We may become exposed to costly and damaging
liability claims, either when testing our product candidates in the clinic or at the commercial stage; and our liability insurance
may not cover all damages from such claims.
We are exposed to potential product liability
and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical
products. Currently we have no products that have been approved for commercial sale; however, our current and future use of product
candidates in clinical studies, and the sale of any approved products in the future, may expose us to liability claims. These claims
might be made by patients that use the product, healthcare providers, pharmaceutical companies or others selling such products.
Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect
the market for our product candidates or any prospects for commercialization of our product candidates.
Although the clinical study process is
designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may
exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical studies or
after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with
any warnings that identify known potential adverse effects and patients who should not use our product candidates.
We purchase liability insurance in connection
with the clinical studies that we undertake in amounts that we consider to be consistent with industry norms. It is possible that
our liabilities could exceed our insurance coverage. We intend to expand our insurance coverage to include the sale of commercial
products if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance coverage
at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful
product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities,
our assets may not be sufficient to cover such claims and our business operations could be impaired.
Should any of the events described above
occur, this could have a material adverse effect on our business, financial condition and results of operations.
We may seek to obtain orphan drug designation
for certain of our product candidates. Orphan drug designation may not ensure that we will enjoy market exclusivity in a particular
market, and if we fail to obtain or maintain orphan drug exclusivity for such product candidates, we may be subject to earlier
competition and our potential revenue will be reduced.
Under the Orphan Drug Act, the FDA may
designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of
fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable
expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the
EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products
which meet the following criteria: a) they are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically
debilitating condition affecting not more than five in 10,000 persons in the European Union or for products that are intended for
the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without
incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment
in developing the drug or biological product; and b) there is no satisfactory method of diagnosis, prevention, or treatment, or,
if such a method exists, the medicine must be of significant benefit to those affected by the condition.
In the United States, orphan drug designation
entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages and
user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation,
the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same
drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority
over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. In the European
Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years
of market exclusivity for the orphan indication following drug or biological product approval, provided that the criteria for orphan
designation are still applicable at the time of the granting of the marketing authorization. This period may be reduced to six
years if at the end of the fifth year, the orphan drug designation criteria are no longer met, including where it is shown that
the product is sufficiently profitable not to justify maintenance of market exclusivity.