If the government or other third-party
payors fail to provide adequate and timely coverage and payment rates for vonapanitase or any additional product candidates or
if surgeons or hospitals choose not to use vonapanitase, our revenue and prospects for profitability will be limited.
In both domestic and
foreign markets, sales of our future products will depend substantially upon the availability of timely coverage and reimbursement
from government and other third-party payors. The majority of incident and prevalent hemodialysis patients have Medicare coverage,
while other patients have other third-party payors, including other government health programs such as Medicaid, managed care providers,
private health insurers and other organizations. Coverage decisions may depend upon clinical and economic standards that disfavor
new drug and biologic products when more established or lower cost therapeutic alternatives are already available or subsequently
become available. Vonapanitase or any additional product candidates, if approved, may face competition from other therapies, biologics,
and drugs for limited financial resources. We may need to conduct post-marketing studies in order to demonstrate the cost-effectiveness
of any future products to the satisfaction of outpatient clinics, hospitals, other target customers and their third-party payors.
These post-marketing studies might require us to commit a significant amount of management time and financial and other resources.
Our future products might not ultimately be considered cost-effective. Adequate third-party coverage and reimbursement might not
be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.
whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare
costs. Assuming coverage is approved, the resulting reimbursement payment rates might not be adequate to allow us to establish
or maintain a market share sufficient to realize a sufficient return on our investments. If reimbursement is not available, or
is available only to limited levels, our product candidates may be competitively disadvantaged, and we, or our collaborators, may
not be able to successfully commercialize our product candidates. Alternatively, securing favorable reimbursement terms may require
us to compromise pricing and prevent us from realizing an adequate margin over cost. In addition, in the United States, no uniform
policy of coverage and reimbursement for drug and biologic products exists among third-party payors. Therefore, coverage and reimbursement
for drug and biologic products can differ significantly from payor to payor. Further, we believe that future coverage and reimbursement
will likely be subject to increased restrictions both in the United States and in international markets. Third-party coverage and
reimbursement for our products or product candidates for which we receive regulatory approval may not be available or adequate
in either the United States or international markets, which could have a negative effect on our business, results of operations,
financial condition and prospects.
impose price controls on pharmaceutical and biological products and penalties for increasing commercial prices at rates that exceed
the government inflation index, which may limit the commercial price we charge and our realization on sales. Further, the net reimbursement
for drug and biologic products may be subject to additional reductions if there are changes to laws that presently restrict imports
of drugs and biologics from countries where they may be sold at lower prices than in the United States. An inability to promptly
obtain coverage and adequate payment rates from both government-funded and private payors for any our product candidates for which
we obtain marketing approval could have a material adverse effect on our operating results, our ability to raise capital needed
to commercialize products and our overall financial condition.
Risks Related to Dependence on Third
We and our contract manufacturers
are subject to significant regulation with respect to manufacturing our product candidates. The manufacturing facilities on which
we rely may not continue to meet regulatory requirements and have limited capacity.
We currently have a
relationship with only one supplier, Lonza, for the manufacturing of the API for vonapanitase for clinical testing purposes, and
intend to continue to use Lonza as our sole or primary supplier of the API for vonapanitase in the future. We have used two companies,
Jubilant HollisterStier and Patheon Manufacturing Services Inc. (formerly DSM Pharmaceuticals), to vial and make our vonapanitase
finished product. We also expect to rely upon third parties to produce materials required for the commercial production of vonapanitase
or any additional product candidates if we succeed in obtaining the necessary regulatory approvals. This may increase the risk
that we will not have sufficient quantities of our product candidates to conduct our clinical trials or such quantities at an acceptable
cost, which could result in the delay, prevention, or impairment of clinical development and commercialization of our product candidates.
All entities involved
in the preparation of drugs or biologics for clinical trials or commercial sale, including our existing contract manufacturers,
are subject to extensive regulation. Ingredients of a finished therapeutic biologic product approved for commercial sale or used
in clinical trials must be manufactured in accordance with cGMPs and equivalent foreign standards. These regulations govern manufacturing
processes and procedures (including record-keeping) and the implementation and operation of quality systems to control and assure
the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction
of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of product candidate that
may not be detectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support
of a BLA on a timely basis and must adhere to the FDA’s cGMPs regulations enforced by the FDA through its facilities inspection
program. Any failure by our third-party manufacturers to comply with cGMPs, or failure to scale-up and validate manufacturing processes,
including any failure to deliver sufficient quantities of product candidates in a timely manner for the process validation required
in connection with a BLA submission, could lead to a delay in, or failure to obtain, regulatory approval of vonapanitase or any
additional product candidates. For example, on November 27, 2013, our third-party supplier of finished biological product, Jubilant
HollisterStier, received a Warning Letter from the FDA alleging that the company was not complying with cGMPs. We received a letter
from the FDA on February 13, 2014, stating that the Warning Letter does not impact the batch of finished product we are using for
our Phase 3 clinical trials. However, if Jubilant HollisterStier or any other third-party supplier does not have an acceptable
cGMP compliance status at the time of review by the FDA of any BLA we might submit, approval of the BLA would be delayed. This
third party supplier or other third parties could encounter similar difficulties that could impede our clinical trials, approval