio”), subject to certain adjustments.
If Checkpoint at any time effects a subdivision of the outstanding common stock (or other capital stock or securities at the time issuable upon conversion
of the Class A common stock) by any stock split, stock dividend, recapitalization or otherwise, the applicable Conversion Ratio in effect immediately before that
subdivision will be proportionately decreased so that the number of shares of common stock (or other capital stock or securities at the time issuable upon
conversion of the Class A common stock) issuable on conversion of each share of Class A common stock will be increased in proportion to such increase in the
aggregate number of shares of common stock (or other capital stock or securities at the time issuable upon conversion of the Class A common stock) outstanding.
If Checkpoint at any time combines the outstanding shares of common stock, the applicable Conversion Ratio in effect immediately before the combination will be
proportionately increased so that the number of shares of common stock (or other capital stock or securities at the time issuable upon conversion of the Class A
common stock) issuable on conversion of each share of Class A common stock will be decreased in proportion to such decrease in the aggregate number of shares
of common stock (or other capital stock or securities at the time issuable upon conversion of the Class A common stock) outstanding. Additionally, if any
reorganization, recapitalization, reclassification, consolidation or merger involving Checkpoint occurs in which the common stock (but not the Class A common
stock) is converted into or exchanged for securities, cash or other property (other than a transaction involving the subdivision or combination of the common
stock), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Class A common stock becomes
convertible into the kind and amount of securities, cash or other property which such Class A Stockholder would have been entitled to receive had he or she
converted the Class A Shares immediately before said transaction. In such case, appropriate adjustment (as determined in good faith by the Board of Directors of
Checkpoint) will be made in the application of the provisions of Checkpoint’s Amended and Restated Certificate of Incorporation relating the subdivision or
combination of the common stock with respect to the rights and interests thereafter of the holders of the Class A common stock, such that the provisions set forth in
of Checkpoint’s Amended and Restated Certificate of Incorporation relating to the subdivision or combination of the common stock (including the provisions with
respect to changes in and other adjustments of the applicable Conversion Ratio) will thereafter be applicable, as nearly as reasonably may be, in relation to any
securities or other property thereafter deliverable upon the conversion of the Class A common stock. Checkpoint is not authorized to issue preferred stock.
Dividends
The holders of outstanding shares of our common stock, including Class A common stock, are entitled to receive dividends out of funds legally available
at the times and in the amounts that our board of directors may determine. All dividends are non-cumulative.
Voting Rights
The holders of our common stock are entitled to one vote for each share of common stock held on all matters submitted to a vote of the stockholders,
including the election of directors, except as to the Class A Directors during the Class A Director Period. Our certificate of incorporation and bylaws do not
provide for cumulative voting rights.
Liquidation and Dissolution
Upon our liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the
holders of our common stock, including Class A common stock, outstanding at that time after payment of other claims of creditors, if any.
Other
The holders of our common stock have no preemptive, conversion, or subscription rights, and there are no redemption or sinking fund provisions
applicable to our common stock.
All of the outstanding shares of our common stock, including Class A common stock, are duly issued, fully paid and non-assessable.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase shares of our common stock in one or more series together with other securities or separately, as described in each
applicable prospectus supplement.
The prospectus supplement relating to any warrants we offer will include specific terms relating to the offering. These terms will include some or all of
the following:
·
·
·
·
·
·
·
the title of the warrants;
the aggregate number of warrants offered;
the designation, number and terms of the shares of common stock purchasable upon exercise of the warrants and procedures by which those numbers may
be adjusted;
the exercise price of the warrants;
the dates or periods during which the warrants are exercisable;
the designation and terms of any securities with which the warrants are issued;
if the warrants are issued as a unit with another security, the date on and after which the warrants and the other security will be separately transferable;
2
·
·
·
·
·
if the exercise price is not payable in U.S. dollars, the foreign currency, currency unit or composite currency in which the exercise price is denominated;
any minimum or maximum amount of warrants that may be exercised at any one time;
any terms relating to the modification of the warrants;
any terms, procedures and limitations relating to the transferability, exchange or exercise of the warrants; and
any other specific terms of the warrants.
DESCRIPTION OF DEBT SECURITIES
We may offer debt securities which may be senior, subordinated or junior subordinated and may be convertible. Unless otherwise specified in the
applicable prospectus supplement, our debt securities will be issued in one or more series under an indenture to be entered into between us and a trustee. We will
issue the debt securities offered by any applicable prospectus supplement under an indenture to be entered into between us and the trustee identified in the
applicable prospectus supplement. The terms of the debt securities will include those stated in the indenture and those made part of the indenture by reference to
the Trust Indenture Act of 1939, as in effect on the date of the indenture. The indenture will be subject to and governed by the terms of the Trust Indenture Act of
1939.
The following description briefly sets forth certain general terms and provisions of the debt securities that we may offer. The particular terms of the debt
securities offered by any prospectus supplement and the extent, if any, to which these general provisions may apply to the debt securities, will be described in the
related prospectus supplement. Accordingly, for a description of the terms of a particular issue of debt securities, reference must be made to both the related
prospectus supplement and to the following description.
The aggregate principal amount of debt securities that may be issued under the indenture is unlimited. The debt securities may be issued in one or more
series as may be authorized from time to time pursuant to a supplemental indenture entered into between us and the trustee or an order delivered by us to the
trustee. For each series of debt securities we offer, a prospectus supplement will describe the following terms and conditions of the series of debt securities that we
are offering, to the extent applicable:
·
title and aggregate principal amount;
· whether the debt securities will be senior, subordinated or junior subordinated;
·
·
·
applicable subordination provisions, if any;
provisions regarding whether the debt securities will be convertible or exchangeable into other securities or property of the Company or any other person;
percentage or percentages of principal amount at which the debt securities will be issued;
· maturity date(s);
·
interest rate(s) or the method for determining the interest rate(s);
· whether interest on the debt securities will be payable in cash or additional debt securities of the same series;
·
dates on which interest will accrue or the method for determining dates on which interest will accrue and dates on which interest will be payable;
3
· whether the amount of payment of principal of, premium, if any, or interest on the debt securities may be determined with reference to an index, formula
or other method;
·
·
·
·
·
·
redemption, repurchase or early repayment provisions, including our obligation or right to redeem, purchase or repay debt securities under a sinking fund,
amortization or analogous provision;
if other than the debt securities’ principal amount, the portion of the principal amount of the debt securities that will be payable upon declaration of
acceleration of the maturity;
authorized denominations;
form;
amount of discount or premium, if any, with which the debt securities will be issued, including whether the debt securities will be issued as “original issue
discount” securities;
the place or places where the principal of, premium, if any, and interest on the debt securities will be payable;
· where the debt securities may be presented for registration of transfer, exchange or conversion;
·
the place or places where notices and demands to or upon the Company in respect of the debt securities may be made;
· whether the debt securities will be issued in whole or in part in the form of one or more global securities;
·
if the debt securities will be issued in whole or in part in the form of a book-entry security, the depository or its nominee with respect to the debt securities
and the circumstances under which the book-entry security may be registered for transfer or exchange or authenticated and delivered in the name of a
person other than the depository or its nominee;
· whether a temporary security is to be issued with respect to such series and whether any interest payable prior to the issuance of definitive securities of the
series will be credited to the account of the persons entitled thereto;
·
·
·
·
·
·
·
the terms upon which beneficial interests in a temporary global security may be exchanged in whole or in part for beneficial interests in a definitive global
security or for individual definitive securities;
the guarantors, if any, of the debt securities, and the extent of the guarantees and any additions or changes to permit or facilitate guarantees of such debt
securities;
any covenants applicable to the particular debt securities being issued;
any defaults and events of default applicable to the debt securities, including the remedies available in connection therewith;
currency, currencies or currency units in which the purchase price for, the principal of and any premium and any interest on, such debt securities will be
payable;
time period within which, the manner in which and the terms and conditions upon which the Company or the purchaser of the debt securities can select
the payment currency;
securities exchange(s) on which the debt securities will be listed, if any;
4
· whether any underwriter(s) will act as market maker(s) for the debt securities;
·
·
·
·
·
·
·
extent to which a secondary market for the debt securities is expected to develop;
provisions relating to defeasance;
provisions relating to satisfaction and discharge of the indenture;
any restrictions or conditions on the transferability of the debt securities;
provisions relating to the modification of the indenture both with and without the consent of holders of debt securities issued under the indenture;
any addition or change in the provisions related to compensation and reimbursement of the trustee;
provisions, if any, granting special rights to holders upon the occurrence of specified events;
· whether the debt securities will be secured or unsecured, and, if secured, the terms upon which the debt securities will be secured and any other additions
or changes relating to such security; and
·
any other terms of the debt securities that are not inconsistent with the provisions of the Trust Indenture Act (but may modify, amend, supplement or
delete any of the terms of the indenture with respect to such series of debt securities).
General
One or more series of debt securities may be sold as “original issue discount” securities. These debt securities would be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates. One or more series of debt
securities may be variable rate debt securities that may be exchanged for fixed rate debt securities.
United States federal income tax consequences and special considerations, if any, applicable to any such series will be described in the applicable
prospectus supplement.
Debt securities may be issued where the amount of principal and/or interest payable is determined by reference to one or more currency exchange rates,
commodity prices, equity indices or other factors. Holders of such debt securities may receive a principal amount or a payment of interest that is greater than or
less than the amount of principal or interest otherwise payable on such dates, depending upon the value of the applicable currencies, commodities, equity indices or
other factors. Information as to the methods for determining the amount of principal or interest, if any, payable on any date, the currencies, commodities, equity
indices or other factors to which the amount payable on such date is linked and certain additional United States federal income tax considerations will be set forth
in the applicable prospectus supplement.
The term “debt securities” includes debt securities denominated in U.S. dollars or, if specified in the applicable prospectus supplement, in any other freely
transferable currency or units based on or relating to foreign currencies.
We expect most debt securities to be issued in fully registered form without coupons and in denominations of $2,000 and any integral multiples thereof.
Subject to the limitations provided in the indenture and in the prospectus supplement, debt securities that are issued in registered form may be transferred or
exchanged at the principal corporate trust office of the trustee, without the payment of any service charge, other than any tax or other governmental charge payable
in connection therewith.
5
Global Securities
The debt securities of a series may be issued in whole or in part in the form of one or more global securities that will be deposited with, or on behalf of, a
depositary identified in the prospectus supplement. Global securities will be issued in registered form and in either temporary or definitive form. Unless and until it
is exchanged in whole or in part for the individual debt securities, a global security may not be transferred except as a whole by the depositary for such global
security to a nominee of such depositary or by a nominee of such depositary to such depositary or another nominee of such depositary or by such depositary or any
such nominee to a successor of such depositary or a nominee of such successor. The specific terms of the depositary arrangement with respect to any debt
securities of a series and the rights of and limitations upon owners of beneficial interests in a global security will be described in the applicable prospectus
supplement.
Governing Law
The indenture and the debt securities shall be construed in accordance with and governed by the laws of the State of New York.
DESCRIPTION OF UNITS
We may issue, in one more series, units comprised of shares of our common stock, warrants to purchase common stock, debt securities or any
combination of those securities. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a
unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities
included in the unit may not be held or transferred separately, at any time or at any time before a specified date.
We may evidence units by unit certificates that we issue under a separate agreement. We may issue the units under a unit agreement between us and one
or more unit agents. If we elect to enter into a unit agreement with a unit agent, the unit agent will act solely as our agent in connection with the units and will not
assume any obligation or relationship of agency or trust for or with any registered holders of units or beneficial owners of units. We will indicate the name and
address and other information regarding the unit agent in the applicable prospectus supplement relating to a particular series of units if we elect to use a unit agent.
We will describe in the applicable prospectus supplement the terms of the series of units being offered, including:
the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be
held or transferred separately;
any provisions of the governing unit agreement that differ from those described herein; and
any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units.
·
·
·
The other provisions regarding our common stock, warrants and debt securities as described in this section will apply to each unit to the extent such unit
consists of shares of our common stock, warrants and/or debt securities.
6
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
Checkpoint Therapeutics, Inc.
New York, New York
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-221493) and Form S-8 (No. 333-216856 and 333-
221488) of Checkpoint Therapeutics, Inc. of our report dated March 11, 2020, relating to the financial statements which appears in this Form 10-K.
/s/ BDO USA, LLP
New York, New York
March 11, 2020
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, James F. Oliviero certify that:
(1) I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2019 of Checkpoint Therapeutics, Inc. (the registrant);
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Dated: March 11, 2020
By:
/s/ James F. Oliviero
James F. Oliviero
President, Chief Executive Officer and Director
Principal Executive Officer
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Garrett Gray, certify that:
(1) I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2019 of Checkpoint Therapeutics, Inc. (the registrant);
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Dated: March 11, 2020
By:
/s/ Garrett Gray
Garrett Gray
Vice President, Finance and Accounting
Principal Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report on Form 10-K of Checkpoint Therapeutics, Inc. (the “Company”) for the period ended December 31, 2019, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, James F. Oliviero, President and Chief Executive Officer of the Company, hereby
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for,
the periods presented in the Report.
Dated: March 11, 2020
By:
/s/ James F. Oliviero
James F. Oliviero
President, Chief Executive Officer and Director
Principal Executive Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report on Form 10-K of Checkpoint Therapeutics, Inc. (the “Company”) for the period ended December 31, 2019, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Garrett Gray, Principal Financial Officer of the Company, hereby certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for,
the periods presented in the Report.
Dated: March 11, 2020
By:
/s/ Garrett Gray
Garrett Gray
Vice President, Finance and Accounting
Principal Financial Officer