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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
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2022
or
For the Transition Period from to .
Commission File Number 001-38128
CHECKPOINT THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
47-2568632
(I.R.S. Employer Identification No.)
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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to § 240.10D-1(b). ☐
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, 2022, 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
$71,439,791 based upon the closing sale price of our common stock of $10.30 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 24, 2023
700,000
12,246,620
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2023 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:
● 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 a 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.
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SUMMARY OF RISK FACTORS
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 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.
● There is substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
● 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.
● Weakness in the U.S. economy, including within our geographic footprint, has adversely affected us in the past and may adversely affect us in the
future.
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 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.
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● 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.
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.
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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. Based on top-line and interim results in
metastatic and locally advanced CSCC, respectively, we submitted a Biologics License Application (“BLA”) to the U.S. Food and Drug Administration
(“FDA”) for these indications in January 2023, which application is filed and under review with a Prescription Drug User Fee Act (“PDUFA”) goal date of
January 3, 2024. 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 June 2022, we announced interim results from a registration-enabling cohort of our multi-regional, Phase 1 clinical trial of cosibelimab in patients with
locally advanced CSCC that are not candidates for curative surgery or radiation. Cosibelimab demonstrated a confirmed objective response rate (“ORR”)
of 54.8% (95% CI: 36.0, 72.7) based on independent central review of 31 patients enrolled in the cohort using Response Evaluation Criteria in Solid
Tumors version 1.1 (“RECIST 1.1”).
In January 2022, we announced top-line results from a registration-enabling cohort of our multi-regional, Phase 1 clinical trial of cosibelimab 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 multi-regional, 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 February 2022 Russian
invasion of Ukraine and the ensuing response disrupted our ability to conduct clinical trials in Russia, Ukraine, and Belarus. The substantially longer
enrollment period in other planned countries made the conduct of the CONTERNO study no longer viable. Accordingly, we expect that the study will be
wound down and closed by the end of the first quarter of 2023.
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, 2022, we have an accumulated deficit of $262.5 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
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Commission (“SEC”). We are not including the information on our website as a part of, nor incorporating it by reference into, this report. 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.
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 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.
Preclinical and clinical studies of PD-1 and PD-L1 blocking antibodies conducted by 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. Potent therapeutic anti-tumor responses due to blocking of
PD-1/PD-L1 interaction have been demonstrated by these approved products in patients with numerous different 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 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, progression-free survival
(“PFS”), and overall survival (“OS”). In January 2022, we announced top-line 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. In June
2022, we announced interim results from another cohort of this study with cosibelimab administered as a fixed dose of 800 mg every two weeks in patients
with locally advanced CSCC that are not candidates for curative surgery or radiation. Cosibelimab demonstrated a confirmed ORR of 54.8% (95% CI:
36.0, 72.7) based on independent central review of 31 patients enrolled in the cohort using RECIST 1.1. The design of the interim analysis incorporated
feedback from the FDA and is intended to potentially support the approval of cosibelimab in this indication.
Based on these results, we submitted a BLA to the FDA for cosibelimab in January 2023, which application is filed and under review with a PDUFA goal
date of January 3, 2024. We intend to submit a marketing authorization application (“MAA”) submission in Europe in the second half of 2023 followed by
additional potential submissions in markets worldwide.
In December 2021, we announced the initiation of our CONTERNO study, a multi-regional, 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 February 2022 Russian
invasion of Ukraine and the ensuing response disrupted our ability to conduct clinical trials in Russia, Ukraine, and Belarus. We evaluated our ability to
expand the number of CONTERNO study sites in our planned Latin American, South
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African and Asian Pacific countries, as well as add additional countries to conduct this clinical trial. However, the substantially longer enrollment period as
a result of the conflict made the conduct of the CONTERNO study no longer viable. At the time of the conflict, only Russia was open for enrollment.
Accordingly, we expect that the study will be wound down and closed by the end of the first quarter of 2023.
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 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.
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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, which was
completed in September 2022. The trial evaluated 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.
CK-103 BET Inhibitor Program
We are developing CK-103, a novel, selective and potent small molecule inhibitor of bromodomain and extra-terminal (“BET”) bromodomains. CK-103
binds to the first and second bromodomains (BD1, BD2) of the BET protein family, BRD2, BRD3, BRD4, and BRDT. A bromodomain is an amino acid
protein domain that recognizes acetylated-lysine. The binding of the drug prevents interaction between BET proteins and both acetylated histones and
transcription factors. Therefore, BET proteins, such as BRD4, are considered potential therapeutic targets in cancer, as they may play a pivotal role in
regulating the transcription of key regulators of cancer cell growth and survival, including the c-Myc oncogene. BRD4 is often required for expression of
c-Myc. Scientific literature has shown that small molecule inhibition of BET bromodomains may lead to selective killing of tumor cells across a broad
range of hematologic malignancies and certain targeted solid tumors. We plan to develop CK-103 for the treatment of various advanced and metastatic
solid tumor cancers, including, but not limited to, those associated with elevated c-Myc expression.
In May 2016, we entered into an exclusive license agreement with Jubilant Biosys Limited ("Jubilant") to develop and commercialize novel compounds
that inhibit BET bromodomains on a worldwide basis. Also in May 2016, we entered into a Sublicense Agreement with TGTX to develop and
commercialize CK-103 in the field of hematological malignancies. We retain the right to develop and commercialize CK-103 in solid tumors. 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.
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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
Target Indication(s)
Locally advanced and
metastatic cutaneous
squamous cell carcinoma
Development
Status
Phase 1 registration-
enabling
Estimated
Completion
of Phase
2024
Estimated Cost to
Complete Phase
$4 to $5 million
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 the claimed 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 in a
pending patent application or issued patent, 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
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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 in-licensed portfolio from Dana-Farber 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 AU 2018226425), one Japanese (JP 6461800), one South Korean (KR 101947702), one Israeli (IL 237737), one Mexican
(MX 370848), two Colombian (CO 34878 and CO 39049), one Canadian (CA 2886433), and two Chinese (CN 104994873 and CN 10782719) counterpart
patents have issued, as well as registration of the two Chinese patents in Hong Kong (HK 1211223 and HK 1253723), and additional international
counterpart applications are pending in Canada and China. The issued international patents and any patents maturing from these pending applications will
expire no sooner than October 2033. Checkpoint has also licensed from Dana-Farber a further anti-PD-L1 antibody portfolio that claims variants of the
antibodies disclosed in the earlier-filed in-licensed family. This additional portfolio includes PCT/US2020/062815, which was filed on December 2, 2020,
and it had been nationalized in the US, Australia, Canada, Europe, and Japan. Any patents maturing from these pending applications will expire no sooner
than December 2040.
In June 2016, Checkpoint also filed a company-owned U.S. provisional application (U.S. 62/356,105) directed to antibodies, including cosibelimab, 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, including cosibelimab, 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. International counterpart patents have also granted in Israel (IL
263611), Japan (JP 7148414), South Korea (KR 10-2422411), and Russia (RU 2749109), and additional national stage applications are pending in
Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, South Korea, Mexico, New Zealand, Singapore and Thailand. Any patents
maturing from these pending applications will expire no sooner than June 2037.
The CAIX segment of the in-licensed portfolio from Dana-Farber includes three granted U.S. patents (U.S. Patent Nos. 8,466,263, 10,450,383, and
11,174,323). 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 26, 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 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 are scheduled to expire no sooner than December 2026.
The GITR segment of the in-licensed portfolio from Dana-Farber 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 have resulted in one US patent (U.S. 11,046,777), one Chinese patent (CN 109689689), one Japanese patent (JP 7082967) and are
also pending in the U.S. (U.S. Appl. No. 17/316,141), Australia, Brazil, Canada, Europe, Israel, South Korea, Singapore, Russian, New Zealand and
Mexico. Any of these national stage applications that issue or grant as patents would expire no earlier than July 2037. U.S. 11,046,777 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.
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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 of substituted quinazolines for inhibiting kinase
activity, 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 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). U.S. Patent No. 11,304,957 is directed to processes for preparing compounds, including the compound, olafertinib . Additionally,
there is a pending U.S. application in this family (U.S. Appl. No. 17/681,387). The granted foreign patents cover the compound, olafertinib, and a broad
range of related compounds, salts, pharmaceutical compositions, including various dosage forms of such pharmaceutical compositions and certain uses of
such compounds or salts thereof in treating cancer, a disorder mediated by EGFR, or NSCLC, either alone or in combination with an additional anti-cancer
and/or cytotoxic agent. The term of granted U.S. and foreign patents runs to August 22, 2034, not including any patent term restorations in the U.S., which
might become available under the provisions of U.S. patent laws, based on regulatory delays associated with obtaining marketing approval. Additional
counterpart applications exist in jurisdictions around the world, including, Australia, Canada, Hong Kong, 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 have
resulted in one US patent (U.S. 11,465,975) and are pending in 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 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 four granted U.S. patents, a granted Indian patent, two granted Japanese patents, two granted Australian patents, two
granted Russian patents, two granted Israeli patents, 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, India, South Korea, New Zealand, and Thailand. 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. U.S. Patent No. 11,319,326,
which is a divisional of the ‘390 patent, 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 proliferative disorder or cancer. 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 divisional 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
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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.
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 50,000 shares valued at $32,500 or $0.65 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 13,683 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
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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, 2022 and 2021, we recognized approximately $0.1 million and $0.2 million respectively, in revenue from our collaboration agreement with TGTX in
the Statements of Operations.
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, our anti-PD-L1 antibody which we originally licensed from Dana-Farber. In January
2019, Fortress transferred the rights to the optimized antibody to us, and we entered into a collaboration agreement directly with Adimab on the same day.
Under the terms of the agreement, Adimab is eligible to receive payments up to an aggregate of approximately $4.8 million 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 $39.0 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 $88.4 million upon our successful achievement of certain clinical development and regulatory milestones for two licensed products, 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 $89.3 million upon our successful achievement of certain sales milestones based on aggregate net sales for two licensed products, 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
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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 $87.4 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 $61.9 million upon the achievement of five regulatory approvals and first commercial sales
in specified territories for two licensed products. In addition, we are eligible to receive potential milestone payments up to an aggregate of $89.3 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, 2022 and 2021, 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, several major pharmaceutical companies have a PD-1 and/or PD-L1 antibody 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.
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In the BET inhibitor space, there are a number of companies which have advanced to early stage clinical trials, including MorphoSys AG’s pelabresib,
Bristol-Myers Squibb’s BMS-986158, 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, 2022, we had twenty-four full and part-time employees. None of our employees are represented by a labor union and we consider our
employee relations to be good.
SUPPLY AND MANUFACTURING
We have limited experience in manufacturing products for clinical or commercial purposes. We currently do not have any manufacturing capabilities. We
have established, or intend to establish, contract manufacturing relationships for the supplies of our product candidates, in each case with a single
manufacturer. As with any supply program, obtaining raw materials of a sufficient 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
Governmental authorities, including the FDA and corresponding state and foreign regulatory agencies, regulate the clinical development, manufacture,
approval 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.
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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.
Where appropriate, the FDA may designate certain drug candidates as eligible for expedited review when they are intended to treat persons with serious or
life-threatening conditions for which there is an unmet medical need. A sponsor can apply for such designation, including fast track review, 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:
● 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 responds 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 are 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 may be 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.
Where applicable, sponsors of drugs 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. Accelerated approval will be subject to the requirement that the
sponsor 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 may be underway at the time a sponsor
files the NDA or BLA. When required to be conducted, such post-marketing studies must also be adequate and well-controlled. The sponsor must carry out
any such post-marketing studies with due diligence. Drug candidates that have received accelerated approval have subsequently 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, among
others, 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:
● 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.
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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:
● 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;
● 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, among other things. 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 terminate 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, among other things, 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 FDA has determined that the product is
safe and effective, as demonstrated through data and information, including 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 monitoring and regulation
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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 may constitute a violation of the FDCA. Violations of the
FDCA or regulatory requirements, including those related to drug manufacturing, at any time during the product development process, approval process, or
marketing and sale following approval may result in agency enforcement actions, including withdrawal of approval, recall, seizure of products, warning
letters, injunctions, fines and/or civil or criminal penalties. Any agency enforcement action could have a material adverse effect on our business.
Failure to comply with applicable federal, state and foreign laws and regulations would likely have a material adverse effect on our business. In addition,
federal, state and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes.
Other Healthcare Laws and Compliance Requirements
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the
Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the United States Department of
Health and Human Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States Attorney offices
within the Department of Justice, and state and local governments.
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 Inflation Reduction Act contains provisions that have the potential to substantially impact
the profitability of drugs. For example, the Inflation Reduction Act authorizes the Centers for Medicare & Medicaid Services (“CMS”) to negotiate drug
prices for certain drugs in Medicare Part D, beginning in 2026, and Parts D and B, beginning in 2028. Additionally, the Inflation Reduction Act imposes
inflation rebates on drugs reimbursed by Medicare Part B and Part D. Given the complexity of the Inflation Reduction Act and the uncertainty with respect
to its impending implementation, the impact of the Inflation Reduction 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 $262.5 million as of December 31, 2022. 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:
● one or more of our product candidates are submitted for marketing approval, as is the case with cosibelimab, 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;
● 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;
● manufacture commercial quantities of one or more of our product candidates or any future product candidate, if approved, at acceptable cost
levels; and
● develop a commercial organization and the supporting infrastructure required to successfully market and sell one or more of our product
candidates or any future product candidate, if approved.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain
profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and
development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all
or part of your investment.
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, and resulting regulatory approval request submissions, of our product candidates and launch and commercialize any product
candidates for which we may receive regulatory approval, including building a commercial organization 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 believe that our cash and cash equivalents are only sufficient to fund our operating expenses into the second quarter
of 2023.
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:
● the timing, design and conduct of, and results from, preclinical studies and clinical trials for our product candidates;
● the timing and process of regulatory approval reviews and 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.
There is substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
Our audited financial statements as of December 31, 2022 have been prepared under the assumption that we will continue as a going concern for the next
twelve months. As of December 31, 2022, we had cash and cash equivalents of $12.1 million and an accumulated deficit of $262.5 million. We do not
believe that our cash and cash equivalents are sufficient for the next twelve months. As a result of our financial condition and other factors described
herein, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend on our ability to
obtain additional funding, as to which no assurances can be given. We continue to analyze various alternatives, including potentially obtaining debt or
equity financings or other arrangements. Our future success depends on our ability to raise capital. We cannot be certain that raising additional capital,
whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on
terms acceptable to us. If we issue additional securities to raise funds, these securities may have rights, preferences, or privileges senior to those of our
common stock, and our current shareholders may experience dilution. If we are unable to obtain funds when needed or on acceptable terms, we may be
required to curtail our current development programs, cut operating costs, forego future development and other opportunities or even terminate our
operations.
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.
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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:
● being permitted to provide only two years of our audited financial statements, in addition to any required unaudited interim financial statements,
with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this
Annual Report on Form 10-K;
● not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
● not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding
mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial
statements;
● disclosure obligations regarding executive compensation; and
● exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a
company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any
such an election to opt out is irrevocable. We have elected to opt out of such extended transition period which means that when a standard is issued or
revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard.
This may make comparison of our financial statements with another public company which has opted into using the extended transition period difficult or
impossible because of the potential differences in accountant standards used.
We are also a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting
and non-voting common shares held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our
annual revenues are more than $100 million during the most recently completed fiscal year and our voting and non-voting common shares held by non-
affiliates is more than $700 million measured on the last business day of our second fiscal quarter. Similar to emerging growth companies, smaller
reporting companies are able to provide simplified executive compensation disclosure, are exempt from the auditor attestation requirements of Section 404,
and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial
statements and not being required to provide selected financial data, supplemental financial information or risk factors.
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
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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.
Weakness in the U.S. economy, including within our geographic footprint, has adversely affected us in the past and may adversely affect us in the
future.
We have been, and will continue to be, impacted by general business and economic conditions in the United States. These conditions include short-term
and long-term interest rates, inflation, money supply, political issues, war, legislative and regulatory changes, fluctuations in both debt and equity capital
markets, broad trends in industry and finance, unemployment and the strength of the U.S. economy and the local economies in which we operate, all of
which are beyond our control.
Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which have been exacerbated by the COVID-19
pandemic and the Russia/Ukraine conflict, resulting in heightened credit risk, reduced valuation of investments, decreased economic activity, heightened
risk of cyberattacks, and inflation. Moreover, many companies have experienced reduced liquidity and uncertainty as to their ability to raise capital during
such periods of market disruption and volatility. In the event that these conditions recur or result in a prolonged economic downturn, our results of
operations, financial position and/or liquidity could be materially and adversely affected. In addition, as a result of recent financial and political events, we
may face increased regulation.
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:
● 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;
● 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
● obtaining market acceptance for our product candidates.
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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 initial discussions with the FDA to execute this strategy in CSCC. Based on top-line
and interim results in metastatic and locally advanced CSCC, respectively, we submitted a BLA to the U.S. FDA for these indications in January 2023,
which application is filed and under review with a PDUFA goal date of January 3, 2024. 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 past 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:
● exposure to unknown liabilities;
● disruption of our business and diversion of our management’s time and attention to develop acquired products or technologies;
● difficulty or inability to secure financing to fund development activities for such acquired or in-licensed technologies in the current economic
environment;
● incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;
● higher than expected acquisition and integration costs;
● increased amortization expenses;
● difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
● impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
● inability to retain key employees of any acquired businesses.
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.
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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 effective 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 trials 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 top-line, 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 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
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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 conducting and 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:
● 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 monitoring 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.
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
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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:
● 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 enrolled patients in our clinical trials.
In February 2022, Russia commenced a military invasion of Ukraine. Russia’s invasion and the ensuing response by Ukraine may prevent the FDA from
auditing our five clinical sites that enrolled a total of 17 patients in these countries upon review of our BLA for cosibelimab. If we are delayed or not able
to obtain regulatory approval, our business may be adversely affected.
We may not receive regulatory approval for our product candidates, or their approval may be delayed, which would have a material adverse effect on
our business and financial condition.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety,
efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, by
other regulatory agencies in the United States, by the European Medicines Agency and by comparable foreign regulatory authorities outside the United
States. Failure to obtain marketing approval for one or more of our product candidates or any future product candidate will prevent us from
commercializing the product candidate. We have not received approval to market any of our product candidates from regulatory authorities in any
jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-
party CROs and other third-party vendors to assist us in this process. Securing marketing approval requires the submission of extensive preclinical and
clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy.
Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing
facilities by, regulatory authorities. One or more of our product candidates or any future product candidate may not be effective, may be only moderately
effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval
or prevent or limit commercial use. If any of our product candidates or any future product candidate receives marketing approval, the accompanying label
may limit the approved use of our drug by severity of disease, patient group, or include contraindications, interactions, or warnings, which could limit sales
of the product.
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.
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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 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:
● regulatory authorities may require the addition of unfavorable labeling statements, including specific warnings, black box warnings, adverse
reactions, precautions, and/or contraindications;
● regulatory authorities may suspend or withdraw their approval of the product, and/or require it to be removed from the market;
● we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; or
● 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.
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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 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;
● warning letters, untitled letters, import alerts, and/or inspection observations;
● withdrawal of the products from the market;
● 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;
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● 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 indications for use 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 new or
additional indications for use for an already 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 practice of medicine or behavior of
physicians in their choice of treatments. Regulatory authorities do, however, restrict promotion by pharmaceutical companies on the subject of off-label
use. If our promotional activities fail to comply with these regulations or guidelines, we may be subject to warnings from, or enforcement action by, these
authorities. In addition, our failure to follow FDA, or any applicable foreign regulatory authority, rules and guidelines relating to promotion and advertising
may cause the FDA, or such applicable foreign regulatory authority, to suspend or withdraw an approved product from the market, require a recall or
institute fines or penalties, or could result in disgorgement of money, operating restrictions, injunctions or criminal prosecution, any of which could harm
our business.
We 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
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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:
● 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 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:
● 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.
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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.
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.
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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:
● 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 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;
● 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;
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● 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 have or 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 have or intend to enter into development and supply agreements with
one or more 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.
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.
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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.
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:
● reliance on the third party for regulatory compliance and quality assurance, while still being required by law to establish adequate oversight and
control over products furnished by that third party;
● the possible breach of the manufacturing agreement by the third party;
● manufacturing delays if our third-party manufacturers are unable to obtain raw materials due to supply chain disruptions, give greater priority to
the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreement
between us;
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● the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
● the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
We rely on our third-party manufacturers to produce or purchase from third-party suppliers the materials necessary to produce our product candidates for
our preclinical and clinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our drugs and there may be a need
to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our
preclinical and clinical trials, and if approved, ultimately for commercial sale. We do not have any control over the process or timing of the acquisition of
these raw materials by our third-party manufacturers. Forces beyond our control, 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.
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
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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, 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.
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.
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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 United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory
changes to the healthcare system. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010, or collectively, the ACA, was signed into law, which substantially changed the way healthcare is financed by both
governmental and private insurers in the United States. By way of example, the ACA increased the minimum level of Medicaid rebates payable by
manufacturers of brand name drugs from 15.1% to 23.1%; it required collection of rebates for drugs paid by Medicaid managed care organizations; it
imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal
government programs; it implemented a new methodology under which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted, or injected; it expanded the eligibility criteria for Medicaid programs; it created a new
Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding
for such research; and it established a Center for Medicare and Medicaid Innovation (“CMMI”) at CMS to test innovative payment and service delivery
models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional
challenges and amendments to the ACA in the future. President Trump signed several Executive Orders and other directives designed to delay the
implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.
Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed
comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been enacted. For example, in 2017,
Congress enacted the Tax Cuts and Jobs Act, which eliminated the tax-based shared responsibility payment imposed by the ACA on certain individuals
who fail to maintain qualifying health coverage for all or part of a year, a process that is commonly referred to as the “individual mandate.” In addition, the
Further Consolidated Appropriations Act, 2020 permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost
employer-sponsored health coverage and medical device tax; and, effective January 1, 2021, it also eliminated the health insurance tax. On December 14,
2018, the U.S. District Court for the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and
therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the U.S. Court
of Appeals for the Fifth Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine
whether the remaining provisions of the ACA are invalid as well. On June 17, 2021, the U.S. Supreme Court reversed the ruling of the Fifth Circuit,
holding that the challengers lacked standing to sue and otherwise abstaining from reaching the merits of the case. Notwithstanding the resolution of this
legal challenge, there may be other efforts to challenge, repeal, or replace the ACA. We are continuing to monitor any changes to the ACA that, in turn,
may potentially impact our business in the future.
President Joseph R. Biden, Jr. signed an Executive Order on Strengthening Medicaid and the Affordable Care Act, stating his administration’s intentions to
reverse the actions of his predecessor and strengthen the ACA. As part of this Executive Order, the Department of Health and Human Services, United
States Treasury, and the Department of Labor are directed to review all existing regulations, orders, guidance documents, policies, and agency actions and
to consider if they are consistent with ensuring coverage under the ACA making high-quality healthcare affordable and accessible to Americans. We are
unable to predict the likelihood of changes to the ACA or other healthcare laws which may negatively impact our profitability.
President Biden intends, as his predecessor did, to take action against drug prices which are considered “high.” Such measures could be addressed in a
legislative package later in 2021 or with the reauthorization of the Prescription Drug User Fee Act (“PDUFA”) in 2022. Drug pricing continues to be a
subject of debate at the executive and legislative levels of U.S. government and we expect to see legislation focusing on this in the coming year. The
American Rescue Plan Act of 2021 signed into law by President Biden on March 14, 2021 includes a provision that will eliminate the statutory cap on
rebates drug manufacturers pay to Medicaid beginning in January 2024. With the elimination of the rebate cap, manufacturers may be required to
compensate states in an amount greater than what the state Medicaid programs pay for the drug.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments
to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2030 with the
exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through December 31, 2021, unless
additional congressional action is taken. Moreover, there has recently been
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heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several
Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, to review the
relationship between pricing and manufacturer patient assistance programs, and to reform government program reimbursement methodologies for
pharmaceutical products. The Prescription Drug Pricing Reduction Act, or PDPRA, which was introduced in Congress in 2019, and again in 2020,
proposed to, among other things, penalize pharmaceutical manufacturers for raising prices on drugs covered by Medicare Parts B and D faster than the rate
of inflation, cap out-of-pocket expenses for Medicare Part D beneficiaries, and several changes to how drugs are reimbursed in Medicare Part B. A similar
drug pricing bill, the Elijah E. Cummings Lower Drug Costs Now Act, proposes to enable direct price negotiations by the federal government for certain
drugs (with the maximum price paid by Medicare capped based on an international index), requires manufacturers to offer these negotiated prices to other
payers, and restricts manufacturers from raising prices on drugs covered by Medicare Parts B and D. This Act passed in the House of Representatives when
it was introduced in 2019, and it has been introduced again in the 2021 term. We cannot predict whether any proposed legislation will become law and the
effect of these possible changes on our business cannot be predicted at this time.
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:
● the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or
the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs,
such as Medicare and Medicaid;
● federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and
civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be
presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a
false statement to avoid, decrease or conceal an obligation to pay money to the federal government; the federal Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit
program or making false statements relating to healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective
implementing regulations, which impose obligations on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their
business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with
respect to safeguarding the privacy, security and transmission of individually identifiable health information;
● 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
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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 our
patent applications may change or be modified throughout the patent prosecution process, leaving our product(s) or process(es) without patent protection.
If our licensors or we fail to obtain or maintain patent protection or trade secret protection for one or more product candidates or any future product
candidate we may license or acquire, third parties may be able to leverage our proprietary information and products without risk of infringement, which
could impair our ability to compete in the market and adversely affect our ability to generate revenues and achieve profitability. Moreover, should we enter
into other collaborations we may be required to consult with or cede control to collaborators regarding the prosecution, maintenance, defense and
enforcement of patents licensed or developed under such collaborations. Therefore, these patents and applications may not be prosecuted, defended, 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 patent laws of foreign countries
may not protect our patent 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 patent 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
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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, the patents or patent applications owned or filed by us, or by our licensors or other collaborators, may be subject to a third-party pre-issuance
submission of prior art to the USPTO, or to opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings
challenging our patent rights or the patent rights of our licensors or collaborators. 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. 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.
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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:
● 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;
● 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.
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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 asserted patents 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 expenses and
could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results
of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have
a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce
the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other
resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings
more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or
other proceedings could compromise our ability to compete in the marketplace.
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:
● infringement and other intellectual property claims which, with or without merit, can be expensive and time consuming to litigate and can divert
management’s attention from our core business;
● substantial damages for past infringement which we may have to pay if a court decides that our product infringes a competitor’s patent;
● a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it would not be required to do;
● if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and
● redesigning our processes so they do not infringe, which may not be possible or could require substantial funds, time, and may result in an
inferior or less-desirable process or product.
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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 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.
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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 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.
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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 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.
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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.
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 implemented a variety of measures to reduce the spread of COVID-19.
The COVID-19 pandemic 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.
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, or if new variants emerge, some participants and
clinical investigators may not be able to comply with clinical trial protocols.
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.
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
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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.
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;
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● 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.
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, November 27, 2020, and December 9, 2022, 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 24, 2023, there were approximately 68 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 3,000,000. The following table provides information as of December 31, 2022, 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)
27,000
$
—
27,000
31.35
—
2,238,798
—
2,238,798
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-programmed death-ligand 1
(“PD-L1”) antibody licensed from the Dana-Farber Cancer Institute, 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. Based on top-line and interim results in metastatic and locally
advanced CSCC, respectively, we submitted a Biologics License Application (“BLA”) to the U.S. Food and Drug Administration (“FDA”) for these
indications in January 2023, which application is filed and under review with a Prescription Drug User Fee Act (“PDUFA”) goal date of January 3, 2024.
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 June 2022, we announced interim results from a registration-enabling cohort of our multi-regional, Phase 1 clinical trial of cosibelimab in patients with
locally advanced CSCC that are not candidates for curative surgery or radiation. Cosibelimab demonstrated a confirmed objective response rate (“ORR”)
of 54.8% (95% CI: 36.0, 72.7) based on independent central review of 31 patients enrolled in the cohort using Response Evaluation Criteria in Solid
Tumors version 1.1 (“RECIST 1.1”).
In January 2022, we announced top-line results from a registration-enabling cohort of our multi-regional, Phase 1 clinical trial of cosibelimab 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 multi-regional, 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 February 2022 Russian
invasion of Ukraine and the ensuing response disrupted our ability to conduct clinical trials in Russia, Ukraine, and Belarus. The substantially longer
enrollment period as a result of the conflict made the CONTERNO study no longer viable. Accordingly, we expect that the study will be wound down and
closed by the end of the first quarter of 2023.
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
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continue to incur significant operating losses for the foreseeable future and may never become profitable. As of December 31, 2022, we have an
accumulated deficit of $262.5 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.
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, stock-based compensation and common stock warrant liabilities. 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 our 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 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. In
each case, we evaluate if the license agreement results in the acquisition of an asset or a business. Such licenses we purchased 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 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
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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.
Stock-Based Compensation
We expense 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. Stock-based compensation for milestone awards will be measured and recorded if and
when it is probable that the milestone will be achieved. We estimate the fair value of stock option grants using the Black-Scholes 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 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.
Common Stock Warrant Liabilities
We have issued freestanding warrants to purchase shares of our common stock in connection with financing activities. Our outstanding common stock
warrants issued in connection with the registered direct financing completed in December 2022 (the “December 2022 Registered Direct Offering”) are
classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside our control. We estimate the fair
value of warrants using the Black-Scholes Model. The assumptions used in calculating the fair value of warrants 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 common stock warrant liability calculations on a prospective basis. The assumptions underlying these
valuations represent 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 common stock warrant liabilities could be materially
different.
The fair value of common stock warrant liabilities is re-measured at each financial reporting date with any changes in fair value being recognized in gain
(loss) on common stock warrant liabilities, a component of other income (loss), in the Statements of Operations. We will continue to re-measure the fair
value of the warrant liabilities until exercise or expiration of the related warrant.
Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021. For a
discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, 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, 2021.
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Comparison of the Years Ended December 31, 2022 and 2021
Revenue
For the year ended December 31, 2022, revenue was approximately $0.2 million compared to approximately $0.3 million for the year ended December 31,
2021, a decrease of approximately $0.1 million. The current and prior period revenue primarily consisted of the reimbursement of patent costs related to
the collaboration agreement with TGTX.
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, 2022, research and development expenses were approximately $49.8 million, compared to approximately $48.5 million
for the year ended December 31, 2021, an increase of $1.3 million. The current period research and development expenses primarily consisted of $25.3
million related to the manufacturing costs of our product candidates, $12.5 million related to clinical costs for our product candidates, $2.6 million related
to regulatory costs, $1.9 million related to the non-cash annual equity fee in connection with the Founders’ Agreement, $4.5 million related to salary
expenses and $0.9 million related to stock compensation expense. For the year ended December 31, 2021, 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, $0.9 million related to regulatory costs, $1.5 million related to salary
expenses and $0.7 million related to stock compensation expense.
We anticipate research and development expenses in 2023 to increase modestly as compared to 2022 due primarily to the manufacture of cosibelimab drug
substance to support a potential commercial launch in 2024.
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, 2022, general and administrative expenses were approximately $8.7 million, compared to approximately $8.5 million for
the year ended December 31, 2021, an increase of $0.2 million. The current period general and administrative expenses primarily consisted of stock
compensation expense of $2.0 million, $1.5 million related to salary expenses, $0.4 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, $1.9 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 $2.5 million, $1.4
million related to salary expenses, $1.0 million related to legal and accounting fees, $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 and $0.4 million related to investor relation fees.
We anticipate general and administrative expenses in 2023 to increase as compared to 2022 due primarily to pre-commercial initiatives to support a
potential commercial launch for cosibelimab in 2024.
Interest Income
For the year ended December 31, 2022, interest income was approximately $0.2 million compared to approximately $0.1 million for the year ended
December 31, 2021, an increase of approximately $0.1 million. The increase was primarily due to higher interest rates earned on our cash deposits.
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Loss on Common Stock Warrant Liabilities
For the year ended December 31, 2022, losses on common stock warrant liabilities were approximately $4.5 million. There were no gains or losses on
common stock warrant liabilities the year ended December 31, 2021. Losses on common stock warrant liabilities are comprised of the total initial fair value
of the liability exceeding the total proceeds and the fair value remeasurement of the common stock warrant liabilities on December 31, 2022, associated
with the December 2022 Registered Direct Offering. We account for warrants as either equity-classified or liability-classified instruments based on an
assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants
are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other
conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as
of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to
be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the
warrants are recognized as a non-cash gain or loss on the Statements of Operations. The fair value of the warrants was estimated using a Black-Scholes
Model (see Note 7).
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, 2022, we had an accumulated deficit of $262.5 million.
In December 2022, we closed on the December 2022 Registered Direct Offering with a single institutional investor for the issuance and sale of 950,000
shares of our common stock and 784,105 pre-funded warrants (the “Pre-Funded Warrants”). Each Pre-Funded Warrant was exercisable for one share of our
common stock. The common stock and the Pre-Funded Warrants were sold together with Series A warrants to purchase up to 1,734,105 shares of common
stock and Series B warrants to purchase up to 1,734,105 shares of common stock (collectively, the “December 2022 Common Stock Warrants”), at a
purchase price of $4.325 per share of common stock and associated December 2022 Common Stock Warrants, and $4.33249 per Pre-Funded Warrant and
associated December 2022 Common Stock Warrants. The Pre-Funded Warrants were funded in full at closing except for a nominal exercise price of
$0.0001 and are exercisable commencing on the closing date and will terminate when such Pre-Funded Warrants are exercised in full. The Series A
warrants are exercisable immediately upon issuance and will expire five years following the issuance date and have an exercise price of $4.075 per share
and the Series B warrants are exercisable immediately upon issuance and will expire eighteen months following the issuance date and have an exercise
price of $4.075 per share. Net proceeds from the December 2022 Registered Direct Offering were $6.7 million after deducting commissions and other
transaction costs.
During the year ended December 31, 2022, we sold a total of 532,816 shares of common stock under an At-the-Market Issuance Sales Agreement (the
“ATM”) for aggregate total gross proceeds of approximately $10.1 million at an average selling price of $18.99 per share, resulting in net proceeds of
approximately $9.9 million after deducting commissions and other transaction costs.
During the year ended December 31, 2021, we sold a total of 1,189,999 shares of common stock under the ATM for aggregate total gross proceeds of
approximately $41.3 million at an average selling price of $34.69 per share, resulting in net proceeds of approximately $40.3 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.
As of December 31, 2022, we had cash and cash equivalents of $12.1 million. We believe that our cash and cash equivalents are only sufficient to fund our
operating expenses into the second quarter of 2023. We will need to secure additional funds through equity or debt offerings, or other potential sources
such as partnerships to fully develop and commercialize, if approved, 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
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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. We cannot be certain that additional funding will be available on acceptable terms, or at all. These factors individually and
collectively raise substantial doubt about our ability to continue as a going concern.
We do not expect any material impact on our long-term development timeline and our liquidity due to the worldwide spread of COVID-19.
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, 2022 and 2021
Operating Activities
Net cash used in operating activities was $57.6 million for the year ended December 31, 2022, compared to $26.3 million for the year ended December 31,
2021. The increase in net cash used in operating activities was due primarily to an increase in manufacturing of cosibelimab and costs to support the BLA
filing of cosibelimab.
Investing Activities
There were no investing activities for the years ended December 31, 2022 and 2021.
Financing Activities
Net cash provided by financing activities was $14.9 million for the year ended December 31, 2022, which related to net proceeds of $9.9 million from the
issuance of common stock as part of our ATM offerings and net proceeds of $6.7 million from the issuance of common share and warrants from the
December 2022 Registered Direct Offering. The current year amount was partially offset by cash paid for taxes related to the net settlement of shares for
employee stock vestings. 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.
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, 2022,
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.
53
Table of Contents
Item 8. Financial Statements and Supplementary Data.
The information required by this Item is set forth in the financial statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
As of December 31, 2022, 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,
2022, 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, 2022.
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, 2022, 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 2023 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 2023 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 2023 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 2023 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 2023 Annual Meeting of Stockholders.
55
Table of Contents
Item 15. Exhibits and Financial Statement Schedules
(a)Financial Statements.
The following financial statements are filed as part of this report:
PART IV
Report of Independent Registered Public Accounting Firm (KPMG, LLP; Boston, MA; PCAOB ID#185)
Report of Independent Registered Public Accounting Firm (BDO USA, LLP; New York, NY; PCAOB ID#243)
Financial Statements:
Balance Sheets as of December 31, 2022 and 2021
Statements of Operations for the Years Ended December 31, 2022 and 2021
Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021
Statements of Cash Flows for the Years Ended December 31, 2022 and 2021
Notes to Financial Statements
F-2
F-3
F-4
F-5
F-6
F-7
F-8 - F-25
56
Table of Contents
(b)Exhibits.
Exhibit No.
Description
3.1
3.2
3.2.1
3.2.2
3.2.3
3.2.4
3.3
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2
10.3
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.
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 December 5, 2022 (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.
Form of pre-funded common stock purchase warrant, filed as Exhibit 4.1 to Form 8-K filed on December 16, 2022 (File No. 001-
38128) and incorporated herein by reference.
Form of Series A/B common stock purchase warrant, filed as Exhibit 4.2 to Form 8-K filed on December 16, 2022 (File No. 001-
38128) and incorporated herein by reference.
Form of placement agent warrant, filed as Exhibit 4.3 to Form 8-K filed on December 15, 2022 (File No. 001-38128) 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.
10.4
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.
57
Table of Contents
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.12.1
10.13
10.13.1
10.14
10.14.1
10.15
10.16
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. **
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 #
Amendment to Checkpoint Therapeutics, Inc. Amended and Restated 2015 Incentive Plan, filed as Exhibit 10.1 to Form 8-K on
December 5, 2022 (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. #
58
Table of Contents
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
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. #
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. **
59
Table of Contents
10.32
10.33
16.1
23.1
23.2
24.1
31.1
31.2
32.1
32.2
101
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. **
Securities Purchase Agreement, dated December 14, 2022, between Checkpoint Therapeutics, Inc. and the Purchaser named therein,
filed as Exhibit 10.1 to Form 8-K filed on December 16, 2022 (File No. 001-38128) and incorporated herein by reference.
Letter from BDO USA, LLP with regard to change in certifying accountant, filed as Exhibit 16.1 to Form 8-K filed on July 21, 2022
(File No. 001-38128) and incorporated herein by reference.
Consent of Independent Registered Public Accounting Firm, KPMG, LLP.*
Consent of Independent Registered Public Accounting Firm, BDO USA, LLP.*
Power of Attorney (included on signature page).*
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
The following financial information from the Company’s Annual Report on Form 10-K for the period ended December 31, 2022,
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.
104
Cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, 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 (KPMG, LLP; Boston, MA; PCAOB ID#185)
Report of Independent Registered Public Accounting Firm (BDO USA, LLP; New York, NY; PCAOB ID#243)
Balance Sheets as of December 31, 2022 and 2021
Statements of Operations for the Years Ended December 31, 2022 and 2021
Statements of Changes in Stockholders’ (Deficit) Equity for the Years Ended December 31, 2022 and 2021
Statements of Cash Flows for the Years Ended December 31, 2022 and 2021
Notes to Financial Statements
F-2
F-3
F-4
F-5
F-6
F-7
F-8 - F-25
F-1
Table of Contents
To the Stockholders and Board of Directors
Checkpoint Therapeutics, Inc.
Report of Independent Registered Public Accounting Firm
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Checkpoint Therapeutics, Inc (the Company) as of December 31, 2022, the related statements of
operations, stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively, the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of
its operations and its cash flows for the year ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited the adjustments to the 2021 financial statements to retrospectively apply the change in accounting due to the reverse stock split, as
described in Note 1. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any
procedures to the 2021 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or
any other form of assurance on the 2021 financial statements taken as a whole.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audit. We are a public accounting firm registered with the 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 audit 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. Our audit 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 audit 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 audit provides a reasonable basis for our opinion.
We have served as the Company’s auditor since 2022.
Boston, Massachusetts
March 31, 2023
F-2
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, before the effects of the adjustments to retrospectively apply the reverse stock split described in Note 1, the accompanying balance sheet
of Checkpoint Therapeutics, Inc. (the “Company”) as of December 31, 2021, the related statements of operations, stockholders’ (deficit) equity, and cash
flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). The 2021 financial statements before the effects
of the adjustments discussed in Note 1 are not presented herein. In our opinion, the financial statements, before the effects of the adjustments to
retrospectively apply the reverse stock split described in Note 1, present fairly, in all material respects, the financial position of the Company at December
31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the
United States of America.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the reverse stock split described in Note 1 and,
accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.
Those adjustments were audited by KPMG LLP.
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 audit. 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 audit 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 audit 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.
/s/ BDO USA, LLP
We served as the Company’s auditor from 2016 to 2022.
New York, NY
March 28, 2022
F-3
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
Common stock warrant liabilities
Total current liabilities
Total Liabilities
Commitments and Contingencies
Stockholders’ (Deficit) Equity
Common Stock ($0.0001 par value), 50,000,000 and 13,500,000 shares authorized as of December 31,
2022 and 2021, respectively
Class A common shares, 700,000 shares issued and outstanding as of December 31, 2022 and
December 31, 2021
Common shares, 9,586,683 and 7,757,440 shares issued and outstanding as of December 31, 2022 and
December 31, 2021, respectively
Common stock issuable, 368,907 and 212,142 shares as of December 31, 2022 and December 31, 2021,
respectively
Additional paid-in capital
Accumulated deficit
Total Stockholders’ (Deficit) Equity
Total Liabilities and Stockholders’ (Deficit) Equity
December 31,
2022
2021
$
$
$
$
$
$
$
12,068
1,149
73
13,290
13,290
20,297
1,306
11,170
32,773
32,773
—
1
1,885
241,117
(262,486)
(19,483)
13,290
$
54,735
976
17
55,728
55,728
24,919
1,063
—
25,982
25,982
—
1
6,598
223,009
(199,862)
29,746
55,728
The accompanying notes are an integral part of these financial statements.
F-4
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 (loss):
Interest income
Loss on common stock warrant liabilities
Total other income
Net Loss
Loss per Share:
Basic and diluted net loss per common share outstanding
Basic and diluted weighted average number of common shares outstanding
For the year ended December 31,
2021
2022
$
192
$
268
49,825
8,700
58,525
(58,333)
160
(4,451)
(4,291)
(62,624)
$
48,453
8,538
56,991
(56,723)
53
—
53
(56,670)
(7.09)
$
(7.45)
8,835,521
7,603,160
$
$
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(in thousands, except share amounts)
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 stock issuable - Founders Agreement
Exercise of warrants
Net loss
Balances at December 31, 2021
Issuance of common shares, net of offering costs -
At-the-market offering
Stock-based compensation expense
Issuance of common shares, net of offering costs -
Registered direct offering (See Note 7)
Issuance of common shares - Founders Agreement
Common shares issuable - Founders Agreement
Net settlement of shares withheld for payment of
employee taxes
Fractional share adjustment
Net loss
Balances at December 31, 2022
Class A Common Shares
Amount
Shares
700,000
$
— 6,242,043
Common Shares
Shares
Amount
1
$
Common
Stock
Additional
Paid-in
Issuable Capital
$ 4,617
$ 173,953
Accumulated
Deficit
$ (143,192) $
Total
Stockholders’
(Deficit) Equity
35,379
—
—
—
—
—
—
$
700,000
—
—
—
—
—
—
—
—
$
700,000
— 1,189,999
121,335
—
—
203,994
—
—
—
— 7,757,440
—
69
—
$
—
—
—
—
—
532,816
143,571
950,000
268,813
—
(64,856)
(1,101)
—
—
—
— 9,586,683
—
$
— 40,269
3,137
—
5,650
—
—
— (4,617)
— 6,598
—
—
1
$ 6,598
—
—
—
—
—
$ 223,009
(56,670)
$ (199,862) $
—
—
—
—
—
—
—
—
—
9,872
2,924
—
—
— (6,598)
— 1,885
—
7,016
—
—
—
—
—
—
—
—
—
1
—
—
—
(1,698)
(6)
—
—
—
(62,624)
$ (262,486) $
$ 1,885
$ 241,117
40,269
3,137
1,033
6,598
—
(56,670)
29,746
9,872
2,924
—
418
1,885
(1,698)
(6)
(62,624)
(19,483)
The accompanying notes are an integral part of these financial statements.
F-6
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
Loss on common stock warrant liabilities
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Other receivables - related party
Accounts payable and accrued expenses
Accounts payable and accrued expenses - related party
Net cash used in operating activities
Cash Flows from Financing Activities:
Issuance of common shares - At-the-market offering
Payment of offering costs for the issuance of common shares - At-the-market offering
Issuance of common shares - Registered direct offering
Payment of offering costs for the issuance of common shares - Registered direct offering
Net settlement of shares withheld for payment of employee taxes
Payment of Fractional shares
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of noncash investing and financing activities:
Issuance of common shares - Founders Agreement
$
$
The accompanying notes are an integral part of these financial statements.
F-7
For the year ended December 31,
2021
2022
$
(62,624)
$
(56,670)
2,924
418
1,885
4,451
(173)
(56)
(4,622)
243
(57,554)
10,120
(248)
7,500
(781)
(1,698)
(6)
14,887
(42,667)
54,735
12,068
6,598
$
$
3,137
1,033
6,598
—
828
3
18,552
213
(26,306)
41,279
(1,010)
—
—
—
—
40,269
13,963
40,772
54,735
4,617
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Note 1 - Organization and Description of Business Operations
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.”
Reverse Stock Split
On November 3, 2022, the holders of a majority of the voting power of the common stock of the Company executed a written consent approving a grant of
discretionary authority to the board of directors of the Company (the “Board”) to, without further stockholder approval, (i) effect a 1:10 reverse stock split
of the Company’s issued and outstanding common stock (the “Reverse Stock Split”), (ii) effect a change in the number of the Company’s authorized shares
from 13,500,000 to 50,000,000 by filing an amendment (the “Certificate Amendment”) to the Company’s Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, and (iii) effect an amendment to the Company’s Amended and Restated 2015 Incentive
Plan to increase the number of shares issuable thereunder, after giving effect to the Reverse Stock Split, from 900,000 to 3,000,000 (the “Plan
Amendment”). The written consent was signed by the holders of 10,914,552 shares of the Company’s common stock and 7,000,000 shares of the
Company’s Class A Common Stock, before giving effect to the Reverse Stock Split. Each share of common stock entitles the holder thereof to one vote on
all matters submitted to stockholders and each share of Class A Common Stock has the voting power of 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, or
approximately 13.5 votes per share as of November 3, 2022. Accordingly, the holders of approximately 58% of the voting power of the Company’s
common stock as of November 3, 2022, signed the written consent approving the Reverse Stock Split, the Certificate Amendment, and the Plan
Amendment. The Board also approved the Reverse Stock Split, the Certificate Amendment, and the Plan Amendment.
Pursuant to rules adopted by the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, a Schedule 14C information
statement was filed with the SEC and provided to the stockholders of the Company. The Reverse Stock Split became effective on December 6, 2022, or
twenty (20) days from the mailing of the information statement to the common stockholders of record. The Authorized Share Reduction also became
effective on December 6, 2022 per the Certificate Amendment filed with the Secretary of State of the State of Delaware.
All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise
indicated. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all
stock options, restricted stock and warrants outstanding at December 6, 2022, which resulted in a proportional decrease in the number of shares of the
Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock and warrants, and, in the case of stock
options and warrants, a proportional increase in the exercise price of all such stock options and warrants.
No fractional shares were issued in connection with the Reverse Stock Split and stockholders who would otherwise be entitled to a fraction of one share
received a proportional cash payment.
F-8
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Liquidity, Capital Resources and Going Concern
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, 2022, the Company had an accumulated deficit of $262.5 million.
In December 2022, the Company closed on a registered direct offering (the “December 2022 Registered Direct Offering”) with a single institutional
investor for the issuance and sale of 950,000 shares of its common stock and 784,105 pre-funded warrants (the “Pre-Funded Warrants). Each Pre-Funded
Warrant was exercisable for one share of our common stock. The common stock and the Pre-Funded Warrants were sold together with Series A warrants to
purchase up to 1,734,105 shares of common stock and Series B warrants to purchase up to 1,734,105 shares of common stock (collectively, the “December
2022 Common Stock Warrants”), at a purchase price of $4.325 per share of common stock and associated December 2022 Common Stock Warrants, and
$4.33249 per Pre-Funded Warrant and associated December 2022 Common Stock Warrants. The Pre-Funded Warrants were funded in full at closing except
for a nominal exercise price of $0.0001 and are exercisable commencing on the closing date and will terminate when such Pre-Funded Warrants are
exercised in full. The Series A warrants are exercisable immediately upon issuance and will expire five years following the issuance date and have an
exercise price of $4.075 per share and the Series B warrants are exercisable immediately upon issuance and will expire eighteen months following the
issuance date and have an exercise price of $4.075 per share. Net proceeds from the December 2022 Registered Direct Offering were $6.7 million after
deducting commissions and other transaction costs.
During the year ended December 31, 2022, the Company sold a total of 532,816 shares of common stock under an At-the-Market Issuance Sales
Agreement (the “ATM”) for aggregate total gross proceeds of approximately $10.1 million at an average selling price of $18.99 per share, resulting in net
proceeds of approximately $9.9 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.
In accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, the Company evaluated whether there are conditions and events,
considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that these financial
statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management's plans that have not been
fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether
the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company's ability to continue as a going concern. The mitigating effect
of management's plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date
that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise
substantial doubt about the entity's ability to continue as a going concern within one year after the date that these consolidated financial statements are
issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the
future receipt of potential funding from future equity or debt issuances and other potential sources such as partnerships cannot be considered probable at
this time because these plans are not entirely within the Company's control nor have these plans been approved by the Board of Directors as of the date of
these financial statements.
As of December 31, 2022, the Company had cash and cash equivalents of $12.1 million. The Company believes that its cash and cash equivalents are only
sufficient to fund its operating expenses into the second quarter of 2023. The Company's expectation to generate operating losses and negative operating
cash flows in the future and the need for additional funding to support its planned operations raise substantial doubt regarding the Company's ability to
continue as a going concern for a period of one year after the date that these financial statements are issued. Management's plans to alleviate the conditions
that raise substantial doubt include reduced 2023 spending, including projected savings through delaying the development timelines of certain programs
and the pursuit of additional cash resources through public or private equity or debt financings and potential partnerships. Management has concluded the
likelihood that its plan to successfully obtain sufficient funding from one or more of these sources, or adequately reduce expenditures, while reasonably
possible, is less than probable. Accordingly, the Company has concluded that substantial doubt exists about the Company's ability to continue as a going
concern for a period of at least 12 months from the date of issuance of these financial statements. 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
F-9
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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. The Company cannot be certain that additional funding will be available to it on acceptable terms, or at all.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
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.
Note 2 - Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. The Company has
no subsidiaries.
Segments
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating
decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and
manages its business in one operating and reporting segment.
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
F-10
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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 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 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 212,142 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.
Pursuant to the Founders Agreement, the Company issued 368,907 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, 2023. Because the number of outstanding shares issuable to Fortress was determinable on
January 1, 2023 prior to the issuance of the December 31, 2022 financial statements, the Company recorded approximately $1.9 million in research and
development expense and a credit to Common shares issuable - Founders Agreement during the year ended December 31, 2022.
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 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.
Common Stock Warrant Liability
The Company has issued freestanding warrants to purchase shares of its common stock in connection with its financing activities and accounts for them in
accordance with applicable accounting guidance as either liabilities or as equity instruments depending on the specific terms of the warrant agreements.
Warrants classified as liabilities are remeasured each period they are outstanding. Any resulting gain or loss related to the change in the fair value of the
warrant liability is recognized in gain (loss) on common stock warrant liabilities, a component of other income (loss), in the Statements of Operations.
F-11
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The Company estimates the fair value of common stock warrant liabilities using the Black-Scholes Model. The assumptions used in calculating the fair
value represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.
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.
Revenue from Contracts with Customers
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers.” The core principle of the new revenue standard is that a
company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
● Step 1: Identify the contract with the customer
● Step 2: Identify the performance obligations in the contract
● Step 3: Determine the transaction price
● Step 4: Allocate the transaction price to the performance obligations in the contract
● Step 5: Recognize revenue when the company satisfies a performance obligation
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).
F-12
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified
that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a
customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer
may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
● Variable consideration
● Constraining estimates of variable consideration
● The existence of a significant financing component in the contract
● Noncash consideration
● Consideration payable to a customer
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each
performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
Revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property is recognized only when (or as) the later of the
following events occurs:
a. The subsequent sale or usage occurs.
b. The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially
satisfied).
Incremental contract costs are expensed when incurred when the amortization period of the asset that would have been recognized is one year or less;
otherwise, incremental contract costs are recognized as an asset and amortized over time as services are provided to a customer.
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, 2022 and
December 31, 2021, 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.
F-13
Table of Contents
Net Loss per Share
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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, 2022 and 2021 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 awards (Note 6)
Unvested restricted stock units (Note 6)
Total
December 31,
2022
3,573,492
27,000
378,897
85,000
4,064,389
2021
1,249
27,000
451,266
—
479,515
The Pre-Funded warrants from the December 2022 Registered Direct Offering were included in the computation of diluted net loss per share since the
exercise price is $0.0001.
Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)
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 2022 and 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 2022 and 2021. 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 August 2020, the FASB issued ASU No. 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20)" and "Derivatives and Hedging-
Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity", which simplifies
accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement
conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share
calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023 for
smaller reporting companies. Early adoption will be permitted. The Company adopted the new guidance in the first quarter of 2022 and the adoption of this
guidance did not 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-
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Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Farber an up-front licensing fee of $1.0 million and, on May 11, 2015, granted Dana-Farber 50,000 shares, valued at $32,500 or $0.65 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 13,683 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-L1 antibody cosibelimab, which is included in the Statements of Operations for the year ended December 31, 2021. There were no milestones
achieved in 2022 related to the license agreement.
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, 2022 and 2021, the Company recognized approximately $0.1
million and $0.2 million, respectively, in revenue related to the collaboration agreement in the Statements of Operations.
Adimab, LLC
In October 2015, Fortress entered into a collaboration agreement with Adimab, LLC (“Adimab”) to discover and optimize antibodies using their
proprietary core technology platform. Under this agreement, Adimab optimized cosibelimab (formerly referred to as CK-301), the Company’s anti-PD-L1
antibody which it originally licensed from Dana-Farber. In January 2019, Fortress transferred the rights to the optimized antibody to the Company, and
Checkpoint entered into a collaboration agreement directly with Adimab on the same day. Under the terms of the agreement, Adimab is eligible to receive
payments from the Company up to an aggregate of approximately $4.8 million upon various filings for regulatory approvals to commercialize the product.
In addition, Adimab is eligible to receive royalty payments from the Company 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
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Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
upon the achievement of a later-stage clinical milestone. There were no milestones achieved in 2022 related to the collaboration agreement.
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 $39.0 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 $88.4 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
$89.3 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 $87.4 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 $61.9 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 $89.3 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 December 31, 2022 and 2021, 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
F-16
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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, 2022, 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 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, 2022 and 2021, 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 each of the years ended December 31, 2022 and
2021, the Company recognized approximately $110,000 in expense in its Statements of Operations related to the advisory agreement, including $50,000 in
expense related to annual equity incentive grants.
F-17
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
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, 2022 and 2021, there was no litigation against the
Company.
Note 6 - Stockholders’ Equity
Common Stock
On November 3, 2022, the holders of a majority of the voting power of the common stock of the Company executed a written consent approving a change
in the number of the Company’s authorized shares from 13,500,000 to 50,000,000, with a par value of $0.0001 per share, by filing a Certificate
Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. 700,000 shares
were designated as “Class A common stock.” The amendment was filed with the Secretary of State of the State of Delaware on December 5, 2022 with an
effective date of December 6, 2022 (See Note 1).
As of December 31, 2022 and 2021, there were 700,000 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.
In November 2020, the Company filed a shelf registration statement on Form S-3 (the “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 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.
During the year ended December 31, 2021, the Company sold a total of 1,189,999 shares of common stock under the ATM for aggregate total gross
proceeds of approximately $41.3 million at an average selling price of $34.69 per share, resulting in net proceeds of approximately $40.3 million after
deducting commissions and other transaction costs.
During the year ended December 31, 2022, the Company sold a total of 532,816 shares of common stock under the ATM for aggregate total gross proceeds
of approximately $10.1 million at an average selling price of $18.99 per share, resulting in net proceeds of approximately $9.9 million after deducting
commissions and other transaction costs.
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CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
In December 2022, the Company closed on the December 2022 Registered Direct Offering with a single institutional investor for the issuance and sale of
950,000 shares of its common stock and 784,105 Pre-Funded Warrants. Each Pre-Funded Warrant was exercisable for one share of our common stock. The
common stock and the Pre-Funded Warrants were sold together with Series A warrants to purchase up to 1,734,105 shares of common stock and Series B
warrants to purchase up to 1,734,105 shares of common stock, at a purchase price of $4.325 per share of common stock and associated December 2022
Common Stock Warrants, and $4.33249 per Pre-Funded Warrant and associated December 2022 Common Stock Warrants. The Pre-Funded Warrants were
funded in full at closing except for a nominal exercise price of $0.0001 and are exercisable commencing on the closing date and will terminate when such
Pre-Funded Warrants are exercised in full. The Series A warrants are exercisable immediately upon issuance and will expire five years following the
issuance date and have an exercise price of $4.075 per share and the Series B warrants are exercisable immediately upon issuance and will expire eighteen
months following the issuance date and have an exercise price of $4.075 per share. The Company also issued the placement agent warrants to purchase up
to 104,046 shares of common stock with an exercise price of $5.406 per share (the “Placement Agent Warrants”). Net proceeds from the December 2022
Registered Direct Offering were $6.7 million after deducting commissions and other transaction costs (See Note 7).
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 56,671 shares and 29,749 shares to Fortress for the years ended December 31, 2022 and 2021, respectively,
and recorded expenses of approximately $0.4 million and $1.0 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, 2022 and 2021, respectively.
Pursuant to the Founders Agreement, the Company issued 368,907 and 212,142 shares of common stock to Fortress for the Annual Equity Fee,
representing 2.5% of the fully-diluted outstanding equity of the Company on January 1, 2023 and January 1, 2022, respectively (see Notes 2 and 4).
Subsequent to the offerings noted above, approximately $22.3 million of securities remain available for sale under the S-3. The Company may offer the
securities under the S-3 from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best
interests of its stockholders.
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 holders of a majority of the voting
power of the common stock of the Company in December 2022 to increase the shares available for issuance to 3,000,000 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, 2022, 2,238,798 shares are available for issuance under the 2015 Incentive Plan.
F-19
Table of Contents
Restricted Stock Awards
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, 2022 and 2021:
Nonvested at December 31, 2020
Granted
Forfeited
Vested
Nonvested at December 31, 2021
Granted
Forfeited
Vested
Non-vested at December 31, 2022
Number of Shares
Weighted Average
Grant Date Fair
Value
386,982
122,900
(1,566)
(57,050)
451,266
159,416
(15,850)
(215,935)
378,897
$
$
$
36.09
28.61
22.43
41.02
33.48
20.00
30.19
36.63
26.15
As of December 31, 2022, there was $2.7 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, 2022, 51,333 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.
Restricted Stock Units
Certain employees have been awarded restricted stock units. The following table summarizes restricted stock units activity for the year ended December
31, 2022:
Non-vested at December 31, 2020
Non-vested at December 31, 2021
Granted
Non-vested at December 31, 2022
Number of
Shares
Weighted Average
Grant Date Fair
Value
— $
—
85,000
85,000
$
—
—
10.50
10.50
As of December 31, 2022, all restricted stock units outstanding are performance-based and vest upon achievement of certain corporate milestones. The
expense for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved. Because the achievement of
these corporate milestones was not probable as of December 31, 2022, no expense related to the restricted stock units has been recognized for the year
ended December 31, 2022.
F-20
Table of Contents
Stock Options
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The following table summarizes stock option award activity for the year ended December 31, 2022 and 2021:
Outstanding as of December 31, 2020
Granted
Outstanding as of December 31, 2021
Granted
Forfeited
Outstanding as of December 31, 2022
Vested and exercisable as of December 31, 2022
Stock Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Life
(in years)
22,000
5,000
27,000
4,000
(4,000)
27,000
15,500
$
$
$
$
32.00
28.50
31.35
14.20
14.20
31.35
23.06
8.04
7.44
6.44
6.89
Upon the exercise of stock options, the Company will issue new shares of its common stock.
The Company used the Black-Scholes 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
Warrants
A summary of warrant activities for year ended December 31, 2022 and 2021 is presented below:
For the Years Ended December 31,
2021
2022
1.04% - 1.50 %
2.85 %
—
10.0
73.07 %
—
10.0
100.65% - 102.71 %
Outstanding as of December 31, 2020
Exercised
Expired
Outstanding as of December 31, 2021
Granted
Fractional share adjustment
Outstanding as of December 31, 2022
Upon the exercise of warrants, the Company will issue new shares of its common stock.
F-21
Warrants
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Life
(in years)
5,751
(70)
(4,432)
1,249
4,356,361
(13)
4,357,597
$
$
$
53.80
—
70.00
—
3.37
—
3.37
1.22
3.83
3.26
Table of Contents
Stock-Based Compensation
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The following table summarizes stock-based compensation expense for the years ended December 31, 2022 and 2021 (in thousands).
Research and development
General and administrative
Total stock-based compensation expense
Note 7 – Common Stock Warrant Liabilities
For the year ended December 31,
2021
2022
$
$
888
2,036
2,924
$
$
684
2,453
3,137
On December 16, 2022, the Company closed on an offering for the sale of shares of its common stock and Pre-Funded Warrants as part of the December
2022 Registered Direct Offering. The common stock and the Pre-Funded Warrants were sold together with December 2022 Common Stock Warrants and
Placement Agent Warrants. The Company also issued the placement agent warrants to purchase shares. Net proceeds from the December 2022 Registered
Direct Offering were $6.7 million after deducting commissions and other transaction costs. (See Note 6)
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and
applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s
Own Equity. For warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in
capital at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial
fair value on the date of issuance, and each balance sheet date thereafter.
The Company deemed the December 2022 Common Stock Warrants and Placement Agent Warrants to be classified as liabilities on the balance sheet as
they contain terms for redemption of the underlying security that are outside its control. The Common Warrants and Placement Agent Warrants were
recorded at the time of closing at a fair value of $7.9 million, determined by using the Black-Scholes Model. As the total fair value of the Common Stock
Warrant Liability exceeded the total net proceeds of $6.7 million, the Company recorded a loss of $1.2 million to loss on common stock warrant liabilities
in the Statements of Operations. Accordingly, there were no proceeds allocated to the common stock and Pre-Funded Warrants issued as part of this
transaction.
The Company revalued the December 2022 Common Stock Warrants and Placement Agent at December 31, 2022 using the Black-Scholes Model. This
resulted in an increase in common stock warrant liability of $3.3 million, with an offsetting loss recorded to loss on common stock warrant liabilities in the
Statements of Operations.
Common Stock Warrant liabilities at December 31, 2020
Common Stock Warrant liabilities at December 31, 2021
Issuance of Common Warrants
Issuance of Placement Agent Warrants
Change in fair value of Common Stock Warrant liabilities
Common Stock Warrant liabilities at December 31, 2022
F-22
$
$
—
—
7,640
278
3,252
11,170
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The Company used the Black-Scholes Model for determining the estimated fair value of the common stock warrant liabilities. A summary of the weighted
average (in aggregate) significant unobservable inputs used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy
was as follows:
Series A Warrants
Exercise price
Volatility
Expected life
Risk-free rate
Dividend yield
Series B Warrants
Exercise price
Volatility
Expected life
Risk-free rate
Dividend yield
Placement Agent Warrants
Exercise price
Volatility
Expected life
Risk-free rate
Dividend yield
Note 8 - Income Taxes
$
$
$
December 16,
2022
December 31,
2022
4.08
$
89.5 %
5.0
3.6 %
—
4.08
89.4 %
5.0
4.0 %
—
December 16,
2022
December 31,
2022
4.08
$
79.1 %
1.5
4.2 %
—
4.08
82.4 %
1.5
4.7 %
—
December 16,
2022
December 31,
2022
5.41
$
89.5 %
5.0
3.6 %
—
5.41
89.4 %
5.0
4.0 %
—
The Company has accumulated net losses since inception and has not recorded an income tax provision or benefit during the years ended December 31,
2022 and 2021.
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-23
For the Year Ended December 31,
2021
2022
21 %
4 %
3 %
(4)%
— %
— %
(3)%
(21)%
— %
21 %
6 %
1 %
1 %
(1)%
— %
(3)%
(25)%
— %
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
The components of the net deferred tax asset as of December 31, 2022 and 2021 are the following (in thousands):
Deferred tax assets:
Net operating loss carryovers
Stock compensation and other
Amortization of license
Accruals and reserves
Tax credits
Start Up Costs
Section 174 Capitalization
Total deferred tax assets
Less valuation allowance
Deferred tax asset, net of valuation allowance
As of December 31,
2022
2021
$
$
$
40,456
1,066
7,952
463
4,112
21
10,671
64,741
(64,741)
— $
38,991
1,193
8,950
157
2,136
27
—
51,454
(51,454)
—
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 $64.7 million and $51.5
million was recorded for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company had federal and state net
operating loss carryforwards of approximately $155.2 million and $117.5 million, respectively. Approximately $124.0 million of the federal net operating
loss carryforwards and $0.3 million of the state net operating loss carryforwards can be carried forward indefinitely. The remaining $31.2 million of federal
and $117.2 million of state net operating loss carryforwards will begin to expire, if not utilized, by 2034 and 2034, respectively. The Company has $2.8
million of research and development credit carryforwards and $1.3 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. The Company has not completed an analysis to
determine whether any such limitations have been triggered as of December 31, 2022. The Company has no income tax affect due to the recognition of a
full valuation allowance on the expected tax benefits of future loss carry forwards based on uncertainty surrounding realization of such assets.
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,
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, 2022 and 2021. 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, 2022 and 2021. 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, 2019, 2020 and 2021 are currently open for examination under the applicable federal
and state income tax statues of limitations. The Company was under examination by the New York City Department Finance for the 2016, 2017 and 2018
tax years. The exam was concluded in 2022 and did not result in material adjustments.
Beginning with the 2022 tax year, the Company is required to capitalize research and development expenses for tax purposes as defined under Internal
Revenue Code Section 174. For expenses that are incurred for research and development in the U.S., the amounts will be amortized over 5 years, and for
expenses that are incurred for research and development outside the U.S., the amounts will be amortized over 15 years.
F-24
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
Note 9 - Accounts Payable and Accrued Expenses
At December 31, 2022 and 2021, 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
Note 10 – Subsequent Events
December 31,
2022
2021
$
$
11,535
1,195
7,289
278
20,297
$
$
16,139
843
7,704
233
24,919
In January 2023, the Pre-Funded warrants from the December 2022 Registered Direct Offering were fully exercised.
In February 2023, the Company closed on a registered direct offering (the “February 2023 Registered Direct Offering”) with a single institutional investor
for the issuance and sale of 1,180,000 shares of its common stock and 248,572 Pre-Funded Warrants. Each Pre-Funded Warrant was exercisable for one
share of common stock. The common stock and the Pre-Funded Warrants were sold together with Series A warrants to purchase up to 1,428,572 shares of
common stock and Series B warrants to purchase up to 1,428,572 shares of common stock (collectively, the “February 2023 Common Stock Warrants”), at
a purchase price of $5.25 per share of common stock and associated February 2023 Common Stock Warrants, and $4.2499 per Pre-Funded Warrant and
associated February 2023 Common Warrants. The Pre-Funded Warrants are funded in full at closing except for a nominal exercise price of $0.0001 and are
exercisable commencing on the closing date and will terminate when such Pre-Funded Warrants are exercised in full. The Series A warrants are exercisable
immediately upon issuance and will expire five years following the issuance date and have an exercise price of $5.00 per share and the Series B warrants
are exercisable immediately upon issuance and will expire eighteen months following the issuance date and have an exercise price of $5.00 per share. The
Company also issued the placement agent warrants to purchase up to 85,714 shares of common stock with an exercise price of $6.5625 per share. Net
proceeds from the February 2023 Registered Direct Offering were $6.7 million after deducting commissions and other transaction costs.
In February 2023, the Pre-Funded warrants from the February 2023 Registered Direct Offering were fully exercised.
F-25
Table of Contents
CHECKPOINT THERAPEUTICS, INC.
Notes to Financial Statements
SIGNATURES
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.
Checkpoint Therapeutics, Inc.
By: /s/ James F. Oliviero
Name: James F. Oliviero
Title: President, Chief Executive Officer and Director
March 31, 2023
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 31, 2023
March 31, 2023
Chairman of the Board
March 31, 2023
Director
Director
Director
Director
Director
March 31, 2023
March 31, 2023
March 31, 2023
March 31, 2023
March 31, 2023
Exhibit 4.6
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 50,000,000 shares of common stock, of which 700,000 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;
● the exercise price of the warrants;
● the dates or periods during which the warrants are exercisable;
● the designation and terms of any securities with which the warrants are issued;
● if the warrants are issued as a unit with another security, the date on and after which the warrants and the other security will be separately
transferable;
● if the exercise price is not payable in U.S. dollars, the foreign currency, currency unit or composite currency in which the exercise price is
denominated;
● any minimum or maximum amount of warrants that may be exercised at any one time;
● any terms relating to the modification of the warrants;
● any terms, procedures and limitations relating to the transferability, exchange or exercise of the warrants; and
● any other specific terms of the warrants.
DESCRIPTION OF DEBT SECURITIES
We may offer debt securities which may be senior, subordinated or junior subordinated and may be convertible. Unless otherwise specified in the
applicable prospectus supplement, our debt securities will be issued in one or more series under an indenture to be entered into between us and a trustee.
We will issue the debt securities offered by any applicable prospectus supplement under an indenture to be entered into between us and the trustee
identified in the applicable prospectus supplement. The terms of the debt securities will include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939, as in effect on the date of the indenture. The indenture will be subject to and governed by the
terms of the Trust Indenture Act of 1939.
The following description briefly sets forth certain general terms and provisions of the debt securities that we may offer. The particular terms of
the debt securities offered by any prospectus supplement and the extent, if any, to which these general provisions may apply to the debt securities, will be
described in the related prospectus supplement. Accordingly, for a description of the terms of a particular issue of debt securities, reference must be made
to both the related prospectus supplement and to the following description.
The aggregate principal amount of debt securities that may be issued under the indenture is unlimited. The debt securities may be issued in one or
more series as may be authorized from time to time pursuant to a supplemental indenture entered into between us and the trustee or an order delivered by
us to the trustee. For each series of debt securities we offer, a prospectus supplement will describe the following terms and conditions of the series of debt
securities that we are offering, to the extent applicable:
● title and aggregate principal amount;
● whether the debt securities will be senior, subordinated or junior subordinated;
● applicable subordination provisions, if any;
● provisions regarding whether the debt securities will be convertible or exchangeable into other securities or property of the Company or any other
person;
● percentage or percentages of principal amount at which the debt securities will be issued;
● maturity date(s);
● interest rate(s) or the method for determining the interest rate(s);
● whether interest on the debt securities will be payable in cash or additional debt securities of the same series;
● dates on which interest will accrue or the method for determining dates on which interest will accrue and dates on which interest will be payable;
● 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;
● 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.
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.
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the registration statements (Nos. 333-251005, 333-270474, 333-270843) on Form S-3 and (Nos. 333-
216856, 333-221488, 333-251000, 333-268740) on Form S-8 of our report dated March 31, 2023, with respect to the financial statements of Checkpoint
Therapeutics, Inc.
Boston, Massachusetts
March 31, 2023
Consent of Independent Registered Public Accounting Firm
Exhibit 23.2
Checkpoint Therapeutics, Inc.
Waltham, MA
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-251005, No. 333-270474 and No. 333-270843)
and Form S-8 (No. 333-216856, No. 333-221488, No. 333-251000, and No. 333-268740) 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 31, 2023
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, 2022 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 31, 2023
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, 2022 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 31, 2023
By: /s/ Garrett Gray
Garrett Gray
Chief Financial Officer
Principal Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Checkpoint Therapeutics, Inc. (the “Company”) for the period ended December 31, 2022, 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.
EXHIBIT 32.1
Dated: March 31, 2023
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, 2022, 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
Dated: March 31, 2023
By: /s/ Garrett Gray
Garrett Gray
Chief Financial Officer
Principal Financial Officer