If we or any of our third-party manufacturers
fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve
a pending application for a new drug or biologic product or revocation of a pre-existing approval. If any such event occurs, our
business, financial condition and results of operations may be materially harmed.
Currency fluctuations in the Swiss Franc and changes in exchange
rates could adversely affect our business by increasing our costs and cause our profitability to decline.
Our contract with Lonza for the manufacturing
of the API is denominated in Swiss Francs. Therefore, fluctuations in the exchange rate for Swiss Francs may affect our operating
results. On January 15, 2015, the Swiss National Bank announced an edit to its policy of fixing the Swiss Franc and Euro exchange
rate, which caused volatility in the currency markets for Swiss Francs and an immediate increase in their value, making our contractual
payments to Lonza more expensive based on the current exchange rates. In the second quarter of 2015, we entered into forward foreign
currency contracts to purchase Swiss Francs to reduce our foreign currency exposure under our contract with Lonza, all of which
have been settled and are no longer outstanding. We have purchased Swiss Francs to mitigate our exposure to fluctuations in the
U.S. dollar value of forecasted transactions denominated in Swiss Francs. In the future we may purchase additional forward foreign
currency contracts to hedge certain forecasted transactions, including those with Lonza, and reduce exposures to foreign currency
fluctuations. Any use of these derivative instruments would be intended to mitigate a portion of the exposure of these risks with
the intent to reduce our risk or cost, but generally would not fully offset any change in operating results as a consequence of
fluctuations in foreign currencies. Any significant foreign exchange rate fluctuations could adversely affect our financial condition
and results of operations and any use of derivative instruments may not offset such fluctuations and could exacerbate their impact
on our financial condition and results of operations.
We rely on third parties to conduct some or all aspects of
our product manufacturing, protocol development, research, and preclinical and clinical testing, and plan to continue to rely on
such third parties if we receive marketing approvals. These third parties may not perform satisfactorily.
We do not currently, and do not expect in the
future, to independently conduct all aspects of our product manufacturing, protocol development, research and monitoring and management
of our clinical programs. Vonapanitase API is produced by our contract manufacturer, Lonza. Vonapanitase finished product is produced
by our contract fill/finish provider, Jubilant HollisterStier. Release testing and stability for API and finished product is performed
by PPD, Inc. We currently rely, and expect to continue to rely, on third parties with respect to these items for our continued
and future clinical studies as well as for commercialization, if we receive regulatory marketing approval. While we will have agreements
governing their activities, we will have limited influence over their actual day-to-day performance. Nevertheless, we will be responsible
for ensuring that the manufacturing is conducted in accordance with regulatory requirements such as cGMPs. Our reliance on the
third parties does not relieve us of our regulatory responsibilities.
Any of these third parties may terminate their
engagements with us under the terms of our agreements upon notice to us. If we need to enter into alternative arrangements, our
product candidate development and eventual commercialization activities may be delayed. Our reliance on these third parties for
research and development activities, and eventual commercial supply, reduces our day-to-day control over these activities but does
not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards and any
applicable trial protocols. For example, for vonapanitase or any additional product candidates that we develop and commercialize
on our own, we will remain responsible for ensuring that the product is manufactured in accordance with cGMPs, each of our clinical
trials is conducted in accordance with GCPs and its protocol and is analyzed in accordance with its statistical analysis plan for
the clinical trial.
If these third parties do not successfully carry
out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our
protocols, we may be delayed in completing, or unable to complete, the clinical trials required to support future approval of vonapanitase
or any additional product candidates, and, if ultimately approved for marketing, may not be able to produce a sufficient amount
of commercial supply.