Set forth below and elsewhere in this report
and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from
the results contemplated by the forward-looking statements contained in this report. The descriptions below include any material
changes to and supersede the description of the risk factors affecting our business previously disclosed in “Part II, Item
1A. Risk Factors” of the Annual Report.
Risks Related to Our Liquidity and Need
for Financing
Before giving effect to any potential
additional sales of our securities, we estimate that our existing capital resources coupled with the proceeds from the October 2020
note sales will only be sufficient to fund our operations into the second quarter of 2021.
Even though we sold the 2020 Notes in October 2020
for proceeds of $500,000, these proceeds are only projected to fund our operations at the current level into the second quarter
of 2021; therefore, we will need to secure additional operating capital to continue operations substantially beyond the first quarter
of 2021. We continuously monitor our cash use as well as the clinical timelines. We will need to secure additional operating capital
in early 2021 and are evaluating options including the licensing of additional rights to commercialize our clinical products as
well as raising capital through the capital markets, either of which could cause a reduction in the trading price of our common
stock. The COVID global pandemic may impact our ability to secure additional financing.
We will need substantial additional
capital for the continued development of product candidates through marketing approval and for our longer-term future operations.
We anticipate that substantial new capital
resources will be required to continue our longer-term product development efforts, including any and all follow-on trials that
will result from our current clinical programs beyond those currently contemplated, and to scale up manufacturing processes for
our product candidates. However, the actual amount of funds that we will need will be determined by many factors, some of which
are beyond our control. These factors include, without limitation:
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the scope of our, or our partners’ clinical trials, which is significantly influenced by
the quality of clinical data achieved as trials are completed and the requirements established by regulatory authorities;
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the
speed with which we, or our partners, complete our clinical trials, which depends on
our ability to attract and enroll qualifying patients and the quality of the work performed
by our clinical investigators and contract research organizations chosen to conduct the
studies or events such as the COVID-19
pandemic;
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the time required to prosecute, enforce
and defend our intellectual property rights, which depends on evolving legal regimes and infringement claims that may arise between
us and third parties;
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the ability to manufacture at scales sufficient to supply commercial
quantities of any of our product candidates that receive regulatory approval, which may require levels of effort not currently
anticipated; and
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the successful commercialization of our product candidates, which will depend on our, or our partners’,
ability to either create or partner with an effective commercialization organization and which could be delayed or prevented by
the emergence of equal or more effective therapies.
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Emerging biotechnology companies like ours
may raise capital through corporate collaborations and by licensing intellectual property rights to other biotechnology or pharmaceutical
enterprises. We intend to pursue this strategy, but there can be no assurance that we will be able to enter into additional license
agreements with respect to our intellectual property or product development programs on commercially reasonable terms, if at all.
There are substantial challenges and risks that will make it difficult to successfully implement any of these alternatives. If
we are successful in raising additional capital through such a license or collaboration, we may have to give up valuable rights
to our intellectual property. In addition, the business priorities of a strategic partner may change over time, which creates the
possibility that the interests of the strategic partner in developing our technology may diminish and could have a potentially
material negative impact on the value of our interest in the licensed intellectual property or product candidates.
Further, if we raise additional funds by
selling shares of our common stock or securities convertible into our common stock the ownership interest of our existing stockholders
may be significantly diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these
securities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interest
expense, restrictive covenants or the granting of security interests in our assets.
Our failure to successfully address our
long-term liquidity requirements would have a material negative impact on our business, including the possibility of surrendering
our rights to some technologies or product opportunities, delaying our clinical trials or ceasing our operations.
We have incurred losses since inception
and expect to incur significant losses in the foreseeable future and may never become profitable.
We
have not commercialized any product candidates to date and incurred net operating losses every year since our inception in 1982.
We believe these losses will continue for the foreseeable future and may increase, as we pursue our product development efforts
related to Tß4. As of September 30, 2020, our accumulated deficit totaled approximately $109 million.
As we expand our research and development
efforts and seek to obtain regulatory approval of our product candidates to make them commercially viable, we anticipate substantial
and increasing operating losses. Our ability to generate revenues and to become profitable will depend largely on our ability,
alone or through the efforts of third-party licensees and collaborators, to efficiently and successfully complete the development
of our product candidates, obtain necessary regulatory approvals for commercialization, scale-up commercial quantity manufacturing
capabilities either internally or through third-party suppliers, and market our product candidates. There can be no assurance that
we will achieve any of these objectives or that we will ever become profitable or be able to maintain profitability. Even if we
do achieve profitability, we cannot predict the level of such profitability. If we sustain losses over an extended period of time
and are not otherwise able to raise necessary funds to continue our development efforts and maintain our operations, we may be
forced to cease operations.
Our common stock is quoted on the
over-the-counter market, which subjects us to the SEC’s penny stock rules and may decrease the liquidity of our common
stock.
Our common stock is traded over-the-counter
on the OTC Bulletin Board. Over-the-counter markets are generally considered to be less efficient than, and not as broad as, a
stock exchange. There may be a limited market for our stock now that it is quoted on the OTC Bulletin Board, trading in our stock
may become more difficult and our share price could decrease. Specifically, you may not be able to resell your shares of common
stock at or above the price you paid for such shares or at all.
In addition, our ability to raise additional
capital may be impaired because of the less liquid nature of the over-the-counter markets. While we cannot guarantee that we would
be able to complete an equity financing on acceptable terms, or at all, we believe that dilution from any equity financing while
our shares are quoted on an over-the-counter market would likely be substantially greater than if we were to complete a financing
while our common stock is traded on a national securities exchange. Further, we are unable to use short-form registration statements
on Form S-3 for the registration of our securities, which could impair our ability to raise additional capital as needed.
Our common stock is also subject to penny
stock rules, which impose additional sales practice requirements on broker-dealers who sell our common stock. The SEC generally
defines “penny stock” as an equity security that has a market price of less than $5.00 per share, subject to certain
exceptions. The ability of broker-dealers to sell our common stock and the ability of our stockholders to sell their shares in
the secondary market will be limited and, as a result, the market liquidity for our common stock will likely be adversely affected.
We cannot assure you that trading in our securities will not be subject to these or other regulations in the future.
The report of our independent registered
public accounting firm contains explanatory language that substantial doubt exists about our ability to continue as a going concern.
The report of our independent registered
public accounting firm on our financial statements for the year ended December 31, 2019 contains explanatory language that
substantial doubt exists about our ability to continue as a going concern, without raising additional capital. As described in
this report, in February 2019 we sold the 2019 Notes for proceeds of $1,300,000 and we received approximately $240,000 from
the exercise of the warrants. Even though we sold the 2020 Notes in October 2020 for proceeds of $500,000, these proceeds
are only projected to fund our operations at the current level into the second quarter of 2021; therefore, we will need to secure
additional operating capital to continue operations substantially beyond the first quarter of 2021. Therefore, we are seeking sources
of capital, but if we are unable to obtain sufficient financing to support and complete these activities, then we would, in all
likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be
placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.
Risks Related to Our Business and Operations
Public health threats could have
an adverse effect on our clinical trials and financial results.
Public health threats could adversely affect
our ongoing or planned business operations. In particular, the novel coronavirus (COVID-19) has resulted in quarantines, restrictions
on travel and other business and economic disruptions. We cannot presently predict the scope and severity of any potential business
shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the partners and other third parties
with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business
in the manner and on the timelines presently planned could be materially and adversely impacted. The COVID-19 pandemic has affected
patient accrual in our ARISE-3 clinical trial and with the last patient being enrolled in October and completed patient treatment
and follow-up in November 2020. As of the date of this report, while we do not specifically foresee additional delays, it
is impossible for us to predict further impact the COVID-19 global pandemic may have.
Our planned Phase 2 clinical trial
of RGN-352 was placed on clinical hold by the FDA in March 2011 due to non-compliance of cGMP regulations by a contract manufacturer
and we are unsure when, if ever, we will be able to resume this trial.
In the second half of 2010, we implemented
the development plans for our Phase 2 clinical trial to evaluate RGN-352 in patients who have suffered an acute myocardial infarction,
or AMI. We had planned to begin enrolling patients near the end of the first quarter of 2011. However, in March 2011, we were
notified by the FDA that the trial was placed on clinical hold as a result of our contract manufacturer’s alleged failure
to comply with current Good Manufacturing Practice (“cGMP”) regulations. The FDA has prohibited us from using any of
the active drug or placebo formulated by this manufacturer in human trials, which will require us to identify a cGMP-compliant
manufacturer and to have new material produced in the event that we seek to resume this trial. We have also learned that the contract
manufacturer has closed its manufacturing facility. Significant preparatory time and procedures will be required before any new
suitable manufacturer would be able to manufacture RGN-352 for the AMI trial. Since we are unable to estimate the length of time
that the trial will be on clinical hold, we have elected to cease activities on this trial until the FDA clinical hold is resolved
and the requisite funding might be secured. Consequently, there can be no assurance that we will be able to timely initiate trial
activities or complete this trial, if at all.
All of our drug candidates are based
on a single compound.
Our current primary business focus is the
development of Tß4, and its analogues, derivatives and fragments, for the regeneration and accelerated repair of damaged
tissue from non-healing dermal and corneal wounds, cardiac injury, central/peripheral nervous system diseases and other conditions,
as well as an improvement in various functions, such as, but not limited to, cardiac and neurological. Unlike many pharmaceutical
companies that have a number of unique chemical entities in development, we are dependent on a single molecule, formulated for
different routes of administration and different clinical indications, for our potential commercial success. As a result, any common
safety or efficacy concerns for Tß4-based products that cross formulations would have a much greater impact on our business
prospects than if our product pipeline were more diversified.
We may never be able to commercialize
our product candidates.
Although Tß4 has shown biological
activity in in vitro studies and in vivo animal models and while we observed clinical activity and efficacious outcomes
in our recent RGN-259 Phase 2a trial and earlier Phase 2 dermal trials, we cannot assure you that our product candidates will exhibit
activity or importance in humans in large-scale trials. Our drug candidates are still in research and development, and we do not
expect them to be commercially available for the foreseeable future, if at all. Only a small number of research and development
programs ultimately result in commercially successful drugs. Potential products that appear to be promising at early stages of
development may not reach the market for a number of reasons. These include the possibility that the potential products may:
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be found ineffective or cause harmful side effects during preclinical studies or clinical trials;
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fail to receive necessary regulatory approvals;
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be precluded from commercialization by proprietary rights of third parties;
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be difficult to manufacture on a large scale; or
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be uneconomical or otherwise fail to achieve market acceptance.
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If any of these potential problems occurs,
we may never successfully market Tß4-based products.
We are subject to intense government
regulation, and we may not receive regulatory approvals for our drug candidates.
Our product candidates will require regulatory
approvals prior to sale. In particular, therapeutic agents are subject to stringent approval processes, prior to commercial marketing,
by the FDA and by comparable agencies in most foreign countries. The process of obtaining FDA and corresponding foreign approvals
is costly and time-consuming, and we cannot assure you that such approvals will be granted. Also, the regulations we are subject
to change frequently and such changes could cause delays in the development of our product candidates.
Three of our drug candidates are currently
in the clinical development stage, and we cannot be certain that we, or our partners, will successfully complete the clinical trials
necessary to receive regulatory product approvals. The regulatory approval process is lengthy, unpredictable and expensive. To
obtain regulatory approvals in the United States, we or a partner must ultimately demonstrate to the satisfaction of the FDA that
our product candidates are sufficiently safe and effective for their proposed administration to humans. Many factors, known and
unknown, can adversely impact clinical trials and the ability to evaluate a product candidate’s safety and efficacy, including:
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the FDA or other health regulatory authorities, or institutional review boards, or IRBs, do not
approve a clinical trial protocol or place a clinical trial on hold;
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suitable patients do not enroll in a clinical trial in sufficient numbers or at the expected rate,
for reasons such as the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for
the trial, the perceptions of investigators and patients regarding safety, and the availability of other treatment options;
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clinical trial data is adversely affected by trial conduct or patient withdrawal prior to completion
of the trial;
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there may be competition with ongoing clinical trials and scheduling conflicts with participating
clinicians;
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patients experience serious adverse events, including adverse side effects of our drug candidates,
for a variety of reasons that may or may not be related to our product candidates, including the advanced stage of their disease
and other medical problems;
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patients in the placebo or untreated control group exhibit greater than expected improvements or
fewer than expected adverse events;
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third-party clinical investigators do not perform the clinical trials on the anticipated schedule
or consistent with the clinical trial protocol and good clinical practices, or other third-party organizations do not perform data
collection and analysis in a timely or accurate manner;
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service providers, collaborators or co-sponsors do not adequately perform their obligations in
relation to the clinical trial or cause the trial to be delayed or terminated;
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we are unable to obtain a sufficient supply of manufactured clinical trial materials;
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regulatory inspections of manufacturing facilities, which may, among other things, require us or
a co-sponsor to undertake corrective action or suspend the clinical trials, such as the clinical hold with respect to our Phase
2 clinical trial of RGN-352;
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the interim results of the clinical trial are inconclusive or negative;
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the clinical trial, although approved and completed, generates data that is not considered by the
FDA or others to be clinically relevant or sufficient to demonstrate safety and efficacy; and
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changes in governmental regulations or administrative actions that could affect the conduct of
the clinical trial or the interpretation of its results.
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There can be no assurance that our, or
our partners’, clinical trials will in fact demonstrate, to the satisfaction of the FDA and others, that our product candidates
are sufficiently safe or effective. The FDA or we may also restrict or suspend our clinical trials at any time if it is believed
that subjects participating in the trials are being exposed to unacceptable health risks.
Clinical trials for product candidates
such as ours are often conducted with patients who have more advanced forms of a particular condition or other unrelated conditions.
For example, in clinical trials for our product candidate RGN-137, we have studied patients who are not only suffering from chronic
epidermal wounds but who are also older and much more likely to have other serious adverse conditions. During the course of treatment
with our product candidates, patients could die or suffer other adverse events for reasons that may or may not be related to the
drug candidate being tested. Further, and as a consequence that all of our drug candidates are based on Tß4, crossover risk
exists such that a patient in one trial may be adversely impacted by one drug candidate, and that adverse event may have implications
for our other trials and other drug candidates. However, even if unrelated to our product candidates, such adverse events can nevertheless
negatively impact our clinical trials, and our business prospects would suffer.
These factors, many of which may be outside
of our control, may have a negative impact on our business by making it difficult to advance product candidates or by reducing
or eliminating their potential or perceived value. As a consequence, we may need to perform more or larger clinical trials than
planned. Further, if we are forced to contribute greater financial and clinical resources to a study, valuable resources will be
diverted from other areas of our business. If we fail to complete or if we experience material delays in completing our clinical
trials as currently planned, or we otherwise fail to commence or complete, or experience delays in, any of our other present or
planned clinical trials, including as a result of the actions of third parties upon which we rely for these functions, our ability
to conduct our business as currently planned could materially suffer.
We may not successfully establish
and maintain development and testing relationships with third-party service providers and collaborators, which could adversely
affect our ability to develop our product candidates.
We have only limited resources, experience
with and capacity to conduct requisite testing and clinical trials of our drug candidates. As a result, we rely and expect to continue
to rely on third-party service providers and collaborators, including corporate partners, licensors and contract research organizations,
or CROs, to perform a number of activities relating to the development of our drug candidates, including the design and conduct
of clinical trials, and potentially the obtaining of regulatory approvals. For example, we currently rely on several third-party
contractors to manufacture and formulate Tß4 into the product candidates used in our clinical trials, develop assays to assess
Tß4’s effectiveness in complex biological systems, recruit clinical investigators and sites to participate in our trials,
manage the clinical trial process and collect, evaluate and report clinical results.
We may not be able to maintain or expand
our current arrangements with these third parties or maintain such relationships on favorable terms. Our third-party contractors
may be impacted by the COVID-19 pandemic. Our agreements with these third parties may also contain provisions that restrict our
ability to develop and test our product candidates or that give third parties rights to control aspects of our product development
and clinical programs. In addition, conflicts may arise with our collaborators, such as conflicts concerning the interpretation
of clinical data, the achievement of milestones, the interpretation of financial provisions or the ownership of intellectual property
developed during the collaboration. If any conflicts arise with our existing or future collaborators, they may act in their self-interest,
which may be adverse to our best interests. Any failure to maintain our collaborative agreements and any conflicts with our collaborators
could delay or prevent us from developing our product candidates. We and our collaborators may fail to develop products covered
by our present and future collaborations if, among other things:
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we or our partners do not achieve our objectives under our collaboration agreements;
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we or our partners are unable to obtain patent protection for the products or proprietary technologies
we develop in our partnerships;
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we are unable to manage multiple simultaneous product development partnerships;
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our partners become competitors of ours or enter into agreements with our competitors;
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we or our partners encounter regulatory hurdles that prevent commercialization of our product candidates;
or
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we develop products and processes or enter into additional partnerships that conflict with the
business objectives of our other partners.
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We also have less control over the timing
and other aspects of our clinical trials than if we conducted the monitoring and supervision entirely on our own. In addition,
activities may be impacted by the COVID-19 pandemic. Third parties may not perform their responsibilities for our clinical trials
on our anticipated schedule or consistent with a clinical trial protocol or applicable regulations. We, and our partners, also
rely on clinical research organizations to perform much of our data management and analysis. They may not provide these services
as required or in a timely manner. If any of these parties do not meet deadlines or follow proper procedures, including procedures
required by law, the preclinical studies and clinical trials may take longer than expected, may be delayed or may be terminated,
which would have a materially negative impact on our product development efforts. If we were forced to find a replacement entity
to perform any of our preclinical studies or clinical trials, we may not be able to find a suitable entity on favorable terms or
at all. Even if we were able to find a replacement, resulting delays in the tests or trials may result in significant additional
expenditures and delays in obtaining regulatory approval for drug candidates, which could have a material adverse impact on our
results of operations and business prospects.
GtreeBNT Co., Ltd. has limited
drug development experience.
We are a party to several license agreements
and a Joint Venture with GtreeBNT. Historically, GtreeBNT’s business focus has been in the IT software industry in Korea
with strong IP positions addressing specific software tools and apps such as optimized multimedia software for smart phones. GtreeBNT
made a strategic decision in November 2013 to expand into the biopharmaceutical business through selected strategic alliances
with biopharmaceutical companies in the U.S. and EU. The collaboration with RegeneRx is the first strategic investment in this
initiative. While GtreeBNT has hired executives and staff with significant pharmaceutical experience, the company has no internal
drug development experience. As a result, GtreeBNT may face more and different challenges in the development of these product candidates
than would more established pharmaceutical companies.
GtreeBNT Co., Ltd. may have
different public reporting requirements than RegeneRx and communications between the two companies may sometimes conflict or be
less than clear.
GtreeBNT is a public company traded on
the Korean stock market. Certain disclosure requirements may differ from RegeneRx’s. Moreover, due to different language
conventions, translations may be less than 100% accurate. Further, RegeneRx may not always get material information related to
clinical trials or manufacturing development or strategic product development strategy in a timely or clear manner.
GtreeBNT Co., Ltd. has limited
financial resources.
GtreeBNT has informed us that they have
limited financial resources. They have to continuously raise capital to fund research, development, clinical trials, and operations.
Therefore, their ability to finance each of these areas is subject to its ability to secured adequate capital. While GtreeBNT has
been able to finance each of these areas, to date, there is no assurance that they will be able to do so in the future. If GtreeBNT
is unable to secure necessary financing to fund clinical trials or operations, it could have a material adverse impact on RGN-137
and RGN-259 and RegeneRx’s ability to continue funding operations while these products are under development.
We are subject to intense competition
from companies with greater resources and more mature products, which may result in our competitors developing or commercializing
products before or more successfully than we do.
We are engaged in a business that is highly
competitive. Research and development activities for the development of drugs to treat indications within our focus are being sponsored
or conducted by private and public research institutions and by major pharmaceutical companies located in the United States and
a number of foreign countries. Most of these companies and institutions have financial and human resources that are substantially
greater than our own and they have extensive experience in conducting research and development activities and clinical trials and
in obtaining the regulatory approvals necessary to market pharmaceutical products that we do not have. As a result, they may develop
competing products more rapidly that are safer, more effective, or have fewer side effects, or are less expensive, or they may
develop and commercialize products that render our product candidates non-competitive or obsolete.
With respect to our product candidate RGN-259,
there are also numerous ophthalmic companies developing drugs for corneal wound healing and other front-of-the-eye diseases and
injuries, including dry eye syndrome. Amniotic membranes have been successfully used to treat corneal wounds in certain cases,
as have topical steroids and antibacterial agents. Most specialty ophthalmic companies have a number of products on the market
that could compete with RGN-259. There are numerous antibiotics to treat eye infections to promote corneal wound healing and many
eye lubrication products that are soothing to the eye and help eye healing, many of which are sold without prescriptions. Companies
also market steroids to treat certain conditions within our area of interest. Allergan, Inc. markets Restasis™, Ophthalmic
Emulsion and Novartis markets Xiidra, which are the only two commercially available and FDA-approved eye drop products to treat
dry eye. Restasis™ and Xiidra have been approved for marketing in certain other countries where we have licensed RGN-259.
We have initially targeted our product
candidate RGN-352 for cardiovascular indications. We have also been exploring the potential of RGN-352 for the treatment of COVID-19.
Most large pharmaceutical companies and many smaller biomedical companies are vigorously pursuing the development of therapeutics
to treat patients after heart attacks and for other cardiovascular indications. Numerous biotechnology and pharmaceutical companies
are developing products to treat COVID-19.
With respect to our product candidate RGN-137
for wound healing, Johnson & Johnson has previously marketed Regranex™ for this purpose in patients with diabetic
foot ulcers. Other companies, such as Novartis, are developing and marketing artificial skins, which we believe could also compete
with RGN-137. Moreover, wound healing is a large and highly fragmented marketplace attracting many companies, large and small,
to develop products for treating acute and chronic wounds.
Even if approved for marketing, our
technologies and product candidates are unproven and they may fail to gain market acceptance.
Our product candidates, all of which are
based on the molecule Tß4, are new and unproven and there is no guarantee that health care providers or patients will be
interested in our product candidates, even if they are approved for use. If any of our product candidates are approved by the FDA,
our success will depend in part on our ability to demonstrate sufficient clinical benefits, reliability, safety, and cost effectiveness
of our, or our partners’, product candidates relative to other approaches, as well as on our ability to continue to develop
our product candidates to respond to competitive and technological changes. If the market does not accept our product candidates,
when and if we are able to commercialize them, then we may never become profitable. Factors that could delay, inhibit or prevent
market acceptance of our product candidates may include:
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the timing and receipt of marketing approvals;
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the safety and efficacy of the products;
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the emergence of equivalent or superior products;
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the cost-effectiveness of the products; and
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It is difficult to predict the future growth
of our business, if any, and the size of the market for our product candidates because the markets are continually evolving. There
can be no assurance that our product candidates will prove superior to products that may currently be available or may become available
in the future or that our research and development activities will result in any commercially profitable products.
We have no marketing experience,
sales force or distribution capabilities. If our product candidates are approved, and we are unable to recruit key personnel to
perform these functions, we may not be able to commercialize them successfully.
Although we do not currently have any marketable
products, our ability to produce revenues ultimately depends on our, or our partners’, ability to sell our product candidates
if and when they are approved by the FDA and other regulatory authorities. We currently have no experience in marketing or selling
pharmaceutical products, and we do not have a marketing and sales staff or distribution capabilities. Developing a marketing and
sales force is also time-consuming and could delay the launch of new products or expansion of existing product sales. In addition,
we will compete with many companies that currently have extensive and well-funded marketing and sales operations. If we fail to
establish successful marketing and sales capabilities or fail to enter into successful marketing arrangements with third parties,
our ability to generate revenues will suffer.
If we enter markets outside the United
States our business will be subject to political, economic, legal and social risks in those markets, which could adversely affect
our business.
There are significant regulatory and legal
barriers to entering markets outside the United States that must be overcome if we, or our partners, seek regulatory approval to
market our product candidates in countries other than the United States. We would be subject to the burden of complying with a
wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience
difficulties adapting to new cultures, business customs and legal systems. Any sales and operations outside the United States would
be subject to political, economic and social uncertainties including, among others:
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changes and limits in import and export controls;
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increases in custom duties and tariffs;
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changes in currency exchange rates;
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economic and political instability;
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changes in government regulations and laws;
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absence in some jurisdictions of effective laws to protect our intellectual property rights; and
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currency transfer and other restrictions and regulations that may limit our ability to sell certain
product candidates or repatriate profits to the United States.
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Any changes related to these and other
factors could adversely affect our business if and to the extent we enter markets outside the United States. Additionally, we have
entered into license agreements with Sigma-Tau S.p.A, Lee’s Pharmaceutical Limited and GtreeBNT Co., Ltd. for the development
of certain of our product candidates in international markets. As a result, these development activities will be subject to compliance
in all respects with local laws and regulations and may be subject to many of the risks described above.
Governmental and third-party payors
may subject any product candidates we develop to sales and pharmaceutical pricing controls that could limit our product revenues
and delay profitability.
The successful commercialization of our
product candidates, if they are approved by the FDA, will likely depend on our ability to obtain reimbursement for the cost of
the product and treatment. Government authorities, private health insurers and other organizations, such as health maintenance
organizations, are increasingly seeking to lower the prices charged for medical products and services. Also, the trend toward managed
health care in the United States, the growth of healthcare maintenance organizations, and recently enacted legislation reforming
healthcare and proposals to reform government insurance programs could have a significant influence on the purchase of healthcare
services and products, resulting in lower prices and reducing demand for our product candidates. The cost containment measures
that healthcare providers are instituting and any healthcare reform could reduce our ability to sell our product candidates and
may have a material adverse effect on our operations. We cannot assure you that reimbursement in the United States or foreign countries
will be available for any of our product candidates, and that any reimbursement granted will be maintained, or that limits on reimbursement
available from third-party payors will not reduce the demand for, or the price of, our product candidates. The lack or inadequacy
of third-party reimbursements for our product candidates would decrease the potential profitability of our operations. We cannot
forecast what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement
may be enacted in the future, or what effect the legislation or regulation would have on our business.
We have no manufacturing or formulation
capabilities and are dependent upon third-party suppliers and/or our licensees to provide us with our product candidates. If these
suppliers do not manufacture our product candidates in sufficient quantities, at acceptable quality levels and at acceptable cost,
or if we are unable to identify suitable replacement suppliers if needed, our clinical development efforts could be delayed, prevented
or impaired.
We do not own or operate manufacturing
facilities and have little experience in manufacturing pharmaceutical products. We currently rely, and expect to continue to rely,
primarily on peptide manufacturers to supply us with Tß4 for further formulation into our product candidates. We have historically
engaged three separate smaller drug formulation contractors for the formulation of clinical grade product candidates, one for each
of our three product candidates in clinical development, although, as described in this report, the contractor we engaged to formulate
and vial RGN-352 has filed for bankruptcy and closed its manufacturing facility, and our clinical trial involving RGN-352 has been
placed on clinical hold. We currently do not have an alternative source of supply for either Tß4 or the individual drug candidates.
If these suppliers, together or individually, are not able to supply us with either Tß4 or individual product candidates
on a timely basis, in sufficient quantities, at acceptable levels of quality and at a competitive price, or if we are unable to
identify a replacement manufacturer to perform these functions on acceptable terms as needed, our development programs could be
seriously jeopardized.
The clinical hold on our RGN-352 trial
will require us to have new material manufactured by a cGMP-compliant manufacturer in the event that we seek to resume this trial.
Significant preparatory time and procedures will be required before any new manufacturer would be able to manufacture RGN-352 for
the AMI trial, due to the time required for revalidation of processes and assays related to such production that were already in
place with the original manufacturer. Since we are unable to estimate the length of time that the trial will be on clinical hold,
we have elected to cease activities on this trial until the FDA clinical hold is resolved and the requisite funding might be secured.
Other risks of relying solely on single
suppliers for each of our product candidates include:
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the possibility that our other manufacturers, and any new manufacturer that we, or our partners,
may identify for RGN-352, may not be able to ensure quality and compliance with regulations relating to the manufacture of pharmaceuticals;
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their manufacturing capacity may not be sufficient or available to produce the required quantities
of our product candidates based on our planned clinical development schedule, if at all;
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they may not have access to the capital necessary to expand their manufacturing facilities in response
to our needs;
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commissioning replacement suppliers would be difficult and time-consuming;
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individual suppliers may have used substantial proprietary know-how relating to the manufacture
of our product candidates and, in the event we must find a replacement or supplemental supplier, our ability to transfer this know-how
to the new supplier could be an expensive and/or time-consuming process;
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an individual supplier may experience events, such as a fire or natural disaster, that force it
to stop or curtail production for an extended period;
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an individual supplier could encounter significant increases in labor, capital or other costs that
would make it difficult for them to produce our products cost-effectively; or
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an individual supplier may not be able to obtain the raw materials or validated drug containers
in sufficient quantities, at acceptable costs or in sufficient time to complete the manufacture, formulation and delivery of our
product candidates.
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Our suppliers may use hazardous and
biological materials in their businesses. Any claims relating to improper handling, storage or disposal of these materials could
be time-consuming and costly to us, and we are not insured against such claims.
Our product candidates and processes involve
the controlled storage, use and disposal by our suppliers of certain hazardous and biological materials and waste products. We
and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage,
handling and disposal of materials and waste products. Even if we and these suppliers and collaborators comply with the standards
prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely
eliminated. In the event of an accident, we could be held liable for any damages that result, and we do not carry insurance for
this type of claim. We may also incur significant costs to comply with current or future environmental laws and regulations.
We face the risk of product liability
claims, which could adversely affect our business and financial condition.
We, or our partners, may be subject to
product liability claims as a result of our testing, manufacturing, and marketing of drugs. In addition, the use of our product
candidates, when and if developed and sold, will expose us to the risk of product liability claims. Product liability may result
from harm to patients using our product candidates, such as a complication that was either not communicated as a potential side
effect or was more extreme than anticipated. We require all patients enrolled in our clinical trials to sign consents, which explain
various risks involved with participating in the trial. However, patient consents provide only a limited level of protection, and
it may be alleged that the consent did not address or did not adequately address a risk that the patient suffered. Additionally,
we will generally be required to indemnify our clinical product manufacturers, clinical trial centers, medical professionals and
other parties conducting related activities in connection with losses they may incur through their involvement in the clinical
trials.
Our ability to reduce our liability exposure
for human clinical trials and commercial sales, if any, of Tß4 is dependent in part on our ability to obtain sufficient product
liability insurance or to collaborate with third parties that have adequate insurance. Although we intend to obtain and maintain
product liability insurance coverage if we gain approval to market any of our product candidates, we cannot guarantee that product
liability insurance will continue to be available to us on acceptable terms, or at all, or that its coverage will be sufficient
to cover all claims against us. A product liability claim, even one without merit or for which we have substantial coverage, could
result in significant legal defense costs, thereby potentially exposing us to expenses significantly in excess of our revenues,
as well as harm to our reputation and distraction of our management.
If any of our key employees discontinue
their services with us, our efforts to develop our business may be delayed.
We are highly dependent on the principal
members of our management team. The loss of our chairman and Chief Scientific Officer, Allan Goldstein, or chief executive officer,
J.J. Finkelstein could prevent or significantly delay the achievement of our goals. We cannot assure you that Dr. Goldstein
or Mr. Finkelstein, or any other key employees or consultants, will not elect to terminate their employment or consulting
arrangements. In addition, we do not maintain a key man life insurance policy with respect to any of our management personnel.
In the future, we anticipate that we will also need to add additional management and other personnel. Competition for qualified
personnel in our industry is intense, and our success will depend in part on our ability to attract and retain highly skilled personnel.
We cannot assure you that our efforts to attract or retain such personnel will be successful.
Mauro Bove, a member of our Board
is a consultant to Lee’s Pharmaceuticals, a relationship which could give rise to a conflict of interest for Mr. Bove.
Mauro Bove is a member of our Board of
Directors and currently provides consulting services to Lee’s Pharmaceuticals Group in Hong Kong. There can be no assurance
that we will ever receive any further payments from Lee’s under the current agreement established between RegeneRx and Lee’s.
As a result of Mr. Bove’s relationship with Lee’s, Mr. Bove may have interests that are different from our
other stockholders in connection with our agreement with Lee’s and circumstances may arise that require the exercise of the
Board’s discretion with respect to Lee’s that require the exclusion of Mr. Bove.
Risks Related to Our Intellectual Property
We may not be able to maintain broad
patent protection for our product candidates, which could limit the commercial potential of our product candidates.
Our success will depend in part on our,
or our partners’ ability to obtain, defend and enforce patents, both in the United States and abroad. We have attempted to
create a substantial intellectual property portfolio, submitting patent applications for various compositions of matter, methods
of use and fragments and derivatives of Tß4. As described elsewhere in this report, we currently do not have adequate financial
resources to fund our ongoing business activities substantially beyond the first quarter of 2021 without additional funding. As
a result of our current financial condition, we continuously evaluate our issued patents and patent applications and may decide
to limit their therapeutic and/or geographic coverage in an effort to enhance our ability to focus on certain medical conditions
and countries within our financial constraints. As a result, we may not be able to protect our intellectual property rights in
indications and/or territories that we otherwise would, and, therefore, our ability to commercialize Tß4, if at all, could
be substantially limited, which could have a material adverse impact on our future results of operations.
If we, or our partners, are not able
to maintain adequate patent protection for our product candidates, we may be unable to prevent our competitors from using our technology
or technology that we license.
Our success will depend in substantial
part on our, or our partners’, abilities to obtain, defend and enforce patents, maintain trade secrets and operate without
infringing upon the proprietary rights of others, both in the United States and abroad. Pursuant to an exclusive worldwide license
from the NIH, we have exclusive rights to use Tß4 in the treatment of non-healing wounds. While patents covering our use
of Tß4 have issued in some countries, we cannot guarantee whether or when corresponding patents will be issued, or the scope
of any patents that may be issued, in other countries. We have attempted to create a substantial intellectual property portfolio,
submitting patent applications for various compositions of matter, methods of use and fragments and derivatives of Tß4. We
have also in-licensed other intellectual property rights from third parties that could be subject to the same risks as our own
patents. If any of these patent applications do not issue, or do not issue in certain countries, or are not enforceable, the ability
to commercialize Tß4 in various medical indications could be substantially limited or eliminated.
In addition, the patent positions of the
products being developed by us and our collaborators involve complex legal and factual uncertainties. As a result, we cannot assure
you that any patent applications filed by us, or by others under which we have rights, will result in patents being issued in the
United States or foreign countries. In addition, there can be no assurance that any patents will be issued from any pending or
future patent applications of ours or our partners, that the scope of any patent protection will be sufficient to provide us with
competitive advantages, that any patents obtained by us or our partners will be held valid if subsequently challenged or that others
will not claim rights in or ownership of the patents and other proprietary rights we or our partners may hold. Unauthorized parties
may try to copy aspects of our product candidates and technologies or obtain and use information we consider proprietary. Policing
the unauthorized use of our proprietary rights is difficult. We cannot guarantee that no harm or threat will be made to our or
our partners’ intellectual property. In addition, changes in, or different interpretations of, patent laws in the United
States and other countries may also adversely affect the scope of our patent protection and our competitive situation.
Due to the significant time lag between
the filing of patent applications and the publication of such patents, we cannot be certain that our licensors were the first to
file the patent applications we license or, even if they were the first to file, also were the first to invent, particularly with
regards to patent rights in the United States. In addition, a number of pharmaceutical and biotechnology companies and research
and academic institutions have developed technologies, filed patent applications or received patents on various technologies that
may be related to our product candidates. Some of these technologies, applications or patents may conflict with our or our licensors’
technologies or patent applications. A conflict could limit the scope of the patents, if any, that we or our licensors may be able
to obtain or result in denial of our or our licensors’ patent applications. If patents that cover our activities are issued
to other companies, we may not be able to develop or obtain alternative technology.
Additionally, there is certain subject
matter that is patentable in the United States but not generally patentable outside of the United States. Differences in what constitutes
patentable subject matter in various countries may limit the protection we can obtain outside of the United States. For example,
methods of treating humans are not patentable in many countries outside of the United States. These and other issues may prevent
us from obtaining patent protection outside of the United States, which would have a material adverse effect on our business, financial
condition and results of operations.
Changes to U.S. patent laws could
materially reduce any value our patent portfolio may have.
The value of our patents depends in part
on their duration. A shorter period of patent protection could lessen the value of our rights under any patents that may be obtained
and may decrease revenues derived from its patents. For example, the U.S. patent laws were previously amended to change the term
of patent protection from 17 years following patent issuance to 20 years from the earliest effective filing date of the
application. Because the time from filing to issuance of biotechnology applications may be more than three years depending on the
subject matter, a 20-year patent term from the filing date may result in substantially shorter patent protection. Future changes
to patent laws could shorten our period of patent exclusivity and may decrease the revenues that we might derive from the patents
and the value of our patent portfolio.
We, or our partners, may not have
adequate protection for our unpatented proprietary information, which could adversely affect our competitive position.
In addition to our patents, we, and our
partners, also rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and
maintain our competitive position. However, others may independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose our technology. To protect our trade secrets, we may enter
into confidentiality agreements with employees, consultants and potential collaborators. However, we may not have such agreements
in place with all such parties and, where we do, these agreements may not provide meaningful protection of our trade secrets or
adequate remedies in the event of unauthorized use or disclosure of such information. Also, our trade secrets or know-how may become
known through other means or be independently discovered by our competitors. Any of these events could prevent us from developing
or commercializing our product candidates.
We may be subject to claims that
we or our employees have wrongfully used or disclosed alleged trade secrets of former employers.
As is commonplace in the biotechnology
industry, we employ now, and may hire in the future, individuals who were previously employed at other biotechnology or pharmaceutical
companies, including competitors or potential competitors. Although there are no claims currently pending against us, we may be
subject to claims that we or certain employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary
information of former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial costs and would be a significant distraction to management.
Risks Related to Our Securities
Our common stock price is volatile,
our stock is highly illiquid, and any investment in our securities could decline substantially in value.
For the period from January 1, 2020
through November 1, 2020 the closing price of our common stock has ranged from $0.14 to $0.70, with an average daily trading
volume of approximately 89,000 shares. Considering our small size and limited resources, as well as the uncertainties and risks
that can affect our business and industry, our stock price is expected to continue to be highly volatile and can be subject to
substantial drops, with or even in the absence of news affecting our business. The following factors, in addition to the other
risk factors described in this report, and the potentially low volume of trades in our common stock since it is not listed on a
national securities exchange, may have a significant impact on the market price of our common stock, some of which are beyond our
control:
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results of pre-clinical studies and clinical trials;
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commercial success of approved products;
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corporate partnerships;
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technological innovations by us or competitors;
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changes in laws and government regulations both in the U.S. and overseas;
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changes in key personnel at our company;
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developments concerning proprietary rights, including patents and litigation matters;
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public perception relating to the commercial value or safety of any of our product candidates;
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other issuances of our common stock, or securities convertible into or exercisable for our common
stock, causing dilution;
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anticipated or unanticipated changes in our financial performance;
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general trends related to the biopharmaceutical and biotechnological industries; and
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general conditions in the stock market.
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The stock market in general has recently
experienced relatively large price and volume fluctuations. In particular, the market prices of securities of smaller biotechnology
companies have experienced dramatic fluctuations that often have been unrelated or disproportionate to the operating results of
these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could
cause a decline in its value. You should also be aware that price volatility may be worse if the trading volume of the common stock
remains limited or declines.
Our principal stockholders have significant
voting power and may take actions that may not be in the best interests of our other stockholders.
Our officers, directors and principal stockholders
together control approximately 48.2% of our outstanding common stock. Included in this group are previous stockholders of Sigma-Tau
and its affiliates, which now have consolidated their holding into Essetifin S.p.A. which holds outstanding shares representing
approximately 26.2% of our outstanding common stock and GtreeBNT which owns approximately 14.7% of our outstanding common stock.
These stockholders also hold options, warrants, convertible promissory notes and stock purchase rights that provide them with the
right to acquire significantly more shares of common stock. Accordingly, if these stockholders acted together they could control
the outcome of all stockholder votes. This concentration of ownership may have the effect of delaying or preventing a change in
control and might adversely affect the market price of our common stock, and therefore may not be in the best interest of our other
stockholders.
If securities or industry analysts
do not publish research or reports or publish unfavorable research about our business, the price of our common stock and other
securities and their trading volume could decline.
The trading market for our common stock
and other securities will depend in part on the research and reports that securities or industry analysts publish about us or our
business. We do not currently have and may never obtain research coverage by securities and industry analysts. If securities or
industry analysts do not commence or maintain coverage of us, the trading price for our common stock and other securities would
be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers
us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover
us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the
price of our common stock and other securities and their trading volume to decline.
The exercise of options and warrants,
conversion of convertible promissory notes, and other issuances of shares of common stock or securities convertible into common
stock will dilute your interest.
As
of September 30, 2020, there were outstanding options to purchase an aggregate of 11,951,250 shares of our common stock
under our 2010 and 2018 incentive equity plans at exercise prices ranging from $0.16 per share to $0.64 per share and outstanding
warrants to purchase 8,485,300 shares of our common stock at a weighted average exercise price of $0.19 per share. On February 27,
2019 we sold the 2019 Notes that will initially be convertible at $0.12 into 10,833,333 shares and the 2019 Warrants to purchase
8,125,000 shares with an exercise price of $0.18 per share. In March 2018 we entered into a warrant reprice and exercise and
issuance agreement (the “Reprice Agreement”) with the holders of the warrants issued in June 2016. Under the terms
of the Reprice Agreement, in consideration of the holders exercising in full all of the 2016 Offering warrants the exercise price
per share of 5,147,059 warrants was reduced to $0.20 per share. As further consideration, we issued to the holders of the 2016
Offering warrants 3,860,294 new warrants with an exercise price of $0.2301 per share. Pursuant to the terms of the Reprice Agreement
the exercise price of the new warrants has been reduced to $0.125 as a result of the February 2019 convertible note sale.
Subsequent to reducing the exercise price to $0.125, the warrant holders exercised all of the repriced warrants, including for
1,935,000 shares of common stock in January 2020 and we have received exercise proceeds of approximately $242,000.
Any issuance of our common stock that is
not made solely to then-existing stockholders proportionate to their interests, such as in the case of a stock dividend or stock
split, will result in dilution to each stockholder by reducing his, her or its percentage ownership of the total outstanding shares.
Moreover, if we issue options or warrants to purchase our common stock in the future and those options or warrants are exercised
or we issue restricted stock, stockholders may experience further dilution. Holders of shares of our common stock have no preemptive
rights that entitle them to purchase their pro rata share of any offering of shares of any class or series.
Our certificate of incorporation
and Delaware law contain provisions that could discourage or prevent a takeover or other change in control, even if such a transaction
would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders
to replace or remove our current management.
Our certificate of incorporation provides
our Board with the power to issue shares of preferred stock without stockholder approval. In addition, we are subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. Subject to specified exceptions, this section provides
that a corporation may not engage in any business combination with any interested stockholder, as defined in that statute, during
the three-year period following the time that such stockholder becomes an interested stockholder. This provision could also have
the effect of delaying or preventing a change of control of our company. The foregoing factors could reduce the price that investors
or an acquirer might be willing to pay in the future for shares of our common stock.
We may become involved in securities
class action litigation that could divert management’s attention and harm our business and our insurance coverage may not
be sufficient to cover all costs and damages.
The stock market has from time to time
experienced significant price and volume fluctuations that have affected the market prices for the common stock of pharmaceutical
and biotechnology companies. These broad market fluctuations may cause the market price of our common stock to decline. In the
past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation
has often been brought against that company. If we experience this sort of volatility, we may become involved in this type of litigation
in the future. Litigation often is expensive and diverts management’s attention and resources, which could hurt our business,
operating results and financial condition.