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What changed in Whitehawk Therapeutics, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Whitehawk Therapeutics, 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.

+646 added−648 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-29)

Top changes in Whitehawk Therapeutics, Inc.'s 2023 10-K

646 paragraphs added · 648 removed · 521 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

126 edited+36 added−37 removed272 unchanged
Biggest changeBribery Act of 2010, and other local anti-corruption laws that apply to our international activities; • the federal Physician Payment Sunshine Act (“Open Payments”), and implementing regulations, which require applicable group purchasing organizations and manufacturers of covered drugs, medical devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value made to covered recipients, including licensed physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others), and teaching hospitals, and information regarding ownership and investment interests held by physicians and their immediate family members; • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers or patients; state laws that require pharmaceutical manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm customers, foreign and state laws, including the E.U.
Biggest changeBribery Act of 2010, and other local anti-corruption laws that apply to our international activities; • the federal Physician Payment Sunshine Act (“Open Payments”), and implementing regulations, which require applicable group purchasing organizations and manufacturers of covered drugs, medical devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value made to covered recipients, including licensed physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others), and teaching hospitals, and information regarding ownership and investment interests held by physicians and their immediate family members; • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers or patients; state laws that require pharmaceutical manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm customers; foreign and state laws, including the EU General Data Protection Regulation 30 Table of Contents (“GDPR”) and a version of the GDPR adopted in the United Kingdom (“UK GDPR”), and state laws and regulations, including general legislation such as the California Consumer Protection Act (“CCPA”), and sector- or subject matter-specific laws and regulations, governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
These additional indications may be important drivers of commercial value and we believe that strategic 4 Table of Contents partnerships, particularly in combination therapies, may be an effective means of developing and commercializing these opportunities.
These additional indications may be important drivers of commercial value, and we believe that strategic partnerships, particularly in combination therapies, may be an effective means of developing and commercializing these 4 Table of Contents opportunities.
Ultimately, nab technology allows FYARRO to take advantage of albumin transport pathways to accumulate at high levels in tumors and deliver sirolimus directly to cancer cells where it can effectively inhibit mTOR. The accumulation of albumin in tumors can be easily visualized by using the dye evans blue which has a high affinity for 6 Table of Contents albumin.
Ultimately, nab technology allows FYARRO to take advantage of albumin transport pathways to accumulate at high levels in tumors and deliver sirolimus directly to cancer cells where it can effectively inhibit mTOR. The accumulation of albumin in tumors can be easily visualized by using evans blue dye which has a high affinity for 6 Table of Contents albumin.
Intravenous injection of albumin-evans blue complex in animals bearing tumors resulted in rapid accumulation of the complex within the tumors which could be easily visualized in a few hours after injection.
Intravenous injection of albumin-evans blue complex in animals bearing tumors resulted in rapid accumulation of the complex within the tumors which could be easily visualized a few hours after injection.
FYARRO is composed of nanoparticles of sirolimus bound to human albumin with average size less than 100 nanometers. An artist’s impression of these nanoparticles is shown below. Figure 3 – Nanoparticle artist impression The orally available mTOR inhibitors have poor and variable absorption, often require therapeutic drug monitoring, and have incomplete target suppression.
FYARRO is composed of nanoparticles of sirolimus bound to human albumin with an average size less than 100 nanometers. An artist’s impression of these nanoparticles is shown below. Figure 3 – Nanoparticle artist impression The orally available mTOR inhibitors have poor and variable absorption, often require therapeutic drug monitoring, and have incomplete target suppression.
If our operations, including those of our contractors or agents who conduct business for or on our behalf, are found to be in violation of any of these laws or any other related governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, additional oversight, and reporting obligations if we becomes subject to a corporate integrity agreement or similar settlement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations.
If our operations, including those of our contractors or agents who conduct business for or on our behalf, are alleged or found to be in violation of any of these laws or any other related governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, additional oversight, and reporting obligations if we becomes subject to a corporate integrity agreement or similar settlement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations.
Sirolimus (also known as rapamycin) is an allosteric inhibitor of mTOR, which binds to the 12-kDa FK506-binding protein 12 ("FKBP12"), and the complex directly and strongly inhibits mTORC1. 5 Table of Contents Figure 1 Currently approved mTOR inhibitors are limited in their applicability due to poor and variable absorption of the oral drugs (sirolimus and everolimus) or variable conversion from prodrug to active drug (temsirolimus) and premedication requirements (temsirolimus).
Sirolimus (also known as rapamycin) is an allosteric inhibitor of mTOR, which binds to the 12-kDa FK506-binding protein 12 ("FKBP12"), and the complex directly and strongly inhibits mTORC1. 5 Table of Contents Figure 1 – mTOR Pathway Currently approved mTOR inhibitors are limited in their applicability due to poor and variable absorption of the oral drugs (sirolimus and everolimus) or variable conversion from prodrug to active drug (temsirolimus) and premedication requirements (temsirolimus).
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters, or untitled letters; • clinical holds on post-approval or Phase 4 clinical studies, if applicable; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; 24 Table of Contents • product seizure or detention, or refusal to permit the import or export of products; • consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs; • mandated modification of promotional materials and labeling and the issuance of corrective information; • the issuance of safety alerts, Dear Healthcare Provider letters, press releases, and other communications containing warnings or other safety information about the product; or • injunctions or the imposition of civil or criminal penalties The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; 23 Table of Contents • fines, warning letters, or untitled letters; • clinical holds on post-approval or Phase 4 clinical studies, if applicable; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; • consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs; • mandated modification of promotional materials and labeling and the issuance of corrective information; • the issuance of safety alerts, Dear Healthcare Provider letters, press releases, and other communications containing warnings or other safety information about the product; or • injunctions or the imposition of civil or criminal penalties The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Nanoparticle Albumin-Bound (nab) Technology The nanoparticle albumin-bound, or nab, technology was created and developed by Neil Desai, our founder and Executive Chairman, and former colleagues while at Abraxis Bioscience. This technology takes advantage of the protein albumin, a natural carrier of water insoluble molecules (e.g., various nutrients, vitamins and hormones) found in humans.
Nanoparticle Albumin-Bound (nab) Technology The nanoparticle albumin-bound, or nab , technology was created and developed by Neil Desai, our founder and Executive Chairman, and former colleagues while at Abraxis Bioscience, LLC. This technology takes advantage of the protein albumin, a natural carrier of water insoluble molecules (e.g., various nutrients, vitamins and hormones) found in humans.
If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to similar actions, penalties, and sanctions, which may also adversely affect our business.
If any of the physicians or other healthcare providers or entities with whom we expect to do business is alleged or found to be not in compliance with applicable laws, they may be subject to similar actions, penalties, and sanctions, which may also adversely affect our business.
Federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: • FDA, Department of Justice, and other government authority prohibitions against the advertisement, promotion and labeling of our products for off-label uses, or uses outside the specific indications approved by the FDA; 30 Table of Contents • the federal Anti-Kickback Statute, which broadly prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as Medicare or Medicaid.
Federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: • FDA, Department of Justice, and other government authority prohibitions against the advertisement, promotion and labeling of our products for off-label uses, or uses outside the specific indications approved by the FDA; • the federal Anti-Kickback Statute, which broadly prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as Medicare or Medicaid.
Post-Marketing Requirements Following approval of a new drug, a pharmaceutical company and the approved drug are subject to continuing regulation by the FDA, including, among other things, establishment registration and drug listing, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the drug, providing the regulatory authorities with updated safety and efficacy information, drug sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling, limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet.
Post-Marketing Requirements Following approval of a new drug, a pharmaceutical company and the approved drug are subject to continuing regulation by the FDA, including, among other things, establishment registration and drug listing, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the drug, providing the regulatory authorities with updated safety and efficacy information, drug sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, 22 Table of Contents restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling, limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet.
At 1.5-years of follow-up after the primary analysis date (i.e., 2-years after the last patient-initiated treatment), 7 of 12 responders were still receiving treatment and the median DOR was still not reached, with 50% of patients exceeding 2.5 years (DOR range 5.6, 47.2+ months). 10 Table of Contents Figure 6 shows the target tumor responses (waterfall plot).
At 1.5-years of follow-up after the primary analysis date 12 Table of Contents (i.e., 2-years after the last patient-initiated treatment), 7 of 12 responders were still receiving treatment and the median DOR was still not reached, with 50% of patients exceeding 2.5 years (DOR range 5.6, 47.2+ months). Figure 9 shows the target tumor responses (waterfall plot).
The relevant European legislation provides that a product can be designated as an orphan drug by the European Commission if its sponsor can establish: that the product is intended for the diagnosis, prevention, or treatment of (1) a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union when the application is made, or (2) a life-threatening, seriously debilitating, or serious and chronic condition in the European Union and that without incentives it is unlikely that the marketing of the product in the European Union would generate sufficient return to justify the necessary investment.
The relevant European legislation provides that a product can be designated as an orphan drug by the European Commission if its sponsor can establish: that the product is intended for the diagnosis, prevention, or 24 Table of Contents treatment of (1) a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union when the application is made, or (2) a life-threatening, seriously debilitating, or serious and chronic condition in the European Union and that without incentives it is unlikely that the marketing of the product in the European Union would generate sufficient return to justify the necessary investment.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 35 Table of Contents
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 34 Table of Contents
These drugs have a narrow therapeutic index and a reduction from the labelled dose can result in a decrease in efficacy. Preclinical study comparisons with FYARRO showed significantly higher tumor uptake, greater downstream mTOR target suppression and increased suppression of tumor growth for FYARRO compared to the oral mTOR inhibitors.
These drugs have a narrow therapeutic index and a reduction from the labelled dose can result in decreased efficacy. Preclinical study comparisons with FYARRO showed significantly higher tumor uptake, greater downstream mTOR target suppression and increased suppression of tumor growth for FYARRO compared to the oral mTOR inhibitors.
Only one patent among those eligible for an extension and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and in certain other jurisdictions to extend the term of a patent that covers an approved drug.
Only one patent among those eligible for an extension and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and in certain other jurisdictions to extend the term of a patent that covers an approved dr ug.
Figure 8 – Waterfall plot of Maximum Reduction in Target Lesions, Two-year Follow-up (Wagner et al., JCO 2021) *A patient with unconfirmed PR is considered having SD as best response (trial required confirmation of responses per RECIST v1.1).
Figure 7 – Waterfall plot of Maximum Reduction in Target Lesions, Two-year Follow-up (Wagner et al., JCO 2021) *A patient with unconfirmed PR is considered having SD as best response (trial required confirmation of responses per RECIST v1.1).
TSC1 and TSC2 Alterations. An exploratory mutational analysis was conducted on patients treated with FYARRO in the AMPECT study in advanced malignant PEComa. In 25 patients with available mutational analysis, TSC1 or TSC2 alterations were found in 14 patients (56%). In this subset of patients with TSC1 or TSC2 alterations, the response rate was 64% (9/14) (Figure 8).
TSC1 and TSC2 Alterations. An exploratory mutational analysis was conducted on patients treated with FYARRO in the AMPECT study in advanced malignant PEComa. In 25 patients with available mutational analysis, TSC1 or TSC2 alterations were found in 14 patients (56%). In this subset of patients with TSC1 or TSC2 alterations, the response rate was 64% (9/14) (Figure 10).
With respect to our licensed patents, we have exclusive, sublicensable rights to certain patents and patent applications relating to FYARRO under our license agreement with BMS . As of December 31, 2022, we licensed five (5) issued U.S. patents with composition of matter and method of use claims covering FYARRO.
With respect to our licensed patents, we have exclusive, sublicensable rights to certain patents and patent applications relating to FYARRO under our license agreement with BMS . As of December 31, 2023, we licensed five (5) issued U.S. patents with composition of matter and method of use claims covering FYARRO.
Figure 2 – Albumin Accumulation Our Product FYARRO ® ( nab -sirolimus, sirolimus protein-bound particles for injectable suspension (albumin-bound)) FYARRO is a form of sirolimus bound to albumin. Sirolimus is a potent inhibitor of the mTOR biological pathway and inhibits downstream signaling from mTOR, which can promote tumor growth.
Figure 2 – Albumin Accumulation Our Product FYARRO ® ( sirolimus protein-bound particles for injectable suspension (albumin-bound)) FYARRO is a form of sirolimus bound to albumin. Sirolimus is a potent inhibitor of the mTOR biological pathway and inhibits downstream signaling from mTOR, the activation of which can promote tumor growth.
The price of FYARRO will be fixed, subject to the ability of Fresenius Kabi to increase pricing under specified circumstances. We have an obligation to purchase certain minimum quantities of FYARRO. Failure to purchase those minimum quantities will result in an additional payment from us to Fresenius Kabi.
The price of FYARRO is fixed, subject to the ability of Fresenius Kabi to increase pricing under specified circumstances. We have an obligation to purchase certain minimum quantities of FYARRO. Failure to purchase those minimum quantities will result in an additional payment from us to Fresenius Kabi.
Information contained in our website does not constitute a part of this Annual Report on Form 10-K or any of our other filings with the SEC unless specifically incorporated herein by reference. In addition, our filings with the SEC may be 34 Table of Contents accessed through the SEC’s Electronic Data Gathering, Analysis, and Retrieval system at http://www.sec.gov.
Information contained in our website does not constitute a part of this Annual Report on Form 10-K or any of our other filings with the SEC unless specifically incorporated herein by reference. In addition, our filings with the SEC may be accessed through the SEC’s Electronic Data Gathering, Analysis, and Retrieval system at http://www.sec.gov.
We also licensed many pending U.S. applications and related pending applications in Europe, Australia, North America, South America, Africa, and Asia. The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained.
We also own or licensed many pending U.S. applications and related pending applications in Europe, Australia, North America, South America, Africa, and Asia. The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained.
With regard to a fast track product, the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.
With regard to a fast track product, the FDA may consider for review sections of the NDA on a 21 Table of Contents rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.
The CCPA will require covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information. The CCPA went into effect on January 1, 2020 and became enforceable by the California Attorney General on July 1, 2020.
The CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information. The CCPA went into effect on January 1, 2020 and became enforceable by the California Attorney General on July 1, 2020.
Under the current regime, all suspected unexpected serious adverse reactions 32 Table of Contents to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the member state where they occurred. In 2014, a new Clinical Trials Regulation 536/2014 (“Clinical Trials Regulation”), replacing the current Directive, was adopted.
Under the current regime, all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the member state where they occurred. In 2014, a new Clinical Trials Regulation 536/2014 (“Clinical Trials Regulation”), replacing the current Directive, was adopted.
Figure 12 FYARRO in combination with KRAS G12C inhibitors for KRAS G12C -mutated cancer xenografts In 2022, we conducted preclinical studies to investigate the antitumor activity of mTOR inhibitors, FYARRO or everolimus, in combination with KRAS G12C inhibitors, sotorasib or adagrasib, in KRAS G12C-mutated cancer xenografts.
FYARRO in combination with KRAS G12C inhibitors for KRAS G12C -mutated cancer xenografts In 2022, we conducted preclinical studies to investigate the antitumor activity of mTOR inhibitors, FYARRO or everolimus, in combination with KRAS G12C inhibitors, sotorasib or adagrasib, in KRAS G12C-mutated cancer xenografts.
The process required by the FDA before a drug may be marketed in the U.S. generally involves the following: • completion of extensive preclinical, sometimes referred to as nonclinical, laboratory tests, animal studies, and formulation studies all performed in accordance with applicable regulations, including the FDA’s good laboratory practice (“GLP”) regulations; • submission to the FDA of an investigational new drug application (“IND”), which must become effective before human clinical trials may begin and must be updated annually and amended in accordance with the regulations; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND and other clinical trial-related regulations, sometimes referred to as good clinical practices (“GCPs”), to establish the safety and efficacy of the proposed drug for its proposed indication(s); • submission to the FDA of an NDA for a new drug; • 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 facility or facilities at which the active pharmaceutical ingredient (“API”) and finished drug product are produced to assess compliance with the FDA’s current good manufacturing practice requirements (“cGMP”); • potential FDA audit of the testing laboratories and clinical trial sites that generated the data in support of the NDA; and • FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the U.S.
The process required by the FDA before a drug may be marketed in the U.S. generally involves the following: • completion of extensive preclinical, sometimes referred to as nonclinical, laboratory tests, animal studies, and formulation studies all performed in accordance with applicable regulations, including the FDA’s good laboratory practice (“GLP”) regulations; • submission to the FDA of an investigational new drug application (“IND”), which must become effective before human clinical trials may begin and must be updated annually and amended in accordance with the regulations; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND and other clinical trial-related regulations, sometimes referred to as good clinical practices (“GCPs”), to establish the safety and efficacy of the proposed drug for its proposed indication(s); • submission to the FDA of an NDA for a new drug; • 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 facility or facilities at which the active pharmaceutical ingredient (“API”) and finished drug product are produced to assess compliance with the FDA’s current good manufacturing practice requirements (“cGMP”); • potential FDA audit of the testing laboratories and clinical trial sites that generated the data in support of the NDA; and • FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the U.S. 18 Table of Contents Prior to beginning a clinical trial with a product candidate in the United States, companies must submit an IND to the FDA.
We also intend to seek patent term extensions in any jurisdictions where they are available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.
We also intend t o seek patent term extensions in any jurisdictions where they are available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.
In addition to patent protection, we also rely on trade secret protection for our proprietary information that is not amenable to, or that we do not consider appropriate for, patent protection, including, for example, certain aspects of our 16 Table of Contents manufacturing processes for the nanoparticle compositions. However, trade secrets can be difficult to protect.
In addition to patent protection, we also rely on trade secret protection for our proprietary information that is not amenable to, or that we do not consider appropriate for, patent protection, including, for example, certain aspects of our manufacturing processes for the nanoparticle compositions. However, trade secrets can be difficult to protect.
For either of these conditions, the applicant must also demonstrate that there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has been authorized in the European Union or, if such method exists, the product has to be of significant 25 Table of Contents benefit compared to products available for the condition.
For either of these conditions, the applicant must also demonstrate that there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has been authorized in the European Union or, if such method exists, the product has to be of significant benefit compared to products available for the condition.
Other Healthcare Laws For our product and any product candidates that obtain regulatory approval and are marketed in the United States, our arrangements, directly or indirectly, with third-party payors, healthcare providers, and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute any products for which we obtain marketing approval.
Other Healthcare Laws For our product and any product candidates that obtain regulatory approval and are marketed in the United States, our arrangements, directly or indirectly, with third-party payors, healthcare providers, and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial 29 Table of Contents arrangements and relationships through which we market, sell, and distribute any products for which we obtain marketing approval.
The principal purposes of our equity incentive plans are to attract, retain and reward personnel through the granting of equity-based compensation awards in order to increase shareholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
The principal purposes of our equity incentive plans are to attract, retain and reward personnel through 33 Table of Contents the granting of equity-based compensation awards in order to increase shareholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
Regulatory Matters Manufacturing, sales, promotion, and other activities following drug approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services (“CMS”), other divisions of the U.S.
Regulatory Matters Manufacturing, sales, promotion, and other activities following drug approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid 25 Table of Contents Services (“CMS”), other divisions of the U.S.
We expect to continue to evaluate options to cost-effectively produce FYARRO at contract manufacturing facilities. We generally expect to rely on third parties for the manufacture or development of any companion diagnostics if we are required to do so in the future for FYARRO.
We expect to continue to evaluate options to cost-effectively produce FYARRO at contract manufacturing facilities. 17 Table of Contents We generally expect to rely on third parties for the manufacture or development of any companion diagnostics if we are required to do so in the future for FYARRO.
A product is eligible for priority review if it has the potential to provide safe and effective therapy where no 22 Table of Contents satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis, or prevention of a disease compared to marketed products.
A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis, or prevention of a disease compared to marketed products.
We cannot 29 Table of Contents predict how future litigation, healthcare reform measures of the Biden administration, or what other regulations will ultimately be implemented at the federal or state level, or the effect of any future legislation or regulation may have on our business.
We cannot predict how future litigation, healthcare reform measures of the Biden administration, or what other regulations will ultimately be implemented at the federal or state level, or the effect of any future legislation or regulation may have on our business.
In January 2021, President Biden also issued an executive order to initiate a special enrollment period to allow people to obtain health insurance coverage through the ACA marketplace and instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, among others.
In January 2021, President Biden also issued an executive order to initiate a special enrollment period 28 Table of Contents to allow people to obtain health insurance coverage through the ACA marketplace and instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, among others.
Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the Patient Protection and Affordable Care Act as amended by 26 Table of Contents the Health Care and Education Reconciliation Act of 2010 (the “ACA”).
Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (the “ACA”).
This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the 20 Table of Contents investigational drug or, as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.
This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the investigational drug or, as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.
We have completed a Type B meeting with the FDA in which we discussed the trial design with the FDA. The PRECISION 1 trial was opened for enrollment in the United States during the first quarter of 2022 and the first patient was dosed in March 2022.
We have completed a Type B meeting with the FDA in which we discussed the trial design with the FDA. The PRECISION1 trial opened for enrollment in the United States during the first quarter of 2022 and the first patient was dosed in March 2022.
We have built capabilities in the United States to commercialize our products. Outside the United States, we intend to selectively evaluate strategic partnerships with partners whose development and commercial capabilities complement our own. Our management team has extensive experience in the discovery, development, and commercialization of cancer therapeutics, including in senior roles at leading oncology companies.
Outside the United States, we intend to selectively evaluate strategic partnerships with partners whose development and commercial capabilities complement our own. Our management team has extensive experience in the discovery, development, and commercialization of cancer therapeutics, including in senior roles at leading oncology companies.
We conducted these studies to determine the utility of a combination of the mTOR inhibitor nab-sirolimus and KRAS inhibitors, which could have synergistic potential in the treatment of 15 Table of Contents KRAS mutated cancers.
We conducted these studies to determine the utility of a combination of the mTOR inhibitor nab- sirolimus and KRAS inhibitors, which could have synergistic potential in the treatment of KRAS mutated cancers.
Furthermore, an independent review board ("IRB") for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial 19 Table of Contents and its informed consent form before the clinical trial begins at that site and must monitor the study until completed.
Furthermore, an independent review board ("IRB") for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed.
Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results.
Adoption of price controls and cost-containment measures, and 26 Table of Contents adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results.
The disease is often treated with the cytotoxic chemotherapy regimens used in soft tissue sarcomas, which have shown only modest benefit for malignant PEComa. PEComas commonly show evidence of mTORC1 activation at least in part due to loss-of-function mutations in or deletions of the TSC1 or TSC2 genes.
FYARRO is the first FDA approved treatment specifically for malignant PEComa. The disease is often treated with the cytotoxic chemotherapy regimens used in soft tissue sarcomas, which have shown only modest benefit for malignant PEComa. PEComas commonly show evidence of mTORC1 activation due at least in part to loss-of-function mutations in or deletions of the TSC1 or TSC2 genes.
FDORA made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.
The Food and Drug Omnibus Reform Act made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.
For FYARRO, we are initially targeting advanced malignant PEComa, an ultra-rare sarcoma with no approved therapies other than FYARRO.
For FYARRO, we initially targeted advanced malignant PEComa, an ultra-rare sarcoma with no approved therapies other than FYARRO.
The first issued U.S. patent is expected to expire in 2029, and the other four are expected to expire in 2030, 2036, 2036 and 2040, respectively. In addition, we licensed related patents in Europe, Australia, North America, South America, and Asia that are expected to expire between 2023 and 2037.
The first issued U.S. patent is expected to expire in 2029, and the other four are expected to expire in 2030, 2036, 2036 and 2040, respectively. In addition, we licensed related patents in Europe, Australia, North America, South America, and Asia that are expected to expire between 15 Table of Contents 2026 and 2037.
Patients with metastatic or inoperable locally advanced disease were treated with FYARRO at 100 mg/m2 administered as an IV infusion over 30 minutes on Days 1 and 8 of a 21-day cycle. The primary endpoint for the study was ORR evaluated by independent radiology review.
AMPECT was the first prospective clinical trial in advanced malignant PEComa. Patients with metastatic or inoperable locally advanced disease were treated with FYARRO at 100 mg/m2 administered as an IV infusion over 30 minutes on Days 1 and 8 of a 21-day cycle. The primary endpoint for the study was ORR evaluated by independent radiology review.
Dose reductions occurred in 12/34 (35%) patients; 11 patients had a one dose reduction from 100 mg/m2 to 75 mg/m2 and 2 patients had two dose reductions to 56 mg/m2. 11 Table of Contents Table 1 TRAE Any Grade ≥ 25%, No. (%) Grade 3, No.
Dose reductions occurred in 12/34 (35%) patients; 11 patients had a one dose reduction from 100 mg/m2 to 75 mg/m2 and 2 patients had two dose reductions to 56 mg/m2. 13 Table of Contents Table 2 – Treatment-related adverse events TRAE Any Grade ≥ 25%, No. (%) Grade 3, No.
Under the Fresenius Agreement, which is effective through March 31, 2024 (or such later date as may be agreed between the parties in writing), we may purchase FYARRO for either clinical or commercial purposes for use in the United States and Canada.
The Fresenius Agreement is effective through March 31, 2024 (or such later date as may be agreed between the parties in writing) and we are currently negotiating an extension to such agreement. Under the Fresenius Agreement, we may purchase FYARRO for either clinical or commercial purposes for use in the United States and Canada.
PRECISION 1 is a registration-directed tumor-agnostic Phase 2 study of FYARRO in patients with TSC1 and TSC2 inactivating alterations that is based on evidence of activity seen in patients with TSC1 and TSC2 inactivating alterations from the completed AMPECT trial (presented at the Connective Tissue Oncology Society (CTOS) Annual Meeting in 2020) and the Expanded Access Program (presented at the ASCO Annual Meeting in 2021).
FYARRO - Ongoing Clinical Development FYARRO in TSC1 and TSC2 inactivating alterations (PRECISION1 Clinical Trial) PRECISION1 is a registration-directed tumor-agnostic Phase 2 study of FYARRO in patients with TSC1 and TSC2 inactivating alterations that is based on evidence of activity seen in patients with TSC1 and TSC2 inactivating alterations from the completed AMPECT trial (presented at the Connective Tissue Oncology Society (CTOS) Annual Meeting in 9 Table of Contents 2020) and our expanded access program (presented at the ASCO Annual Meeting in 2021).
On November 22, 2021, the U.S. Food and Drug Administration (the “FDA”) approved FYARRO sirolimus protein-bound particles for injectable suspension (albumin-bound) for the treatment of adult patients with locally advanced unresectable or metastatic malignant PEComa.
("Mirati"), all further discussed below and throughout this document. On November 22, 2021, the U.S. Food and Drug Administration (the “FDA”) approved FYARRO sirolimus protein-bound particles for injectable suspension (albumin-bound) for the treatment of adult patients with locally advanced unresectable or metastatic malignant PEComa.
Results of these studies showed that combining FYARRO with either of the KRAS G12C inhibitors significantly improved response against KRAS G12C mutant lung cancer and bladder cancer tumors in vivo and FYARRO also showed significantly greater potency in the combination compared to everolimus.
Results of these studies showed that combining FYARRO with either of the KRAS G12C inhibitors significantly improved response against KRAS G12C mutant lung cancer and bladder cancer tumors in vivo and FYARRO also showed significantly greater potency in the combination compared to everolimus. FYARRO - Historical Clinical Development Advanced Malignant PEComa Trial (AMPECT) PEComa.
Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level.
Unlike Medicare Parts A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees, advisors and consultants, while being committed to a diverse and dynamic workplace.
We consider the relationship with our employees to be good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees, advisors and consultants, while being committed to a diverse and dynamic workplace.
On February 22, 2022, we launched FYARRO in the United States for treatment of advanced malignant PEComa and recognized net revenue from product sales of $15.2 million for the year ended December 31, 2022.
On February 22, 2022, we launched FYARRO in the United States for treatment of advanced malignant PEComa and recognized net product sales of $24.4 million and $15.2 million for the years ended December 31, 2023 and 2022, respectively.
These and other applicable state and foreign privacy laws, as well as uncertain changes in future regulation and legislation, could impact our business strategies, increase our potential liability, increase our compliance costs, and adversely affect our business.
The CCPA and such other new and evolving legislation may impact our business activities significantly, and these and other applicable state and foreign privacy laws, as well as uncertain changes in future regulation and legislation, could impact our business strategies, increase our potential liability, increase our compliance costs, and adversely affect our business.
Many of the companies against which we are competing against or which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved drugs than we do.
These companies include divisions of large pharmaceutical companies and biotechnology companies of various sizes. 16 Table of Contents Many of the companies against which we are competing or which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved drugs than we do.
An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter usually describes all of the specific deficiencies in the NDA identified by the FDA.
A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter usually describes all of the specific deficiencies in the NDA identified by the FDA.
Throughout this document we refer to FYARRO ( nab -sirolimus, sirolimus protein-bound particles for injectable suspension (albumin-bound)) as FYARRO in the context of commercialization for the treatment of advanced malignant perivascular epithelioid cell tumor (“PEComa”), investigational use, our clinical trials, regulatory matters such as orphan drug designation and our license agreement with BMS, all further discussed below and throughout this document.
Throughout this document we refer to FYARRO ( nab -sirolimus, sirolimus protein-bound particles for injectable suspension (albumin-bound)) as FYARRO in the context of commercialization for the treatment of advanced malignant PEComa, investigational use, our clinical trials, regulatory matters such as orphan drug designation and our license agreement with BMS and collaboration agreement with Mirati Therapeutics, Inc.
Intellectual Property We strive to protect the proprietary technologies that we believe are important to our business, including pursuing and maintaining patent protection intended to cover formulations of FYARRO, its methods of use, related technologies, and other inventions that are important to our business.
Of patients with TSC1 or TSC2 inactivating alterations, 44% had a response. Intellectual Property We strive to protect the proprietary technologies that we believe are important to our business, including pursuing and maintaining patent protection intended to cover formulations of FYARRO, its methods of use, related technologies, and other inventions that are important to our business.
In particular, the FDA closely regulates the marketing, labeling, advertising, and promotion of drug products. A company can make only those claims relating to safety and efficacy that are approved by the FDA and in accordance with the 23 Table of Contents provisions of the approved label.
In particular, the FDA closely regulates the marketing, labeling, advertising, and promotion of drug products. A company can make only those claims relating to safety and efficacy that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.
Our Strategy Our objective is to develop and commercialize innovative drugs that address the serious unmet medical needs of cancer patients and patients with other diseases that are driven by alterations in the mTOR pathway. The principal components of our strategy include: • Commercialize FYARRO in advanced malignant PEComa .
Our Strategy Our objective is to develop and commercialize innovative drugs that address the serious unmet medical needs of cancer patients that are driven by alterations in the mTOR pathway.
The first clinical and commercial validation of this technology is BMS's Abraxane ® , which is approved in the United States and worldwide for the treatment of breast cancer, non-small cell lung cancer and pancreatic cancer. Abraxane has generated >$1.0 billion of sales in the United States every year since 2018.
The first clinical and commercial validation of this technology is BMS's Abraxane ® , which is approved in the United States and worldwide for the treatment of breast cancer, non-small cell lung cancer and pancreatic cancer.
For example, California recently enacted the California Consumer Privacy Act (“CCPA”), which creates new individual privacy rights for California consumers, as defined in the law, and places increased privacy and security obligations on entities handling personal data of consumers or households.
For example, in 2020, California enacted the CCPA, which created new individual privacy rights for California consumers, as defined in the law, and placed increased privacy and security obligations on entities handling personal data of consumers or households.
Prior to beginning a clinical trial with a product candidate in the United States, companies must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies.
An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies.
While we are primarily focused on cancer, the mTOR pathway is also relevant in other indications and we may opportunistically study these indications to broaden the application of FYARRO or satisfy unmet medical needs. In October 2022, we entered into a collaboration and supply agreement with Mirati Therapeutics, Inc.
While we are primarily focused on cancer, the mTOR pathway is also relevant in other indications and we may opportunistically study these indications to broaden the application of FYARRO or satisfy unmet medical needs.
Government Regulation Government authorities in the United States, at the federal, state, and local level, and other countries extensively regulate, among other things, the research, development, nonclinical and clinical testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, and export and import of products such as those we are developing. 18 Table of Contents Generally, before a new drug can be marketed, considerable data must be generated, which demonstrate the drug’s quality, safety, and efficacy.
Government Regulation Government authorities in the United States, at the federal, state, and local level, and other countries extensively regulate, among other things, the research, development, nonclinical and clinical testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, and export and import of products such as those we are developing.
In addition, we have ongoing studies as well as studies in planning for testing the safety and efficacy of FYARRO in combination with other targeted agents, such as our current collaboration with Mirati to evaluate the combination of Mirati’s adagrasib, a KRASG12C selective inhibitor, and FYARRO in KRASG12C mutant non-small cell lung cancer (NSCLC) and other solid tumors.
We have additional ongoing studies evaluating FYARRO in combination with other targeted agents, such as our study to evaluate the efficacy and safety of the combination of FYARRO with letrozole for the treatment of advanced or recurrent EEC and our current collaboration with Mirati to evaluate the combination of Mirati’s adagrasib, a KRAS G12C selective inhibitor, and FYARRO in KRAS G12C mutant non-small cell lung cancer (NSCLC) and other solid tumors.
In addition to advanced malignant PEComa, based on exploratory data from the completed Phase 2 registrational study, Advanced Malignant PEComa Trial (“AMPECT”) and our expanded access program (the "Expanded Access Program"), we initiated a registration-directed tumor-agnostic Phase 2 study (“PRECISION 1”) of FYARRO in patients with Tuberous Sclerosis Complex 1 and 2 (“ TSC1” & “ TSC2” ) alterations.
In addition to advanced malignant PEComa, based on exploratory data from the completed Phase 2 registrational study, Advanced Malignant PEComa Trial (“AMPECT”) and data for FYARRO in other solid tumors with TSC1 and TSC2 inactivating alterations , we initiated a registration-directed tumor-agnostic Phase 2 study (“PRECISION1”) of FYARRO in patients with Tuberous Sclerosis Complex 1 (“ TSC1 ”) and Tuberous Sclerosis Complex 2 (“ TSC2 ”) alterations.
We believe that FYARRO’s differentiated pharmacologic profile, high tumor accumulation, and ability to effectively inhibit important targets in the mTOR pathway make it a well-positioned drug to address resistance and suboptimal efficacy of existing mTOR inhibitors. We are studying FYARRO in cancers with known mTOR pathway activation, including tumor-agnostic indications targeting specific genomic alterations that activate the mTOR pathway.
We believe that FYARRO’s differentiated pharmacologic profile, high tumor accumulation, and ability to effectively inhibit important targets in the mTOR pathway make it a well-positioned drug to address resistance and suboptimal efficacy of existing mTOR inhibitors.
There are other companies working to develop therapies in the field of kinase inhibition for cancer and other diseases. These companies include divisions of large pharmaceutical companies and biotechnology companies of various sizes.
There are other companies working to develop therapies in the field of kinase inhibition for cancer and other diseases.
The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. 33 Table of Contents Brexit and the Regulatory Framework in the United Kingdom On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the EU, commonly referred to as Brexit.
The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.
Such data must then be organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority. Drugs are also subject to other federal, state, and local statutes and regulations.
Generally, before a new drug can be marketed, considerable data must be generated which demonstrate the drug’s quality, safety, and efficacy. Such data must then be organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority. Drugs are also subject to other federal, state, and local statutes and regulations.
If third-party payors do not consider our drugs to be cost-effective compared to other available therapies, they may not cover our drugs as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our drugs on a profitable basis.
If third-party payors do not consider our drugs to be cost-effective compared to other available therapies, they may not cover our drugs as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our drugs on a profitable basis. 27 Table of Contents In recent years, additional laws have resulted in direct or indirect reimbursement reductions for certain Medicare providers.
Each such manufacturer is required to pay a prorated share of the branded prescription drug fee based on the dollar value of its branded prescription drug sales to certain federal programs identified in the law. The ACA also expanded the 340B program to include additional types of covered entities.
The ACA requires pharmaceutical manufacturers of branded prescription drugs to pay a branded prescription drug fee to the federal government. Each such manufacturer is required to pay a prorated share of the branded prescription drug fee based on the dollar value of its branded prescription drug sales to certain federal programs identified in the law.
Phase 1, Phase 2, and Phase 3 trials may not be completed successfully within any specified period, if at all. The FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
The FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to successfully commercialize FYARRO for the advanced malignant PEComa indication or complete development of, obtain approval for and commercialize FYARRO for one or more other indications in a timely manner, our business will be harmed. • If any of our third-party manufacturers encounter difficulties in production, our ability to provide adequate supply of FYARRO for patients or for clinical trials or any other product candidate that we may develop in the future, if approved, could be delayed or prevented. • We are dependent on a single-source supplier for the drug product FYARRO, and the loss of such supplier could harm our business. • If we cannot replicate the results from our earlier preclinical studies and clinical trials of our product candidates in our later preclinical studies and clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidates. • If we experience delays or difficulties in the enrollment and/or maintenance of patients in clinical trials, our regulatory submissions or receipt of necessary regulatory approvals could be delayed or prevented. • We have limited resources and are currently focusing our efforts on developing and commercializing FYARRO for particular indications.
Biggest changeThis reliance on third parties, some of which are sole source suppliers, increases the risk that we will not have sufficient quality and quantities of FYARRO to meet demand or otherwise or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts. • If we cannot replicate the results from our earlier preclinical studies and clinical trials of our product candidates in our later preclinical studies and clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidates. • If we experience delays or difficulties in the enrollment and/or maintenance of patients in clinical trials, our regulatory submissions or receipt of necessary regulatory approvals could be delayed or prevented. • We have limited resources and are currently focusing our efforts on developing and commercializing FYARRO for particular indications.
We conducted a Phase 2 registrational study of FYARRO (the “AMPECT" trial) for PEComa and completed a rolling New Drug Application (an “NDA”) submission for FYARRO in May 2021. The U.S. Food and Drug Administration (the “FDA”) accepted our NDA in July 2021 and approved FYARRO for the treatment of advanced malignant PEComa in November 2021.
We conducted a Phase 2 registrational study of FYARRO (“AMPECT" trial) for PEComa and completed a rolling New Drug Application (an “NDA”) submission for FYARRO in May 2021. The U.S. Food and Drug Administration (the “FDA”) accepted our NDA in July 2021 and approved FYARRO for the treatment of advanced malignant PEComa in November 2021.
FYARRO will require additional clinical development, expansion of manufacturing capabilities, regulatory approval from foreign regulatory authorities in jurisdictions outside of the United States where we plan to market FYARRO for advanced malignant PEComa and potentially in additional indications , if approved, substantial investment and significant marketing efforts before we can generate any revenues from product sales.
FYARRO will require additional clinical development, expansion of manufacturing capabilities, regulatory approval from foreign regulatory authorities in jurisdictions outside of the United States where we plan to market FYARRO for advanced malignant PEComa and potentially in additional indications , if approved, substantial investment and significant marketing efforts before we can generate any substantial revenues from product sales.
If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize FYARRO for multiple indications, which would materially harm our business.
If we are not successful with respect to one or more of these factors, we could experience significant delays or an inability to successfully commercialize FYARRO for multiple indications in a timely manner or at all, which would materially harm our business.
Our future operating results are dependent on our ability to successfully discover, develop, obtain regulatory approval for and commercialize product candidates other than FYARRO. Prior to initiating clinical trials with product candidates, we will need to file an IND or similar application to the FDA or regulatory authorities in other jurisdictions.
Our future operating results are dependent on our ability to successfully discover, develop, obtain regulatory approval for and/or commercialize product candidates other than FYARRO. Prior to initiating clinical trials with product candidates, we will need to file an IND or similar application to the FDA or regulatory authorities in other jurisdictions.
In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes.
In August 2022, Congress passed the Inflation Reduction Act of 2022 (the "Inflation Reduction Act"), which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes.
For instance, patients for our trials for the TSC1 & TSC2 study are screened using genomic information to identify alterations in the TSC1 & TSC2 genes and utilizing such criteria and/or certain highly specific criteria related to the cancer sub-types may limit patient populations eligible for our clinical trials.
For instance, patients for our trials for the TSC1 and TSC2 study are screened using genomic information to identify alterations in the TSC1 or TSC2 genes and utilizing such criteria and/or certain highly specific criteria related to the cancer sub-types may limit patient populations eligible for our clinical trials.
For example, with respect to FYARRO, we cannot be certain how many patients will harbor the TSC1 & TSC2 alterations that FYARRO is designed to target or that the number of patients enrolled for each alteration will suffice for regulatory approval and inclusion of each such alteration in the approved label.
For example, with respect to FYARRO, we cannot be certain how many patients will harbor the TSC1 or TSC2 alterations that FYARRO is designed to target or that the number of patients enrolled for each alteration will suffice for regulatory approval and inclusion of each such alteration in the approved label.
Patients may not be able to tolerate FYARRO or any of our future product candidates in combination with other therapies or dosing of FYARRO in combination with other therapies may have unexpected consequences.
Patients may not be able to tolerate FYARRO or any of our future product candidates in combination with other therapies or dosing of FYARRO or any of our future product candidates in combination with other therapies may have unexpected consequences.
If we do not accurately evaluate the completed clinical trial data, likelihood of future clinical trial success, commercial potential or target markets for FYARRO or any of our other product candidates that we may develop in the future, we may relinquish valuable rights to that product candidate or program through collaboration, licensing or other strategic or royalty arrangements in cases in which we would have been more advantageous for us to retain sole development and commercialization rights to such product candidate or program.
If we do not accurately evaluate the completed clinical trial data, likelihood of future clinical trial success, commercial potential or target markets for FYARRO or any of our other product candidates that we may develop in the future, we may relinquish valuable rights to FYARRO or any future product candidate or program through collaboration, licensing or other strategic or royalty arrangements in cases in which we would have been more advantageous for us to retain sole development and commercialization rights to such product candidate or program.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies.
While the FDA granted us Priority Review of our NDA for FYARRO in patients with advanced malignant PEComa, there is no guarantee that this Fast Track designation for the TSC1 & TSC2 alterations will qualify for or that we will be able to take advantage of the expedited review procedures or that we will ultimately obtain regulatory approval of FYARRO in other indications.
While the FDA granted us Priority Review of our NDA for FYARRO in patients with advanced malignant PEComa, there is no guarantee that this Fast Track designation for the TSC1 or TSC2 alterations will qualify for or that we will be able to take advantage of the expedited review procedures or that we will ultimately obtain regulatory approval of FYARRO in other indications.
In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes.
In August 2022, Congress passed the Inflation Reduction Act, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes.
Failure to comply with the GDPR and the applicable national data protection laws of the European Union Member States may result in fines up to €20.0 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties.
Failure to comply with the GDPR and the applicable national data protection laws of European Union member states may result in fines up to €20.0 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties.
In addition, EOC's termination of the EOC License Agreement prior to completing development or commercialization of the FYARRO under the collaboration adversely impacts the potential approval and our revenue from the licensed product in the EOC Territory and we will not receive future revenues from the collaboration.
In addition, EOC's termination of the EOC License Agreement prior to completing development or commercialization of FYARRO under the collaboration adversely impacts the potential approval and our revenue from the licensed product in the EOC Territory and we will not receive future revenues from the collaboration.
In addition, EOC’s termination of the EOC License Agreement prior to completing development or commercialization of the FYARRO under the collaboration adversely impacts the potential approval and our revenue from the licensed product in the EOC Territory and we will not receive future revenues from the collaboration.
In addition, EOC’s termination of the EOC License Agreement prior to completing development or commercialization of FYARRO under the collaboration adversely impacts the potential approval and our revenue from the licensed product in the EOC Territory and we will not receive future revenues from the collaboration.
It may be necessary for us to assume the responsibility at our own expense for the development of FYARRO in the EOC Territory or find another partner for the territory.
It may be necessary for us to assume the responsibility at our own expense for the development of FYARRO in the EOC Territory or find another partner for the territory.
Any failure or delay in the development of our internal sales, marketing and distribution capabilities could adversely impact the commercialization of any of our product candidates that we obtain approval to market, if we do not have arrangements in place with third parties to provide such services on our behalf.
Any failure or delay in the development of our internal sales, marketing and distribution capabilities could adversely impact the commercialization of any of our product candidates that we obtain approval to market or if we do not have arrangements in place with third parties to provide such services on our behalf.
Our ability to generate future revenue and achieve profitability depends significantly on our ability, or any current or future collaborator’s ability, to achieve several objectives, including, but not limited to: • demonstrating the safety and efficacy of FYARRO to the satisfaction of the FDA and obtaining regulatory approval for FYARRO for other indications and for any future product candidates, if any, for which there is a commercial market; 38 Table of Contents • launching and successfully commercializing FYARRO or any product candidates following any regulatory approval, including the development of a commercial infrastructure, whether in-house or with one or more collaborators; • maintaining commercially viable supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and meet the market demand for FYARRO or any other product candidates we may develop, if approved; • completing development activities, including clinical trials for FYARRO for TSC1 & TSC2 , successfully and on a timely basis; • obtaining additional regulatory and marketing approvals for FYARRO for additional indications; • our ability to complete investigational new drug application (an “IND”) enabling studies and successfully submit INDs or IND supplements or comparable applications, which become effective without any objections by the FDA or comparable regulatory authorities before commencing a clinical trial for any future product candidates; • establishing and maintaining relationships with contract research organizations (“CROs”) and clinical sites for the clinical development of FYARRO in other indications and any other future product candidates that we may develop; • timely receipt of regulatory approvals from applicable regulatory authorities for any product candidates for which we successfully complete clinical development; • developing or contracting for an efficient and scalable manufacturing process for future product candidates, including obtaining finished products that are appropriately packaged for sale; • negotiating and maintaining an adequate price for our product or any future product candidates, both in the United States and in foreign countries where our products are commercialized; • a continued acceptable safety profile following any regulatory approval of product candidates; • commercial acceptance of product candidates by patients, the medical community and third-party payors; • obtaining coverage and adequate reimbursement by third-party payors for product candidates; • satisfying any required post-regulatory approval commitments to applicable regulatory authorities; • identifying, assessing and developing new product candidates; • obtaining, maintaining and expanding patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally; • protecting our rights in our intellectual property portfolio; • defending against third-party interference or infringement claims, if any; • entering into and maintaining, on favorable terms, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product and any future product candidates; and • addressing any competing therapies and technological and market developments; and attracting, hiring and retaining qualified personnel.
Our ability to generate future revenue and achieve profitability depends significantly on our ability, or any current or future collaborator’s ability, to achieve several objectives, including, but not limited to: • demonstrating the safety and efficacy of FYARRO to the satisfaction of the FDA and obtaining regulatory approval for FYARRO for other indications and for any other product candidates that we may develop in the future, if any, for which there is a commercial market; 37 Table of Contents • launching and successfully commercializing FYARRO or any other product candidates that we may develop in the future following any regulatory approval, including the development of a commercial infrastructure, whether in-house or with one or more collaborators; • maintaining a commercially viable supply of, and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and meet the market demand for FYARRO or any other product candidates that we may develop in the future, if approved; • completing development activities, including clinical trials for FYARRO for TSC1 and TSC2 , successfully and on a timely basis; • obtaining additional regulatory and marketing approvals for FYARRO for additional indications; • our ability to complete investigational new drug application (an “IND”) enabling studies and successfully submit INDs or IND supplements or comparable applications, which become effective without any objections by the FDA or comparable regulatory authorities before commencing a clinical trial for any future product candidates; • establishing and maintaining relationships with contract research organizations (“CROs”) and clinical sites for the clinical development of FYARRO in other indications and any other future product candidates that we may develop; • timely receipt of regulatory approvals from applicable regulatory authorities for any product candidates for which we successfully complete clinical development; • developing or contracting for an efficient and scalable manufacturing process for future product candidates, including obtaining finished products that are appropriately packaged for sale; • negotiating and maintaining an adequate price for FYARRO or any future product candidates, both in the United States and in foreign countries where our products are commercialized; • a continued acceptable safety profile following any regulatory approval of product candidates; • commercial acceptance of product candidates by patients, the medical community and third-party payors; • obtaining coverage and adequate reimbursement by third-party payors for FYARRO or any future product candidates; • satisfying any required post-regulatory approval commitments to applicable regulatory authorities; • identifying, assessing and developing new product candidates; • obtaining, maintaining and expanding patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally; • protecting our rights in our intellectual property portfolio; • defending against third-party interference or infringement claims, if any; • entering into and maintaining, on favorable terms, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize FYARRO and any future product candidates; and • addressing any competing therapies and technological and market developments and attracting, hiring and retaining qualified personnel.
Despite the implementation of security measures in an effort to protect systems that store our information, given their size and complexity and the increasing amounts of information maintained on our internal information technology systems, and those of our third-party CROs, other contractors (including sites performing our clinical trials) and consultants, these systems are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure or lead to the loss, destruction, alteration or dissemination of, or damage to, our data.
Despite the implementation of security measures in an effort to protect systems that store our information, given their size and complexity and the increasing amounts of information maintained on our internal information technology systems, and those of our third-party CROs, other contractors (including sites performing our clinical trials) and consultants, these systems are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches and incidents from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of systems and information), which may compromise our system infrastructure or lead to the loss, destruction, alteration or dissemination of, or damage to, our data.
Further, for FYARRO for advanced malignant PEComa, or if FYARRO receives regulatory approval for any other indication, or if any other product candidate that we may develop in the future if any of our product candidates obtains regulatory approval, toxicities associated with such product candidates and not seen during clinical testing may also develop after such approval and lead to a requirement to (i) conduct additional clinical safety trials, (ii) add additional contraindications, warnings and precautions to the drug label, (iii) significantly restrict the use of the product, (iv) change the way the product is distributed or administered, (v) implement a risk evaluation and mitigation strategy, or create a medication guide outlining the risks of such side effects for distribution to patients, or (vi) suspend or withdraw the product from the market.
Further, for FYARRO for advanced malignant PEComa, or if FYARRO receives regulatory approval for any other indication, or if any other product candidate that we may develop in the future, if any, obtains regulatory approval, toxicities associated with such product candidates and not seen during clinical testing may also develop after such approval and lead to a requirement to (i) conduct additional clinical safety trials, (ii) add additional contraindications, warnings and precautions to the drug label, (iii) significantly restrict the use of the product, (iv) change the way the product is distributed or administered, (v) implement a risk evaluation and mitigation strategy, or create a medication guide outlining the risks of such side effects for distribution to patients, or (vi) suspend or withdraw the product from the market.
Collaborations involving our product candidates would pose numerous risks to us, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected; • collaborators may de-emphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, including as a result of a business combination or sale or disposition of a business unit or development function, or available funding or external factors such as an acquisition that diverts resources or creates competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than us; • a collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of FYARRO or any other product candidate that we may develop in the future, if approved, relative to other products; • we may grant exclusive rights to our collaborators that would prevent us from collaborating with others; • collaborators may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property related proceedings that could jeopardize or invalidate our proprietary information and intellectual property or expose us to potential litigation or other intellectual property related proceedings; • disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; • collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all; • collaborators may not provide us with timely and accurate information regarding development progress and activities under the collaboration or may limit our ability to share such information, which could adversely impact our ability to report progress to our investors and otherwise plan our own development of our product candidates; • collaborators may own or co-own intellectual property covering our products that results from us collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and • a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws, resulting in civil or criminal proceedings.
Collaborations involving FYARRO or any future product candidates would pose numerous risks to us, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected; • collaborators may de-emphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, including as a result of a business combination or sale or disposition of a business unit or development function, or available funding or external factors such as an acquisition that diverts resources or creates competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than us; • a collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of FYARRO or any other product candidate that we may develop in the future, if approved, relative to other products; • we may grant exclusive rights to our collaborators that would prevent us from collaborating with others; • collaborators may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property related proceedings that could jeopardize or invalidate our proprietary information and intellectual property or expose us to potential litigation or other intellectual property related proceedings; • disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; 77 Table of Contents • collaboration agreements may not lead to development or commercialization of FYARRO or any other product candidates that we may develop in the future in the most efficient manner or at all; • collaborators may not provide us with timely and accurate information regarding development progress and activities under the collaboration or may limit our ability to share such information, which could adversely impact our ability to report progress to our investors and otherwise plan our own development of FYARRO or any other product candidates that we may develop in the future; • collaborators may own or co-own intellectual property covering our products that results from us collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and • a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws, resulting in civil or criminal proceedings.
If FYARRO or any other product candidates that we may develop in the future is associated with serious adverse events or other undesirable side effects or have unexpected characteristics in preclinical studies or clinical trials when used alone or in combination with other approved products or investigational new drugs, we may need to conduct additional studies to further evaluate the product candidates’ safety, interrupt, delay or abandon their development or halt clinical trials or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
If FYARRO or any other product candidates that we may develop in the future is associated with serious adverse events or other undesirable side effects or have unexpected characteristics in preclinical studies or clinical trials when used alone or in combination with other approved products or investigational new drugs, we may need to conduct additional studies to further evaluate their safety, interrupt, delay or abandon their development or halt clinical trials or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including, among others: • the efficacy and safety profile as demonstrated in clinical trials compared to alternative treatments; • the timing of market introduction of the product candidate as well as competitive products; • the clinical indications for which a product candidate is approved; • restrictions on the use of product candidates in the labeling approved by regulatory authorities, such as boxed warnings or contraindications in labeling, or a risk evaluation and mitigation strategy, if any, which may not be required of alternative treatments and competitor products; • the potential and perceived advantages of our product candidates over alternative treatments; • the cost of treatment in relation to alternative treatments; • the availability of coverage and adequate reimbursement by third-party payors, including government authorities or the willingness of patients to pay out-of-pocket in the absence of third-party payor coverage; • the availability of an approved product candidate for use as a combination therapy; • the prevalence and severity of any adverse effects associated with any approved product candidate; • any restrictions on the use of our product candidates together with other medications; • relative convenience and ease of administration; • the willingness of the target patient population to try new therapies and undergo required diagnostic screening to determine treatment eligibility and of physicians to prescribe these therapies and diagnostic tests; • the effectiveness of sales and marketing efforts; 43 Table of Contents • unfavorable publicity relating to our product candidates; and • the approval of other new therapies for the same indications.
The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including, among others: • the efficacy and safety profile as demonstrated in clinical trials compared to alternative treatments; • the timing of market introduction of the product candidate as well as competitive products; • the clinical indications for which a product candidate is approved; • restrictions on the use of product candidates in the labeling approved by regulatory authorities, such as boxed warnings or contraindications in labeling, or a risk evaluation and mitigation strategy, if any, which may not be required of alternative treatments and competitor products; • the potential and perceived advantages of our product candidates over alternative treatments; • the cost of treatment in relation to alternative treatments; • the availability of coverage and adequate reimbursement by third-party payors, including government authorities or the willingness of patients to pay out-of-pocket in the absence of third-party payor coverage; • the availability of an approved product candidate for use as a combination therapy; • the prevalence and severity of any adverse effects associated with any approved product candidate; 42 Table of Contents • any restrictions on the use of our product candidates together with other medications; • relative convenience and ease of administration; • the willingness of the target patient population to try new therapies and undergo required diagnostic screening to determine treatment eligibility and of physicians to prescribe these therapies and diagnostic tests; • the effectiveness of sales and marketing efforts; • unfavorable publicity relating to our product candidates; and • the approval of other new therapies for the same indications.
For example, a United States federal government shutdown or budget sequestration, such as ones that occurred during 2013, 2018 and 2019, or the current diversion of resources to handle the COVID-19 public health emergency and pandemic may result in significant reductions to the FDA’s budget, employees and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to obtain regulatory approval for our product candidates.
For example, a United States federal government shutdown or budget sequestration, such as ones that occurred during 2013, 2018 and 2019, or the diversion of resources to handle the COVID-19 public health emergency and pandemic may result in significant reductions to the FDA’s budget, employees and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to obtain regulatory approval for our product candidates.
Our internal computer systems, or those of any of our CROs, manufacturers, other contractors or consultants or potential future collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and material disruption of our operations.
Our internal computer systems, or those of any of our CROs, manufacturers, other contractors or consultants or potential future collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, or use or other processing of, or destruction of our proprietary or confidential data, employee data, or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and material disruption of our operations.
In addition, failure to comply with FDA, EMA and other comparable foreign regulatory requirements may have negative consequences, including: • adverse inspection findings; • additional warnings or otherwise restrict the product’s indicated use, label, or marketing; • restrictions on our FYARRO products, distribution, manufacturers or manufacturing processes; • issuance of warning letters, safety alerts, dear-healthcare-provider letters, press releases or other communications containing warnings regarding the product that would result in adverse publicity; • voluntary or mandatory product recalls and publicity requirements or withdrawal of FYARRO from the market; • suspension or withdrawal of marketing or regulatory approvals or other permits or voluntary; • product seizures, detentions or import bans; • total or partial suspension of production; • imposition of restrictions on operations, including costly new manufacturing requirements; • requirement to establish or modify a REMS; • requirement to conduct post-marketing studies or surveillance; • restrictions on drug distribution or use; • requirements to conduct post-marketing studies or clinical trials; • refusal to approve pending applications or supplements to approved applications that we submit and other delays; • delays in or the rejection of approvals of additional indications for FYARRO; • restrictions on our ability to conduct clinical trials, including full or partial clinical holds on, or the suspension or termination of, ongoing or planned trials; • fines, restitution or disgorgement of profits or revenue; • reputational harm; 60 Table of Contents • refusal of government contracts or future orders under existing contracts, exclusion from participation in federal health care programs; or • injunctions or the imposition of civil or criminal penalties, including False Claims Act liability.
In addition, failure to comply with FDA, EMA and other comparable foreign regulatory requirements may have negative consequences, including: • adverse inspection findings; • additional warnings or otherwise restrict the product’s indicated use, label, or marketing; • restrictions on our FYARRO products, distribution, manufacturers or manufacturing processes; • issuance of warning letters, safety alerts, dear-healthcare-provider letters, press releases or other communications containing warnings regarding the product that would result in adverse publicity; • voluntary or mandatory product recalls and publicity requirements or withdrawal of FYARRO from the market; • suspension or withdrawal of marketing or regulatory approvals or other permits or voluntary; • product seizures, detentions or import bans; • total or partial suspension of production; • imposition of restrictions on operations, including costly new manufacturing requirements; • requirement to establish or modify a REMS; • requirement to conduct post-marketing studies or surveillance; • restrictions on drug distribution or use; • requirements to conduct post-marketing studies or clinical trials; • refusal to approve pending applications or supplements to approved applications that we submit and other delays; • delays in or the rejection of approvals of additional indications for FYARRO; • restrictions on our ability to conduct clinical trials, including full or partial clinical holds on, or the suspension or termination of, ongoing or planned trials; • fines, restitution or disgorgement of profits or revenue; • reputational harm; • refusal of government contracts or future orders under existing contracts, exclusion from participation in federal health care programs; or • injunctions or the imposition of civil or criminal penalties, including False Claims Act liability.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize FYARRO or any other product candidates we may develop in the future, if approved. Adequate additional financing may not be available to us in sufficient amounts or on acceptable terms, or at all.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to further develop and commercialize FYARRO or any other product candidates we may develop in the future, if approved. Adequate additional financing may not be available to us in sufficient amounts or on acceptable terms, or at all.
Patient enrollment and retention for our current or any future clinical trials may be affected by other factors, including: • size and nature of the patient population; • severity of the disease under investigation; • availability and efficacy of approved drugs for the disease under investigation; • patient eligibility criteria for the trial in question as defined in the protocol or as mandated by regulatory agencies; • perceived risks and benefits of the product candidate under study; • clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies and product candidates, including any new products that may be approved or other product candidates being investigated for the indications we are investigating; • the ability to recruit clinical study investigators with the appropriate competencies and experience; • clinicians’ willingness to screen their patients for biomarkers to indicate which patients may be eligible for enrollment in our clinical trials; • patient referral practices of physicians; 51 Table of Contents • the ability to obtain and maintain patient consents; • the ability to monitor patients adequately during and after treatment; • proximity and availability of clinical trial sites for prospective patients; and • factors we may not be able to control, such as current or potential pandemics that may limit patients, principal investigators or staff or clinical site availability (e.g., the COVID-19 pandemic).
Patient enrollment and retention for our current or any future clinical trials may be affected by other factors, including: • size and nature of the patient population; • severity of the disease under investigation; • availability and efficacy of approved drugs for the disease under investigation; • patient eligibility criteria for the trial in question as defined in the protocol or as mandated by regulatory agencies; • perceived risks and benefits of the product candidate under study; • clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies and product candidates, including any new products that may be approved or other product candidates being investigated for the indications we are investigating; • the ability to recruit clinical study investigators with the appropriate competencies and experience; • clinicians’ willingness to screen their patients for biomarkers to indicate which patients may be eligible for enrollment in our clinical trials; • patient referral practices of physicians; • the ability to obtain and maintain patient consents; • the ability to monitor patients adequately during and after treatment; • proximity and availability of clinical trial sites for prospective patients; and • factors we may not be able to control, such as current or potential pandemics that may limit patients, principal investigators or staff or clinical site availability (e.g., the COVID-19 pandemic).
Applications for any future product candidates could fail to receive regulatory approval for many reasons, including the following: • the FDA, EMA or other comparable foreign regulatory authorities may disagree with the design, implementation or results of our clinical trials; • the FDA, EMA or other comparable foreign regulatory authorities may determine that our product candidates are not safe or effective, are only moderately effective or have undesirable or unintended side effects, 57 Table of Contents toxicities or other characteristics that preclude us from obtaining regulatory approval or prevent or limit commercial use; • the population studied in the clinical trial may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; • the FDA, EMA or other comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • we may be unable to demonstrate to the FDA, EMA or other comparable foreign regulatory authorities that our product candidate’s risk-benefit ratio for our proposed indication is acceptable; • the FDA, EMA or other comparable foreign regulatory authorities may find deficiencies with or fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; • the FDA, EMA or other comparable regulatory authorities may fail to approve companion diagnostic tests for our product candidates, if required; and • the approval policies or regulations of the FDA, EMA or other comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Applications for any future product candidates could fail to receive regulatory approval for many reasons, including the following: • the FDA, EMA or other comparable foreign regulatory authorities may disagree with the design, implementation or results of our clinical trials; • the FDA, EMA or other comparable foreign regulatory authorities may determine that our product candidates are not safe or effective, are only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude us from obtaining regulatory approval or prevent or limit commercial use; • the population studied in the clinical trial may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; • the FDA, EMA or other comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • we may be unable to demonstrate to the FDA, EMA or other comparable foreign regulatory authorities that our product candidate’s risk-benefit ratio for our proposed indication is acceptable; • the FDA, EMA or other comparable foreign regulatory authorities may find deficiencies with or fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; • the FDA, EMA or other comparable regulatory authorities may fail to approve companion diagnostic tests for our product candidates, if required; and • the approval policies or regulations of the FDA, EMA or other comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
As described in Note 16 (Commitments and contingencies) to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, we have been, are, and may in the future become, party to lawsuits and legal proceedings including, without limitation, actions and proceedings in the ordinary course of business relating to our collaboration partners, directors, officers, stockholders, intellectual property rights, employment matters and the safety or efficacy of our products, which will cause us to incur legal fees and other costs related thereto, including potential expenses for the reimbursement of legal fees of officers and directors under indemnification obligations.
As described in Note 13 (Commitments and contingencies) to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, we have been, are, and may in the future become, party to lawsuits and legal proceedings including, without limitation, actions and proceedings in the ordinary course of business relating to our collaboration partners, directors, officers, stockholders, intellectual property rights, employment matters and the safety or efficacy of our products, which will cause us to incur legal fees and other costs related thereto, including potential expenses for the reimbursement of legal fees of officers and directors under indemnification obligations.
As a result, we may fail to capitalize on other indications or product candidates that may ultimately prove to be more profitable or to have a greater likelihood of success. We are currently focusing our resources and efforts on developing and commercializing FYARRO for particular indications.
We have limited resources and are currently focusing our efforts on developing and commercializing FYARRO for particular indications. As a result, we may fail to capitalize on other indications or product candidates that may ultimately prove to be more profitable or to have a greater likelihood of success.
Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including: • the failure of the third party to manufacture FYARRO or any of our other product candidates that we may develop in the future according to our schedule and specifications, or at all, including if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them; • the termination or nonrenewal of arrangements or agreements by our third-party contractors at a time that is costly or inconvenient for us; • the breach by the third-party contractors of our agreements with them; • the failure of third-party contractors to comply with applicable regulatory requirements, including manufacturing drug supply pursuant to strictly enforced cGMPs; • the failure of the third-party contractor to manufacture FYARRO or any of our other product candidates that we may develop in the future according to our specifications; • the mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified; • clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and • the misappropriation of our proprietary information, including our trade secrets and know-how.
Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including: • the failure of the third party to manufacture FYARRO or any of our other product candidates that we may develop in the future according to our schedule and specifications, or at all, including if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them; • the termination or nonrenewal of arrangements or agreements by our third-party contractors at a time that is costly or inconvenient for us; • the breach by the third-party contractors of our agreements with them; • the failure of third-party contractors to comply with applicable regulatory requirements, including manufacturing drug supply pursuant to strictly enforced cGMPs; • the failure of the third-party contractor to manufacture FYARRO or any of our other product candidates that we may develop in the future according to our specifications; 71 Table of Contents • the mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified; • clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and • the misappropriation of our proprietary information, including our trade secrets and know-how.
For example: • others may be able to develop products that are similar to FYARRO or any future product candidates but that are not covered by the claims of the patents that we own or license; • we or our licensors or collaborators might not have been the first to make the inventions covered by the issued patents or patent application that we own or license; • we or our licensors or collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that the pending patent applications we own or license will not lead to issued patents; • issued patents that we own or license may be held invalid or unenforceable, as a result of legal challenges by our competitors; 85 Table of Contents • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may have an adverse effect on our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
For example: • others may be able to develop products that are similar to FYARRO or any future product candidates but that are not covered by the claims of the patents that we own or license; • we or our licensors or collaborators might not have been the first to make the inventions covered by the issued patents or patent application that we own or license; • we or our licensors or collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that the pending patent applications we own or license will not lead to issued patents; • issued patents that we own or license may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may have an adverse effect on our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
In March 2022 and October 2018, we announced that the FDA granted Fast Track designation for FYARRO for the investigation of the treatment of adult and adolescent patients with malignant solid tumors harboring TSC1 & TSC2 alterations and of patients with advanced malignant PEComa, respectively.
In March 2022 and October 2018, we announced that the FDA granted Fast Track designation for FYARRO for the investigation of the treatment of adult and adolescent patients with malignant solid tumors harboring TSC1 or TSC2 alterations and of patients with advanced malignant PEComa, respectively.
Prior to the recent approval of our NDA for FYARRO for advanced malignant PEComa, we had not submitted an application for approval or obtained FDA approval for any product. Approval of an NDA is not guaranteed. The approval process is expensive and uncertain and may take several years.
Prior to the approval of our NDA for FYARRO for advanced malignant PEComa, we had not submitted an application for approval or obtained FDA approval for any product. Approval of an NDA is not guaranteed. The approval process is expensive and uncertain and may take several years.
Under the unitary patent system, European applications will soon have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court (UPC). As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation.
Under the unitary patent system, European applications have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court (the "UPC"). As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation.
For example, the U.S. government and other governments in jurisdictions in which we may operate in the future have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls in connection with the conflict between Russia and Ukraine.
For example, the U.S. government and other governments in jurisdictions in which we may operate in the future have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls in connection with the conflict in Ukraine.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations.
If our operations are alleged or found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant consequences, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations.
Our bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for any state law claims for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees or our stockholders to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provisions of the DGCL, or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, our amended and restated certificate of incorporation or our bylaws (including the interpretation, validity or enforceability thereof), or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine; provided, that these choice of forum provisions do not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.
Our bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for any state law claims for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees or our stockholders to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provisions of the DGCL, or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, our amended and restated certificate of incorporation or our bylaws (including the interpretation, validity or enforceability thereof), or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine; provided, that these choice of forum provisions do not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for 99 Table of Contents which the federal courts have exclusive jurisdiction.
Events that may result in a delay or unsuccessful completion of additional clinical development of FYARRO include, among other things: • unexpectedly high rate of patients withdrawing consent or being lost to follow-up; • feedback from the FDA and foreign regulatory authorities, institutional review boards (“IRBs”), or a data safety monitoring board, or results from clinical trials that might require modification to a clinical trial protocol; • imposition of a clinical hold by the FDA or other regulatory authorities, a decision by the FDA, other regulatory authorities, IRBs or us, or a recommendation by a data safety monitoring board to suspend or terminate trials at any time for safety issues or for any other reason; • deviations from the trial protocol by clinical trial sites and investigators or failure to conduct the trial in accordance with regulatory requirements; • failure of third parties, such as CROs, to satisfy their contractual duties or meet expected deadlines; • delays in the testing, validation, manufacturing and delivery of FYARRO to customers or the clinical trial sites; • delays caused by patients dropping out of a trial due to side effects, disease progression or other reasons; • unacceptable risk-benefit profile or unforeseen safety issues or adverse drug reactions; • failure to demonstrate the efficacy of FYARRO in this clinical trial; • changes in government regulations or administrative actions or lack of adequate funding to continue the trials; or • business interruptions resulting from geo-political actions, including war and terrorism, such as the Russia-Ukraine conflict, or natural disasters and public health epidemics, such as the COVID-19 pandemic.
Events that may result in a delay or unsuccessful completion of additional clinical development of FYARRO include, among other things: • unexpectedly high rate of patients withdrawing consent or being lost to follow-up; • feedback from the FDA and foreign regulatory authorities, institutional review boards (“IRBs”), or a data safety monitoring board, or results from clinical trials that might require modification to a clinical trial protocol; • imposition of a clinical hold by the FDA or other regulatory authorities, a decision by the FDA, other regulatory authorities, IRBs or us, or a recommendation by a data safety monitoring board to suspend or terminate trials at any time for safety issues or for any other reason; • deviations from the trial protocol by clinical trial sites and investigators or failure to conduct the trial in accordance with regulatory requirements; • failure of third parties, such as CROs, to satisfy their contractual duties or meet expected deadlines; • delays in the testing, validation, manufacturing and delivery of FYARRO to customers or the clinical trial sites; • delays caused by patients dropping out of a trial due to side effects, disease progression or other reasons; • unacceptable risk-benefit profile or unforeseen safety issues or adverse drug reactions; • failure to demonstrate the efficacy of FYARRO in this clinical trial; • changes in government regulations or administrative actions or lack of adequate funding to continue the trials; or • business interruptions resulting from geo-political actions, including war and terrorism, such as the conflicts in Ukraine and the Middle East, or natural disasters and public health epidemics, such as the COVID-19 pandemic.
We expect to incur significant costs in an effort to detect and prevent security incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach.
We expect to incur significant costs in an effort to detect and prevent security incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach or incident.
Any claims of patent infringement asserted by third parties would be time consuming and could: • result in costly litigation that may cause negative publicity; • divert the time and attention of our technical personnel and management; • cause development delays; • prevent us from commercializing any of our product candidates until the asserted patent expires or is held finally invalid or not infringed in a court of law; • require us to develop non-infringing technology, which may not be possible on a cost-effective basis; • subject us to significant liability to third parties; or 86 Table of Contents • require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all, or which might be non-exclusive, which could result in our competitors gaining access to the same technology.
Any claims of patent infringement asserted by third parties would be time consuming and could: • result in costly litigation that may cause negative publicity; • divert the time and attention of our technical personnel and management; • cause development delays; • prevent us from commercializing any of our product candidates until the asserted patent expires or is held finally invalid or not infringed in a court of law; • require us to develop non-infringing technology, which may not be possible on a cost-effective basis; • subject us to significant liability to third parties; or • require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all, or which might be non-exclusive, which could result in our competitors gaining access to the same technology.
We have no operations in Russia, Belarus or Ukraine, but we do not and cannot know if the current uncertainties in these geopolitical areas, which are unfolding in real-time, may escalate and result in broad economic and security conditions or rationing of medical supplies, which could limit our ability to conduct clinical trials outside the United States or result in material implications for our business.
We have no operations in the Middle East, Russia, Belarus or Ukraine, but we do not and cannot know if the current uncertainties in these geopolitical areas, which are unfolding in real-time, may escalate and result in broad economic and security conditions or rationing of medical supplies, which could limit our ability to conduct clinical trials outside the United States or result in material implications for our business.
The GDPR may increase our responsibility and liability in relation to personal data that we may process, and we may be required to put in place additional mechanisms in an effort to comply with the GDPR.
The GDPR and UK GDPR may increase our responsibility and liability in relation to personal data that we may process, and we may be required to put in place additional mechanisms in an effort to comply with the GDPR and UK GDPR.
Moreover, any actions we may bring to enforce our intellectual property against our competitors could provoke them to bring counterclaims against us; • there may be significant pressure on the United States government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and • countries other than the United States may have patent laws less favorable to patentees than those upheld by United States courts, allowing foreign competitors a better opportunity to create, develop and market competing products or product candidates.
Moreover, any actions we may bring to enforce our intellectual property against our competitors could provoke them to bring counterclaims against us; 82 Table of Contents • there may be significant pressure on the United States government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and • countries other than the United States may have patent laws less favorable to patentees than those upheld by United States courts, allowing foreign competitors a better opportunity to create, develop and market competing products or product candidates.
In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price (an “ASP”) and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. Further, these prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs.
In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. Further, these prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs.
If the FDA, EMA or other comparable foreign regulatory authorities do not approve or revoke their approval of these other therapies, or if safety, efficacy, commercial adoption, manufacturing or supply issues arise with the therapies we choose to evaluate in combination with FYARRO or any future product candidate, we may be unable to obtain approval of or successfully market any one or all of the product candidates we develop.
If the FDA, EMA or other comparable foreign regulatory authorities do not approve or revoke their approval of these other therapies, or if safety, efficacy, commercial adoption, manufacturing or supply issues arise with the therapies we choose to evaluate in combination with FYARRO or any future product candidate, we may be unable to obtain approval of or successfully market FYARRO or any future product candidates we develop.
Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • our right to sublicense patents and other rights to third parties; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; 93 Table of Contents • our right to transfer or assign the license; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by us and our licensors and partners; and • the priority of invention of patented technology.
Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • our right to sublicense patents and other rights to third parties; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • our right to transfer or assign the license; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by us and our licensors and partners; and • the priority of invention of patented technology.
A smaller reporting company is a company that, as of the last business day of its most recently completed second fiscal quarter, has (i) an aggregate market value of the company’s voting stock held by non-affiliates, or public float, of less than $250 million or (ii) less than $100 million in revenue and less than $700 million in public float.
A smaller reporting company is a company that (i) as of the last business day of its most recently completed second fiscal quarter has an aggregate market value of the company’s voting stock held by non-affiliates, or public float, of less than $250 million or (ii) for the most recently completed fiscal year has less than $100 million in revenue and as of the last business day of its most recently completed second fiscal quarter has less than $700 million in public float.
Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we may not be certain that we or our licensors are the first to either (1) file any patent application related to our product or product candidates or (2) invent any of the inventions claimed in the patents or patent applications.
Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we may not be certain that we or our licensors are the first to either file any patent application related to our product or product candidates or invent any of the inventions claimed in the patents or patent applications.
For example, in our AMPECT trial of FYARRO, most treatment-related adverse events were mild or moderate, with the most commonly reported adverse events being anemia, edema, infections, mucositis, pain, nail changes, vomiting, thrombocytopenia, hypertension and nausea. Treatment-related adverse events in our other oncology and PAH trials of FYARRO included thrombocytopenia, diarrhea, fatigue, mucosal inflammation, nausea, anemia, and rash.
For example, in our AMPECT trial of FYARRO, most treatment-related adverse events were mild or moderate, with the most commonly reported adverse events being anemia, edema, infections, mucositis, pain, nail changes, vomiting, thrombocytopenia, hypertension and nausea. Treatment-related adverse events in our other trials of FYARRO included thrombocytopenia, diarrhea, fatigue, mucosal inflammation, nausea, anemia, and rash.
Patients treated with FYARRO or our other product candidates that we may develop in the future may also be undergoing surgical, radiation and/or chemotherapy treatments, which can cause side effects or adverse events that are unrelated to our product candidate but may still impact the success of our clinical trials.
Patients treated with FYARRO or our other product candidates that we may develop in the future may also be undergoing surgical, radiation and/or chemotherapy treatments, which can cause side effects or adverse events that are unrelated to FYARRO or any future product candidates but may still impact the success of our clinical trials.
For truncating TSC1 & TSC2 inactivating alterations, there are no existing FDA or EMA approved products indicated for such use. If FYARRO receives additional regulatory approval for these TSC1 & TSC2 indications, it may face competition from other drug candidates in clinical trials that target the mTOR pathway.
For TSC1 or TSC2 inactivating alterations, there are no existing FDA or EMA approved products indicated for such use. If FYARRO receives additional regulatory approval for these TSC1 and TSC2 indications, it may face competition from other drug candidates in clinical trials that target the mTOR pathway.
Future growth would impose significant added responsibilities on members of management, including: • identifying, recruiting, integrating, maintaining and motivating additional employees; • managing our internal development efforts effectively, including the clinical, FDA, EMA and other comparable foreign regulatory agencies’ review process for FYARRO and any other product candidates, while complying with any contractual obligations to contractors and other third parties we may have; and • improving our operational, financial and management controls, reporting systems and procedures.
Future growth would impose significant added responsibilities on members of management, including: • identifying, recruiting, integrating, maintaining and motivating additional employees; • managing our internal development efforts effectively, including the clinical, FDA, EMA and other comparable foreign regulatory agencies’ review process for FYARRO and any other product candidates we may develop in the future, while complying with any contractual obligations to contractors and other third parties that we may have; and • improving our operational, financial and management controls, reporting systems and procedures.
On January 24, 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the 63 Table of Contents court’s order in Catalyst , the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved.
On January 24, 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst , the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved.
If FYARRO for the investigation for the treatment of patients with malignant solid tumors harboring TSC1 & TSC2 alterations, or FYARRO for any other indication or any other product candidates that we may develop in the future that receives Fast Track designation, does not continue to meet the criteria for Fast Track designation, or if our clinical trials are delayed, suspended or terminated, or put 62 Table of Contents on clinical hold due to unexpected adverse events or issues with clinical supply, we will not receive the benefits associated with the Fast Track program.
If FYARRO for the investigation for the treatment of patients with malignant solid tumors harboring TSC1 or TSC2 alterations, or FYARRO for any other indication or any other product candidates that we may develop in the future that receives Fast Track designation, does not continue to meet the criteria for Fast Track designation, or if our clinical trials are delayed, suspended or terminated, or put on clinical hold due to unexpected adverse events or issues with clinical supply, we will not receive the benefits associated with the Fast Track program.
We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of our current or any future collaborators.
We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, and we could face potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of our current or any future collaborators.
There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs such as FYARRO. Third-party payors may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication.
There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs. Third-party payors may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication.
Furthermore, any negative results we may report in clinical trials of our product candidates may make it difficult or impossible to recruit and retain patients in other clinical trials we are conducting. Similarly, negative results reported by our competitors about their drug candidates may negatively affect patient recruitment in our clinical trials.
Furthermore, any negative results we may report in clinical trials of FYARRO or any future product candidates may make it difficult or impossible to recruit and retain patients in other clinical trials we are conducting. Similarly, negative results reported by our competitors about their drug candidates may negatively affect patient recruitment in our clinical trials.
Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our working capital, our ability to fund the commercialization of FYARRO, the development of FYARRO for additional indications and any future product candidates, our ability to achieve and maintain profitability and the performance of our stock.
Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our working capital, our ability to fund the continued commercialization of FYARRO, the development of FYARRO for additional indications and any future product candidates, our ability to achieve and maintain profitability and the performance of our stock price.
We may be unable to obtain United States approval for FYARRO for additional indications or other product candidates that we may develop in the future or foreign regulatory approval for FYARRO or such product candidates that we may develop in the future and, as a result, may be unable to commercialize FYARRO or other product candidates and our business will be substantially harmed.
We may be unable to obtain United States approval for FYARRO for additional indications or other product candidates that we may develop in the future or foreign regulatory approval for FYARRO or other product candidates that we may develop in the future and, as a result, may be unable to commercialize FYARRO in additional indications or any future product candidates and in such event our business will be substantially harmed.
To date, we have devoted substantially all of our resources to research and development activities, business planning, establishing and maintaining our intellectual property portfolio, preparing for commercialization of FYARRO, hiring personnel, raising capital and providing general and administrative support for these operations.
To date, we have devoted substantially all of our resources to research and development activities, business planning, establishing and maintaining our intellectual property portfolio, the commercialization of FYARRO, hiring personnel, raising capital and providing general and administrative support for these operations.
In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to ensure that we will be able to manufacture sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
In addition, exclusive marketing rights in the United States may be limited if we seek approval 62 Table of Contents for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to ensure that we will be able to manufacture sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
We cannot assure you that our data protection efforts and our investment in information technology, or the efforts or investments of CROs, consultants or other third parties, will prevent significant breakdowns or breaches in systems or other cyber incidents that cause loss, destruction, unavailability, alteration or dissemination of, or damage to, our data that could have a material adverse effect upon our reputation, business, operations or financial condition.
We cannot assure you that our data protection efforts and our investment in information technology, or the efforts or investments of CROs, consultants or other third parties, have prevented or will prevent significant breakdowns or breaches in systems or other cyber incidents that cause loss, destruction, unavailability, or unauthorized alteration, dissemination, or other processing of, or damage to, our data that could have a material adverse effect upon our reputation, business, operations or financial condition.
Although we own or license twelve (12) issued patents in the United States, we cannot be certain that the claims in our other United States pending patent applications, corresponding international patent applications and patent applications in certain foreign territories, or those of our licensors, will be considered patentable by the United States Patent and 83 Table of Contents Trademark Office (the “USPTO”), courts in the United States or by the patent offices and courts in foreign countries, nor can we be certain that the claims in our issued patent will not be found invalid or unenforceable if challenged.
Although we own or license twelve (12) issued patents in the United States, we cannot be certain that the claims in our other United States pending patent applications, corresponding international patent applications and patent applications in certain foreign territories, or those of our licensors, will be considered patentable by the United States Patent and Trademark Office (the “USPTO”), courts in the United States or by the patent offices and courts in foreign countries, nor can we be certain that the claims in our issued patent will not be found invalid or unenforceable if challenged.
Further, our relationships with healthcare professionals, clinical investigators, CROs and third-party payors in connection with our current and future business activities may be subject to federal and state healthcare fraud and abuse laws, false claims laws, transparency laws, government price reporting, and health information privacy and security laws, which could expose us to significant losses, including, among other things, criminal sanctions, civil penalties, contractual damages, exclusion from governmental healthcare programs, reputational harm, administrative burdens and diminished profits and future earnings.
Further, our relationships with healthcare professionals, clinical investigators, CROs and third-party payors in connection with our current and future business activities may be subject to federal and state healthcare fraud and abuse laws, false claims laws, 66 Table of Contents transparency laws, government price reporting, and health information privacy and security laws, which could expose us to significant losses, including, among other things, criminal sanctions, civil penalties, contractual damages, exclusion from governmental healthcare programs, reputational harm, administrative burdens and diminished profits and future earnings.
These risks include, but are not limited to, the following: • We are a commercial-stage biopharmaceutical company, have a limited operating history and have a single product approved for commercial sale, which may make it difficult for you to evaluate our current business and likelihood of success and viability. • We have incurred significant net losses since our inception, and we expect to continue to incur significant net losses for the foreseeable future. • Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve several objectives relating to the discovery, development and commercialization of FYARRO and any future product candidates. • We may be unable to obtain United States approval for FYARRO for additional indications or other product candidates that we may develop in the future or foreign regulatory approval for FYARRO or other product candidates that we may develop in the future and, as a result, may be unable to commercialize FYARRO or any future product candidates and our business will be substantially harmed. • Even following approval and commercialization of FYARRO for the advanced malignant PEComa indication, we will require additional capital to finance our operations.
These risks include, but are not limited to, the following: • We are a commercial-stage biopharmaceutical company, have a limited operating history and have a single product approved for commercial sale, which may make it difficult for you to evaluate our current business and likelihood of success and viability. • We have incurred significant net losses since our inception, and we expect to continue to incur significant net losses for the foreseeable future. • Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve several objectives relating to the discovery, development and commercialization of FYARRO and any other product candidates that we may develop in the future. • We may be unable to obtain United States approval for FYARRO for additional indications or any other product candidates that we may develop in the future or foreign regulatory approval for FYARRO or other product candidates that we may develop in the future and, as a result, may be unable to commercialize FYARRO in additional indications or any future product candidates and in such event our business will be substantially harmed. • Even following approval and commercialization of FYARRO for the advanced malignant perivascular epithelioid cell tumor ("PEComa") indication, we will require additional capital to finance our operations.
Even if favorable coverage and reimbursement status is attained for FYARRO or one or more product candidates that we may develop in the future for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Even if favorable coverage and reimbursement status is attained for FYARRO or one or more product candidates that we may develop in the future for which we receive regulatory approval, it is possible that less favorable coverage policies and reimbursement rates may be implemented in the future.
FYARRO or other product candidates may be used in populations for which safety concerns may be particularly scrutinized by regulatory agencies. In addition, FYARRO is being studied in combination with other therapies, which may exacerbate adverse events associated with the therapy.
FYARRO or any future product candidates may be used in populations for which safety concerns may be particularly scrutinized by regulatory agencies. In addition, FYARRO is being studied in combination with other therapies, which may exacerbate adverse events associated with the therapy.
The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.
The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product 64 Table of Contents candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.
Such announcements could also harm our reputation or the market for our future products, which could have a material adverse effect on our business. 88 Table of Contents Derivation proceedings may be necessary to determine priority of inventions, and an unfavorable outcome may require us to cease using the related technology or to attempt to license rights from the prevailing party.
Such announcements could also harm our reputation or the market for our future products, which could have a material adverse effect on our business. Derivation proceedings may be necessary to determine priority of inventions, and an unfavorable outcome may require us to cease using the related technology or to attempt to license rights from the prevailing party.
We may be required to report these adverse events or unexpected side effects to the FDA or comparable foreign regulatory authorities, which could, among other things, order us to cease further development of FYARRO.
We may be required to report these adverse events or unexpected side effects to the FDA or comparable foreign regulatory authorities, which could, among other things, order us to cease commercial sales or further development of FYARRO.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experiences disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
Some of the factors that may cause the market price of our common stock to fluctuate include: • our ability to obtain regulatory approvals for FYARRO in other indications or for any other product candidates that we may develop in the future, and delays or failures to obtain such approvals; • the results of current, and any future, nonclinical or clinical trials of FYARRO or any of our product candidates that we may develop in the future; • the failure of FYARRO or any product candidates that we may develop in the future, if approved for marketing and commercialization, to achieve commercial success; • any inability to obtain adequate supply of FYARRO or any of our product candidates that we may develop in the future or the inability to do so at acceptable prices; • the entry into, or termination of, key agreements, including key licensing, supply or collaboration agreements; • adverse regulatory authority decisions; • the initiation of material developments in, or conclusion of, disputes or litigation to enforce or defend any of our intellectual property rights or defend against the intellectual property rights of others; 95 Table of Contents • changes in laws or regulations applicable to FYARRO or any of our product candidates that we may develop in the future; • announcements by commercial partners or competitors of new commercial products, clinical progress (or the lack thereof), significant contracts, commercial relationships, or capital commitments; • failure to meet or exceed financial and development projections we may provide to the public; • failure to meet or exceed the financial and development projections of the investment community; • the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; • general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors, including deteriorating market conditions due to investor concerns regarding inflation and hostilities between Russia and Ukraine; • adverse publicity relating to our markets, including with respect to other products and potential products in such markets; • the introduction of technological innovations or new therapies competing with our products and potential products; • announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by us or our competitors; • disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies; • the loss of key employees; • significant lawsuits, including patent or stockholder litigation; • if securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our business and stock; • changes in the market valuations of similar companies; • general and industry-specific economic conditions potentially affecting our research and development expenditures; • sales of our common stock by us or our stockholders in the future, or the anticipation thereof; • trading volume of our common stock; • changes in the structure of health care payment systems; • adverse regulatory decisions; • trading volume of our common stock; and • period-to-period fluctuations in our financial results.
Some of the factors that may cause the market price of our common stock to fluctuate include: • our ability to obtain regulatory approvals for FYARRO in other indications or for any other product candidates that we may develop in the future, and delays or failures to obtain such approvals; • the results of current, and any future, nonclinical or clinical trials of FYARRO or any of our product candidates that we may develop in the future; • the failure of FYARRO or any product candidates that we may develop in the future, if approved for marketing and commercialization, to achieve commercial success; • any inability to obtain adequate supply of FYARRO or any of our product candidates that we may develop in the future or the inability to do so at acceptable prices; • the entry into, or termination of, key agreements, including key licensing, supply or collaboration agreements; • adverse regulatory authority decisions; • the initiation of material developments in, or conclusion of, disputes or litigation to enforce or defend any of our intellectual property rights or defend against the intellectual property rights of others; • changes in laws or regulations applicable to FYARRO or any of our product candidates that we may develop in the future; • announcements by commercial partners or competitors of new commercial products, clinical progress (or the lack thereof), significant contracts, commercial relationships, or capital commitments; • failure to meet or exceed financial and development projections we may provide to the public; • failure to meet or exceed the financial and development projections of the investment community; • the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; • general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors, including turmoil in the global banking system, deteriorating market conditions due to investor concerns regarding inflation, and conflicts in Ukraine and the Middle East; • adverse publicity relating to our markets, including with respect to other products and potential products in such markets; • the introduction of technological innovations or new therapies competing with our products and potential products; • announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by us or our competitors; • disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies; • the loss of key employees; • significant lawsuits, including patent or stockholder litigation; • if securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our business and stock; • changes in the market valuations of similar companies; • general and industry-specific economic conditions potentially affecting our research and development expenditures; • sales of our common stock by us or our stockholders in the future, or the anticipation thereof; • trading volume of our common stock; • changes in the structure of health care payment systems; 94 Table of Contents • adverse regulatory decisions; • trading volume of our common stock; and • period-to-period fluctuations in our financial results.
Our ability to generate substantial product sales sufficient to achieve profitability depends on our ability, alone or with strategic collaboration partners, to obtain the regulatory and marketing approvals necessary to successfully complete discovery, development and eventual commercialization of additional indications (such as TSC1 & TSC2 ), commercialize FYARRO in foreign jurisdictions or any future product candidates.
Our ability to generate substantial product sales sufficient to achieve profitability depends on our ability, alone or with strategic collaboration partners, to obtain the regulatory and marketing approvals necessary to successfully complete discovery, development and eventual commercialization of additional indications (such as TSC1 and TSC2 ) or any future product candidates, and commercialize FYARRO or any other future product candidates, if approved, in foreign jurisdictions.
Even though FYARRO has received FDA approval for advanced malignant PEComa, and even if FYARRO receives regulatory approval for additional indications, if any of our product candidates that we develop in the future were to receive regulatory approval or be commercialized for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA, EMA or other comparable foreign regulatory authorities could revoke approval of the therapy used in combination with such product candidates, or safety, efficacy, manufacturing or supply issues could arise with these existing therapies.
Even though FYARRO has received FDA approval for advanced malignant PEComa, and even if FYARRO receives regulatory approval for additional indications, or if any of our product candidates that we develop in the future were to receive regulatory approval or be commercialized for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA, EMA or other comparable foreign regulatory authorities could revoke approval of the therapy used in combination with such products, or safety, efficacy, manufacturing or supply issues could arise with 51 Table of Contents these existing therapies.
Also, to the extent other approved diagnostics are able to broaden their labeling claims to include our approved drug products, we may be forced to abandon our companion diagnostic development plans or we may not be able to compete effectively upon approval, which could adversely impact our ability to generate revenue from the sale of our approved products and our business operations.
Also, 60 Table of Contents to the extent other approved diagnostics are able to broaden their labeling claims to include our approved drug products, we may be forced to abandon our companion diagnostic development plans or we may not be able to compete effectively upon approval, which could adversely impact our ability to generate revenue from the sale of our approved products and our business operations.
We are required to use commercially reasonable efforts or diligent efforts to commercialize products based on the licensed rights and to pay certain royalties based off our net sales, certain sublicense fees and certain other fees. We may not meet these requirements, 74 Table of Contents which could result in a loss or termination of any rights under such agreements.
We are required to use commercially reasonable efforts or diligent efforts to commercialize products based on the licensed rights and to pay certain royalties based off our net sales, certain sublicense fees and certain other fees. We may not meet these requirements, which could result in a loss or termination of any rights under such agreements.
Such a loss of patent protection would have a material adverse impact on our business. Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities.
Such a loss of patent protection would have a material adverse impact on our business. 86 Table of Contents Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFor discussion of legal proceedings, see Note 16 (Commitments and contingencies) to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 101 Table of Contents PART II
Biggest changeFor discussion of legal proceedings, see Note 13 (Commitments and contingencies) to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 101 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 changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock has traded since the Merger on the Nasdaq Capital Market on August 27, 2021, under the symbol “AADI.” Stockholders As of March 23, 2023, there were 86 stockholders of record of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the Nasdaq Capital Market on August 27, 2021, under the symbol “AADI.” Stockholders As of March 8, 2024, there were 84 stockholders of record of our common stock.
Unregistered Sales of Equity Securities and Use of Proceeds There have been no unregistered sales of securities other than previously disclosed by us on Form 10-Q or Form 8-K. Issuer Purchases of Equity Securities There were no repurchases of shares of common stock made during the year ended December 31, 2022 . Item 6. [Reserved] . 102 Table of Contents
Unregistered Sales of Equity Securities and Use of Proceeds There have been no unregistered sales of securities other than previously disclosed by us on Form 10-Q or Form 8-K. Issuer Purchases of Equity Securities There were no repurchases of shares of common stock made during the year ended December 31, 2023 . Item 6. [Reserved] . 102 Table of Contents

Item 7. Management's Discussion & Analysis

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

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Biggest changeDuring the year ended December 31, 2021, we recorded a $74.2 million impairment charge to reduce the carrying value of the intangible asset to its fair value to $3.9 million at the Effective Times, as a result of the excess fair value ascribed to the acquired contract intangible asset related to the Merger. 110 Table of Contents Other Income, Net The following table sets forth our other income, net: Year Ended December 31, 2022 2021 Change in fair value of convertible promissory notes $ — $ 1,585 Gain upon extinguishment of debt — 196 Interest income 2,398 13 Interest expense (230) (665) Total other income $ 2,168 $ 1,129 Other income, net for the year ended December 31, 2022 , was $2.2 million of income, compared to $1.1 million of income for the year ended December 31, 2021 .
Biggest changeOther Income (Expense), Net The following table sets forth our other income, net: Year Ended December 31, 2023 2022 Foreign exchange loss (1) — Interest income 6,400 2,398 Interest expense (231) (230) Total other income, net $ 6,168 $ 2,168 Other income, net for the year ended December 31, 2023 , was $6.2 million of income, compared to $2.2 million of income for the year ended December 31, 2022 .
Financing Activities Cash provided by financing activities for the year ended December 31, 2022 related to $72.5 million gross cash proceeds from our 2022 PIPE Financing, $0.4 million from exercise of stock options and $0.3 million in proceeds from the issuances of stock under the ESPP, offset by $0.7 million of financing costs related to the 2021 PIPE Financing and the 2022 PIPE Financing.
Cash provided by financing activities for the year ended December 31, 2022 related to $72.5 million gross cash proceeds from our 2022 PIPE Financing, $0.4 million from exercise of stock options and $0.3 million in proceeds from the issuances of stock under the ESPP, offset by $0.7 million of financing costs related to the 2021 PIPE Financing and the 2022 PIPE Financing.
We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical studies and clinical trials, identifying and designing product candidates, the regulatory approval process for FYARRO in additional indications, outside the United States and any other product candidates we may develop in the future, and the commercial launch of FYARRO.
We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical and clinical trials and identifying and designing product candidates, the regulatory approval process for FYARRO outside the United States and in additional indications and any other product candidates we may develop in the future and the commercial launch of FYARRO.
Co-payment assistance is accrued at the time of product sale to the SDs and SP based on estimated patient participation and average co-pay benefit to be paid per a claim. Our estimated amounts are compared to actual program participation and co-pay amounts paid using data provided by third-party administrators.
Co-payment assistance is accrued at the time of product sale to the SDs and SP based on estimated patient participation and average co-pay benefit to be paid per claim. Our estimated amounts are compared to actual program participation and co-pay amounts paid using data provided by third-party administrators.
As a result, we expect that our research and development expenses will increase substantially in the foreseeable future as we continue to invest in research and development activities, pursue clinical development of FYARRO in additional indications and any other product candidates we may develop in the future and expand our product candidate pipeline.
As a result, we expect that our research and development expenses will increase in the foreseeable future as we continue to invest in research and development activities, pursue clinical development of FYARRO in additional indications and any other product candidates we may develop in the future and expand our product candidate pipeline.
Any continued inability to travel and conduct face-to-face meetings, as well as constraints surrounding hospital infrastructure and staff, can also make it more difficult to enroll and maintain patients in ongoing or planned clinical trials.
Any inability to travel and conduct face-to-face meetings, as well as constraints surrounding hospital infrastructure and staff, can also make it more difficult to enroll and maintain patients in ongoing or planned clinical trials.
EOC License Agreement In December 2020, we entered into the EOC License Agreement with EOC under which we received $14.0 million in January 2021 in non-refundable upfront consideration as partial payment for the rights and licenses granted to EOC by us for the further development and commercialization of FYARRO in the People’s Republic of China, Hong Kong Special Administration Region, Macao Special Administrative Region and Taiwan (the “Licensed Territory”).
EOC License Agreement In December 2020, we entered into the license agreement ("EOC License Agreement") with EOC Pharma (Hong Kong) Limited ("EOC") under which we received $14.0 million in January 2021 in non-refundable upfront consideration as partial payment for the rights and licenses granted to EOC by us for the further development and commercialization of FYARRO in the People’s Republic of China, Hong Kong Special Administration Region, Macao Special Administrative Region and Taiwan (the “Licensed Territory”).
While we have largely resumed normal operations, any resurgence or worsening of the COVID-19 pandemic may cause us to reinstitute certain measures to protect employee safety, including staggered work hours or reduced in-person staffing, that could result in additional disruption and/or delays in our ability to conduct development activities.
While we have resumed normal operations, any resurgence of the COVID-19 pandemic may cause us to reinstitute certain measures to protect employee safety, including staggered work hours or reduced in-person staffing, that could result in additional disruption and/or delays in our ability to conduct development activities.
If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment. • Co-Payment Assistance : We offer co-payment assistance to commercially insured patients meeting certain eligibility requirement.
If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment. • Co-Payment Assistance : We offer co-payment assistance to commercially insured patients meeting certain eligibility requirements.
To date, we have experienced some supply disruptions due to the COVID-19 pandemic, including closures at certain chip manufacturers, which led to extended lead times for FYARRO and diversion of certain lab materials needed to support COVID-19 relief efforts.
We experienced some supply disruptions due to the COVID-19 pandemic, including closures at certain chip manufacturers, which led to extended lead times for FYARRO and diversion of certain lab materials needed to support COVID-19 relief efforts.
These accounting principles require us to make certain estimates, judgements and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented.
These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented.
If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment. • Chargebacks : Chargebacks are discounts and fees that relate to contracts with government and other entities purchasing from the SDs and SP at a discounted price.
If actual future rebates vary 106 Table of Contents from estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment. • Chargebacks : Chargebacks are discounts and fees that relate to contracts with government and other entities purchasing from the SDs and SP at a discounted price.
We reflect these accruals as either a reduction in the related account receivable from the distributor or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management's estimates that consider channel mix and experience to date. 113 Table of Contents Estimates are assessed periodically and updated to reflect current information.
We reflect these accruals as either a reduction in the related account receivable from the distributor or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management's estimates that consider channel mix and experience to date. Estimates are assessed periodically and updated to reflect current information.
On September 22, 2022, the Company entered into the Purchase Agreement for the 2022 PIPE Financing with the 2022 PIPE Investors for the sale by the Company of 3,373,526 shares of the Company’s common stock for a price of $12.50 per share and Pre-Funded Warrants to purchase an aggregate of 2,426,493 shares of the Company's common stock, at a purchase price of $12.4999 per Pre-Funded Warrant.
On September 22, 2022, the Company entered into the Purchase Agreement for the 2022 PIPE Financing with the 2022 PIPE Investors for the sale of 3,373,526 shares of our common stock for a price of $12.50 per share and Pre-Funded Warrants to purchase an aggregate of 2,426,493 shares of our common stock, at a purchase price of $12.4999 per Pre-Funded Warrant.
We will pay Cowen 3.0% of the aggregate gross proceeds from each sale of shares of common stock under the Sales Agreement. As of December 31, 2022, no shares of common stock had been sold under the Sales Agreement.
We will pay Cowen 3.0% of the aggregate gross proceeds from each sale of shares of common stock under the Sales Agreement. As of December 31, 2023, no shares of common stock had been sold under the Sales Agreement.
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes to those statements thereto appearing elsewhere in this Annual Report on Form 10-K filed with the SEC for the year ending December 31, 2022 .
The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the related notes to those statements thereto appearing elsewhere in this Annual Report on Form 10-K filed with the SEC for the year ending December 31, 2023 .
In accordance with the BMS License Agreement, we are required to pay 20% of all sublicense fees to BMS. As such, we recognized $2.8 million of license expense in the fourth quarter of 2020 and had a corresponding $2.8 million sublicense payable to BMS on the balance sheet as of December 31, 2020, which was paid in 2021.
In accordance with the BMS License Agreement, we are required to pay 20% of all sublicense fees to BMS. As such, we recognized $2.8 million of license expense in the fourth quarter of 2020 and had a corresponding $2.8 million sublicense payable to BMS as of December 31, 2020, which was paid in 2021.
In October 2022, we entered into a collaboration and supply agreement with Mirati Therapeutics, Inc. (“Mirati”) to evaluate the combination of Mirati’s adagrasib, a KRAS G12C selective inhibitor, and FYARRO in KRAS G12C mutant non-small cell lung cancer (NSCLC) and other solid tumors.
In October 2022, we entered into a collaboration and supply agreement with Mirati to evaluate the combination of Mirati’s adagrasib, a KRAS G12C selective inhibitor, and FYARRO in KRAS G12C mutant non-small cell lung cancer (NSCLC) and other solid tumors.
You should read this Annual Report completely, including Part I, Item 1A (Risk Factors) of this Annual Report and the “Cautionary Statement Regarding Forward-Looking Statements” sections of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by our forward-looking statements contained in the following discussion and analysis.
You should read this Annual Report completely, including Part I, Item 1A (Risk Factors) of this Annual Report and the “Forward-Looking Statements” sections of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by our forward-looking statements contained in the following discussion and analysis.
Shelf Registration Statement; $75M At the Market Offering On March 17, 2022, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), with respect to an “at the market offering” pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having aggregate gross proceeds of up to $75.0 million through Cowen as our sales agent.
On March 17, 2022, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), with respect to an “at the market offering” pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having aggregate gross proceeds of up to $75.0 million through Cowen as our sales agent.
Share-Based Compensation We recognize all share-based payments to employees, including grants of employee stock options in the consolidated statements of operations and comprehensive loss based on their fair values. All of our share-based awards, to employees, non-employees, officers, and directors, are subject only to service-based vesting conditions.
Share-Based Compensation We recognize all share-based payments to employees, including grants of employee stock options, employee stock purchase plan, and restricted stock units in the consolidated statements of operations and comprehensive loss based on their fair values. All of our share-based awards, to employees, non-employees, officers, and directors, are subject only to service-based vesting conditions.
For the year ended December 31, 2022, cash used in operating activities was $49.6 million and resulted from (i) our net loss of $60.5 million, and (ii) a $1.8 million net decrease in our working capital accounts, primarily driven by an increase in accounts receivable and inventory related to the commercial launch of FYARRO in February 2022; offset by (i) a decrease in accounts payable and accrued expenses, and $12.7 million in non-cash adjustments, which was primarily related to share-based compensation expense, the impairment of the contract intangible asset, and depreciation and amortization expense.
For the year ended December 31, 2022, cash used in operating activities was $49.6 million and resulted from (i) our net loss of $60.5 million, and (ii) a $1.8 million net increase in our operating assets and liabilities, primarily driven by an increase in accounts receivable, prepaid expenses, inventory related to the commercial launch of FYARRO in February 2022, and accrued expenses; offset by a decrease in accounts payable, and (iii) $12.7 million in non-cash adjustments, which were primarily related to share-based compensation expense, the impairment of the contract intangible asset, and depreciation and amortization expense.
For example, during the COVID-19 pandemic, our clinical trials have been, and may continue to be, affected by the closure of offices, lack of resources or closure of borders, among other measures being put in place around the world and we made certain modifications to employee travel, with masking and vaccination requirements in our offices, and with our employees working remotely fully or intermittently.
For example, during the COVID-19 pandemic, our clinical trials were affected by the closure of offices, lack of resources and closure of borders, among other measures being put in place around the world and we made certain modifications to employee travel, with masking and vaccination requirements in our offices, and with our employees working remotely fully or intermittently.
As actual costs become known, we adjust our estimates and related accounts on the balance sheet. We have not experienced any material differences between accrued costs and actual costs incurred since our inception.
As 112 Table of Contents actual costs become known, we adjust our estimates and related accounts on the balance sheet. We have not experienced any material differences between accrued costs and actual costs incurred since our inception.
We have incurred net losses in each year since inception and as of December 31, 2022 we had an accumulated deficit of $203.2 million. These losses have resulted principally from costs incurred in connection with research and development activities, selling, general and administrative costs associated with our operations, and costs associated with the Merger.
We have incurred net losses in each year since inception and as of December 31, 2023 we had an accumulated deficit of $269.0 million. These losses have resulted principally from costs incurred in connection with research and development activities, selling, general and administrative costs associated with our operations, and costs associated with the Merger.
While certain of these disruptions have been resolved since the start of the COVID-19 pandemic, we are continuing to monitor our supply chain and contingency planning is ongoing with our partners to reduce the possibility of an interruption to our development activities or the availability of necessary materials.
While these disruptions have been resolved, we are continuing to monitor our supply chain and contingency planning is ongoing with our partners to reduce the possibility of an interruption to our development activities or the availability of necessary materials.
We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical and clinical trials and identifying and 106 Table of Contents designing product candidates, the regulatory approval process for FYARRO outside the United States and in additional indications and any other product candidates we may develop in the future and the commercial launch of FYARRO.
We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical studies and clinical trials, identifying and designing product candidates, the regulatory approval process for FYARRO, outside the United States and in additional indications and any other product candidates we may develop in the future, and the continued commercialization of FYARRO.
For example, as the COVID-19 pandemic has developed, we have taken numerous steps to help ensure the health and safety of our employees.
For example, as the COVID-19 pandemic developed, we took numerous steps to help ensure the health and safety of our employees.
We recorded net product sales of $15.2 million during the year ended December 31, 2022. • We have built a cross-functional commercial team consisting of marketing, market access and commercial operations and will continue to strategically build our sales and our commercial infrastructure with capabilities designed to scale when necessary to support future commercial launches.
We recorded net product sales of $24.4 million and $15.2 million during the years ended December 31, 2023 and 2022, respectively. 105 Table of Contents • We have built a cross-functional commercial team consisting of marketing, market access and commercial operations and will continue to strategically build our sales and our commercial infrastructure with capabilities designed to scale when necessary to support future commercial launches.
The terms of any offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
The terms of any offering thereunder will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into 2025. We have incurred net losses in each year since inception and as of December 31, 2022, we had an accumulated deficit of $203.2 million.
Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into the fourth quarter of 2025. We have incurred net losses in each year since inception and as of December 31, 2023, we had an accumulated deficit of $269.0 million.
Pursuant to the terms of the amendment, the remaining portion of the previously outstanding payment obligation ($5.8 million), which is recorded on our balance sheet as due to licensor, is due on the third anniversary of the effective time of such 2021 PIPE Financing plus any accrued and unpaid interest due thereon.
Pursuant to the terms of the amendment, the remaining portion of the previously outstanding payment obligation ($5.8 million), which is recorded on our consolidated balance sheets as due to licensor, is due on the third anniversary of the effective time of the 2021 PIPE Financing (i.e., August 26, 2024), plus any accrued and unpaid interest due thereon.
Food and Drug Administration (the “FDA”) approved FYARRO sirolimus protein-bound particles for injectable suspension (albumin-bound) for the treatment of adult patients with locally advanced unresectable or metastatic malignant perivascular epithelioid cell tumor (“PEComa”). On February 22, 2022, we launched FYARRO in the United States for treatment of advanced malignant PEComa.
In November 2021, the U.S. Food and Drug Administration (the “FDA”) approved FYARRO sirolimus protein-bound particles for injectable suspension (albumin-bound) for the treatment of adult patients with locally advanced unresectable or metastatic malignant PEComa. On February 22, 2022, we launched FYARRO in the United States for treatment of advanced malignant PEComa.
The following table summarizes our cash flows for the years presented (amounts in thousands): Year Ended December 31, 2022 2021 Net cash used in operating activities $ (49,640) $ (22,423) Net cash (used in) provided by investing activities (132,886) 25,153 Net cash provided by financing activities 72,620 141,804 Net (decrease) increase in cash, cash equivalents and restricted cash $ (109,906) $ 144,534 Operating Activities Our cash used in operating activities primarily results from our net loss adjusted for non-cash expenses, changes in working capital components, amounts due to contract research organizations to conduct our clinical programs and employee-related expenditures for research and development and selling, general and administrative activities.
The following table summarizes our cash flows for the years presented (in thousands): Year Ended December 31, 2023 2022 Net cash used in operating activities $ (59,663) $ (49,640) Net cash provided by (used in) investing activities 83,206 (132,886) Net cash provided by financing activities 326 72,620 Net increase (decrease) in cash, cash equivalents and restricted cash $ 23,869 $ (109,906) Operating Activities Our cash used in operating activities primarily results from our net loss adjusted for non-cash expenses, changes in working capital components, amounts due to contract research organizations to conduct our clinical programs and employee-related expenditures for research and development and selling, general and administrative activities.
Our cash flows from operating activities will continue to be affected by spending to commercialize FYARRO in advanced malignant PEComa, advance and support FYARRO in additional indications in the clinic, develop new product candidates, and other operating and general administrative activities, including operating as a public company.
Our cash flows from operating activities will continue to be affected by spending to advanced malignant PEComa, advance and support 110 Table of Contents FYARRO in additional indications in the clinic, and other operating and general administrative activities, including operating as a public company.
Liquidity and Capital Resources As of December 31, 2022, we had $172.6 million of cash, cash equivalents and short-term investments. Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into 2025.
Liquidity and Capital Resources As of December 31, 2023, we had $108.8 million of cash, cash equivalents and short-term investments. Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into the fourth quarter of 2025.
Compensation expense related to awards to employees is calculated on a straight-line basis by recognizing the grant date fair value over the associated service period of the award, which is generally the vesting term.
Options granted during the year have a minimum contractual term of ten years. Compensation expense related to awards to employees is calculated on a straight-line basis by recognizing the grant date fair value over the associated service period of the award, which is generally the vesting term.
Our net losses were $60.5 million and $110.1 million for the years ended December 31, 2022 and 2021, respectively. These losses have resulted principally from costs incurred in connection with research and development activities, selling, general and administrative costs associated with our operations, and costs associated with the Merger.
Our net losses were $65.8 million and $60.5 million for the years ended December 31, 2023 and 2022, 109 Table of Contents respectively. These losses have resulted principally from costs incurred in connection with research and development activities, and selling, general and administrative costs associated with our operations.
Impact of Negative Global or National Events Businesses have been and will continue to be impacted by a number of challenging global and national events and circumstances that continue to evolve, including the COVID-19 pandemic, extreme weather conditions, increased economic uncertainty, inflation, rising interest rates, and conflicts in Eastern Europe and in other countries.
Impact of Negative Global or National Events Businesses have been and will continue to be impacted by a number of challenging global and national events and circumstances that continue to evolve, including the recent turmoil in the global banking system, public health epidemics, such as the COVID-19 pandemic, extreme weather conditions, increased economic uncertainty, inflation, rising interest rates, and geopolitical instability, including the conflicts in Ukraine, the Middle East and in other countries.
The shares of our common stock to be offered and sold under the Sales Agreement will be issued and sold pursuant to our shelf registration statement on the Form S-3 (File No. 333-255129), which was filed with the SEC on April 8, 2021, and which became effective on April 15, 2021.
The shares of our common stock to be offered and sold under the Sales Agreement will be issued and sold pursuant to our shelf registration statement on the Form S-3 (File No. 333-255129) (the “Prior Registration Statement”), which was filed with the SEC on April 8, 2021, and which became effective on April 15, 2021, as the same may be replaced by our shelf registration statement on Form S-3 (File No. 333-277018) (the “New Registration Statement”), which was filed with the SEC on February 12, 2024, and which has not yet become effective.
In addition to advanced malignant PEComa, based on exploratory data from our completed Phase 2 registrational study, Advanced Malignant PEComa Trial (“AMPECT”), and our expanded access program for FYARRO, we have initiated a registration-directed tumor-agnostic Phase 2 study (“PRECISION 1”) of FYARRO in patients with Tuberous Sclerosis Complex 1 and 2 (“ TSC1 & TSC2 ”) alterations.
In addition to advanced malignant PEComa, based on exploratory data from our completed Phase 2 registrational study, Advanced Malignant PEComa Trial (“AMPECT trial”) and data for FYARRO in other solid tumors with TSC1 and TSC2 inactivating alterations , we initiated a registration-directed tumor-agnostic Phase 2 study (“PRECISION1 trial”) of FYARRO in patients with malignant solid tumors with alterations of the Tuberous Sclerosis Complex 1 (“ TSC1 ”) or Tuberous Sclerosis Complex 2 (“ TSC2 ”) genes.
For the years ended 114 Table of Contents December 31, 2022 and 2021, we recognized share‑based compensation expense, net of estimated forfeitures, in the statements of operations and comprehensive loss as follows (amounts in thousands): Year Ended December 31, 2022 2021 Selling, general and administrative $ 6,333 $ 1,449 Research and development 3,310 657 Total $ 9,643 $ 2,106 As of December 31, 2022, total unamortized share‑based compensation was $28.8 million which we expect to recognize over a weighted average period of 2.7 years.
For the years ended December 31, 2023 and 2022, we recognized share‑based compensation expense in the statements of operations and comprehensive loss as follows (in thousands): Year Ended December 31, 2023 2022 Selling, general and administrative $ 7,450 $ 6,333 Research and development 4,504 3,310 Total $ 11,954 $ 9,643 As of December 31, 2023, total unamortized share‑based compensation was $25.3 million which we expect to recognize over a weighted average period of 2.5 years.
Investing Activities Cash used in investing activities for the year ended December 31, 2022 related to purchases of short-term investments $145.2 million, offset by maturities of $12.8 million. Cash provided by investing activities for the year ended December 31, 2021 related to cash acquired in connection with the Merger of $29.7 million offset by $4.5 million of transaction related expenses.
Cash used in investing activities for the year ended December 31, 2022 related to purchases of short-term investments of $145.2 million offset by maturities of $12.8 million.
Accordingly, to the extent that our product candidates continue to advance into clinical trials, including larger and later-stage clinical trials, our expenses will increase substantially and may become more variable. Impairment of Acquired Contract Intangible Asset Impairment of acquired contract intangible asset relates to a write down of the acquired contract intangible asset to fair value.
Accordingly, to the extent that our product candidates continue to advance into clinical trials, including larger and later-stage clinical trials, our expenses will increase substantially and may become more variable.
Under the terms of an August 2021 amendment to the license agreement, we paid BMS $5.8 million, representing 50% of the previously outstanding payment obligation under the agreement, following the effective time of the 2021 Private Investment in Public Equity (PIPE) Financing ("2021 PIPE Financing") that occurred in connection with the closing of the reverse acquisition of Aerpio Pharmaceuticals, Inc.
Under the terms of the Amendment, we paid BMS $5.8 million, representing 50% of the previously outstanding payment obligation under the agreement, following the effective time of our 2021 private investment in public equity (PIPE) financing ("2021 PIPE Financing") that occurred in connection with the closing of the reverse merger of Aerpio Pharmaceuticals, Inc. whereby Aspen Merger Subsidiary, Inc., our wholly-owned subsidiary (“Merger Sub”), merged with and into Aadi Subsidiary, Inc.
Results of Consolidated Operations: The following table presents the results of operations for the periods indicated (amounts in thousands): Year Ended December 31, 2022 2021 Revenue Product sales, net $ 15,216 $ — License revenue — 1,000 Grant revenue — 120 Total revenue 15,216 1,120 Operating expenses Selling, general and administrative 40,176 18,511 Research and development 32,662 19,670 Cost of goods sold 1,335 — Impairment of acquired contract intangible asset 3,724 74,156 Total operating expenses 77,897 112,337 Loss from operations (62,681) (111,217) Other income, net 2,168 1,129 Loss before income tax expense (60,513) (110,088) Income tax expense — (2) Net loss $ (60,513) $ (110,090) Comparison of Years Ended December 31, 2022 and 2021 Product Sales, Net Our product sales, net consist of sales of FYARRO since its launch in the United States on February 22, 2022.
Results of Operations: The following table presents the results of operations for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Revenue Product sales, net $ 24,354 $ 15,216 Total revenue 24,354 15,216 Operating expenses Selling, general and administrative 44,549 40,176 Research and development 48,929 32,662 Cost of goods sold 2,809 1,335 Impairment of acquired contract intangible asset — 3,724 Total operating expenses 96,287 77,897 Loss from operations (71,933) (62,681) Other income, net 6,168 2,168 Loss before income tax expense (65,765) (60,513) Income tax expense — — Net loss $ (65,765) $ (60,513) Comparison of Years Ended December 31, 2023 and 2022 Product Sales, Net Our product sales, net consist of sales of FYARRO since its launch in the United States on February 22, 2022.
Expenses related to our commercial launch including personnel expenses, sales support, and marketing are included in selling, general and administrative expenses for the year ended December 31, 2022.
Expenses related to our commercialization of FYARRO, in cluding personnel expenses, sales support, and marketing are included in selling, general and administrative expenses for the years ended December 31, 2023 and 2022.
The increase was primarily driven by a $16.3 million increase in expenses related to headcount, consultants, and other expenses, a $2.5 million increase in clinical development expenses related to the PRECISION 1 trial, offset by a $5.8 million decrease related to clinical drug product manufacturing.
The $16.2 million increase was primarily driven by a $7.0 million increase in clinical development expenses with $5.5 million of the $7.0 million increase related to the PRECISION1 trial, $4.5 million in expenses related to headcount, consultants, and other expenses, and $4.7 million related to clinical drug product manufacturing.
The Fresenius Agreement contains specific activities such as non-cancellable commitments, minimum purchase commitments, and binding annual forecasts. Under the Fresenius Agreement, which is effective through March 31, 2024 (or such later date as may be agreed between the parties in writing), we may purchase FYARRO for either clinical or commercial purposes for use in the United States and Canada.
The Fresenius Agreement contains specific activities such as non-cancellable commitments, minimum purchase commitments, and binding annual forecasts. The Fresenius Agreement is effective through March 31, 2024 (or such later date as may be agreed between the parties in writing) and we are currently negotiating an extension to such agreement.
We also have contracts with various organizations to conduct research and development activities, including clinical trial organizations to manage clinical trial activities and manufacturing companies to manufacture the drug product used in the clinical trials. The scope of the services under these research and development contracts can be modified and the contracts cancelled by us upon written notice.
We also have contracts with various organizations to conduct research and development activities, including clinical trial organizations to manage clinical trial activities and manufacturing companies to manufacture the drug product used in the clinical trials.
In accordance with the BMS License Agreement, we recognized $0.2 million of license expense in the fourth quarter of 2021 and had a corresponding $0.2 million sublicense payable to BMS on the balance sheet as of December 31, 2021, which was paid in 2022. 104 Table of Contents On June 27, 2022, we received written notice from EOC that EOC has elected to terminate the EOC License Agreement, effective immediately.
In accordance with the BMS License Agreement, we recognized $0.2 million of license expense in the fourth quarter of 2021 and had a corresponding $0.2 million sublicense payable to BMS as of December 31, 2021, which was paid in 2022.
The shelf registration statement allows us to sell from time to time up to $150.0 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for our own account in one or more 111 Table of Contents offerings.
The Prior Registration Statement presently allows us, and the new Registration Statement will allow us, to sell from time to time up to $150.0 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for our own account in one or more offerings and is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs.
For the fiscal year ended December 31, 2022 , we recorded net revenue from product sales of $15.2 million and net loss of $60.5 million. See “Results of Consolidated Operations” for further discussion of our results.
For the fiscal year ended December 31, 2023 , we recorded net revenue from product sales of $24.4 million and net loss of $65.8 million compared to the fiscal year ended December 31, 2022, where we recorded net revenue from product sales of $15.2 million and net loss of $60.5 million.
Under the BMS License Agreement, BMS is entitled to receive certain development milestone payments, royalties on net sales from licensed products under the agreement and any sublicense fees.
Under the BMS License Agreement, BMS is entitled to receive certain development milestone payments, royalties on net sales from licensed products under the agreement and any sublicense fees. Under the terms of this agreement , we recorded royalties on net product sales of $1.8 million and $1.1 million for the years ended December 31, 2023 and 2022, respectively.
In August 2021, we entered into an amendment to extend the lease of our 2,760 square feet of office space in Pacific Palisades, California. We exercised an option, under our prior lease agreement, to extend the term of the lease for an additional three-year period. Included in the renewal were nine months of rent abatement and a rent escalation clause.
We exercised an option, under our prior lease agreement, to extend the term of the lease for an additional three-year period. Included in the renewal were nine months of rent abatement and a rent escalation clause. Rent expense is being recorded on a straight-line basis.
Components of Statements of Operations and Comprehensive Loss Revenue Product Sales, Net FYARRO was approved by the FDA in November 2021. On February 22, 2022, we launched sales of FYARRO to specialty distributors (“SD”s) and a specialty pharmacy (“SP”). We recognize product sales when the SDs and SP obtain control of the product, which occurs upon delivery.
Components of Statements of Operations and Comprehensive Loss Revenue Product Sales, Net FYARRO was approved by the FDA in November 2021 for treating adult patients with locally advanced unresectable or metastatic malignant PEComa. On February 22, 2022, we launched sales of FYARRO to specialty distributors (“SDs”) and a specialty pharmacy (“SP”).
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Historically, revisions to our estimates have not resulted in a material change to our financial statements. Our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
We believe our approach to utilizing albumin bound sirolimus has the potential to produce transformational therapies to cancer patients with mTOR pathway driver alterations where other mTOR inhibitors have not or cannot be effectively exploited due to problems of pharmacology, effective drug delivery, safety, or effective targeting to the disease site. In November 2021, the U.S.
We believe our approach to utilizing this novel combination of technologies has the potential to produce transformational therapies for patients with cancers beyond PEComa that have known mTOR pathway activation and/or cancers in which other mTOR inhibitors have not been fully exploited due to problems of pharmacology, effective drug delivery, safety, or effective targeting to the disease site.
Cost of Goods Sold Cost of goods sold was $1.3 million reflecting primarily royalties incurred on product sold during the year ended December 31, 2022 . There were no cost of goods sold during the year ended December 31, 2021 .
Cost of Goods Sold Cost of goods sold for the year ended December 31, 2023 and 2022 was $2.8 million and $1.3 million, respectively. This increase is primarily driven by royalties incurred on product sold.
In arriving at our estimate, we also consider historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry. Grant Revenue Grant revenue is derived from federal grants, primarily with the FDA. We have determined that the government agencies providing grants to us are not customers.
In arriving at our estimate, we also consider historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry.
We expect our expenses, and the potential for losses, to increase substantially as we conduct clinical trials of FYARRO, in additional indications and seek to expand our pipeline.
We expect our expenses, and the potential for losses, to increase as we conduct clinical trials of FYARRO in additional indications and seek to expand our pipeline. On September 22, 2022, we received funding of $72.2 million, net from a private investment in public equity financing (the "2022 PIPE Financing") with certain investors (the "2022 PIPE Investors").
We will continue to evaluate the impact that these events could have on our operations, financial position, results of operations and cash flows in fiscal year 2023.
We will continue to evaluate the impact that these events could have on our operations, financial position, results of operations and cash flows in fiscal year 2024. Key Trends and Factors Affecting Comparability Between Periods • Commercial sale of FYARRO was launched on February 22, 2022, for the treatment of patients with advanced malignant PEComa.
During the year ended December 31, 2022, w e recognized an impairment charge of $3.7 million to fully impair the contract intangible asset based on Gossamer's termination of the Gossamer License Agreement as a result of Gossamer not meeting its primary or secondary endpoint in the UC-SHIFT clinical trial.
During the year ended December 31, 2022, we recognized an impairment of $3.7 million to fully impair the contract intangible asset based on Gossamer's termination of the license agreement, dated June 24, 2018, with Gossamer Bio, Inc.
Other general and administrative expenses include professional fees for legal, auditing, tax and business consulting services, insurance costs, intellectual property and patent costs, facility costs and travel costs. We expect that selling, general and administrative expenses will increase in the future as we expand our operating activities.
Other general and administrative expenses include professional fees for legal, auditing, tax and business consulting services, insurance costs, intellectual property and patent costs, facility costs and travel costs. Research and Development Expenses Research and development expenses, which consist primarily of costs associated with our product research and development efforts, are expensed as incurred.
On June 27, 2022, EOC filed a Request for Arbitration with the International Chamber of Commerce’s International Court of Arbitration against us. The arbitration process is ongoing. We intend to defend ourselves vigorously in this matter and pursue all relief to which we are entitled.
On June 27, 2022, we received written notice from EOC that EOC has elected to terminate the EOC License Agreement, effective immediately. On June 27, 2022, EOC filed a Request for Arbitration with the International Chamber of Commerce’s International Court of Arbitration against us. The arbitration process is ongoing.
Research and Development Expenses The following table presents our research and development expenses for the periods indicated (amounts in thousands): Year Ended December 31, 2022 2021 Personnel expense $ 18,526 $ 4,359 Consultants 4,543 2,458 External clinical development 8,347 5,838 Clinical drug product manufacturing 818 6,646 Other expense 428 369 Total research and development expense $ 32,662 $ 19,670 Research and development expenses for the year ended December 31, 2022 , were $32.7 million, an increase of $13.0 million, compared to $19.7 million for the year ended December 31, 2021.
The $4.3 million increase was primarily driven by $4.1 million of legal costs predominantly related to the EOC arbitration and other related expenses, $0.7 million of personnel expenses related to increased headcount, incentive bonuses and share-based compensation, and $1.3 million of commercial and marketing expense, offset by a decrease of $1.8 million of consulting expenses and insurance. 108 Table of Contents Research and Development Expenses The following table presents our research and development expenses for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Personnel expense $ 22,961 $ 18,526 Consultants 3,657 4,543 External clinical development 15,341 8,347 Clinical drug product manufacturing 5,516 818 Other expense 1,454 428 Total research and development expense $ 48,929 $ 32,662 Research and development expenses for the year ended December 31, 2023 , were $48.9 million, compared to $32.7 million for the year ended December 31, 2022.
We expect these expenses will continue to increase in 2023, as compared to 2022, with the ongoing commercialization of FYARRO and preparation for potential future launches. • We continue to build out our research and development team and we expect our research and development costs will increase in 2023, relative to 2022, as a result of significant expenses related to the PRECISION 1 trial which was open to enrollment during the year ended December 31, 2022, with the first patient dosed in March 2022. • As a public company our expenses have increased from prior year as a privately held company, including (i) costs to comply with the rules and regulations of the SEC and those of the Nasdaq Capital Market (“Nasdaq”), (ii) legal, accounting and other professional services, (iii) insurance, (iv) investor relations activities, and (v) other administrative and professional services.
We expect these expenses to decrease, as compared to prior periods. • We continue to build out our research and development team and we expect our research and development costs will increase in 2024, relative to prior periods, as a result of significant expenses related to the PRECISION1 trial which was open to enrollment during the years ended December 31, 2023 and 2022, with the first patient dosed in March 2022.
Liquidity and Capital Resources Overview As of December 31, 2022, we had $172.6 million of cash, cash equivalents and short-term investments.
The change was primarily driven by higher interest rates on short-term investments held during the year ended December 31, 2023 compared to the year ended December 31, 2022. Liquidity and Capital Resources Overview As of December 31, 2023, we had $108.8 million of cash, cash equivalents and short-term investments.
Overview We are a biopharmaceutical company focused on developing and commercializing precision therapies for genetically defined cancers with alterations in mTOR pathway genes. Our lead drug product, FYARRO ® , is a form of sirolimus bound to albumin. Sirolimus is a potent inhibitor of the mTOR biological pathway, the activation of which pathway can promote tumor growth.
Overview We are a biopharmaceutical company focused on developing and commercializing precision therapies for cancers with alterations in the mTOR pathway, a key regulator of cell growth and cancer progression.
There were no new grants during the year ended December 31, 2022 . 109 Table of Contents Operating Expenses Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2022 , were $40.2 million, an increase of $21.7 million, compared to $18.5 million for the year ended December 31, 2021.
Product sales, net for the years ended December 31, 2023 and 2022 were $24.4 million and $15.2 million, respectively. Operating Expenses Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2023 , were $44.5 million, compared to $40.2 million for the year ended December 31, 2022.
We have completed a Type B meeting with the FDA in which we discussed the trial design and the PRECISION 1 trial was opened for enrollment in the United States during the first quarter of 2022, with dosing of our first patient in March 2022.
The PRECISION1 trial was opened for enrollment in the United States during the first quarter of 2022, with dosing of our first patient in March 2022. On December 14, 2023, we announced results from an interim analysis on the first third of participants in the PRECISION1 trial.
The term of the lease is seventy-three months unless terminated sooner. Rent expense is being recorded on a straight-line basis. Rent expense related to the Pacific Palisades and Morristown leases was $0.4 million and $0.2 million for the years ended December 31, 2022 and 2021, respectively.
Rent expense related to the Pacific Palisades and Morristown leases was $0.5 million and $0.4 million for the years ended December 31, 2023 and 2022, respectively. See Note 7 to the consolidated financial statements for details related to future lease payments.
In the event of a cancellation, we would be liable for the cost and expenses incurred to date as well as any close out costs of the service arrangement. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
For the year ended December 31, 2021, cash used in operating activities was $22.4 million and resulted from (i) our net loss of $110.1 million offset by non-cash adjustments totaling $75.4 million, which was primarily related to impairment of the acquired contract intangible asset of $74.2 million, and (ii) a $12.3 million net increase in our working capital accounts, primarily driven by the receipt of the $14.0 million upfront payment on accounts receivable pursuant to the EOC License Agreement.
For the year ended December 31, 2023, cash used in operating activities was $59.7 million and resulted from (i) our net loss of $65.8 million, (ii) a $3.4 million net increase in our operating assets and liabilities, primarily driven by an increase in accounts receivable, inventory, and accounts payable, offset by a decrease in prepaid expenses and other current assets and accrued liabilities, and (iii) by net non-cash adjustments totaling $9.5 million, which were primarily related to share-based compensation expense, discount amortization on short-term investments, lease expense, and depreciation and amortization expense.
We are unable to estimate the possible loss or range of loss, therefore no amounts have been accrued as of December 31, 2022. See Notes 9 and 16 to the audited financial statements for more information about the EOC License Agreement, its termination and resulting arbitration.
We intend to defend ourselves vigorously in this matter and pursue all relief to which we are entitled. We are unable to estimate the possible loss or range of loss, therefore no amounts have been accrued as of December 31, 2023.
These expenses are partially offset by interest income earned on cash, cash equivalents and short-term investments, and gain on extinguishment of debt. Income Tax Expense During the years ending December 31, 2022 and 2021, we recognized zero and $2,000 of income tax expense on the statement of operations and comprehensive loss, respectively.
Income Tax Expense During the years ended December 31, 2023 and 2022, we recognized no income tax expense on the statements of operations and comprehensive loss.
Costs incurred prior to the FDA approval were expensed when incurred . 108 Table of Contents Other Income, Net Other income, net consists of the change in fair value of convertible promissory notes and interest expense related to such notes.
Costs incurred prior to the FDA approval were expensed when incurred . 107 Table of Contents Impairment of Acquired Contract Intangible Asset Impairment of acquired contract intangible asset relates to a write down of the acquired contract intangible asset to fair value.
Delaney resigned from his position as President and Chief Executive Officer and as a member of our board of directors, and, effective March 15, 2023, our board of directors appointed Scott Giacobello, our Chief Financial Officer, as Interim Chief Executive Officer and President. Mr.
On September 27, 2023, our board of directors (the "Board") appointed David J. Lennon, Ph.D., to serve as our President and Chief Executive Officer, effective as of October 2, 2023, replacing Scott Giacobello in such roles. Mr.
We anticipate having preliminary data on a meaningful number of patients in the PRECISION 1 trial during the second quarter of 2023. For more information regarding our business, including FYARRO, AMPECT and the PRECISION 1 trial, see Part I, Item 1 (Business). Recent Developments • Leadership Transition .
The trial is expected to be fully enrolled by May 2024 and completed by the end of 2024, with results anticipated in early 2025. For more information regarding our business, including FYARRO, the AMPECT trial and the PRECISION1 trial, see Part I, Item 1 (Business). 103 Table of Contents Recent Developments • PRECISION1 Interim Analysis .
Removed
Effective January 1, 2023, our board of directors appointed Brendan Delaney, our former Chief Operating Officer, to President and Chief Executive Officer and Neil Desai, our founder, director, and former-President and Chief Executive Officer, to Executive Chairman. Mr. Delaney was also appointed to serve on our board of directors. Effective March 14, 2023, Mr.

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