AVENUE THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
| Page |
|---|
| |
|---|
| PART I | |
|---|
| Item 1. | Business | | 4 |
|---|
| Item 1A. | Risk Factors | | 25 |
|---|
| Item 1B. | Unresolved Staff Comments | | 52 |
|---|
| Item 1C. | Cybersecurity | | 52 |
|---|
| Item 2. | Properties | | 52 |
|---|
| Item 3. | Legal Proceedings | | 52 |
|---|
| Item 4. | Mine Safety Disclosures | | 52 |
|---|
| |
|---|
| PART II | | |
|---|
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | 52 |
|---|
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 54 |
|---|
| Item 8. | Consolidated Financial Statements and Supplementary Data | | 62 |
|---|
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | | 62 |
|---|
| Item 9A. | Controls and Procedures | | 62 |
|---|
| Item 9B. | Other Information | | 62 |
|---|
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | | 63 |
|---|
| |
|---|
| PART III | | |
|---|
| Item 10. | Directors, Executive Officers and Corporate Governance | | 63 |
|---|
| Item 11. | Executive Compensation | | 63 |
|---|
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | 63 |
|---|
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | | 63 |
|---|
| Item 14. | Principal Accountant Fees and Services | | 63 |
|---|
| |
|---|
| PART IV | | |
|---|
| Item 15. | Exhibits and Consolidated Financial Statement Schedules | | 64 |
|---|
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of current or historical fact contained in this report, including statements that express our intentions, plans, objectives, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “should,” “project,” “will,” “would,” and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from:
| ● | the fact that we currently have no drug products for sale and that our success is dependent on our product candidates receiving regulatory approval and being successfully commercialized; |
| ● | the possibility that serious adverse or unacceptable side effects are identified during the development of our current or future product candidates, such that we would need to abandon or limit development of some of our product candidates; |
| ● | our ability to successfully develop, partner, or commercialize any of our current or future product candidates including AJ201, IV tramadol, and BAER-101; |
| ● | the substantial doubt raised about our ability to continue as a going concern, which may hinder our ability to obtain future financing; |
| ● | the significant losses we have incurred since inception and our expectation that we will continue to incur losses for the foreseeable future; |
| ● | our need for substantial additional funding, which may not be available to us on acceptable terms, or at all, which unavailability could force us to delay, reduce, or eliminate our product development programs or commercialization efforts; |
| ● | our reliance on third parties for several aspects of our operations; |
| ● | our reliance on clinical data and results obtained by third parties that could ultimately prove to be inaccurate, unreliable, or unacceptable to regulatory authorities; |
| ● | the possibility that we may not receive regulatory approval for any or all of our product candidates, or that such approval may be significantly delayed due to scientific or regulatory reasons; |
| ● | the fact that even if one or more of our product candidates receives regulatory approval, they will remain subject to substantial regulatory scrutiny; |
| ● | the effects of current and future laws and regulations relating to fraud and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations; |
| ● | the effects of competition for our product candidates and the potential for new products to emerge that provide different or better therapeutic alternatives for our targeted indications; |
| ● | the possibility that the government or third-party payors fail to provide adequate coverage and payment rates for our product candidates or any future products; |
| ● | our ability to establish sales and marketing capabilities or to enter into agreements with third parties to market and sell our product candidates; |
| ● | our exposure to potential product liability claims; |
| ● | related to the protection of our intellectual property and our potential inability to maintain sufficient patent protection for our technology and products; |
| ● | our ability to maintain compliance with the obligations under our intellectual property licenses and funding arrangements with third parties, without which licenses and arrangements we could lose rights that are important to our business; |
| ● | the fact that Fortress Biotech, Inc. (“Fortress”) controls a majority of the voting power of our outstanding capital stock and has rights to receive significant share grants annually; and |
| ● | the risks described under the section titled “Risk Factors” in this Annual Report and in other filings we make with the Securities and Exchange Commission. |
The forward-looking statements contained in this report reflect our views and assumptions as of the effective date of this report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Except as required by law, we assume no responsibility for updating any forward-looking statements to reflect events or circumstances that may arise after the date of this report, except as required by applicable law.
We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
SUMMARY RISK FACTORS
Our business is subject to risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face. You should carefully consider these risk factors, the risk factors described in Item 1A, and the other reports and documents that we have filed with the Securities and Exchange Commission (“SEC”).
Risks Pertaining to Our Business and Influence
| ● | We currently have no drug products for sale, but we are developing three drug product candidates, AJ201, BAER-101, and IV tramadol. We are dependent on the success of our product candidates and cannot guarantee that our product candidates will receive regulatory approval or be successfully commercialized. |
| ● | If serious adverse or unacceptable side effects are identified during the development of our current or future product candidates, we may need to abandon or limit our development of some of our product candidates. |
| ● | There is no assurance that we will be able to successfully develop AJ201, BAER-101 or IV tramadol. |
| ● | We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors. |
Risks Pertaining to Our Finances
| ● | There is substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing. |
| ● | We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future, and may never achieve or maintain profitability. |
| ● | We will require substantial additional funding, which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital, we may have to delay, reduce or eliminate our product development programs or commercialization efforts. |
| ● | We do not have any products that are approved for commercial sale and therefore do not expect to generate any revenues from product sales in the foreseeable future, if ever. |
| ● | Raising additional capital may cause dilution to our existing stockholders, restrict our operations, or require us to relinquish proprietary rights. |
Risks Pertaining to Reliance on Third Parties
| ● | We rely, and expect to continue to rely, on third parties to conduct our preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or complying with applicable regulatory requirements. |
| ● | We rely on third parties to manufacture our product candidates and will rely on third parties to manufacture any products for which we receive regulatory approval and their failure to produce them in the volumes that we require on a timely basis, to produce our products according to the applicable quality standards and requirements, or to comply with stringent regulations applicable to pharmaceutical drug manufacturers, create delays in the commercialization of our product candidates, if approved, the loss of potential revenues or an inability to meet market demand. |
| ● | We rely on clinical data and results obtained by third parties that could ultimately prove to be inaccurate, unreliable, or unacceptable to regulatory authorities. |
Risks Pertaining to Regulatory Approval Process
| ● | We may not receive regulatory approval for our product candidates, or our approval may be significantly delayed due to scientific or regulatory reasons. |
| ● | Even if one or more of our product candidates receives regulatory approval, which may not occur, it will remain subject to substantial regulatory scrutiny. |
| ● | Our current and future relationships with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens, and diminished profits and future earnings. |
| ● | Regulatory approval for any approved product is limited by the FDA to those specific indications and conditions for which clinical safety and efficacy have been demonstrated. |
| ● | If the Drug Enforcement Agency (“DEA”) decides to reschedule tramadol from a Schedule IV controlled substance to a more restrictive Schedule, our related clinical development and, if approved, regulatory approval could be delayed or prevented and, if approved, we could be subject to additional, more burdensome security requirements and quota system controls thereby losing IV tramadol's competitive advantage. |
Risks Pertaining to the Commercialization of Product Candidates
| ● | We are subject to new legislation, regulatory proposals, and managed care initiatives that may increase our costs of compliance and adversely affect our ability to market any products for which we receive regulatory approval, obtain collaborators, and raise capital. |
| ● | Public concern regarding the safety of opioid drug products such as IV tramadol could delay or limit our ability to obtain regulatory approval, result in the inclusion of serious risk information in our labeling, negatively impact market performance, or require us to undertake other activities that may entail additional costs. |
| ● | We expect intense competition for our product candidates, and new products may emerge that provide different or better therapeutic alternatives for our targeted indications. |
| ● | If the government or third-party payors fail to provide adequate coverage and payment rates for our product candidates, if approved, or any future products we may license or acquire in the future, if any, or if hospitals choose to use therapies that are less expensive, our potential revenue and prospects for profitability will be limited. |
| ● | If we are unable to establish sales and marketing capabilities or to enter into agreements with third parties to market and sell our product candidates, if approved, we may not be successful in commercializing our product candidates if and when they are approved. |
| ● | We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for our product candidates, or other product candidates we may license or acquire, and may have to limit their commercialization, if approved. |
Risks Pertaining to Intellectual Property and Potential Disputes Thereof
| ● | If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired. |
| ● | If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in any litigation would harm our business. |
| ● | If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. |
| ● | If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business. |
Risks Pertaining to the Influence of Fortress Biotech, Inc. (“Fortress”)
| ● | Fortress controls a majority of the voting power of our outstanding capital stock and has the rights to receive significant share grants annually, which will result in dilution of our other stockholders and could reduce the value of our common stock. |
| ● | We have entered into certain agreements with Fortress and may have received better terms from unaffiliated third parties. |
