Our facilities and
quality systems and the facilities and quality systems of some or all of our third-party contractors must also pass a pre-approval
inspection for compliance with the applicable regulations as a condition of regulatory approval of vonapanitase or any additional
product candidates. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved
with the preparation of our product candidate or the associated quality systems for compliance with the regulations applicable
to the activities being conducted. If these facilities and quality systems do not pass a pre-approval plant inspection from the
FDA or a comparable foreign authority, approval of our product candidate by the FDA or the equivalent approvals in other jurisdictions
will not be granted until the regulatory authority is satisfied that the facility complies with applicable regulations.
also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party
contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our
product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory
authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that
may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure
of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.
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
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.