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What changed in DELCATH SYSTEMS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DELCATH SYSTEMS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+490 added−532 removedSource: 10-K (2024-03-26) vs 10-K (2023-03-27)

Top changes in DELCATH SYSTEMS, INC.'s 2023 10-K

490 paragraphs added · 532 removed · 318 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

124 edited+34 added−64 removed102 unchanged
Biggest changeIf our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, criminal and civil monetary penalties, damages, fines, imprisonment, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate its business and our results of operations.
Biggest changeIf our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, criminal and civil monetary penalties, damages, fines, imprisonment, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate its business and our results of operations. 13 Table of Contents Health Reform In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the health care system and efforts to control health care costs, including drug prices, that could have a significant negative impact on our business, including preventing, limiting or delaying regulatory approval of our drug candidates and reducing the sales and profits derived from our products once they are approved.
In Europe, the hepatic delivery system is a stand-alone medical device having the same device components as the HEPZATO but without the melphalan hydrochloride and is approved for sale under the trade name CHEMOSAT Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers of the liver.
In Europe, the hepatic delivery system is a stand-alone medical device having the same device components as HEPZATO KIT, but without the melphalan hydrochloride and is approved for sale under the trade name CHEMOSAT Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers in the liver.
Cancers in the Liver—A Significant Unmet Need According to the American Cancer Society’s, or ACS , Cancer Facts & Figures 2023 report, cancer is the second leading cause of death in the United States, with an estimated 609,820 deaths and over 1.9 million new cases expected to be diagnosed in 2023.
Cancers in the Liver—A Significant Unmet Medical Need According to the American Cancer Society’s, or ACS , Cancer Facts & Figures 2023 report, cancer is the second leading cause of death in the United States, with an estimated 609,820 deaths and over 1.9 million new cases expected to be diagnosed in 2023.
In January 2022, Immunocore Holdings plc announced FDA approval for KIMMTRAK (tebentafusp-tebn) for the treatment of HLA-A *02:01-positive adult patients with unresectable or metastatic uveal melanoma. This is the first drug approved specifically for patients with metastatic uveal melanoma. HLA-A *02:01 patients represent approximately 45% of patients with uveal melanoma.
In January 2022, Immunocore Holdings plc announced FDA approval for KIMMTRAK (tebentafusp-tebn) for the treatment of HLA-A *02:01-positive adult patients with unresectable or metastatic uveal melanoma. This is the first drug approved specifically for patients with mUM. HLA-A *02:01 patients represent approximately 45% of patients with uveal melanoma.
The process required by the FDA before drug product candidates may be marketed in the United States generally involves the following: • submission to the FDA of an IND, which must become effective before human clinical trials may begin and must be updated periodically, but at least annually; • completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s good laboratory practice, or GLP, regulations; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication; • submission to the FDA of an NDA after completion of all pivotal clinical trials; • a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the product is produced and tested to assess compliance with current good manufacturing practice, or cGMP, regulations; and • FDA review and approval of an NDA prior to any commercial marketing or sale of the drug in the United States.
The process required by the FDA before drug product candidates may be marketed in the United States generally involves the following: • submission to the FDA of an Investigational New Drug (IND) application, which must become effective before human clinical trials may begin and must be updated periodically, but at least annually; • completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s good laboratory practice, or GLP, regulations; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication; • submission to the FDA of an NDA after completion of all pivotal clinical trials; • a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the product is produced and tested to assess compliance with current good manufacturing practice, or cGMP, regulations; and • FDA review and approval of an NDA prior to any commercial marketing or sale of the drug in the United States.
Neuroendocrine Cancer Neuroendocrine Tumors or NETs or neuroendocrine neoplasia are a rare group of cancers that originate in neuroendocrine cells. NETs can originate anywhere in the body, the most common sites include the digestive tract, rectum, lungs, pancreas, or appendix.
Neuroendocrine Cancer Neuroendocrine Tumors or NETs or neuroendocrine neoplasia are a rare group of cancers that originate from neuroendocrine cells. NETs can originate anywhere in the body, the most common sites include the digestive tract, rectum, lungs, pancreas, or appendix.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payers and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Primary liver cancers (hepatocellular carcinoma, or HCC, and Intrahepatic Cholangiocarcinoma or ICC) originates in the liver or biliary tissue and is particularly prevalent in populations where the primary risk factors for the disease, such as hepatitis-B, hepatitis-C, high levels of alcohol consumption, aflatoxin, cigarette smoking and exposure to industrial pollutants, are present.
Primary liver cancers (hepatocellular carcinoma, or HCC, and Intrahepatic Cholangiocarcinoma or ICC) originates in the liver or biliary tract and is particularly prevalent in populations where the primary risk factors for the disease, such as hepatitis-B, hepatitis-C, high levels of alcohol consumption, aflatoxin, cigarette smoking and exposure to industrial pollutants, are present.
According to Lane et al., JAMA Ophthalmol . 2018 Sep 1;136(9):981-98, once ocular melanoma has spread to the liver, median overall survival for these patients is up to 12 months. There is no one standard of care for patients with ocular melanoma liver metastases.
According to Lane et al., JAMA Ophthalmol . 2018 Sep 1;136(9):981-98, once uveal melanoma has spread to the liver, median overall survival for these patients is up to 12 months. There is no one standard of care for patients with uveal melanoma liver metastases.
Additionally, the civil monetary penalties statute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Additionally, the statute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The Phase 1b portion of the trial enrolled seven patients each of which were treated with two courses of PHP (melphalan 3mg/kg, max 220 mg per cycle) combined with four courses IPI+NIVO escalating the dosing from 1mg/kg each IPI+NIVO (cohort 1) to IPI 1mg/kg + NIVO 3mg/kg (cohort 2).
The Phase 1b portion of the trial enrolled seven patients each of which were treated with two cycles of PHP (melphalan 3mg/kg, max 220 mg per cycle) combined with four cycles of IPI+NIVO, escalating the dosing from 1mg/kg each IPI+NIVO (cohort 1) to IPI 1mg/kg + NIVO 3mg/kg (cohort 2).
Based on third party research that we commissioned approximately 5,000-6,200 cases of ocular melanoma are diagnosed in the United States and Europe annually, and approximately 50% of these patients will develop metastatic disease. Of metastatic cases of ocular melanoma, approximately 90% of patients develop liver involvement.
Based on third party research that we commissioned approximately 5,000-6,200 cases of uveal melanoma are diagnosed in the United States and Europe annually, and approximately 50% of these patients will develop metastatic disease. Of metastatic cases of uveal melanoma, approximately 90% of patients develop liver involvement.
Eventually 50% of all metastatic patients will see 6 Table of Contents their disease progress to the liver in addition to their initial diagnosed metastatic site and in 20% of these patient’s liver progression is the cause of mortality . Deipolyi AR, et al.J Vasc Inter Radiol. 2018;29(9):1226-1235. Treatment options for patients with multiple sites of metastatic disease vary.
Eventually 50% of all metastatic patients will see their disease progress to the liver in addition to their initial diagnosed metastatic site and in 20% of these patient’s liver progression is the cause of mortality . Deipolyi AR, et al.J Vasc Inter Radiol. 2018;29(9):1226-1235. Treatment options for patients with multiple sites of metastatic disease vary.
In the case of HEPZATO, the primary mode of action is attributable to the drug component of the product, which means that the Center for Drug Evaluation and Research has primary jurisdiction over its pre-market development and review.
In the case of HEPZATO, the primary mode of action is attributable to the drug component of the product, which means that the Center for Drug Evaluation and Research had primary jurisdiction over its pre-market development and review.
Achieving EU Medical Device Regulation certification entails a detailed evaluation from a designated EU Notified Body, including an audit of quality systems and a review of documentation supporting safety and performance claims for the device.
Achieving EU Medical Device Regulation certification entailed a detailed evaluation from a designated EU Notified Body, including an audit of quality systems and a review of documentation supporting safety and performance claims for the device.
Under this system, incidents are defined as any malfunction or deterioration in the characteristics and/or performance of a device, as well as any inadequacy in the labeling or the instructions for use which, directly or indirectly, might lead to or might have led to the death of a patient, user or other persons or to a serious deterioration in their state of health.
Under this system, incidents are defined as any malfunction or deterioration in the characteristics and/or 15 Table of Contents performance of a device, as well as any inadequacy in the labeling or the instructions for use which, directly or indirectly, might lead to or might have led to the death of a patient, user or other persons or to a serious deterioration in their state of health.
The Hatch-Waxman Act permits the applicant to rely, in part, upon the FDA’s findings of safety and effectiveness for previously approved products. A Section 505(j) NDA, also known as an abbreviated NDA, is used for a generic version of a drug that has already been approved.
The Hatch-Waxman Act permits the applicant to 11 Table of Contents rely, in part, upon the FDA’s findings of safety and effectiveness for previously approved products. A Section 505(j) NDA, also known as an abbreviated NDA, is used for a generic version of a drug that has already been approved.
The FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, dissemination of off-label information, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label.
The FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, dissemination of off-label information, industry-sponsored scientific and educational activities. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label.
The term “remuneration” has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing anything at less than its fair market value.
The term “remuneration” has been broadly interpreted to include anything of value, including for example, gifts, 12 Table of Contents discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing anything at less than its fair market value.
For new oncology products, the FDA will often solicit an opinion from an Oncology Drug Advisory 12 Table of Contents Committee, or ODAC, which is a panel of expert authorities knowledgeable in the fields of general oncology, pediatric oncology, hematologic oncology, immunologic oncology, biostatistics, and other related professions.
For new oncology products, the FDA will often solicit an opinion from an Oncology Drug Advisory Committee, or ODAC, which is a panel of expert authorities knowledgeable in the fields of general oncology, pediatric oncology, hematologic oncology, immunologic oncology, biostatistics, and other related professions.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, 14 Table of Contents restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Physicians in Europe have used CHEMOSAT to treat patients with a variety of cancers in the liver, primarily ocular melanoma liver metastases, and other tumor types, including cutaneous melanoma, hepatocellular carcinoma, cholangiocarcinoma, and liver metastases from colorectal cancer, breast, pancreatic and neuroendocrine.
Physicians in Europe have used CHEMOSAT to treat patients with a variety of cancers in the liver, primarily ocular melanoma liver metastases, and other tumor types, including cutaneous melanoma, hepatocellular carcinoma, cholangiocarcinoma, and liver metastases from colorectal, breast, and pancreatic cancer, as well as neuroendocrine tumors.
The release of the clinical study report from the FOCUS Trial will create the opportunity to apply for National Level reimbursement in each European country in regard to metastatic ocular melanoma (mOM). These applications must be made by us on a country-by-country basis, with priority placed on markets where CHEMOSAT is currently used.
The release of the clinical study report from the FOCUS Trial will create the opportunity to apply for National Level reimbursement in each European country in regard to metastatic uveal melanoma (mUM). These applications must be made by us on a country-by-country basis, with priority placed on markets where CHEMOSAT is currently used.
The IRA permits the Department of Health and Human Services to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
The IRA permits the Department of Health and Human Services, or HHS, to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
United States Regulatory Environment In the United States, the FDA regulates drug and device products under the FDCA, and its implementing regulations. HEPZATO is subject to regulation as a combination product, which means it is composed of both a drug product and a device product.
Regulatory Environment In the United States, the FDA regulates drug and device products under the Food, Drug and Cosmetic Act (FDCA), and its implementing regulations. HEPZATO is subject to regulation as a combination product, which means it is composed of both a drug product and a device product.
None of our employees are represented by a labor union or covered by a collective bargaining agreement, nor have we experienced any work stoppages. We believe our relationship with our employees is good. As required, we also engage consultants to provide services to the Company, including quality assurance and corporate services.
None of our employees are represented by a labor union or covered by a collective bargaining agreement, nor have we experienced any work stoppages. We believe our relationship with our employees is good. As required, we also engage consultants to provide services to the Company, including those related to marketing, quality assurance, manufacturing, and corporate services.
We also believe that physician relationships, especially relationships with leaders in the medical, surgical, and oncology communities, are important competitive factors. We also believe that the current global economic conditions and new healthcare reforms 21 Table of Contents could put competitive pressure on us, including reduced selling prices and potential reimbursement rates, and overall procedure rates.
We also believe that physician relationships, especially relationships with leaders in the medical, surgical, and oncology communities, are important competitive factors. We also believe that the current global economic conditions and new healthcare reforms could put competitive pressure on us, including reduced selling prices and potential reimbursement rates, and overall procedure rates.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. IND submissions may not result in FDA authorization to commence a clinical trial. A separate 11 Table of Contents submission to an existing IND must also be made for each successive clinical trial conducted during product development.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. IND submissions may not result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development.
In August 2019, a European patent was granted by the European Patent Office with claims directed to our filter and frame apparatus and validated in eleven countries to provide additional European patent coverage for our filter and frame apparatus to the European patent directed to the frame apparatus that was granted in April 2017.
In April 2017 and August 2019, European patents were granted by the European Patent Office with claims directed to our filter and frame apparatus, the August 2019 patent was validated in eleven countries to provide additional European patent coverage for our filter and frame apparatus to the European patent directed to the filter and frame apparatus that was granted in April 2017.
The American Cancer Society estimates that 287,850 women will be diagnosed with BC in the United States annually. BC is the second leading cancer-related cause of death for women (behind lung cancer) in the United States. GLOBOCAN 2020 estimates are that there are, annually, 726,259 women diagnosed with breast cancer in the United States, Western Europe and the United Kingdom.
The American Cancer Society estimates that 287,850 women will be diagnosed with BC in the United States annually. BC is the second leading cancer-related cause of death for women (behind lung cancer) in the United States. GLOBOCAN 2020 estimates that there are, annually, 726,259 women diagnosed with breast cancer in the United States, the European Union and the United Kingdom.
At the cut-off date of November 15, 2022, the median follow-up was 29.1 months (range 8.9 – 30.2), the median PFS was 29.1 months (95% CI 11.9 – 46.3) and the median duration of response was 27.1 months (range 7.4 – 28.5).
At the cut-off date of November 15, 2022, the median follow-up was 29.1 months (range 8.9 – 30.2), the median Progression Free Survival (PFS) was 29.1 months (95% CI 11.9 – 46.3) and the median Duration Of Response (DOR) was 27.1 months (range 7.4 – 28.5).
We are required to maintain ISO 13485 certification for medical devices to be sold in the EU, which requires, among other items, an implemented quality system that applies to component quality, supplier control, product design and manufacturing operations.
We are required to maintain ISO 13485 certification for medical devices to be sold in the EU, which requires, among other items, an implemented quality system that applies to component quality, supplier control, product design and manufacturing operations. Our facilities are ISO 13485:2016 certified.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave states the authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and to seek attorney’s fees and costs associated with pursuing federal civil actions.
In the disease states we are targeting there are also numerous clinical trials sponsored by third parties, which can compete for potential patients in the near term and may ultimately lead to new competitive therapies.
In the disease states we are targeting there are also numerous clinical 17 Table of Contents trials sponsored by third parties, which can compete for potential patients in the near term and may ultimately lead to new competitive therapies.
Endocrine-Related Cancer. 15(4), 1083-1097 NETs have a metastasis rate of between 60-80% and the majority of these accrue in the liver (85%). We estimate that approximately 12,000 NETs patients in the United States, the United Kingdom and the European Union each year could be candidates for treatment with HEPZATO and CHEMOSAT.
Endocrine-Related Cancer. 15(4), 1083-1097 NETs have a metastasis rate of between 60-80% and the majority of these accrue in the liver (85%). We estimate that approximately 12,000 NETs patients in the United States, the United Kingdom and the European Union each year could be candidates for treatment with HEPZATO (if it received FDA approval for such treatment) and CHEMOSAT.
However, the FDA is not bound by the recommendation of an advisory committee and may deny approval of an NDA by issuing a CRL, if the applicable regulatory criteria are not satisfied.
However, the FDA is not bound by the recommendation of an advisory committee and may deny approval of an NDA by issuing a Complete Response Letter, or CRL, if the applicable regulatory criteria are not satisfied.
Metastatic liver cancer, also called liver metastasis, or secondary liver cancer, results from the spread or “metastases” of a primary cancer into the liver. These metastases often continue to grow even after the primary cancer in another part of the body has been removed.
Cancers metastatic to the liver, also called liver metastasis, or secondary liver cancer, result from the spread or “metastases” of a primary cancer into the liver. These metastases often continue to grow even after the primary cancer in another part of the body has been removed or successfully treated.
Certain markets in Europe are experiencing the effects of continued economic weakness, which is affecting healthcare budgets and reimbursement. CHEMOSAT competes and, if approved by the FDA, HEPZATO will compete with all forms of liver cancer treatments, including surgery, systemic chemotherapy, focal therapies, and palliative care.
Certain markets in Europe are experiencing the effects of continued economic weakness, which is affecting healthcare budgets and reimbursement. CHEMOSAT and HEPZATO compete with all forms of liver cancer treatments, including surgery, systemic chemotherapy, focal therapies, and palliative care.
We hold rights in ten U.S. utility patents, one U.S. design patent, three pending U.S. utility patent applications, six issued foreign counterpart utility patents (including the validations of European Patents with claims directed to our filter and frame apparatus in 19 European countries, a European patent with claims directed to our filter apparatus and media in nine countries, and a European patent with claims to a kit of parts, directed to CHEMOSAT ® , in 18 countries), five issued foreign counterpart design patents, and two pending foreign counterpart patent applications.
We hold rights in twelve U.S. utility patents, one U.S. design patent, three pending U.S. utility patent applications, nine issued foreign counterpart utility patents (including the validations of European Patents with claims directed to our filter and frame apparatus in 19 European countries, a European patent with claims directed to our filter apparatus and media in nine countries, and a European patent with claims to a kit of parts, directed to CHEMOSAT ® , in 18 countries), four issued foreign counterpart design patents, and one pending foreign counterpart patent application.
Failure to comply with applicable foreign regulatory agency or FDA requirements may result in warning letters, fines, civil or criminal penalties, suspensions, delays in clinical development, recall or seizure of products, partial or total suspension of production or withdrawal of a product from the market.
Failure to comply with applicable requirements may result in warning letters, fines, civil or criminal penalties, suspensions, delays in clinical development, recall or seizure of products, partial or total suspension of production, or withdrawal of a product from the market. U.S.
We believe that 80% of ICC patients are not candidates for surgical resection, and that approximately 20-30% of these may be candidates for certain focal interventions.
We believe that 80% of ICC patients are not candidates for surgical resection, and that approximately 20-30% of these may be candidates for certain local treatments.
If Delcath or its present or future third-party manufacturers or suppliers are not able to comply with these requirements, the FDA may require the recall of our product from distribution or may withdraw any potential approvals of an NDA for that product.
If Delcath or its present or future third-party manufacturers or suppliers are not able to comply with these requirements, the FDA may require the recall of our product from distribution or may withdraw approval for that product.
Pancreatic Cancer Pancreatic adenocarcinoma comes with a poor prognosis for those diagnosed with the disease. The American Cancer Society estimates that pancreatic cancer will affect 62,210 patients annually, with 49,830 annual deaths in the United States. Along with GLOBOCAN estimates for Western Europe, pancreatic cancer effects a total of 132,442 patients annually with 105,638 annual deaths.
Pancreatic Cancer Pancreatic adenocarcinoma has a poor prognosis. The American Cancer Society estimates that pancreatic cancer will affect 62,210 patients annually, with 49,830 annual deaths in the United States. Along with GLOBOCAN estimates for Western Europe, pancreatic cancer affects a total of 132,442 patients annually with 105,638 annual deaths.
While the exclusivity only applies to the indication for which the drug has been approved, we believe that this exclusivity will provide us with added protection once commercialization of an orphan drug designated product begins. There has been and continues to be substantial litigation regarding patent and other intellectual property rights in the pharmaceutical and medical device areas.
While the exclusivity only applies to the indication for which the drug has been approved, we believe that this exclusivity will provide us with added protection. There has been and continues to be substantial litigation regarding patent and other intellectual property rights in the pharmaceutical and medical device areas.
This “whole organ” therapy is performed by isolating the circulatory system of the liver, infusing the liver with a chemotherapeutic agent, and then filtering the blood prior to returning it to the patient’s circulatory system. During the procedure, known as percutaneous hepatic perfusion, PHP ® , or PHP therapy, three catheters are placed percutaneously through standard interventional radiology techniques.
This “whole organ” therapy is performed by isolating the circulatory system of the liver, infusing the liver with a chemotherapeutic agent, and then filtering the blood prior to returning it to the patient’s circulatory system. During the PHP procedure, two catheters are placed percutaneously through standard interventional radiology techniques.
Due to COVID-related delays experienced by the medical device industry and Notified Bodies alike, on April 17, 2020, the European Parliament adopted the European Commission’s proposal to postpone the implementation of the EU Medical Device Regulation or EU 2017/745 by 12 months or until May 26, 2021.
This EU Medical Device Regulation became effective on May 25, 2017, and governs all facets of medical devices. Due to COVID-related delays experienced by the medical device industry and Notified Bodies alike, on April 17, 2020, the European Parliament adopted the European Commission’s proposal to postpone the implementation of (EU) 2017/745 by 12 months or until May 26, 2021.
CHOPIN Trial The Leiden University Medical Center completed a Phase 1b trial (CHOPIN trial) on the use of the Delcath CHEMOSAT ® Hepatic Delivery System with Melphalan (CHEMOSAT) in combination with the immune checkpoint inhibitors (ICI) ipilimumab and nivolumab to treat patients with metastatic uveal melanoma with liver metastases.
CHOPIN Trial The Leiden University Medical Center completed the Phase 1b portion of a Phase 1b/2 trial (CHOPIN trial) on the use of CHEMOSAT in combination with the immune checkpoint inhibitors (ICI) ipilimumab and nivolumab to treat patients with metastatic uveal melanoma with liver metastases.
The goal of the CHOPIN trial is to study the safety and potential synergistic effects of systemic ICI therapy ipilimumab plus nivolumab (IPI+NIVO) when combined with Delcath’s proprietary liver-targeted percutaneous hepatic perfusion treatment in metastatic uveal melanoma patients.
The goal of the CHOPIN trial is to evaluate the safety and efficacy of systemic ICI therapy with ipilimumab plus nivolumab (IPI+NIVO) when combined with Delcath’s liver-targeted percutaneous hepatic perfusion treatment in metastatic uveal melanoma patients.
Such off-label uses are common across medical specialties, in particular in oncology. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’ communications regarding off-label use.
Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’ communications regarding off-label use. U.S.
An FSCA is an action taken by a manufacturer to reduce a risk of death or serious deterioration in the state of health associated with the use of a medical device that is already placed on the market.
An FSCA is an action taken by a manufacturer to reduce a risk of death or serious deterioration in the state of health associated with the use of a medical device that is already placed on the market. An FSCA may include device recall, modification exchange and destruction.
The just released publication presented updated safety and efficacy results from the Phase 1b portion of the trial which were previously presented in June 2022 at the American Society of Clinical Oncology Annual Meeting.
Published results from the Phase 1b portion of the trial include updated safety and efficacy results which were presented in June 2022 at the American Society of Clinical Oncology Annual Meeting.
Similar requirements to the United States’ IND are required in the European Union and other jurisdictions in which we may conduct clinical trials. Clinical Trials For purposes of NDA submission and approval, clinical trials are typically conducted in the following sequential phases, which may overlap: • Phase 1 Clinical Trials.
Similar requirements to the U.S.’ IND are required in the European Union and other jurisdictions in which we may conduct clinical trials. 10 Table of Contents Clinical Trials For purposes of NDA submission and approval, clinical trials are typically conducted in the following sequential phases, which may overlap: • Phase 1 Clinical Trials.
The development and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product will be granted on a timely basis, if at all.
The development and approval process requires substantial time, effort and financial resources, and we cannot be certain that the FDA will approve any of our product candidates on a timely basis, if at all.
A European patent was 20 Table of Contents granted by the European Patent Office for our chemotherapy filtration apparatus in December 2018 and in July 2019 a European patent was granted by the European Patent Office with claims to a kit of parts, directed to CHEMOSAT ® .
European patents were granted by the European Patent Office for our chemotherapy filtration apparatus in December 2018 and 2023 and in July 2019 a European patent was granted by the European Patent Office with claims to a kit of parts comprising our chemotherapy filtration apparatus and directed to CHEMOSAT ® .
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize 17 Table of Contents price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (and the maximum prices as a result of the negotiations becoming effective beginning on January 1, 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D for price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Our corporate offices are located at 1633 Broadway, Suite 22C, New York, New York 10019. Our telephone number is (212) 489-2100 and our internet address is www.delcath.com . Company Overview We are an interventional oncology company focused on the treatment of primary and metastatic liver cancers.
Our corporate offices are located at 566 Queensbury Avenue, Queensbury, New York 12804. Our telephone number is (212) 489-2100 and our internet address is www.delcath.com. Company Overview We are an interventional oncology company focused on the treatment of primary and cancers metastatic to the liver.
Currently we have an interim level of reimbursement in Germany. The CE Mark has been affixed to the CHEMOSAT in 23 centers in 4 countries. On February 28, 2022, CHEMOSAT received Medical Device Regulation certification under the European Medical Devices Regulation [2017/745/EU], which may be considered by jurisdictions when evaluating reimbursement.
Currently we have an interim level of reimbursement in Germany. On February 28, 2022, CHEMOSAT received Medical Device Regulation certification under the European Medical Devices Regulation (EU) 2017/745, which may be considered by jurisdictions when evaluating reimbursement.
Even if we obtain coverage for a given product by a 14 Table of Contents third-party payor, the third-party payor’s reimbursement rates may not be adequate to make the product affordable to patients or profitable to us, or the third-party payors may require co-payments that patients find unacceptably high.
Therefore, even if the cancer center obtains coverage for a given product by a third-party payor, the third-party payor’s reimbursement rates may not be adequate to make the product affordable to patients or profitable to us, or the third-party payors may require co-payments that patients find unacceptably high.
During the COVID-19 pandemic, we allowed our employees to work remotely where needed and if practicable to ensure the health and safety of our team members. Many of our employees have transitioned back to working on-site, but we continue to provide our employees with the option to work from home. Available Information Our website address is www.delcath.com.
During the COVID-19 pandemic, we allowed our employees to work remotely where needed and if practicable to ensure the health and safety of our team members. Many of our employees have transitioned back to working on-site, but we continue to provide our employees, depending on their role, with the option to work from home.
Cancer that begins in one area of the body often metastasizes to the liver. Patient prognosis is generally poor once cancer has spread to the liver. Consequently, cancers of the liver remain a major unmet medical need globally. Liver Cancers—Incidence and Mortality Cancers of the liver consist of primary liver cancer and metastatic liver cancer.
Cancer that begins in one area of the body often metastasizes to the liver. 4 Table of Contents Patient prognosis is generally poor once cancer has spread to the liver. Consequently, cancers in the liver remain a major unmet medical need globally.
We have also posted on our website the Audit Committee Charter, the Compensation and Stock Option Committee Charter, the Nominating and Corporate Governance Committee Charter, the Code of Business Conduct and Ethics and Whistleblower Policy, which govern our directors, officers, and employees. 23 Table of Contents
We have also posted on our website the Audit Committee Charter, the Compensation and Stock Option Committee Charter, the Nominating and Corporate Governance Committee Charter, the Code of Business Conduct and Ethics and Whistleblower Policy.
Many of our competitors have substantially greater financial, technological, research and development, marketing, and personnel resources. In addition, some of our competitors have considerable experience in conducting clinical trials, regulatory, manufacturing and commercialization capabilities.
Neither of these procedures are approved for the treatment of mUM. Many of our competitors have substantially greater financial, technological, research and development, marketing, and personnel resources. In addition, some of our competitors have considerable experience in conducting clinical trials, regulatory, manufacturing and commercialization capabilities.
As previously reported, the Best Overall Response included 1 complete response, 5 partial responses and 1 stable disease accounting for an Objective Response Rate of 85.7% and a Disease Control Rate of 100%.
In the seven patients, best tumor responses included 1 complete response, 5 partial responses and 1 stable disease accounting for an Objective Response Rate of 85.7% and a Disease Control Rate of 100%.
Based on our research, an estimated 800 patients with ocular melanoma liver metastases in the United States, and 1,200 patients in Europe may be eligible for treatment with HEPZATO annually. Currently 55% of the patients have no approved treatment option and most of those patients are treated with multiple lines of therapy.
Based on our research, an estimated 800 patients with uveal melanoma liver metastases in the United States, and 1,200 patients in Europe may be eligible for treatment with HEPZATO KIT or CHEMOSAT annually. Currently 55% of the patients are not eligible for KIMMTRAK, the only approved uveal melanoma systemic therapy, and most patients are treated with multiple lines of therapy.
HEPZATO is approved can treat all mOM patients and will be the only drug to treat the remaining 55% of patients. Traditionally, metastatic uveal melanoma patients have been treated with a variety of local and regional techniques.
HEPZATO is approved to treat all mUM patients and is the only approved drug to treat the remaining 55% of patients. Traditionally, mUM patients have been treated with both systemic and a variety of local regional techniques.
We estimate approximately 98,000 CRC patients in the United States, the United Kingdom and the EU annually could be candidates for treatment with HEPZATO and CHEMOSAT. Breast Cancer Breast cancer or BC is the most diagnosed cancer in women in the United States and worldwide.
We estimate approximately 98,000 5 Table of Contents CRC patients in the United States, the United Kingdom and the European Union annually could be candidates for treatment with HEPZATO (if it received FDA approval for such treatment) and CHEMOSAT. Breast Cancer Breast cancer or BC is the most diagnosed cancer in women in the United States and worldwide.
Primary jurisdiction for regulation of HEPZATO has been assigned to the FDA’s Center for Drug Evaluation and Research. The FDA has granted Delcath six orphan drug designations (five for melphalan the treatment of patients with ocular (uveal) melanoma cutaneous melanoma, intrahepatic cholangiocarcinoma, hepatocellular carcinoma, and neuroendocrine tumor indications and one for doxorubicin in the treatment of patients with hepatocellular carcinoma).
The FDA has granted us six orphan drug designations (five for melphalan in the treatment of patients with ocular (uveal) melanoma, cutaneous melanoma, intrahepatic cholangiocarcinoma, hepatocellular carcinoma, and neuroendocrine tumor indications and one for doxorubicin in the treatment of patients with hepatocellular carcinoma).
As of March 1, 2022, we have assumed direct responsibility for sales, marketing and distribution of CHEMOSAT in Europe. UK upgraded the status from “Research” to “Special Status”. European Reimbursement A critical driver of utilization growth for CHEMOSAT in Europe is the expansion of reimbursement mechanisms for the procedure in our priority markets.
On March 1, 2022, we assumed direct responsibility for sales, marketing and distribution of CHEMOSAT in Europe. UK Interventional Procedures Advisory Committee (IPAC) upgraded the recommendation from “Research Only” to “Special”. European Reimbursement A critical driver of utilization growth for CHEMOSAT in Europe is the expansion of reimbursement mechanisms for the procedure in our priority markets.
An FSCA may include device recall, modification exchange and destruction. 19 Table of Contents The manufacturer or its authorized representative must notify its customers and/or the end users of the medical device of the FSCA via a Field Safety Notice.
The manufacturer or its authorized representative must notify its customers and/or the end users of the medical device of the FSCA via a Field Safety Notice.
A CRL may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive, and time-consuming requirements related to clinical trials, preclinical studies, or manufacturing. Data from clinical trials are not always conclusive and the FDA may interpret data differently than the applicant or its collaborators interpret data.
A CRL may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive, and time-consuming requirements related to clinical trials, preclinical studies, or manufacturing.
Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor.
Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. The coverage determination process may require providing scientific and clinical support for the use of our products to each payor separately.
The filters adsorb chemotherapeutic agent from the blood, before the filtered blood is returned to the patient’s circulatory system thereby reducing systemic exposure to the drug and related toxic side effects. PHP therapy is performed in an interventional radiology suite in approximately two to three hours.
The filters adsorb melphalan from the blood before the filtered blood is returned to the patient’s circulatory system thereby reducing systemic exposure to the drug and related side effects. PHP therapy is performed in an interventional radiology suite in approximately two to three hours. Patients remain in an intensive care or step-down unit overnight for observation following the procedure.
Patents directed to our chemotherapy filtration system “Apparatus for Removing Chemotherapy Compounds from Blood” were issued by the United States Patent and Trademark Office in July 2017, October 2018, August 2019, February 2020, and February 2022.
Patents to our chemotherapy filtration apparatus “Apparatus for Removing Chemotherapy Compounds from Blood”, including claims directed to apparatus, methods, kits, and filter media, were issued by the U.S. Patent and Trademark Office (USPTO) in July 2017, October 2018, August 2019, February 2020, February 2022, and April 2023.
Approval may be contingent on a Risk Evaluation and Mitigation Strategy, or REMS, that limits the labeling, distribution, or promotion of a drug product. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety problems occur after the product reaches the market.
Approval may be contingent on the implementation and adherence to a Risk Evaluation and Mitigation Strategy, or REMS, that focuses on preventing, monitoring, and/or managing specific risks associated with a product. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety problems occur after the product reaches the market.
According to the ACS, approximately 41,260 new cases of these cancers are expected to be diagnosed in the United States, leading to approximately 30,520 deaths.
According to GLOBOCAN 2020, an estimated 68,500 new cases of primary liver cancer are diagnosed in the United States and Europe annually. According to the ACS, approximately 41,260 new cases of these cancers are expected to be diagnosed in the United States, leading to approximately 30,520 deaths.
We estimate that approximately 6,000 breast cancer patients with hepatic only involvement in the United States and Western Europe (including the United Kingdom and Italy) could be candidates for treatment with HEPZATO and CHEMOSAT. An additional 10,000 patients could receive benefits from HEPZATO and CHEMOSAT in the palliative setting based on local treatment guidelines.
We estimate that approximately 6,000 breast cancer patients with hepatic involvement in the United States and the European Union could be candidates for treatment with HEPZATO KIT and CHEMOSAT. An additional 10,000 patients could benefit from treatment with HEPZATO (if it received FDA approval for such treatment) and CHEMOSAT in the palliative setting based on local treatment guidelines.
There are numerous companies developing and marketing devices for the performance of focal therapies, including Boston Scientific Corporation, the Covidien Products division of Medtronic plc, Merit Medical Systems, Inc., Varian Medical Systems, Inc., Sirtex Medical Limited, AngioDynamics, Inc., and many others.
There are numerous companies developing and marketing devices for the performance of local regional procedures, including Boston Scientific Corporation, the Covidien Products division of Medtronic plc, Merit Medical Systems, Inc., Varian Medical Systems, Inc., Sirtex Medical Limited, AngioDynamics, Inc., and many others. These procedures include trans-arterial chemoembolization (TACE, DEBTACE) and Radioembolization (SIRT, TARE, or Y90).
These procedures include trans-arterial chemoembolization (TACE, DEBTACE) and Radioembolization (SIRT, TARE, or Y90). TACE is performing approximately 50,000 to 60,000 treatments per year and Y90 is performing 10,000 to 15,000 treatment per year.
Procedures in the liver, and liver directed treatments (interventional oncology) are performed by an interventional radiologist. These procedures include trans-arterial chemoembolization (TACE, DEBTACE) and Radioembolization (SIRT, TARE, or Y90). TACE is used in approximately 50,000 to 60,000 treatments per year and Y90 is used in 10,000 to 15,000 treatments per year.
Each member of our management team has over 10 to 30 years of industry experience Additionally, the team has significant experience in capital raises, mergers/acquisitions, business development, and sales and marketing in the pharmaceutical industry. Our board of directors is constituted by individuals with significant experience in the pharmaceutical and biotechnology industries.
Additionally, the team has significant experience in capital raises, mergers/acquisitions, business development, and sales and marketing in the pharmaceutical industry. Our Board also consists of individuals with significant experience in the pharmaceutical and biotechnology industries.
A Hong Kong patent directed to our Filter and Frame Apparatus was issued in March 2018.
These claims are directed to HEPZATO ® KIT . A Hong Kong patent directed to our Filter and Frame Apparatus was issued in March 2018. A Hong Kong patent directed to our chemotherapy filtration apparatus was issued in September 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur liquidity and capital requirements will depend on numerous factors, including: • clinical studies, including closing our Phase 3 clinical trial in ocular melanoma liver metastases; • the timing and costs of our various United States and foreign regulatory filings, obtaining approvals and complying with regulations; • the timing and costs associated with developing our manufacturing operations; • the timing of product commercialization activities, including marketing and distribution arrangements overseas; • market acceptance of any approved product candidates, including product pricing and product reimbursement by third-party payors; • executive compensation, including the cost of attracting senior executives; • the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and • the impact of competing technological and market developments.
Biggest changeOur liquidity and capital requirements will depend on numerous factors, including: • our ability to successfully sell HEPZATO in the United States and CHEMOSAT in Europe; • the outcome of any of our future clinical studies; • the timing and costs of our various United States and foreign regulatory filings, obtaining approvals and complying with regulations; • our ability to secure the continuous supply of melphalan and other critical components of HEPZATO and CHEMOSAT from facilities in compliance with applicable manufacturing regulations; • our ability to secure commercially reasonable terms for the supply of melphalan and other critical components of HEPZATO and CHEMOSAT; • the timing, costs and regulatory approval processes associated with developing our and/or our partners’ manufacturing operations; • the cost and ability to effectively establish and maintain the commercial infrastructure and manufacturing capabilities required to support the commercialization of HEPZATO, CHEMOSAT and any other products for which we receive marketing approval including product sales, medical affairs, marketing, manufacturing and distribution; • market acceptance of any approved product candidates, including product pricing and product reimbursement by third-party payors; • our need to implement additional internal systems and infrastructure, including financial and reporting systems; • executive compensation, including the cost of attracting senior executives; 20 Table of Contents • our headcount growth and associated costs as we expand our research and development and further establish a commercial infrastructure; • our debt requirements, including contractual obligations under such agreements; • the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and • the impact of competing technological and market developments.
Further downgrades of the U.S. credit rating, automatic spending cuts, or a government shutdown could negatively impact our liquidity, financial condition and earnings. U.S. debt ceiling and budget deficit concerns have increased the possibility of credit-rating downgrades and economic slowdowns, or a recession in the United States.
Further downgrades of the U.S. credit rating, automatic spending cuts, or a government shutdown could negatively impact our liquidity, financial condition and earnings. The U.S. debt ceiling and budget deficit concerns have increased the possibility of credit-rating downgrades and economic slowdowns, or a recession in the United States.
Without adequate reimbursement, commercialization of CHEMOSAT in Europe may not be successful. We have obtained the right to affix the CE Mark for CHEMOSAT, and we intend to seek third-party or government reimbursement within those countries in the Europe where we expect to market and sell CHEMOSAT.
Without adequate reimbursement, commercialization of CHEMOSAT in Europe may not be successful. We have obtained the right to affix the CE Mark for CHEMOSAT, and we intend to seek third-party or government reimbursement within those countries in Europe where we expect to market and sell CHEMOSAT.
Under the current regulatory scheme in the European Union, CHEMOSAT is approved for marketing as a device only, and doctors will separately obtain melphalan for use with CHEMOSAT. Although melphalan has been approved in the European Union for over a decade, we are aware that there are currently three approved manufacturers of melphalan in certain countries of the European Union.
Under the current regulatory scheme in the European Union, CHEMOSAT is approved for marketing as a device only, and doctors will separately obtain melphalan for use with CHEMOSAT. Although melphalan has been approved in the European Union for over a decade, we are aware that there are currently three approved manufacturers of melphalan in certain countries in the European Union.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including exclusion from payment by federal health care programs, civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including exclusion from payment by federal health care programs, civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
However, certain consultants and third parties with whom we have business relationships, and to whom in some cases we have disclosed trade secrets and other proprietary knowledge, may also provide services to other parties in the medical device industry, including companies, universities and research organizations that are developing competing products.
However, certain consultants and third parties with whom we have business relationships, and to whom in some cases we have disclosed trade secrets and other proprietary knowledge, may also provide services to other parties in the medical device/pharmaceutical industry, including companies, universities and research organizations that are developing competing products.
Our success depends upon the efforts of our employees. The loss of any of our senior executives or other key employees could harm its business. Competition for experienced personnel is intense and, if key individuals leave us, we could be adversely affected if suitable replacement personnel are not quickly identified and hired.
Our success depends upon the efforts of our employees. The loss of any of our senior executives or other key employees could harm our business. Competition for experienced personnel is intense and, if key individuals leave us, we could be adversely affected if suitable replacement personnel are not quickly identified and hired.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, including that our product candidates may not advance through development or be approved for commercial sale, we are unable to predict if or when we will generate product revenue or achieve or maintain profitability.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, including that our product candidates may not advance through development or be approved for commercial sale, we are unable to predict if or when we will generate significant product revenue or achieve or maintain profitability.
Among the factors that may cause the market price of our common stock to fluctuate are the risks described elsewhere in this “Risk Factors” section and other factors, including: • fluctuations in our quarterly operating results or the operating results of competitors; • variance in financial performance from the expectations of investors; • changes in the estimation of the future size and growth rate of our markets; • changes in accounting principles or changes in interpretations of existing principles, which could affect financial results; • conditions and trends in the markets served; • changes in general economic, industry and market conditions; • success of competitive products and services; • changes in market valuations or earnings of competitors; • changes in pricing policies or the pricing policies of competitors; • announcements of significant new products, contracts, acquisitions or strategic alliances by us or our competitors; 47 Table of Contents • potentially negative announcements, such as a review of any of our filings by the SEC, changes in accounting treatment or restatements of previously reported financial results or delays in our filings with the SEC; • the commencement or outcome of litigation involving us, our general industry or both; • our filing for protection under federal bankruptcy laws; • changes in capital structure, such as future issuances of securities or the incurrence of additional debt; • actual or expected sales of common stock by stockholders; and • the trading volume of our common stock.
Among the factors that may cause the market price of our common stock to fluctuate are the risks described elsewhere in this “Risk Factors” section and other factors, including: • fluctuations in our quarterly operating results or the operating results of competitors; • variance in financial performance from the expectations of investors; • changes in the estimation of the future size and growth rate of our markets; • changes in accounting principles or changes in interpretations of existing principles, which could affect financial results; • conditions and trends in the markets served; • changes in general economic, industry and market conditions; • success of competitive products and services; • changes in market valuations or earnings of competitors; • changes in pricing policies or the pricing policies of competitors; • announcements of significant new products, contracts, acquisitions or strategic alliances by us or our competitors; • potentially negative announcements, such as a review of any of our filings by the SEC, changes in accounting treatment or restatements of previously reported financial results or delays in our filings with the SEC; • the commencement or outcome of litigation involving us, our general industry or both; • our filing for protection under federal bankruptcy laws; • changes in capital structure, such as future issuances of securities or the incurrence of additional debt; • actual or expected sales of common stock by stockholders; and • the trading volume of our common stock.
In addition, because CHEMOSAT and HEPZATO are intended for use in patients with cancer, there is an increased risk of death among the patients treated with our system, which may increase the risk of product liability lawsuits related to clinical trials or commercial sales.
In addition, because CHEMOSAT and HEPZATO are intended for use in patients with cancer, there is an increased risk of death among the patients treated with our product, which may increase the risk of product liability lawsuits related to clinical trials or commercial sales.
We may be subject to claims against us even if the injury is due to the actions of others. For example, if the medical personnel that use our system on patients are not properly trained or are negligent in the use of the system, the patient may be injured, which may subject us to claims.
We may be subject to claims against us even if the injury is due to the actions of others. For example, if the medical personnel that use our product on patients are not properly trained or are negligent in the use of the system, the patient may be injured, which may subject us to claims.
Accordingly, we will face additional risks resulting from our international operations including: • difficulties in enforcing agreements and collecting receivables in a timely manner through the legal systems of many countries outside the United States; • the failure to satisfy foreign regulatory requirements to market our products on a timely basis or at all; • availability of, and changes in, reimbursement within prevailing foreign healthcare payment systems; • difficulties in managing foreign relationships and operations, including any relationships that we establish with foreign sales or marketing employees and agents; • limited protection for intellectual property rights in some countries; • fluctuations in currency exchange rates; • the possibility that foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade; • the possibility of any material shipping delays; • significant changes in the political, regulatory, safety or economic conditions in a country or region; • protectionist laws and business practices that favor local competitors; and • trade restrictions, including the imposition of, or significant changes to, the level of tariffs, customs duties and export quotas.
Accordingly, we will face additional risks resulting from our international operations including: • difficulties in enforcing agreements and collecting receivables in a timely manner through the legal systems of many countries outside the United States; • the failure to satisfy foreign regulatory requirements to market our products on a timely basis or at all; • availability of, and changes in, reimbursement within prevailing foreign healthcare payment systems; • difficulties in managing foreign relationships and operations, including any relationships that we establish with foreign sales or marketing employees and agents; • limited protection for intellectual property rights in some countries; 26 Table of Contents • fluctuations in currency exchange rates; • the possibility that foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade; • the possibility of any material shipping delays; • significant changes in the political, regulatory, safety or economic conditions in a country or region; • protectionist laws and business practices that favor local competitors; and • trade restrictions, including the imposition of, or significant changes to, the level of tariffs, customs duties and export quotas.
If we are unable to obtain orphan drug designation in the United States, we will not be eligible to obtain the period of market exclusivity that could result from orphan drug designation or be afforded the financial incentives associated with orphan drug designation.
If we are unable to obtain or maintain orphan drug designation in the United States, we will not be eligible to obtain the period of market exclusivity that could result from orphan drug designation or be afforded the financial incentives associated with orphan drug designation.
We have established our European headquarters in Galway, Ireland and conduct finishing operations, assembly, packaging, labeling and distribution at this facility. We currently utilize third parties to manufacture some components of CHEMOSAT and HEPZATO.
We have established our European headquarters in Galway, Ireland and conduct finishing operations, assembly, packaging, labeling and distribution for CHEMOSAT at this facility. We currently utilize third parties to manufacture some components of CHEMOSAT and HEPZATO.
The board of directors will have the sole discretion in determining whether to declare and pay dividends in the future. The declaration of dividends will depend on profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our board of directors.
The Board will have the sole discretion in determining whether to declare and pay dividends in the future. The declaration of dividends will depend on profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our Board.
Furthermore, our board of directors has the authority to issue up to 10,000,000 shares of preferred stock in one or more series and to determine the rights and preferences of the shares of any such series without stockholder approval.
Furthermore, our Board has the authority to issue up to 10,000,000 shares of preferred stock in one or more series and to determine the rights and preferences of the shares of any such series without stockholder approval.
If physicians are unwilling to obtain melphalan separately from CHEMOSAT and/or to prescribe the use of melphalan independently, our sales opportunities in the EU will be significantly limited.
If physicians are unable or unwilling to obtain melphalan separately from CHEMOSAT and/or to prescribe the use of melphalan independently, our sales opportunities in the EU will be significantly limited.
The ACA, among other things, subjected manufacturers to new annual fees and taxes 37 Table of Contents for specified branded prescription drugs, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, expanded health care fraud and abuse laws, revised the methodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated, imposed an additional rebate similar to an inflation penalty on new formulations of drugs, extended the Medicaid Drug Rebate Program to Medicaid managed care organizations, expanded the 340B program, which caps the price at which manufacturers can sell covered outpatient pharmaceuticals to specified hospitals, clinics and community health centers, and provided incentives to programs that increase the federal government’s comparative effectiveness research.
The ACA, among other things, subjected manufacturers to new annual fees and taxes for specified branded prescription drugs, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, expanded health care fraud and abuse laws, revised the methodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated, imposed an additional rebate similar to an inflation penalty on new formulations of drugs, extended the Medicaid Drug Rebate Program to Medicaid managed care organizations, expanded the 340B program, which caps the price at which manufacturers can sell covered outpatient pharmaceuticals to specified hospitals, clinics and community health centers, and provided incentives to programs that increase the federal government’s comparative effectiveness research.
Because our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting Common Stock held by non-affiliates was less than $560.0 million measured on the last business day of our second fiscal quarter, we qualify again as a “smaller reporting company” as defined in the Exchange Act.
Because our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates was less than $700.0 million measured on the last business day of our second fiscal quarter, we qualify again as a “smaller reporting company” as defined in the Exchange Act.
If a third-party claims that we infringed its patents, any of the following may occur: • we may become liable for substantial damages for past infringement if a court decides that our technologies infringe upon a competitor’s patent; • we may become prohibited from selling or licensing our product without a license from the patent holder, which may not be available on commercially acceptable terms or at all, or which may require us to pay substantial royalties or grant cross-licenses to our patents; and • we may have to redesign our product so that it does not infringe upon others’ patent rights, which may not be possible or could require substantial funds or time.
If a third-party claims that we infringed its patents, any of the following may occur: • we may become liable for substantial damages for past infringement if a court decides that our technologies infringe upon a competitor’s patent; 37 Table of Contents • we may become prohibited from selling or licensing our product without a license from the patent holder, which may not be available on commercially acceptable terms or at all, or which may require us to pay substantial royalties or grant cross-licenses to our patents; and • we may have to redesign our product so that it does not infringe upon others’ patent rights, which may not be possible or could require substantial funds or time.
Item 1A. Risk Factors An investment in our securities involve a high degree of risk. You should carefully consider the following risks, in conjunction with the financial and other information contained in this Annual Report on Form 10-K. As previously discussed, our actual results could differ materially from our forward-looking statements.
Item 1A. Risk Factors An investment in our securities involves a high degree of risk. You should carefully consider the following risks, in conjunction with the financial and other information contained in this Annual Report on Form 10-K. As previously discussed, our actual results could differ materially from our forward-looking statements.
The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. Moreover, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.
The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the United States and global financial markets and economic conditions. Moreover, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.
While we have written contracts and supply agreements for key components for CHEMOSAT and HEPZATO, we do not have written contracts with all suppliers for the manufacture of components for CHEMOSAT and HEPZATO.
We do not have written contracts with all of our suppliers for the manufacture of components for CHEMOSAT and HEPZATO. While we have written contracts and supply agreements for key components for CHEMOSAT and HEPZATO, we do not have written contracts with all suppliers for the manufacture of components for CHEMOSAT and HEPZATO.
These broad market and industry factors may materially harm the market price of our common stock and expose the Company to securities class action litigation. Such litigation, even if unsuccessful, could be costly to defend and divert management’s attention and resources, which could further materially harm our financial condition and results of operations.
These broad market and industry factors may materially harm the market price of our common stock and expose us to securities class action litigation. Such litigation, even if unsuccessful, could be costly to defend and divert management’s attention and resources, which could further materially harm our financial condition and results of operations.
In addition, the notes to our financial statements for the year ended December 31, 2022, included in this Annual Report on Form 10-K, contain a disclosure describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern.
In addition, the notes to our financial statements for the year ended December 31, 2023, included in this Annual Report on Form 10-K, contain a disclosure describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern.
Furthermore, the legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues. The United States and the European Union and its member states continue to issue new privacy and data protection rules and regulations that relate to personal data and health information.
Furthermore, the legislative and regulatory landscape for information privacy and security continues to evolve, and there has been an increasing amount of focus on privacy and security issues. The United States and the European Union and its member states continue to issue new privacy and data protection rules and regulations that relate to personal data.
If we are not able to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our consolidated financial statements and/or seek protection under federal bankruptcy law or enter into a receivership, and it is likely that holders of our common stock and holders of securities convertible into our common stock will lose all of their investment.
If we are not able to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those 19 Table of Contents assets are carried on our consolidated financial statements and/or seek protection under federal bankruptcy law or enter into a receivership, and it is likely that holders of our common stock and holders of securities convertible into our common stock will lose all of their investment.
Our patents provide patent protection for our CHEMOSAT hepatic delivery system, HEPZATO, 43 Table of Contents hemofiltration cartridge apparatus, hemofiltration cartridge design, methods of treatment of a subject with cancer in accordance with various embodiments of our system, embodiments of our system for delivering a high concentration of a small molecule chemotherapeutic agent to a subject while minimizing systemic exposure to the small molecule chemotherapeutic agent, and methods of setting up a filter apparatus for hemofiltration in accordance with our procedures using our proprietary hepatic deliver system.
Our patents provide patent protection for our CHEMOSAT hepatic delivery system, HEPZATO, hemofiltration cartridge apparatus, hemofiltration cartridge design, methods of treatment of a subject with cancer in accordance with various embodiments of our system, embodiments of our system for delivering a high concentration of a small molecule chemotherapeutic agent to a subject while minimizing systemic exposure to the small molecule chemotherapeutic agent, and methods of setting up a filter apparatus for hemofiltration in accordance with our procedures using our proprietary hepatic deliver system.
Our ability to conduct timely clinical trials in the United States and abroad depends on our ability to manufacture the system, including sourcing the chemotherapeutic agents or other compounds through third parties in accordance with FDA and other regulatory requirements.
Our ability to conduct timely clinical trials in the United States and abroad depends on our ability to manufacture the product, including sourcing the chemotherapeutic agents or other compounds through third parties in accordance with FDA and other regulatory requirements.
The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, market or competitors. Securities and industry analysts do not 49 Table of Contents currently, and may never, publish research on us.
The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, market or competitors. Securities and industry analysts do not currently, and may never, 41 Table of Contents publish research on us.
We have in the past, and may in the future, become subject to litigation or claims arising in or outside the ordinary course of business (other than intellectual property infringement actions) that could negatively affect our business operations and financial condition, including securities class actions and shareholder derivative actions, both of which are typically expensive to defend.
We have in the past, and may in the future, become subject to litigation or claims arising in or outside the ordinary course of business (other than intellectual property infringement actions) that could negatively affect our business operations and 22 Table of Contents financial condition, including securities class actions and shareholder derivative actions, both of which are typically expensive to defend.
If physicians are unwilling to obtain melphalan separately for use with CHEMOSAT, our ability to commercialize CHEMOSAT in the EU will be significantly limited. Our product instructions and indication reference the chemotherapeutic agent melphalan.
If physicians are unable or unwilling to obtain melphalan separately for use with CHEMOSAT, our ability to commercialize CHEMOSAT in the EU will be significantly limited. Our product instructions and indication reference the chemotherapeutic agent melphalan.
Litigation may be necessary to enforce any patents issued or assigned to us or to determine the scope and validity of third-party proprietary rights. Litigation could be costly and could divert our attention from our business. There are no guarantees that we will receive a 44 Table of Contents favorable outcome in any such litigation.
Litigation may be necessary to enforce any patents issued or assigned to us or to determine the scope and validity of third-party proprietary rights. Litigation could be costly and could divert our attention from our business. There are no guarantees that we will receive a favorable outcome in any such litigation.
We are also no longer required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
We are also not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
Our independent registered public accounting firm issued a report dated March 27, 2023 in connection with the audit of our financial statements as of December 31, 2022, which included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern including our significant working capital deficiency, significant losses and need to raise additional funds to meet our obligations and sustain our operations.
Our independent registered public accounting firm issued a report dated March 26, 2024 in connection with the audit of our financial statements as of December 31, 2023, which included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern including our significant working capital deficiency, significant losses and need to raise additional funds to meet our obligations and sustain our operations.
We design the clinical trials for our products, but rely on academic institutions, corporate partners, contract research organizations and other third parties to assist in managing, monitoring and otherwise carrying out these trials. We rely heavily on these parties for the execution of our clinical studies and control only certain aspects of their activities.
We design the clinical trials for our products, but rely on academic institutions, corporate partners, contract research organizations and other third parties to assist in managing, monitoring and otherwise carrying out these trials. We also plan on relying heavily on these parties for the execution of our clinical studies and control only certain aspects of their activities.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the European Medicines Agency, or EMA, from approving another marketing application for the same indication for that drug during that time period.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA, from approving another marketing application for the same indication for that drug during that time period.
We cannot assure you that any of the events discussed below will not occur. Risks Related to Our Business and Financial Condition Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern as of December 31, 2022.
We cannot assure you that any of the events discussed below will not occur. Risks Related to Our Business and Financial Condition Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
If we are unable to obtain an adequate supply of the necessary components or negotiate acceptable terms, we may not be able to manufacture CHEMOSAT and HEPZATO in commercial quantities or in a cost-effective manner, and commercialization of CHEMOSAT and HEPZATO in the United States, the European Union and elsewhere may be delayed.
If we are unable to obtain an adequate supply of the necessary components or negotiate acceptable terms, we may not be able to manufacture CHEMOSAT and HEPZATO in commercial quantities or in a cost-effective manner, and commercialization of CHEMOSAT and HEPZATO in the United States, the European Union and elsewhere may be adversely impacted.
In Germany, we had received a ZE diagnostic-related group code, or ZE Code, which, beginning in 2016, permits hospitals in Germany to obtain reimbursement for CHEMOSAT procedures. Negotiations on the amount of reimbursement to be received under the ZE Code were concluded in 2016 and the procedure was reimbursed under the ZE Code in 2017.
In Germany, we had received a ZE diagnostic-related group code (“ZE Code” ) which, beginning in 2016, permits hospitals in Germany to obtain reimbursement for CHEMOSAT procedures. Negotiations on the amount of reimbursement to be received under the ZE Code were concluded in 2016 and the procedure was reimbursed under the ZE Code in 2017.
In addition to limiting sales opportunities, delays in manufacturing CHEMOSAT and HEPZATO may adversely affect our ability to obtain regulatory approval in the United States and other jurisdictions.
In addition to limiting sales opportunities, delays in manufacturing CHEMOSAT and HEPZATO may adversely affect our ability to obtain regulatory approval for other indications in the United States and other jurisdictions.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection that covers the commercial products to develop their own competing products that are the same or substantially the same as our commercial product and, further, may export otherwise infringing products to territories where we have patent protection, but judicial systems do not adequately enforce patents to cause infringing activities to be ceased.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection that covers the commercial products to develop their own competing products that are the same or substantially the same as our 35 Table of Contents commercial product and, further, may export otherwise infringing products to territories where we have patent protection, but judicial systems do not adequately enforce patents to cause infringing activities to be ceased.
The Federal Reserve has raised interest rates multiple times in response to concerns about inflation and it may raise them again. Higher interest rates, coupled with reduced government spending and volatility in financial markets may increase economic uncertainty and affect consumer spending.
The Federal Reserve has raised interest rates multiple times in response to concerns about inflation and it may raise them again. Higher interest rates, coupled with the risk of government shutdowns reduced government spending and volatility in financial markets may increase economic uncertainty and affect consumer spending.
The success of our products may be harmed if the government, private health insurers or other third-party payers do not provide sufficient coverage or reimbursement.
The success of our products may be harmed if the government, private health insurers or other third-party payors do not provide sufficient coverage or reimbursement.
Certain provisions of our Amended and Restated Certificate of Incorporation and By-laws could have the effect of making it more difficult for our stockholders to replace management at a time when a substantial number of 48 Table of Contents stockholders might favor a change in management.
Certain provisions of our Amended and Restated Certificate of Incorporation and By-laws could have the effect of making it more difficult for our stockholders to replace management at a time when a substantial number of stockholders might favor a change in management.
It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example, with respect to proper priority claims, inventorship, claim scope or patent term adjustments.
It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the 36 Table of Contents future, for example, with respect to proper priority claims, inventorship, claim scope or patent term adjustments.
Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademark rights in the face of any such infringement. We may rely primarily on trade secret protection for important proprietary technologies.
Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademark rights in the face of any such infringement. 38 Table of Contents We may rely primarily on trade secret protection for important proprietary technologies.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq.
If we cannot raise additional capital, our potential to generate future revenues will be significantly limited since we will not be able to further commercialize CHEMOSAT and HEPZATO, complete our clinical trials or conduct future product development and clinical trials.
If we cannot raise additional capital, our potential to generate future revenues will be significantly limited since we will not be able to further commercialize CHEMOSAT and HEPZATO, or conduct future product development, including clinical trials, if any.
Legal 28 Table of Contents Proceedings.” Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims.
Legal Proceedings.” Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims.
We cannot predict the effect that future sales of shares of our common stock or other equity-related securities would have on the market price of our common stock. We have a history of reverse splits, which have severely impacted our common stock price.
We cannot predict the effect that future sales of shares of our common stock or other equity-related securities would have on the market price of our common stock. 40 Table of Contents We have a history of reverse splits, which have severely impacted our common stock price.
Some of these factors are beyond our control. Broad market fluctuations may lower the market price of our common stock and affect the volume of trading, regardless of our financial condition, results of operations, business or prospects.
Some of these factors are beyond our control. Broad market fluctuations may lower the market price of our common stock and affect the volume of trading, regardless of our financial condition, results 39 Table of Contents of operations, business or prospects.
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, declaring dividends, creating liens, redeeming its stock or making investments.
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific 21 Table of Contents actions, such as incurring additional debt, making capital expenditures, declaring dividends, creating liens, redeeming its stock or making investments.
Not all of our United States patent rights have corresponding patent rights effective in European or other foreign jurisdictions. Similar considerations apply in any other country where we are prosecuting patent applications, have been issued patents, or have decided not to pursue patent protection relating to our technology.
Not all of our U.S. patent rights have corresponding patent rights effective in European or other foreign jurisdictions. Similar considerations apply in any other country where we are prosecuting patent applications, have been issued patents, or have decided not to pursue patent protection relating to our technology.
However, no melphalan labels in the EU reference our product, and the labels vary from country to country with respect to the approved indication of the drug and its mode of 32 Table of Contents administration.
However, no melphalan labels in the EU reference our product, and the labels vary from country to country with respect to the approved indication of the drug and its mode of administration.
Were such a claim asserted, we would likely incur substantial legal and related expenses even if we prevail on the merits. Claims for damages, whether or not successful, could cause delays in clinical trials and result in the loss of physician endorsement, adverse publicity and/or limit our ability to market and sell the system, resulting in loss of revenue.
Were such a claim asserted, we would likely incur substantial legal and related expenses even if we prevail on the merits. Claims for damages, whether or not successful, could result in the loss of physician endorsement, adverse publicity and/or limit our ability to market and sell our products, resulting in loss of revenue.
If we fail to overcome the challenges inherent in international operations, our business and results of operations may be materially adversely affected. 41 Table of Contents Rapid technological developments in treatment methods for liver cancer and competition with other forms of liver cancer treatments could affect our ability to achieve meaningful revenues or profit.
If we fail to overcome the challenges inherent in international operations, our business and results of operations may be materially adversely affected. Rapid technological developments in treatment methods for liver cancer and competition with other forms of liver cancer treatments could affect our ability to achieve meaningful revenues or profit. Competition in the cancer treatment industry is intense.
We may not be successful in our efforts to expand the commercialization of CHEMOSAT in the European Union, and we may not be successful in commercializing HEPZATO in the United States and CHEMOSAT or HEPZATO in other foreign countries. Each country requires a different commercialization strategy, so our European Union marketing strategy may not translate to other markets.
We may not be successful in our efforts to expand the commercialization of CHEMOSAT in the European Union or United Kingdom, and we may not be successful in commercializing HEPZATO in the United States and CHEMOSAT or HEPZATO in other foreign countries. Each country requires a different commercialization strategy.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, strategic alliances and license and development agreements in connection with any collaborations.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, exercise of our outstanding warrants and conversion of outstanding preferred stock, strategic alliances and license and development agreements in connection with any collaborations.
Competition in the cancer treatment industry is intense. CHEMOSAT and HEPZATO compete with all forms of liver cancer treatments that are alternatives to surgical resection. Many of our competitors have substantially greater resources and considerable experience in conducting clinical trials and obtaining regulatory approvals.
CHEMOSAT and HEPZATO compete with all forms of liver cancer treatments that are alternatives to surgical resection. Many of our competitors have substantially greater resources and considerable experience in conducting clinical trials and obtaining regulatory approvals.
Similarly, the ongoing military conflict between Russia and Ukraine has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may adversely affect our business or the third parties on whom we rely.
Similarly, public health crises and ongoing global geopolitical conflict has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may adversely affect our business or the third parties on whom we rely.
Patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement, and defense of our patents and applications.
Patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement, and defense of our patents and applications. Furthermore, the U.S. Supreme Court and the U.S.
For the years ended December 31, 2022 and 2021, we incurred net losses of approximately $36.5 million and $25.6 million, respectively and expect 27 Table of Contents to continue to incur losses in 2023. To date, we have funded operations through a combination of private placements and public offerings of our securities, debt financing including convertible notes.
For the years ended December 31, 2023, and 2022, we incurred net losses of approximately $47.7 million and $36.5 million, respectively, and expect to continue to incur losses in 2024. To date, we have funded operations through a combination of private placements and public offerings of our securities and debt financing, including convertible notes.
In addition, since CHEMOSAT currently is approved for commercialization solely in the European Union, or the EU, and limited other jurisdictions (including the United Kingdom), if we are unsuccessful in commercializing the product in the EU and/or if HEPZATO is not approved in the United States and elsewhere, we will have no means of generating revenue.
In addition, since CHEMOSAT currently is approved for commercialization solely in the EU and limited other jurisdictions (including the United Kingdom), and HEPZATO is approved only in the United States, if we are unsuccessful in commercializing the products in the EU and the United States, we will have no means of generating revenue.
If we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and may not achieve or sustain profitability, which would have a material adverse effect on our business, results of operations, financial condition and prospects.
If we are not able to maintain regulatory compliance, we may lose any marketing approval that we obtained and may not achieve or sustain profitability, which would have a material adverse effect on our business, results of operations, financial condition and prospects. We may not be able to obtain or maintain orphan drug designation or exclusivity for our product candidates.
If we are unable to obtain adequate supplies of components from existing suppliers or need to switch to an alternate supplier and obtain FDA or other regulatory agency approval of that supplier, commercialization of CHEMOSAT and HEPZATO may be delayed.
If we are unable to obtain adequate supplies of components from existing suppliers or need to switch to an alternate supplier and obtain FDA or other regulatory agency approval of that supplier, commercialization of CHEMOSAT and HEPZATO may be delayed. We may be unsuccessful in commercializing CHEMOSAT and HEPZATO because of inadequate infrastructure or an ineffective commercialization strategy.
As a result, holders of our common stock must rely on stock appreciation for any return on their investment. If we engage in acquisitions, reorganizations or business combinations, we will incur a variety of risks that could adversely affect our business operations or our stockholders.
We do not expect to pay dividends in the foreseeable future. As a result, holders of our common stock must rely on stock appreciation for any return on their investment. If we engage in acquisitions, reorganizations or business combinations, we will incur a variety of risks that could adversely affect our business operations or our stockholders.
If we are unable to develop this infrastructure in the United States or elsewhere or to collaborate with an alliance partner to market our products in the United States or foreign countries, particularly in Asia, our efforts to commercialize CHEMOSAT and HEPZATO or any other product outside of the European Union may be less successful.
If we are unable to develop this infrastructure in the United States or elsewhere or to collaborate with an alliance partner to market our products in the United States or foreign countries, particularly in Asia, our efforts to commercialize CHEMOSAT and HEPZATO or any other product may not succeed.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • refusals or delays in the approval of NDAs or supplements to approved NDAs; • refusal of a regulatory authority to review pending market approval applications or supplements to approved NDAs; • restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory product recalls or seizures; • fines, FDA warning letters or untitled letters, or holds on clinical trials; 33 Table of Contents • import or export restrictions; • injunctions or the imposition of civil or criminal penalties; • restrictions on product administration, requirements for additional clinical trials or changes to product labeling or REMS programs; or • recommendations by regulatory authorities against entering into governmental contracts with us.
We must implement and ensure compliance with the HEPZATO REMS. 29 Table of Contents Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory product recalls or seizures; • fines, FDA warning letters or untitled letters, or holds on clinical trials; • import or export restrictions; • injunctions or the imposition of civil or criminal penalties; • restrictions on product administration, requirements for additional clinical trials or changes to product labeling or REMS programs; or • recommendations by regulatory authorities against entering into governmental contracts with us.
Any failure by us to maintain or protect our information technology systems and data integrity, including from cyber-attacks, intrusions or other breaches, could result in the unauthorized access to personally identifiable information, theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations.
Any failure by us to maintain or protect our information technology systems and data integrity, including from cyber-attacks, intrusions or other breaches, could result in the unauthorized access to sensitive information, or otherwise compromise our confidential or proprietary information and disrupt our operations.
We are subject to significant ongoing regulatory obligations and oversight in the EU and will be subject to such obligations in the United States and any other country where we receive marketing authorization or approval.
We are subject to significant ongoing regulatory obligations and oversight in the EU and the United States and will be in any other country where we receive marketing authorization or approval. We are subject to ongoing regulatory obligations and oversight in the countries where HEPZATO and CHEMOSAT have been approved.
In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.
In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations. Environmental, social and governance matters and any related reporting obligations may impact our business.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price 34 Table of Contents negotiations with Medicare (and the maximum price as a result of the negotiations becoming effective beginning on January 1, 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D for price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and other supporting information for each proposed therapeutic indication in order to establish to the FDA’s satisfaction the product’s safety, efficacy, potency and purity for each intended use.
Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and other supporting information for each proposed therapeutic indication in order to establish to the FDA’s satisfaction the product’s safety, efficacy, potency and purity for each intended use. Clinical development is a long, expensive and uncertain process and is subject to delays.
Our business could be adversely affected by economic downturns, inflation, increases in interest rates, natural disasters, public health crises such as the COVID-19 pandemic, political crises, geopolitical events, such as the crisis in Ukraine, or other macroeconomic conditions, which have in the past and may in the future negatively impact our business and financial performance.
Our business could be adversely affected by economic downturns, inflation, increases in interest rates, natural disasters, public health crises, political crises, global geopolitical conflicts, or other macroeconomic conditions, which have in the past and may in the future negatively impact our business and financial performance.
If some investors find our Common Stock less attractive as a result of any choice we make to reduce disclosure, there may be a less active trading market for our Common Stock and the market price for our Common Stock may be more volatile. 52 Table of Contents Item 1B. Unresolved Staff Comments. Not applicable.
If some investors find our common stock less attractive as a result of any choice we make to reduce disclosure, there may be a less active trading market for our common stock and the market price for our common stock may be more volatile.
Although Delcath is not aware of any direct impacts of the war between the Ukraine and the Russian Federation on its supply chain, the war could adversely impact our ability to obtain components and/or significantly increase the cost of obtaining such components for the Company’s products from its third-party suppliers in a timely manner or at all.
Although we are not aware of any direct impacts of the war between the Ukraine and the Russian Federation, the conflicts in the Middle East, or any other global conflict on our supply chain, such current or future conflicts could adversely impact our ability to obtain components and/or significantly increase the cost of obtaining such components for our products from third-party suppliers in a timely manner or at all.
Risks Related to FDA and Foreign Regulatory Approvals and Regulatory Matters The development and approval process in the United States could take many years, require substantial resources and may never lead to the approval of HEPZATO by the FDA for use in the United States.
Risks Related to FDA and Foreign Regulatory Approvals and Regulatory Matters The development and approval process in the United States and abroad could take many years, require substantial resources and may never lead to the approval of our product candidates by the FDA for use in the United States or by foreign regulators in their respective jurisdictions.
Further, if there are any modifications to the product, including changes in indications, labeling or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new or supplemental NDA, which may require us to develop additional data or conduct additional preclinical studies and clinical trials.
Further, if there are any modifications to the product, including changes to product, labeling or manufacturing processes or facilities, we may be required to submit and obtain prior FDA approval, which may require us to develop additional data or conduct additional studies.
Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process, and may result in a failure to obtain regulatory approval for HEPZATO if these requirements are not met. Purchasers of CHEMOSAT in Europe may not receive third-party reimbursement or such reimbursement may be inadequate.
Our failure, or any failure by such third-party partners, to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process, and may result in a failure to obtain regulatory approval for product candidates then being studied. Purchasers of CHEMOSAT in Europe may not receive third-party reimbursement or such reimbursement may be inadequate.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our corporate offices currently occupy 6,877 square feet of office space at 1633 Broadway, Suite 22C, New York, New York under a sub-lease agreement that expires in May 2023.
Biggest changeItem 2. Properties. Our corporate offices occupy 10,320 square feet at 566 Queensbury Avenue in Queensbury, New York. The corporate office is owned by the Company. We ended the sublease for our former corporate offices at 1633 Broadway, Suite 22C, New York, New York in February 2024.
We also own two buildings comprised of approximately 10,320 square feet at 566 Queensbury Avenue in Queensbury, New York and 6,000 square feet at 95-97 Park Road in Queensbury, New York. These facilities house manufacturing, quality assurance and quality control, research and development, and office space functions.
We also own a building comprised of approximately 6,000 square feet at 95-97 Park Road in Queensbury, New York. These Queensbury facilities house manufacturing, quality assurance and quality control, research and development, and office space functions. We also own approximately four acres of land at 12 and 14 Park Road in Queensbury, New York.
We also own approximately four acres of land at 12 and 14 Park Road in Queensbury, New York. In addition, we sub-lease a facility for office and manufacturing comprised of approximately 2,409 square feet at 19 Mervue, Industrial Park in Galway, Ireland under a lease agreement that expires in August 2026.
In January 2024, we entered into a five-year lease for approximately 18,000 square feet of space at 2 Country Club Road in Queensbury, New York. In addition, we sub-lease a facility for office and manufacturing comprised of approximately 2,409 square feet at 19 Mervue, Industrial Park in Galway, Ireland under a lease agreement that expires in August 2026.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFrom time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties, or injunctions prohibiting us from selling our products or engaging in other activities.
Biggest changeClaims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties, or injunctions prohibiting us from selling our products or engaging in other activities. medac Matter See Note 15 - “ Commitment and Contingencies - Litigation, Claims and Assessments - medac Matter ” for more information. Item 4. Mine Safety Disclosures.
Removed
Item 3. Legal Proceedings. medac GmbH In April 2021, the Company’s wholly-owned subsidiary, Delcath Systems Ltd, issued to medac GmbH, a privately held, multi-national pharmaceutical company based in Germany (“medac”), an invoice for a €1 million milestone payment under a License, Supply and Marketing Agreement dated December 10, 2018 (the “medac Agreement”) between medac and the Company.
Added
Item 3. Legal Proceedings. From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation.
Removed
The medac Agreement provided to medac the exclusive right to market and sell CHEMOSAT in all member states of the European Union, Norway, Liechtenstein, Switzerland and the United Kingdom for which the Company was entitled to a combination of upfront and success-based milestone payments as well as a fixed transfer price per unit of CHEMOSAT and specified royalties.
Added
Not applicable. 46 Table of Contents Part II
Removed
In response to medac’s subsequent dispute and non-payment of the invoice, on October 12, 2021, the Company notified medac in writing that it was terminating the medac Agreement due to medac’s nonpayment of the €1 million milestone payment, with the effective date of termination of the medac Agreement being April 12, 2022. medac disputed having an obligation to make the milestone payment and demanded withdrawal of the termination notice.
Removed
In response to medac’s continued failure to make the milestone payment and its demand for the Company to withdraw its termination notice, on December 16, 2021, we initiated an arbitration proceeding pursuant to the dispute resolution procedures of the medac Agreement.
Removed
Thereafter, on December 30, 2021, we received a letter from medac stating that, due to our failure to withdraw the termination notice, medac was terminating the medac Agreement with immediate effect. In a separate letter, medac agreed to orderly transition through February 28, 2022 in order to minimize the impact of any termination on patients and physicians.
Removed
The Company agreed to purchase inventory held at medac in March 2022 for approximately $0.2 million. As a result of the early termination of the medac Agreement, the Company revised its estimate of the contract life which resulted in an acceleration of $1.742 million of revenue recognition associated with deferred revenue.
Removed
On December 30, 2022, the parties reached a final settlement of the matter and Delcath has agreed pay medac a royalty on sales of CHEMOSAT units over a defined minimum for a period of five years or until a maximum payment has been reached.
Removed
The settlement terms also contain a minimum annual payment of $0.2 million in the event the annual royalty payment does not reach the agreed on minimum payment amount.
Removed
The Company has estimated the settlement to be $1.2 million and recorded $1.0 million it as other liabilities, non-current and $0.2 million as accrued expenses on the Company’s condensed consolidated balance sheet and a $1.2 million charge in selling, general and administrative expenses in the Company’s condensed consolidated statement of operations and comprehensive loss for the year ended December 31, 2022.
Removed
Lachman Consultant Services, Inc. On January 24, 2023, Lachman Consultant Services, Inc (“Lachman”) served the Company with a Complaint alleging that Delcath owes Lachman approximately $0.9 million in unpaid consulting fees plus interest, costs and 53 Table of Contents attorneys’ fees. The lawsuit is Lachman Consultant Services, Inc. v.
Removed
Delcath Systems, Inc., Index No. 650103-2023 (New York Supreme Court, New York County . The Company filed an answer to Lachman’s Complaint on February 22, 2023. On March 17, 2023, Delcath responded to Lachman’s March 3, 2023 Motion for Partial Summary Judgment. On March 20, 2023, the Court denied Lachman’s request that the case be moved into the Commercial Division.
Removed
The current return date of Lachman’s motion for partial summary judgment is March 31, 2023. The dispute arises from a July 22, 2021 agreement between Lachman and Delcath under which Lachman was to provide assistance to the Company in regard to preparing for a FDA inspection and good manufacturing practices, training and support.
Removed
In August 2022, the Company disputed $0.3 million of charges from Lachman. As of December 31, 2022, the Company has accrued $0.9 million as accrued liability on the Company’s condensed consolidated balance sheet. The Company plans to vigorously defend this lawsuit and has reserved its rights to dispute all of Lachman charges as the litigation proceeds.
Removed
The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods. Item 4. Mine Safety Disclosures. Not applicable. 54 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn March 16, 2023, there were approximately 64 holders of record of our common stock based on information furnished by American Stock Transfer and Trust Company, LLC, the transfer agent for our securities. Dividend Policy. The Company has never declared or paid cash dividends on its common stock and has no intention to do so in the foreseeable future.
Biggest changeOn February 29, 2024, there were approximately 57 holders of record of our common stock based on information furnished by Equiniti, LLC, the transfer agent for our securities. Dividend Policy. We have never declared or paid cash dividends on our common stock and have no intention to do so in the foreseeable future.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information. The Company’s common stock, par value $0.01 per share, is traded on the Nasdaq Capital Market under the symbol “DCTH”. Holders.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information. Our common stock, par value $0.01 per share, is traded on The Nasdaq Capital Market under the symbol “DCTH.” Holders.
Removed
On July 18, 2022, the Company and certain accredited investors entered into a securities purchase agreement pursuant to which the Company agreed to sell and issue to the investors in a private placement (i) an aggregate of 690,954 shares of the Company’s common stock at a purchase price of $3.98 per share and (ii) 566,751 pre-funded warrants to purchase common stock at a purchase price of $3.97 per pre-funded warrant.
Added
Furthermore, the terms of the Avenue Loan Agreement contain negative covenants prohibiting us from issuing cash dividends. Recent Sales of Unregistered Securities. See Note 12 - “ Preferred Purchase Agreement ” for more information. Repurchases of Equity Securities. We did not repurchase any shares of our common stock during the fiscal year ended December 31, 2023. Item 6. [Reserved.]
Removed
The pre-funded warrants have an exercise price of $0.01 per share of common stock and are immediately exercisable. Upon the closing of the private placement on July 20, 2022, the Company received gross proceeds of approximately $5.0 million, before the deduction of offering expenses payable by the Company.
Removed
The Company intends to use the net proceeds of the private placement for working capital and other general corporate purposes.
Removed
Based in part upon the representations of the investors in the securities purchase agreement, the offering and sale of the securities was made in reliance on the exemption afforded by Regulation D under the Securities Act of 1933, as amended (the “Securities Act”), and corresponding provisions of state securities or “blue sky” laws.
Removed
The sale of the securities did not involve a public offering and was made without general solicitation or general advertising.
Removed
The investors represented that they are accredited investors, as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and that they were acquiring the securities for investment purposes only and not with a view to any resale, distribution or other disposition of the securities in violation of the U.S. federal securities laws.
Removed
On December 7, 2022, the Company and certain accredited investors entered into a securities purchase agreement pursuant to which the Company agreed to sell and issue to the investors in a private placement (i) an aggregate of 1,448,889 shares of the Company’s common stock at a purchase price of $2.90 per share, and (ii) 692,042 pre-funded warrants to purchase common stock at a purchase price of $2.89 per pre-funded warrant.
Removed
The pre-funded warrants have an exercise price of $0.01 per share of common stock and are immediately exercisable. Upon the closing of the private placement on December 13, 2022, the Company received gross proceeds of approximately $6.2 million, before the deduction of offering expenses payable by the Company.
Removed
The Company intends to use the net proceeds of the private placement for working capital and other general corporate purposes.
Removed
Based in part upon the representations of the investors in the securities purchase agreement, the offering and sale of the securities was made in reliance on the exemption afforded by Regulation D under the Securities Act and/or Regulation S under the Securities Act inasmuch as certain investors are not a “U.S. person” (as defined in Rule 902 under the Securities Act) and the requirements of Rule 903 under the Securities Act are otherwise met, and corresponding provisions of state securities or “blue sky” laws.
Removed
The sale of the securities did not involve a public offering and was made without general solicitation or general advertising.
Removed
The investors represented that they are accredited investors, as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and that they were acquiring the securities for investment purposes only and not with a view to any resale, distribution or other disposition of the securities in violation of the U.S. federal securities laws.
Removed
The Company did not repurchase any shares of our common stock during the fourth quarter of the fiscal year ended December 31, 2022. 55 Table of Contents EQUITY COMPENSATION PLAN INFORMATION The following table sets forth information as of December 31, 2022 with respect to compensation plans (including individual compensation arrangements) under which shares of common stock of the Company are authorized for issuance.
Removed
Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Plan category (a) (b) (c) Equity compensation plans approved by security holders 1,604,053 $ 9.67 870,508 Equity compensation plans not approved by security holders (1) 630,999 $ 11.89 0 Total 2,235,052 $ 10.30 870,508 (1) Includes (a) stock options for an aggregate of 499 shares of Common Stock issued under the Company’s 2019 Equity Incentive Plan, which allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards to the Company’s officers, directors, employees, consultants, and advisors, including options to purchase shares of common stock at exercise prices not less than 100% of fair value on the dates of grant.
Removed
As of November 2, 2020, no additional grants may be made under this plan, which has been superseded by the Company’s 2020 Omnibus Equity Incentive Plan; however, outstanding awards granted under this plan will remain outstanding and continue to be administered in accordance with the terms of this plan and the applicable award agreements;(b) pursuant to an employment agreement dated as of August 31, 2020 between the Company and Gerard Michel, the Company’s Chief Executive Officer, on October 1, 2020, a nonqualified and non-plan stock option “inducement award” to purchase 498,000 shares of the Company’s common stock in reliance on Nasdaq Rule 5635(c)(4) pursuant to the terms of a stock option award agreement between the Company and Mr.
Removed
Additional information about this stock option award will be included in the Company’s proxy statement for its 2023 annual meeting of stockholders under the heading “Gerard Michel Employment Agreement”;(c) new hire inducement awards to purchase 132,500 shares of the Company’s common stock in reliance on Nasdaq Rule 5635(c)(4) pursuant to the terms of a stock option award agreement between the Company and five employees hired during 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

32 edited+24 added−42 removed2 unchanged
Biggest changeOur future liquidity and capital requirements will depend on numerous factors, including the initiation and progress of clinical trials and research and product development programs; obtaining regulatory approvals and complying with applicable laws and regulations; the timing and effectiveness of product commercialization activities, including marketing arrangements; the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and the effect of competing technological and market developments.
Biggest changeOur future liquidity and capital requirements will depend on numerous factors, including our ability to successfully commercialize HEPZATO and CHEMOSAT; the cost of and our ability to obtain additional regulatory approvals for HEPZATO and CHEMOSAT in additional jurisdictions and for additional indications; our ability to build a commercial infrastructure for HEPZATO for the treatment of mUM in the United States; obtaining regulatory approvals and complying with applicable laws and regulations; the timing and effectiveness of product commercialization activities, including marketing arrangements; our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure; the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and the effect of competing technological and market developments.
In Europe, the hepatic delivery system is a stand-alone medical device having the same device components as HEPZATO but without the melphalan hydrochloride and is approved for sale under the trade name CHEMOSAT Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers of the liver.
In Europe, the hepatic delivery system is a stand-alone medical device having the same device components as HEPZATO KIT, but without the melphalan hydrochloride and is approved for sale under the trade name CHEMOSAT Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers in the liver.
We have historically funded our operations primarily with proceeds from sales of common stock, warrants and prefunded warrants for the purchase of our common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements.
We have historically funded our operations primarily with proceeds from sales of common stock, warrants and prefunded warrants for the purchase of common stock and from the exercise of such warrants, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements.
In the United States, HEPZATO is considered a combination drug and device product and is regulated as a drug by the United States Food and Drug Administration, or the FDA. Primary jurisdiction for regulation of HEPZATO has been assigned to the FDA’s Center for Drug Evaluation and Research.
In the United States, HEPZATO is considered a combination drug and device product and is regulated as a drug by the FDA. Primary jurisdiction for regulation of HEPZATO has been assigned to the FDA’s Center for Drug Evaluation and Research.
The increase is primarily due to higher expenses for preparation of the pre-NDA meeting in April 2022 and increased third party expenses related to the NDA resubmission which occurred on February 14, 2023.
The decrease is primarily due to higher expenses for preparation of the pre-NDA meeting in April 2022 and increased third party expenses throughout 2022 related to the NDA resubmission which occurred on February 14, 2023.
Valuation of stock options generally requires certain assumptions, including the fair value of our common stock (generally an observable market price, as our common stock is publicly traded), the expected term of the financial instrument (judgment is required), the expected volatility of our common stock over the expected term (generally estimated by reference to the historical volatility of our common stock), our expected dividend rate over the expected term (currently estimated as zero, given that we are not projecting profits over the intermediate term) and the expected risk-free rate over the expected term (generally estimated by reference to United States treasury instruments with similar remaining terms).
Stock Based Compensation Valuation of stock options generally requires certain assumptions, including the fair market value of our common stock (generally an observable market price, as our common stock is publicly traded), the expected term of the financial instrument (judgment is required), the expected volatility of our common stock over the expected term (generally estimated by reference to the historical volatility of our common stock), our expected dividend rate over the expected term (currently estimated as zero, given that we are not projecting profits over the intermediate term) and the expected risk-free rate over the expected term (generally estimated by reference to U.S. treasury instruments with similar remaining terms).
Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs in isolation may result in a significantly lower or higher fair value measurement.
Increases or decreases in projected financial targets and probabilities of payment may result in significant changes in the fair value measurements. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs in isolation may result in a significantly lower or higher fair value measurement.
Cost of Goods Sold During the year ended December 31, 2022, cost of goods sold was relatively flat at $0.7 million for both 2022 and 2021.
Cost of Goods Sold During the year ended December 31, 2023, cost of goods sold was relatively flat between $0.6 million and $0.7 million for both 2023 and 2022.
The FDA has granted Delcath six orphan drug designations (five for melphalan in the treatment of patients with ocular (uveal) melanoma, cutaneous melanoma, intrahepatic cholangiocarcinoma, hepatocellular carcinoma, and neuroendocrine tumor indications and one for doxorubicin in the treatment of patients with hepatocellular carcinoma). HEPZATO has not been approved for sale in the United States.
The FDA has granted us six orphan drug designations (five for melphalan in the treatment of patients with ocular (uveal) melanoma, cutaneous melanoma, intrahepatic cholangiocarcinoma, hepatocellular carcinoma, and neuroendocrine tumor indications and one for doxorubicin in the treatment of patients with hepatocellular carcinoma).
During the same period in 2021, we recorded $1.3 million in product revenue and $2.3 million in other revenue. Our product revenues increased $1.2 million primarily due to transitioning to direct selling of CHEMOSAT beginning in March 2022.
During the same period in 2022, we recorded $2.5 million in product revenue and $0.2 million in other revenue. Our product revenues decreased $0.6 million primarily due to transitioning to direct selling of CHEMOSAT beginning in March 2022.
In addition to HEPZATO’s use to treat mOM, we believe that HEPZATO has the potential to treat other liver dominant cancers, such as Metastatic Colorectal Cancer and Cholangiocarcinoma, and plan to begin the study of HEPZATO to treat such conditions in the near future.
In addition to HEPZATO’s use to treat mUM, we believe that HEPZATO has the potential to treat other liver dominant cancers, such as metastatic colorectal cancer, metastatic neuroendocrine tumors, metastatic breast cancer and intrahepatic cholangiocarcinoma, and plan to begin the study of 47 Table of Contents HEPZATO KIT to treat such conditions in the near future.
Our fair value measurements are generally related to a contingent liability and stock-based compensation. Contingent liabilities are re-measured to fair value each reporting period using projected financial targets, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model.
Our fair value measurements are generally related to a contingent liability, warrant liability, a preferred stock offering, investments, and stock-based compensation. Contingent Liabilities Contingent liabilities are re-measured to fair value each reporting period using projected financial targets, discount rates, probabilities of payment, and projected payment dates.
Selling, General and Administrative Expenses For the year ended December 31, 2022, selling, general and administrative expenses increased to $17.3 million from $13.6 million for the year ended December 31, 2021, an increase of $3.7 million or 27%.
Selling, General and Administrative Expenses For the year ended December 31, 2023, selling, general and administrative expenses increased to $22.1 million from $17.3 million for the year ended December 31, 2022, an increase of $4.8 million or 28%.
Our capital commitments past the next twelve months include (a) $0.2 million of lease liabilities; (b) $1.0 million for settlement of litigation with medac; (c) $3.4 million of loan principal payments; and (d) $5.0 million of convertible note principal payments, if the holders do not elect to convert the notes into equity.
Capital Commitments Our capital commitments over the next twelve months include (a) $6.3 million to satisfy accounts payable, accrued expenses, current lease liabilities and current medac settlement and (b) $10.6 million of loan and convertible note principal payments, if the holders do not elect to convert up to $5.0 million of the notes into equity.
Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in 60 Table of Contents pricing the asset or liability.
Fair Value Measurements GAAP emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.
Our most advanced development program is the treatment of ocular melanoma liver metastases, or mOM. We are currently reviewing the incidence, unmet need, available efficacy data and development requirements for a broad set of liver cancers in order to select a portfolio of follow-on indications that will maximize the value of the HEPZATO platform.
We are currently reviewing the incidence, unmet medical need, and development requirements for a broad set of cancers of the liver in order to select a portfolio of follow-on indications that will maximize the value of the HEPZATO KIT.
The Avenue Loan bears interest at an annual rate equal to the greater of (a) the sum of 7.7% plus the prime rate as reported in The Wall Street Journal and (b) 10.95%. The interest rate at December 31, 2022 was 15.2%. The Avenue Loan is secured by all of the Company’s assets globally, including intellectual property.
The Avenue Loan bears interest at an annual rate equal to the greater of (a) the sum of 7.7% plus the prime rate as reported in The Wall Street Journal and (b) 10.95%. The interest rate pursuant to the Avenue Loan on December 31, 2023 was 16.20%.
Other revenues decreased as a result of the amortization of our license agreement with medac, pursuant to which medac had served as our exclusive distributor of CHEMOSAT in the United Kingdom and European Union. On December 30, 2021, medac terminated the license agreement and ceased distribution activities at the end of a mutually agreed transition period on February 28, 2022.
Other revenues decreased as a result of the amortization of our license agreement with medac, pursuant to which medac had served as our exclusive distributor of CHEMOSAT in the United Kingdom and European Union.
We have entered into a Controlled Equity Offering SM Sales Agreement (“ATM Sales Agreement”), with Cantor Fitzgerald & Co. (the “Sales Agent”), pursuant to which we may offer and sell, at our sole discretion through the Sales Agent, shares of our common stock having an aggregate offering price of up to $17.0 million.
(the “Sales Agent”), pursuant to which we may offer and sell, at our sole discretion through the Sales Agent, shares of common stock having an aggregate offering price of up to $17.0 million. To date, we have sold approximately $4.0 million of our common stock, prior to issuance costs, under the ATM Sales Agreement.
Projected financial targets are based on our most recent internal operational budgets and may take into consideration alternate scenarios that could result in more or less profitability for the respective service line. Increases or decreases in projected financial targets and probabilities of payment may result in significant changes in the fair value measurements.
Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected financial targets are based on our most recent internal operational budgets and may take into consideration alternate scenarios that could result in more or less profitability for the respective service line.
Research and Development Expenses For the year ended December 31, 2022, research and development expenses increased to $18.6 million from $13.8 million for the year ended December 31, 2021, an increase of $4.8 million or 35%.
Research and Development Expenses For the year ended December 31, 2023, research and development expenses decreased to $17.5 million from $18.6 million for the year ended December 31, 2022, a decrease of $1.1 million or 6%.
Our clinical development program for HEPZATO is comprised of the FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma (the “FOCUS Trial”), a global registration clinical trial that is investigating objective response rate in metastatic ocular melanoma, or mOM, a type of primary liver cancer.
Our clinical development program for HEPZATO was comprised of the FOCUS Trial, a global registration clinical trial that investigated objective response rate in patients with mUM.
In some cases, these organization do not bill on a timely basis. Management monitors certain key drivers of these costs and estimates accruals in an attempt to properly match expenses incurred with the appropriate reporting period. However, there is judgment involved and the actual billings could be more or less than the estimated accrual. Item 7A.
Accrued Expenses We utilize contract research organizations in order to perform research and development and conduct clinical trials. In some cases, these organizations do not bill on a timely basis. Management monitors certain key drivers of these costs and estimates accruals in an attempt to properly match expenses incurred with the appropriate reporting period.
There are currently patients enrolled in our early access program sites. 57 Table of Contents On February 28, 2022, CHEMOSAT received Medical Device Regulation (MDR) certification under the European Medical Devices Regulation [2017/745/EU], which may be considered by jurisdictions when evaluating reimbursement.
On February 28, 2022, CHEMOSAT received Medical Device Regulation (MDR) certification under the European Medical Devices Regulation (EU) 2017/745, which may be considered by jurisdictions when evaluating reimbursement. As of March 1, 2022, we have assumed direct responsibility for sales, marketing and distribution of CHEMOSAT in Europe.
On August 6, 2021, the Company entered into the Avenue Loan Agreement with Avenue for a term loan in an aggregate principal amount of up to $20 million (the “Avenue Loan”).
No sales were made during the year ending December 31, 2023. Avenue Loan Agreement On August 6, 2021, we entered into the Avenue Loan Agreement with Avenue Venture Opportunities Fund, L.P. (the “Lender,” or “Avenue”), as amended on March 31, 2023, for a term loan in an aggregate principal amount of up to $20.0 million (the “Avenue Loan”).
We are evaluating alternative solutions which management believes does not expose us to significant credit risk or jeopardizes our liquidity. Our future results are subject to substantial risks and uncertainties. We have operated at a loss for our entire history and there can be no assurance that we will ever achieve consistent profitability.
We have operated at a loss for our entire history and there can be no assurance that we will ever achieve or maintain profitability.
Additional details can be found in Note 3 to the Company’s audited consolidated financial statements contained in this Annual Report on Form 10-K. Fair Value Measurements GAAP emphasizes that fair value is a market-based measurement, not an entity-specific measurement.
Certain critical accounting estimates have a significant impact on amounts reported in the consolidated financial statements. A summary of those critical accounting estimates is below. Additional details can be found in Note 3 to our audited consolidated financial statements contained in this Annual Report on Form 10-K.
During the years ended December 31, 2022 and 2021, the Company used $25.0 million and $22.6 million respectively, of cash in our operating activities. On March 10, 2023, we had a banking relationship with SVB.
During the years ended December 31, 2023 and 2022, we used $31.3 million and $25.0 million, respectively, of cash in our operating activities, and $6.3 million and $0.7 million, respectively, for principal payments of outstanding debt. Our future results are subject to substantial risks and uncertainties.
Interest Expense, Net For the year ended December 31, 2022, we recognized $2.7 million of interest expense, as compared to $1,2 million in the prior year, an increase of $1.5 million. The increase primarily relates to a full year of interest expense and amortization of debt discount associated with the Avenue loan which commenced on August 6, 2021.
The increase is primarily due to increased headcount and higher costs incurred to prepare for the commercialization of HEPZATO in the United States in 2023. Interest Expense, Net For the year ended December 31, 2023 , we recognized $1.4 million of interest expense, as compared to $2.7 million in the prior year, a decrease of $1.3 million.
As of March 1, 2022, we have assumed direct responsibility for sales, marketing and distribution of CHEMOSAT in Europe. Liquidity and Capital Resources At December 31, 2022, we had cash, cash equivalents and restricted cash totaling $11.8 million, as compared to cash, cash equivalents and restricted cash totaling $27.0 million at December 31, 2021.
Liquidity and Capital Resources On December 31, 2023, we had cash, cash equivalents and restricted cash totaling $12.7 million and short-term investments totaling $19.8 million, as compared to cash, cash equivalents and restricted cash totaling $11.8 million on December 31, 2022.
On March 15, 2023, the Company returned to Avenue the $4.0 million held in the restricted cash to paydown a portion of the outstanding loan balance. 58 Table of Contents We also expect to use cash and cash equivalents to fund our potential approval of HEPZATO from the FDA, commercialization of HEPZATO and CHEMOSAT and any future clinical research trials and operating activities.
On March 15, 2023, we returned to Avenue $4.0 million held in the restricted cash to pay down a portion of the outstanding loan balance, principal payments of $2.1 million and an incremental 4.25% of the final payment of $0.2 million.
Overview We are an interventional oncology company focused on the treatment of primary and metastatic liver cancers. Our lead product candidate, the HEPZATO ® KIT (melphalan hydrochloride for injection/hepatic delivery system), or HEPZATO, is a drug/device combination product designed to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects.
Overview We are an interventional oncology company focused on the treatment of primary and cancers metastatic to the liver.
Removed
We believe that the disease states we are investigating and intend to investigate are unmet medical needs that represent significant market opportunities. In December 2021, the Company announced that the FOCUS Trial for HEPZATO met its pre-specified endpoint. For information on the FOCUS Trial, see “Part I, Item 1. Business—Clinical Development Program—The FOCUS Trial”.
Added
Our lead product, the HEPZATO KIT (“HEPZATO” melphalan for Injection/Hepatic Delivery System), a drug/device combination product, was approved by the FDA on August 14, 2023 indicated as a liver-directed treatment for adult patients with uveal melanoma with unresectable hepatic metastases affecting less than 50% of the liver and no extrahepatic disease, or extrahepatic disease limited to the bone, lymph nodes, subcutaneous tissues, or lung that is amenable to resection or radiation.
Removed
On February 14, 2023 we filed a New Drug Application resubmission to the US Food and Drug Administration (the FDA) for the HEPZATO Kit (melphalan hydrochloride for Injection/Hepatic Delivery System) seeking approval of the HEPZATO Kit in the treatment of patients with unresectable hepatic-dominant metastatic ocular melanoma, or mOM.
Added
We believe that those and similar disease states are areas of unmet medical needs that represent significant market opportunities. We have sufficient raw material and component constituent parts of HEPZATO KIT to meet the first year of our anticipated demand and we intend to manage supply chain risk through stockpiled inventory and contracting with multiple suppliers for critical components.
Removed
On March 20, 2023, the FDA determined the resubmission constituted a complete response and set a Prescription Drug User Fee Act target action date of August 14, 2023.
Added
Funding Requirements If there is a substantial delay in the activation of sites approved to administer HEPZATO, we expect to need to raise additional capital under structures available to us, including debt and/or equity offerings, which may not be on terms favorable to us.
Removed
The resubmission is in response to a September 12, 2013 Complete Response Letter, or CRL, from the FDA for the Company’s NDA in December 2010 seeking approval of its first generation melphalan hydrochloride for injection/hepatic delivery system. The NDA resubmission contains comprehensive data and information on Generation Two HEPZATO Kit relating to the matters identified in the CRL.
Added
In a substantially delayed site activation scenario, we will not have sufficient funds to meet our obligations within twelve months from the issuance date of these condensed consolidated financial statements. As such, there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern.
Removed
On March 20, 2023, the FDA determined the resubmission constituted a complete response and set a Prescription Drug User Fee Act target action date of August 14, 2023. We continue to promote our early access programs in the United States to make HEPZATO readily available to mOM patients.
Added
Debt financing and 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.
Removed
We are focused on continuing to treat these patients with mOM as regulatory approval is sought in the United States.
Added
If we raise funds through collaborations, or other similar 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 and/or may reduce the value of our common stock.
Removed
As of the closure of SVB on March 10, 2023, we held approximately $1.1 million of unrestricted cash in deposits held in SVB, $4.0 million held in a restricted SVB account as required per the Avenue Loan Agreement and approximately $0.2 million of restricted cash held in SVB collateral accounts as required per our line of credit for the property in New York City and our credit card program with SVB.
Added
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 our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Removed
SVB was closed on March 10, 2023 by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. On March 12, 2023, the U.S. Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023.
Added
We also expect to use cash and cash equivalents to fund activities relating to commercial support for HEPZATO, CHEMOSAT and any future clinical research trials and operating activities.
Removed
On March 13, 2023, we were able to access all of our cash, cash equivalents and investments held at or through SVB.
Added
Additional capital commitments beyond the next twelve months include (a) $0.8 million for settlement of litigation with medac and (b) less than $0.1 million of lease liabilities. 48 Table of Contents Sources of Liquidity ATM Sales Agreement We entered into a Controlled Equity Offering SM Sales Agreement (“ATM Sales Agreement”), with Cantor Fitzgerald & Co.
Removed
While we have not experienced any losses in such accounts, the recent failure of SVB exposed us to significant credit risk prior to the completion by the FDIC of the resolution of SVB in a manner that fully protected all depositors.
Added
The Avenue Loan is secured by all of our assets globally, including intellectual property. The Avenue Loan matures on August 1, 2024.
Removed
To date, we have sold approximately $4.0 million of our common stock, prior to issuance costs, under the ATM Sales Agreement. We will need to raise additional capital under structures available to us, including debt and/or equity offerings.
Added
On March 31, 2023, we reached an agreement to amend the existing loan agreement with Avenue to defer the interest only period to September 30, 2023 with an additional extension option upon the FDA approval for the HEPZATO KIT and subsequent receipt of at least $10 million from the sale and issuance of equity securities.
Removed
These circumstances raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Our financial statements do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
Added
In exchange for this extension, the Company agreed to provide Avenue with 34,072 warrants to purchase shares of common stock. The exercise price of the warrants is $0.01. On August 14, 2023, the Company received the FDA approval for the HEPZATO KIT and subsequently received over $10 million from the exercise of warrants.
Removed
Our ability to continue as a going concern depends on our ability to raise additional capital through the sale of equity or debt securities, or through partnering or licensing transactions in which we receive cash to support our future operations.
Added
At our option, we elected to extend the interest only period to December 31, 2023. Principal payments of approximately $1.0 million began in January 2024.
Removed
If we are unable to secure additional capital or if additional capital is not available on favorable terms for us, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash.
Added
Private Placements, Common Offering and Warrants On March 27, 2023, we entered into a securities purchase agreement with certain accredited investors (the “Preferred Purchase Agreement”), pursuant to which we agreed to issue and sell, in a private placement (the “Series F Preferred Offering”), (i) 24,900 shares of our Series F-1 Convertible Preferred Stock, par value $0.01 per share (the “Series F-1 Preferred Stock”), (ii) tranche A warrants (the “Preferred Tranche A Warrant”) to acquire 34,859 shares of Series F-3 Convertible Preferred Stock, par value $0.01 per share (the “Series F-3 Preferred Stock”) and (iii) tranche B warrants (the “Preferred Tranche B Warrant,” together with the Preferred Tranche A Warrant, the “Preferred Warrants”) to acquire 24,900 shares of Series F-4 Convertible Preferred Stock, par value $0.01 per share (the “Series F-4 Preferred Stock”) for an aggregate offering price of $24.9 million before deducting the fees paid to the placement agent and the financial advisors and other financing expenses payable by us.
Removed
Our capital commitments over the next twelve months include (a) $6.9 million to satisfy December 31, 2022 accounts payable, accrued expenses and lease liabilities and (b) $8.6 million of loan principal payments.
Added
Also on March 27, 2023, we entered into a securities purchase agreement with the our Chief Executive Officer, Gerard Michel, pursuant to which we agreed to issue and sell, in a private placement (the “Common Offering”, and together with the Series F Preferred Offering, the “Private Placements”), (i) 19,646 shares of common stock, (ii) tranche A warrants to acquire 31,110 shares of common stock (the “Common Tranche A Warrants”, and together with the Preferred Tranche A Warrants, the “Tranche A Warrants”) and (iii) tranche B warrants to acquire 16,666 shares of common stock (the “Common Tranche B Warrants”, and together with the Preferred Tranche B Warrants, the “Tranche B Warrants”) for an approximate aggregate offering price of $0.1 million.
Removed
The Avenue Loan matures on August 1, 2024. Additional information regarding the Avenue Loan can be found in Note 10 to the Company’s audited consolidated financial statements contained in this Annual Report on Form 10-K.
Added
On June 12, 2023, the stockholders approved the Private Placements at the annual general meeting of stockholders and therefore, the Preferred Warrants and Common Warrants issued in the Private Placements are exercisable. The exercise of all such Preferred Warrants and Common Warrants would generate approximately $60.0 million in proceeds.
Removed
On March 15, 2023, the Company returned to Avenue the $4.0 million held in the restricted cash to paydown a portion of the outstanding loan balance. On July 20, 2022, the Company closed a private placement for the issuance and sale of 690,954 shares of common stock and 566,751 pre-funded warrants to purchase common stock to certain investors.
Added
There can be no guarantee that all such Warrants are ever exercised, and if so, there is no guarantee that we will ever receive the full $60.0 million in proceeds.
Removed
Each share of common stock was sold at a price per share of $3.98 and the pre-funded warrants were sold at a price of $3.97 per pre-funded warrants. pre-funded warrants have an exercise price of $0.01 per share of Common Stock and are immediately exercisable.
Added
During the twelve months ended December 31, 2023, all of the Preferred Tranche A Warrants were exercised for an aggregate exercise price of $34.9 million into 34,859 shares of Series F-3 Preferred Stock and all of the Common Tranche A Warrants were exercised for an aggregate exercise price of $0.1 million into 31,110 shares of common stock.
Removed
The Company received gross proceeds from the private placement of approximately $5.0 million before deducting offering expenses. On December 13, 2022, the Company closed a private placement for the issuance and sale of 1,448,889 shares of common stock and 692,042 pre-funded warrants to purchase common stock to certain investors.
Added
As of December 31, 2023, 46,197 shares of our Series F-1, F-2 and F-3 Preferred Stock were converted into 12,073,145 shares of common stock. 49 Table of Contents Results of Operations Year ended December 31, (In thousands) 2023 2022 Total revenues $ 2,065 $ 2,719 Cost of goods sold (635) (686) Gross profit 1,430 2,033 Research and development expenses 17,502 18,583 Selling, general and administrative expenses 22,110 17,303 Total operating expenses 39,612 35,886 Operating loss (38,182) (33,853) Interest and other income (expense) (9,496) (2,655) Net loss $ (47,678) $ (36,508) Revenue We recorded approximately $2.1 million in product revenue during the year ended December 31, 2023.
Removed
Each share of common stock was sold at a price per share of $2.90 and the pre-funded warrants were sold at a price of $2.89 per pre-funded warrants. The pre-funded warrants have an exercise price of $0.01 per share of Common Stock and are immediately exercisable.
Added
The decrease primarily relates to a reduction in interest expense after we returned $6.3 million to Avenue in the first quarter of 2023.
Removed
The Company received gross proceeds from the private placement of approximately $6.2 million before deducting offering expenses.
Added
The net interest was further positively affected in 2023 due to investing cash received from the Private Placements in March 2023 and the subsequent warrant exercises in August 2023. 50 Table of Contents Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
Removed
Additionally, while the long-term economic impact of either the COVID-19 pandemic or the conflict between Russia and Ukraine is difficult to assess or predict, each of these events has caused significant disruptions to the global financial markets and contributed to a general global economic slowdown.
Added
Warrant Liability The valuation of the warrant liability was determined using option pricing models. These models use inputs such as the underlying price of the shares issued at the measurement date, volatility, risk free interest rate and expected life of the instrument.
Removed
Furthermore, inflation rates, particularly in the United States and the United Kingdom, have increased recently to levels not seen in decades. In addition, the U.S. Federal Reserve has raised, and is expected to further raise, interest rates in response to concerns about inflation.
Added
In addition, we used probabilities of recording at least $10 million in quarterly U.S. revenue from the commercialization of HEPZATO as inputs in the model to determine the fair value of warrants liability. We adjust the fair value of the warranty liability at the end of each reporting period.
Removed
Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks. Recent bank failures may also have an impact on our liquidity and capital resources. For example, on March 10, 2023, the FDIC, took control and was appointed receiver of SVB.
Added
However, there is judgment involved and the actual billings could be more or less than the estimated accrual. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not required. 51 Table of Contents

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