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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to .
Commission File Number 001-38128
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.)
95 Sawyer Road, Suite 110
Waltham, Massachusetts 02453
(Address of Principal Executive Offices)
02453
(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
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
☐
☒
☒
Accelerated filer
Smaller reporting company
☐
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2021, 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 $184,715,964 based upon the closing sale price of our common stock of $2.95 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 23, 2022
7,000,000
83,590,092
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2022 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K.
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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.
Item 9C.
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
Reserved
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
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 and 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,” “will,” “could,” “project,” “intend” 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, including the
novel coronavirus (COVID-19) pandemic’s or other crises’ potentials to negatively affect the hospitals and clinical sites in which we may
conduct any of our clinical trials, and patients’ willingness to access those sites to continue the 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 regarding the potential differentiation of cosibelimab, including a potentially favorable study profile as compared to the currently
available anti-PD-1 therapies, the two-fold mechanism of action of cosibelimab translating into potential enhanced efficacy, and the projections
of publication and regulatory submission timelines;
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. New risks and
uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. 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. In addition, with respect to all of our forward-looking statements, we
claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Our business is subject to risks of which you should be aware before making an investment decision. The risks described below are a summary of the
principal risks associated with an investment in us and are not the only risks we face. You should carefully consider
SUMMARY OF RISK FACTORS
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these risk factors, the risk factors described in Item 1A, and the other reports and documents that we have filed with the Securities and Exchange
Commission (“SEC”).
Risks Related to our Finances and Capital Requirements
● We have incurred significant losses since our inception and anticipate that we will incur continued losses for the foreseeable future. We have not
generated any sales revenue from our development stage products, and we do not know when, or if, we will generate any revenue from sales of an
approved product.
● Our short operating history makes it difficult to evaluate our business and prospects.
● Our success is contingent upon raising additional capital for our development programs and commercialization efforts, which may fail. Even if
successful, our future capital raising activities may dilute our current stockholders, restrict our operations, or require us to relinquish proprietary
rights.
● Our limited resources may cause us to fail to capitalize on programs or product candidates presenting commercial opportunity or high likelihood of
success.
Risks Pertaining to our Business Strategy, Structure and Organization
● Our future growth and success depend on our ability to successfully develop and commercialize our product candidates, which we have yet to do.
● Our future growth depends on our acquiring or in-licensing products or product candidates and integrating such products into our business.
Risks Inherent in Drug Development and Commercialization
● Because results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance may
not have favorable results in later clinical trials. Moreover, interim, “top-line,” and preliminary data from our clinical trials that we announce or
publish may change, or the perceived product profile may be impacted, as more patient data or additional endpoints are analyzed.
● We may not receive the required regulatory approvals for any of our product candidates on our projected timelines, if at all, which may result in
increased costs and delay our ability to generate revenue.
●
If a product candidate demonstrates lack of efficacy or adverse side effects, we may need to abandon or limit the development of such product
candidate.
● We may not obtain the desired labeling claims or intended uses for product promotion, or favorable scheduling classifications, to successfully
promote our products.
●
Even if a product candidate is approved, it may be subject to various post-marketing requirements, including studies or clinical trials, and increased
regulatory scrutiny.
● Our competitors have developed or may develop treatments for our products’ target indications, which could limit our product candidates’
commercial opportunity and profitability.
●
If our products are not broadly accepted by the healthcare community, the revenues from any such product will likely be limited.
● Any successful products liability claim related to any of our current or future product candidates may cause us to incur substantial liability and limit
the commercialization of such products.
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Risks Related to Reliance on Third Parties
● We rely, and will rely in the future, on third-party contract research organizations and contract manufacturers for the conduct of our preclinical and
clinical studies and trials, for the completion of commercial and pre-commercial manufacturing and, eventually, for commercialization. If such third
parties fail to perform contractual obligations, meet deadlines, comply with applicable regulations, or if our relationships with such third parties are
disrupted, our product candidates may be delayed, and our revenue potential may be limited.
● We rely on clinical data and results obtained by third parties, which may prove inaccurate or unreliable.
Risks Relating to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries
● We operate in a heavily regulated industry, and we cannot predict the impact that any future legislation or administrative or executive action may
have on our operations.
● We may be subject to 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.
Risks Pertaining to Intellectual Property and Potential Disputes with Licensors Thereof
●
If we are unable to maintain sufficient patent protection for our technology and products, our competitors could develop and commercialize
products similar or identical to ours, impairing our ability to successfully commercialize potential products.
● We or our licensors may be subject to costly and time-consuming litigation for infringement of third-party intellectual property rights or to enforce
our or our licensors’ patents.
● Any dispute with our licensors may affect our ability to develop or commercialize our product candidates.
Risks Relating to Our Platform and Data
● Our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our or third parties’
cybersecurity.
Risks Relating to Our Control by Fortress Biotech, Inc. (“Fortress”)
●
Fortress controls a voting majority of our common stock and has the right to receive significant share grants annually, which will result in dilution
of our other stockholders and could reduce the value of our common stock.
● We have entered into certain agreements with Fortress and may have received better terms from unaffiliated third parties.
Risks Related to Conflicts of Interest
●
The Chairman of our Board of Directors is also the Executive Chairman, President, and Chief Executive Officer of TG Therapeutics, Inc.(“TGTX”).
We have entered a collaboration agreement and a sublicense agreement with TGTX, and as a result, certain conflicts of interest may arise.
● We share certain directors with Fortress, which could create conflicts of interest between us and Fortress.
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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, an anti-programmed death-ligand 1
(“PD-L1”) antibody licensed from the Dana-Farber Cancer Institute (“Dana-Farber”), in an ongoing global, open-label, multicohort Phase 1 clinical trial in
checkpoint therapy-naïve patients with selected recurrent or metastatic cancers, including ongoing cohorts in locally advanced and metastatic cutaneous
squamous cell carcinoma (“CSCC”) intended to support one or more applications for marketing approval. In addition, we are evaluating our lead small-
molecule, targeted anti-cancer agent, olafertinib, a third-generation epidermal growth factor receptor (“EGFR”) inhibitor, as a potential new treatment for
patients with EGFR mutation-positive non-small cell lung cancer (“NSCLC”).
In January 2022, we announced topline results from a cohort of the registration-enabling Phase 1 clinical trial of cosibelimab administered as a fixed dose
of 800 mg every two weeks in patients with metastatic CSCC. The cohort met its primary endpoint, with cosibelimab demonstrating a confirmed objective
response rate (“ORR”) of 47.4% (95% CI: 36.0, 59.1) based on independent central review of 78 patients enrolled in the metastatic CSCC cohort using
Response Evaluation Criteria in Solid Tumors version 1.1 (“RECIST 1.1”).
In December 2021, we announced the initiation of our CONTERNO study, a global, open-label, multi-center, randomized Phase 3 trial of cosibelimab in
combination with pemetrexed and platinum chemotherapy for the first-line treatment of patients with NSCLC. The primary endpoint for the CONTERNO
Phase 3 trial is overall survival (“OS”), and key secondary endpoints include progression-free survival (“PFS”), ORR and safety.
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.
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, 2021, we have an accumulated deficit of $199.9 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 95 Sawyer Road, Suite 110, Waltham, MA 02453. 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.
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In addition, we may disclose material non-public information by disseminating press releases, by disclosing information during publicly accessible
meetings or conference calls, or through our website or social media accounts.
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. 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. Additionally, cosibelimab has a functional Fc domain that may be capable of inducing antibody-dependent cellular cytotoxicity
(“ADCC”) and complement-dependent cytotoxicity (“CDC”) against tumor cells.
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 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 metastatic melanoma 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, NSCLC,
melanoma, RCC, head and neck cancer, CSCC 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 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, including ongoing cohorts in locally advanced and metastatic CSCC, intended to support one or more
applications for marketing approval. The primary endpoint is ORR, and secondary endpoints include duration of response, PFS, and OS. In January 2022,
we announced topline results from a cohort of this study with cosibelimab administered as a fixed dose of 800 mg every two weeks in patients with
metastatic CSCC. The cohort met its primary endpoint, with cosibelimab demonstrating a confirmed ORR of 47.4% (95% CI: 36.0, 59.1) based on
independent central review of 78 patients enrolled in the metastatic CSCC cohort using RECIST 1.1. Based on these results, Checkpoint intends to submit a
Biologics License Application (“BLA”) to the U.S. Food and Drug Administration (“FDA”) for cosibelimab in late 2022, to be followed by a marketing
authorization application (“MAA”) submission in Europe and additional potential submissions in markets worldwide.
We commenced our CONTERNO study, a global, randomized Phase 3 trial of cosibelimab in December 2021. The CONTERNO study is an open-label,
multi-center, randomized trial investigating cosibelimab combined with pemetrexed and investigator’s choice of platinum chemotherapy (either carboplatin
or cisplatin) versus pemetrexed and platinum chemotherapy alone in patients with previously untreated stage IV non-squamous NSCLC and with no EGFR
mutations or ALK translocations. The primary endpoint for the CONTERNO Phase 3 trial is OS, and key secondary endpoints include PFS, ORR and
safety. The study is designed to potentially support full regulatory approvals worldwide.
CK-302 (Anti-GITR) Program
Our anti-GITR monoclonal antibody, CK-302, is a fully human agonistic antibody that is designed to bind to 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
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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 has the potential to abrogate
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 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 one or more
oncological indications as a monotherapy or in combination with an anti-PD-L1 antibody as well as other anti-tumor immune response potentiating
compounds and targeted therapies.
Currently, we are in preclinical development for this program.
Targeted Anti-Cancer Agents
Olafertinib (also known as CK-101 and RX518) EGFR Inhibitor Program
We are developing olafertinib 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 PFS 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.
Third-generation EGFR inhibitors are designed to be highly selective against one or more EGFR activating mutations and the T790M resistance mutation
with minimal inhibition of wild-type EGFR, thereby potentially improving tolerability and safety profiles. In November 2015, Tagrisso® (osimertinib), a
third-generation EGFR inhibitor developed by AstraZeneca plc, received accelerated FDA approval for the treatment of patients with metastatic EGFR
T790M mutation-positive NSCLC who have progressed on or after receiving EGFR tyrosine kinase inhibitor 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. Subsequently, in April 2018, Tagrisso received FDA
approval for the first-line treatment of adult patients with metastatic NSCLC whose tumors have the EGFR exon 19 deletion or exon 21 L858R activating
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 from the EGFR inhibitor comparators, erlotinib or gefitinib.
We are developing olafertinib for the potential treatment of adult patients with metastatic NSCLC whose tumors have EGFR exon 19 deletion mutations.
We believe that olafertinib has the potential to be effective in this population as a monotherapy or in combination with other anti-tumor immune response
potentiating compounds.
In March 2015, Fortress entered into an exclusive license agreement with NeuPharma, Inc., 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 Investigational New Drug application (“IND”) and we initiated a Phase 1 clinical trial in September 2016. The trial is
evaluating the safety and tolerability of ascending doses of olafertinib in patients with advanced solid tumors to determine the maximum tolerated dose and
the safety and efficacy of olafertinib in patients with EGFR mutation-positive NSCLC. In September 2018, we announced preliminary interim data in an
oral presentation at the International Association for the Study of Lung Cancer 19th World Conference on Lung Cancer in Toronto. In November 2020,
NeuPharma, Inc. commenced a Phase 3 clinical trial in China evaluating olafertinib in treatment-naïve locally advanced or metastatic NSCLC patients
whose tumors have EGFR exon 19 deletion mutations. We have met with the FDA to discuss the adequacy of the ongoing Phase 3 trial in China.
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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 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. Currently, we have completed the required
CMC, pharmacology and toxicology activities that we believe will support an IND application filing.
Anti-CAIX Research Program
Our anti-carbonic anhydrase IX (“CAIX”) antibody is a fully human preclinical antibody designed to recognize CAIX expressing cells and kill them via
ADCC and 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 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.
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
Cosibelimab
Cosibelimab
Target Indication(s)
Locally advanced and metastatic
cutaneous squamous cell carcinoma
Previously untreated stage IV non-
squamous NSCLC in combination
with pemetrexed and platinum
chemotherapy
Development
Status
Phase 1 registration-enabling
2022*
Estimated
Completion
of Phase
Estimated Cost to
Complete Phase
$4 to $5 million
Phase 3
2024
$30 to $35 million
Olafertinib
EGFR mutation-positive NSCLC
Phase 1
2022
<$1 million
*Completion of phase for this study indicates completion of the portion of study, which, if successful, could potentially support the submission of one or
more applications for marketing approval.
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Completion dates and costs in the above table are estimates due to the uncertainties associated with clinical trials and the related requirements of
development. In the cases where the requirements for 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, 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 that 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. But that maximum of five additional years is, itself,
subject to a cap of a maximum of 14 years of patent protection from the date of marketing approval.
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 PD-L1, CAIX, and GITR.
The PD-L1 segment of the portfolio includes two granted U.S. patents (U.S. Patent Nos. 9,828,434 and 10,604,581) directed to antibodies that bind to PD-
L1 and methods of augmenting a patient’s immune response by administering an anti-PD-L1 antibody, respectively. The ‘434 patent is scheduled to expire
October 4, 2033, and the ‘581 patent is scheduled to expire November 18, 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. Two Australian (AU 2013326901 and
2018226425), one Japanese (JP 6461800), one South Korean (KR 101947702), one Israeli (IL 237737), one Mexican (MX 370848), one Colombian (CO
34878), one Canadian
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(CA 2886433), and two Chinese (CN 104994873 and CN 10782719) counterpart patents have issued, and additional international counterpart applications
are pending in Canada, China, Europe and Hong Kong. The issued international patents and any patents maturing from these pending applications will
expire no sooner than October 2033. In June 2016, Checkpoint also filed a company-owned 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. The ’610 application has now issued as U.S. Patent No. 10,590,199 with claims
directed to specific anti-PD-L1 antibodies and fragments thereof, as well as methods of treating tumors/cancers with anti-PD-L1 antibodies and fragments
thereof. The ’199 patent is scheduled to expire on May 31, 2038, 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. A further U.S. application, U.S. Appl. No.
16/818,621, was filed before the issuance of the ‘199 patent and is currently pending. An Israeli counterpart patent has also granted (IL 263611), and
additional national stage applications are pending in Australia, Brazil, Canada, China, Europe, Hong Kong, 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 CAIX segment of the portfolio includes three granted U.S. patents (U.S. Patent Nos. 8,466,263, 10,450,383, and 11,174,323) and one pending U.S.
application (U.S. Appl. No. 17/498,582). 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 ‘323 patent is directed to methods of treating renal cancer
with anti-CAIX antibodies, and its term runs until February 11, 2027. The ‘263 patent, the ‘383 patent, the ‘323 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 patent (EP 1979379) is in force in Switzerland, Liechtenstein, Germany,
France and the United Kingdom. A Canadian counterpart patent (CA 2,632,094) 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 GITR segment of the portfolio includes an International Application No. PCT/US2015/054010, filed in October 2015, and International Application
No. PCT/US2017/043504, filed in July 2017. All of the national stage applications claiming priority to PCT/US2015/054010 have lapsed; however, there is
one granted patent (U.S. Patent No. 10,463,732) in this family. The ‘732 patent will not expire until at least October 2035, barring any patent term
restorations that might become available under the provisions of U.S. patent laws. 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, New Zealand
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. One U.S. patent (U.S. 11,046,777) has issued in the patent family claiming priority to PCT/UC2017/043504, and this U.S. patent will not expire
until at least July 2037, barring any patent term restorations that might become available under the provisions of the U.S. patent laws.
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 olafertinib. EGFR is a receptor tyrosine kinase of the
ErbB family and is also known as “Her1” and “ErbB1.” The in-licensed patent estate includes four granted U.S. patents, a granted European patent, a
granted patent in Hong Kong, a granted patent in Singapore, a granted patent in the Philippines, a granted Japanese patent, a granted South Korean patent, a
granted Malaysian patent, two granted Australian patents, a granted New Zealand patent, two granted Israeli patents, a granted Mexican patent and a
granted Russian patent. U.S. Patent No. 9,550,770 is directed to a generic formula of small molecules and also has a specific claim directed to the
compound, olafertinib. 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, olafertinib. U.S. Patent No. 10,172,868 is
directed to methods of treating non-small cell lung cancer with a specific list of compounds, including the compound, olafertinib. U.S. Patent No.
10,653,701 is directed to methods of treating skin cancer or lung cancer with a substituted quinazoline compound comprising an electrophilic group capable
of forming a covalent bond with a nucleophile, which includes the compounds of the ‘868 patent (e.g., the compound, olafertinib). Additionally, there is a
pending U.S. application in this family (U.S. Appl. No. 16/843,610) that was recently allowed, but has not yet issued, a further pending U.S. application
(U.S. Appl. No. 17/681,387) has been filed. The granted foreign patents cover the compound, olafertinib, and a broad range of related compounds, salts,
pharmaceutical
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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, the Philippines, Singapore, South Korea, Malaysia, 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. National stage applications claiming priority to PCT/US2019/017117 are pending in the U.S. (U.S. Appl. No. 16/967,696), Australia,
Canada, China, Europe, Hong Kong, the Philippines, Israel, Japan, South Korea, Singapore and New Zealand. Any of these national stage applications that
issue or grant as patents (including U.S. Application No. 16/967,696) would expire no earlier than February 2039.
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, which claim the benefit of two earlier-filed Indian provisional
applications. This patent estate has three granted U.S. patents, a granted Indian patent, two granted Japanese patents, two granted Australian patents, two
granted Russian patents, a granted Israeli patent, two granted patents in Hong Kong, two granted Chinese patents, two granted Mexican patents, and two
granted European patents that have each been validated across a broad range of European countries. National stage applications claiming priority to
PCT/IN2016/050098 or PCT/IN2016/050300 are pending in Brazil, Canada, Israel, India, South Korea, New Zealand, Thailand and the U.S. U.S. Patent
No. 10,689,390, which is the U.S. national phase entry of PCT/IN2016/050098, is directed to a generic formula of small molecule BET inhibitors and
specifically claims exemplified small molecule BET inhibitors. The granted claims of the ‘390 patent also cover pharmaceutical compositions. Pending U.S.
Application (U.S. Appl. No.16/869,517) is directed to methods of treatment with the compounds claimed in the ‘390 patent, including inhibiting one or
more BET family bromodomains in the cell and treating a condition mediated by one or more BET family bromodomains. U.S. Patent No. 10,689,395,
which is the U.S. national phase entry of PCT/IN2016/050300, is directed to a generic formula of small molecule BET inhibitors that cover half of the
exemplified small molecule BET inhibitors disclosed in PCT/IN2016/050300. The granted claims of the ‘395 patent also cover pharmaceutical
compositions and a method of treating cancer. U.S. Patent No. 11,267,820, which is a continuation of the ‘395 patent, is directed to the remaining half of the
exemplified compounds disclosed in PCT/IN2016/050300 and has claims similar to those granted from the ‘395 patent. Any patents maturing from this
patent estate are expected to expire in 2036.
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 designation 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 drug product will be granted a seven-year period of marketing exclusivity for such FDA-approved orphan drug product. In September
2017, we received FDA Orphan Drug Designation for olafertinib for the treatment of EGFR mutation-positive NSCLC.
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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 $6.2 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 $27.6 million upon TGTX’s successful
achievement of certain clinical development, regulatory and first commercial sale milestones. This is comprised of up to approximately $8.4 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, 2021 and 2020, we recognized approximately $0.2 million and $1.0 million respectively, in revenue from
our collaboration agreement with TGTX in the Statements of Operations. The year ended December 31, 2020 included a milestone payment of $925,000
upon the 12th patient dosed in a phase 1 clinical trial for the anti-PD-L1 antibody cosibelimab during March 2020.
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
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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 incurred $3.7 million in milestone payments under our 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 olafertinib, 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.
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.
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
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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 each of
the years ended December 31, 2021 and 2020, we recognized approximately $0.1 million 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 preclinical 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 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®), Regeneron (approved PD-1 with the brand name Libtayo®) and GlaxoSmithKline (approved PD-
1 with the brand name Jemperli®). We are aware of several anti-GITR antibody development programs that are or were 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.
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
mutation-positive NSCLC in the United States. 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 and for the adjuvant treatment of patients with
early stage EGFR mutation positive NSCLC. 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’ nazartinib, Janssen’s lazertinib, and EQRx’s almonertinib.
In the BET inhibitor space, there are a number of companies which have advanced to early stage clinical trials, including Constellation Pharmaceuticals’
pelabresib, Bristol-Myers Squibb’s BMS-986158, GlaxoSmithKline’s molibresib, Abbvie’s mivebresib, Incyte’s INCB57643 and Zenith Epigenetics’s
ZEN003694.
Additional information can be found under Item 1A - Risk Factors - Risks Related to Our Business and Industry.
EMPLOYEES
As of December 31, 2021, we had fourteen full and part-time employees. None of our employees are represented by a labor union and we consider our
employee relations to be good.
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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 plan to 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 outside of the United States
face similar challenges from the numerous local and regional 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 and corresponding foreign regulatory
agency 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, including 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 preclinical 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.
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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”) or BLA. 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.
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 or BLA
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 or BLA. 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 or BLA to the FDA or foreign regulatory authorities for marketing approval.
Clinical testing must meet requirements for institutional review board or ethics committee oversight, informed consent and good clinical practices, and
must be conducted pursuant to an IND, unless exempted.
For purposes of NDA or BLA 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, external factors such as pandemics or geopolitical conflicts 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;
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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.
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.
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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.
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. In addition, in the U.S., the Patient Protection and Affordable Care Act (the “Affordable Care Act”) contains provisions
that have the potential to substantially change healthcare delivery and financing, including impacting the profitability of drugs. For example, the Affordable
Care Act revised the methodology by which rebates owed by manufacturers for covered outpatient drugs are calculated under the Medicaid Drug Rebate
Program, extended the Medicaid Drug Rebate Program to utilization of covered drugs dispensed to individuals enrolled in Medicaid managed care
organizations, and subjected manufacturers to new annual fees for certain branded prescription drugs. Given the complexity of the Affordable Care Act and
the substantial requirements for regulation thereunder, the impact of the Affordable Care Act on our financial conditions and operations cannot be
predicted, whether in its current form or as amended or repealed.
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.
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Risks Related to Our Finances and Capital Requirements
We have incurred significant losses since our inception and anticipate that we will incur continued losses for the foreseeable future. We 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 $199.9 million as of December 31, 2021. 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 submitted for marketing approval or are approved for commercial sale, due to our need to establish the
necessary commercial infrastructure to launch this product candidate without substantial delays, including manufacturing to build pre-commercial
inventory, 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;
● we initiate one or more clinical trials to pursue additional indications for our product candidates, or if 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 candidates receives regulatory approval.
Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from the sale of our
development stage products, and we do not know when, or if, we will generate any revenue. 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. 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;
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● manufacture commercial quantities of one or more of our product candidates or any future product candidate, if approved, at acceptable cost levels;
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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.
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
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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 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 believe that
our cash and cash equivalents balances are sufficient to fund our anticipated operating cash requirements for at least one year from the date of issuance 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;
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.
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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 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
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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.
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.
We may expend our limited resources to pursue certain product candidates or indications and fail to capitalize on product candidates or indications that
may be more profitable or for which there is a greater likelihood of success.
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.
Risks Related to our Business Strategy, Structure, and Organization
We currently have no drug products for sale and are dependent on the future success of our product candidates. We can give no 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 a
development-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 and maintaining successful licensing and other arrangements with product development partners;
achieving clinical endpoints to support preparation of approval applications;
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participating in regulatory approval processes, including ultimately gaining approval to market a drug product, which may not occur;
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, in checkpoint therapy-naïve patients
with selected recurrent or metastatic cancers, including CSCC, to potentially support one or more U.S. BLAs and comparable applications for marketing
approval outside the U.S. In January 2020, we announced that we had discussed with the FDA this strategy in CSCC. Similarly, we intend to use data from
our licensor’s ongoing Phase 3 clinical trial of olafertinib (formerly CK-101), conducted only in China, in patients with EGFR mutation-positive NSCLC, to
potentially support a U.S. NDA and comparable applications for marketing approval outside the U.S. We believe, based on published FDA guidance
documents, public statements of companies with comparable product candidates, 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. If we prove to be incorrect, running additional studies in
the U.S. will require substantial time, effort and financial resources or may not be possible at all.
Our operations have been limited to organizing our company, acquiring, developing and securing our proprietary technologies 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 identify product
candidates, develop and commercialize product candidates in our portfolio and any product candidates we are able to identify and enter into successful
collaborative arrangements with other companies in the future, 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.
Our future growth depends on our ability to identify and acquire or in-license products and successfully integrating such acquired or in-licensed
products into our existing operations.
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;
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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.
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.
Risks Inherent in Drug Development and Commercialization
Because results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance may not
have favorable results in later clinical trials or receive regulatory approval. Moreover, interim, “top-line,” and preliminary data from our clinical trials
that we announce or publish may change, or the perceived product profile may be negatively impacted, as more patient data or additional endpoints
(including efficacy and safety) are analyzed.
Pharmaceutical development has inherent risks. The outcome of preclinical development testing and early clinical trials may not be predictive of the
outcome of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often
susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical
studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates. Once a product candidate has displayed
sufficient preclinical data to warrant clinical investigation, we will be required to demonstrate through adequate and well-controlled clinical trials that our
product candidates are effective with a favorable benefit-risk profile for use in populations for their target indications before we can seek regulatory
approvals for their commercial sale. Many drug candidates fail in the early stages of clinical development for safety and tolerability issues or for insufficient
clinical activity, despite promising preclinical results. Accordingly, no assurance can be made that a safe and efficacious dose can be found for these
compounds or that they will ever enter into advanced clinical trials alone or in combination with other product candidates. Moreover, success in early
clinical trials does not mean that later clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate
sufficient safety or efficacy despite having progressed through initial clinical testing. Companies frequently experience significant setbacks in advanced
clinical trials, even after earlier clinical trials have shown promising results. There is an extremely high rate of failure of pharmaceutical candidates
proceeding through clinical trials.
Individually reported outcomes of patients treated in clinical trials may not be representative of the entire population of treated patients in such studies. In
addition, registration or larger scale Phase 3 studies, which are often conducted internationally, are inherently subject to increased operational risks
compared to earlier stage studies, including the risk that the results could vary on a region to region or country to country basis, which could materially
adversely affect the outcome of the study or the opinion of the validity of the study results by applicable regulatory agencies.
From time to time, we may publicly disclose top-line or preliminary data from our clinical trials, which is based on a preliminary analysis of then available
data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular
study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of such data, and we may not have received or
had the opportunity to fully and carefully evaluate all data from the particular study or trial, including all endpoints and safety data. As a result, top-line or
preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results,
once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to audit and verification procedures that may
result in the final data being materially different from the topline, interim, or preliminary data we previously published. When providing top-line results, we
may disclose the primary endpoint of a study before all secondary endpoints have been fully analyzed. A positive primary endpoint does not translate to all,
or any, secondary endpoints being met. As a result, top-line and preliminary data should be viewed with caution until the final data are available, including
data from the full safety analysis and the final analysis of all endpoints.
Further, from time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may
complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data
become available. For example, many of the results reported in our early clinical trials rely on local
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investigator-assessed efficacy outcomes which may be subject to greater variability or subjectivity than results assessed in a blinded, independent, centrally
reviewed manner, often required of final or later phase, adequate and well-controlled registration-directed clinical trials. If the results from our registration-
directed trials are different from the results found in the earlier studies, we may need to terminate or revise our clinical development plan, which could
extend the time for conducting our development program and could have a material adverse effect on our business. Also, time-to-event based endpoints
such as duration of response and progression-free survival have the potential to change, sometimes drastically, with longer follow-up. In addition, as
patients continue on therapy, there can be no assurance given that the final safety data from studies, once fully analyzed, will be consistent with prior safety
data presented, will be differentiated from other similar agents in the same class, will support continued development, or will be favorable enough to
support regulatory approvals for the indications studied. Further, others, including regulatory agencies, may not accept or agree with our assumptions,
estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular
program, the approvability or commercialization of the particular product candidate or product and our company in general. The information we choose to
publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and regulators or others may not agree
with what we determine is material or otherwise appropriate information to include in our disclosure. If the interim, top-line or preliminary data that we
report differ from final results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, or
successfully commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or 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;
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.
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.
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Difficulties in the enrollment of patients in clinical trials may prevent or delay receipt of necessary regulatory approvals.
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 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.
Russian military action in Europe may impact foreign countries in which we may need to enroll patients in our clinical trials and could cause such
clinical trials to be delayed or suspended.
In February 2022, Russia commenced a military invasion of Ukraine. Russia's invasion and the ensuing response by Ukraine may disrupt our ability to
conduct clinical trials in Russia, Ukraine, Belarus, and Georgia. Although the route, length and impact of Russia's military action is highly unpredictable,
our clinical trial sites in Russia, Ukraine, Belarus, and Georgia may suspend or terminate trials, and patients could be forced to evacuate or choose to
relocate, making them unavailable for initial or further participation in our clinical trials. Alternative sites to fully and timely compensate for our clinical
trial activities in these areas may not be available and we may need to find other countries to conduct these clinical trials. Furthermore, Russian military
action may prevent the FDA from auditing our clinical sites in these countries upon review of our planned BLA for cosibelimab. Interruptions of our
clinical trials, particularly of the CONTERNO study, may delay our clinical development and approvals for our product candidates, which could increase
our costs and jeopardize our ability to commence product sales and generate revenues.
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
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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.
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 available therapies and standards of care, 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 study design,
including the control arm used in our study, or data are 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.
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 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
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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;
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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.
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.
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
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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:
restrictions on such products, operations, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
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● 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.
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.
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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.
If our competitors develop treatments for any of our product candidates’ target indications and those competitor products are approved more quickly,
marketed more successfully or demonstrated to be more effective, the commercial opportunity for our product candidate will be reduced or eliminated.
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 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.
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.
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. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large
and established companies. We will also face competition from these third parties in establishing clinical trial sites, in patient registration for clinical trials,
and in identifying and in-licensing new product candidates.
Further, 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
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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.
If any of our product candidates are successfully developed but do not achieve broad market acceptance among physicians, patients, healthcare payors
and the medical community, the revenues that any such product candidates generate from sales will be limited.
Even if our product candidates receive regulatory approval, they may not gain market acceptance among physicians, patients, healthcare payors and the
medical community. Coverage and reimbursement of our product candidates by third-party payors, including government payors, generally would also be
necessary for commercial success. The degree of market acceptance of any approved products would depend on a number of factors, including, but not
necessarily limited to:
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the efficacy and safety as demonstrated in clinical trials;
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 hospitals and clinics and patients of the product as a safe and effective treatment;
the potential and perceived advantages of product candidates over alternative treatments;
the safety of product candidates in a broader patient group (i.e. based on actual use);
the cost of treatment in relation to alternative treatments;
the availability of adequate reimbursement and pricing by third parties and government authorities;
changes in regulatory requirements by government authorities for our product candidates
relative convenience and ease of administration;
the prevalence and severity of side effects and adverse events;
the effectiveness of our sales and marketing efforts; and
unfavorable publicity relating to the product.
If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may
not generate sufficient revenue from these products and in turn we may not become or remain profitable.
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.
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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 be unsuccessful in commercializing our product candidates, if 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 approved product candidate, we would need to build marketing, sales, distribution, managerial and other non-technical capabilities, or arrange for third
parties to perform these services, and we may be unsuccessful in doing so. In the event of successful development and regulatory approval of any of our
current or future product candidates, 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.
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
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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;
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. If we obtain marketing approval for one or more of our product candidates in development, we intend to
expand our insurance coverage to include the sale of commercial products, 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.
Risks Related to Reliance on Third Parties
We intend to contract with third parties for the manufacture of our approved products, if any. If such contract manufacturer fails to timely produce
sufficient product volume or to comply with applicable regulations, the commercialization of our product candidates may be delayed, we may be unable
to meet market demand, and we 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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We rely, and expect to continue to rely, on third parties to conduct our preclinical studies and clinical trials. Those third parties may perform
unsatisfactorily, fail to meet deadlines for trial completion, or to comply with applicable regulatory requirements.
We rely on third-party CROs and site management organizations to conduct some of our preclinical studies and all 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, image reading vendors, laboratories, 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 or other third party vendors, institutions or investigators 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, including the impacts of COVID-19, could disrupt the ability of our
third-party CROs, site management organizations, image reading vendors, laboratories, 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.
We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing and for the
future commercialization of our approved products, if any. Reliance on third parties increases the risk that we will not have sufficient quantities of our
products 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 or maintain 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;
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supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreement between us;
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.
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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, including the effects of the COVID-19 pandemic, 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.
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.
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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.
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.
Risks Relating to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries
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,
specifically through rulemaking and guidance, that could impact the pharmaceutical business and industry. A few of the major administrative actions
include:
1. On October 9, 2019, the Centers for Medicare & Medicaid Services (“CMS”) issued a proposed rule entitled, Modernizing and Clarifying the
Physician Self-Referral Regulations and on the same day the HHS Office of Inspector General issued a similar rule, entitled Revisions to Safe
Harbors Under the Anti-Kickback Statute, and Civil Monetary penalty Rules Regarding Beneficiary Inducements. The proposed rules are an effort
to reform regulations dealing with anti-kickback and self-referral laws. The proposals are attempting to allow certain financial arrangements that
would otherwise violate anti-kickback and self-referral laws for providers that are participating in value-based payment arrangements. The
proposed rule could impact drug purchasing behavior to ensure providers are within their budget and/or restructure existing payment structures
between providers and manufacturers.
2. On October 30, 2019, the Administration issued an advanced notice of proposed rulemaking (“ANPRM”) entitled, International Pricing Index
Model for Medicare Part B Drugs. This ANPRM is soliciting feedback on a potential proposal to align United States drug prices in the Medicare
Part B program with international prices. It also solicits public feedback on a policy that would allowing private-sector vendors to negotiate prices,
take title to drugs, and improve competition for hospital and physician business. Although this is only a notice for a potential rule, it signals the
Administration’s desire to regulatorily influence the United States drug pricing system that could adversely affect the industry.
3. On November 15, 2019, CMS issued a proposed rule entitled, Transparency in Coverage and finalized the Calendar Year (“CY”) 2020 Outpatient
Prospective Payment System (“OPPS”) & Ambulatory Surgical Center Price Transparency Requirements for Hospitals to Make Standard
Charges Rule. Together the rules would increase price transparency through health plans and in hospitals. The affects may influence consumer
purchasing habits in the health care sector as a whole. Although the transparency provisions are not yet in effect and the hospital price transparency
requirements are subject to litigation, there could be implications for the industry related to drug pricing if or when it is enacted.
4. On November 18, 2019, CMS issued a proposed rule entitled, Medicaid Fiscal Accountability Regulation (“MFAR”). The proposed rule would
significantly impact states’ ability to finance their Medicaid programs. If finalized, the MFAR could force states to restructure their Medicaid
financing that could disincentivize or change state prescription drug purchasing behavior that would adversely impact the industry.
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5. On December 18, 2019, the FDA issued a proposed rule entitled, Importation of Prescription Drugs. The proposed rule would allow the
importation of certain prescription drugs from Canada. If finalized, states or other non-federal government entities would be able to submit
importation program proposals to FDA for review and authorization. This proposed rule could also influence pricing practices in the United States.
6. On January 30, 2020, CMS issued a state waiver option entitled, Health Adult Opportunity (“HAO”). The HAO would allow states to restructure
benefits and coverage policies for their Medicaid programs. The HAO will provide states administrative flexibilities in exchange for a capped
federal share. The cap on the federal share is commonly referred to as a “block grant.” Importantly, the HAO allows states to set formularies that
align with Essential Health Benefit requirements while still requiring manufacturers to participate in the Medicaid Rebate Program. Depending on
utilization of the HAO by states, it could impact the industry – especially if states elect to use a formulary.
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;
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.
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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.
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, 2018, a Texas federal district court
judge issued a ruling declaring that the ACA in its entirety is unconstitutional. Upon appeal, the Fifth Circuit upheld the district court’s ruling that the
individual mandate is unconstitutional. However, the Fifth Circuit remanded the case back to the district court to conduct a more thorough assessment of the
constitutionality of the entire ACA despite the individual mandate being unconstitutional. The Supreme Court agreed to hear the case on appeal from the
Fifth Circuit on March 2, 2020 and held oral arguments on November 10, 2020. While this lawsuit has no immediate legal effect on the ACA and its
provisions, this lawsuit is ongoing and the outcome may have a significant impact on our business.
The Bipartisan Budget Act of 2018, the “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 Senate Committee on Health, Education, Labor, and Pensions (HELP) advanced the Lower Health Care Costs Act of 2019. Among other things, the
bill is intended to reduce costs in the United States health sector. The bill revises certain requirements to expedite the approval of generics and biosimilars.
It also limits prices that pharmacy benefit managers may charge health insurers or enrollees for prescription drugs. Although this bill still needs to pass the
full Senate and House of Representatives, it is worth noting the wide-ranging effects it could have on the health care sector.
On December 12, 2019, the House of Representatives passed broad legislation (H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act) that would,
among other provisions, require HHS to negotiate drug prices and impose price caps and restructure the Medicare Part D benefit, imposing more financial
responsibility on certain drug manufacturers. Failure by a manufacturer to reach an agreement with HHS on the negotiated price could result in significant
penalties for prescription drug manufacturers. In addition, S. 2543, the Prescription Drug Pricing Reduction Act would also, among other provisions,
restructure the Medicare Part D benefit, but it would not authorize direct negotiation by the federal government. While we cannot predict what proposals
may ultimately become law, the elements under consideration could significantly change the landscape in which the pharmaceutical market operates.
The Trump Administration took several regulatory steps to redirect ACA implementation. The HHS finalized a Medicare hospital payment reduction for
Part B drugs acquired through the 340B Drug Pricing Program.
Under the Trump Administration, HHS finalized several proposals aimed at lowering drug prices for Medicare beneficiaries and increasing price
transparency. For example, the Trump Administration issued an interim final rule on November 27, 2020 implementing a “Most Favored Nation” payment
model for Part B drugs that applies international reference pricing to determine reimbursement for certain drugs paid by Medicare Part B. The interim final
rule was enjoined by federal courts prior to its implementation date of January 1, 2021, and the lawsuit is ongoing. In addition, HHS, in conjunction with
the FDA, finalized four pharmaceutical importation pathways in September 2020: (1) regulations establishing importation of pharmaceuticals from Canada
by wholesalers and pharmacists; (2) FDA guidance permitting manufacturers to import their own pharmaceuticals that were originally intended for
marketing in other countries; (3) a request for proposals from private sector entities to import prescription drugs for personal use under existing statutory
authority; and (4) a request for proposals from private sector entities to reimport insulin under existing statutory authority. Further, on November 11, 2020,
the Trump Administration issued a final rule that changes the permissible structure of drug rebates and discounts between drug manufacturers and third-
party payors (including pharmacy benefit managers that negotiate drug prices on behalf of such third-party payors). This final rule, often referred to as the
“Rebate Rule,” could have significant direct and indirect impacts on drug pricing in both government and commercial markets. With respect to price
transparency, the Trump Administration promulgated regulations that require hospitals and third-party payors to disclose prices of items and services,
which may impact negotiated rates in the commercial market.
On January 20, 2021, Joe Biden was inaugurated as the 46th president of the United States. As a presidential candidate, Mr. Biden indicated support for
several policies aimed at lowering drug prices, including government price negotiation, drug importation,
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international reference pricing, and price increase controls. The incoming Biden Administration may continue, modify, or repeal many of the drug pricing
policies proposed and finalized by the Trump Administration. While we cannot predict which policies the Biden Administration may support and enforce,
the policies finalized in the months prior to the beginning of Mr. Biden’s term, if continued, could significantly change the landscape in which the
pharmaceutical market operates and significantly impact our ability to effectively market and sell our products.
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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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;
our ability to generate revenues and achieve or maintain profitability;
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. In January 2020, President Trump signed into law
the U.S.-Mexico-Canada (USMCA) trade deal into law. As enacted, there are no commitments with respect to biological product intellectual property rights
or data protection, which may create an unfavorable environment across these three countries.
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
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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;
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.
Risks Related to Intellectual Property and Potential Disputes with Licensors Thereof
If we are unable to obtain and maintain sufficient patent protection for our technology and products, 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.
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
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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.
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.
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.
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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 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.
We depend on our licensors to maintain and enforce the intellectual property covering certain of our product candidates. We have limited, if any,
control over the resources that our licensors can or will devote to securing, maintaining, and enforcing patents protecting 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.
Protecting our proprietary rights is difficult and costly, and we may be unable 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
●
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, and an unfavorable outcome in any litigation would harm our business.
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.
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.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expense 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.
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
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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.
If we fail to comply with our obligations under our intellectual property licenses and third-party funding arrangements, we could lose rights that are
important to our business.
We have in-licensed the rights to all of our product candidates from third parties. Any disputes between us and any of our licensors regarding our rights
under our license agreements may impact our ability to develop and commercialize these product candidates. 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 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.
Risks Relating to Our Platform and Data
Our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our or third parties’ cybersecurity.
We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business. In the ordinary course of business,
we collect, store, and transmit confidential information, including, but not limited to, information related to our intellectual property and proprietary
business information, personal information, and other confidential information. It is critical that we
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maintain such confidential information in a manner that preserves its confidentiality and integrity. Furthermore, we have outsourced elements of our
operations to third party vendors, who each have access to our confidential information, which increases our disclosure risk.
Although we have implemented internal security and business continuity measures and have developed an information technology infrastructure, our
internal computer systems, as well as those of current and future third parties on which we rely, are vulnerable to damage from computer viruses and
unauthorized access, and may fail. Our information technology and other internal infrastructure systems, including corporate firewalls, servers, data center
facilities, lab equipment, and internet connection, face the risk of breakdown or other damage or interruption from service interruptions, system
malfunctions, natural disasters, terrorism, war, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional
actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including
the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the
confidentiality, integrity and availability of information), each of which could compromise our system infrastructure or lead to the loss, destruction,
alteration, disclosure, or dissemination of, or damage or unauthorized access to, our data or data that is processed or maintained on our behalf, or other
assets.
In addition, the loss or corruption of, or other damage to, clinical trial data from completed or future clinical trials could result in delays in our regulatory
approval efforts and could significantly increase our costs to recover or reproduce the data. Likewise, we will rely on third parties for the manufacture of our
current or future drug candidates and to conduct clinical trials, and similar events relating to their systems and operations could also have a material adverse
effect on our business and lead to regulatory agency actions. The risk of a security breach or disruption, particularly through cyber-attacks or cyber
intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of
attempted attacks and intrusions from around the world have increased.
Sophisticated cyber attackers (including foreign adversaries engaged in industrial espionage) are skilled at adapting to existing security technology and
developing new methods of gaining access to organizations’ sensitive business data, which could result in the loss of proprietary information, including
trade secrets. We may be unable to anticipate all types of security threats and to implement preventive measures effective against all such security threats.
The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources,
including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies.
Any security breach or other event leading to the loss or damage to, or unauthorized access, use, alteration, disclosure, or dissemination of, personal
information, including personal information regarding clinical trial subjects, contractors, directors, or employees, our intellectual property, proprietary
business information, or other confidential or proprietary information, could directly harm our reputation, enable competitors to compete with us more
effectively, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, or
otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information.
Each of the foregoing could result in significant legal and financial exposure and reputational damage that could adversely affect our business.
Notifications and follow-up actions related to a security incident could impact our reputation or cause us to incur substantial costs, including legal and
remediation costs, in connection with these measures and otherwise in connection with any actual or suspected security breach. Our efforts to detect and
prevent security incidents and otherwise implement our internal security and business continuity measures, including those connected with any actual,
potential, or anticipated attack, may cause us to incur significant cost, including those connected with the engagement of additional personnel (including
third-party experts and consultants), employment protection technologies, and employee training.
The costs related to significant security breaches or disruptions could be material and our insurance policies may not be adequate to compensate us for the
potential losses arising from any such disruption in, or failure or security breach of, our systems or third-party systems where information important to our
business operations or commercial development is stored or processed. In addition, such insurance may not be available to us in the future on economically
reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a
suit, regardless of its merit, could be costly and divert management attention. Furthermore, if the information technology systems of our third-party vendors
and other contractors and consultants become subject to disruptions or security breaches, we may have insufficient recourse against such third parties and
we may
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have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this
nature from occurring.
The occurrence of such a cybersecurity breach could result in interruptions in our operations, material disruption of our development programs or our
business operations, and may cause us financial, legal, business, or reputational harm.
Fortress controls a voting majority of our common stock.
Risks Relating to Our Control by Fortress Biotech Inc.
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, which became effective as of March 17, 2015 and was amended and restated on July 11, 2016, 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 January 1
of each year. 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.
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.
Risks Related to Conflicts of Interest
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. 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 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.
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
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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.
General Risks
Major public health issues, and specifically the pandemic caused by the spread of COVID-19, could have an adverse impact on our financial condition
and results of operations and other aspects of our business.
In December 2019, a novel strain of coronavirus, COVID-19, was first detected in Wuhan, China, and has since spread around the world. On March 11,
2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak had evolved into a pandemic. In response to the pandemic,
many governments around the world are implementing a variety of measures to reduce the spread of COVID-19, including travel restrictions and bans,
instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders and required closures of non-essential businesses.
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of
financial markets. Although COVID-19 has not had a material adverse effect on our business to date, no assurance can be given that it will not in the future
if the situation persists or worsens. The extent to which the coronavirus impacts our business and operating results will depend on future developments that
are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the coronavirus and the actions to contain
the coronavirus or treat its impact, among others.
Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, our clinical trials may be affected by the
pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data
analysis may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources
toward pandemic efforts, or other reasons related to the pandemic. If the coronavirus continues to spread, some participants and clinical investigators may
not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede
participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our clinical trials. Infections
and deaths related to the pandemic may disrupt the United States’ and other countries’ healthcare and healthcare regulatory systems. Such disruptions could
divert healthcare resources away from, or materially delay FDA or other regulatory review and/or approval with respect to, our clinical trials. It is unknown
how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review
resulting from such disruptions could materially affect the development and study of our product candidates.
We currently rely on third parties, such as contract laboratories, contract research organizations, medical institutions and clinical investigators to conduct
these studies and clinical trials. If these third parties themselves are adversely impacted by restrictions resulting from the coronavirus outbreak, we will
likely experience delays and/or realize additional costs. We also rely on third parties for the manufacture of our product candidates for preclinical and
clinical testing. Disruptions to the global supply chain could impact our or our third-party manufacturers’ ability to obtain raw materials or other products
necessary to manufacture and distribute our product candidates. As a result, our efforts to obtain regulatory approvals for, and to commercialize, our
product candidates may be delayed or disrupted.
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The Company’s employees have been and are currently being affected by the COVID-19 pandemic. Our office and management personnel are mostly
working remotely, and the Company may need to enact further precautionary measures to help minimize the risk of our employees being exposed to the
coronavirus. If these conditions worsen, or last for an extended period of time, the Company’s ability to manage its business may be impaired, and
operational risks, cybersecurity risks and other risks the Company faced even prior to the pandemic may be elevated.
The potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, however it has already caused, and is
likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable
terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and
adversely affect our business and the value of our common stock.
The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and will depend on future developments that cannot be
predicted with confidence, such as the duration of the outbreak, the severity of COVID-19, and the effectiveness of actions to contain and treat for COVID-
19. Although, as of the date of this Annual Report on Form 10-K, we do not expect any material impact on our long-term activity, we do not yet know the
full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole,
which could have a material adverse effect on our business, financial condition and results of operations and cash flows.
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.
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.
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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.
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:
●
●
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, which may be impacted by economic or other crises
or external factors, including the effects of the COVID-19 pandemic on the global economy;
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;
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.
●
●
●
●
●
●
●
●
●
●
●
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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 95 Sawyer Road, Suite 110, Waltham, MA, 02453. We are not currently under a lease agreement at 95
Sawyer Road. 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.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
Market information
Our common stock is listed on the NASDAQ Capital Market and trades under the symbol “CKPT.”
Equity Compensation Plans
On March 21, 2017, November 9, 2017 and November 27, 2020, 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 15, 2022, there were approximately 83 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 9,000,000. The following table provides information as of December 31, 2021, regarding the securities authorized
for issuance under our equity compensation plan, the 2015 Plan.
Number of
securities to be
issued upon
exercise of
outstanding
options
Weighted-average
exercise price of
outstanding
options
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities reflected
in column 1)
270,000
$
—
$
270,000
3.14
—
3.14
3,025,119
—
3,025,119
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Item 6. RESERVED
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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, an anti-PD-L1 antibody licensed from
the Dana-Farber, in an ongoing global, open-label, multicohort Phase 1 clinical trial in checkpoint therapy-naïve patients with selected recurrent or
metastatic cancers, including ongoing cohorts in locally advanced and metastatic cutaneous squamous cell carcinoma intended to support one or more
applications for marketing approval. In addition, we are evaluating our lead small-molecule, targeted anti-cancer agent, olafertinib, a third-generation
EGFR inhibitor, as a potential new treatment for patients with EGFR mutation-positive NSCLC.
In January 2022, we announced topline results from a cohort of the registration-enabling Phase 1 clinical trial of cosibelimab administered as a fixed dose
of 800 mg every two weeks in patients with metastatic CSCC. The cohort met its primary endpoint, with cosibelimab demonstrating a confirmed ORR of
47.4% (95% CI: 36.0, 59.1) based on independent central review of 78 patients enrolled in the metastatic CSCC cohort using RECIST 1.1.
In December 2021, we announced the initiation of our CONTERNO study, a global, open-label, multi-center, randomized Phase 3 trial of cosibelimab in
combination with pemetrexed and platinum chemotherapy for the first-line treatment of patients with NSCLC. The primary endpoint for the CONTERNO
Phase 3 trial is OS, and key secondary endpoints include PFS, ORR and safety.
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.
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, 2021, we have an accumulated deficit of $199.9 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 95 Sawyer Road, Suite 110, Waltham, MA 02453. Our telephone number is (781) 652-4500 and our email address is
ir@checkpointtx.com.
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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, but not limited to, those related to research and
development expenses, accrued research and development 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. We believe that the
accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas
involving management's judgments and estimates.
Research and Development
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, and costs associated with regulatory filings, laboratory costs and other supplies.
In accordance with 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. In each case, we evaluate if the license
agreement results in the acquisition of an asset or a business. 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. Accordingly, the total
purchase price for the licenses acquired during the period is reflected as research and development on the Consolidated Statements of Operations.
Accrued Research and Development Expense
We record accruals for estimated costs of research, preclinical, clinical and manufacturing development within accrued expenses which are significant
components of research and development expenses. A substantial portion of our ongoing research and development activities is conducted by third-party
service providers such as contract research organizations in connection with our clinical studies, contract manufacturing organizations, trial sites in
connection with our clinical studies and vendors associated with licenses/milestones. We accrue the costs incurred under agreements with these third parties
based on estimates of actual work completed in accordance with the respective agreements. We determine the estimated costs through the reviewing of
open contracts, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed
and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service
providers invoice us monthly for services performed or when contractual milestones are met.. Payments made to third parties under these arrangements in
advance of the performance of the related services are recorded as prepaid expenses until the services are rendered.
If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust accrued expenses or prepaid expenses
accordingly, which impact research and development expenses. Although we do not expect our estimates to be materially different from amounts actually
incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may
result in reporting amounts that are too high or too low in any particular period.
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Stock-Based Compensation
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 forfeitures, which are recorded upon occurrence. 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.
We will continue to use judgment in evaluating the expected volatility, expected terms and interest rates utilized for our stock-based compensation expense
calculations on a prospective basis. The assumptions underlying these valuations represent our management's best estimate, which involve inherent
uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different
assumptions or estimates, our stock-based compensation expense could be materially different. We expect to continue to grant options and other stock-
based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2021 compared to the year ended December 31, 2020. For a
discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019, 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, 2020.
Comparison of the Years Ended December 31, 2021 and 2020
Revenue
For the year ended December 31, 2021, revenue was approximately $0.3 million compared to approximately $1.1 million for the year ended December 31,
2020, a decrease of approximately $0.8 million. Revenue for the current period primarily consisted of $0.2 million from TGTX related to the collaboration
agreement. Revenue for the year ended December 31, 2020 primarily consisted of $1.0 million from TGTX related to the collaboration agreement,
including a milestone of $925,000 upon the 12th patient dosed in a phase 1 clinical trial for cosibelimab during March 2020.
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, 2021, research and development expenses were approximately $48.5 million, compared to approximately $16.4 million
for the year ended December 31, 2020, an increase of $32.1 million. The current period research and development expenses primarily consisted of $17.0
million related to the manufacturing costs of our product candidates, $14.3 million related to clinical costs for our product candidates, $6.6 million related
to the non-cash annual equity fee in connection with the Founders’ Agreement, $6.4 million related to a non-refundable milestone payment upon the first
patient dosed in a Phase 3 clinical study of cosibelimab, $1.5 million related to salary expenses and $0.7 million related to stock compensation expense. For
the year ended December 31, 2020, research and development expenses primarily consisted of $8.0 million related to clinical costs for our product
candidates, $1.7 million related to manufacturing and related costs of our product candidates, $4.6 million related to the non-cash annual equity fee in
connection with the Founders’ Agreement, $0.6 million related to salary expenses and $0.6 million related to stock compensation expense.
We anticipate research and development expenses in 2022 to increase modestly as compared to 2021.
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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, 2021, general and administrative expenses were approximately $8.5 million, compared to approximately $7.9 million for
the year ended December 31, 2020, an increase of $0.6 million. The current period general and administrative expenses primarily consisted of stock
compensation expense of $2.5 million, $1.4 million related to salary expenses, $1.0 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, $1.0 million related to legal and accounting fees and $0.4 million related
to investor relation fees. The prior period general and administrative expenses primarily consisted of stock compensation expense of $2.2 million, $1.2
million related to salary expenses, $0.9 million related to legal and accounting fees, $0.9 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 $0.9
million related to investor relation fees.
We anticipate general and administrative expenses in 2022 to modestly increase as compared to 2021.
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, 2021, we had an accumulated deficit of $199.9 million.
During the year ended December 31, 2021, we sold a total of 11,899,983 shares of common stock under the ATM for aggregate total gross proceeds of
approximately $41.3 million at an average selling price of $3.47 per share, resulting in net proceeds of approximately $40.3 million after deducting
commissions and other transaction costs.
In September 2020, we completed an underwritten public offering in which we sold 7,321,429 shares of our common stock at a price of $2.80 per share for
gross proceeds of approximately $20.5 million. Total net proceeds from the offering were approximately $18.9 million, net of underwriting discounts and
offering expenses of approximately $1.6 million. The shares were sold under a Registration Statement (No. 333-221493) on Form S-3 (the “2017 S-3”),
filed with the SEC.
During the year ended December 31, 2020, we sold a total of 5,104,234 shares of common stock under the ATM for aggregate total gross proceeds of
approximately $12.8 million at an average selling price of $2.50 per share, resulting in net proceeds of approximately $12.4 million after deducting
commissions and other transaction 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 believe that our cash and cash equivalents balances are sufficient to fund our anticipated operating cash requirements for at least one year
from the date of issuance 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.
In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its long-term development
timeline and its liquidity due to the worldwide spread of COVID-19. However, the Company is continuing to assess the effect on its operations by
monitoring the spread of COVID-19, as well as the effect of the COVID-19 pandemic on the Company’s clients, vendors, and business partners, and the
actions implemented to combat the virus throughout the world.
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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.
Cash Flows for the Years Ended December 31, 2021 and 2020
Operating Activities
Net cash used in operating activities was $26.3 million for the year ended December 31, 2021, compared to $16.6 million for the year ended December 31,
2020. The increase in net cash used in operating activities was due primarily to an increase in manufacturing of cosibelimab and clinical trial expenses in the
current period.
Investing Activities
There were no investing activities for the years ended December 31, 2021 and 2020.
Financing Activities
Net cash provided by financing activities was $40.3 million for the year ended December 31, 2021, which related to net proceeds from the issuance of
common stock as part of our ATM offerings. Net cash provided by financing activities was $31.2 million for the year ended December 31, 2020, which
related to net proceeds of $18.9 million from the issuance of common stock as part of our underwritten public offering in September 2020 and net proceeds
of $12.4 million from the issuance of common stock as part of our ATM offerings.
Recently Issued Accounting Standards
See Note 2 to our Financial Statements.
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, 2021, 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.
53
Table of Contents
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
As of December 31, 2021, 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,
2021, 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, 2021. 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, 2021, our internal control over
financial reporting was effective based on these criteria.
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 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
54
Table of Contents
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 2022 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 2022 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 2022 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 2022 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 2022 Annual Meeting of Stockholders.
55
Table of Contents
PART IV
Item 15. Exhibits and 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, 2021 and 2020
Statements of Operations for the Years Ended December 31, 2021 and 2020
Statements of Stockholders’ Equity for the Years Ended December 31, 2021 and 2020
Statements of Cash Flows for the Years Ended December 31, 2021 and 2020
Notes to Financial Statements
56
F-2
F-3
F-4
F-5
F-6
F-7 - F-19
Table of Contents
(b)Exhibits.
Exhibit No.
3.1
3.2
3.2.1
3.2.2
3.2.3
3.3
4.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Description
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.
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.
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Checkpoint Therapeutics, Inc., filed as Exhibit 3.1
to Form 8-K filed on June 4, 2020 (File No. 001-38128) and incorporated herein by reference.
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Checkpoint Therapeutics, Inc., filed as Exhibit 3.1
to Form 8-K filed on June 11, 2021 (File No. 001-38128) and incorporated herein by reference.
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. *
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.
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.
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.
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.
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.
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. **
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. **
57
Table of Contents
10.8
10.9
10.10
10.11
10.12
10.12.1
10.13
10.13.1
10.14
10.15
10.16
10.17
10.18
10.19
10.20
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.
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.
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. **
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.
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. **
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.**
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. #
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. #
Checkpoint Therapeutics, Inc. Amended and Restated 2015 Incentive Plan, filed as Exhibit 10.1 to Form 8-K filed on June 4, 2020 (File
No. 001-38128) and incorporated herein by reference #
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. #
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. #
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. #
Amendment No. 5, dated September 24, 2020, 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 6,
2020 (File No. 001-38128) and incorporated herein by reference. #
58
Table of Contents
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
23.1
24.1
31.1
31.2
32.1
32.2
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. #
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. #
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. #
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. **
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.
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.
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. **
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.
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.
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.
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. **
Master Services Agreement, dated November 8, 2017, between Checkpoint Therapeutics, Inc. and Samsung Biologics Co., Ltd., filed
as Exhibit 10.2 to Quarterly Report on Form 10-Q filed on November 6, 2020 (File No. 001-38128) and incorporated herein by
reference. **
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.*
59
Table of Contents
101
104
The following financial information from the Company’s Annual Report on Form 10-K for the period ended December 31, 2021,
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.
Cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL.
Filed herewith.
*
** Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
#
Management Compensation Arrangement.
Item 16. Form 10-K Summary
None.
60
Table of Contents
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (BDO USA, LLP; New York, NY; PCAOB ID#243)
Balance Sheets as of December 31, 2021 and 2020
Statements of Operations for the Years Ended December 31, 2021 and 2020
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 and 2020
Statements of Cash Flows for the Years Ended December 31, 2021 and 2020
Notes to Financial Statements
F-2
F-3
F-4
F-5
F-6
F-7 - F-19
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
Checkpoint Therapeutics, Inc.
Waltham, MA
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Checkpoint Therapeutics, Inc. (the “Company”) as of December 31, 2021 and 2020, 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, 2021
and 2020, 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 28, 2022
F-2
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
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), 135,000,000 and 95,000,000 shares authorized as of December 31,
2021 and 2020, respectively
Class A common shares, 7,000,000 shares issued and outstanding as of December 31, 2021 and
December 31, 2020
Common shares, 77,574,405 and 62,420,439 shares issued and outstanding as of December 31, 2021 and
December 31, 2020, respectively
Common stock issuable, 2,121,422 and 1,742,449 shares as of December 31, 2021 and
December 31, 2020, respectively
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
December 31,
2021
2020
$
$
$
$
54,735
976
17
55,728
55,728
24,919
1,063
25,982
25,982
1
8
6,598
223,001
(199,862)
29,746
55,728
$
$
$
$
40,772
1,804
20
42,596
42,596
6,367
850
7,217
7,217
1
6
4,617
173,947
(143,192)
35,379
42,596
The accompanying notes are an integral part of these financial statements.
F-3
CHECKPOINT THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Table of Contents
Revenue - related party
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income:
Interest income
Total other income
Net Loss
Loss per Share:
Basic and diluted net loss per common share outstanding
For the year ended December 31,
2020
2021
268
$
1,069
48,453
8,538
56,991
(56,723)
53
53
(56,670)
(0.75)
$
$
16,352
7,918
24,270
(23,201)
120
120
(23,081)
(0.41)
$
$
$
Basic and diluted weighted average number of common shares outstanding
76,031,595
55,830,582
The accompanying notes are an integral part of these financial statements.
F-4
Table of Contents
Balances at December 31, 2019
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, 2020
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, 2021
CHECKPOINT THERAPEUTICS, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
Class A Common Shares
Amount
Shares
7,000,000
$
1 47,004,764
Common Shares
Shares
Common
Shares
Additional
Paid-in
Amount Issuable Capital
$ 136,442
$ 2,510
$
5
Accumulated
Deficit
Total
Stockholders’
Equity
$ (120,111) $
18,847
—
—
5,104,234
—
— 12,393
—
12,393
—
—
—
—
—
—
$
7,000,000
—
—
—
—
—
—
$
7,000,000
7,321,429
1,117,340
1,769,930
—
—
—
—
—
—
1 62,420,439
102,742
—
—
$
— 11,899,983
1,213,346
—
—
2,039,939
—
—
—
1 77,574,405
698
—
—
$
— 18,908
2,780
—
3,411
1
—
— (2,510)
— 4,617
—
—
6
$ 4,617
—
—
—
13
—
— 40,267
3,137
—
5,650
2
—
— (4,617)
— 6,598
—
—
8
$ 6,598
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
18,909
2,780
901
4,617
13
(23,081)
35,379
40,269
3,137
1,033
6,598
—
(56,670)
29,746
$ 223,001
(56,670)
$ (199,862) $
$ 173,947
(23,081)
$ (143,192) $
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
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 - Public offering
Offering costs for the issuance of common stock - Public offering
Proceeds from issuance of common stock - At-the-market offering
Offering costs for the issuance of common stock - At-the-market offering
Proceeds from the exercise of warrants
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
For the year ended December 31,
2020
2021
$
(56,670)
$
(23,081)
3,137
1,033
6,598
828
3
18,765
(26,306)
—
—
41,279
(1,010)
—
40,269
13,963
40,772
54,735
4,617
$
$
2,780
901
4,617
(941)
6
(833)
(16,551)
20,500
(1,660)
12,767
(374)
13
31,246
14,695
26,077
40,772
2,510
$
$
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
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
immunotherapy and targeted oncology 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, 2021, the Company had an accumulated deficit of $199.9 million.
During the year ended December 31, 2021, the Company sold a total of 11,899,983 shares of common stock under the ATM for aggregate total gross
proceeds of approximately $41.3 million at an average selling price of $3.47 per share, resulting in net proceeds of approximately $40.3 million after
deducting commissions and other transaction 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 are sufficient to fund its anticipated operating cash requirements for at least one
year from the date of issuance 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.
In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its long-term development
timeline and its liquidity due to the worldwide spread of the coronavirus (“COVID-19”). However, the Company is continuing to assess the effect on its
operations by monitoring the spread of COVID-19, as well as the effect of the COVID-19 pandemic on the Company’s clients, vendors, and business
partners, and the actions implemented to combat the virus throughout the world.
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.
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Segments
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities 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 highly liquid 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 have no alternative future use.
Annual Equity Fee
Under the Founder’s Agreement with Checkpoint dated March 17, 2015 and amended in July 2016 and October 2017 (the “Founders Agreement”), Fortress
is entitled to an annual equity fee on January 1 of each year 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
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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 1,742,449 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, 2021. Because the number of outstanding shares issuable to Fortress was determinable on
January 1, 2021 prior to the issuance of the December 31, 2020 financial statements, the Company recorded approximately $4.6 million in research and
development expense and a credit to Common shares issuable - Founders Agreement during the year ended December 31, 2020.
Pursuant to the Founders Agreement, the Company issued 2,121,422 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, 2022. Because the number of outstanding shares issuable to Fortress was determinable on
January 1, 2022 prior to the issuance of the December 31, 2021 financial statements, the Company recorded approximately $6.6 million in research and
development expense and a credit to Common shares issuable - Founders Agreement during the year ended December 31, 2021.
Stock-Based Compensation Expenses
The Company expenses stock-based compensation 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.
Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair
value due to their liquid or short-term nature, such as accounts payable and accrued expenses.
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Revenue from Contracts with Customers
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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
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
●
● Noncash consideration
● Consideration payable to a customer
The existence of a significant financing component in the contract
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).
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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.
Income Taxes
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. As of December 31, 2021 and
December 31, 2020, the Company 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.
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, 2021 and 2020 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
Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)
December 31,
2021
12,493
270,000
4,512,701
4,795,194
2020
57,515
220,000
3,869,896
4,147,411
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.
The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments,
net operating loss utilization and carryback periods and modifications to the net interest deduction limitations. The CARES Act did not have a material
impact on the Company’s income tax provision for 2021. The Company will continue to evaluate the impact of the CARES Act on its financial position,
results of operations and cash flows.
On December 27, 2020, the President of the United States signed the Consolidated Appropriations Act, 2021 (“Consolidated Appropriations Act”) into law.
The Consolidated Appropriations Act is intended to enhance and expand certain provisions of the CARES Act, allows for the deductions of expenses
related to the Payroll Protection Program funds received by companies, and provides an update to meals and entertainment expensing for 2021. The
Consolidated Appropriations Act did not have a material impact to the Company’s income tax provisions for 2021 and 2020. The Company will continue to
evaluate the impact of the Consolidated Appropriations Act on its financial position, results of operations and cash flows.
Recently Adopted Accounting Standards
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
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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
adopted the new guidance in the first quarter of 2021 and the adoption of this guidance did not to have a material impact on its 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.
Dana-Farber also receives an annual license maintenance fee of $50,000, which is creditable against future milestone payments or royalties. The portfolio
of antibodies licensed from Dana-Farber include antibodies targeting PD-L1, GITR and CAIX.
In December 2021 the Company expensed a non-refundable milestone payment of $4.0 million upon the first patient dosed in a Phase 3 clinical study of its
anti-PD-LI antibody cosibelimab, which is included in the Statements of Operations for the year ended December 31, 2021.
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 $27.6 million upon TGTX’s successful achievement of certain clinical development, regulatory and first commercial sale milestones. This is
comprised of up to approximately $8.4 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. The Company also receives an annual
license maintenance fee, which is creditable against future milestone payments or royalties. 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, 2021 and 2020, the Company recognized approximately $0.2
million and $1.0 million, respectively, in revenue related to the collaboration agreement in the Statements of Operations. The revenue for the year ended
December 31, 2020 included a milestone of $925,000 upon the 12th patient dosed in a phase 1 clinical trial for the anti-PD-L1 antibody cosibelimab during
March 2020.
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Adimab, LLC
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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.
In December 2021 the Company expensed non-refundable milestone payments of $2.4 million upon the first patient dosed in a Phase 3 clinical study of its
anti-PD-LI antibody cosibelimab, which is included in the Statements of Operations for the year ended December 31, 2021. The expense included the
amount due for the first patient dosed in a Phase 2 clinical study of cosibelimab, which was payable upon the achievement of a later-stage clinical
milestone.
NeuPharma, Inc.
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 olafertinib, 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.
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 each of the years ended
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
December 31, 2021 and 2020, the Company recognized approximately $0.1 million in revenue related to the sublicense agreement in the Statements of
Operations.
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, 2021, the Company did not receive any milestones 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 in July 2016 and October 2017. 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 January 1 of each year, 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.
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
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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, 2021 and 2020, the Company recognized $0.5 million in expense on its Statements of Operations related to the MSA.
Caribe BioAdvisors, LLC
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, 2021 and 2020, the
Company recognized approximately $110,000 and $111,000, respectively, in expense in its Statements of Operations related to the advisory agreement,
including $50,000 and $51,000, 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, 2021 and 2020, there was no litigation against the
Company.
Note 6 - Stockholders’ Equity
Common Stock
At the Company’s 2021 Annual Meeting of Stockholders held on June 9, 2021, its stockholders approved an amendment to its certificate of incorporation
to increase the number of authorized shares of common stock available to issue by 40,000,000 to 135,000,000 with a par value of $0.0001 per share, of
which 7,000,000 shares are designated as “Class A common stock.” The amendment was filed with the Secretary of State of the State of Delaware on June
10, 2021.
As of December 31, 2021 and 2020, 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 stockholders. The holders of common stock are entitled to one vote per share of common stock held. The
Class A common stockholders 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.
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
In November 2017, the Company filed a shelf registration statement on Form S-3 (the “2017 S-3”), which was declared effective in December 2017. Under
the 2017 S-3, the Company may sell up to a total of $100 million of its securities. In connection with the 2017 S-3, the Company entered into an ATM (the
“2017 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.
In September 2020, the Company completed an underwritten public offering in which it sold 7,321,429 shares of its common stock at a price of $2.80 per
share for gross proceeds of approximately $20.5 million. Total net proceeds from the offering were approximately $18.9 million, net of underwriting
discounts and offering expenses of approximately $1.6 million.
In November 2020, the Company filed a shelf registration statement on Form S-3 (the “2020 S-3”), which was declared effective in December 2020. 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 (the “2020
ATM”) with the Agents relating to the sale of shares of common stock. Under the 2020 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.
During the year ended December 31, 2020, the Company sold a total of 5,104,234 shares of common stock under an At-the-Market Issuance Sales
Agreement for aggregate total gross proceeds of approximately $12.8 million at an average selling price of $2.50 per share, resulting in net proceeds of
approximately $12.4 million after deducting commissions and other transaction costs.
During the year ended December 31, 2021, the Company sold a total of 11,899,983 shares of common stock under the ATM for aggregate total gross
proceeds of approximately $41.3 million at an average selling price of $3.47 per share, resulting in net proceeds of approximately $40.3 million after
deducting commissions and other transaction 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 297,490 shares and 310,625 shares to Fortress for the year ended December 31, 2021 and 2020,
respectively, and recorded expenses of approximately $1.0 million and $0.9 million 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, 2021 and 2020, respectively.
Pursuant to the Founders Agreement, the Company issued 2,121,422 and 1,742,449 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, 2022 and January 1, 2021, respectively (see Notes 2 and 4).
Subsequent to the offerings noted above, approximately $54.6 million of securities remain available for sale under the 2020 S-3. The Company may offer
the securities under the 2020 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.
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 2020 to increase
the shares available for issuance to 9,000,000 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, 2021, 3,025,119 shares are available for issuance under the 2015 Incentive Plan.
F-16
Table of Contents
Restricted Stock
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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, 2021 and 2020:
Nonvested at December 31, 2019
Granted
Vested
Nonvested at December 31, 2020
Granted
Forfeited
Vested
Non-vested at December 31, 2021
Number of Shares
Weighted Average
Grant Date Fair
Value
3,303,839
1,117,340
(551,283)
3,869,896
1,229,012
(15,666)
(570,541)
4,512,701
$
$
$
4.29
2.39
5.23
3.61
2.86
2.24
4.10
3.35
As of December 31, 2021, there was $3.0 million of total unrecognized compensation cost related to non-vested restricted stock, which is expected to be
recognized over a weighted-average period of 1.9 years. This amount does not include, as of December 31, 2021, 433,334 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.
Stock Options
The following table summarizes stock option award activity for the year ended December 31, 2021 and 2020:
Outstanding as of December 31, 2019
Granted
Outstanding as of December 31, 2020
Granted
Outstanding as of December 31, 2021
Vested and exercisable as of December 31, 2021
Stock Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Life
(in years)
160,000
60,000
220,000
50,000
270,000
75,000
$
$
$
$
3.64
2.04
3.20
2.85
3.14
2.33
8.56
8.04
7.44
7.57
Upon the exercise of stock options, the Company will issue new shares of its common stock.
The Company used the Black-Scholes option pricing model for determining the estimated fair value of stock-based compensation related to stock options.
The table below summarizes the assumptions used:
Risk-free interest rate
Expected dividend yield
Expected term in years
Expected volatility
For the Years Ended December 31,
2020
0.65% - 1.02 %
2021
1.04% - 1.50 %
—
10.0
—
10.0
100.65% - 102.71 %
101.27% - 104.60 %
F-17
Table of Contents
Warrants
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
A summary of warrant activities for year ended December 31, 2021 and 2020 is presented below:
Outstanding as of December 31, 2019
Exercised
Expired
Outstanding as of December 31, 2020
Exercised
Expired
Outstanding as of December 31, 2021
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Life
(in years)
6.81
0.13
7.00
5.39
0.00
7.00
0.00
1.25
1.22
3.83
Warrants
4,207,447
(102,742)
(4,047,190)
57,515
(698)
(44,324)
12,493
$
$
$
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, 2021 and 2020 (in thousands).
Research and development
General and administrative
Total stock-based compensation expense
Note 7 - Income Taxes
For the year ended December 31,
2020
2021
$
$
684
2,453
3,137
$
$
617
2,163
2,780
The Company has accumulated net losses since inception and has not recorded an income tax provision or benefit during the years ended December 31,
2021 and 2020.
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
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
Other
Change in valuation allowance
Income taxes provision (benefit)
F-18
For the Year Ended December 31,
2020
2021
21 %
6 %
1 %
1 %
(1)%
— %
(3)%
(25)%
— %
21 %
5 %
— %
(1)%
1 %
(1)%
(1)%
(24)%
— %
Table of Contents
The components of the net deferred tax asset as of December 31, 2021 and 2020 are the following (in thousands):
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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
As of December 31,
2021
2020
$
$
$
38,991
1,193
8,950
157
2,136
27
51,454
(51,454)
— $
27,537
2,191
5,560
178
1,781
28
37,275
(37,275)
—
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 $ 51.5 million and $37.3
million was recorded for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the Company had federal and state net
operating loss carryforwards of approximately $143.6 million and $136.1 million, respectively. Approximately $ 112.6 million of the federal net operating
loss carryforwards and $1.6 million of the state net operating loss carryforwards can be carried forward indefinitely. The remaining $31.2 million of federal
and $134.5 million of state net operating loss carryforwards will begin to expire, if not utilized, by 2034 and 2034, respectively. The Company has $1.2
million of research and development credit carryforwards and $1.0 million of orphan drug credit carryforwards, which will begin to expire, if not utilized,
by 2034. 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, 2021 and 2020. 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, 2021 and 2020. 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, 2018, 2019 and 2020 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.
Note 8 - Accounts Payable and Accrued Expenses
At December 31, 2021 and 2020, accounts payable and accrued expenses consisted of the following (in thousands):
Accounts payable
Accrued compensation
Research and development
Other
Total accounts payable and accrued expenses
F-19
December 31,
2021
2020
$
$
16,139
843
7,704
233
24,919
$
$
3,438
535
2,009
385
6,367
Table of Contents
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 28, 2022
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)
Chief Financial Officer
(Principal Financial Officer)
Date
March 28, 2022
March 28, 2022
Chairman of the Board
March 28, 2022
Director
Director
Director
Director
Director
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
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 135,000,000 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 expiring in 2025 (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;
exercise price of
the
warrants;
the
the dates or periods during which
exercisable;
the warrants are
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
warrants.
terms of
the
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.
Waltham, MA
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-251005) and Form S-8 (No. 333-
216856, No. 333-221488 and No. 333-251000) of Checkpoint Therapeutics, Inc. of our report dated March 28, 2022, relating to the financial
statements which appears in this Annual Report on Form 10-K.
/s/ BDO USA, LLP
New York, NY
March 28, 2022
EXHIBIT 31.1
I, James F. Oliviero certify that:
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(1) I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2021 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 28, 2022
By: /s/ James F. Oliviero
James F. Oliviero
President, Chief Executive Officer and Director
Principal Executive Officer
EXHIBIT 31.2
I, Garrett Gray, certify that:
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(1) I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2021 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 28, 2022
By: /s/ Garrett Gray
Garrett Gray
Chief Financial Officer
Principal Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Checkpoint Therapeutics, Inc. (the “Company”) for the period ended December 31, 2021, 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 28, 2022
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
In connection with the Annual Report on Form 10-K of Checkpoint Therapeutics, Inc. (the “Company”) for the period ended December 31, 2021, 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.
EXHIBIT 32.2
5
Dated: March 28, 2022
By: /s/ Garrett Gray
Garrett Gray
Chief Financial Officer
Principal Financial Officer