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Reata Pharmaceuticals Inc (RETA)
:RETA
Risk Overview Q2, 2023
Risk Distribution
31% Tech & Innovation
28% Finance & Corporate
16% Legal & Regulatory
13% Production
7% Macro & Political
5% Ability to Sell
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Reata Pharmaceuticals Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q2, 2023
Main Risk Category
Tech & Innovation
With 19 Risks
Tech & Innovation
With 19 Risks
Number of Disclosed Risks
61
+5
From last reportS&P 500 Average: 31
61
+5
From last reportS&P 500 Average: 31
Recent Changes
5Risks added
0Risks removed
0Risks changed
Since Jun 2023
5Risks added
0Risks removed
0Risks changed
Since Jun 2023
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of Reata Pharmaceuticals in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 61
Tech & Innovation
Total Risks: 19/61 (31%)Above Sector Average
Innovation / R&D9 | 14.8%
Innovation / R&D - Risk 1
We may be unable to obtain orphan drug designations for some of our product candidates or to maintain the benefits associated with orphan drug designation status, including market exclusivity, which may cause our revenue, if any, to be reduced.Innovation / R&D - Risk 2
We may not be successful in our efforts to identify, license, discover, develop, or commercialize additional product candidates.Although a substantial amount of our effort will focus on the continued clinical testing, potential approval, and commercialization of our existing product candidates, the success of our business also depends upon our ability to identify, license, discover, develop, or commercialize additional product candidates. Research programs to identify new product candidates require substantial technical, financial, and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. Our research programs or licensing efforts may fail to yield additional product candidates for clinical development and commercialization for a number of reasons, including but not limited to the following:
- our research or business development methodology or search criteria and process may be unsuccessful in identifying potential product candidates;- we may not be able or willing to assemble sufficient resources to acquire, discover, or develop additional product candidates;- our product candidates may not succeed in preclinical or clinical testing;- our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval;- competitors may develop alternatives that render our product candidates obsolete or less attractive;- product candidates we develop may be covered by third parties' patents or other exclusive rights;- the market for a product candidate may change during our program so that such a product may become unreasonable to continue to develop;- a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and - a product candidate may not be accepted as safe and effective by patients, the medical community, or third-party payors.
If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, license, discover, develop, or commercialize additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations.
Innovation / R&D - Risk 3
Clinical trials of our product candidates may not uncover all possible AEs that patients may experience.Clinical trials are conducted in representative samples of the potential patient population, which may have significant variability. By design, clinical trials are based on a limited number of subjects and are of limited duration of exposure to the product, to determine whether the product candidate demonstrates the substantial evidence of efficacy and safety necessary to obtain regulatory approval. As with the results of any statistical sampling, we cannot be sure that all side effects of our product candidates may be uncovered. It may be the case that only with a significantly larger number of patients exposed to the product candidate for a longer duration may a more complete safety profile be identified. Further, even larger clinical trials may not identify rare SAEs, and the duration of such studies may not be sufficient to identify when those events may occur. Other products have been approved by the regulatory authorities for which safety concerns have been uncovered following approval. Such safety concerns have led to labeling changes, restrictions on distribution through use of a REMS, or withdrawal of products from the market, and any of our product candidates may be subject to similar risks.
Although to date we have not seen evidence of significant safety concerns with our product candidates in the patient populations currently undergoing clinical trials with omaveloxolone and bardoxolone beyond those seen in BEACON, patients treated with our products, if approved, may experience previously unreported adverse reactions, and it is possible that the FDA or other regulatory authorities may ask for additional safety data as a condition of, or in connection with, our efforts to obtain approval of our product candidates. If safety problems occur or are identified after our products, if any, reach the market, we may make the decision or be required by regulatory authorities to amend the labeling of our products, recall our products, or even withdraw approval for our products.
Innovation / R&D - Risk 4
Our product candidates may cause or have attributed to them undesirable side effects or have other properties that delay or prevent their regulatory approval or limit their commercial potential.Undesirable side effects caused by our product candidates or that may be identified as related to our product candidates by investigators conducting our clinical trials or even related to competing products in development that utilize a similar mechanism of action or act through a similar biological disease pathway could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in the delay or denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. AEs and SAEs that emerge during treatment with our product candidates or other compounds acting through similar biological pathways may be deemed to be related to our product candidate. This may require longer and more extensive Phase 3 clinical development, or regulatory authorities may increase the amount of data and information required to approve, market, or maintain our product candidates and could result in negative labeling or a restrictive REMS. This may also result in an inability to obtain approval of our product candidates.
The occurrence of any or all of these events may cause the development of our product candidates to be delayed or terminated, which could materially and adversely affect our business and prospects. Our product candidates have in the past and may in the future be deemed to cause AEs and SAEs.
Innovation / R&D - Risk 5
We may face delays in completing our ongoing or planned clinical trials due to a number of factors, including failure to enroll sufficient number of patients in our clinical trials in a timely manner, or these studies may not be completed at all.Clinical trials can be delayed, suspended, or terminated for a variety of reasons, including delay or failure to:
- reach timely agreement on acceptable terms with prospective contract research organization (CROs) and clinical trial sites;- manufacture sufficient quantities of product candidate with acceptable quality attributes for use in clinical trials;- obtain required regulatory or IRB approval or guidance;- maintain clinical sites in compliance with clinical trial protocols and GCP;- initiate or add a sufficient number of clinical trial sites;- recruit, enroll, and retain patients through the completion of the trial; and - address any physician or patient safety concerns that arise during the course of the trial.
We experienced trial enrollment delays in our Phase 3 ADPKD trial, and a termination of a Phase 3 trial in pulmonary arterial hypertension associated with connective tissue disease (CTD-PAH), due to the COVID-19 pandemic.
We recently have experienced and may continue to experience slowing of patient enrollment or higher patient discontinuations in our ongoing Phase 3 FALCON study and long-term extension EAGLE study, due to the safety concerns raised during the FDA Advisory Committee Meeting and based on the CRL received for our NDA for bardoxolone for the treatment of patients with CKD caused by Alport Syndrome.
In addition, we could encounter delays if a clinical trial is suspended or terminated by us, by the relevant IRBs at the sites at which such studies are being conducted, or by the FDA or other regulatory authorities. A suspension or termination of clinical trials, including imposition of a clinical hold, may result from any number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities, unforeseen safety issues or adverse side effects, changes in laws or regulations, or a principal investigator's determination that an SAE could be related to our product candidates. Any delays in completing our clinical trials will increase the costs of the trial, delay or prevent the product candidate's development and approval, and jeopardize our ability to commence marketing and generate revenue. Any of these occurrences may materially and adversely harm our business and operations and prospects.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the rate at which we can recruit and enroll patients in testing our product candidates. Patients may be unwilling to participate in clinical trials of our product candidates for a variety of reasons, some of which may be beyond our control, including:
- severity of the disease under investigation;- real or perceived availability of alternative treatments;- size and nature of the patient population;- eligibility criteria for and design of the trial in question;- perceived risks and benefits of the product candidate under study;- ongoing clinical trials of potentially competitive agents;- physicians' and patients' perceptions as to the potential advantages of our product candidates being studied in relation to available therapies or other products under development;- our CROs' and our trial sites' efforts to facilitate timely enrollment in clinical trials;- patient referral practices of physicians; and - the need to monitor patients and collect patient data adequately during and after treatment.
Patients may be unwilling to participate in our clinical trials for bardoxolone due to the SAEs or AEs we previously detected in a subset of patients with advanced T2D CKD, and patients currently controlling their disease with standard of care may be reluctant to participate in a clinical trial with an investigational drug. Likewise, patients may be unwilling to participate in our clinical trials for omaveloxolone and bardoxolone due to unforeseen factors beyond our control. Most of the conditions that we are studying are rare diseases, and enrollment in clinical trials may be limited by the lack of suitable patients with these diseases. We may not be able to successfully initiate or continue clinical trials if we cannot rapidly enroll a sufficient number of eligible patients to participate in the clinical trials required by regulatory agencies. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit, or terminate on-going or planned clinical trials, any of which could have a material adverse effect on our business and prospects.
Innovation / R&D - Risk 6
Success in earlier Phase 1 and 2 clinical trials may not be indicative of the results that may be obtained in larger registrational clinical trials, which may delay or prevent obtaining regulatory approval.Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Success in preclinical studies and early clinical trials may not be predictive of results in larger clinical trials, and successful results from early or small clinical trials may not be replicated or show as favorable an outcome in larger clinical trials, even if successful. For example, we have previously endeavored to develop bardoxolone for the treatment of T2D CKD. While bardoxolone appeared to be safe and effective throughout Phase 2 clinical development for kidney disease, we encountered heart failure related to fluid overload during the pivotal Phase 3 trial, known as BEACON, that resulted in the termination of the T2D CKD program. Heart failure appeared to occur at a very low rate in only a particular type of patient studied during BEACON, which was not observed during Phase 2. Our other Phase 2 clinical programs with omaveloxolone and bardoxolone have involved a relatively small number of patients exposed for a relatively short period of time compared to the Phase 3 clinical trials that we may need to conduct. Accordingly, the Phase 2 clinical trials that we have conducted may not have uncovered safety issues, even if they exist. The biochemical pathways that we believe are affected by omaveloxolone and bardoxolone are implicated in a variety of biological processes and disease conditions, and it is possible that the use of our product candidates to treat larger numbers of patients will demonstrate unanticipated AEs, including possible drug-drug interactions, which may negatively affect their safety profile.
We have submitted an NDA for omaveloxolone in patients with FA, but the there can be no assurance that the NDA will be approved. The FDA had originally indicated that we must conduct another clinical trial of omaveloxolone in patients with FA prior to seeking approval, prior to indicating thereafter that an NDA filing would be an acceptable next step in the regulatory process. However, there can be no assurance that the FDA will not determine that another clinical trial must be conducted. Furthermore, the FDA could determine that an accelerated approval regulatory pathway for omaveloxolone in patients with FA is the most appropriate approval pathway, which will require us to conduct another clinical trial as a post-marketing requirement. The results of this trial may not be sufficient to support or maintain approval of omaveloxolone for treatment of patients with FA.
We have also submitted an MAA for omaveloxolone in patients with FA. As with the FDA, there can be no assurance that the MAA will be approved by the EMA, and, even if approved, the approval could be a conditional approval which would require that we agree to conduct a post-approval confirmatory clinical trial. We have had limited or no discussions of these trial data with other global regulatory health authorities, and these regulatory bodies may not concur that these studies would be adequate to support a marketing application or that the benefits would translate to approvable trial endpoints or be reflected on our product label.
In addition, we cannot assure that any potential advantages that we believe bardoxolone may have for our current clinical programs will be substantiated by each of our registrational clinical trials or that we will be able to include a discussion of any advantages in our labeling should we obtain approval. We cannot assure that our previous data in our Phase 2 and Phase 3 trials and our trials in T2D CKD may predict effects in our registrational trial in patients with CKD caused by ADPKD or other forms of CKD. Additionally, we have discussed CKD caused by Alport syndrome trial data with the FDA, EMA and the PMDA and ADPKD trial data with the FDA. In further discussions with the FDA of the two-year results of our CARDINAL Phase 3 trial in patients with CKD caused by Alport syndrome, the FDA has stated that, in order to continue to pursue approval of bardoxolone in patients with CKD caused by Alport syndrome, we will be required to conduct another pre-approval clinical trial of bardoxolone in patients with CKD caused by Alport syndrome. The EMA has determined that our MAA for bardoxolone in patients with CKD caused by Alport syndrome is not approvable, as a consequence of which we have withdrawn the MAA. Additionally, we have received scientific advice from the EMA that the proposed Phase 3 clinical study cannot be used as a standalone study to support the indication of bardoxolone in ADPKD. The EMA recommended that we evaluate, in addition to the traditional endpoints, the effect of bardoxolone on total kidney volume in these patients and requested that we seek additional guidance on our program. We have had limited or no discussions of these trial data with other global regulatory health authorities, and these regulatory bodies may not concur that these studies would be adequate to support a marketing application or that the benefits would translate to approvable trial endpoints or be reflected on our product label.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, or after achieving positive results in pivotal trials, and we have had, and may face, similar setbacks. In addition, the patient populations under investigation with omaveloxolone and bardoxolone have many co-morbidities that may cause severe illness or death, which may be attributed to omaveloxolone and bardoxolone in a manner that negatively affects the safety profile of our product candidate. If the results of our ongoing or future clinical trials for omaveloxolone and bardoxolone are inconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance, or if there are unanticipated safety concerns or AEs that emerge during clinical trials, we may be prevented from or delayed in obtaining marketing approval, and even if we obtain marketing approval, any sales may suffer.
Innovation / R&D - Risk 7
Other than the submission of an NDA with the FDA and an MAA with the EMA for bardoxolone in patients with CKD caused by Alport syndrome and for omaveloxolone in patients with FA, we have limited experience in submitting an NDA, MAA, or other marketing applications and may be unable to do so efficiently or at all for omaveloxolone, bardoxolone, or any product candidate we are developing or may develop in the future.We have conducted, or are currently conducting, Phase 2 and Phase 3 trials for omaveloxolone and bardoxolone, and we may need to conduct additional Phase 2 trials before initiating additional Phase 3 clinical trials with omaveloxolone and bardoxolone. The conduct of Phase 3 trials and the submission of an NDA, MAA, or other marketing application is a complicated process. We have limited experience in preparing, submitting, and prosecuting regulatory filings, and, other than the submission of an NDA with the FDA and an MAA with the EMA for bardoxolone in patients with CKD caused by Alport syndrome and for omaveloxolone in patients with FA, we have not previously submitted an NDA, MAA, or other marketing application. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials and other requirements in a way that leads to the submission of an NDA, MAA, or other marketing application and approval of any product candidate we are developing. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Risks related to the successful execution of our trials or successful filing of the NDA exist not only because of the complexity of the process, but also because of our lack of previous experience as an organization.
Innovation / R&D - Risk 8
The clinical and commercial success of omaveloxolone and bardoxolone will depend on a number of factors, many of which are beyond our control.The clinical and commercial success of omaveloxolone and bardoxolone will depend on a number of factors, including the following, many of which are beyond our control:
- the timely initiation, continuation, and completion of our Phase 2 and Phase 3 clinical trials for omaveloxolone and bardoxolone, which will depend substantially upon requirements for such trials imposed by the FDA and other regulatory agencies and bodies;- our ability to demonstrate the safety and efficacy of our product candidates to the satisfaction of the relevant regulatory authorities;- whether the FDA or other regulatory authorities will accept NDAs for approval of our product candidates;- whether we are required by the FDA or other regulatory authorities to conduct additional clinical trials, and the scope and nature of such clinical trials, prior to approval to market our products, and whether we are required to agree to post-marketing approval commitments or requirements in connection with the approval of a drug product;- the timely receipt of necessary marketing approvals from the FDA and foreign regulatory authorities, including pricing and reimbursement determinations;- the ability to successfully commercialize our product candidates for marketing and sale, if approved by the FDA or foreign regulatory authorities, whether alone or in collaboration with others;- our ability and the ability of third-party manufacturers to manufacture the quantities of our product candidates with quality attributes necessary to meet regulatory requirements and at a scale and yield sufficient to meet anticipated demand at a cost that allows us to achieve profitability;- our success in educating health care providers and patients about the benefits, risks, administration, and use of our product candidates, if approved;- acceptance of our product candidates, if approved, as safe and effective by patients and the healthcare community;- the achievement and maintenance of compliance with all regulatory requirements applicable to our product candidates, our third-party manufacturers, and our internal operations;- the maintenance of an acceptable safety profile of our products, if any, following any approval;- the availability, perceived advantages, relative cost, relative safety, and relative efficacy of alternative and competitive treatments;- our ability to provide approved product with a convenient and patient-friendly capsule configuration;- our ability to successfully enforce our intellectual property rights for our product candidates and against the products of potential competitors; and - our ability to avoid or succeed in third-party patent interference or patent infringement claims.
We cannot assure you that we will ever be able to achieve profitability through the sale of, or royalties from, our product candidates. If we or our collaborators are not successful in obtaining approval for and commercializing our product candidates, or are delayed in completing those efforts, our business and operations would be adversely affected.
Innovation / R&D - Risk 9
We are substantially dependent on the success of our lead product candidates, omaveloxolone and bardoxolone. We have received a CRL from the FDA with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome.To date, we have invested a substantial portion of our efforts and financial resources in the research and development of omaveloxolone and bardoxolone, which are currently our lead product candidates. These are our lead product candidates that have advanced into registrational clinical development, but there can be no assurance that further clinical trials will not be required, or that regulatory delays will not be incurred. It could be years before the trials required for their approval are completed, if ever. We received a CRL from the FDA with respect to its review of our NDA for bardoxolone in the treatment of patients with CKD caused by Alport syndrome and have withdrawn our Alport syndrome MAA in the EU. We will continue to work with the FDA and EMA to confirm our next steps on our Alport syndrome program. However, in any event, the development program for bardoxolone has been substantially delayed, and there is a high degree of risk that bardoxolone will not be approved in the future for any indication in the United States or elsewhere. Furthermore, these negative outcomes regarding bardoxolone may cause the FDA and regulators in other jurisdictions, such as the EMA, to be skeptical in their future review of other indications for bardoxolone or other drug products which we develop and for which we submit for approval. Except for omaveloxolone in the treatment of patients with FA, our other clinical and preclinical programs are less advanced in development and may never enter into registrational clinical trials. Although we believe that Nrf2 activators have many potential clinical applications, we may fail to pursue successful indications and may miss opportunities for development in other indications as a result of limited resources. We also may fail to focus our efforts by attempting to develop single product candidates in multiple indications and formulations without success.
Our near-term prospects are dependent upon successful interactions with global regulatory authorities and on successful commercialization of omaveloxolone and bardoxolone. We may need to complete additional or larger and more extensive controlled clinical trials to validate the results observed in clinical trials to date to continue further development and seek regulatory approval of these product candidates. We have announced positive results from our
MOXIe trial of omaveloxolone in patients with FA. We have submitted an NDA for omaveloxolone in patients with FA. However, there can be no assurance that the NDA will be approved by the FDA. Furthermore, there is a risk that the FDA will not agree that the data submitted in the NDA support full approval of the NDA; in this event, the FDA could determine that the data support accelerated approval under Subpart H or do not support any type of approval. An accelerated approval would require that we agree to conduct a post-approval confirmatory clinical trial. In addition, although there may be many potentially promising indications beyond those we are currently investigating, we are still exploring indications for which further development of, and investment for, our lead product candidates may be appropriate. Accordingly, the costs and time to complete development and the related risks are currently unknown. We have also submitted an MAA for omaveloxolone in patients with FA. As with the FDA, there can be no assurance that the MAA will be approved by the EMA, and, even if approved, the approval could be a conditional approval which would require that we agree to conduct a post-approval confirmatory clinical trial.
Trade Secrets9 | 14.8%
Trade Secrets - Risk 1
If we fail to comply with our obligations in the agreements under which we license intellectual property and other rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.Trade Secrets - Risk 2
If we do not obtain additional protection under the Hatch-Waxman Act and similar foreign legislation extending the terms of our patents and obtaining data exclusivity for our product candidates, our business may be materially harmed.Depending upon the timing, duration, and specifics of FDA regulatory approval for our product candidates, one or more of our United States patents may be eligible for limited patent term extension under the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. Patent term extension, however, is limited to a maximum of five years and cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval by the FDA. In addition, only one patent applicable to an approved product is eligible for the extension.
The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. It takes at least six months to obtain approval of the application for patent term extension. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened, our competitors may obtain earlier approval of competing products, and our ability to generate revenue could be materially adversely affected.
Trade Secrets - Risk 3
Intellectual property rights do not prevent all potential threats to competitive advantages we may have.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and intellectual property rights may not adequately protect our business or permit us to maintain our competitive advantage.
The following examples are illustrative:
- Others may be able to make compounds that are the same as or similar to our current or future product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed;- We or any of our licensors or collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;- We or any of our licensors or collaborators might not have been the first to file patent applications covering certain of our inventions;- Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;- The prosecution of our pending patent applications may not result in granted patents;- Granted patents that we own or have licensed may not cover our products or may be held not infringed, invalid, or unenforceable, as a result of legal challenges by our competitors;- With respect to granted patents that we own or have licensed, especially patents that we either acquire or in-license, if certain information was withheld from or misrepresented to the patent examiner, such patents might be held to be unenforceable;- Patent protection on our product candidates may expire before we are able to develop and commercialize the product or before we are able to recover our investment in the product;- Our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for such activities, as well as in countries in which we do not have patent rights, and may then use the information learned from such activities to develop competitive products for sale in markets where we intend to market our product candidates;- We may not develop additional proprietary technologies that are patentable;- The patents of others may have a material adverse effect on our business; and - We may choose not to file a patent application for certain technologies, trade secrets, or know-how, and a third party may subsequently file a patent covering such intellectual property.
Additionally, competitors could enter the market with generic versions of our product candidates, which may adversely affect sales of our product candidates, if approved. Under the Hatch-Waxman Act, a pharmaceutical manufacturer may submit an ANDA seeking approval of a generic copy of an approved innovator product. A manufacturer may also submit an NDA under Section 505(b)(2) of the FFDCA that references the FDA's finding of safety and effectiveness of a previously approved drug. An NDA product submitted under Section 505(b)(2) (a 505(b)(2) NDA) may be a new or improved version of the original innovator product. Innovative small molecule drugs may be eligible for certain periods of regulatory exclusivity (e.g., five years for new chemical entities, three years for changes to an approved drug requiring a new clinical trial, and seven years for orphan drugs), which precludes FDA approval of, or in some circumstances, the FDA filing and review of, an ANDA or 505(b)(2) NDA relying on the FDA's finding of safety and effectiveness for the innovative drug. In addition to the benefits of regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation, or an approved use of the drug, which would be listed with the product in the FDA publication, "Approved Drug Products with Therapeutic Equivalence Evaluations," also known as the Orange Book. If there are patents listed in the Orange Book, a generic applicant that seeks to market its product before expiration of the patents listed in the Orange Book must include in the ANDA or 505(b)(2) NDA what is known as a "Paragraph IV certification," challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Notice of the certification must also be given to the innovator and, if within 45 days of receiving notice the innovator sues to protect its patents, approval of the ANDA will be stayed for 30 months or a longer or shorter period determined by the court.
Innovator pharmaceutical patents are particularly vulnerable in the complex milieu of administrative, regulatory, and legal challenges. Specifically, a patent that might become or already is the subject of litigation related to Paragraph IV certification can be challenged by any party, such as a generic competitor, at the USPTO in an IPR. If an IPR is instituted by the Patent Trial and Appeal Board (PTAB) at the USPTO, a court could stay the litigation pending a decision by the USPTO in the IPR because the decision could affect substantive and procedural aspects at trial. Under these circumstances, however, and some litigation to date indicates, a court may decline to toll the 30-month stay for ANDA approval when staying the litigation. Thus, for instance, a decision by the PTAB not reversed on any appeal and invalidating all relevant claims of a patent-in-suit, could prompt a generic competitor to motion for lifting of the litigation stay, and thereafter motion for summary judgement in the litigation before expiration of the 30-month stay.
Accordingly, if our product candidates are approved, competitors could file ANDAs for generic versions of our product candidates that reference our product candidates. If there are patents listed for our product candidates in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict whether any patents issuing from our pending patent applications will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.
We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license. Moreover, if any patents that are granted and listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, the affected product could more immediately face generic competition and its sales would likely decline materially. Should sales decline, we may have to write off a portion or all of the intangible assets associated with the affected product and our results of operations and cash flows could be materially and adversely affected.
Trade Secrets - Risk 4
The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States, and we may encounter significant problems in securing and defending our intellectual property rights outside the United States.Many companies have encountered significant problems in protecting and defending intellectual property rights in certain countries. The legal systems of certain countries, particularly certain developing countries, do not always favor the enforcement of patents, trade secrets, and other intellectual property rights, particularly those relating to pharmaceutical products, which could make it difficult for us to stop infringement of our patents, misappropriation of our trade secrets, or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our intellectual property rights in foreign countries could result in substantial costs, divert our efforts and attention from other aspects of our business, and put our patents in these territories at risk of being invalidated or interpreted narrowly, or our patent applications at risk of not being granted, and could provoke third parties to assert claims against us. We may not prevail in all legal or other proceedings that we may initiate and, if we were to prevail, the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Trade Secrets - Risk 5
We have an extensive worldwide patent portfolio. The cost of maintaining our patent protection is high and requires continuous review and compliance. We may not be able to effectively maintain our intellectual property position throughout the global market.The USPTO and foreign patent offices require maintenance fees and payments as well as continued compliance with procedural and documentary requirements. Non-compliance may result in abandonment or lapse of the subject patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance may result in reduced royalty payments for lack of patent coverage in a particular jurisdiction from our collaborators or may result in increased competition, either of which could have a material adverse effect on our business.
We have made, and will continue to make, certain strategic decisions in balancing costs and the potential protection afforded by the patent laws of certain countries. As a result, we may not be able to prevent third parties from practicing our inventions in all countries throughout the world or from selling or importing products made using our inventions in and into the United States or other countries. Third parties may use our technologies in territories in which we have not obtained patent protection to develop their own products and, further, may infringe our patents in territories which provide ineffective or inadequate enforcement mechanisms, even if we have patent protection. Such third-party products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Trade Secrets - Risk 6
We may be subject to claims asserting that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual's current or former employer. Litigation may be necessary to defend against these claims. If we fail in 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 defending against such claims, litigation could result in substantial costs and be a distraction to our business.
In addition, while we require our employees or contractors who may be involved in the conception or 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, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
Trade Secrets - Risk 7
Our reliance on third parties and our agreements with collaborators require us to share our trade secrets. Confidentiality agreements may not prevent a competitor from discovering, misappropriating, or disclosing them.Our reliance on third-party contractors to develop and manufacture our product candidates is based upon agreements that limit the rights of the third parties to use or disclose our confidential information, including our trade secrets and know-how. Despite the contractual provisions, the need to share trade secrets and other confidential information increases the risk that such trade secrets and information are disclosed or used, even if unintentionally, in violation of these agreements. In the highly competitive markets in which our product candidates are expected to compete, protecting our trade secrets, including our strategies for addressing competing products, is imperative, and any unauthorized use or disclosure could impair our competitive position and may have a material adverse effect on our business and operations.
In addition, our collaborators are larger, more complex organizations than ours, and the risk of inadvertent disclosure of our proprietary information may be increased despite their internal procedures and the contractual obligations in place with our collaborators. Despite our efforts to protect our trade secrets and other confidential information, a competitor's discovery of such trade secrets and information could impair our competitive position and have a material adverse effect on our business.
Trade Secrets - Risk 8
We may be involved in intellectual property disputes with third parties and competitors that could be costly and time consuming and negatively affect our competitive position.Our commercial success may depend on our avoiding infringement of the patents and other proprietary rights of third parties as well as on enforcing our patents and other proprietary rights against third parties. Pharmaceutical and biotechnology intellectual property disputes are characterized by complex, lengthy, and expensive litigation over patents and other intellectual property rights. We may initiate, become a party to, or be threatened with future litigation or other proceedings regarding intellectual property rights with respect to our product candidates and competing products.
As our product candidates advance toward commercialization, we or our collaborators may be subject to intellectual property infringement or misappropriation claims from third parties. We attempt to ensure that our product candidates do not infringe third-party patents and other proprietary rights. However, the patent landscape in competitive product areas is highly complex, and there may be patents of third parties of which we are unaware that may result in claims of infringement. Accordingly, there can be no assurance that our product candidates do not infringe proprietary rights of third parties, and parties making claims against us may seek and obtain injunctive or other equitable relief, which could potentially block further efforts to develop and commercialize our product candidates. Any litigation involving defense against claims of infringement, regardless of the merit of such claims, would involve substantial litigation expense and would be a substantial diversion of management time.
If we succeed in commercializing one or more of our product candidates under United States law, the approved product would likely be considered a NCE and, if so, would benefit from a period of data exclusivity in which no competitor could receive marketing approval for a product containing the same active pharmaceutical ingredient. Similar laws provide various periods of data exclusivity for new chemical entities in Europe and certain other foreign jurisdictions. Once the applicable period of regulatory exclusivity has expired, competitors may seek to market generic versions of our products even though issued patents protecting those products are still in force. In the event that a generic competitor seeks such approval, it may be necessary for us to take legal action to enforce our patents. In addition, the generic competitor may seek to invalidate our patents or to obtain a ruling of non-infringement in a court proceeding or by challenging our patents through interference, reexamination, IPR, and post-grant review proceedings before the USPTO or through other comparable proceedings, such as oppositions or invalidation proceedings, before foreign patent offices. Any such resulting litigation or administrative proceedings would involve substantial expense, would be a substantial diversion of management time, and could create uncertainty regarding future sales of our products. Findings of invalidity or non-infringement with respect to our patents could have a material adverse effect on our business. Moreover, third parties, including generic competitors or others, may initiate judicial or administrative proceedings in the United States and foreign jurisdictions to challenge our patents from time to time, which could have a material adverse effect on our business.
We may consider initiating administrative proceedings and other means for challenging third-party patents and patent applications. Third parties may also challenge our patents and patent applications, through interference, reexamination, IPR, and post-grant review proceedings before the USPTO, or through other comparable proceedings, such as oppositions or invalidation proceedings, before foreign patent offices. An unfavorable outcome in any such challenge could result in loss of patent protection for our technology or require us to cease using the related technology and to attempt to license rights to it from the prevailing third party, which may not be available on commercially reasonable terms, if at all, in which case our business could be harmed. Even if we are successful, participation in administrative proceedings before the USPTO or a foreign patent office may result in substantial costs and time on the part of our management and other employees.
Furthermore, there is a risk that any public announcements concerning the existence, status, or outcomes of intellectual property litigation or administrative proceedings may adversely affect the price of our stock. If securities analysts or our investors interpret such existence, status, or outcomes as negative or otherwise creating uncertainty, our Class A common stock price may be adversely affected.
Trade Secrets - Risk 9
We rely on, and may not have, adequate protection of our proprietary technologies to compete effectively in our market.We rely upon a combination of intellectual property rights, patents, trademarks, trade secrets, and contractual arrangements to protect the intellectual property related to our technologies. We will only be able to protect our products and proprietary information and technology by preventing unauthorized use by third parties to the extent that our patents, trademarks, trade secrets, and contractual position allow us to do so. Any disclosure to or misappropriation by third parties of our trade secrets or confidential information could compromise our competitive position. Moreover, we may in the future be involved in legal or administrative proceedings involving our intellectual property that are initiated by us or by third parties. As our product candidates continue in development, third parties may infringe or misappropriate, or attempt to challenge the validity and enforceability of, our patents, trademarks, trade secrets, and proprietary information and technologies. In addition, third parties may accuse our product candidates of infringement of third-party intellectual property. Any of these proceedings could result in significant costs and commitment of management time and attention.
We also may in the future be involved in initiating legal or administrative proceedings involving our intellectual property and the product candidates of our competitors. These proceedings can result in significant costs and commitment of management time and attention, and there can be no assurance that our efforts would be successful in preventing or limiting the ability of our competitors to market competing products.
Composition-of-matter patents relating to the active pharmaceutical ingredient are generally considered to be the strongest form of patent protection for pharmaceutical products, as such patents provide protection not limited to a particular method of use or formulation. Method-of-use patents protect the use of a product for the specified purpose(s) or indication(s), and do not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Omaveloxolone, cemdomespib, and bardoxolone are protected by granted United States and foreign patents claiming compositions of matter and methods of use. Each compound is the subject of pending United States and foreign patent applications claiming compositions of matter or methods of use. We rely on a combination of these and other types of patents to protect our product candidates, and there can be no assurance that our intellectual property will create and sustain the competitive position of our product candidates. We may choose not to file patent applications to protect certain technologies and may also choose to allow certain patents or patent applications to lapse or expire based on cost-benefit considerations.
Pharmaceutical product patents involve highly complex legal and scientific questions, which can result in uncertainties. For example, patent laws vary from country to country and may change over time. In addition, the interpretation of patent law by the court systems in a country may change over time. This variability adds uncertainty with respect to the validity and enforceability of our patents and the likelihood that our patent applications will result in granted patents. Pending patent applications that we own or license, and new applications filed by us or our licensors, may fail to result in issued patents. Third parties may challenge the validity or enforceability of our issued patents or patents resulting from our pending or future applications, which may result in such patents being narrowed, invalidated, or held unenforceable. Even if our patents and patent applications are not challenged by third parties, those patents and patent applications may not prevent others from designing around our claims and may not otherwise adequately protect our product candidates. If the breadth or strength of protection provided by the patents and patent applications that we hold with respect to our product candidates is threatened, then competitors with significantly greater resources could threaten our ability to commercialize our product candidates.
Discoveries are generally published in the scientific literature well after their actual development. Patent applications in the United States and other countries are typically not published until 18 months after filing and in some cases are never published. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned and licensed patents or patent applications, or that we or our licensors were the first to file for patent protection covering such inventions. Subject to meeting other requirements for patentability, for United States patent applications filed prior to March 16, 2013, the first to invent the claimed invention is entitled to receive patent protection for that invention, while outside the United States the first to file a patent application encompassing the invention is entitled to patent protection for the invention.
The United States subsequently implemented a "first inventor to file" system under the Leahy-Smith America Invents Act (AIA), effective March 16, 2013. Effects of this system and other elements of the AIA are evolving, especially as the federal courts develop a body of case law around the statutory provisions of the AIA. Creating further uncertainty, such provisions include procedures for challenging issued patents and pending patent applications. We may become involved in opposition, inter partes review (IPR), or interference proceedings challenging our patents and patent applications or the patents and patent applications of others; the outcomes of any such proceedings are highly uncertain. For example, an unfavorable outcome could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology and compete directly with us, or result in our inability to manufacture, develop, or commercialize our product candidates without infringing the patent rights of others.
In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how, information, or technology that is not covered by our patents. Although our agreements require all of our employees to assign their inventions to us, and we require all of our employees, consultants, advisors, and any third parties who have access to our trade secrets, proprietary know-how, and other confidential information and technology to enter into appropriate confidentiality agreements, we cannot be certain that our trade secrets, proprietary know-how, and other confidential information and technology will not be subject to unauthorized disclosure or that our competitors will not otherwise gain access to or independently develop substantially equivalent trade secrets, proprietary know-how, and other information and technology. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property globally. If we are unable to prevent unauthorized disclosure of our intellectual property related to our product candidates and technology to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business and operations.
Cyber Security1 | 1.6%
Cyber Security - Risk 1
Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.Finance & Corporate
Total Risks: 17/61 (28%)Above Sector Average
Share Price & Shareholder Rights6 | 9.8%
Share Price & Shareholder Rights - Risk 1
Our amended and restated certificate of incorporation designates the state or federal courts located in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.Share Price & Shareholder Rights - Risk 2
Provisions in our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current directors or management.Our amended and restated certificate of incorporation and second amended and restated bylaws contain provisions that may have the effect of discouraging, delaying, or preventing a change in control or changes in our management. These provisions could also limit the price that investors might be willing to pay in the future for shares of our Class A common stock, thereby depressing its market price. In addition, because our board of directors is responsible for appointing the members of our executive 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:
- provide for a dual class common stock structure, as a result of which our current Class B common stock holders, who also own a substantial number of shares of Class A common stock, will have control over matters requiring stockholder approval, including significant corporate transactions such as a merger;- authorize "blank check" preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock;- create a classified board of directors whose members serve staggered three-year terms;- specify that special meetings of our stockholders can be called only by our board of directors pursuant to a resolution adopted by a majority of the total number of directors;- prohibit stockholder action by written consent;- establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;- provide that our directors may be removed prior to the end of their term only for cause;- provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;- require a supermajority vote of the holders of our common stock or the majority vote of our board of directors to amend our bylaws; and - require a supermajority vote of the holders of our common stock to amend the classification of our board of directors into three classes and to amend certain other provisions of our amended and restated certificate of incorporation.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.
Moreover, because we are incorporated in Delaware, we are governed by certain anti-takeover provisions under Delaware law which may discourage, delay, or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who acquires in excess of 15% of our outstanding voting power without the prior approval of our board of directors 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 power, unless the merger or combination is approved in a prescribed manner.
Any provision of our amended and restated certificate of incorporation, our second amended and restated bylaws, or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.
Share Price & Shareholder Rights - Risk 3
A significant portion of our total outstanding shares may be sold, which could cause the market price of our Class A common stock to drop significantly and impede our ability to raise future capital, even if our business is doing well.As of February 20, 2023, we have 4,625,445 shares of Class B common stock outstanding representing 14.1% of our outstanding shares of common stock, all of which are currently restricted as a result of securities laws, but may be converted into shares of Class A common stock and sold, subject to any applicable volume limitations under federal securities laws with respect to affiliate sales, in the near future.
Additionally, our Seventh Amended and Restated Registration Rights Agreement dated as of November 10, 2010, entered into with certain of our investors in connection with our Series A through H preferred stock financings, provides certain registration rights for 4,423,719 shares of Class B common stock and 1,898,576 shares of Class A common stock as of February 20, 2023. Once we register these shares, they can be freely sold in the public market.
In addition, as of February 20, 2023, there are approximately 4,135,816 and 1,898,576 shares subject to outstanding options to purchase, and RSUs representing, shares of Class B and Class A common stock, respectively, that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements and Rule 144 under the Securities Act. We have registered all shares of Class A common stock or Class B common stock that we issue under our employee benefit plans, including our Second Amended and Restated Long Term Incentive Plan (the LTIP Plan). Once they are issued in accordance with the terms of the plans, they can be freely sold in the public market upon issuance, subject to the restrictions imposed on our affiliates under Rule 144 and, in the case of Class B common stock, conversion to Class A common stock.
Sales of a substantial number of shares of our Class A common stock in the public market, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A common stock. If the market price of our Class A common stock is low, we may not be able to raise additional equity in amounts sufficient to fund our business plans or we may issue significant additional shares to raise funds, resulting in significant dilution to our stockholders.
Share Price & Shareholder Rights - Risk 4
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.The trading market for our Class A common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us downgrade 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 in turn could cause our stock price or trading volume to decline.
Share Price & Shareholder Rights - Risk 5
The market price of our Class A common stock may be highly volatile, which may materially and adversely affect the value of your investment in our Class A common stock.Although our Class A common stock is listed on The Nasdaq Global Market, an active trading market for our Class A common stock may not be sustained, and you may not be able to sell your shares quickly.
In November 2019, we closed a follow-on underwritten public offering of 2,760,000 shares of our Class A common stock at $183.00 per share. In December 2020, we closed a follow-on underwritten public offering of 2,000,000 shares of our Class A common stock at $140.85 per share. Since our initial public offering (IPO) in May 2016 through February 20, 2023, our closing stock price has reached a low of $13.07 and a high of $247.74. Between January 3, 2022, and December 31, 2022, the closing price of shares of our Class A common stock increased by $10.67 per share.
In general, pharmaceutical, biotechnology, and other life sciences company stocks have been highly volatile in the current market. The volatility of pharmaceutical, biotechnology, and other life sciences company stocks is sometimes unrelated to the operating performance of particular companies, and stocks often respond to trends and perceptions rather than financial performance. In particular, the market price of shares of our Class A common stock could be subject to wide fluctuations in response to the following factors:
- results of clinical trials of our product candidates;- the timing of the release of results of and regulatory updates regarding our clinical trials, which we experienced in February 2022 in connection with the receipt of a CRL from the FDA in connection with our NDA for bardoxolone in patients with CKD caused by Alport syndrome;- the level of expenses related to any of our product candidates or clinical development programs;- results of clinical trials of our competitors' products;- safety issues with respect to our product candidates or our competitors' products;- regulatory actions with respect to our product candidates and any approved products or our competitors' products;- fluctuations in our financial condition and operating results;- adverse developments concerning our third-party collaborations and our manufacturers;- the termination of a third-party collaboration, significant difficulties with an established collaboration, or the inability to establish additional collaborations;- the publication of research reports by securities analysts about us or our competitors or our industry or negative recommendations or withdrawal of research coverage by securities analysts;- the inability to obtain adequate product supply for any approved drug product or the inability to do so at acceptable prices;- disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies;- the ineffectiveness of our internal controls;- our failure or the failure of our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;- additions and departures of key personnel;- announced strategic decisions by us or our competitors;- changes in legislation or other regulatory developments affecting our product candidates or our industry;- fluctuations in the valuation of the pharmaceutical industry and particular companies perceived by investors to be comparable to us;- sales of our Class A common stock or Class B common stock by us, our insiders, or our other stockholders;- speculation in the press or investment community, including about merger or acquisition activity;- announcement or expectation of additional financing efforts;- announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;- changes in accounting principles;- terrorist acts, acts of war, or periods of widespread civil unrest;- natural disasters such as earthquakes and other calamities;- public health epidemics;- changes in market conditions for pharmaceutical stocks;- changes in general market and economic conditions, including inflation and interest rate fluctuations; and - the other factors described in this "Risk Factors" section.
As a result of fluctuations caused by these and other factors, comparisons of our operating results across different periods may not be accurate indicators of our future performance. Any variances that we report in the future may differ from the expectations of market analysts and investors, which could cause the price of our Class A common stock to fluctuate significantly. Moreover, securities class action litigation has often been initiated against companies following periods of volatility in their stock price, particularly companies in the life sciences industry such as us. This type of litigation could result in substantial costs and divert our management's attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation. This could have a material, adverse effect on our business, financial condition and results of operations. See Note 15, Commitments and
Contingencies-Bardoxolone Securities Litigation of Notes to Consolidated Financial Statements for a description of our securities litigation.
Share Price & Shareholder Rights - Risk 6
The dual class structure of our common stock and the existing ownership of capital stock by our executive officers and directors, together with their respective affiliates, have the effect of concentrating the voting power of our common stock and will limit your control over matters subject to stockholder approval.Each share of Class A common stock is entitled to one vote per share, and each share of Class B common stock is entitled to three votes per share. As of February 20, 2023, our executive officers and directors, together with their respective affiliates, collectively owned shares representing approximately 97.7% of our total Class B common stock, including shares subject to outstanding options that are exercisable within 60 days of such date, and approximately 13.8% of our total Class A common stock, including shares subject to outstanding options that are exercisable and shares that will be settled upon the vesting of RSUs within 60 days of such date. Because of the greater number of votes per share attributed to our Class B common stock, our executive officers and directors, together with their respective affiliates, collectively beneficially own shares representing approximately 44.6% of the voting power of our outstanding capital stock.
Accordingly, these stockholders will be able to exert effective control over our management and affairs and over matters requiring stockholder approval, including the election of our board of directors and approval of significant corporate transactions. The interests of those stockholders may differ from those of other stockholders, and they may vote their shares in a way that is contrary to the way other stockholders vote their shares. This concentration of ownership could have the effect of entrenching our management or the board of directors, delaying or preventing a change in our control, or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material adverse effect on the market value of our Class A common stock. Future transfers by holders of Class B common stock will generally result in those shares converting on a 1 for 1 basis to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long-term, which may include our executive officers, directors, and affiliates.
Accounting & Financial Operations2 | 3.3%
Accounting & Financial Operations - Risk 1
Our ability to use net operating losses and research and development credits to offset future taxable income may be subject to certain limitations.Accounting & Financial Operations - Risk 2
Because we do not intend to declare cash dividends on our shares of common stock in the foreseeable future, stockholders must rely on appreciation of the value of our common stock for any return on their investment.We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. As a result, we expect that only appreciation of the price of our Class A common stock, if any, will provide a return to holders of our Class A common stock for the foreseeable future.
Debt & Financing1 | 1.6%
Debt & Financing - Risk 1
We have incurred significant losses since our inception. We anticipate that we will continue to incur losses for the foreseeable future and may never achieve or sustain profitability. We will require additional financings to fund our operations.Corporate Activity and Growth8 | 13.1%
Corporate Activity and Growth - Risk 1
In connection with the Development Agreement, upon approval of bardoxolone in the United States or certain specified European countries, we agreed to make royalty payments on our world-wide net sales, excluding net sales made by Kyowa Kirin, to BXLS. We granted BXLS a security interest in substantially all of our assets. The Development Agreement also contains negative covenants that may restrict our ability to pursue our business strategies, including, among other things, to obtain additional financing or reasonable terms for additional financing.Corporate Activity and Growth - Risk 2
We may seek collaborations with third parties, in addition to our collaboration with Kyowa Kirin, with development, regulatory, and commercial expertise for our current and future product candidates. If we fail to maintain or establish such collaborations, or such collaborations are not successful, it may disrupt our business or we may not be able to capitalize on the development and commercialization of our current and future product candidates.We have entered into the Kyowa Kirin Agreement with respect to the development and commercialization by Kyowa Kirin of bardoxolone for renal, cardiovascular, diabetes, and certain related metabolic indications in certain territories in Asia. If Kyowa Kirin were to elect not to participate in the development and commercialization of all of our bardoxolone indications or to determine that their collaboration with us is no longer a strategic priority, were unable to perform their obligations under the Kyowa Kirin Agreement, were to determine that, if approved, bardoxolone could not be priced at a profitable level in Japan, or if a successor were to reduce their level of commitment to their collaboration with us, our ability to develop and commercialize our product candidates could suffer. In addition, our Kyowa Kirin collaboration is, and any future collaboration may be, exclusive and preclude us from entering into additional collaboration agreements with other parties in the area or field of exclusivity. Kyowa Kirin has allowed us to make regulatory filings and conduct clinical trials in its exclusive territory in order to generate clinical trial data that we may use in connection with seeking approval of our product candidates in the United States. There can be no assurance that one or more of these authorizations will not be withdrawn.
Our collaboration with Kyowa Kirin and potential other third parties for bardoxolone requires cooperation between the parties, and failure to do so can negatively affect the development and commercialization of certain of our product candidates. Multi-party decision-making is complex and involves significant time and effort. There can be no assurance that we and our collaborators will cooperate or reach consensus. Any disputes or lack of cooperation with our collaborators may negatively affect the timing or success of our planned clinical trials or commercialization plans.
If we fail to establish and maintain, or are prohibited from establishing, strategic collaborations related to our product candidates, we could bear all of the risk and costs related to the development and commercialization of any such product candidate, and we may need to seek additional financing, hire additional employees, and otherwise develop expertise at our cost. This in turn may negatively affect the development of our other product candidates as we direct resources to our most advanced product candidates.
Corporate Activity and Growth - Risk 3
We may engage in future acquisitions that could disrupt our business, cause dilution to our stockholders, and harm our business, results of operations, financial condition, and cash flows and future prospects.While we have no specific plans to acquire any other businesses, we may, in the future, make acquisitions of, or investments in, companies that we believe have products or capabilities that are a strategic or commercial fit with our present or future product candidates and business or otherwise offer opportunities for our company. In connection with these acquisitions or investments, we may:
- issue stock that would dilute our existing stockholders' percentage of ownership;- incur debt and assume liabilities; and - incur amortization expenses related to intangible assets or incur large and immediate write-offs.
We may not be able to complete acquisitions on favorable terms, if at all. If we do complete an acquisition, we cannot assure you that it will ultimately strengthen our competitive position or that it will be viewed positively by customers, financial markets, or investors. Furthermore, future acquisitions could pose numerous additional risks to our operations, including:
- problems integrating the purchased business, products or technologies, or employees or other assets of the acquisition target;- increases to our expenses;- disclosed or undisclosed liabilities of the acquired asset or company;- diversion of management's attention from their day-to-day responsibilities;- reprioritization of our development programs and even cessation of development and commercialization of our current product candidates;- harm to our operating results or financial condition;- entrance into markets in which we have limited or no prior experience; and - potential loss of key employees, particularly those of the acquired entity.
We may not be able to complete any acquisitions or effectively integrate the operations, products, or personnel gained through any such acquisition.
Corporate Activity and Growth - Risk 4
We incur significant costs as a result of operating as a public company, and we devote substantial resources to public company compliance programs.As a public company, we incur significant legal, insurance, accounting, and other expenses. The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of The Nasdaq Global 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. We have invested, and will continue to invest, in resources to comply with laws, regulations, and standards, and this investment will result in increased general and administrative expenses and may divert management's time and attention from product development activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may be harmed. As a public company, it is more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
Specifically, to comply with the requirements of being a public company, we are undertaking various actions, including implementing new internal controls and procedures and hiring new accounting or internal audit staff. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. Any failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations. In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the price of our Class A common stock could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on The Nasdaq Global Market and could be subject to fines, sanctions, and other regulatory action, and potentially civil litigation.
The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and disclosure controls and procedures quarterly. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. This assessment includes the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we continue to dedicate internal resources and utilize outside consultants and continue to execute a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. If material weaknesses are identified in the future or we are not able to comply with the requirements of Section 404 in a timely manner, our reported financial results could be materially misstated, we could receive an adverse opinion regarding our internal controls over financial reporting from our accounting firm, if and when required, and we could be subject to investigations or sanctions by regulatory authorities, which would require additional financial and management resources, which could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. We cannot assure you that there will not be material weaknesses or significant deficiencies in our disclosure controls or our internal controls over financial reporting in the future.
Corporate Activity and Growth - Risk 5
The Merger may not be completed within the expected timeframe, or at all, and significant delay or the failure to complete the Merger could adversely affect our business and the market price of our common stock.Added
On July 28, 2023, we entered into the Merger Agreement with Biogen and Merger Sub, pursuant to which, and on the terms and subject to the conditions thereof, Merger Sub will merge with and into us, and we will survive as a wholly-owned subsidiary of Biogen. The consummation of the Merger is subject to customary closing conditions, including, among other things, (i) adoption of the Merger Agreement and approval of the Merger by the affirmative vote of the holders of at least a majority of the voting power of all shares of our common stock entitled to vote thereon, (ii) the expiration or termination of the required waiting period applicable to the consummation of the Merger under the HSR Act, and (iii) the absence of any (A) injunction, order or decree by any court of competent jurisdiction preventing the consummation of the Merger or the acquisition of shares of our common stock by Biogen or Merger Sub, and (B) law or order that prohibits or makes illegal the consummation of the Merger or the acquisition of shares of our common stock by Biogen or Merger Sub.
The governmental authorities from which authorizations under the HSR Act are required have broad discretion in administering the governing laws and regulations, and may take into account various facts and circumstances in their consideration of the Merger, including other potential transactions in the pharmaceutical industry or other industries. These governmental authorities may initiate proceedings seeking to prevent, or otherwise seek to prevent, the Merger entirely or until certain requirements are met. Under the terms of the Merger Agreement, the parties have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions that are necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and each of the other transactions contemplated by the Merger Agreement, including, subject to certain conditions and only to the extent such action is conditioned on the consummation of the transactions contemplated by the Merger Agreement, (i) obtaining each third-party consent or regulatory approval necessary, proper or advisable to complete the Merger, and (ii) proposing, negotiating, committing to, or effecting a sale or disposition of such assets or businesses that are required to be divested or a license or grant of commercialization rights to businesses, product lines, fields of use, divisions, business arrangements, contracts, assets or interests therein of Reata or Biogen, subject to certain limitations.
Many of the conditions to consummation of the Merger are not within our control or the control of Biogen or Merger Sub, and we cannot predict when or if these conditions will be satisfied. There can be no assurance that our business, our relationships or our financial condition will not be adversely affected, as compared to the condition prior to the announcement of the Merger, if the Merger is not consummated within the expected timeframe, or at all. Failure to complete the Merger within the expected timeframe, or at all, could adversely affect our business and the market price of our common stock in a number of ways, including the following:
- If the Merger is not completed within the expected timeframe, or at all, the share price of our common stock may change or decline significantly to the extent that the current market price of our stock reflects assumptions regarding the completion of the Merger;- We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other costs in connection with the Merger, for which we may receive little or no benefit if the Merger is not completed. Many of these fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger;- Failure to complete the Merger within the expected timeframe, or at all, may result in negative publicity and a negative impression of us in the investment community and may lead to subsequent offers to acquire our company at a lower price or otherwise on less favorable terms to us and our stockholders than contemplated by the Merger;- Our ability to attract, retain and motivate personnel, including our senior management, may be impaired;- We may have difficulties maintaining relationships with third-party manufacturers, contract research organizations, collaborators and other business partners;- Upon termination of the Merger Agreement by us or Biogen under specified circumstances, we would be required to pay a termination fee of approximately $264.0 million; and - We could be subject to litigation related to any failure to complete the Merger.
Corporate Activity and Growth - Risk 6
The announcement and pendency of our acquisition by Biogen could adversely affect our business, prospects, financial condition, and results of operations.Added
The announcement and pendency of the Merger could cause disruptions in and create uncertainty surrounding our business, which could have an adverse effect on our business, prospects, financial condition, and results of operations, regardless of whether the Merger is completed.
These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the Merger:
- the diversion of significant management time and resources towards the completion of the Merger;- the potential business uncertainty, including changes to existing business relationships (including, without limitation, suppliers and other business partners), during the pendency of the Merger that could affect our financial performance;- the impairment of our ability to attract, retain and motivate key personnel, including our senior management;- the inability to pursue alternative business opportunities or make appropriate changes to our business strategies because of requirements in the Merger Agreement that we conduct our business in the ordinary course and not engage in certain kinds of transactions or business activities prior to the completion of the Merger, including the fact that our stockholders would forego the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent public company; and - litigation relating to the Merger instituted against us and others, and the nature, costs, outcome and distractions related thereto.
Corporate Activity and Growth - Risk 7
The Merger Agreement contains provisions that could discourage a potential competing acquirer of our company or could result in any competing proposal being at a lower price than it might otherwise be.Added
During the pendency of the Merger, we are subject to certain restrictions on our ability to solicit alternative acquisition proposals from third parties, to provide information to third parties and to enter into or continue discussions or negotiations with third parties regarding alternative acquisition proposals, subject to customary exceptions. In addition, we may be required to pay Biogen a termination fee of approximately $264.0 million in specified circumstances, including if the Merger Agreement is terminated in specified circumstances following our receipt of a Superior Proposal (as defined in the Merger Agreement). These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of our company from considering or proposing such an acquisition, including, if the Merger Agreement is terminated prior to the consummation of the Merger, after such termination of the Merger Agreement, even if it were prepared to pay a purchase price per share higher than the purchase price per share proposed to be paid in the Merger. These provisions might also result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in specified circumstances under the Merger Agreement, including, in certain circumstances, after a valid termination of the Merger Agreement in accordance with the terms thereof.
Corporate Activity and Growth - Risk 8
We may encounter difficulties in managing our growth and expanding our operations successfully.As we seek to advance our product candidates through clinical trials and, if approved, through commercialization, we will need to expand our development, regulatory, quality assurance, manufacturing, commercialization, compliance, and administration capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to increase the responsibilities on members of management and manage any future growth effectively. Our failure to effectively manage our growth in this regard could prevent us from successfully implementing our strategy and maintaining the confidence of investors in our company.
Legal & Regulatory
Total Risks: 10/61 (16%)Above Sector Average
Regulation8 | 13.1%
Regulation - Risk 1
If we fail to comply with United States and certain foreign government laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.Regulation - Risk 2
While the Merger Agreement is in effect, we are subject to restrictions on our business activities.Added
The Merger Agreement includes restrictions on the conduct of our business (including the businesses of our respective subsidiaries) prior to the completion of the Merger, generally requiring us to use reasonable best efforts to conduct our operations in all material respects according to our ordinary and usual course of business consistent with past practice and preserve intact our business organization and to preserve the present relationships with those persons having significant business relationships with us or our subsidiaries and not to engage in specified types of transactions or take specified actions during this period unless required by law or the Merger Agreement or agreed to in writing by Biogen. In addition, we are subject to a variety of specified restrictions. Unless we obtain Biogen's prior written consent (which consent may not be unreasonably withheld, conditioned or delayed), except as specifically required by the Merger Agreement or required by applicable law, we may not, among other things and subject to certain exceptions, limitations and qualifications, incur additional indebtedness, issue additional shares of our common stock of the common stock of our subsidiaries other than in connection with stock awards outstanding as of July 28, 2023, repurchase our common stock, pay dividends, acquire certain assets or securities, sell or dispose of intellectual property, or enter into material contracts or make certain capital expenditures. We may find that these and other contractual restrictions in the Merger Agreement delay or prevent us from responding, or limit our ability to respond, effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if our management believes they may be advisable. If any of these effects were to occur, it could materially and adversely affect our operating results, financial position, cash flows or the price of our common stock.
Regulation - Risk 3
The regulatory approval process is highly uncertain, and we may not obtain regulatory approval for the commercialization of our product candidates. Even if we believe our completed, current, or planned clinical trials are successful, regulatory authorities may not agree that they provide adequate data on safety or efficacy or may require that we conduct confirmatory clinical trials either prior to approval or after market approval.The time required to obtain approval, if any, by the FDA and comparable foreign regulatory authorities is unpredictable, but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate's clinical development and may vary among jurisdictions. With the exception of an NDA filed with the FDA and an MAA filed with the EMA for bardoxolone in patients with CKD caused by Alport syndrome and for omaveloxolone in patients with FA, we have not submitted an NDA or obtained regulatory approval for any product candidate, and it is possible that none of our current or future product candidates we may discover, in-license, or acquire and seek to develop in the future will ever obtain regulatory approval. Our receipt of a CRL from the FDA with respect to the NDA for bardoxolone in patients with CKD caused by Alport syndrome, the withdrawal of our MAA for bardoxolone in patients with CKD caused by Alport syndrome, and scientific advice from the EMA that the proposed Phase 3 clinical study in ADPKD cannot be used as a standalone study to support the indication of bardoxolone in ADPKD, puts our entire bardoxolone platform at a high degree of risk. Accordingly, there can be no assurance that bardoxolone will be approved for any indication.
Our product candidates could be delayed in receiving or fail to receive regulatory approval from the FDA or other regulatory authorities for many reasons, including:
- inadequate design or implementation of our clinical trials;- failure to demonstrate to the satisfaction of regulatory authorities that a product candidate is safe and effective for its proposed indication;- failure of clinical trials to meet the level of statistical or clinical significance required for approval;- failure to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;- FDA refusal to accept efficacy results from clinical trial sites outside the United States where the standard of care is potentially different from that in the United States;- the insufficiency of data collected from preclinical studies and clinical trials of our present or future product candidates to support the submission and filing of an NDA or other submission or to obtain regulatory approval;- inadequate manufacturing processes or facilities of third-party manufacturers with whom we contract for clinical and commercial supplies;- internal FDA delays in the scheduling and conducting of on-site regulatory inspections due to pandemic-related circumstances (e.g., travel restrictions) or other federal, state, or local restrictions;- changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval;- the CROs that conduct clinical trials on our behalf may take actions outside of our control that materially adversely affect our clinical trials;- collaborators may not perform or complete their activities contributing to our development programs in a timely manner or at all; or - one or more SAEs may be related or possibly related to one of our product candidates, and any such determination may adversely affect our ability to obtain regulatory approval, whether or not the determination is correct.
The FDA or other regulatory authorities may require more information, including additional preclinical, clinical, nonclinical, or CMC data, to support approval, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program altogether. In addition, future shutdowns of the United States federal government may result in delays in the review or approval, if any, of our NDAs. Even if we do obtain regulatory approval, our product candidates may be approved for fewer or more limited indications than we request, approval may be contingent on the performance of costly post-marketing clinical trials, or approval may require labeling that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. In addition, if our product candidates produce undesirable side effects or safety issues, the FDA may require the establishment of a REMS, or other regulatory authorities may require the establishment of a similar strategy, that may restrict distribution of our approved products, if any, and impose burdensome implementation requirements on us. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
Even if we believe our completed, current, or planned clinical trials are successful, regulatory authorities may not agree that our completed clinical trials provide adequate data on safety or efficacy, which was the case in connection with the FDA's issuance of a CRL regarding our NDA for bardoxolone in patients with CKD caused by Alport syndrome and the withdrawal of our MAA for bardoxolone in patients with CKD caused by Alport syndrome. In addition, the FDA originally concluded that the results of our MOXIe Phase 2 clinical trial, while positive, were not sufficient to support approval of omaveloxolone for the treatment of patients with FA. Consequently, the FDA advised us that we needed to conduct a second clinical trial prior to submitting an NDA, prior to subsequently agreeing that we could proceed with the filing of an NDA for omaveloxolone in patients with FA. Certain of our Phase 3 clinical trials have been or may be designed to permit us to file an application for accelerated approval based on positive interim data. Even if we believe the interim data will support an application for accelerated approval, the regulatory authorities may not agree, which could delay approval. Approval by one regulatory authority does not ensure approval by any other regulatory authority. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. We may not be able to submit for regulatory approvals, and even if we submit, the applications may not be filed by the FDA or comparable regulatory agency, and we may not receive the necessary approvals to commercialize our product candidates in any market.
Regulation - Risk 4
If our product candidates obtain marketing approval, we will be subject to more extensive healthcare laws, regulation, and enforcement, including United States healthcare reform and other changes, and our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition.If we obtain approval for any of our product candidates, the regulatory requirements applicable to our operations, in particular our sales and marketing efforts, will increase significantly with respect to our operations. Also, the potential for civil and criminal enforcement by the federal government and the states and foreign governments will increase with respect to the conduct of our business. The laws that may affect our operations in the United States, currently and in the future, include, without limitation:
- the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;- federal civil and criminal false claims laws and civil monetary penalty laws, including the civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims that are false or fraudulent to the federal government;- HIPAA, which created additional federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;- HIPAA, as amended by HITECH, and its implementing regulations, which imposes certain requirements, including mandatory contractual terms, on certain types of entities, relating to the privacy, security, and transmission of individually identifiable health information;- the federal legislation commonly referred to as the Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the CMS information related to payments and other transfers of value to physicians, physician assistants, certain types of advanced practice nurses, and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members;- federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and - state law equivalents of each of the above federal laws, such as the federal Anti-Kickback Statute and false claims laws, that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or which otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information relating to drug price increases; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information and genetic information in certain circumstances, many of which differ from each other and from HIPAA in significant ways, thus complicating compliance efforts.
Our clinical trial programs and research collaborations may implicate international data protection laws, including the GDPR in the EU. The GDPR became effective on May 25, 2018 and governs the collections and use of personal data in the EU. The GDPR, which is wide-ranging in scope, imposes several obligations and restrictions concerning the consent of the individuals to whom the personal data relates, the information provided to the individuals, the transfer of personal data out of the EU, data breach notifications, security and confidentiality of the personal data, the use of third-party processors in connection with the processing of the personal data, and imposition of substantial potential fines or penalties for breaches or noncompliance of the data protection obligations. Data protection authorities from the different EU member states may interpret the GDPR and national laws differently and impose additional requirements, which add to the complexity of processing personal data in the EU. Guidance on implementation and compliance practices are often updated or otherwise revised. Complying with varying jurisdictional requirements could increase the costs and complexity of compliance, including the new risk of substantial financial penalties for data breach or improper processing of personal data under the GDPR. Failure by our collaborators to comply with the GDPR on the transfer of personal data outside of the EU into the United States may result in the imposition of criminal and administrative sanctions on such collaborators, which could adversely affect our business and could create liability for us.
The scope of these laws and our lack of experience in establishing the compliance programs necessary to comply with this complex and evolving regulatory environment increase the risks that we may violate the applicable laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, and imprisonment, any of which could materially adversely affect our ability to operate our business and our financial results.
Regulation - Risk 5
We are subject to United States and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability, fines, penalties, or other serious consequences for violations, which can harm our business.We are subject to export control and import laws and regulations, including the United States Export Administration Regulations, United States Customs regulations, various economic and trade sanctions regulations administered by the United States Treasury Department's Office of Foreign Assets Controls, the United States Foreign Corrupt Practices Act of 1977, as amended (FCPA), the United States domestic bribery statute contained in 18 U.S.C. § 201, the United States Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the United States to sell our products abroad once we enter a commercialization phase and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
Regulation - Risk 6
We will need to obtain approval of any proposed product names, and any failure or delay associated with such approval may adversely affect our business.Any proprietary name or trademark we intend to use for our product candidates will require approval from the FDA, and similar health authorities outside the United States, regardless of whether we have secured a formal trademark registration from the USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with other product names. The FDA may also object to a product name if it believes the name inappropriately implies certain medical claims or contributes to an overstatement of efficacy. If the FDA objects to any product names we propose, which we have experienced, we will be required to adopt an alternative name for our product candidates. If we adopt an alternative name, we would lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties, and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.
Regulation - Risk 7
Even if we are able to obtain regulatory approval of our product candidates, we cannot predict the labeling we will obtain, and it may be more narrow than originally sought.Although we are conducting one registrational trial and have completed pivotal trials in patients with Alport syndrome caused by CKD and FA, specific labeling language has not yet been agreed upon with regulatory authorities. For both omaveloxolone and bardoxolone, regulatory approvals, if obtained at all, may include very narrowly-defined indications for which these products may be marketed, since this limitation is a common outcome of health authority review and approval processes. Alternatively, the specific labeling language could highlight real or potential perceived risks that could limit the use of the product candidates in the marketplace or require a REMS. These labeling limitations may be driven by either preclinical or clinical outcomes, some of which may not yet have been observed in our early studies. Such limitations or warnings may affect our ability to successfully commercialize our products. Due to the rarity of the diseases for which our product candidates are targeted, a narrower than expected indication or other restrictions in labeling could significantly affect our ability to generate revenue.
Regulation - Risk 8
If our product candidates receive regulatory approval, we will be subject to additional, ongoing regulatory requirements and we may face future development, manufacturing, and regulatory difficulties.Our product candidates, if approved, will also be subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping, submission of safety and other post-market approval information, importation, and exportation. In addition, approved products, manufacturers, and manufacturers' facilities are required to comply with extensive FDA, EMA, United Kingdom Medicines and Healthcare Products Regulatory Agency (MHRA), PMDA, and Australian Therapeutic Goods Administration (TGA) requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to CGMP requirements. As such, we and our potential future contract manufacturers will be subject to continual review and periodic inspections to assess compliance with CGMPs. Accordingly, we and others with whom we work will be required to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, EMA, MHRA, PMDA, TGA, and other similar agencies and to comply with certain requirements concerning advertising and promotion for our product candidates. Promotional communications with respect to prescription drugs also are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved labeling. Accordingly, once approved, we may not promote our products, if any, for indications or uses for which they are not approved.
If a regulatory agency discovers previously unknown problems with a product, such as AEs of unanticipated severity or frequency or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing, or labeling of a product, it may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If our product candidates or manufacturers fail to comply with applicable regulatory requirements, a regulatory agency may:
- issue warning letters or untitled letters;- request voluntary product recalls;- mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;- require us or our potential future collaborators to enter into a consent decree or obtain a permanent injunction against us or our potential future collaborators, which can include shutdown of manufacturing facilities, imposition of fines, reimbursements for inspection costs, taking of specific actions by required due dates, and penalties for noncompliance;- impose other administrative or judicial civil or criminal penalties or pursue criminal prosecution;- withdraw regulatory approval;- refuse to approve pending applications or supplements to approved applications filed by us or by our collaborators or potential collaborators;- impose restrictions on operations, including costly new manufacturing requirements; or - seize or detain products.
Litigation & Legal Liabilities2 | 3.3%
Litigation & Legal Liabilities - Risk 1
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.Litigation & Legal Liabilities - Risk 2
Lawsuits may be filed against us and/or [Biogen] challenging the transactions contemplated by the Merger Agreement. An adverse ruling in any such lawsuit may delay or prevent the proposed acquisition from being completed.Added
Lawsuits arising out of or relating to the Merger Agreement, our proxy statement or the proposed acquisition of us by Biogen may be filed in the future. One of the conditions to completion of the Merger is the absence of any injunction or other order being in effect that prohibits completion of the Merger. Accordingly, if a plaintiff is successful in obtaining an injunction, then such order may prevent the proposed acquisition from being completed, or from being completed within the expected timeframe.
Production
Total Risks: 8/61 (13%)Above Sector Average
Employment / Personnel2 | 3.3%
Employment / Personnel - Risk 1
If we fail to attract and retain senior management and key personnel, in particular our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, and Chief Innovation Officer, we may be unable to successfully develop our product candidates, conduct our clinical trials, and commercialize our product candidates.Employment / Personnel - Risk 2
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could result in significant liability for us and harm our reputation.We are exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, comply with the FCPA and other anti-bribery laws, report financial information or data accurately, or disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions, delays in clinical trials, or serious harm to our reputation. We have adopted a code of conduct for our directors, officers, and employees (the Code of Ethics and Business Conduct), but it is not always possible to identify and deter employee misconduct. The precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could harm our business, results of operations, financial condition, and cash flows, including through the imposition of significant fines or other sanctions.
Supply Chain5 | 8.2%
Supply Chain - Risk 1
Our product candidates and certain of the components of our product candidates are currently acquired from single-source suppliers and have been purchased without long-term supply agreements. The loss of any of these suppliers, or their failure to supply us with supplies of sufficient quantity and quality to obtain and complete manufacture of drug substance or finished drug product of acceptable quality at an acceptable price, would materially and adversely affect our business.Supply Chain - Risk 2
We currently rely, and expect to continue to rely, on third parties to conduct many aspects of our product candidate manufacturing activities, and for potential commercial product manufacturing. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.We do not own any facility that may be used to conduct clinical-scale manufacturing and processing, so we must rely on collaborators and outside vendors to manufacture supplies and process our product candidates. Outside of scale-up and validation activities, we have not yet routinely caused our product candidates to be manufactured or processed at a commercial scale and/or frequency and may not be able to do so for any of our product candidates. In addition, our anticipated reliance on a limited number of third-party manufacturers exposes us to certain risks.
If a replacement contractor is needed, we may be unable to identify manufacturers, especially with acceptable terms, because the number of potential manufacturers is limited. Additionally, the FDA or an equivalent foreign regulatory agency must evaluate any replacement contractor added after initial approval, and we must demonstrate comparability of product produced at any new manufacturer added after completion of Phase 3 clinical trials or initial product approval. This process would require additional development work, testing, and compliance inspections. A new manufacturer would also have to be educated in, or develop substantially equivalent processes for, production of our product candidates and products, if any.
Our third-party manufacturers might be unable to timely formulate and manufacture our product candidates or produce the quantity and quality required to meet our clinical and commercial needs, if any. Contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately. Our contract manufacturers may not perform as agreed, may not devote sufficient resources to our product candidates, 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.
Manufacturers are subject to ongoing periodic unannounced inspection by the FDA or corresponding agencies in other geographic locations, to ensure strict compliance with CGMP and other government regulations and corresponding foreign standards. Although we do not have control over third-party manufacturers' compliance with these regulations and standards, we are ultimately responsible for ensuring that our product candidates are manufactured in accordance with CGMP.
Failure of any third-party manufacturer to maintain compliance with applicable laws and regulations could result in sanctions by the FDA, including request for a voluntary recall, warning letter, seizure of products, injunctions prohibiting some or all further sales and/or recalling product on the market, possible consent decree imposing substantial fines, preclusion of government contracts, import alerts, and criminal liability. In addition, failure of a third-party manufacturer for a product undergoing review by the FDA to maintain an acceptable CGMP compliance status could result in a decision by the FDA not to approve a pending NDA. Similar actions may be taken by foreign regulatory authorities.
We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates and products, if any. Our third-party manufacturers could misappropriate our proprietary technology, including our trade secrets and know-how.
Our third-party manufacturers could breach or terminate their agreements with us in a manner or at a time that may negatively affect our planned development and commercialization activities or the timelines for the achievement of development and commercialization activities.
Raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects or could introduce impurities to our products. Our contract manufacturers and critical reagent suppliers may be subject to inclement weather, as well as natural or man-made disasters. Disruptions to the operations of our third-party manufacturers or suppliers unrelated to our product candidates could occur, including the bankruptcy of a manufacturer or supplier or a catastrophic event or another type of force majeure event affecting a manufacturer or supplier.
Each of the risks discussed could delay our clinical trials, the approval of any of our product candidates by the FDA or foreign regulatory authorities, or the commercialization of our product candidates, and could result in higher costs or deprive us of potential product revenue. In addition, we will rely on third parties to perform release tests on our product candidates prior to delivery to patients. If these tests are not appropriately done and test data are not reliable, patients could be put at risk of serious harm, and the FDA or foreign regulatory authorities could place significant restrictions on our company until deficiencies are remedied to their satisfaction.
Supply Chain - Risk 3
We rely on third parties to conduct most of our preclinical studies and clinical trials for our product candidates, and if our third-party contractors do not properly and successfully perform their obligations under our agreements with them, we may not be able to obtain or may be delayed in receiving regulatory approvals for our product candidates.We rely heavily on universities, hospitals, and other institutions and third parties, including the principal investigators and their staff, to carry out our preclinical studies and clinical trials in accordance with our protocols and designs. We also rely on a number of third-party CROs to assist in undertaking, managing, monitoring, and executing our ongoing clinical trials. We expect to continue to rely on CROs, clinical data management organizations, medical institutions, and clinical investigators to conduct our development efforts in the future, including our Phase 3 development programs. We compete with many other companies for the resources of these third parties, and large pharmaceutical companies often have significantly more extensive agreements and relationships with such third-party providers, and such providers may prioritize the requirements of such large pharmaceutical companies over ours. The third parties upon whom we rely may terminate their engagements with us at any time, or we may terminate the engagements, which may cause delay in the development and commercialization of our product candidates. If any such third party terminates its engagement with us or fails to perform as agreed or if we terminate the engagement, we may be required to enter into alternative arrangements, or perform various functions ourselves, which could result in significant cost and delay to our product development program. Moreover, our agreements with such third parties generally do not provide assurances regarding employee turnover and availability, which may cause interruptions in the research on our product candidates by such third parties.
While our reliance on these third parties for certain development and management activities will reduce our control over these activities, it will not relieve us of our responsibilities. For example, the FDA and foreign regulatory authorities require compliance with regulations and standards, including GCP requirements, for designing, conducting, monitoring, recording, analyzing, and reporting the results of clinical trials to ensure that the data and results from studies are credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. Although we rely on third parties to conduct our clinical trials, we are responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan and protocol under legal and regulatory requirements. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or any of our CROs fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or other regulatory authorities may require us to perform additional clinical trials prior to any marketing approval, if granted.
We cannot assure that, upon inspection by a regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP requirements. Similarly, we rely on certain CROs that conduct nonclinical studies, some of which must be conducted in compliance with GLP requirements for designing, conducting, monitoring, recording, analyzing, and reporting the results of such studies. If we or any of the CROs that perform nonclinical studies for us fail to comply with applicable GLP requirements, the data generated in those studies may be deemed unreliable, and the FDA or other regulatory authorities may require us to repeat or to perform additional studies before an IND application becomes effective or prior to any marketing approval, if granted.
If CROs and other third parties do not successfully carry out their duties under their agreements with us, if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to trial protocols or to regulatory requirements, or if they otherwise fail to comply with regulations and trial protocols or meet expected standards or deadlines, the studies of our product candidates may not meet regulatory requirements. If studies do not meet regulatory requirements or if these third parties need to be replaced, the development of our product candidates may be delayed, suspended, or terminated, or the results may not be acceptable. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates on a timely basis, at a reasonable cost, or at all.
Supply Chain - Risk 4
If we, our collaborators, or our third-party manufacturers cannot manufacture our product candidates or products at sufficient quality, yields, and quantities, we may experience delays in development, regulatory approval, and commercialization.Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture our product candidates at sufficient quality, yields, and at commercial scale. We have limited direct experience in manufacturing, or managing third parties in manufacturing, certain types of our product candidates in the volumes that are expected to be necessary to support commercialization. Our efforts to establish these capabilities may not meet our requirements as to scale-up, timeliness, yield, cost, or quality in compliance with CGMP. Our clinical trials must be conducted with product candidates produced under applicable CGMP regulations. Failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We, our collaborators, or our experienced third-party manufacturers may encounter difficulties in production, which may include but are not limited to:
- costs and challenges associated with scale-up and attaining sufficient manufacturing yields;- supply chain issues, including the timely availability and shelf-life requirements of raw materials and supplies, the lack of redundant and backup suppliers, and the potential of introducing impurities during the manufacturing process that could materially impact the availability of the drug product;- quality control and assurance;- shortages of qualified personnel and capital required to manufacture large quantities of product;- competing capacity needs at contract manufacturing organizations (CMOs) supporting product development as quantities for supply increase;- establishment of commercial supply capacity through binding supply agreements;- compliance with regulatory requirements that vary in each country where a product might be sold;- capacity limitations and scheduling availability in contracted facilities; and - natural disasters, cyberattacks, adverse geo-political events, pandemics, or other force majeure events that affect facilities and possibly limit production or loss of product inventory maintained in third-party storage facilities.
Supply Chain - Risk 5
If we or our collaborators are unable to establish sales, marketing, and distribution capabilities or enter into or maintain agreements with third parties to market and sell our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.We do not have a fully-developed sales and marketing infrastructure and have no experience in the sales, marketing, or distribution of pharmaceutical products in any country. To achieve commercial success for any product for which we obtain marketing approval, we will need to establish sales and increase marketing capabilities or make and maintain our existing arrangements with third parties to perform these services at a level sufficient to support our commercialization efforts.
To the extent that we would undertake sales and marketing of any of our products directly, there are risks involved with establishing our own sales, marketing, and distribution capabilities. Factors that may inhibit our efforts to commercialize our products, if any, include:
- our inability to recruit, train, and retain adequate numbers of effective sales and marketing personnel;- the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products;- our inability to effectively manage geographically dispersed sales and marketing teams;- the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and - unforeseen costs and expenses associated with creating an independent sales and marketing organization.
With respect to bardoxolone, we are currently dependent in certain territories on the commercialization capabilities of our collaborator, Kyowa Kirin. If Kyowa Kirin were to fail to devote the necessary resources and attention to sell and market our products, or in any way be unsuccessful in commercializing our products, if any, in their territories, our business and financial condition would suffer.
Costs1 | 1.6%
Costs - Risk 1
It is difficult to predict the reimbursement or insurance coverage of our products, if approved. Failure to obtain adequate coverage and reimbursement, or obtaining limited reimbursement, from third-party payors may render our products less attractive to patients and healthcare providers. Additionally, third-party payors may require patients or healthcare providers to submit certain data or meet certain criteria such as demonstrated evidence of continuing clinical benefit to reauthorize continued reimbursement for our products. However, this data may be unavailable, or the criteria may not be met, in which case coverage and reimbursement may cease.Macro & Political
Total Risks: 4/61 (7%)Above Sector Average
Economy & Political Environment1 | 1.6%
Economy & Political Environment - Risk 1
The full effect of recent United States healthcare reform and other changes in the healthcare industry, laws, and regulations and in healthcare spending is currently unknown, and the reform and other changes may adversely affect our business model.International Operations1 | 1.6%
International Operations - Risk 1
A variety of risks associated with operating our business internationally could materially adversely affect our business.Natural and Human Disruptions2 | 3.3%
Natural and Human Disruptions - Risk 1
The COVID-19 outbreak has caused and could continue to cause disruptions in our business and operating results, including our clinical development activities.Natural and Human Disruptions - Risk 2
The occurrence of natural disasters, including a tornado, an earthquake, fire, or any other catastrophic event, could disrupt our operations or the operations of third parties who provide vital support functions to us, which could have a material adverse effect on our business, results of operations, and financial condition.We and the third-party service providers on which we depend for various support functions, such as data storage, are vulnerable to damage from catastrophic events, such as power loss, natural disasters, terrorism, and similar unforeseen events beyond our control. Our corporate offices and other facilities are located in the Dallas area, which in the past has experienced damaging storms including tornadoes. Despite having mechanisms in place to ensure system redundancy, resiliency, and data and system backups, natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition, and prospects.
If a natural disaster, power outage, or other event occurred that prevented us from using all or a significant portion of our offices or other facilities, damaged critical infrastructure such as our data storage facilities, financial systems, or manufacturing resource planning and quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans that we have in place, including those of our third-party SaaS service providers, currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business.
Furthermore, catastrophic events, such as power loss, natural disasters, terrorism, public health crises such as pandemics or epidemics, and similar unforeseen events beyond our control, could adversely affect our employees and our clinical study operations, including forcing us to stop a trial and start over. Additionally, parties in our supply chain may be operating from single sites, increasing their vulnerability to such events. If such an event were to affect our employees, our clinical study operations, or our supply chain, it could have a material adverse effect on our business, results of operations, and financial condition.
Ability to Sell
Total Risks: 3/61 (5%)Above Sector Average
Competition1 | 1.6%
Competition - Risk 1
We face substantial competition. There is a possibility that our competitors may discover, develop, obtain regulatory approval of, and commercialize drugs before we do, or develop drugs that are safer, more effective, or less costly.Demand2 | 3.3%
Demand - Risk 1
If the market opportunities for our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer. Because the target patient populations of our product candidates are small, we must be able to successfully identify patients and acquire a significant market share to achieve profitability and growth.Demand - Risk 2
Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, third-party payors, and others in the health care community.Even if we obtain marketing approval for our product candidates, these product candidates may not gain market acceptance among physicians, third-party payors, patients, and others in the health care community. Market acceptance of any approved product depends on a number of other factors, including:
- the clinical indications for which the product is approved and the labeling required by regulatory authorities for use with the product, including any warnings, testing, and other qualifying criteria for patient use, that may be required in the labeling;- acceptance by physicians and patients of the product as a safe and effective treatment and the willingness of physicians to prescribe new therapies and of the target patient population to try new therapies;- the cost, safety, efficacy, and convenience of treatment in relation to alternative treatments;- the completion of any genetic tests that are required by the product labeling or third-party payors and formulary committees;- the restrictions on the use of our products together with other medications, if any;- the availability of adequate coverage and adequate reimbursement or pricing by third-party payors and government authorities; and - the effectiveness of our sales and marketing efforts.
Failure to gain market acceptance of our product candidates, if approved, may adversely affect our business and financial condition.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.