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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2022

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to             

 

Commission File No. 001-38207

 

 

 

CELCUITY INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   No. 82-2863566
(State of incorporation)   (IRS Employer Identification No.)

 

16305 36th Avenue North; Suite 100

Minneapolis, Minnesota 55446

 

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (763) 392-0767

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value per share   CELC   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer  
Non-accelerated filer   Smaller reporting company  
      Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO

 

On November 3, 2022 there were 15,459,739 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

 

 

 

 
 

 

Celcuity Inc.

Table of Contents

 

  PAGE
PART I. FINANCIAL INFORMATION
 
ITEM 1. Financial Statements (unaudited) 3
   
Condensed Balance Sheets as of September 30, 2022 and December 31, 2021 3
   
Condensed Statements of Operations for the three months and nine months ended September 30, 2022 and 2021 4
   
Condensed Statements of Stockholders’ Equity for the three months and nine months ended September 30, 2022 5
   
Condensed Statements of Stockholders’ Equity for the three months and nine months ended September 30, 2021 6
   
Condensed Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 7
   
Notes to Unaudited Condensed Financial Statements 8
   
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
   
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 24
   
ITEM 4. Controls and Procedures 24
   
PART II. OTHER INFORMATION
 
ITEM 1. Legal Proceedings 25
   
ITEM 1A. Risk Factors 25
   
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
   
ITEM 3. Defaults Upon Senior Securities 46
   
ITEM 4. Mine Safety Disclosures 46
   
ITEM 5. Other Information 46
   
ITEM 6. Exhibits 47
   
Signatures 48

 

As used in this report, the terms “we,” “us,” “our,” “Celcuity,” and the “Company” mean Celcuity Inc., unless the context indicates another meaning.

 

2
 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

Celcuity Inc.

Condensed Balance Sheets

 

    September 30, 2022     December 31, 2021  
      (unaudited)          
Assets                
Current Assets:                
Cash and cash equivalents   $ 57,483,776     $ 84,286,381  
Deposits     22,009       22,009  
Deferred transaction costs     349,147       22,144  
Payroll tax receivable     260,926       298,764  
Prepaid assets     6,578,252       722,677  
Total current assets     64,694,110       85,351,975  
Property and equipment, net     302,005       312,444  
Operating lease right-of-use assets     295,535       241,901  
Total Assets   $ 65,291,650     $ 85,906,320  
Liabilities and Stockholders’ Equity:                
Current Liabilities:                
Accounts payable   $ 3,168,198     $ 1,507,099  
Finance lease liabilities     3,916       5,850  
Operating lease liabilities     194,643       189,858  
Accrued expenses     3,278,315       802,893  
Total current liabilities     6,645,072       2,505,700  
Finance lease liabilities     -       2,449  
Operating lease liabilities     107,830       61,771  
Note payable, non-current     15,013,407       14,625,923  
Total Liabilities     21,766,309       17,195,843  
Commitments and Contingencies (Note 4)     -       -  
Stockholders’ Equity:                
Preferred stock, $0.001 par value: 2,500,000 shares authorized; 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021     -       -  
Common stock, $0.001 par value: 65,000,000 and 25,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively; 14,942,958 and 14,918,887 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively     14,943       14,919  
Additional paid-in capital     128,225,939       124,622,405  
Accumulated deficit     (84,715,541 )     (55,926,847 )
Total Stockholders’ Equity     43,525,341       68,710,477  
Total Liabilities and Stockholders’ Equity   $ 65,291,650     $ 85,906,320  

 

See accompanying notes to the financial statements

 

3
 

 

Celcuity Inc.

Condensed Statements of Operations

(unaudited)

 

    2022     2021     2022     2021  
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
                         
Operating expenses:                                
                                 
Research and development   $ 9,621,505     $ 4,960,515     $ 24,685,505     $ 20,266,965  
General and administrative     1,022,050       639,271       3,066,382       1,768,058  
Total operating expenses     10,643,555       5,599,786       27,751,887       22,035,023  
Loss from operations     (10,643,555 )     (5,599,786 )     (27,751,887 )     (22,035,023 )
                                 
Other income (expense)                                
Interest expense     (537,661 )     (433,072 )     (1,428,108 )     (824,283 )
Interest income     287,495       5,612       391,301       7,803  
Loss on sale of fixed assets     -       -       -       (263 )
Other income (expense), net     (250,166 )     (427,460 )     (1,036,807 )     (816,743 )
Net loss before income taxes     (10,893,721 )     (6,027,246 )     (28,788,694 )     (22,851,766 )
Income tax benefits     -       -       -       -  
Net loss   $ (10,893,721 )   $ (6,027,246 )   $ (28,788,694 )   $ (22,851,766 )
                                 
Net loss per share, basic and diluted   $ (0.75 )   $ (0.41 )   $ (1.95 )   $ (1.78 )
                                 
Weighted average common shares outstanding, basic and diluted     14,938,224       14,877,619       14,928,727       12,867,484  

 

See accompanying notes to the financial statements

 

4
 

 

Celcuity Inc.

Condensed Statements of Changes in Stockholders’ Equity

Three and Nine Months Ended September 30, 2022

 

      Shares       Amount       Capital       Deficit       Total  
      Common Stock       Additional Paid-In       Accumulated          
      Shares       Amount       Capital       Deficit       Total  
Balance at December 31, 2021     14,918,887     $ 14,919     $ 124,622,405     $ (55,926,847 )   $ 68,710,477  
Stock-based compensation     -       -       756,271       -       756,271  
Exercise of common stock options, net of shares withheld for exercise price     1,415       1       7,413       -       7,414  
Net loss     -       -       -       (7,934,447 )     (7,934,447 )
Balance at March 31, 2022 (unaudited)     14,920,302     $ 14,920     $ 125,386,089     $ (63,861,294 )   $ 61,539,715  
Stock-based compensation     3,273       3       1,519,456       -       1,519,459  
Employee stock purchases     15,888       16       80,525       -       80,541  
Exercise of common stock options, net of shares withheld for exercise price     1,871       2       9,540       -       9,542  
Net loss     -       -       -       (9,960,526 )     (9,960,526 )
Balance at June 30, 2022 (unaudited)     14,941,334     $ 14,941     $ 126,995,610     $ (73,821,820 )   $ 53,188,731  
Stock-based compensation     250       -       1,223,054       -       1,223,054  
Exercise of common stock options, net of shares withheld for exercise price     1,374       2       7,275       -       7,277  
Net loss     -       -       -       (10,893,721 )     (10,893,721 )
Balance at September 30, 2022 (unaudited)     14,942,958     $ 14,943     $ 128,225,939     $ (84,715,541 )   $ 43,525,341  

 

See accompanying notes to the financial statements

 

5
 

 

Celcuity Inc.

Condensed Statements of Changes in Stockholders’ Equity

Three and Nine Months Ended September 30, 2021

 

    Common Stock     Additional Paid-In     Accumulated        
    Shares     Amount     Capital     Deficit     Total  
Balance at December 31, 2020     10,299,822     $ 10,300     $ 38,013,551     $ (26,321,581 )   $ 11,702,270  
Stock-based compensation     -       -       449,098       -       449,098  
Exercise of common stock warrants     1,185       1       11,256       -       11,257  
Exercise of common stock options, net of shares withheld for exercise price     12,707       13       (13 )     -       -  
Issuance of common stock upon closing of follow-on offering, net of underwriting discounts and offering costs     1,971,100       1,971       25,766,522       -       25,768,493  
Issuance of common stock in an at-the-market (“ATM”) offering     3,082       3       38,959       -       38,962  
Issuance costs associated with ATM offering     -       -       (3,868 )     -       (3,868 )
Net loss     -       -       -       (2,791,668 )     (2,791,668 )
Balance at March 31, 2021 (unaudited)     12,287,896     $ 12,288     $ 64,275,505     $ (29,113,249 )   $ 35,174,544  
Stock-based compensation     2,964       3       540,314       -       540,317  
Employee stock purchases     5,496       6       25,811       -       25,817  
Exercise of common stock options, net of shares withheld for exercise price     9,136       9       36,850       -       36,859  
Issuance of common stock warrants, note payable     -               289,839       -       289,839  
Issuance of common stock, licensing agreement     349,406       349       4,999,651       -       5,000,000  
Net loss     -       -       -       (14,032,852 )     (14,032,852 )
Balance at June 30, 2021 (unaudited)     12,654,898     $ 12,655     $ 70,167,970     $ (43,146,101 )   $ 27,034,524  
Stock-based compensation     -       -       699,916       -       699,916  
Exercise of common stock options, net of shares withheld for exercise price     1,000       1       5,099       -       5,100  
Issuance of common stock upon closing of follow-on offering, net of underwriting discounts and offering costs     2,250,000       2,250       52,759,842       -       52,762,092  
Net loss     -       -       -       (6,027,246 )     (6,027,246 )
Balance at September 30, 2021 (unaudited)     14,905,898     $ 14,906     $ 123,632,827     $ (49,173,347 )   $ 74,474,386  

 

See accompanying notes to the financial statements

 

6
 

 

Celcuity Inc.

Condensed Statements of Cash Flows

(unaudited)

 

    2022     2021  
    Nine Months Ended September 30,  
    2022     2021  
Cash flows from operating activities:                
Net loss   $ (28,788,694 )   $ (22,851,766 )
Adjustments to reconcile net loss to net cash used for operations:                
Depreciation     161,981       240,206  
Stock-based compensation     3,498,784       1,689,331  
Issuance of common stock, licensing agreement     -       5,000,000  
Amortization of debt issuance costs and discount     284,184       173,361  
Payment-in-Kind interest     311,764       196,348  
Non-cash operating lease, net     (2,791 )     (7,681 )
Loss on sale of fixed assets     -       263  
Changes in operating assets and liabilities:                
Payroll tax receivable     37,838       (166,309 )
Prepaid assets and deposits     (5,855,575 )     (120,311 )
Accounts payable     1,553,176       1,553,381  
Accrued expenses     2,270,422       105,239  
Net cash used for operating activities     (26,528,911 )     (14,187,938 )
                 
Cash flows from investing activities:                
Purchases of property and equipment     (46,724 )     (71,959 )
Proceeds from sale of property and equipment     -       500  
Net cash used for investing activities     (46,724 )     (71,459 )
                 
Cash flows from financing activities:                
Proceeds from exercise of common stock warrants     -       11,257  
Proceeds from exercise of employee stock options     24,233       41,959  
Proceeds from employee stock purchases     80,541       25,817  
Proceeds from follow-on offering, net of underwriting discounts and offering costs     -       78,530,585  
Proceeds from note payable, net of debt issuance costs and discount of $652,061     -       14,347,939  
Payments for debt issuance costs     (8,463 )     -  
Gross proceeds from an ATM offering     -       38,962  
Payments for secondary registration statement costs     (318,897 )     (3,868 )
Payments for finance leases     (4,384 )     (4,353 )
Net cash (used for) provided by financing activities     (226,970 )     92,988,298  
Net change in cash and cash equivalents     (26,802,605 )     78,728,901  
                 
Cash and cash equivalents:                
Beginning of period     84,286,381       11,637,911  
End of period   $ 57,483,776     $ 90,366,812  
                 
Supplemental disclosure of cash flow information:                
Interest paid   $ 832,161     $ 454,573  
Supplemental disclosures of non-cash investing and financing activities:                
Property and equipment included in accounts payable   $ 104,818     $ -  
Offering and registration statement costs included in accounts payable     11,230       -  
Deferred financing costs and offering and registration statement costs included in accrued expenses     205,000       -  
Issuance of common stock warrants and final fee recognized as discount to note payable     -       964,839  

 

See accompanying notes to the financial statements

 

7
 

 

CELCUITY INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)

(For the Three and Nine Months Ended September 30, 2022 and 2021)

 

1. Organization

 

Nature of Business

 

Celcuity Inc., a Delaware corporation (the “Company”), is a clinical-stage biotechnology company focused on development of targeted therapies for multiple solid tumor indications. The Company’s lead therapeutic candidate is gedatolisib, a potent, reversible dual inhibitor that selectively targets all Class I PI3K isoforms and mTOR. Its mechanism of action and pharmacokinetic properties are highly differentiated from other currently approved and investigational therapies that target PI3K or mTOR alone or together. The Company initiated a Phase 3 study evaluating gedatolisib in patients with HR+/HER2- advanced breast cancer in 2022. Its CELsignia companion diagnostic platform is uniquely able to analyze live patient tumor cells to identify new groups of cancer patients likely to benefit from already approved targeted therapies. The Company was co-founded in 2012 by Brian F. Sullivan and Dr. Lance G. Laing and is based in Minnesota. The Company has not generated any revenues to date.

 

2. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

 

Basis of Presentation

 

The accompanying unaudited financial statements include the accounts of the Company and have been prepared in accordance with Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, as permitted by Article 10, the unaudited financial statements do not include all of the information required by accounting principles generally accepted in the United States (“U.S. GAAP”). The balance sheet at December 31, 2021 was derived from the audited financial statements at that date and does not include all the disclosures required by U.S. GAAP. In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair presentation have been reflected in the financial statements. These unaudited condensed financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021 and the related footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

 

Accounting Estimates

 

Management uses estimates and assumptions in preparing these unaudited condensed financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates and the difference could be material. Significant items subject to such estimates and assumptions include the valuation of stock-based compensation and prepaid or accrued clinical trial costs.

 

Risks and Uncertainties

 

The Company is subject to risks common to companies in the development stage including, but not limited to, dependency on, the clinical and commercial success of its initial drug product, gedatolisib, the clinical and commercial success of its diagnostic tests, ability to obtain regulatory approval of its drug product, gedatolisib, ability to obtain regulatory approval of its diagnostic tests, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians and consumers, and significant competition.

 

Clinical Trial Costs

 

The Company records prepaid assets or accrued expenses for prepaid or estimated clinical trial costs conducted by third-party service providers, which includes the conduct of preclinical studies and clinical trials. These costs can be a significant component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with service agreements with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its prepaid assets or accrued expenses. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled, and the rate of patient enrollments may vary from the Company’s estimates, resulting in an adjustment to expense in future periods. Changes in these estimates that result in material changes to the Company’s prepaid assets or accrued expenses could materially affect the Company’s results of operations.

 

8
 

 

Application of New or Revised Accounting Standards

 

Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), a company constituting an “emerging growth company” is, among other things, entitled to rely upon certain reduced reporting requirements. The Company is an emerging growth company but has irrevocably elected not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. As a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies that are not emerging growth companies. The Company’s emerging growth company filer status will cease on its Form 10-K filing for the year ended December 31, 2022.

 

Recently Adopted Accounting Pronouncements

 

In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which provides guidance on how an issuer should account for modifications made to equity-classified written call options. The guidance in the ASU requires the issuer to treat the modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. The issuer should measure the effect of a modification as the difference between the fair value of the modified warrant and the fair value of that warrant immediately before modification. The standard is effective for all entities for all fiscal years beginning after December 15, 2021. The Company adopted this accounting standard effective January 1, 2022, and based on the standard, determined that the Representative’s Warrant amendment was equity-classified, treated as a deemed dividend within Additional Paid-in Capital, and the estimated incremental fair value of the modification for the Representative’s Warrant at the date of amendment was $271,988.

 

3. Net Loss Per Common Share

 

Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. For all periods presented, the common shares underlying the options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per common share is the same.

 

For the three and nine months ended September 30, 2022 and 2021, potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding were options to purchase 1,919,114 and 1,184,721 shares of common stock, respectively, warrants to purchase 309,652 and 378,442 shares of common stock, respectively, and 3,273 and 2,964 shares of restricted common stock, respectively.

 

In accordance with ASU 2021-04, for purposes of calculating basic and diluted net loss per share for the three- and nine-month periods ended September 30, 2022, the reported net loss was increased by approximately $272,000 related to the deemed dividend resulting from the amendment to the warrant agreement as further discussed in Note 5. This adjustment increased the basic and diluted net loss per share by $.02 for the three- and nine-month periods ended September 30, 2022.

 

4. Commitments

 

Operating and Finance Leases

 

The Company leases its corporate space in Minneapolis, Minnesota. In September 2017, the Company entered into a non-cancelable operating lease agreement for building space. The lease commenced, and the Company moved to the facility in May 2018, in conjunction with the termination of its then existing lease. Rent expense is recorded on a straight-line basis over the lease term. In July 2020, the Company signed an amendment to extend this lease through April 30, 2022. The lease amendment provides for monthly rent, real estate taxes and operating expenses. As a result of the lease amendment, the Company recorded an incremental $197,211 in the operating right-of-use (“ROU”) asset and lease liability. In July 2021, the Company signed the second amendment to extend this lease through April 30, 2023. The lease amendment provides for monthly rent, real estate taxes and operating expenses. As a result of the lease amendment, the Company recorded an incremental $193,571 in the operating right-of-use (“ROU”) asset and lease liability. In July 2022, the Company signed the third amendment to extend this lease through April 30, 2024. This amendment provides for monthly rent, real estate taxes and operating expenses. The Company recorded an incremental $195,437 in the operating right-of-use (“ROU”) asset and lease liability pertaining to this amendment.

 

In May 2018, the Company entered into a non-cancelable finance lease agreement for office equipment with a five-year term. The underlying assets are included in furniture and equipment. The lease contains a bargain purchase option at the end of the lease.

 

When an implicit rate is not provided, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

 

9
 

 

Clinical Research Studies

 

The Company enters into contracts in the normal course of business to conduct research and development programs internally and through third parties that include, among others, arrangements with vendors, consultants, CMO’s, and CRO’s. The Company currently has five Phase 2 clinical trial agreements in place to evaluate targeted therapies selected with one of our CELsignia tests. Timing of milestone payments related to the Phase 2 clinical trials are uncertain and the contracts generally provide for termination following a certain period after notice, therefore the Company believes that non-cancelable obligations under the agreements are not material. The Company also has a license agreement in place with Pfizer to research, develop, manufacture and commercialize gedatolisib. In conjunction with the license agreement, the Company continued a Phase 1b study – B2151009 related to gedatolisib. These patients subsequently transitioned to an Expanded Access study – CELC-G-001. Contracts related to the Phase 1B study and the Expanded Access study, are generally based on time and material. In addition, contracts related to the Company’s Phase 3 clinical study (VIKTORIA-1) are generally cancelable with reasonable notice within 120 days and the Company’s obligations under these contracts are primarily based on services performed through termination dates plus certain cancelation charges, if any, as defined in each of the respective agreements. In addition, these agreements may, from time to time, be subjected to amendments as a result of any change orders executed by the parties. As of September 30, 2022, the Company had only one material non-cancelable contractual commitment with respect to these arrangements, which totaled approximately $2.5 million.

 

5. Stockholders’ Equity

 

On September 13, 2022, the Company entered into a First Amendment to Representative’s Warrant (the “Warrant Amendment”) with Craig-Hallum Capital Group LLC (“Craig-Hallum”), amending the terms of that certain Representative’s Warrant, dated September 22, 2017 (the “Representative’s Warrant”) issued by the Company to Craig-Hallum in connection with the Company’s initial public offering. Under the terms of the Warrant Amendment, (i) the number of shares of the Company’s common stock issuable upon exercise of the Representative’s Warrant was reduced from 138,000 shares to 70,000 shares, and (ii) the exercise period of the Representative’s Warrant was extended three years to September 19, 2025. There were no other material amendments or modifications to the Representative’s Warrant. The estimated incremental fair value of the Representative’s Warrant at the date of amendment was $271,988. As the Company has an accumulated deficit balance in Retained Earnings, the incremental impact will be recorded as a deemed dividend, classified within Additional Paid-in Capital.

 

On September 1, 2022, the Company held a Special Meeting of Stockholders, at which the Company’s stockholders approved a proposal to amend the Company’s Certificate of Incorporation to increase the authorized number of the Company’s Common Stock from 30,000,000 shares to 65,000,000 shares.

 

On May 15, 2022, the Company entered into a securities purchase agreement with certain institutional and other accredited investors for the sale of Company common stock, preferred stock that may be convertible into common stock and warrants initially exercisable for preferred stock for $100 million in the aggregate, before deducting placement agent fees and other offering expenses. Pursuant to the securities purchase agreement, investors will purchase shares of common stock and preferred stock at a price per share of $5.75 (on an as converted to common stock basis). For each share of common stock and each 1/10 of a share of preferred stock purchased, investors will receive a warrant exercisable for 0.40 shares of common stock. The exercise price of the warrants will be at a 40% premium to the price paid by investors for the initial shares of common stock purchased in the private placement. The preferred stock will be convertible into common stock at the holder’s election, subject to certain limitations such as beneficial ownership. The closing of the private placement is conditioned on, among other customary items, the first patient enrolled in the Company’s Phase 3 clinical study (VIKTORIA-1) having received their first dose of treatment at a clinical site located in the United States, provided that if such date does not occur on or before December 31, 2022, each investor will have the right to terminate its obligation to purchase securities under the securities purchase agreement. The Company also entered into a customary registration rights agreement with the investors pursuant to which it agreed to file a registration statement with the SEC registering the resale of (i) the shares of common stock to be issued and sold in the private placement, (ii) the shares of common stock issuable upon conversion of the preferred stock purchased in the private placement and (iii) the shares of common stock issuable upon conversion of the shares of preferred stock that may be issued upon exercise of warrants purchased in the private placement. As of September 30, 2022, the Company has incurred $142,241 in fees related to the transaction.

 

On February 4, 2022, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC, as agent (“Jefferies”), pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50,000,000. The Company will pay Jefferies a commission equal to 3.0% of the aggregate gross proceeds from each sale of such shares. On October 12, 2022, pursuant to the above agreement, the Company sold 500,000 shares of common stock in a single transaction at a price of $10.35 per share, generating gross proceeds of $5.2 million ($4.8 million net of commissions and offering expenses).

 

On July 1, 2021, the Company completed a follow-on offering whereby it sold 2,250,000 shares of common stock at a public offering price of $25.00 per share. The offering generated approximately $56.3 million before deducting underwriting discounts of approximately $3.4 million and offering expenses of approximately $0.1 million.

 

10
 

 

On February 26, 2021, the Company completed a follow-on offering whereby it sold 1,971,100 shares of common stock (including 257,100 shares of common stock in connection with the full exercise of the underwriters’ option to purchase additional shares) at a public offering price of $14.00 per share. The aggregate gross proceeds from the sale of shares in the follow-on offering, including the sale of shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, was approximately $27.6 million before deducting underwriting discounts of approximately $1.6 million and offering expenses of approximately $0.2 million.

 

On June 5, 2020, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley FBR, Inc. (the “Agent”). Pursuant to the ATM Agreement, the Company was able to offer and sell from time to time, at its option, shares of common stock having an aggregate offering price of up to $10,000,000, par value $0.001 per share (the “Placement Shares”), through the Agent.

 

During the nine months ended September 30, 2022 and 2021, the Company sold 0 and 3,082 shares, respectively, of common stock pursuant to the ATM Agreement, at an average selling price of $12.64 per share. On February 23, 2021, in conjunction with the Company’s follow-on offering, the ATM Agreement was terminated through the Agent.

 

6. Stock-Based Compensation

 

The following table summarizes the activity for all stock options outstanding for the nine months ended September 30:

 

    2022     2021  
    Shares     Weighted Average Exercise Price     Shares     Weighted Average Exercise Price  
Options outstanding at beginning of year     1,315,321     $ 11.97       849,949     $ 9.33  
Granted     720,047       7.19       402,550       23.04  
Exercised     (4,660 )     5.20       (40,620 )     7.26  
Forfeited     (111,594 )     10.86       (27,158 )     19.07  
Balance at September 30     1,919,114     $ 6.08       1,184,721     $ 13.84  
                                 
Options exercisable at September 30:     882,215     $ 5.92       560,915     $ 9.45  
                                 
Weighted Average Grant Date Fair Value for options granted during the period:           $ 4.87             $ 15.28  

 

The following table summarizes additional information about stock options outstanding and exercisable at September 30, 2022:

 

Options Outstanding   Options Exercisable
Options Outstanding   Weighted Average Remaining Contractual Life     Weighted Average Exercise Price     Aggregate Intrinsic Value     Options Exercisable   Weighted Average Exercise Price     Aggregate Intrinsic Value  
1,919,114     7.98     $ 6.08     $ 7,791,703     882,215   $ 5.92     $ 3,779,591  

 

The Company recognized stock-based compensation expense for stock options of $1,162,751 and $673,022 for the three months ended September 30, 2022 and 2021, respectively and $3,329,969 and $1,611,575 for the nine months ended September 30, 2022 and 2021, respectively. In May 2022, the Company modified the exercise price on 776,324 stock option awards to $5.50, the closing market price on the Nasdaq Capital Market on May 17, 2022. The effect of this modification on stock-based compensation was $49,088 for the three months ending September 30, 2022 and $477,431 for the nine months ending September 30, 2022. The effect of this modification on stock-based compensation over the remaining service period will be approximately $389,000. In December 2021, the Company modified the exercise price on 311,000 stock option awards to $13.44, the closing market price on the Nasdaq Capital Market on December 15, 2021. No director or officer awards were modified. The effect of this modification on stock-based compensation was $21,778 and $0 for the three months ended September 30, 2022 and 2021, respectively and $75,562 and $0 for the nine months ended September 30, 2022 and 2021, respectively. The effect of this modification on stock-based compensation over the remaining service period will be approximately $219,000. In May 2020, the Company modified the exercise price on 203,750 stock option awards to $5.10, the closing market price on the Nasdaq Capital Market on May 14, 2020. No director or officer awards were modified. The effect of this modification on stock-based compensation was $7,681 and $12,602 for the three months ended September 30, 2022 and 2021, respectively and $30,897 and $34,396 for the nine months ended September 30, 2022 and 2021. The effect of this modification on stock-based compensation over the remaining service period will be approximately $27,000.

 

11
 

 

The Black-Scholes option-pricing model was used to estimate the grant date fair value of equity-based awards with the following weighted-average assumptions for the nine months ended September 30:

 

    2022     2021  
Risk-free interest rate     1.68% - 3.93%       0.63% - 1.16%  
Expected volatility     76.2% - 79.6%       76.6% - 76.9%  
Expected life (years)     5.29 to 6.25       5.0 to 6.08  
Expected dividend yield     0%       0%  

 

The inputs for the Black-Scholes valuation model require management’s significant assumptions. Prior to the Company’s initial public offering, the price per share of common stock was determined by the Company’s board based on recent prices of common stock sold in private offerings. Subsequent to the initial public offering, the price per share of common stock is determined by using the closing market price on the Nasdaq Capital Market on the grant date. The risk-free interest rates are based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life is based on the simplified method in accordance with the SEC Staff Accounting Bulletin Nos. 107 and 110. The expected volatility is estimated based on historical volatility information of peer companies that are publicly available in combination with the Company’s calculated volatility since being publicly traded.

 

All assumptions used to calculate the grant date fair value of non-employee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options issued in connection with the agreements would also be cancelled.

 

The Company had 3,273 and 2,964 shares of restricted stock outstanding as of September 30, 2022 and 2021, respectively, and 250 and 0 shares of restricted stock vested during the three months ended September 30, 2022 and 2021. The Company recognized stock-based compensation expense for restricted stock of $7,245 and $20,792 for the three months ended September 30, 2022 and 2021, respectively and $36,686 and $59,359 for the nine months ended September 30, 2022 and 2021, respectively.

 

The Company initially reserved a maximum of 750,000 shares of common stock for issuance under the 2017 Amended and Restated Stock Incentive Plan (the “2017 Plan”). The number of shares reserved for issuance was automatically increased by 102,540, 102,998 and 149,189 shares on January 1, 2020, 2021 and 2022, respectively, and will increase automatically on January 1 each year from 2023 through 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of Company common stock as of the immediately preceding December 31. At the Annual Meeting held on May 12, 2021 and May 12, 2022, the stockholders approved a one-time, 500,000 increase each year for a total increase of 1,000,000 to the number of shares reserved for issuance under the 2017 Plan. However, the Company’s board may reduce the amount of the increase in any particular year. The total remaining shares available for grant under the Company’s 2017 Plan as of September 30, 2022 was 325,094.

 

Total unrecognized compensation cost related to stock options and restricted stock is estimated to be recognized as follows for the year ended:

 

         
2022   $ 1,116,837  
2023     3,277,254  
2024     2,130,739  
2025     1,333,749  
2026     176,866  
Total estimated compensation cost to be recognized   $ 8,035,445  

 

The Company recognized stock-based compensation expense related to its employee stock purchase plan of $53,058 and $6,102 for the three months ended September 30, 2022 and 2021, respectively and $132,129 and $18,397 for the nine months ended September 30, 2022 and 2021, respectively. The Company initially reserved a total of 100,000 shares for issuance under the employee stock purchase plan. The number of shares reserved for issuance was automatically increased by 51,270, 51,499 and 74,594 shares on January 1, 2020, 2021 and 2022, respectively, and will increase automatically on each subsequent January 1 by the number of shares equal to 0.5% of the total outstanding number of shares of Company common stock as of the immediately preceding December 31. However, the Company’s board may reduce the amount of the increase in any particular year. The total remaining shares available for issuance under the employee stock purchase plan as of September 30, 2022 was 208,929.

 

12
 

 

The Company recognized total stock-based compensation expense as follows for the three and nine months ended September 30:

 

    2022     2021     2022     2021  
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2022     2021     2022     2021  
Stock-based compensation expense in operating expenses:                                
Research and development   $ 676,524     $ 434,597     $ 1,937,707     $ 1,017,855  
General and administrative     546,530       265,319       1,561,077       671,476  
Total   $ 1,223,054     $ 699,916     $ 3,498,784     $ 1,689,331  

 

7. Debt

 

On April 8, 2021, the Company entered into a loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP, a Delaware limited partnership (“Innovatus”) in its capacity as Collateral Agent and sole Lender. The Lender agreed to loan up to $25 million in three tranches consisting of (i) a $15.0 million non-contingent term A loan that was funded on April 8, 2021, (ii) a $5 million term B loan to be funded upon request of the Company no later than March 31, 2022, and (iii) a $5 million term C loan to be funded upon request of the Company no later than March 31, 2023 (collectively the “Term Loans”). The Company is no longer eligible to draw on the term B loan. Funding of the term C is subject to the Company’s ability to achieve certain milestones.

 

The Loan Agreement also contains certain events of default, warranties and covenants of the Company. In connection with each funding of the Term Loans, the Company is required to issue Innovatus a warrant (the “Warrants”) to purchase a number of shares of the Company’s stock equal to 2.5% of the principal amount of the relevant Term Loan funded by the exercise price, which will be based on the lower of (i) $14.40 per share or (ii) the volume weighted price per share of the Company’s stock for the five-trading day period ending on the last trading day immediately preceding the funding date of the Term C loan. The warrants may be exercised on a cashless basis and are immediately exercisable through the tenth anniversary of the applicable funding date. In connection with the first tranche of the Term Loans, the Company issued a warrant to Innovatus to purchase 26,042 shares of the Company’s common stock at an exercise price of $14.40 per share. The company evaluated the warrant under ASC 470, debt, and recognized an additional debt discount of approximately $0.3 million based on the relative fair value of the base instruments and warrants. The company calculated the fair value of the warrant using the Black-Scholes model. In connection with the funding of the first tranche of the Term Loans, a final fee of approximately $0.7 million was recorded as additional principal as a debt discount, and a facility fee of approximately $0.1 million was recorded as additional debt discount. The Company is also required to maintain a minimum cash balance in agreement with the term loans’ default terms.

 

On August 9, 2022, the Company amended the Loan Agreement. Under the amended Loan Agreement, Innovatus, as Lender, has agreed to loan up to $75 million, a $50 million increase from the original Loan Amount, in five tranches consisting of: (i) a $15 million term A loan that was funded on April 8, 2021 upon entering into the original Loan Agreement, (ii) a $20 million term B loan to be funded upon request of the Company no later than December 31, 2022, with such funding conditioned upon the closing of the Company’s $100 million private placement announced on May 16, 2022, (iii) a $10 million term C loan to be funded upon request of the Company no later than April 1, 2024, (iv) a $20 million term D loan to be funded upon request of the Company no later than November 1, 2024, and (v) a $10 million term E loan to be funded upon request of the Company no later than February 28, 2025. Funding of the term B loan is conditioned upon the closing of the Company’s $100 million private placement announced on May 16, 2022, and funding of the term C, D, and E loans are conditioned upon satisfaction of certain clinical trial milestones and certain financial covenants determined on a pro forma as-funded basis.

 

Under the amended Loan Agreement, Innovatus has the right, at its election and until August 9, 2025, the third anniversary of the loan amendment date, to convert into Common Stock up to (1) 20% of the outstanding principal amount of term A loan, and (ii) an additional 7% of the amount by which the aggregate principal amount of the funded term B, C, D, and E loans exceed $35 million, provided that the aggregate outstanding principal amount of all term loans is at least $35 million, which such conversion based upon a price per share equal to $10.00.

 

13
 

 

The Company is entitled to make interest-only payments for forty-eight months, or up to sixty months from the original Loan Agreement date if certain conditions are met. The Term Loans will mature on April 8, 2027, the sixth anniversary of the initial funding date, and will bear interest at a rate equal to the sum of (a) the greater of (i) Prime Rate (as defined in the amended Loan Agreement) or (ii) 3.25%, plus 5.7%. Additionally, the Company elected to make 4.95% of the interest rate as payable in-kind, which shall accrue as principal monthly. The Amended Loan Agreement includes certain other fees, such as a final fee of 4.5% of the funded loan amounts not converted into equity by the lender, which apply if prepayment, an event of default, or change of control occurs prior to August 9, 2025, the third anniversary of the Amendment date. Subject to certain other conditions, no final fee will be payable after August 9, 2025. The Company has the option to prepay the loan at any time following the first anniversary of the amended loan agreement date, with tiered prepayment fees ranging from 0 to 1% based on when the prepayment occurs. Upon a change in control or event of default, mandatory prepayment will be required, and if such an event occurs prior to the first anniversary of the Amendment date, an additional prepayment fee of 3.0% applies.

 

The amended Loan Agreement remains secured by all assets of the Company. Proceeds will be used for working capital purposes and to fund the Company’s general business requirements. The amended Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to or based upon liquidity, trailing twelve months revenue and the funded loan amounts.

 

In connection with the original and amended Loan Agreement and the funding of the first tranche of the Term Loans, the Company incurred debt issuance costs of approximately $0.7 million. The debt issuance costs, and the debt discount are amortized to interest expense using the effective interest method over the life of the Term Loans. The carrying value of the debt approximates fair value as of September 30, 2022.

 

Long-term debt consisted of the following:

 

    September 30, 2022  
       
Note payable   $ 15,000,000  
Add: Payment-in-Kind interest (added to principal)     611,765  
Add: final fee     675,000  
Less: unamortized debt issuance costs     (481,304 )
Less: unamortized debt discount     (792,054 )
Total long-term debt   $ 15,013,407  

 

Future principal payments, including the final fee, are as follows:

 

   

Years Ending

December 31,

 
       
2024   $ 5,854,412  
2025     7,805,882  
2026     2,626,471  
Total   $ 16,286,765  

 

8. License Agreement

 

On April 8, 2021, the Company entered into a license agreement with Pfizer to research, develop, manufacture and commercialize gedatolisib, a potent, well-tolerated, reversible dual inhibitor that selectively targets all Class I PI3K isoforms and mTOR. The Company paid Pfizer $5.0 million in upfront fees and issued to Pfizer $5.0 million of shares of the Company’s common stock pursuant to an Equity Grant Agreement. The upfront payment and the issuance of shares were expensed to research & development in full for the three months ending June 30, 2021.

 

The Company is also required to make milestone payments to Pfizer upon achievement of certain development and commercial milestone events, up to an aggregate of $335.0 million. Additionally, the Company will pay Pfizer tiered royalties on sales of gedatolisib at percentages ranging from the low to mid-teens, which may be subject to deductions for expiration of valid claims, amounts due under third-party licenses and generic competition. Unless earlier terminated, the license agreement will expire upon the expiration of all royalty obligations. The royalty period will expire on a country-by-country basis upon the later of (a) 12 years following the date of first commercial sale of such product in such country, (b) the expiration of all regulatory or data exclusivity in such country for such product or (c) the date upon which the manufacture, use, sale, offer for sale or importation of such product in such country would no longer infringe, but for the license granted in the license agreement, a valid claim of a licensed patent right.

 

The Company has the right to terminate the license agreement for convenience upon 90 days’ prior written notice. Pfizer may not terminate the agreement for convenience. Either the Company or Pfizer may terminate the license agreement if the other party is in material breach and such breach is not cured within the specified cure period. In addition, either the Company or Pfizer may terminate the license agreement in the event of specified insolvency events involving the other party.

 

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and the related notes appearing under Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” discussed in Item 1A of Part II in this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

Overview

 

Celcuity is a clinical-stage biotechnology company focused on development of targeted therapies for treatment of multiple solid tumor indications. The Company’s lead therapeutic candidate is gedatolisib, a pan-PI3K/mTOR inhibitor. Its mechanism of action and pharmacokinetic properties are highly differentiated from other currently approved and investigational therapies that target PI3K or mTOR alone or together. The Company initiated VIKTORIA-1, a Phase 3 study evaluating gedatolisib in patients with HR+/HER2- advanced breast cancer in 2022. Its CELsignia companion diagnostic platform is uniquely able to analyze live patient tumor cells to identify new groups of cancer patients likely to benefit from already approved targeted therapies.

 

Gedatolisib is a potent, well-tolerated, small molecule reversible dual inhibitor, administered intravenously, that selectively targets all class I isoforms of PI3K and mammalian target of rapamycin (mTOR). In April 2021, we obtained exclusive global development and commercialization rights to gedatolisib under a license agreement with Pfizer, Inc. We believe gedatolisib’s unique mechanism of action, differentiated chemical structure, favorable pharmacokinetic properties, and intravenous formulation offer distinct advantages over currently approved and investigational therapies that target PI3K or mTOR alone or together.

 

Overcomes limitations of therapies that only inhibit a single class I PI3K isoform or only one mTOR kinase complex

 

Gedatolisib is a pan-class I isoform PI3K and mTOR inhibitor with low nanomolar potency for the p110α, p110β, p110γ, and p110δ isoforms and mTORC1 and mTORC2 complexes. Each PI3K isoform and mTOR complex is known to preferentially affect different signal transduction events that involve tumor cell survival, depending upon the aberrations associated with the linked pathway. When a therapy only inhibits a single class I isoform (e.g., alpelisib, a PI3K-α inhibitor) or only one mTOR kinase complex (e.g., everolimus, an mTORC1 inhibitor), numerous feedforward and feedback loops between the PI3K isoforms and mTOR complexes cross-activates the uninhibited sub-units. This, in turn, induces compensatory resistance that reduces the efficacy of isoform specific PI3K or single mTOR kinase complex inhibitors. Inhibiting all four PI3K isoforms and both mTOR complexes, as gedatolisib does, thus prevents the confounding effect of isoform interaction that may occur with isoform-specific PI3K inhibitors and the confounding interaction between PI3K isoforms and mTOR.

 

Better tolerated by patients than oral PI3K and mTOR drugs

 

Gedatolisib is administered intravenously (IV) on a four-week cycle of three weeks-on, one week-off, in contrast to the orally administered pan-PI3K or dual PI3K/mTOR inhibitors that are no longer being clinically developed. Oral pan-PI3K or PI3K/mTOR inhibitors have repeatably been found to induce significant side effects that were not well tolerated by patients. This typically leads to a high proportion of patients requiring dose reductions or treatment discontinuation. The challenging toxicity profile of these drug candidates ultimately played a significant role in the decisions to halt their development, despite showing promising efficacy. By contrast, gedatolisib stabilizes at lower concentration levels in plasma compared to orally administered PI3K inhibitors, resulting in less toxicity, while maintaining concentrations sufficient to inhibit PI3K/mTOR signaling.

 

Isoform-specific PI3K inhibitors administered orally were developed to reduce toxicities in patients. While the range of toxicities associated with isoform-specific inhibitors is narrower than oral pan-PI3K or PI3K/mTOR inhibitors, administering them orally on a continuous basis still leads to challenging toxicities. The experience with an FDA approved oral p110-α specific inhibitor, Piqray, illustrates the challenge. In its Phase 3 pivotal trial Piqray was found to induce a Grade 3 or 4 adverse event (AE) related to hyperglycemia in 39% of patients evaluated. In addition, 26% of patients discontinued alpelisib due to treatment related adverse events. By contrast, in the 103-patient dose expansion portion of the Phase 1b clinical trial with gedatolisib, only 7% of patients experienced Grade 3 or 4 hyperglycemia and less than 10% discontinued treatment.

 

As of September 30, 2022, 492 patients with solid tumors have received gedatolisib in eight clinical trials sponsored by Pfizer. Of the 492 patients, 129 were treated with gedatolisib as a single agent in three clinical trials. The remaining 363 patients received gedatolisib in combination with other anti-cancer agents in five clinical trials. Additional patients received gedatolisib in combination with other anti-cancer agents in nine investigator sponsored clinical trials.

 

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A Phase 1b trial (B2151009) evaluating patients with HR+/HER2- metastatic breast cancer was initiated in 2016 and subsequently enrolled 138 patients. Nine patients from this study continue to receive study treatment, as of September 30, 2022, each of whom have received study treatment for more than three years. The B2151009 clinical trial was an open label, multiple arm Phase 1b study that evaluated gedatolisib in combination with palbociclib (CDK4/6 inhibitor) and fulvestrant or letrozole in patients with HR+/HER2- advanced breast cancer. Thirty-five patients were enrolled in two dose escalation arms to evaluate the safety and tolerability and to determine the maximum tolerated dose (MTD) of gedatolisib when used in combination with the standard doses of palbociclib and endocrine therapy (letrozole or fulvestrant). The MTD was determined to be 180 mg administered intravenously once weekly. A total of 103 patients were subsequently enrolled in one of four expansion arms (A, B, C, D).

 

High objective overall response rates (ORR) were observed in all four expansion arms and were comparable in each arm for PIK3CA WT and PIK3CA MT patients. In treatment-naïve patients (Arm A), ORR was 85%. In patients who received prior hormonal therapy alone or in combination with a CDK4/6 inhibitor (Arms B, C, and D), ORR ranged from 32% to 77%. Each arm achieved its primary endpoint target, which was reporting higher ORR in the study arm than ORR from either the PALOMA-2 (ORR=55%) study that evaluated palbociclib plus letrozole for Arm A or the PALOMA-3 study (ORR=25%) that evaluated palbociclib plus fulvestrant for Arms B, C, and D. For all enrolled patients, a clinical benefit rate (CBR) of ≥79% was observed. Median progression-free survival (PFS) was 31.1 months for patients receiving first-line treatment (Arm A) and 12.9 months for patients who received a prior CDK4/6 inhibitor and were treated in the study with the Phase 3 dosing schedule (Arm D).

 

Gedatolisib combined with palbociclib and endocrine therapy demonstrated a favorable safety profile with manageable toxicity. The majority of treatment emergent adverse events were Grade 1 and 2. The most frequently observed adverse events included stomatitis/mucosal inflammation, the majority of which were Grade 1 and 2. The most common Grade 4 AEs were neutropenia and neutrophil count decrease, which were assessed as related to treatment with palbociclib. No grade 5 events were reported in this study.

 

We activated VIKTORIA-1, a Phase 3, open-label, randomized clinical trial to evaluate the efficacy and safety of two regimens in adults with HR+/HER2- advanced breast cancer whose disease has progressed after prior CDK4/6 therapy in combination with an aromatase inhibitor: 1) gedatolisib in combination with palbociclib and fulvestrant; and 2) gedatolisib in combination with fulvestrant. Two hundred clinical sites in North America, Europe, South America, Asia, and Australia have been selected to participate in the study. The first clinical site was activated in the third quarter.

 

The clinical trial will enable separate evaluation of subjects according to their PIK3CA status. Subjects who meet eligibility criteria and are PIK3CA WT will be randomly assigned (1:1:1) to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm A), gedatolisib and fulvestrant (Arm B), or fulvestrant (Arm C). Subjects who meet eligibility criteria and are PIK3CA MT will be randomly assigned (3:3:1) to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm D), alpelisib and fulvestrant (Arm E), or gedatolisib and fulvestrant (Arm F).

 

Our proprietary CELsignia diagnostic platform is the only commercially ready technology we are aware of that uses a patient’s living tumor cells to identify the specific abnormal cellular process driving a patient’s cancer and the targeted therapy that best treats it. This enables us to identify patients whose tumors may respond to a targeted therapy, even though they lack a previously associated molecular mutation. By identifying cancer patients whose tumors lack an associated genetic mutation but have abnormal cellular activity a matching targeted therapeutic is designed to inhibit, CELsignia CDx can expand the markets for a number of already approved targeted therapies. Our current CDx identifies breast and ovarian cancer patients whose tumors have cancer drivers potentially responsive to treatment with human epidermal growth factor receptor 2-negative (HER2), mesenchymal-epithelial transition factor (c-MET), or phosphatidylinositol 3-kinases (PI3K) targeted therapeutics. While U.S. Food and Drug Administration (“FDA”) approval or clearance is not currently required for CELsignia tests offered as a stand-alone laboratory developed test, if we are partnered with a drug company to launch a CELsignia test as a companion diagnostic for a new drug indication, we would be required to obtain premarket approval, or PMA, in conjunction with the pharmaceutical company seeking a new drug approval for the matching therapy.

 

We are supporting the advancement of new potential indications for four different targeted therapies, controlled by other pharmaceutical companies, that would rely on a CELsignia CDx to select patients. Five Phase 2 trials are underway to evaluate the efficacy and safety of these therapies in CELsignia selected patients. These patients are not currently eligible to receive these drugs and are not identifiable with a molecular test.

 

Supporting the development of a potential first-in-class targeted therapy for breast cancer, like gedatolisib, with our CELsignia platform is a natural extension of our strategy to use our CELsignia CDx to enable new indications for other companies’ targeted therapies. By combining companion diagnostics designed to enable proprietary new drug indications with targeted therapies that treat signaling dysregulation our CDx identifies, we believe we are uniquely positioned to improve the standard-of-care for many early and late-stage breast cancer patients. Our goal is to play a key role in the multiple treatment approaches required to treat breast cancer patients at various stages of their disease. With each program, we are:

 

  Leveraging the proprietary insights CELsignia provides into live patient tumor cell function
  Using a CELsignia CDx to identify new patients likely to respond to the paired targeted therapy
  Developing a new targeted therapeutic option for breast cancer patients
  Maximizing the probability of getting regulatory approval to market the targeted therapy indication

 

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Recent Developments

 

On August 9, 2022, Celcuity amended its existing debt financing agreement with an affiliate of Innovatus Capital Partners, LLC (“Innovatus”) to provide Celcuity with up to $75 million in term loans, a $50 million increase from the original debt financing agreement dated April 8, 2021. Celcuity received $15 million at the closing of the original agreement in April 2021. Celcuity will be able to draw an additional $20 million tranche following closing the of the $100 million private placement. Celcuity will be able to draw on two additional tranches of $10 million each and one additional tranche of $20 million upon achievement of certain clinical trial milestones and satisfaction of certain financial covenants determined on a pro forma as-funded basis. Funding of these additional tranches is also subject to other customary conditions and limits on when the Company can request funding for such tranches. Celcuity is entitled to make interest only payments for the 48-month period from the original agreement date or for the 60-month period from the original agreement date if certain conditions are met. The loans will mature on April 8, 2027, the sixth anniversary of the initial funding date. Innovatus has the right to convert outstanding principal into shares of Celcuity common stock until the third anniversary of the loan amendment date, with such amount limited to an aggregate of up to $6.5 million assuming all tranches are funded. The loan is secured by all of Celcuity’s assets.

 

Celcuity completed selection of clinical trial sites for the Phase 3 VIKTORIA-1 clinical trial. The 200-sites selected exceeded the number of sites initially targeted. Operational activities are focused now on facilitating activation of these sites and to dose the first patient. The clinical trial protocol was updated to include an additional study arm (Arm F) to evaluate gedatolisib plus fulvestrant in 50 patients who have PIK3CA mutations. This update was made in response to a recommendation from the European Medicines Agency (EMA) that the study arms for PIK3CA mutated patients mirror the same study arms for PIK3CA non-mutated patients. No changes were made to the primary endpoints. VIKTORIA-1 will evaluate the safety and efficacy of gedatolisib in combination with fulvestrant with or without palbociclib in adults with HR+/HER2- advanced breast cancer whose disease progressed while receiving prior CDK4/6 therapy. Further details about the study are available at ClinicalTrials.gov.

 

On July 18, 2022, gedatolisib was granted Breakthrough Therapy Designation for HR+/HER2- metastatic breast cancer after progression on CDK4/6 therapy. Breakthrough Therapy designation is granted by the FDA to expedite the development and regulatory review of an investigational medicine that is intended to treat a serious or life-threatening condition. The criteria for Breakthrough Therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on one or more clinically significant endpoints over available therapy. The benefits of Breakthrough Therapy Designation include more intensive guidance from the FDA on an efficient development program, access to a scientific liaison to help accelerate review time, and potential eligibility for priority review if relevant criteria are met. Celcuity’s breakthrough application was supported by data from a Phase 1b study that assessed the safety, tolerability and clinical activity of gedatolisib in combination with palbociclib and fulvestrant in patients with HR+/HER2- metastatic breast cancer whose disease progressed during treatment with a CDK4/6 therapy and an aromatase inhibitor.

 

On May 15, 2022, the Company entered into a securities purchase agreement with certain institutional and other accredited investors for the sale of Company common stock, preferred stock that may be convertible into common stock and warrants initially exercisable for preferred stock for $100 million in the aggregate, before deducting placement agent fees and other offering expenses. Pursuant to the securities purchase agreement, investors will purchase shares of common stock and preferred stock at a price per share of $5.75 (on an as converted to common stock basis). For each share of common stock and each 1/10 of a share of preferred stock purchased, investors will receive a warrant exercisable for 0.40 shares of common stock. The exercise price of the warrants will be at a 40% premium to the price paid by investors for the initial shares of common stock purchased in the private placement. The preferred stock will be convertible into common stock at the holder’s election, subject to certain limitations such as beneficial ownership. The closing of the private placement is conditioned on, among other customary items, the first patient enrolled in the Company’s Phase 3 clinical study (VIKTORIA-1) having received their first dose of treatment at a clinical site located in the United States, provided that if such date does not occur on or before December 31, 2022, each investor will have the right to terminate its obligation to purchase securities under the securities purchase agreement. The Company also entered into a customary registration rights agreement with the investors pursuant to which it agreed to file a registration statement with the SEC registering the resale of (i) the shares of common stock to be issued and sold in the private placement, (ii) the shares of common stock issuable upon conversion of the preferred stock purchased in the private placement and (iii) the shares of common stock issuable upon conversion of the shares of preferred stock that may be issued upon exercise of warrants purchased in the private placement.

 

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Impact of COVID-19 on our Business

 

Although we have largely returned to normal operations in our facility, the COVID-19 pandemic continues and its effect on our operations and financial condition will depend in large part on future developments which cannot be reasonably estimated at this time. Future developments include the duration, scope and severity of the pandemic, the emergence of new virus variants that are more contagious or harmful than prior variants, actions taken by governmental authorities, suppliers, clinical trial sites, and other business partners to contain or mitigate the pandemic’s impact, and the potential adverse effects on the suppliers, labor market and general economic activity.

 

As we continue to advance our clinical trial collaborations, we remain in close contact with our current clinical sponsors, and principal investigators, as well as prospective pharmaceutical company and clinical collaborators, to monitor the impact of COVID-19 on our trial enrollment timelines and collaboration discussions. We experienced delays in the enrollment of patients in our ongoing clinical trials and now expect interim results from two of our CELsignia Phase 2 clinical trials, FACT-1 and FACT-2 to be delayed until mid-2023 and final results approximately nine months later. We could experience further delays in clinical trials and collaborations with pharmaceutical companies and sponsors if new variants emerge or if the spread of COVID-19 once again accelerates. Due to the inherent uncertainty associated with the COVID-19 pandemic, we are unable to predict the impact the pandemic may have on our clinical trial work and overall financial condition.

 

Results of Operations

 

We have not generated any revenue from sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not and have never been profitable and have incurred losses in each period since our inception in 2012. For the three months ended September 30, 2022 and 2021, we reported a net loss of approximately $10.9 million and $6.0 million, respectively and for the nine months ended September 30, 2022 and 2021, we reported a net loss of approximately $28.8 million and $22.9 million, respectively. As of September 30, 2022, we had an accumulated deficit of approximately $84.7 million. As of September 30, 2022, we had cash and cash equivalents of approximately $57.5 million.

 

Components of Operating Results

 

Revenue

 

To date, we have not generated any revenue. With the execution of the Pfizer license agreement in April 2021, whereby we acquired exclusive world-wide licensing rights to develop and commercialize gedatolisib, we expect to conduct clinical trials to support potential regulatory approval to market gedatolisib. If we obtain regulatory approvals to market gedatolisib, we expect to generate revenue from sales of the drug for the treatment of breast cancer patients. Additionally, we will seek to generate revenue from partnership agreements with pharmaceutical companies to provide companion diagnostics for such pharmaceutical partners’ existing or investigational targeted therapies. If a new drug indication is received that requires use of our companion diagnostic to identify eligible patients, we expect to generate revenues from sales of tests to treating physicians.

 

Research and Development

 

Since our inception, we have primarily focused on research and development of our CELsignia platform, development and validation of our CELsignia tests, and research related to the discovery of new cancer sub-types. Beginning in April 2021, we are also focusing on development of gedatolisib, a PI3K/mTOR targeted therapy. Research and development expenses primarily include:

 

employee-related expenses related to our research and development activities, including salaries, benefits, recruiting, travel and stock-based compensation expenses;
laboratory supplies;
consulting fees paid to third parties;
clinical trial costs;
validation costs for gedatolisib;
facilities expenses; and
legal costs associated with patent applications.

 

Internal and external research and development costs are expensed as they are incurred. As we continue development of gedatolisib, manage the VIKTORIA-1 Phase 3 trial and other clinical trials to evaluate the efficacy of targeted therapies in cancer patients selected with one of our CELsignia tests, the proportion of research and development expenses allocated to external spending will grow at a faster rate than expenses allocated to internal expenses.

 

General and Administrative

 

General and administrative expenses consist primarily of salaries, benefits and stock-based compensation related to our executive, finance and support functions. Other general and administrative expenses include professional fees for auditing, tax, and legal services associated with being a public company, director and officer insurance, investor relations and travel expenses for our general and administrative personnel.

 

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Sales and Marketing

 

Sales and marketing expenses consist primarily of professional and consulting fees related to these functions. To date, we have incurred immaterial sales and marketing expenses as we continue to focus primarily on the development of our first drug, gedatolisib, CELsignia platform and corresponding CELsignia tests. We would expect to begin to incur increased sales and marketing expenses in anticipation of the commercialization of our first drug, gedatolisib, and CELsignia tests. These increased expenses are expected to include payroll-related costs as we add employees in the commercial departments, costs related to the initiation and operation of our sales and distribution network and marketing related costs.

 

Interest Expense

 

Interest expense is primarily due to a Loan Agreement and finance lease obligations.

 

Interest Income

 

Interest income consists of interest income earned on our cash and cash equivalent balances.

 

Results of Operations

 

Comparison of the Three Months Ended September 30, 2022 and 2021

 

    Three Months Ended              
    September 30,     Increase (Decrease)  
    2022     2021     $     Percent Change  
                         
Statements of Operations Data:                  
Operating expenses:                                
                                 
Research and development   $ 9,621,505     $ 4,960,515     $ 4,660,990       94 %
General and administrative     1,022,050       639,271       382,779       60 %
Total operating expenses     10,643,555       5,599,786       5,043,769       90 %
Loss from operations     (10,643,555 )     (5,599,786 )     (5,043,769 )     90 %
                                 
Other income (expense)                              
Interest expense     (537,661 )     (433,072 )     (104,589 )     24 %
Interest income     287,495       5,612       281,883       5,023 %
Other income (expense), net     (250,166 )     (427,460 )     177,294       (41 )%
Net loss before income taxes     (10,893,721 )     (6,027,246 )     (4,866,475 )     81 %
Income tax benefits     -       -       -       - %
Net loss   $ (10,893,721 )   $ (6,027,246 )   $ (4,866,475 )     81 %

 

Comparison of the Nine Months Ended September 30, 2022 and 2021

 

    Nine Months Ended              
    September 30,     Increase (Decrease)  
    2022     2021     $     Percent Change  
Statements of Operations Data:                  
Operating expenses:                                
                                 
Research and development   $ 24,685,505     $ 20,266,965     $ 4,418,540       22 %
General and administrative     3,066,382       1,768,058       1,298,324       73 %
Total operating expenses     27,751,887       22,035,023       5,716,864       26 %
Loss from operations     (27,751,887 )     (22,035,023 )     (5,716,864 )     26 %
                                 
Other income (expense)                                
Interest expense     (1,428,108 )     (824,283 )     (603,825 )     73 %
Interest income     391,301       7,803       383,498       4,915 %
Loss on sale of fixed assets     -       (263 )     263       n/a %
Other income (expense), net     (1,036,807 )     (816,743 )     (220,064 )     27 %
Net loss before income taxes     (28,788,694 )     (22,851,766 )     (5,936,928 )     26 %
Income tax benefits     -       -       -       - %
Net loss   $ (28,788,694 )   $ (22,851,766 )   $ (5,936,928 )     26 %

 

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Research and Development

 

Our research and development expenses for the three months ended September 30, 2022 were approximately $9.6 million, representing an increase of approximately $4.7 million, or 94%, compared to the same period in 2021. Of the $4.7 million increase in research and development expenses, $1.2 million was related to increased employee and consulting expenses, of which $0.2 million was in the form of non-cash stock-based compensation. The remaining $3.5 million increase of research and development expenses is primarily related to costs for existing clinical trials and for activities supporting the initiation of the VIKTORIA-1 pivotal trial.

 

Our research and development expenses for the nine months ended September 30, 2022 were approximately $24.7 million, representing an increase of approximately $4.4 million, or 22%, compared to the same period in 2021. Included in the $4.4 million increase is a $10 million reduction in gedatolisib licensing related expenses offset by increases of $14.4 million in other research and development expenses. In the 2021 period, research and development expenses included a $10.0 million upfront license fee related to the execution of the Pfizer license agreement while there were no licensing agreement expenses for gedatolisib in 2022. Of the $14.4 million increase in research and development expense, $4.2 million was related to increased employee and consulting expenses, of which $0.9 million was in the form of non-cash stock-based compensation. The remaining $10.2 million increase of research and development expenses is related to costs for existing clinical trials and for activities supporting the initiation of the VIKTORIA-1 pivotal trial.

 

Conducting a significant amount of research and development is central to our business model. We plan to increase our research and development expenses for the foreseeable future as we seek to develop gedatolisib, discover new cancer sub-types, and develop and validate additional CELsignia tests to diagnose such sub-types. We also expect to incur increased expenses to support companion diagnostic business development activities with pharmaceutical companies as we develop additional CELsignia tests and initiate a clinical trial for gedatolisib.

 

General and Administrative

 

Our general and administrative expenses for the three months ended September 30, 2022 were approximately $1.0 million, representing an increase of approximately $0.4 million, or 60%, compared to the same period in 2021. Employee related expenses accounted for $0.3 million of the $0.4 million increase, including approximately $0.3 million in non-cash stock-based compensation. The remaining $0.1 million increase of general and administrative expenses resulted from director and officer insurance and other professional fees associated with being a public company.

 

Our general and administrative expenses for the nine months ended September 30, 2022 were approximately $3.1 million, representing an increase of approximately $1.3 million, or 73%, compared to the same period in 2021. Employee related expenses accounted for $1.1 million of the $1.3 million increase, including approximately $0.9 million in non-cash stock-based compensation. The remaining $0.2 million of the increase resulted from director and officer insurance and other professional fees associated with being a public company.

 

We anticipate that our general and administrative expenses will increase in future periods, reflecting both increased costs in connection with the potential future commercialization of gedatolisib and CELsignia tests, an expanding infrastructure, and increased professional fees associated with being a public company.

 

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Interest Expense

 

Interest expense for the three months ended September 30, 2022 was $0.5 million and represents an increase of $0.1 million, or 24%, compared to the same period in 2021. The increase is due to a higher interest rate on the loan.

 

Interest expense for the nine months ended September 30, 2022 was $1.4 million and represents an increase of $0.6 million, or 73%, compared to the same period in 2021. The increase is due to the loan agreement being in place for the entire nine-month period in 2022 rather than for only a fraction of the period in 2021 and a higher interest rate on the loan.

 

Interest Income

 

Interest income for the three months ended September 30, 2022 was $0.3 million higher compared to the same period in 2021. The increase was due to higher market interest rates.

 

Interest income for the nine months ended September 30, 2022 was $0.4 million higher compared to the same period in 2021. The increase was due to higher market interest rates.

 

Liquidity and Capital Resources

 

Since our inception, we have incurred losses and cumulative negative cash flows from operations. Through September 30, 2022, we have raised capital of approximately $13.7 million and $7.5 million through private placements of common equity and unsecured convertible notes, respectively. On September 22, 2017, we closed on the initial public offering of our common stock, which generated approximately $23.3 million of additional cash after taking into account underwriting discounts and commissions and offering expenses. On June 5, 2020, we entered into an At Market Issuance Sales Agreement with B. Riley, FBR, Inc (the “ATM Agreement”). The ATM Agreement allowed us to sell shares of common stock up to an aggregate offering price of $10.0 million. Through September 30, 2022, we generated approximately $0.1 million of additional cash through sales pursuant to the ATM Agreement, after taking into account commissions and offering expenses. On February 26, 2021, we completed a follow-on offering of our common stock, which generated approximately $25.8 million of additional cash after taking into account underwriting discounts and offering expenses. In conjunction with the follow-on offering, the ATM Agreement was terminated. On April 8, 2021, we entered into a loan agreement with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), whereby Innovatus agreed to loan up to $25 million in three tranches consisting of (i) a $15.0 million non-contingent term A loan that was funded on April 8, 2021, (ii) a $5 million term B loan with a deadline of March 31, 2022 and we are no longer eligible to draw on, and (iii) a $5 million term C loan to be funded upon our request no later than March 31, 2023. Funding of the term C loan is subject to our ability to achieve certain milestones. On July 1, 2021, we completed a follow-on offering of our common stock, which generated approximately $52.8 million of additional cash after taking into account underwriting discounts of approximately $3.4 million and offering expenses of approximately $0.1 million.

 

On February 4, 2022, we entered into an Open Market Sale AgreementSM with Jefferies LLC, as agent, pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50,000,000. On October 12, 2022, pursuant to this agreement, the Company sold 500,000 shares of common stock in a single transaction at a price of $10.35 per share, generating gross proceeds of $5.2 million ($4.8 million net of commissions and offering expenses).

 

On May 15, 2022, we entered into a securities purchase agreement with certain institutional and other accredited investors for the sale of Company common stock, preferred stock that may be convertible into common stock and warrants exercisable for common stock for $100 million in the aggregate, before deducting placement agent fees and other offering expenses. Pursuant to the securities purchase agreement, investors will purchase shares of common stock and preferred stock at a price per share of $5.75 (on an as converted to common stock basis), with the closing (funding) of such purchase to occur following the achievement of a milestone in our Phase 3 study (VIKTORIA-1). The sale of shares of common stock includes forty percent (40%) warrant coverage and customary resale registration rights. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” above for additional details.

 

On August 9, 2022, the Company amended the loan agreement with Innovatus to provide up to $75 million in term loans. As mentioned above, the initial term A loan of $15 million was funded on April 8, 2021. Th Company will be able to draw an additional $20 million following the closing of the $100 million private placement. Additionally, the Company will be able to draw on two additional tranches of $10 million and one additional tranche of $20 million upon achievement of certain clinical trial milestones and satisfaction of certain financial covenants determined on a pro forma as-funded basis. Funding of these additional tranches is also subject to other customary conditions and limits on when the Company can request funding for such tranches.

 

Cash from our historical capital raising activities has been our primary source of funds for our operations since inception. As of September 30, 2022, our cash and cash equivalents were approximately $57.5 million, and we had an accumulated deficit of approximately $84.7 million.

 

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We expect that our research and development and general and administrative expenses will increase as we continue to develop gedatolisib, conduct research related to the discovery of new cancer sub-types, conduct clinical trials, and pursue other business development activities. We would also expect to incur sales and marketing expenses as we commercialize gedatolisib and our CELsignia tests. We expect to use cash on hand, together with the funds to be received under the securities purchase agreement described above, to fund our research and development expenses, clinical trial costs, capital expenditures, working capital, sales and marketing expenses, and general corporate expenses.

 

Based on our current business plan, we believe that our current cash on hand will provide sufficient cash to finance operations and pay obligations when due for at least the next twelve months.

 

We may seek to raise additional capital to expand our business, pursue strategic investments, and take advantage of financing or other opportunities that we believe to be in the best interests of the Company and our stockholders. Additional capital may be raised through the sale of common or preferred equity or convertible debt securities, entry into debt facilities or other third-party funding arrangements. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. Agreements entered into in connection with such capital raising activities could contain covenants that would restrict our operations or require us to relinquish certain rights. Additional capital may not be available on reasonable terms, or at all.

 

Cash Flows

 

The following table sets forth the primary sources and uses of cash for the nine months ended September 30:

 

    September 30,  
    2022     2021  
       
Net cash provided by (used in):                
Operating activities   $ (26,528,911 )   $ (14,187,938 )
Investing activities     (46,724 )     (71,459 )
Financing activities     (226,970 )     92,988,298  
Net increase (decrease) in cash and cash equivalents   $ (26,802,605 )   $ 78,728,901  

 

Operating Activities

 

Net cash used in operating activities was approximately $26.5 million for the nine months ended September 30, 2022 and consisted primarily of a net loss of approximately $28.8 million and working capital changes of approximately $2.0 million, offset by non-cash expense items of approximately $4.3 million. The approximately $2.0 million of working capital changes was primarily due to an increase of approximately $5.9 million in prepaid assets, partially offset by increases in accounts payable and accrued expenses of approximately $1.6 million and $2.3 million, respectively. Non-cash expense items of approximately $4.3 million primarily consisted of approximately $3.5 million of stock-based compensation expense, non-cash interest expense of approximately $0.6 million and depreciation expense of approximately $0.2 million.

 

Net cash used in operating activities was approximately $14.2 million for the nine months ended September 30, 2021 and consisted primarily of a net loss of approximately $22.9 million, offset by non-cash expense items of approximately $7.3 million and working capital changes of $1.4 million. Non-cash expense items of approximately $7.3 million primarily consisted of $5.0 million for issuance of common stock related to a license agreement, stock-based compensation expense of approximately $1.7 million, non-cash interest expense of approximately $0.4 million and depreciation expense of approximately $0.2 million. The approximately $1.4 million of working capital changes was primarily due to an increase in accounts payable and accrued expenses.

 

Investing Activities

 

Net cash used in investing activities for the nine months ended September 30, 2022 and 2021 were minimal and consisted of purchases of property and equipment.

 

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Financing Activities

 

Net cash used in financing activities was approximately $0.2 million for the nine months ended September 30, 2022 and consisted of payments for secondary registration statement costs, offset partially by proceeds from the exercise of employee stock options and proceeds from employee stock purchases.

 

Net cash provided by financing activities for the nine months ended September 30, 2021 was approximately $93.0 million. The $93.0 million primarily consisted of approximately $78.5 million from net proceeds from the sale of shares of our common stock through two follow-on offerings and approximately $14.4 million from net proceeds related to the closing of a loan agreement. The remaining $0.1 million was the result of proceeds from the exercise of common stock warrants and employee stock options and proceeds from employee stock purchases.

 

Recent Accounting Pronouncements

 

From time-to-time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed in Note 2 to our unaudited condensed financial statements included in Item 1 of Part I of this Quarterly Report, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

 

Critical Accounting Policies and Use of Estimates

 

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates.

 

Our significant accounting policies are more fully described in Note 2 to our unaudited condensed financial statements included in Item 1 of Part I of this Quarterly Report.

 

Private Securities Litigation Reform Act

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Such forward-looking information is included in this Quarterly Report and in other materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us). Forward-looking statements include all statements based on future expectations. This Quarterly Report contains forward-looking statements that involve risks and uncertainties including, but not limited to, (i) our clinical trial plans and the estimated costs for such trials, including the timing of activating a Phase 3 clinical trial for gedatolisib and enrolling patients in such trial; (ii) our expectations with respect to costs and timelines to develop, validate and launch CELsignia tests and to continue to develop gedatolisib; (iii) our beliefs related to the perceived advantages of our CELsignia tests compared to traditional molecular or other diagnostic tests; (iv) the expected benefits of gedatolisib; (v) our expectations regarding the timeline of patient enrollment and results from clinical trials, including the existing clinical trial for gedatolisib; (vi) the future payments that may be owed to Pfizer under the license agreement; (vii) our expectations regarding partnering with pharmaceutical companies and other third parties; (viii) our expectations regarding revenue from sales of CELsignia tests and revenue from milestone or other payment sources; (ix) our plans with respect to research and development and related expenses for the foreseeable future; (x) our expectations regarding business development activities, including companion diagnostic related activities with pharmaceutical companies, expanding our sales and marketing functions and the costs associated with such activities; (xi) our expectations with respect to the CELsignia tests and the analytical capabilities and potential impact of such tests; (xii) our beliefs regarding the ability of our cash on hand to fund our research and development expenses, capital expenditures, working capital, sales and marketing expenses, and general corporate expenses, as well as the increased costs associated with being a public company; (xiii) our expectations with respect to closing on our $100 million private placement announced May 16, 2022 and our plans with respect to potentially raising capital; and (xiv) our expectations regarding the impact that the COVID-19 pandemic and related economic effects will have on our business and results of operations.

 

In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on their interpretation of currently available information.

 

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These statements involve known and unknown risks, uncertainties and other factors that may cause our results or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Certain risks, uncertainties and other factors include, but are not limited to, our limited operating history; the potential impact of the COVID-19 pandemic on our business; our initial success being heavily dependent on the success of our CELsignia HER2 Pathway Activity Test; our inability to develop and commercialize gedatolisib; our inability to determine whether our CELsignia tests are currently commercially viable; challenges we may face in developing and maintaining relationships with pharmaceutical company partners; the complexity and timeline for development of CELsignia tests and gedatolisib; the uncertainty and costs associated with clinical trials; the uncertainty regarding market acceptance by physicians, patients, third-party payors and others in the medical community, and with the size of market opportunities available to us; the pricing of molecular and other diagnostic products and services that compete with us; uncertainty with insurance coverage and reimbursement for our CELsignia tests; difficulties we may face in managing growth, such as hiring and retaining a qualified sales force and attracting and retaining key personnel; changes in government regulations; and obtaining and maintaining intellectual property protection for our technology and time and expense associated with defending third-party claims of intellectual property infringement, investigations or litigation threatened or initiated against us. These and additional risks, uncertainties and other factors are described more fully in Item 1A of Part II of this Quarterly Report . Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis and retrieval system (EDGAR) at www.sec.gov.

 

You should read the cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. You should read this Quarterly Report completely. Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

 

ITEM 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures. The Certifying Officers have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2022. Based on that review and evaluation, the Certifying Officers have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures, as designed and implemented, are effective and provide reasonable assurance that information required to be disclosed by us in the periodic and current reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the periods specified by the SEC’s rules and forms.

 

Changes in Internal Control Over Financial Reporting.

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

From time to time we may be involved in disputes or litigation relating to claims arising out of our operations. We are not currently a party to any legal proceedings that could reasonably be expected to have a material adverse effect on our business, financial condition and results of operations.

 

ITEM 1A. Risk Factors

 

Risk factors that could cause actual results to differ from our expectations and that could negatively impact our financial condition and results of operations are summarized and discussed in more detail below, in each case including certain updates from those set forth in our Quarterly Report for the period ended March 31, 2022. Additional risks and uncertainties not presently known to us or that are currently not believed to be significant to our business may also affect our actual results and could harm our actual business, financial condition and/or operating results.

 

Summary of Risk Factors

 

We have a limited operating history and we may never generate revenue or profit;
     
An inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize our integrated therapeutic (Rx) and companion diagnostic (CDx) strategy;
     
We are currently conducting and will continue to conduct clinical trials. Clinical trials are expensive and complex with uncertain outcomes, which may prevent or delay commercialization of any drug product candidates or CELsignia tests;
     
The COVID-19 pandemic may materially and adversely impact our business, including ongoing clinical trials;
     
Our future strategy is dependent on the success of our initial drug product, gedatolisib, as well as other drug products we may develop. If we are unable to successfully complete clinical development of, obtain regulatory approval for or commercialize our drug products, or if we experience delays in doing so, our business will be materially and adversely impacted;
     
The successful development of biopharmaceuticals such as gedatolisib is highly uncertain;
     
We were not involved in the early development of gedatolisib; therefore, we are dependent on third parties having accurately generated, collected, interpreted and reported data from certain preclinical and clinical trials;
     
As an organization, we have never successfully completed any registrational clinical trials, and we may be unable to do so for any drug candidates we may develop;
     
For a new drug to be approved for marketing, the FDA in the United States and health authorities in other countries, must determine that the drug is safe and effective. Because all drugs can have adverse effects, the data from our Phase 3 clinical study must demonstrate to the satisfaction of the FDA and other health authorities that the benefits of gedatolisib in combination with palbociclib and fulvestrant, or gedatolisib in combination with fulvestrant, outweigh its risks. Failure to demonstrate sufficient magnitude of benefit, even if the benefit is found to be statistically significant, may not support regulatory approval;
     
If we encounter difficulties enrolling patients in any of our clinical trials, our clinical development activities could be delayed or otherwise adversely affected;
     
If we are unable to obtain and maintain intellectual property protection for our products and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products or technology similar or identical to ours, and our ability to successfully commercialize our technology and diagnostic tests may be impaired;
     
We depend on intellectual property licensed from third parties, including from Pfizer for our lead product candidate, gedatolisib, and termination of this license could result in the loss of significant rights, which would materially and adversely impact our business;
     
If we fail to comply with our obligations under our patent license with Pfizer, we could lose certain license rights that are important to our business;
     
Our success with CELsignia is heavily dependent on the success of our first CELsignia trials and we cannot be certain of the outcomes of such trials;
     
We may not be successful in finding pharmaceutical company partners for continuing development of additional CELsignia tests;
     
While our CELsignia HER2 Pathway Activity Test and CELsignia Multi-Pathway Activity Test are commercially ready, we have not attempted to market these to physicians or their patients as stand-alone tests and have no ability to determine if these tests or any of our other tests will be commercially viable;
     
We will be dependent on our ability to attract and retain key personnel; and
     
We face significant competition from other pharmaceutical and diagnostic companies.

 

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Risks Relating to Our Business

 

We have a limited operating history and we may never generate revenue or profit.

 

We are a clinical-stage biotechnology company that commenced activities in January 2012. We only have a limited operating history and our business plan has not been tested. Since inception, we have had no revenue and have incurred significant operating losses. We have financed our operations primarily through equity and debt offerings. To generate revenue and become and remain profitable, we must continue to pursue our integrated companion diagnostic (CDx) and therapeutic (Rx) strategy that leverages our CELsignia CDx platform. To do so, we need to successfully complete our five existing clinical trial collaborations, continue to develop other CELsignia tests for other cancer sub-types, cultivate partnerships with pharmaceutical companies, and develop and commercialize gedatolisib pursuant to our license agreement with Pfizer. We must also build operational and financial infrastructure to support commercial operations, train and manage employees, and market and sell our CELsignia tests (as a companion diagnostic and/or as a stand-alone test) and, once fully developed and commercialized, our anticipated drug products.

 

We may never succeed in any of these activities and, even if we do, we may never generate revenue that is sufficient to achieve profitability. We expect to continue to incur significant expenses and operating losses for the foreseeable future, and the net losses we incur may fluctuate significantly from quarter to quarter. Our failure to become and remain profitable would decrease our value and could impair our ability to raise capital, maintain or expand our research and development efforts, expand our business, or continue our operations.

 

Our inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize our integrated therapeutic (Rx) and companion diagnostic (CDx) strategy.

 

We may require additional capital to finance capital expenditures and operating expenses over the next several years as we launch our integrated therapeutic and companion diagnostic strategy and expand our infrastructure, commercial operations and research and development activities. We may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements. Additional funding may not be available to us on acceptable terms, or at all. If we raise funds by issuing equity securities, dilution to our stockholders could result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our existing securities. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also include restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business. In the event that we enter into collaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms. If the first dosing of the first patient enrolled in our Phase 3 clinical study (VIKTORIA-1) does not occur on or before December 31,2022, each investor under the securities purchase agreement we entered into on May 15, 2022, will have the right to terminate its obligation to purchase our securities under the securities purchase agreement. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives. In addition, we may have to work with a partner on one or more of our products or market development programs, which could lower the economic value of those programs to our company.

 

We will be dependent on our ability to attract and retain key personnel.

 

Our operations will be materially dependent upon the services of our officers and key employees, including Brian F. Sullivan, our Chief Executive Officer, and Dr. Lance G. Laing, our Chief Science Officer. Successful implementation of our business plan will also require the services of other consultants and additional personnel. We cannot assure you that we will be able to attract and retain such persons as employees, independent contractors, consultants or otherwise. If we are not able to attract individuals with the skills required for our business, or if we lose the services of either Mr. Sullivan or Dr. Laing, we may be unable to successfully implement our business plan.

 

The COVID-19 pandemic may materially and adversely impact our business, including ongoing clinical trials.

 

The outbreak of COVID-19 and government measures taken in response have had a significant impact on the global economy, with healthcare systems particularly affected. In response to the COVID-19 outbreak, public health measures have been implemented across much of the United States, Europe and Asia, including in the locations of our offices, clinical trial sites, and partners.

 

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As a result of the COVID-19 pandemic, we have and may in the future experience disruptions that could materially and adversely impact our clinical trials, business, financial condition and results of operations. Potential disruptions include but are not limited to:

 

delays or difficulties in enrolling patients in clinical trials and obtaining the results of completed clinical trials;
     
increased rates of patients withdrawing from clinical trials following enrollment as a result of quarantine or concerns about COVID-19;
     
diversion of healthcare resources away from the conduct of clinical trials;
     
delays in prospective clinical trial collaborations with pharmaceutical companies and sponsors;
     
interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;
     
limitations on our ability to recruit and hire key personnel due to our inability to meet with candidates because of travel restrictions; and
     
limitations on employee resources that would otherwise be focused on the conduct of clinical trials and research as a result of focus addressing COVID-19 mitigation and loss of productivity from remote work.

 

Beyond the direct effect of the pandemic, COVID-19 has had broad economic effects. The economic impact of COVID-19 may adversely affect us in a variety of ways, including without limitation making our stock price more volatile, making it more difficult to raise additional capital through offerings of equity or debt securities, and reducing the availability of bank loans. As a result, we may face difficulties raising capital and capital raising efforts may be on terms than are less favorable than would have been previously available.

 

All of the effects of COVID-19 described herein are expected to apply to any future recurrences of COVID-19 and any other pandemics that may occur in the future.

 

Risks Related to Our Drug Product, Gedatolisib

 

Our future strategy is dependent on the success of our initial drug product, gedatolisib, as well as other drug products we may develop. If we are unable to successfully complete clinical development of, obtain regulatory approval for or commercialize our drug products, or if we experience delays in doing so, our business will be materially harmed.

 

To date, we have not yet completed any registrational clinical trials or the development of any drug products. Our future success and ability to generate revenue from our drug products, which we do not expect will occur for several years, if ever, is dependent on our ability to successfully develop, obtain regulatory approval for and commercialize one or more drug products. We may not have the financial resources to continue development of, or to modify existing or enter into new collaborations for, a drug product if we experience any issues that delay or prevent regulatory approval of, or our ability to commercialize, our drug products, including:

 

our inability to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our drug products are safe and effective;
     
insufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;
     
negative or inconclusive results from our preclinical studies, clinical trials or the clinical trials of others for drug products similar to ours, leading to a decision or requirement to conduct additional preclinical studies or clinical trials or abandon a program;
     
product-related adverse events experienced by subjects in our clinical trials or by individuals using drugs or therapeutic biologics similar to our drug products;
     
delays in submitting applications, or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial or a suspension or termination of a clinical trial once commenced;
     
conditions imposed by the FDA or comparable foreign regulatory authorities regarding the scope or design of our clinical trials;
     
poor effectiveness of our drug products during clinical trials;
     
better than expected performance of control arms, such as placebo groups, which could lead to negative or inconclusive results from our clinical trials;
     
delays in enrolling subjects in clinical trials;
     
high drop-out rates of subjects from clinical trials;
     
inadequate supply or quality of drug products or other materials necessary for the conduct of our clinical trials;
     
greater than anticipated clinical trial or manufacturing costs;
     
unfavorable FDA or comparable regulatory authority inspection and review of a clinical trial site;
     
failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;
     
delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our therapies in particular; or
     
varying interpretations of data by the FDA and comparable foreign regulatory authorities.

 

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The preliminary efficacy and safety data reported for the B2151009 Phase 1b clinical trial was provided to us by Pfizer and is subject to change once data cleansing and data verification activities are completed.

 

The preliminary efficacy and safety data reported for the B2151009 Phase 1b clinical trial was provided to us by Pfizer. Pfizer provided this data as of a data cutoff date of January 11, 2021, before Pfizer had cleaned the data, locked the clinical database, and completed preparation of a final Clinical Study Report. We have not independently reviewed or verified the data, which includes case report forms (CRF) for each patient and reconciliation with the data endpoints reported. We may discover, upon performing the study close out activities for B2151009, which includes reconciliation and adjudication of the endpoint reported data with the CRF, inconsistencies with the data as originally provided by Pfizer to us. As a result, the data presented as of the date hereof is subject to change once data cleaning and verification activities have been completed and other study close-out procedures are completed.

 

We were not involved in the early development of gedatolisib; therefore, we are dependent on third parties having accurately generated, collected, interpreted and reported data from certain preclinical and clinical trials gedatolisib.

 

We had no involvement with or control over the initial preclinical and clinical development of gedatolisib. We are dependent on third parties having conducted their research and development in accordance with the applicable protocols and legal, regulatory and scientific standards; having accurately reported the results of all preclinical studies and clinical trials conducted with respect to such drug product; and having correctly collected and interpreted the data from these trials. If these activities were not compliant, accurate or correct, the clinical development, regulatory approval or commercialization of our drug product will be adversely affected.

 

As an organization, we have never successfully completed any registrational clinical trials, and we may be unable to do so for any drug candidates we may develop.

 

We will need to successfully complete registrational clinical trials in order to obtain the approval of the FDA or comparable foreign regulatory authorities to market our drug products. Carrying out clinical trials, including later-stage registrational clinical trials, is a complicated process. As an organization, we have not previously completed any registrational clinical trials. In order to do so, we will need to build and expand our clinical development and regulatory capabilities, and we may be unable to recruit and train qualified personnel. We also expect to continue to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval of or commercialize any potential product candidates. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to submission and approval of our drug products. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approval of any drug products that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing our drug products.

 

If we encounter difficulties enrolling patients in any of our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

 

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including:

 

the patient eligibility and exclusion criteria defined in the protocol;
     
the size of the patient population required for analysis of the clinical trial’s primary endpoints;
     
the proximity of patients to clinical trial sites;
     
the design of the clinical trial;
     
our ability to recruit clinical trial investigators with the appropriate competencies and experience, and the ability of these investigators to identify and enroll suitable patients;
     
perception of the safety profile of our drug products;
     
our ability to obtain and maintain patient consents; and
     
the risk that patients enrolled in clinical trials will drop out of the trials before completion.

 

Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.

 

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Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

 

To obtain the requisite regulatory approvals to commercialize any drug products, we must demonstrate through extensive preclinical studies and clinical trials that such drug product is safe and effective in humans. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful, and a clinical trial can fail at any stage of testing.

 

Differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products. Additionally, we are conducting and plan to conduct some open-label trials, where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in those trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. Where a randomized, placebo-controlled clinical trial is designed to allow enrolled subjects to cross-over to the treatment arm, there may be a risk of inadvertent unblinding of subjects prior to cross-over, which may limit the clinical meaningfulness of those data and may require the conduct of additional clinical trials. As such, the results from an open-label trial may not be predictive of future clinical trial results with any of our product candidates for which we include an open-label clinical trial when studied in a controlled environment with a placebo or active control.

 

Successful completion of clinical trials is a prerequisite to submitting a new drug application, or NDA, to the FDA and similar marketing applications to comparable foreign regulatory authorities for each drug product and, consequently, the ultimate approval and commercial marketing of any drug products. We may experience delays in activating our Phase 3 clinical trial due to requests from the FDA for additional information, including additional nonclinical or clinical data, or for requests to amend the clinical trial protocol. Additional delays may be incurred once the Phase 3 clinical trial is initiated if it takes longer than expected to activate the targeted number of clinical sites, if the enrollment of patients is negatively affected by COVID-19, by staffing shortages at clinical sites, or by other unanticipated factors, or if the FDA and other regulatory authorities require us to pause our Phase 3 clinical trial due to unexpected safety issues. We also may experience numerous unforeseen events during, or as a result of, any future clinical trials that we could conduct that could delay or prevent our ability to receive marketing approval or commercialize our current product candidates or any future product candidates. Our costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our clinical trials will begin as planned, will need to be reassigned or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations. Any delays in our clinical development programs may harm our business, financial condition and results of operations significantly.

 

For a new drug to be approved for marketing, the FDA and other regulatory authorities, must determine that the drug is safe and effective. Because all drugs can have adverse effects, the data from our Phase 3 clinical study must demonstrate to the satisfaction of the FDA and other health authorities that the benefits of gedatolisib in combination with palbociclib and fulvestrant, or gedatolisib in combination with fulvestrant, outweigh its risks. Failure to demonstrate sufficient magnitude of benefit, even if the benefit is found to be statistically significant, may not support regulatory approval.

 

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If a drug meets its primary efficacy endpoint objective in a Phase 3 clinical trial, and the drug sponsor has additional nonclinical and clinical data required by the FDA or other regulatory authorities, the drug sponsor may submit an NDA seeking marketing approval. Upon submission of an NDA, these health authorities perform a benefit-risk assessment that considers the strength and quality of evidence available and takes remaining uncertainties into account. These considerations include an assessment of the strengths and limitations of clinical trials, including design, and potential implications for assessing drug efficacy, the magnitude of benefit and interpretation of clinical importance, the benefit attributed to the drug when studied in combination with other therapies, and the clinical relevance of the study endpoints. We have sought feedback from the FDA and other regulatory authorities on the design of our Phase 3 clinical trial with the goal of addressing these considerations in the clinical trial’s design. However, due to the complexity of clinical trials, the uncertainty of outcomes, and the uncertainty of how the FDA and other regulatory authorities may balance benefits and risks in their review of an NDA, it may not be practical or possible to address all benefit-risk assessment considerations in a Phase 3 clinical trial so that sufficient evidence is generated to support a marketing approval, even if the primary endpoint objective is achieved. The FDA or other regulatory authorities may require us to redesign or conduct additional unplanned clinical trials before granting any approval and we may not get approval at all. If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials or other testing of our product candidates, or if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

 

be delayed in obtaining marketing approval for our such product candidates or not obtain marketing approval at all;
     
obtain approval for indications or patient populations that are not as broad as intended or desired;
     
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
     
be subject to changes in the way the product is administered;
     
be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;
     
have regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on its distribution in the form of a REMS or through modification to an existing REMS;
     
be sued; or
     
experience damage to our reputation.

 

The successful development of biopharmaceuticals is highly uncertain.

 

Successful development of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Product candidates that appear promising in the early phases of development may fail to reach the market for several reasons including, among other things, that clinical trial results may show the product candidates to be less effective than expected or to have unacceptable side effects or toxicities; we may fail to receive the necessary regulatory approvals or there may be a delay in receiving such approvals; or the proprietary rights of others and their competing products and technologies that may prevent our product candidates from being commercialized.

 

The length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one drug product to the next and from one country to the next and may be difficult to predict. Even if we are successful in obtaining marketing approval, commercial success of any approved products will also depend in large part on the availability of coverage and adequate reimbursement from third-party payors, including government payors such as the Medicare and Medicaid programs and managed care organizations in the U.S. or country specific governmental organizations in foreign countries, which may be affected by existing and future healthcare reform measures designed to reduce the cost of healthcare. Third-party payors could require us to conduct additional studies, including post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and divert our resources. If government and other healthcare payors were not to provide coverage and adequate reimbursement for our products once approved, market acceptance and commercial success would be reduced.

 

In addition, if any of our drug products receive marketing approval, we will be subject to significant post-approval regulatory obligations. In addition, there is always the risk that we, a regulatory authority or a third party might identify previously unknown problems with a product post-approval, such as adverse events of unanticipated severity or frequency. Compliance with these requirements is costly, and any failure to comply or other issues with our drug products post-approval could adversely affect our business, financial condition and results of operations.

 

We face significant competition from other biopharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

 

The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations and well-established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly as they develop novel approaches to treating disease indications that our product candidates are also focused on treating. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to in-license novel therapeutics that could make the product candidates that we develop obsolete. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaboration partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products. We believe the key competitive factors that will affect the development and commercial success of our product candidates are efficacy, safety, tolerability, reliability, convenience of use, price and reimbursement.

 

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Even if we obtain regulatory approval of drug products, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.

 

Even if any drug product we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

 

If any future drug product we develop receives marketing approval, whether as a single agent or in combination with other therapies, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If the product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including:

 

efficacy and potential advantages compared to other treatments;

 

the ability to offer our products, if approved, for sale at competitive prices;

 

convenience and ease of administration compared to other treatments;

 

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

 

the strength of marketing and distribution support;

 

the ability to obtain sufficient third-party coverage, market access and adequate reimbursement; and

 

the prevalence and severity of any side effects.

 

Risks Related to Intellectual Property for Gedatolisib

 

We depend on intellectual property licensed from third parties, including from Pfizer for our lead product candidate, and termination of this license could result in the loss of significant rights, which would harm our business.

 

We are dependent on patents, know-how and proprietary technology, both our own and licensed from others. All patents covering gedatolisib and any combination therapies using our product candidates are licensed from third parties. Any termination of a product license could result in the loss of significant rights and would cause material adverse harm to our ability to commercialize our product candidates.

 

Disputes may also 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 patent and other rights to third parties under collaborative development relationships;

 

our diligence obligations with respect to the use of licensed technology in relation to our development and commercialization of our product candidates and what activities satisfy those diligence obligations; and

 

the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.

 

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

 

We are generally also subject to all of the same risks with respect to protection of intellectual property that we own, as we are for intellectual property that we license. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize products could materially suffer.

 

If we fail to comply with our obligations under our patent license with Pfizer, we could lose license rights that are important to our business.

 

We are a party to a license agreement with Pfizer pursuant to which we in-license key patents for our gedatolisib. This license imposes various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, Pfizer may have the right to terminate the license, in which event we would not be able to develop or market the products covered by such licensed intellectual property. We may have limited control over the maintenance and prosecution of these in-licensed rights, activities or any other intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such activities by these licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. We have limited control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the intellectual property rights, or defend certain of the intellectual property that is licensed to us. It is possible that the licensors’ infringement proceeding or defense activities may be less vigorous than had we conducted them ourselves.

 

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We may not be successful in obtaining or maintaining necessary rights to develop any future product candidates on acceptable terms.

 

Because our programs may involve additional product candidates that may require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, in-license or use these proprietary rights. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which could harm our business. We may need to cease use of the compositions or methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology.

 

The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. There can be no assurance that we will be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding the additional product candidates that we may seek to acquire.

 

Risks Related to Government Regulation for Gedatolisib

 

We may not obtain the necessary regulatory approvals to commercialize our product candidate.

 

We will need FDA approval to commercialize our product candidate in the U.S. In order to obtain FDA approval, we must submit to the FDA a new drug application, or NDA, demonstrating that the drug product is safe for humans and effective for its intended use. This demonstration requires significant research and animal tests, which are referred to as pre-clinical studies, as well as human tests, which are referred to as clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the drug product and requires substantial resources for research, development and testing. We cannot predict whether our research and clinical approaches will result in a drug that the FDA considers safe for humans and effective for indicated uses. The FDA has substantial discretion in the drug approval process and may require us to conduct additional pre-clinical and clinical testing or to perform post-marketing studies. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may delay commercialization of, and our ability to derive product revenues from, our drug product; impose costly procedures on us; or diminish any competitive advantages that we may otherwise enjoy. Even if we comply with all FDA requests, the FDA may ultimately reject our NDA. We cannot be sure that we will ever obtain regulatory clearance for our drug product. Failure to obtain FDA approval of our drug product will severely undermine our business by reducing our number of salable products and, therefore, corresponding product revenues.

 

The FDA or comparable foreign regulatory authorities may disagree with our regulatory plan for our product candidates.

 

The general approach for FDA approval of a new drug is dispositive data from one or more well-controlled Phase 3 clinical trials of the product candidate in the relevant patient population. Phase 3 clinical trials typically involve a large number of patients, have significant costs and take years to complete.

 

Our clinical trial results may not support approval of our product candidates. In addition, our product candidates could fail to receive regulatory approval, or regulatory approval could be delayed, for many reasons, including the following:

 

the FDA or comparable foreign regulatory authorities may disagree with the dosing regimen, design or implementation of our clinical trials;

 

we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates are safe and effective for any of their proposed indications;

 

we may encounter safety or efficacy problems caused by the COVID-19 pandemic;

 

the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

 

we may be unable to demonstrate that our product candidates’ clinical and other benefits outweigh their safety risks;

 

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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

 

the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of an NDA or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the U.S. or elsewhere;

 

the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

 

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

 

Breakthrough Therapy Designation or Fast Track Designation from the FDA may not actually lead to a faster development or regulatory review or approval process.

 

If a drug is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for Fast Track Designation. The designation offers the opportunity for frequent interactions with the FDA to discuss the drug’s development plan and to ensure collection of appropriate data needed to support drug approval, as well as eligibility for submission of a New Drug Application.

 

In addition, a drug may receive Breakthrough Therapy Designation if it is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The benefits of Breakthrough Therapy Designation include more intensive guidance from the FDA on an efficient development program, access to a scientific liaison to help accelerate review time, and potential eligibility for priority review if relevant criteria are met. This designation can expedite the development and regulatory review of an investigational medicine that is intended to treat a serious or life-threatening condition.

 

Both Fast Track and Breakthrough Therapy Designations are within the discretion of the FDA. While the FDA has granted both designations to our lead drug candidate, gedatolisib, such designations may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA procedures, and neither designation assures ultimate approval by the FDA. In addition, the FDA may later decide that the product no longer meets the qualification conditions and may rescind either or both such designations.

 

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

 

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, a comparable foreign regulatory authority must also approve the manufacturing, marketing and promotion of the product candidate in those countries.

 

Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the U.S., including additional preclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the U.S., a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

 

We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the U.S. have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

 

Even if we receive regulatory approval of any product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

 

If any of our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-marketing information, including both federal and state requirements in the U.S. and requirements of comparable foreign regulatory authorities. In addition, we will be subject to continued compliance with requirements for any clinical trials that we conduct post-approval.

 

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Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

 

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the product candidate. Certain endpoint data we hope to include in any approved product labeling also may not make it into such labeling, including exploratory or secondary endpoint data such as patient-reported outcome measures. The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-marketing studies or clinical trials to assess new safety risks or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

 

restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls;

 

fines, warning letters or holds on clinical trials;

 

refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;

 

product seizure or detention or refusal to permit the import or export of our product candidates; and

 

injunctions or the imposition of civil or criminal penalties.

 

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Products may be promoted only for the approved indications and in accordance with the provisions of the approved label. The policies of the FDA and comparable foreign regulatory authorities may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

 

Risks Related to Our CELsignia Tests

 

Our success with CELsignia is heavily dependent on the success of our first CELsignia trials.

 

Our business strategy is focused on attracting pharmaceutical company partnerships that provide revenue from the sale of CELsignia tests during clinical trials, from milestone payments during clinical trials, from sales of our CELsignia tests as companion diagnostics or stand-alone tests thereafter, and, potentially, from royalties on the incremental drug revenues our tests enable. Our ability to obtain such partnerships and generate such revenue depends in part on the ability of our first CELsignia tests to demonstrate the potential incremental opportunity available for pharmaceutical companies. We do not expect to receive the first interim results for our prospective clinical trials for the CELsignia HER2 Pathway Activity Test until mid 2023 and with final results expected approximately nine months later. Success of the clinical trials using the CELsignia HER2 Pathway Activity Test or CELsignia Multi-Pathway Activity Test will depend on many factors, such as successfully enrolling patients, meeting trial endpoint goals, and completing the trial in a timely manner. Our ability to complete the trial could be delayed or prevented for several reasons that are out of our control, such as the FDA withdrawing its authorization and approval to perform the study, NSABP, West Cancer Center, Massachusetts General Hospital, MD Anderson Cancer Center, or University of Rochester determining that the human and/or toxicology test results do not support continuing the trial, or participants having adverse reactions or side-effects to the drugs administered in the study. If we are unable to demonstrate that the CELsignia HER2 Pathway Activity Test or CELsignia Multi-Pathway Activity Test is suitable as a companion diagnostic for the targeted therapy, we will likely not be able to generate future revenue from our CELsignia HER2 Pathway Activity Test or CELsignia Multi-Pathway Activity test and may not be able to attract other pharmaceutical companies to partner with us for the development and commercialization of other CELsignia tests. Further, potential pharmaceutical company partners may delay negotiating development agreements until results of the first clinical trial using our CELsignia HER2 Pathway Activity Test trial are available. Even if the ultimate outcome of the first clinical trial using a CELsignia HER2 Pathway Activity Test trial is positive, any delays could materially and adversely affect our business.

 

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We may not be successful in finding pharmaceutical company partners for continuing development of additional CELsignia tests.

 

We intend to develop strategic partnerships with pharmaceutical companies for developing additional CELsignia tests. Many of the potential partners are global, multi-billion-dollar pharmaceutical companies with sophisticated research and development organizations and multiple priorities. We may not be successful in our efforts to establish such a strategic partnership or other alternative arrangements for our CELsignia tests because, among other things, our research and development pipeline may be insufficient, such tests may be deemed to be at too early of a stage of development for collaborative effort, or third parties may not view such tests as having the requisite potential to demonstrate efficacy. In addition, we may be restricted under collaboration agreements from entering into future agreements with other partners. Even if we are able to find suitable partners, we may not be successful in negotiating development agreements with such partners that provide revenue from the sale of our CELsignia tests, from milestone payments, and/or from royalties on the incremental drug revenues that our tests enable. If we are unable to reach agreements with suitable strategic partners on a timely basis, on acceptable terms or at all, we may have to curtail the development of additional CELsignia tests, our expected revenue opportunities may be significantly smaller than expected and our business may fail.

 

While our CELsignia HER2 Pathway Activity Test and CELsignia Multi-Pathway Activity Test are commercially ready, we have not attempted to market these to physicians or their patients as stand-alone tests and have no ability to determine if these tests or any of our other tests will be commercially viable.

 

While our CELsignia HER2 Pathway Activity Test and CELsignia Multi-Pathway Activity Test are analytically validated, conducted in our CLIA certified and CAP accredited laboratory, and currently ready for commercial use as an LDT, we have not attempted to market them to physicians or their patients. Furthermore, we have commenced only limited communications with KOLs to build awareness and credibility of our CELsignia diagnostic platform and CELsignia tests. Accordingly, we have no ability to determine whether our CELsignia HER2 Pathway Activity Test, CELsignia Multi-Pathway Activity Test or any other future CELsignia tests, will be commercially viable as stand-alone tests. We may never be successful in generating revenue from our CELsignia tests as stand-alone tests, and if we are unable to build pharmaceutical partnerships that enable us to market the CELsignia HER2 Pathway Activity Test, the CELsignia Multi-Pathway Activity Test, and other tests as companion diagnostic tests, we may never generate any revenue and our business may fail.

 

Developing our CELsignia tests involves a lengthy and complex process that may not be successful.

 

Our CELsignia tests may take several years to develop from the time they are discovered to the time they are available for patient use, if ever. In order to develop additional CELsignia tests into commercially ready products, we need to successfully complete a variety of activities, including, among others, conducting substantial research and development, conducting extensive analytical testing, and maintaining our CLIA certified and CAP accredited laboratory. In addition, our business strategy is focused on our CELsignia tests being sold as companion diagnostics. This will require obtaining and maintaining partnerships with pharmaceutical companies and successfully completing clinical studies that demonstrate the suitability of the applicable CELsignia test as a companion diagnostic for their targeted therapies.

 

These activities will require us to expend significant resources. Based on comparable companies in this industry, few research and development projects result in commercially viable products, and success in early clinical studies often is not replicated in later studies. At any point, we may abandon development of a product candidate for several reasons, such as a clinical validation study failing to demonstrate the prospectively defined endpoints of the study. We may also be required to expend considerable resources repeating clinical studies, which would adversely affect the timing for generating potential revenue from a new product and our ability to invest in other products in our pipeline.

 

Clinical trials are expensive and complex with uncertain outcomes, which may prevent or delay commercialization of our CELsignia tests.

 

For our CELsignia tests to become a companion diagnostic for a matching targeted therapy, we must conduct clinical trials to demonstrate that patients who have an abnormal signaling pathway, as identified by our CELsignia tests, respond to treatment with a matching targeted therapy. Clinical testing is expensive, is difficult to design and implement, and can take many years to complete, and its outcome is inherently uncertain. As a company, we have limited experience in conducting or participating in clinical trials. We cannot be certain that any future clinical trials will conclusively demonstrate that any CELsignia test is effective as a companion diagnostic. If our trials do not yield positive results, we may be unable to maintain the pharmaceutical company partnerships we build or find additional partners, we may not be able to successfully commercialize our CELsignia tests or generate any revenue, our business may fail, and you may lose part or all of your investment.

 

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We cannot be certain that our existing clinical trial or future clinical trials, if any, will begin or be completed on time, if at all. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to commercialize our CELsignia tests, such as:

 

delay or failure in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with planned trial sites and/or strategic partners;

 

delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design, in obtaining authorization from such authorities to commence the trial, and/or in complying with conditions or other requirements imposed by such regulatory authorities with respect to the trial;

 

delay or failure in recruiting and enrolling suitable subjects to participate in one or more clinical trials, or in such participants completing a trial or returning for follow-up during or after the trial;

 

clinical sites, investigators or other third-parties deviating from the trial protocol, failing to conduct the trial in accordance with regulatory and contractual requirements, and/or dropping out of a trial;

 

regulatory imposition of a clinical hold for any of our clinical trials, where a clinical hold in a trial in one indication would result in a clinical hold for clinical trials in other indications; and

 

changes in governmental regulations or administrative actions.

 

Significant nonclinical or clinical trial delays could prevent us from maintaining and/or developing new pharmaceutical company partnerships. Delays could also shorten any periods during which we may have the exclusive right to commercialize our CELsignia tests or allow our competitors to bring products to market before we do. As such, any delays could impair our ability to successfully commercialize our CELsignia tests and may materially and adversely affect our business, financial condition, results of operations and prospects.

 

Even if our CELsignia tests achieve positive clinical trial results, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

 

If any of our potential CELsignia tests, including our first CELsignia HER2 Pathway Activity Test and CELsignia Multi-Pathway Activity Test, achieve positive clinical trial results, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. For example, conventional genomic- or proteomic-based analyses are commonly used today to diagnose cancer and prescribe cancer medications, and physicians may continue to rely on these diagnostic tests instead of adopting the use of a CELsignia test. The degree of market acceptance of our CELsignia tests will depend on a number of factors, including:

 

their efficacy and other potential advantages compared to alternative diagnostic tests;

 

our ability to offer them for sale at competitive prices;

 

their convenience and ease of obtaining patient specimens compared to alternative diagnostics;

 

the willingness of the target patient population to try new diagnostics and of physicians to initiate such diagnostics;

 

the strength of marketing and distribution support;

 

the availability of third-party coverage and adequate reimbursement for our diagnostic tests; and

 

our ability to partner with pharmaceutical companies to develop companion diagnostic programs for the new cancer sub-types we discover.

 

If our CELsignia tests do not achieve an adequate level of acceptance, we may never generate significant product revenues and we may not become profitable.

 

Our CELsignia related business, operational and financial goals may not be attainable if the market opportunities for our CELsignia tests or our pharmaceutical company partners are smaller than we expect. Our internal research and estimates on market opportunities have not been verified by independent sources, and we have not independently verified market and industry data from third-parties that we have relied on.

 

The total market opportunities that we believe exist are based on a variety of assumptions and estimates, including the number of potential companion diagnostic programs we will be able to successfully pursue, the amount of potential milestone payments that we could receive in companion diagnostic programs, the number of patients we will test in clinical trials, the price we will be able to charge for our tests and the total annual number of cancer patients with undiagnosed abnormal cell signaling. In addition, we have relied on third-party publications, research, surveys and studies for information related to determining market opportunities, including without limitation, information on the number of cancer patients and those receiving various forms of treatment, the cost of drug therapy, the amount of revenue generated from various types of drug therapy, the objective response rates of drug therapies, the number of deaths caused by cancer and the expected growth in cancer drug therapy and diagnostic markets. Our internal research and estimates on market opportunities have not been verified by independent sources, and we have not independently verified market and industry data from third-parties that we have relied on. Any or all of our assumptions and/or estimates may prove to be incorrect for several reasons, such as inaccurate reports or information that we have relied on, potential patients or providers not being amenable to using our CELsignia platform for diagnostic testing or such patients becoming difficult to identify and access, limited reimbursement for companion diagnostics, pricing pressure due to availability of alternative diagnostic tests, or an inability of the CELsignia tests’ companion drugs to obtain the necessary regulatory approvals for new indications. If any or all of our assumptions and estimates prove inaccurate, we and our companion diagnostic pharmaceutical partners may not attain our business, operational and financial goals.

 

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The expected selling price range of our CELsignia tests is an estimate. We have not yet sold any such tests and the actual price we are able to charge may be substantially lower than our expected price range.

 

We have estimated the selling price range of our CELsignia tests based on the pricing of other diagnostic tests currently available and assumptions regarding the efficacy and market acceptance of our tests. We have not yet sold our CELsignia tests and cannot be certain of the actual price we may be able to charge. The availability and price of our competitors’ products could limit the demand and the price we are able to charge. We may not achieve our business plan if acceptance is inhibited by price competition, if pharmaceutical companies refuse to pay our expected prices for CELsignia tests in clinical trials, if physicians are reluctant to switch from other diagnostic tests to our CELsignia tests or if physicians switch to other new products or choose to reserve our CELsignia tests for use in limited circumstances. Furthermore, reductions in the reimbursement rate of third-party payors have occurred and may occur in the future. Each of these factors could cause our selling price to be substantially lower than expected, and we may fail to generate revenue or become profitable.

 

The insurance coverage and reimbursement status of new diagnostic products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for CELsignia tests could limit our ability to market those CELsignia tests and decrease our ability to generate revenue.

 

The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive diagnostic tests and treatments. Sales of any of our potential CELsignia tests will depend substantially, both in the United States and internationally, on the extent to which the costs of our CELsignia tests will be paid by health maintenance, managed care, and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. Reimbursement by a payor may depend on a number of factors, including a payor’s determination that the CELsignia tests are neither experimental nor investigational, appropriate for the specific patient, cost-effective, supported by peer-reviewed publications, and included in clinical practice guidelines.

 

If reimbursement is not available, or is available only to a limited amount, we may not be able to successfully commercialize our CELsignia tests at expected levels, or potentially at all. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our research and development investment.

 

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved diagnostic products. In the United States, the principal decisions about reimbursement for new diagnostic products and services are typically made by CMS. CMS decides whether and to what extent a new product or service will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. As such, a significant portion of our potential revenue depends on CMS approving coverage and reimbursement of our CELsignia tests.

 

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of diagnostic tests such as our potential CELsignia tests. In many countries, particularly the countries of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time. To obtain reimbursement or pricing approval in some countries, we may be required to demonstrate the cost-effectiveness of our CELsignia tests relative to other available diagnostic tests. The prices of products under such systems may be substantially lower than in the United States. Other countries allow companies to fix their own prices for products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our CELsignia tests. Accordingly, in markets outside the United States, the reimbursement for our potential CELsignia tests may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profit.

 

Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our potential CELsignia tests. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. We expect to experience pricing pressures in connection with the sale of any CELsignia tests due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes.

 

We may encounter difficulties in commercializing and marketing our CELsignia products, including in hiring and retaining a qualified sales force.

 

In order to commercialize any CELsignia test, we must build marketing, sales, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. For each CELsignia test we develop, we intend to pursue development agreements with the pharmaceutical companies that provide matching targeted therapies. Once we have completed the analytical validation of a CELsignia test, we plan to target KOLs to build product awareness. Once we have clinical validation data available, we expect to expand our sales and marketing efforts to target the broader market and coordinate our go-to-market activities with those of our partner pharmaceutical companies. These activities will be expensive and time consuming and will require significant attention of our executive officers to manage. In particular, there is intense competition for qualified sales personnel and our inability to hire or retain an adequate number of sales representatives could limit our ability to maintain or expand our business and increase sales. Furthermore, there is no guarantee that any new drug indications will require our CELsignia tests as a companion diagnostic or that any pharmaceutical company will effectively coordinate sales and marketing activities with us. Any failure or delay in these activities, including if we are unable to develop our marketing and sales networks or if our sales personnel do not perform as expected, would adversely impact the commercialization our CELsignia platform, and our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

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We face significant competition from other diagnostic companies and our operating results will suffer if we fail to compete effectively.

 

The diagnostic testing industry is intensely competitive. We have competitors both in the United States and abroad, including universities and other research institutions and providers of diagnostics that focus on developing genomic or proteomic analyses of a patient’s diseased cells or theranostic tests to predict specific patient responses to a drug therapy. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and well-established marketing and sales forces. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, products or services that are more effective or less costly than the CELsignia tests that we are currently developing or that we may develop. In addition, established medical technology, biotechnology and/or pharmaceutical companies may invest heavily to accelerate discovery and development of diagnostic tests that could make our CELsignia tests less competitive.

 

Our ability to compete successfully will depend largely on our ability to:

 

discover and develop CELsignia tests for cancer sub-types that are superior to other products in the market;

 

demonstrate compelling advantages in the efficacy and convenience of our CELsignia tests on a cost competitive basis;

 

attract qualified scientific, product development and commercial personnel;

 

obtain and maintain patent and other proprietary protection as necessary for our CELsignia platform;

 

obtain required U.S. and international regulatory approvals;

 

successfully collaborate with research institutions and pharmaceutical companies in the discovery, development and commercialization of our current and future CELsignia tests; and

 

successfully expand our operations and build a sales force to support commercialization.

 

If our sole laboratory facility becomes inoperable, we will be unable to perform our tests and our business will be harmed.

 

We do not have redundant laboratory facilities. We perform all of our diagnostic services in our laboratory located in Minneapolis, Minnesota. Our facility and the equipment we use to perform our tests would be costly to replace and could require substantial lead time to repair or replace. The facility may be harmed or rendered inoperable by physical damage from fire, floods, tornadoes, power loss, telecommunications failures, break-ins and similar events, which may render it difficult or impossible for us to perform our tests for some period of time. The inability to perform our tests may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future. Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

 

In order to rely on a third party to perform our tests, we could only use another facility with established state licensure and CLIA accreditation under the scope of which our potential CELsignia tests could be performed following validation and other required procedures. We cannot assure you that we would be able to find another CLIA-certified facility willing to adopt CELsignia tests and comply with the required procedures, or that this laboratory would be willing to perform the tests for us on commercially reasonable terms.

 

Our instrument or reagent suppliers may fail to meet our quality requirements for the items we purchase or fail to provide a continuous supply of the items we utilize to perform our CELsignia tests.

 

We utilize highly specialized reagents and instruments to perform our CELsignia tests. We may be unable to find suitable replacement reagents and instruments on a timely basis, if at all. Interruption in the supply of these items or degradation in their quality could delay analytical and clinical studies, and/or render us unable to deliver CELsignia tests. This would interrupt sales and adversely affect our business, results of operations and financial condition.

 

Performance issues or price increases by our shipping carriers could adversely affect our business, results of operations and financial condition, and harm our reputation and ability to provide our CELsignia tests on a timely basis.

 

Expedited, reliable shipping is essential to our operations. Should our shipping carrier encounter delivery performance issues such as loss, damage or destruction of a sample, such occurrences may damage our reputation and lead to decreased demand for our services and increased cost and expense to our business. In addition, any significant increase in shipping rates could adversely affect our operating margins and results of operations. Similarly, strikes, severe weather, natural disasters or other service interruptions by delivery services we use would adversely affect our ability to receive and process patient samples on a timely basis. There are only a few providers of overnight nationwide transport services, and there can be no assurance that we will be able to maintain arrangements with providers on acceptable terms, if at all.

 

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Our CELsignia tests represent a novel approach to companion diagnostics, which could result in heightened regulatory scrutiny, delays in clinical development, or delays in our ability to commercialize any products.

 

Our unique and proprietary CELsignia technology is the first cancer diagnostic platform we are aware of that can detect the underlying signaling dysfunction driving a patient’s cancer. Because this is a novel approach to companion diagnostics, there can be no assurance as to the length of a clinical trial period, the number of patients the FDA or another applicable regulatory authority will require to be enrolled in the trials in order to establish the safety and efficacy of our CELsignia tests and the companion drugs, or that the data generated in these trials will be acceptable to the FDA or another applicable regulatory authority to support marketing approval of new indications for the companion drugs. This could delay or prohibit our clinical trials and/or commercialization of our CELsignia tests.

 

If the FDA were to begin regulating our tests, we could incur substantial costs and delays associated with trying to obtain premarket clearance or approval.

 

Most LDTs are not currently subject to FDA regulation, although reagents, instruments, software or components provided by third parties and used to perform LDTs may be subject to regulation. We believe that the CELsignia tests are LDTs, which is a term that describes tests that are designed and performed within a single laboratory. As a result, we believe the CELsignia tests are not currently subject to regulation by the FDA in accordance with the FDA’s current policy of exercising enforcement discretion regarding LDTs.

 

Historically, the FDA has not required laboratories that furnish only LDTs to comply with the agency’s requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls). In mid-2014, the FDA published a draft Guidance Document describing a proposed approach for a regulatory framework for LDTs, but in late 2016, the FDA indicated it did not intend to finalize the LDT Guidance Document at that time. It is not clear when or if the FDA will seek to alter the current LDT regulatory framework in the future. We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for our tests, whether through additional guidance issued by the FDA, new enforcement policies adopted by the FDA or new legislation enacted by Congress. We cannot predict with certainty the timing or content of future legislation enacted or guidance issued regarding LDTs, or how it will affect our business.

 

If premarket review is required by the FDA at a future date or if we decide to voluntarily pursue FDA premarket review of our CELsignia tests, there can be no assurance that our CELsignia tests or any tests we may develop in the future will be cleared or approved by the FDA on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our CELsignia tests. If our CELsignia tests are allowed to remain on the market but there is uncertainty in the marketplace about our tests, if they are labeled investigational by the FDA, or if labeling claims the FDA allows us to make are more limited than we expect, reimbursement may be adversely affected and we may not be able to sell our CELsignia tests. Compliance with FDA regulations would increase the cost of conducting our business and subject us to heightened regulation and scrutiny by the FDA and penalties for failure to comply with these requirements.

 

If we fail to obtain required federal and state laboratory licenses, we could lose the ability to perform our tests.

 

Clinical laboratory tests, including our CELsignia tests, are regulated under CLIA. CLIA is a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease. CLIA regulations mandate specific standards for laboratories in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management and quality assurance. CLIA certification is also required in order for us to be eligible to bill state and federal healthcare programs, as well as many private third-party payers, for any tests we launch. We will also be required to maintain state licenses in certain states to conduct testing in our laboratories. While we currently have CLIA certification for our Minnesota laboratory, failure to maintain this certification would adversely affect our ability to launch our CELsignia tests.

 

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CELsignia Risks Related to Intellectual Property

 

If we are unable to obtain and maintain intellectual property protection for our CELsignia technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and diagnostic tests similar or identical to ours, and our ability to successfully commercialize our technology and diagnostic tests may be impaired.

 

Our ability to compete successfully will depend in part on our ability to obtain and enforce patent protection for our products, preserve our trade secrets and operate without infringing the proprietary rights of third parties. We have applied for patents that protect our technology. Our patent portfolio includes three issued U.S. patents, five issued international patents, five pending U.S. patent applications, 23 pending non-U.S. patent applications, one pending international PCT patent application, and numerous corresponding non-U.S. patent applications. Each patent and patent application covers methods of use. However, we cannot assure you that our intellectual property position will not be challenged or that all patents for which we have applied will be granted. The validity and breadth of claims in patents involve complex legal and factual questions and, therefore, may be highly uncertain. Uncertainties and risks that we face include the following:

 

our pending or future patent applications may not result in the issuance of patents;

 

the scope of any existing or future patent protection may not exclude competitors or provide competitive advantages to us;

 

our patents may not be held valid if subsequently challenged;

 

other parties may claim that our products and designs infringe the proprietary rights of others, and even if we are successful in defending our patents and proprietary rights, such litigation may be costly; and

 

other parties may develop similar products, duplicate our products, or design around our patents.

 

The patent prosecution process is expensive and time-consuming, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patent applications at a reasonable cost or in a timely manner, or in all jurisdictions. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions, and under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope. It is also possible that we will fail to identify patentable aspects of our discovery and nonclinical development output before it is too late to obtain patent protection.

 

The patent position of companies like ours is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. The U.S. Patent and Trademark Office, or U.S. PTO, has not established a consistent policy regarding the breadth of claims that it will allow in medical technology patents. In addition, the laws of foreign jurisdictions may not protect our rights to the same extent as the laws of the United States. For example, India and China do not allow patents for methods of treating the human body. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our technology or CELsignia tests, in whole or in part, or which effectively prevent others from commercializing competitive technologies and diagnostic tests. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

 

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. PTO or patent offices in foreign jurisdictions, or become involved in opposition, derivation, reexamination, inter parties review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology and compete directly with us, without payment to us, or result in our inability to commercialize CELsignia platform without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to develop or commercialize current or future CELsignia tests.

 

Even if our owned patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned patents by developing similar or alternative technologies or products in a non-infringing manner.

 

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and product candidates, or limit the duration of the patent protection of our technology and potential diagnostic tests. Given the amount of time required for the development, testing and regulatory review of new diagnostic tests, patents protecting such tests might expire before or shortly after such candidates are commercialized. As a result, our owned patent portfolio may not provide us with sufficient rights to exclude others from commercializing diagnostic tests similar or identical to ours.

 

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

 

The commercial success of CELsignia tests depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our CELsignia tests and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the medical technology, biotechnology and pharmaceutical industries. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our CELsignia platform, including interference or derivation proceedings before the U.S. PTO and similar bodies in other jurisdictions. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.

 

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If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our CELsignia platform and CELsignia tests. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our CELsignia platform or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

 

If we are not able to prevent disclosure of our trade secrets and other proprietary information, the value of our CELsignia platform could be significantly diminished.

 

We rely on trade secret protection to protect our interests in proprietary know-how and in processes for which patents are difficult to obtain or enforce. We may not be able to protect our trade secrets adequately. We have a policy of requiring our consultants, advisors and strategic partners to enter into confidentiality agreements and our employees to enter into invention, non-disclosure and non-compete agreements. However, no assurance can be given that we have entered into appropriate agreements with all parties that have had access to our trade secrets, know-how or other proprietary information. There is also no assurance that such agreements will provide meaningful protection of our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure of information. Furthermore, we cannot provide assurance that any of our employees, consultants, contract personnel, or strategic partners, either accidentally or through willful misconduct, will not cause serious damage to our programs and/or our strategy, for example by disclosing important trade secrets, know-how or proprietary information to our competitors. It is also possible that our trade secrets, know-how or other proprietary information could be obtained by third parties as a result of breaches of our physical or electronic security systems. Any disclosure of confidential data into the public domain or to third parties could allow our competitors to learn our trade secrets and use the information in competition against us. In addition, others may independently discover our trade secrets and proprietary information. Any action to enforce our rights is likely to be time consuming and expensive, and may ultimately be unsuccessful, or may result in a remedy that is not commercially valuable. These risks are accentuated in foreign countries where laws or law enforcement practices may not protect proprietary rights as fully as in the United States. Any unauthorized disclosure of our trade secrets or proprietary information could harm our competitive position.

 

Other Risks Related to Government Regulation for Our Business

 

Failure to comply with the HIPAA security and privacy regulations may increase our operational costs.

 

A portion of the data that we obtain and handle for or on behalf of our clients is considered protected health information, or PHI, subject to HIPAA. Under HIPAA and our contractual agreements with our HIPAA-covered entity health plan customers, we are considered a “business associate” to those customers, and are required to maintain the privacy and security of PHI in accordance with HIPAA and the terms of our business associate agreements with our clients, including by implementing HIPAA-required administrative, technical and physical safeguards. We are also required to maintain similar business associate agreements with our subcontractors that have access to PHI of our customers in rendering services to us or on our behalf. We will incur significant costs to establish and maintain these safeguards and, if additional safeguards are required to comply with HIPAA regulations or our clients’ requirements, our costs could increase further, which would negatively affect our operating results. Furthermore, we cannot guarantee that such safeguards have been and will continue to be adequate under applicable laws. If we have failed, or fail in the future, to maintain adequate safeguards, or we or our agents or subcontractors use or disclose PHI in a manner prohibited or not permitted by HIPAA, our subcontractor business associate agreements, or our business associate agreements with our customers, or if the privacy or security of PHI that we obtain and handle is otherwise compromised, we could be subject to significant liabilities and consequences.

 

We will also need to expend a considerable amount of resources complying with other federal, state and foreign laws and regulations. If we are unable to comply or have not complied with such laws, we could face substantial penalties or other adverse actions.

 

Our operations are subject, directly or indirectly, to other federal, state and foreign laws and regulations that are complex and their application to our specific products, services and relationships may not be clear and may be applied to our business in ways that we do not anticipate. Compliance with laws and regulations will require us to expend considerable resources implementing internal policies and procedures for compliance and ongoing monitoring and will require significant attention of our management team. This will be challenging as an early-stage company with limited financial resources and human capital. These laws include, for example:

 

Title XI of the Social Security Act, commonly referred to as the federal Anti-Kickback Statute, which prohibits the knowing and willful offer, payment, solicitation or receipt of remuneration, directly or indirectly, in cash or in kind, in return for or to reward the referral of patients or arranging for the referral of patients, or in return for the recommendation, arrangement, purchase, lease or order of items or services that are covered, in whole or in part, by a federal healthcare program such as Medicare or Medicaid;

 

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The civil False Claims Act, that forbids the knowing submission or “causing the submission” of false or fraudulent information or the failure to disclose information in connection with the submission and payment of claims for reimbursement to Medicare, Medicaid, federal healthcare programs or private health plans;

 

The federal Physician Self-referral Law, commonly known as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients to providers of “designated health services” with whom the physician or a member of the physician’s immediate family has an ownership interest or compensation arrangement, unless a statutory or regulatory exception applies, and similar state equivalents that may apply regardless of payor; and

 

The U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and the USA PATRIOT Act, which among other things, prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.

 

Many states and foreign governments have adopted similar laws and regulations. Violations of law could subject us to civil or criminal penalties, monetary fines, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations. We could also be required to change or terminate some portions of operations or business or could be disqualified from providing services to healthcare providers doing business with government programs.

 

Risks Related to Our Reliance on Third Parties

 

We will rely on third parties to conduct certain aspects of our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for, or commercialize, any potential product candidates.

 

We will depend upon third parties to conduct certain aspects of our preclinical studies and depend on third parties, including independent investigators, to conduct our clinical trials, under agreements with universities, medical institutions, contract research organizations, or CROs, strategic partners and others. We expect to negotiate budgets and contracts with such third parties, which may result in delays to our development timelines and increased costs.

 

We continue to build our infrastructure and hire personnel necessary to execute our operational plans. We will rely especially heavily on third parties over the course of our clinical trials, and, as a result, may have limited control over the clinical investigators and limited visibility into their day-to-day activities, including with respect to their compliance with the approved clinical protocol. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of clinical trial sponsors, clinical investigators and clinical trial sites. If we or any of these third parties fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to suspend or terminate these trials or perform additional preclinical studies or clinical trials before approving our marketing applications. We cannot be certain that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP requirements and may require a large number of patients.

 

Our failure or any failure by these third parties to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be adversely affected if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

 

Any third parties conducting aspects of our preclinical studies or our clinical trials will not be our employees and, except for remedies that may be available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our preclinical studies and clinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the preclinical or clinical data they obtain is compromised due to the failure to adhere to our protocols or regulatory requirements or for other reasons, our development timelines, including clinical development timelines, may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed or precluded entirely.

 

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The pharmaceutical companies that we partner with may not be successful in receiving regulatory approval for drug indications or may not commercialize their companion therapies for our expected companion diagnostic programs.

 

While we intend to provide our pharmaceutical company partners with new patient populations for such partners’ existing or investigational targeted therapies, there can be no assurances that such partners will be able to obtain regulatory approval for new indications to treat these patient populations or otherwise be successful in commercializing these new therapies. The pharmaceutical companies we partner with:

 

may not meet clinical trial endpoint targets in evaluating efficacy of a targeted therapy in the patient population;

 

may encounter regulatory or production difficulties that could constrain the supply of the companion therapies;

 

may have difficulties gaining acceptance of the use of the companion therapies in the clinical community;

 

may not pursue commercialization of any companion therapies;

 

may elect not to continue or renew commercialization programs based on changes in their strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

 

may not commit sufficient resources to the marketing and distribution of such companion therapies; or

 

may terminate their relationship with us.

 

Any of these factors could adversely affect our commercialization strategy, business, results of operations and financial condition.

 

Our reliance on third parties to formulate and manufacture our drug product will expose us to a number of risks that may delay the development, regulatory approval and commercialization of our drug product or result in higher product costs.

 

We have no direct experience in drug formulation or manufacturing and do not intend to establish our own manufacturing facilities. We lack the resources and expertise to formulate or manufacture our own product candidates. Instead, we will contract with one or more manufacturers to manufacture, supply, store and distribute drug supplies for our clinical trials. If our drug product receives FDA approval, we will rely on one or more third-party contractors to manufacture our drugs. Our anticipated future reliance on a limited number of third-party manufacturers exposes us to risks that, among other things, we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA must approve any replacement contractor; our third-party manufacturers might be unable to formulate and manufacture our drugs in the volume and of the quality required to meet our clinical and/or commercial needs, if any; our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products; and our contract manufacturers may fail to comply with good manufacturing practice and other government regulations and corresponding foreign standards. Each of these risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA, or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenues.

 

Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

 

On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The U.S. PTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition. Depending on future actions by the U.S. Congress, the federal courts, and the U.S. PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. In addition, there may be patent law reforms in foreign jurisdictions that could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents in those foreign jurisdictions.

 

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

 

Our current and future employees may have been previously employed at universities or other biotechnology, diagnostic technology or pharmaceutical companies, including our competitors or potential competitors and strategic partners. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these employees or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.

 

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In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

 

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

 

Any lawsuits relating to infringement of intellectual property rights necessary to defend ourselves or enforce our rights will be costly and time consuming and could be unsuccessful.

 

Because competition in our industry is intense, competitors may infringe or otherwise violate our issued patents, patents of our licensors or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming, and could distract our technical and management personnel from their normal responsibilities. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. We may also elect to enter into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay royalties and other fees that could be significant. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure.

 

Risks Relating to Our Common Stock

 

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

 

Provisions in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors will be responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

 

allow the authorized number of our directors to be changed only by resolution of our board of directors;

 

limit the manner in which stockholders can remove directors from our board of directors;

 

establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;

 

require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

 

limit who may call stockholder meetings;

 

authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

 

require the approval of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws.

 

Moreover, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

 

Any of these provisions of our charter documents or Delaware law could, under certain circumstances, depress the market price of our common stock.

 

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The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock or could subject us to securities litigation.

 

Our stock price may be extremely volatile. The stock market in general and the market for smaller medical technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell our common stock at or above the price they paid for such stock. The market price for our common stock may be influenced by many factors, including:

 

the success of competitive products or technologies;

 

results of planned clinical trials for gedatolisib, as well as our CELsignia HER2 Pathway Activity Test, CELsignia Multi-Pathway Activity Test or other CELsignia tests may develop in the future;

 

regulatory or legal developments in the United States and other countries;

 

developments or disputes concerning patent applications, issued patents or other proprietary rights;

 

the recruitment or departure of key personnel;

 

the level of expenses related to any of our CELsignia tests or clinical development programs;

 

actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

 

operating results that fail to meet expectations of securities analysts that cover our company;

 

variations in our financial results or those of companies that are perceived to be similar to us;

 

changes in the structure of healthcare payment systems;

 

market conditions in the pharmaceutical, biotechnology and medical technology sectors;

 

sales of our stock by us, our insiders and our other stockholders;

 

general economic and market conditions; and

 

the other factors described in this “Risk Factors” section.

 

Additionally, companies that have experienced volatility in the market price of their stock have been subject to an increased incidence of securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

 

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

 

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

 

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting of Section 404(b) of the Sarbanes-Oxley Act;

 

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

reduced disclosure obligations regarding executive compensation; and

 

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

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We have taken advantage of reduced reporting burdens in this report. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

We incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

 

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the continued listing requirements of The Nasdaq Stock Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our ongoing legal and financial compliance costs and will make some activities more time-consuming and costly.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by our management on our internal control over financial reporting. Depending upon our filer status, if we cease to be an emerging growth company, we could also be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm as required by Section 404(b). While we, as of September 30, 2022, concluded that our internal control over financial reporting was effective, we may need to dedicate additional internal resources and engage outside consultants to maintain compliance with Section 404 in the future. Any material weaknesses that we may identify in the future could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Recent Unregistered Sales of Equity Securities

 

None

 

ITEM 3. Defaults Upon Senior Securities

 

None.

 

ITEM 4. Mine Safety Disclosures

 

None.

 

ITEM 5. Other Information

 

None.

 

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ITEM 6. Exhibits

 

EXHIBIT INDEX

 

Exhibit No.   Description
     
2.1   Form of Plan of Conversion (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-1/A filed with the SEC on September 12, 2017).
     
3.1*   Certificate of Incorporation of the Company, as amended.
     
3.2   Bylaws, incorporated by reference from Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 13, 2017.
     
4.1  

Specimen Certificate representing shares of common stock of Celcuity Inc., incorporated by reference from Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A filed September 12, 2017.

     
4.2   Description of Registered Securities (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2020).
     
4.3  

Form of Warrant to Purchase Units of Membership Interest issued by Celcuity LLC to Cedar Point Capital, LLC, as placement agent of membership units and unsecured convertible promissory notes of Celcuity LLC (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 filed with the SEC on August 23, 2017).

     
4.4   Form of Warrant to Purchase Shares of Common Stock issued by Celcuity Inc. in connection with the conversion of 1.25% Unsecured Convertible Promissory Notes (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 25, 2017).
     
4.5   Representative’s Warrant to Purchase Common Stock (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 25, 2017).
     
4.6  

Form of Warrant, incorporated by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 8, 2021.

     
4.7   First Amendment to Representative’s Warrant, dated September 13, 2022, between Celcuity Inc. and Craig Hallum Capital Group, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 14, 2022.
     
4.8  

Equity Grant Agreement, dated April 8, 2021, between the Company and Pfizer, Inc., incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 8, 2021.

     
4.9  

Loan and Security Agreement, dated as of April 8, 2021, by and between the Company and Innovatus Life Sciences Lending Fund I, LP., incorporated by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 11, 2021.

     
4.10   Form of Warrant, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022.
     
4.11   Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Preferred Stock filed May 16, 2022, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022.
     
10.1   Third Amendment to Lease, dated July 27, 2022, by and between Celcuity Inc. and West Glen Development I, LLC, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 29, 2022.
     
10.2   The First Amendment to Loan and Security Agreement, dated August 9, 2022, by and among the Company and Innovatus Life Sciences Lending Fund I, LP, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 11, 2022.
     
31.1*   Certification of Chairman and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2*   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1**   Certification of Chairman and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2**   Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101*  

Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2022, formatted in Inline XBRL: (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Changes in Stockholders’ Equity, (iv) the Condensed Statements of Cash Flows, and (v) the Notes to Condensed Financial Statements.

     
104*   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 

* Filed herewith.
   
** Furnished herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: November 10, 2022   CELCUITY INC.
     
  By /s/ Brian F. Sullivan
    Brian F. Sullivan
    Chairman and Chief Executive Officer
    (Principal Executive Officer)
     
  By /s/ Vicky Hahne
    Vicky Hahne
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

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