20-F
falseFY0001709626two years0001709626ncna:OfficeAndComputerEquipmentMemberifrs-full:GrossCarryingAmountMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberncna:OfficeAndComputerEquipmentMember2021-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:RightofuseAssetsMember2021-12-310001709626ncna:OfficeAndComputerEquipmentMemberifrs-full:GrossCarryingAmountMember2021-12-310001709626ifrs-full:CapitalRedemptionReserveMember2021-12-3100017096262022-01-012022-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJuly122023Member2023-01-012023-12-310001709626ncna:ResearchAndDevelopmentExpensesMember2022-01-012022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateMarch92022OneMember2022-01-012022-12-310001709626ncna:GrantDateJanuary112023Memberncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateOneMember2023-01-012023-12-310001709626ifrs-full:FixedInterestRateMember2022-12-310001709626ncna:GrantDateAugust112021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2020-12-310001709626us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-12-310001709626ncna:GrantDateMarch92022Memberncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateThreeMember2022-01-012022-12-310001709626ifrs-full:ReserveOfChangeInValueOfTimeValueOfOptionsMember2022-12-310001709626ncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateFebruary102021TwoMemberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateMarch92022Memberncna:TwoThousandTwentyTwoShareOptionsMember2022-01-012022-12-310001709626ifrs-full:TopOfRangeMemberifrs-full:ComputerSoftwareMember2023-01-012023-12-310001709626ncna:GrantDateJanuary112023Memberncna:TwoThousandTwentyThreeShareOptionsMember2023-01-012023-12-310001709626ncna:GrantDateSeptember152021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:RightofuseAssetsMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMember2023-01-012023-12-310001709626ifrs-full:LegalProceedingsProvisionMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:RightofuseAssetsMember2023-01-012023-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJanuary112023TwoMember2023-01-012023-12-310001709626ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2022-12-310001709626ifrs-full:RightofuseAssetsMember2023-12-310001709626ifrs-full:AccumulatedDepreciationAndAmortisationMember2021-12-310001709626ifrs-full:CountryOfDomicileMember2023-12-310001709626ncna:HighestPaidDirectorMember2021-01-012021-12-310001709626ifrs-full:CapitalReserveMember2020-12-310001709626ncna:GrantDateSeptember152021TwoMemberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJune162023OneMember2023-12-310001709626ifrs-full:CurrencyRiskMember2022-12-310001709626ncna:GrantDateMarch92022Memberncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateFourMember2022-01-012022-12-310001709626ncna:GrantDateSeptember152021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ncna:PatentMember2023-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:GrantDateJanuary112023TwoMember2023-01-012023-12-310001709626ncna:GrantDateAugust112021Memberncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:InterestRateRiskMember2022-12-310001709626ifrs-full:RetainedEarningsMember2021-01-012021-12-310001709626ifrs-full:LegalProceedingsProvisionMemberifrs-full:CountryOfDomicileMember2022-12-310001709626ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2021-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:FixturesAndFittingsMember2022-01-012022-12-310001709626ncna:GrantDateFebruary102021Memberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:DilapidationsMember2022-12-310001709626ifrs-full:AccumulatedDepreciationAndAmortisationMember2023-12-310001709626ncna:NotLaterThanFiveYearsMember2022-12-310001709626ncna:GrantDateFebruary102021TwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-12-3100017096262023-12-310001709626ncna:GrantDateFebruary102021OneMemberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:FixturesAndFittingsMember2023-12-310001709626ncna:GrantDateJanuary132021Memberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:ReserveOfChangeInValueOfTimeValueOfOptionsMember2021-01-012021-12-310001709626ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2023-12-310001709626ncna:NonInterestBearingMember2023-12-310001709626ncna:GrantDateJanuary112023OneMemberncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateFourMember2023-01-012023-12-310001709626ifrs-full:ComputerSoftwareMember2022-12-310001709626ncna:PatentMemberifrs-full:GrossCarryingAmountMember2022-01-012022-12-310001709626ifrs-full:OtherReservesMember2023-12-310001709626ncna:GrantDateAugust112021Memberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateDecember152021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:PatentMemberifrs-full:GrossCarryingAmountMember2023-01-012023-12-310001709626ifrs-full:TopOfRangeMemberncna:EmployeeMember2023-01-012023-12-310001709626ifrs-full:CountryOfDomicileMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberncna:OfficeAndComputerEquipmentMember2023-01-012023-12-310001709626ifrs-full:InterestRateRiskMember2023-01-012023-12-310001709626ifrs-full:ComputerSoftwareMember2023-01-012023-12-310001709626ncna:GrantDateDecember152021Memberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:TopOfRangeMemberifrs-full:RightofuseAssetsMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMember2021-12-310001709626ncna:GrantDateSeptember152021Memberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:GrantDateJuly122022OneMember2022-01-012022-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:RightofuseAssetsMember2023-12-310001709626ncna:GrantDateFebruary102021OneMemberncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:ShareBasedCompensationAwardVestingDateFourMemberncna:GrantDateFebruary102021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:OfficeAndComputerEquipmentMemberifrs-full:GrossCarryingAmountMember2023-12-3100017096262021-01-012021-12-310001709626ncna:GrantDateFebruary102021TwoMemberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMember2023-01-012023-12-310001709626ifrs-full:TopOfRangeMember2023-04-012023-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:FixturesAndFittingsMember2022-12-310001709626ifrs-full:CapitalReserveMember2021-12-310001709626ifrs-full:ForeignCountriesMember2023-01-012023-12-310001709626ifrs-full:InterestRateRiskMember2023-12-310001709626ifrs-full:NotLaterThanOneYearMember2022-12-310001709626ncna:GrantDateAugust112021Memberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:InterestRateRiskMember2022-01-012022-12-310001709626ncna:GrantDateJanuary112023OneMemberncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateThreeMember2023-01-012023-12-310001709626ifrs-full:ForeignCountriesMember2022-12-310001709626ifrs-full:ReserveOfChangeInValueOfTimeValueOfOptionsMember2021-12-310001709626ifrs-full:IssuedCapitalMember2022-12-310001709626ifrs-full:LaterThanThreeYearsAndNotLaterThanFiveYearsMember2022-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJanuary112023TwoMember2023-01-012023-12-310001709626ncna:GrantDateFebruary102021TwoMemberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2022-12-310001709626ncna:GrantDateSeptember152021TwoMemberncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberncna:OfficeAndComputerEquipmentMember2022-01-012022-12-310001709626ifrs-full:CountryOfDomicileMember2022-12-310001709626ifrs-full:CapitalRedemptionReserveMember2020-12-310001709626ifrs-full:GrossCarryingAmountMember2023-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:BottomOfRangeMember2023-01-012023-12-310001709626ncna:GrantDateSeptember152021TwoMemberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:OrdinarySharesMember2023-12-310001709626ncna:DilapidationsMember2023-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:GrantDateFebruary102021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626country:DEifrs-full:LegalProceedingsProvisionMember2022-12-310001709626ifrs-full:OtherReservesMember2021-01-012021-12-310001709626ifrs-full:IssuedCapitalMember2023-01-012023-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:GrossCarryingAmountMember2022-12-310001709626ncna:GrantDateJanuary112023Memberncna:TwoThousandTwentyThreeShareOptionsMember2023-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:GrossCarryingAmountMember2021-12-310001709626ifrs-full:OtherReservesMember2023-01-012023-12-310001709626ncna:OfficeAndComputerEquipmentMember2023-12-310001709626ifrs-full:FixedInterestRateMember2023-12-310001709626ifrs-full:OtherReservesMember2022-01-012022-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJune162023OneMember2023-01-012023-12-310001709626ncna:GrantDateSeptember152021Memberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateAugust112021Memberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:RightofuseAssetsMember2022-01-012022-12-310001709626ifrs-full:CountryOfDomicileMember2021-01-012021-12-3100017096262022-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJanuary112023TwoMember2023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022Member2022-01-012022-12-310001709626ifrs-full:FloatingInterestRateMember2023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022Member2022-12-310001709626ifrs-full:LaterThanOneYearAndNotLaterThanThreeYearsMember2023-12-310001709626ifrs-full:CurrencyRiskMember2023-12-310001709626us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-12-310001709626ifrs-full:RightofuseAssetsMemberifrs-full:GrossCarryingAmountMember2022-12-310001709626ifrs-full:RightofuseAssetsMember2022-12-310001709626ifrs-full:ComputerSoftwareMember2023-12-310001709626ncna:PatentMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2022-01-012022-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:FixturesAndFittingsMember2022-12-310001709626ncna:GrantDateJanuary132021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ncna:DilapidationsMember2023-01-012023-12-310001709626ncna:PatentMember2022-12-310001709626ifrs-full:AccumulatedDepreciationAndAmortisationMember2023-01-012023-12-310001709626ncna:GrantDateFebruary102021OneMemberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:PatentMember2023-01-012023-12-310001709626ifrs-full:RetainedEarningsMember2023-12-310001709626ifrs-full:SharePremiumMember2023-01-012023-12-310001709626us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-12-310001709626ifrs-full:TopOfRangeMemberncna:DirectorsMember2023-01-012023-12-310001709626ifrs-full:SharePremiumMember2020-12-310001709626ncna:GrantDateJanuary112023Memberncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateFourMember2023-01-012023-12-310001709626ncna:GrantDateFebruary102021OneMemberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:NotLaterThanOneYearMember2023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberncna:OfficeAndComputerEquipmentMember2023-12-310001709626ifrs-full:IssuedCapitalMember2023-12-310001709626ncna:GrantDateSeptember152021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:CardiffProTidesMember2023-01-012023-12-310001709626ncna:ResearchAndDevelopmentExpensesMember2021-01-012021-12-310001709626ncna:GrantDateMarch92022Memberncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyTwoShareOptionsMember2022-01-012022-12-310001709626ncna:PatentMemberifrs-full:GrossCarryingAmountMember2023-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:GrantDateJanuary112023TwoMember2023-01-012023-12-310001709626ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2021-01-012021-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:FixturesAndFittingsMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:FixturesAndFittingsMember2021-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2021-12-310001709626ifrs-full:AccumulatedDepreciationAndAmortisationMember2022-12-310001709626ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2022-01-012022-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:RightofuseAssetsMember2021-12-310001709626ncna:GrantDateDecember152021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ncna:GrantDateFebruary102021TwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateFebruary102021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ncna:GrantDateJanuary112023Memberncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateThreeMember2023-01-012023-12-310001709626ifrs-full:FloatingInterestRateMember2022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:GrantDateFebruary102021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateFebruary102021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:CountryOfDomicileMember2021-12-310001709626ifrs-full:RetainedEarningsMember2022-12-310001709626ncna:HighestPaidDirectorMember2022-01-012022-12-310001709626ncna:PatentMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2021-12-310001709626ncna:GrantDateSeptember152021TwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2022-01-012022-12-310001709626ncna:GrantDateJanuary112023OneMemberncna:TwoThousandTwentyThreeShareOptionsMember2023-12-310001709626ncna:GrantDateSeptember152021TwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateJanuary112023OneMemberncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateOneMember2023-01-012023-12-310001709626ifrs-full:CapitalReserveMember2023-12-310001709626ifrs-full:CapitalRedemptionReserveMember2023-12-310001709626ifrs-full:CapitalRedemptionReserveMember2022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateFourMemberncna:GrantDateSeptember152021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:RetainedEarningsMember2021-12-310001709626ifrs-full:IssuedCapitalMember2020-12-310001709626ifrs-full:IssuedCapitalMember2022-01-012022-12-310001709626ncna:GrantDateAugust112021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ifrs-full:FixturesAndFittingsMember2023-12-310001709626ifrs-full:ReserveOfChangeInValueOfTimeValueOfOptionsMember2023-01-012023-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJune162023OneMemberncna:ShareBasedCompensationAwardVestingDateOneMember2023-01-012023-12-310001709626ifrs-full:TopOfRangeMemberifrs-full:CountryOfDomicileMember2023-04-012023-04-010001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMember2023-12-310001709626ifrs-full:OtherReservesMember2022-12-310001709626ncna:HighestPaidDirectorMember2023-01-012023-12-310001709626ncna:NonInterestBearingMember2022-12-310001709626ifrs-full:FixturesAndFittingsMember2023-01-012023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022OneMember2022-12-310001709626ifrs-full:SharePremiumMember2022-01-012022-12-310001709626ifrs-full:SharePremiumMember2022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:GrantDateSeptember152021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022Memberncna:ShareBasedCompensationAwardVestingDateOneMember2022-01-012022-12-310001709626ncna:PatentMember2022-01-012022-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMember2022-01-012022-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:FixturesAndFittingsMember2022-01-012022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022OneMember2022-01-012022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:GrantDateSeptember152021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:GrantDateJanuary112023OneMemberncna:TwoThousandTwentyThreeShareOptionsMember2023-01-012023-12-310001709626ncna:GrantDateJanuary132021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:RightofuseAssetsMemberifrs-full:BottomOfRangeMember2023-01-012023-12-310001709626ncna:GrantDateMarch92022Memberncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateOneMember2022-01-012022-12-310001709626ncna:GrantDateJanuary132021Memberncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2023-12-310001709626ifrs-full:FixturesAndFittingsMember2022-12-310001709626ncna:CardiffConsultantsMember2023-01-012023-12-310001709626ifrs-full:GrossCarryingAmountMember2022-01-012022-12-310001709626ncna:GrantDateFebruary102021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ifrs-full:TopOfRangeMember2023-01-012023-03-310001709626ifrs-full:ReserveOfChangeInValueOfTimeValueOfOptionsMember2023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMember2022-01-012022-12-310001709626ncna:OfficeAndComputerEquipmentMemberifrs-full:GrossCarryingAmountMember2022-12-310001709626ifrs-full:AccumulatedDepreciationAndAmortisationMember2022-01-012022-12-310001709626ifrs-full:OtherReservesMember2021-12-310001709626ncna:OfficeAndComputerEquipmentMemberifrs-full:GrossCarryingAmountMember2022-01-012022-12-310001709626ifrs-full:CountryOfDomicileMember2022-01-012022-12-310001709626ifrs-full:RightofuseAssetsMemberifrs-full:GrossCarryingAmountMember2023-01-012023-12-310001709626ifrs-full:BottomOfRangeMember2023-12-310001709626ncna:NotLaterThanFiveYearsMember2023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateMarch92022OneMember2022-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJune162023Member2023-01-012023-12-3100017096262020-12-310001709626ifrs-full:OrdinarySharesMember2022-12-310001709626ncna:GrantDateJanuary132021Memberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:IssuedCapitalMember2021-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:FixturesAndFittingsMember2021-12-310001709626ncna:GrantDateJanuary112023Memberncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyThreeShareOptionsMember2023-01-012023-12-310001709626ncna:ResearchAndDevelopmentExpensesMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberncna:OfficeAndComputerEquipmentMember2022-12-310001709626ifrs-full:RetainedEarningsMember2020-12-310001709626ifrs-full:BottomOfRangeMemberifrs-full:CountryOfDomicileMember2023-04-012023-04-010001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:GrantDateSeptember152021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJune162023Member2023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:GrantDateJuly122022OneMember2022-01-012022-12-310001709626ifrs-full:CurrencyRiskMember2023-01-012023-12-310001709626ncna:OfficeAndComputerEquipmentMember2022-12-310001709626ifrs-full:GrossCarryingAmountMember2021-12-310001709626ncna:ShareBasedCompensationAwardVestingDateOneMemberncna:GrantDateSeptember152021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2023-01-012023-12-310001709626ifrs-full:RetainedEarningsMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:RightofuseAssetsMember2023-12-310001709626ifrs-full:SharePremiumMember2021-12-310001709626ifrs-full:GrossCarryingAmountMember2023-01-012023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:GrantDateJuly122022Member2022-01-012022-12-310001709626ifrs-full:LaterThanOneYearAndNotLaterThanThreeYearsMember2022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:GrantDateDecember152021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626dei:BusinessContactMember2023-01-012023-12-310001709626ncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:GrantDateSeptember152021OneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:ComputerSoftwareMember2023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:GrantDateJuly122022OneMember2022-01-012022-12-310001709626ifrs-full:RightofuseAssetsMemberifrs-full:GrossCarryingAmountMember2022-01-012022-12-310001709626ifrs-full:ForeignCountriesMember2023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022OneMember2022-01-012022-12-3100017096262021-12-310001709626ifrs-full:GrossCarryingAmountMember2022-12-310001709626ifrs-full:TopOfRangeMemberncna:ConsultantsMember2023-01-012023-12-310001709626ncna:GrantDateDecember152021Memberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateMarch92022OneMemberncna:ShareBasedCompensationAwardVestingDateOneMember2022-01-012022-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022Memberncna:ShareBasedCompensationAwardVestingDateFourMember2022-01-012022-12-310001709626ncna:PatentMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2023-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJuly122023Member2023-12-310001709626ifrs-full:CapitalReserveMember2022-12-310001709626ifrs-full:LegalProceedingsProvisionMember2022-12-310001709626ncna:PatentMemberifrs-full:GrossCarryingAmountMember2022-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJune162023Memberncna:ShareBasedCompensationAwardVestingDateOneMember2023-01-012023-12-310001709626ifrs-full:OrdinarySharesMember2021-12-310001709626ifrs-full:SharePremiumMember2021-01-012021-12-310001709626ncna:PatentMemberifrs-full:GrossCarryingAmountMember2021-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:GrantDateMarch92022OneMember2022-01-012022-12-310001709626ncna:GrantDateJanuary132021Memberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ncna:GrantDateSeptember152021TwoMemberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:ForeignCountriesMember2021-01-012021-12-310001709626ncna:GrantDateFebruary102021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:CurrencyRiskMember2022-01-012022-12-310001709626ncna:GrantDateJanuary112023OneMemberncna:TwoThousandTwentyThreeShareOptionsMember2023-01-012023-12-310001709626ncna:OfficeAndComputerEquipmentMember2023-01-012023-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateThreeMemberncna:GrantDateJanuary112023TwoMember2023-01-012023-12-310001709626ncna:GrantDateDecember152021Memberncna:ShareBasedCompensationAwardVestingDateOneMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:CountryOfDomicileMember2023-04-012023-04-010001709626ifrs-full:ReserveOfChangeInValueOfTimeValueOfOptionsMember2020-12-310001709626ifrs-full:ComputerSoftwareMemberifrs-full:GrossCarryingAmountMember2022-01-012022-12-310001709626ncna:PatentMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2022-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateJuly122022Member2022-01-012022-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:GrantDateMarch92022OneMember2022-01-012022-12-310001709626ifrs-full:BottomOfRangeMemberifrs-full:CreditRiskMember2023-12-310001709626ifrs-full:SharePremiumMember2023-12-310001709626ncna:TwoThousandTwentyTwoShareOptionsMemberncna:ShareBasedCompensationAwardVestingDateFourMemberncna:GrantDateMarch92022OneMember2022-01-012022-12-310001709626ifrs-full:OtherReservesMember2020-12-310001709626ncna:GrantDateMarch92022Memberncna:TwoThousandTwentyTwoShareOptionsMember2022-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMember2022-12-310001709626ifrs-full:TopOfRangeMemberncna:LongTermIncentivePlanMember2020-01-012020-12-3100017096262023-01-012023-12-310001709626ifrs-full:BrandNamesMember2023-01-012023-12-310001709626ncna:ShareBasedCompensationAwardVestingDateTwoMemberncna:GrantDateFebruary102021TwoMemberncna:TwoThousandTwentyOneShareOptionsMember2021-01-012021-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:FixturesAndFittingsMember2023-01-012023-12-310001709626ifrs-full:TopOfRangeMember2023-12-310001709626ifrs-full:LaterThanThreeYearsAndNotLaterThanFiveYearsMember2023-12-310001709626ifrs-full:ForeignCountriesMember2022-01-012022-12-310001709626ncna:GrantDateSeptember152021Memberncna:TwoThousandTwentyOneShareOptionsMember2021-12-310001709626ifrs-full:ReserveOfChangeInValueOfTimeValueOfOptionsMember2022-01-012022-12-310001709626ifrs-full:ForeignCountriesMember2021-12-310001709626ifrs-full:GrossCarryingAmountMemberifrs-full:FixturesAndFittingsMember2023-12-310001709626ncna:TwoThousandTwentyThreeShareOptionsMemberncna:GrantDateJuly122023Memberncna:ShareBasedCompensationAwardVestingDateOneMember2023-01-012023-12-310001709626ifrs-full:RetainedEarningsMember2022-01-012022-12-310001709626ifrs-full:IssuedCapitalMember2021-01-012021-12-310001709626ncna:PatentMemberifrs-full:AccumulatedDepreciationAndAmortisationMember2023-01-012023-12-310001709626ifrs-full:AccumulatedDepreciationAmortisationAndImpairmentMemberifrs-full:RightofuseAssetsMember2022-12-31iso4217:EURncna:Subsidiaryxbrli:purencna:Planncna:Employeeutr:Yncna:Directorncna:Leasexbrli:sharesiso4217:GBPxbrli:sharesiso4217:GBPncna:Segmentncna:LeaseContract

As filed with the Securities and Exchange Commission on March 20, 2024

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to ______________________________

Commission File Number 001-38215

NUCANA PLC

(Exact name of Registrant as specified in its charter)

England and Wales

(Jurisdiction of incorporation or organization)

NuCana plc

3 Lochside Way

Edinburgh EH12 9DT

United Kingdom

Telephone: +44 (0)131 357 1111

(Address of principal executive offices)

Hugh S. Griffith, Chief Executive Officer

NuCana plc

3 Lochside Way

Edinburgh EH12 9DT

United Kingdom

Telephone: +44 (0)131 357 1111

Email: info@nucana.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

American Depositary Shares, each representing one Ordinary Share, nominal value £0.04 per share

 

NCNA

 

The Nasdaq Stock Market LLC

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 52,860,335 ordinary shares, par value £0.04 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

 

 

 

Emerging growth company

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP

 

International Financial Reporting Standards as issued

by the International Accounting Standards Board

 

Other

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

 


 

 

A

TABLE OF CONTENTS

Page

 

GENERAL INFORMATION

iv

PRESENTATION OF FINANCIAL AND OTHER DATA

iv

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

iv

WEBSITE DISCLOSURE

v

PART I

1

Item 1.

Identity of Directors, Senior Management and Advisers

1

Item 2.

Offer Statistics and Expected Timetable

1

Item 3.

Key Information

1

A.

Selected Financial Data

1

B.

Capitalization and Indebtedness

2

C.

Reasons for the Offer and Use of Proceeds

2

D.

Risk Factors

2

Item 4.

Information on the Company

59

A.

History and Development of the Company

59

B.

Business

59

C.

Organizational Structure

100

D.

Property, Plant and Equipment

100

Item 4A.

Unresolved Staff Comments

100

Item 5.

Operating and Financial Review and Prospects

101

A.

Operating Results

101

B.

Liquidity and Capital Resources

106

C.

Research and Development, Patents and Licenses, etc.

108

D.

Trend Information

108

E.

Critical Accounting Estimates

109

F.

[Reserved]

109

G.

[Reserved]

109

 

H.

 

Non-GAAP Financial Measures

109

Item 6.

Directors, Senior Management and Employees

110

A.

Directors and Senior Management

110

B.

Compensation

112

C.

Board Practices

121

D.

Employees

123

E.

Share Ownership

123

 

F.

 

Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation

123

Item 7.

Major Shareholders and Related Party Transactions

124

A.

Major Shareholders

124

B.

Related Party Transactions

126

C.

Interests of Experts and Counsel

127

Item 8.

Financial Information

128

A.

Consolidated Statements and Other Financial Information

128

B.

Significant Changes

128

Item 9.

The Offer and Listing

128

A.

Offer and Listing Details

128

B.

Plan of Distribution

128

C.

Markets

128

D.

Selling Shareholders

128

E.

Dilution

128

F.

Expenses of the Issue

128

 

ii


 

TABLE OF CONTENTS

(continued)

Item 10.

Additional Information

128

A.

Share Capital

128

B.

Memorandum and Articles of Association

128

C.

Material Contracts

144

D.

Exchange Controls

144

E.

Taxation

144

F.

Dividends and Paying Agents

152

G.

Statement by Experts

152

H.

Documents on Display

153

I.

Subsidiary Information

153

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

153

Item 12.

Description of Securities Other than Equity Securities

154

A.

Debt Securities

154

B.

Warrants and Rights

154

C.

Other Securities

154

D.

American Depositary Shares

154

PART II

156

Item 13.

Defaults, Dividend Arrearages and Delinquencies

156

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

156

Item 15.

Controls and Procedures

156

A.

Disclosure Controls and Procedures

156

B.

Management’s Annual Report on Internal Control over Financial Reporting

156

C.

Attestation Report of the Registered Public Accounting Firm

156

D.

Changes in Internal Control Over Financial Reporting

156

Item 16A.

Audit Committee Financial Expert

156

Item 16B.

Code of Ethics

157

Item 16C.

Principal Accountant Fees and Services

157

Item 16D.

Exemptions From the Listing Standards For Audit Committees

157

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

157

Item 16F.

Change in the Registrant’s Certifying Accountant

157

Item 16G.

Corporate Governance

157

Item 16H.

Mine Safety Disclosure

158

Item 16I.

 

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

158

Item 16K.

 

Cybersecurity

158

PART III

161

Item 17

Financial Statements

161

Item 18

Financial Statements

161

Item 19

Exhibits

162

 

 

iii


 

GENERAL INFORMATION

In this annual report on Form 20-F (“Annual Report”), “NuCana,” “NuCana plc,” the “Group,” the “Company,” “we,” “us” and “our” refer to NuCana plc and its consolidated subsidiaries, except where the context otherwise requires.

NuCana® and Acelarin® are our registered trademarks and ProTidesTM is our trademark.

PRESENTATION OF FINANCIAL AND OTHER DATA

The consolidated financial statement data as at December 31, 2023, 2022, 2021, 2020, and 2019 and for the years ended December 31, 2023, 2022, 2021, 2020, and 2019 have been derived from our consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States). The financial statement data as at December 31, 2021, 2020 and 2019 and for the years ended December 31, 2020 and 2019 have been derived from our consolidated financial statements, which are not presented herein, which have also been prepared in accordance with IFRS as issued by IASB.

All references in this Annual Report to “$” are to U.S. dollars and all references to “£” are to pounds sterling.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains estimates and forward-looking statements, principally in the sections titled “Risk Factors,” “Operating and Financial Review and Prospects” and “Business.” Some of the matters discussed concerning our operations and financial performance include forward-looking statements and estimates within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements and estimates. Forward-looking statements include, but are not limited to, statements about:

the development of NUC-3373 and NUC-7738, as well as Acelarin, including statements regarding the expected initiation, timing, progress and availability of data from our clinical trials;
the potential attributes and benefit of our ProTides and their competitive positions;
our ability to successfully commercialize our ProTides, if approved;
our estimates regarding expenses, capital requirements and our need for additional financing;
our ability to acquire or in-license new product candidates;
potential collaborations; and
the duration and strength of our patent portfolio.

These forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Factors that could cause actual results, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results to differ materially include, but are not limited to, those discussed under “Risk Factors” in this Annual Report. Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this Annual Report not to occur. These forward-looking statements are based on assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future.

Forward-looking statements and estimates speak only at the date they were made, and we undertake no obligation to update or to review any forward-looking statement or estimate because of new information, future events or other factors. Forward-looking statements and estimates involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these forward-looking statements and estimates.

iv

 


 

The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only at the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this Annual Report might not occur, and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive of, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.

WEBSITE DISCLOSURE

We maintain a public website at https://www.nucana.com and use our website as a routine channel of distribution of company information, including press releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Our website includes an Investors section through which we make available, free of charge, our Annual Reports on Form 20-F, Reports on Form 6-K, as well as any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Accordingly, investors should monitor our website in addition to following press releases, filings with the SEC, and public conference calls and webcasts.

None of the information provided on our website, in our press releases or public conference calls and webcasts or through social media is incorporated into, or deemed to be a part of, this Annual Report or in any other report or document we file with the SEC, and any references to such website is intended to be inactive textual references only.

v

 


 

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2. Offer Statistics and Expected Timetable

Not Applicable.

Item 3. Key Information

A.
Selected Financial Data

The following tables summarize our consolidated financial data as of the dates and for the periods indicated. The consolidated financial data as of and for the years ended December 31, 2023, 2022, 2021, 2020 and 2019 have been derived from our consolidated financial statements, which have been prepared in accordance with IFRS, as issued by the IASB, and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Our historical results are not necessarily indicative of the results that may be expected in the future. The following selected consolidated financial data should be read in conjunction with Item 5, “Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this Annual Report.

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

 

(in thousands, except per share data)

 

Consolidated statement of operations
   and comprehensive loss data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

£

(25,062

)

 

£

(36,426

)

 

£

(36,834

)

 

£

(25,899

)

 

£

(19,728

)

Administrative expenses

 

 

(6,063

)

 

 

(7,291

)

 

 

(8,529

)

 

 

(7,050

)

 

 

(5,953

)

Impairment of intangible assets

 

 

(503

)

 

 

(292

)

 

 

(2,809

)

 

 

 

 

 

 

Net foreign exchange (losses) gains

 

 

(1,156

)

 

 

4,887

 

 

 

267

 

 

 

(3,472

)

 

 

(1,019

)

Operating loss

 

 

(32,784

)

 

 

(39,122

)

 

 

(47,905

)

 

 

(36,421

)

 

 

(26,700

)

Finance income

 

 

754

 

 

 

669

 

 

 

103

 

 

 

246

 

 

 

1,049

 

Loss before tax

 

 

(32,030

)

 

 

(38,453

)

 

 

(47,802

)

 

 

(36,175

)

 

 

(25,651

)

Income tax credit

 

 

4,398

 

 

 

6,432

 

 

 

7,269

 

 

 

5,493

 

 

 

4,239

 

Loss for the year

 

 

(27,632

)

 

 

(32,021

)

 

 

(40,533

)

 

 

(30,682

)

 

 

(21,412

)

Other comprehensive (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translation of foreign operations

 

 

(41

)

 

 

61

 

 

 

5

 

 

 

(12

)

 

 

(11

)

Total comprehensive loss for the year

 

£

(27,673

)

 

£

(31,960

)

 

£

(40,528

)

 

£

(30,694

)

 

£

(21,423

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

£

(0.53

)

 

£

(0.61

)

 

£

(0.78

)

 

£

(0.81

)

 

£

(0.66

)

 

1

 


 

 

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Consolidated statement of
   financial position data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

£

17,225

 

 

£

41,912

 

 

£

60,264

 

 

£

87,356

 

 

£

51,962

 

Total assets

 

 

27,811

 

 

 

58,254

 

 

 

77,474

 

 

 

107,792

 

 

 

70,268

 

Share capital

 

 

2,114

 

 

 

2,095

 

 

 

2,087

 

 

 

2,047

 

 

 

1,299

 

Share premium

 

 

141,306

 

 

 

141,108

 

 

 

141,050

 

 

 

140,890

 

 

 

79,541

 

Accumulated deficit

 

 

(207,706

)

 

 

(180,573

)

 

 

(149,726

)

 

 

(110,594

)

 

 

(80,055

)

Capital reserve (1)

 

 

42,466

 

 

 

42,466

 

 

 

42,466

 

 

 

42,466

 

 

 

42,466

 

Net assets/Total equity attributable
   to equity holders of the Company

 

 

14,887

 

 

 

38,502

 

 

 

65,548

 

 

 

99,230

 

 

 

63,522

 

Total liabilities

 

 

(12,924

)

 

 

(19,752

)

 

 

(11,926

)

 

 

(8,562

)

 

 

(6,746

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares

 

 

52,860

 

 

 

52,373

 

 

 

52,180

 

 

 

51,175

 

 

 

32,479

 

 

(1)
The capital reserve balance arose from the impact of the reduction of our share premium account and corresponding increase to our capital reserve account reflected as of June 30, 2017 in connection with our re-registration as a public limited company, as further described in Note 13 to the consolidated financial statements.

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

Our business has significant risks. You should carefully consider the following risk factors and all other information contained in our Annual Report on Form 20-F for the year ended December 31, 2023 (our “Annual Report”) and in subsequent reports filed on Form 6-K, including our consolidated financial statements and the related notes. The risks and uncertainties described below are those significant risk factors, currently known and specific to us, that we believe are relevant to our business, results of operations and financial condition. If any of these risks materialize, our business, results of operations or financial condition could suffer and the price of the American Depositary Shares, or ADSs, could decline. Additional risks and uncertainties not currently known to us or that we now deem immaterial may also harm us and adversely affect our business, results of operations and financial condition.

 

Summary of Risk Factors

An investment in our ADSs is subject to a number of risks, including risks related to our business and industry, risks related to development of our product candidates, and risks related to our ADSs. The following summarizes some, but not all, of these risks. Please carefully consider all of the information discussed in our Annual Report and in subsequent reports filed on Form 6-K for a more thorough description of these and other risks.

 

Risks Related to Our Business and Industry

We have incurred significant operating losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.
We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
We depend heavily on the success of our product candidates NUC-3373 and NUC-7738. We cannot give any assurance that these product candidates will receive regulatory approval for any indication, which is necessary before any of them can be commercialized. If we, and any collaborators with whom we may enter into agreements for the development and commercialization of any of these product candidates, are unable to

2

 


 

commercialize them, or experience significant delays in doing so, our ability to generate revenue and our financial condition will be adversely affected.
Our lack of any approved products may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
Our business could be significantly and adversely affected by a pandemic.
Exchange rate fluctuations may adversely affect our results of operations and financial condition.

 

Risks Related to Development of Our Product Candidates

Initial success in the ongoing and completed early-stage clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.
Drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and may experience delays in obtaining, or ultimately be unable to obtain, the approval of our product candidates.
Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain ProTide candidates over other potential candidates and certain indications over other potential indications. These decisions may prove to have been wrong and may adversely affect our performance.
We may not be successful in our efforts to use and expand our technology platform to build a pipeline of additional ProTide candidates.

 

Risks Related to Marketing Approval of Our Product Candidates

If we are not able to obtain, or if there are delays in obtaining, required marketing approvals, we will not be able to commercialize our product candidates and our ability to generate revenue will be impaired.
Our product candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
Any product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

 

Risks Related to Our Dependence on Third Parties

We rely on, and expect to continue to rely on, third parties to conduct our clinical trials for our product candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain marketing approval for or commercialize our product candidates, and our business could be substantially harmed.
We contract with third parties for the manufacture and shipment of our product candidates for preclinical studies and clinical trials and expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
If we fail to comply with our obligations under our license and collaboration agreement with Cardiff ProTides Ltd., we could lose rights to licensed and assigned intellectual property that are necessary for developing and commercializing certain potential product candidates.

 

Risks Related to the Commercialization of Our Product Candidates

Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

3

 


 

Even if we are able to commercialize any product candidates, such drugs may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies.

 

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain intellectual property protection for our technology and products, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired. In addition, if we infringe the valid patent rights of others, we may be prevented from making, using or selling our products or may be subject to damages or penalties.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest, and our business may be adversely affected.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Our proprietary information, or that of our suppliers and any future collaborators, may be lost or we may suffer security breaches or other cybersecurity incidents.

 

Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business

We currently have a limited number of employees, and our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

 

Risks Related to the ADSs

The price of our ADSs may be volatile and may fluctuate due to factors beyond our control.
We will continue to incur increased costs as a result of operating as a public company in the United States, and our management is required to devote substantial time to new compliance initiatives and corporate governance practices.
Certain of our existing shareholders, members of our board of directors and senior management maintain the ability to exercise significant control over us. Your interests may conflict with the interests of these existing shareholders.
Future sales, or the possibility of future sales, of a substantial number of our ADSs or ordinary shares could adversely affect the price of our ADSs.
Holders of our ADSs may be subject to limitations on transfer of their ADSs.

 

Risks Related to Our Business and Industry

 

We have incurred significant operating losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

 

We have incurred significant operating losses since our inception. We incurred net losses of £21.4 million for the year ended December 31, 2019, £30.7 million for the year ended December 31, 2020, £40.5 million for the year ended December 31, 2021, £32.0 million for the year ended December 31, 2022, and £27.6 million as of December 31, 2023. As of December 31, 2023, we had an accumulated deficit of £207.7 million. Our product candidate, NUC-3373, is currently being evaluated in three ongoing clinical trials: a Phase 1b/2 trial (NuTide:302) in combination with other agents, in patients with advanced colorectal cancer; a randomized Phase 2 clinical trial of NUC-3373 (NuTide:323), in combination with approved anticancer agents including leucovorin, irinotecan, and bevacizumab for the second-line treatment of patients with advanced colorectal cancer; and a Phase 1b/2 clinical trial (NuTide:303) in combination with the PD-1 inhibitor pembrolizumab for patients with

4

 


 

advanced solid tumors and in combination with docetaxel for patients with lung cancer. Our product candidate NUC-7738 is currently in the Phase 2 part of a Phase 1/2 clinical trial (NuTide:701) for patients with advanced solid tumors which is evaluating NUC-7738 as a monotherapy and in combination with pembrolizumab. It may be several years, if ever, before we have a product candidate ready for commercialization. To date, we have financed our operations primarily through public and private placements of our equity securities. We expect to continue to incur significant expenses and operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:

continue development of our ProTides, including completing ongoing clinical trials and initiating additional clinical trials of NUC-3373 and NUC-7738;
complete preclinical studies and potentially initiate clinical trials of any preclinical-stage product candidates;
identify and develop new product candidates;
establish a robust supply chain for the manufacture of our product candidates in accordance with current good manufacturing practice, or cGMP;
seek marketing approvals for our product candidates that successfully complete pivotal clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any products for which we obtain marketing approval;
pursue market acceptance of our product candidates in the medical community and with third-party payors;
maintain, expand and protect our intellectual property portfolio;
expand our headcount by recruiting personnel to drive our clinical development programs and effectively manage out-sourced development activities;
enter into collaboration arrangements, if any, for the development of our product candidates or in-license other products and technologies;
achieve milestones which will trigger payments under our license agreements; and
add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

 

In addition, protecting our intellectual property may result in litigation aimed at enforcing or defending our patents. Intellectual property litigation is expensive and, in the event that we lose any such litigation, we may be subject to additional significant legal expense, including the potential requirement to pay the legal expenses of opposing parties.

 

Because of the numerous risks and uncertainties associated with developing new pharmaceutical drugs, we are unable to predict the extent of any future losses or when we will become profitable, if at all. In addition, our expenses could increase beyond expectations if we are required by the Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, or other foreign regulatory agencies, to perform studies and clinical trials in addition to those that we currently anticipate, or if there are any delays in the completion of planned clinical trials or the development of any of our ProTides.

 

To become and remain profitable, we must develop and eventually commercialize products with significant market potential. This will require us to be successful in a range of challenging activities, including the following:

completing clinical trials of our product candidates that achieve their clinical endpoints;
obtaining marketing approval for our product candidates;
obtaining satisfactory acceptance, formulary placement coverage and adequate reimbursement for our approved products from third-party payors, including private health insurers, managed care providers and governmental payor programs, including Medicare and Medicaid in the U.S.;
manufacturing, marketing and selling those products for which we may obtain marketing approval; and
achieving market acceptance of our product candidates in the medical community and with third-party payors.

 

We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a

5

 


 

quarterly or annual basis. Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our discovery and preclinical development efforts, expand our business or continue our operations and may require us to raise additional capital that may dilute your ownership interest. A decline in the value of the company could also cause you to lose all or part of your investment.

 

We depend heavily on the success of our product candidates, NUC-3373 and NUC-7738. We cannot give any assurance that these product candidates will receive regulatory approval for any indication, which is necessary before any of them can be commercialized. If we, and any collaborators with whom we may enter into agreements for the development and commercialization of any of these product candidates, are unable to commercialize them, or experience significant delays in doing so, our ability to generate revenue and our financial condition will be adversely affected.

 

We do not currently generate any revenues from sales of any products, and we may never be able to develop or commercialize a marketable product. We have invested substantially all of our efforts and financial resources to date in the development of NUC-3373 and NUC-7738, as well as Acelarin, for which we discontinued the NuTide:121 clinical trial in March 2022. Our ability to generate product revenues, which we do not expect will occur for at least the next several years, if ever, will depend heavily on the successful development and eventual commercialization of these product candidates, if approved, which may never occur. Each of NUC-3373 and NUC-7738 will require additional clinical development, management of clinical, preclinical and manufacturing activities, regulatory approval in multiple jurisdictions, procurement of manufacturing supply, commercialization, substantial additional investment and significant marketing efforts before we generate any revenues from product sales, if at all. We are not permitted to market or promote any product candidates in the United States, Europe or other countries before we receive regulatory approval from the FDA, the EMA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for NUC-3373, NUC-7738 or any future product candidate. We have not submitted a New Drug Application, or NDA, to the FDA, a Marketing Authorization Application, or MAA, to the EMA or comparable applications to other regulatory authorities for any of our product candidates and do not expect to be in a position to do so in the foreseeable future. The success of our product candidates will depend on many factors, including the following:

we may not be able to demonstrate that the product candidate is safe and effective as a treatment for our targeted indications to the satisfaction of the applicable regulatory authorities;
the applicable regulatory authorities may require additional preclinical or clinical trials of the product candidate, including additional toxicology trials, which would increase our costs and prolong our development;
the results of clinical trials of our product candidates may not meet the level of statistical or clinical significance required by the applicable regulatory authorities for marketing approval;
the applicable regulatory authorities may disagree with the number, design, size, conduct or implementation of our planned clinical trials;
the contract research organizations, or CROs, that we retain to conduct clinical trials may take actions outside of our control that adversely impact our clinical trials;
the applicable regulatory authorities may not find the data from preclinical studies and clinical trials sufficient to demonstrate that the clinical and other benefits of the product candidate outweigh its safety risks;
the applicable regulatory authorities may disagree with our interpretation of data from preclinical studies and clinical trials or may require that we conduct additional studies;
the applicable regulatory authorities may not accept data generated at our clinical trial sites;
if we submit an NDA to the FDA or an MAA to the EMA, and it is reviewed by an advisory committee, the advisory committee may recommend against approval of our application or may recommend that the FDA or the EMA require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;
the applicable regulatory authorities may require development of a risk evaluation and mitigation strategy, or REMS, as a condition of approval;
the applicable regulatory authorities may change its approval policies or adopt new regulations;
the applicable regulatory authorities may identify deficiencies in our formulation and manufacturing processes or facilities of our third-party manufacturers;

6

 


 

we may face delays in our formulation and manufacturing process as a result of having not yet optimized formulations or due to lack of availability of starting materials;
we may be unable to scale up the manufacture process for some of our product candidates;
we may face challenges on the safe and appropriate administration of our drugs in the clinic, including with respect to the conversion of our product candidates from a dry powder formulation to a liquid formulation prior to intravenous, or IV, administration, precipitation or other blockages in IV infusion lines, and the handling and storage of the IV infusion bags containing our product candidates, any of which may result in the need to carry out additional studies on the administration and compatibility of our product candidates with infusion sets and pumps;
we may be faced with challenges from third parties with respect to our right to use certain processes used in the formulation and process development of our product candidates;
we may have to defend our patents against infringement by third parties;
we may unknowingly infringe third-party patents;
we may face a “freedom to operate” issue;
we will be dependent on the efforts of third parties in completing clinical trials of, receiving regulatory approval for and commercializing, any product candidate we license to such third parties;
through our clinical trials, we may discover factors that limit the commercial viability of the product candidate or make its commercialization unfeasible;
we may not be successful in completing preclinical studies and clinical trials of, receiving marketing approvals for, establishing commercial manufacturing capabilities for and commercializing, any product candidate to which we retain rights under a collaboration agreement; and
we may not be successful in gaining acceptance of any product candidate by patients, the medical community and third-party payors, effectively competing with other therapies, maintaining a continued acceptable safety profile following approval and qualifying for, maintaining, enforcing and defending our intellectual property rights and claims.

 

With respect to each of NUC-3373 and NUC-7738, if we or our suppliers, as applicable, do not overcome one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize that product candidate.

 

We cannot be certain that NUC-3373 or NUC-7738 or any future product candidates will be successful in clinical trials or receive regulatory approval. Further, NUC-3373 or NUC-7738 or any future product candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for NUC-3373 or NUC-7738 or any future product candidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to manufacture and market NUC-3373 or NUC-7738 or any future product candidates, our revenues will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patient groups that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

 

We plan to seek regulatory approval to commercialize NUC-3373 and NUC-7738 in the United States and the European Union, and potentially in additional countries. While the scope of regulatory approval is similar in many countries, to obtain separate regulatory approval in multiple countries requires us to comply with the numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of NUC-3373 and NUC-7738, and we cannot predict success in these jurisdictions.

 

Products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval from the FDA and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality. Discussions with the FDA about the feasibility of an accelerated approval typically begin early in the development of a new drug or biological product in order to identify, among other things, an appropriate surrogate or intermediate clinical endpoint.

 

7

 


 

However, even if we were to generate clinical data sufficient to support an NDA submission seeking accelerated approval for any of our product candidates, there can be no assurance that such marketing application will be accepted by the FDA for substantive review or that approval will be granted on a timely basis, or at all. In addition, if another company receives full approval from the FDA to market a product for treatment of a similar indication to our product candidate, our ability to seek and obtain accelerated approval for our product candidate in the same or similar indication may be materially adversely affected. The FDA or foreign regulatory authorities also could require us to conduct further studies or trials prior to considering our application or granting a marketing approval of any type. We might not be able to fulfill the FDA’s requirements in a timely manner, which would cause delays, or approval might not be granted because our submission is deemed incomplete by the FDA. A failure to obtain accelerated approval for any of our product candidates would result in a longer time period to obtain approval for and commercialize such product candidate, could increase the cost of development of such product candidates and could harm our competitive position in the marketplace.

 

Even if we were to receive accelerated approval from the FDA for any of our other product candidates, we will be subject to rigorous post-marketing requirements, including the submission of confirmatory clinical data verifying the clinical benefit of the product. Drug products marketed under an accelerated approval NDA also are subject to a requirement that all promotional materials must be submitted to the FDA at least 30 days prior to their dissemination. The FDA could seek to withdraw accelerated approval for multiple reasons, including if we fail to conduct the required post-marketing study with due diligence, the post-marketing study fails to verify the product’s clinical benefit, other evidence shows that the product is not safe or effective under the conditions of use, or we disseminate promotional materials that are found by the FDA to be false and misleading.

 

Our lack of any approved products may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

 

Biopharmaceutical drug development is a highly speculative undertaking and involves a substantial degree of risk. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies, and conducting clinical trials of our product candidates. We have not yet demonstrated our ability to successfully complete large-scale, randomized, pivotal clinical trials compared to standards of care, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Typically, it takes several years to develop one new drug from the time it is discovered to when it is available for treating patients. In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

 

We will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our product candidates or continue our development programs.

 

The development of pharmaceutical drugs is capital-intensive. We expect our expenses to increase with our ongoing activities, particularly as we conduct larger-scale clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We may also need to raise additional funds sooner if we choose to pursue additional indications or geographies for our product candidates or otherwise expand more rapidly than we presently anticipate. Furthermore, we will continue to incur costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

 

As of December 31, 2023, we had £17.2 million in cash and cash equivalents. We believe, based upon our current operating plan, that, our cash and cash equivalents on hand will not be sufficient to fund our anticipated operations for at least the next twelve months. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing research and development and other corporate activities. Because the length of time and activities associated with successful research and development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. In addition, our future capital requirements will depend on many factors, and could increase significantly as a result of many factors, including:

the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our product candidates;

8

 


 

the scope, prioritization and number of our research and development programs;
the costs, timing and outcome of regulatory review of our product candidates;
the extent to which we enter into non-exclusive, jointly funded clinical research collaboration arrangements, if any, for the development of our product candidates in combination with other companies’ products;
our ability to establish collaboration arrangements for the development of our product candidates on favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under our license agreements and any collaboration agreements into which we may enter, if any;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future collaboration agreements, if any;
the extent to which we acquire or in-license product candidates and technologies, and the terms of such in-licenses;
the costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; and
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims.

 

Conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that can take years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that may not be commercially available for several years, if ever. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

 

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Volatility in the financial markets has generally made equity and debt financing more difficult to obtain and may compromise our ability to meet our fundraising needs. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.

 

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities.

 

We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

The development of pharmaceutical drugs is capital-intensive. We have incurred recurring losses from our operations, have an accumulated deficit totaling £207.7 million and cash flows used in operating activities of £26.4 million as of and for the year ended December 31, 2023. We had cash and cash equivalents of £17.2 million at December 31, 2023. We expect our expenses to increase in the medium to long-term with our ongoing activities, particularly if we conduct larger-scale clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we will continue to incur costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. In addition, we have based estimates of our cash runway on assumptions including, but not limited to, our expectations as to our future expenses and costs and our continued eligibility to receive R&D tax credits in the United Kingdom. There is no assurance that these assumptions will be correct and, as a result, we could use our available capital resources sooner than we currently expect. Because of these funding needs and related risks and the current cash balance on hand, there is uncertainty related to our ability to raise sufficient additional capital within the going concern period, prior to our cash balances being exhausted, which occurs in the going concern assessment period. These events or conditions raise substantial doubt on our ability to continue as a going concern and, therefore, that we may be unable to realize our assets and discharge our liabilities

9

 


 

in the normal course of business. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities. We may also need to raise additional funds if we choose to pursue additional indications or geographies for development and commercialization of our product candidates or otherwise expand more rapidly than we presently anticipate.

 

In light of the foregoing, we have disclosed in the footnotes to our financial statements that there is uncertainty related to the ability of us to raise additional capital within the going concern period and our independent registered public accounting firm has included an explanatory paragraph stating that we have concluded that a substantial doubt exists about our ability to continue as a going concern. The inclusion of these may negatively impact the trading price of our securities, have an adverse impact on our relationship with third parties with whom we do business, including our customers, vendors and employees, and could make it challenging and difficult for us to raise additional equity or debt financing to the extent needed, all of which could have a material adverse impact on our business, results of operations, financial condition and prospects.

 

Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

 

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity and debt financings. The sale of additional equity or convertible debt securities would dilute all of our shareholders. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, limitations on declaring dividends and other operating restrictions that could adversely impact our ability to conduct our business. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our ADSs to decline.

 

We could decide to seek funds through collaborations, strategic alliances or licensing arrangements with third parties, and we could be required to do so at an earlier stage than otherwise would be desirable. In connection with any such collaborations, strategic alliances or licensing arrangements, we may be required to relinquish valuable rights to our intellectual property, future revenue streams, research programs or product candidates, grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, or otherwise agree to terms unfavorable to us.

 

Inadequate funding for the FDA, the SEC and other, government agencies could hinder such agencies’ ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

 

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

 

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. Moreover, shutdowns or slowdowns in normal agency work caused by public health emergencies can increase the time needed for the agency to complete its review or make final approval or other administrative decisions. If a prolonged government shutdown or slowdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public market and obtain necessary capital in order to properly capitalize and continue our operations.

10

 


 

 

We may be unable to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments or benefit from favorable United Kingdom tax legislation.

 

As a United Kingdom resident company, we are subject to U.K. corporate taxation. We have generated losses since inception. As of December 31, 2023, we had cumulative carry forward tax losses of £98.5 million. Subject to any relevant restrictions, including the Corporate Income Loss Restriction and the Corporate Capital Loss Restriction that, broadly, restrict the amount of carried forward losses that can be utilized to 50% of group profits or gains arising above £5.0 million per tax year, we expect these to be available to carry forward and offset against future operating profits.

 

As a company that carries out extensive research and development activities, we have benefited from the United Kingdom's research and development tax credit regime for small and medium-sized companies, whereby, in respect of expenditure incurred in the current period from April 1, 2023 to March 31, 2024, we are able to surrender the trading losses that arise from our qualifying research and development activities for a payable tax credit of up to 18.6% (or up to 26.97% to the extent we meet the R&D intensive company criteria in this period). Based on the amount of our qualifying R&D expenditure in the fiscal year ended December 31, 2023 and our expectations as to the amount of our qualifying R&D expenditure in the current fiscal year, we believe that we qualified as an R&D intensive company for 2023. Our qualifying expenditures largely comprise employment costs for research staff, consumables and subcontract costs incurred as part of research projects. Certain subcontracted qualifying research expenditures are eligible for a cash rebate of up to 17.53% for R&D intensive companies, in respect of expenditure incurred in the current period from April 1, 2023 to March 31, 2024. The majority of our pipeline research, clinical trials management and manufacturing development activities are currently eligible for inclusion within these tax credit cash rebate claims. In relation to accounting periods beginning on or after April 1, 2021 there is a cap on payable credit claims in excess of £20,000 by reference to, broadly, three times the total Pay As You Earn, or PAYE, and national insurance contributions, or NICs, liability of the company. Unless an exemption applies, this could restrict the amount of payable credit that we can claim. In addition, to qualify for R&D tax credits, a company must be a going concern at the time when the claim is made. HMRC considers a company to be a going concern if its latest published accounts were prepared on a going concern basis, and nothing in the accounts suggests that status depends on its receiving R&D relief or tax credits. There can be no assurance that we are or will remain eligible for the R&D tax credits for the most recent accounting period or for future accounting periods. In respect of accounting periods beginning on or after April 1, 2024, existing U.K. research and development tax regimes will be replaced with a new regime that is similar to the existing R&D expenditures credit (RDEC) scheme and the SME scheme described above will cease to apply. As well as the new regime, there will also be a standalone regime for R&D intensive loss making SMEs. We are still reviewing the terms of these regimes, and our eligibility for them, but their application is likely to have an impact on our claims for research and development tax relief in respect of our costs incurred in future accounting periods.

 

We may benefit in the future from the United Kingdom’s “patent box” regime, which allows certain profits attributable to revenues from patented products to be taxed at an effective rate of 10%. As we have many different patents covering our products, future upfront fees, milestone fees, product revenues and royalties could be taxed at this favorably low tax rate. When taken in combination with the enhanced relief available on our research and development expenditures, we expect a long-term lower rate of corporation tax to apply to us. However, as a result of the changes to the United Kingdom research and development tax credit regimes (whether as a result of the reform of the U.K. research and development tax regime outlined above, or otherwise) or if there are unexpected adverse changes to the “patent box” regime, or for any reason we are unable to qualify for such advantageous tax legislation, or we are unable to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments then our business, results of operations and financial condition may be adversely affected.

 

Tax authorities may disagree with our positions and conclusions regarding certain tax positions, or may apply existing rules in an arbitrary or unforeseen manner, resulting in unanticipated costs, taxes or non-realization of expected benefits.

 

A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, His Majesty’s Revenue & Customs, or HMRC, the U.S. Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including methodologies for valuing developed technology and amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

 

11

 


 

A tax authority may take the position that material income tax liabilities, interest and penalties are payable by us, for example where there has been a technical violation of contradictory laws and regulations that are relatively new and have not been subject to extensive review or interpretation, in which case we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.

 

Changes and uncertainties in the tax system in the countries in which we have operations, could materially adversely affect our financial condition and results of operations, and reduce net returns to our shareholders.

 

We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices in jurisdictions in which we operate or in the future into which we sell our products, could increase the estimated tax liability that we have expensed to date and paid or accrued on our balance sheets, and otherwise affect our financial position, future results of operations, cash flows in a particular period and overall or effective tax rates in the future in countries where we have operations or may sell our products, reduce post-tax returns to our shareholders and increase the complexity, burden and cost of tax compliance.

 

Our business may become subject to economic, political, regulatory and other risks associated with international operations.

 

As a company based in the United Kingdom, our business is subject to risks associated with conducting business internationally. Many of our suppliers and collaborative and clinical trial relationships are located outside of the United States. Accordingly, our future results could be harmed by a variety of factors, including:

economic weakness, including inflation, or political instability;
differing and changing regulatory requirements for drug approvals;
differing jurisdictions could present different issues for securing, maintaining or obtaining freedom to operate in such jurisdictions;
potentially reduced protection for intellectual property rights;
difficulties in compliance with non-U.S. laws and regulations;
changes in regulations and customs, tariffs and trade barriers;
changes in currency exchange rates of the pound sterling, the euro and currency controls;
changes in a specific country’s or region’s political or economic environment, including the implications of the United Kingdom’s withdrawal from the European Union, or any potential future referendum regarding the independence of Scotland;
trade protection measures, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments;
differing reimbursement regimes and price controls in certain non-U.S. markets;
negative consequences from changes in tax laws;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
workforce uncertainty in countries where labor unrest is more common than in the United States;
difficulties associated with staffing and managing international operations, including differing labor relations;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires; and
changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad, interest rates, fuel prices, international currency fluctuations, corruption, political

12

 


 

instability, acts of war, including the ongoing conflict in Ukraine and any potential spread of the conflict into a wider war, acts of terrorism, and pandemics or other public health crises.

 

We may be adversely affected by the effects of inflation.

 

Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred.

 

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and its financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, or the FDIC, as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. A statement issued on March 12, 2023, by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money, including funds held in uninsured deposit accounts, borrowers under credit agreements, letters of credit and certain other financial instruments with SVB, Signature Bank or any other financial institution that is placed into receivership by the FDIC. In the United Kingdom, on March 13, 2023, the Bank of England, or BoE, issued a press release stating that the BoE, in consultation with the Prudential Regulation Authority, or PRA, HM Treasury, or HMT, and the Financial Conduct Authority, or FCA, had taken the decision (using the resolution powers for stabilizing failing banks under the Banking Act 2009) to sell Silicon Valley Bank UK Limited, or SVBUK, the U.K. affiliate of SVB, to HSBC UK Bank Plc. According to the press release, the BoE and HMT confirmed that depositors would have access to all of their money with SVBUK as a result of this transaction. However, if any of our other counterparties to instruments such as uninsured deposit accounts, credit agreements, letters of credit and certain other financial instruments were to be placed into receivership, we may be unable to access such funds. In addition, if any parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. In this regard, counterparties to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of SVB and uncertainty remains over liquidity concerns in the broader financial services industry. Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program. There is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could

13

 


 

involve financial institutions or financial services industry companies with which we have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, the following:

Delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;
Loss of access to revolving existing credit facilities or other working capital sources and/or the inability to refund, roll over or extend the maturity of, or enter into new credit facilities or other working capital resources;
Potential or actual breach of contractual obligations that require us to maintain letters of credit or other credit support arrangements; or
Termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.

In addition, investor concerns regarding the U.S., U.K. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by parties with whom we conduct business, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. For example, a party with whom we conduct business may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy. Any bankruptcy or insolvency, or the failure to make payments when due, of any counterparty of ours, or the loss of any significant relationships, could result in material losses to us and may material adverse impacts on our business.

 

Future pandemics or public health crises could adversely impact our business, including our preclinical studies and clinical trials.

 

Public health crises such as pandemics or similar outbreaks could adversely impact our business. We rely on third-party manufacturers, distributors, information technology and software service providers, law and accounting firms, CROs, and consultants who are subject to, or may become subject to, pandemic-related controls. Pandemics may also affect employees of third-party CROs located in affected geographies that we rely upon to carry out clinical trials. If these third parties cannot perform the services we require in a timely way and we cannot successfully implement replacements or workarounds, our business, results of operations, and financial condition could be harmed. As a result of potential future pandemics, we may in the future experience disruptions that could severely impact our business, preclinical studies and clinical trials, including:

delays or difficulties in enrolling patients in our clinical trials;
delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;
delays or disruptions in preclinical experiments and investigational new drug application-enabling good laboratory practice standard toxicology studies due to unforeseen circumstances at CROs and vendors along their supply chain;
increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting a virus, infection, or other disease, being forced to quarantine, or not wanting to attend hospital visits;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

14

 


 

interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by national, state or local governments, employers and others or interruption of clinical trial subject visits and trial procedures (particularly any procedures that may be deemed non-essential), which may impact the integrity of subject data and clinical trial endpoints;
interruption or delays in the operations of the FDA, the EMA or other foreign regulatory agencies, which may impact approval timelines;
interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in our supply chain or distribution vendors’ ability to ship product candidates; and
limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, an increased reliance on working from home or mass transit disruptions.

 

These and other factors could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.

 

In addition, the trading prices for our ADSs and for the securities of other biopharmaceutical companies may be highly volatile during certain periods as a result of a pandemic. As a result, we may face difficulties raising capital through sales of our ADSs or such sales may be on unfavorable terms. The extent to which a pandemic may impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the emergence, severity and spread of new variants of a disease, the duration of a pandemic and any outbreak of future variants, the potential imposition of travel restrictions and actions to contain a pandemic and any future outbreaks, such as social distancing and quarantines or lock-downs in the United Kingdom, the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United Kingdom, the United States and other countries to contain and treat a disease.

 

The ongoing conflict in Ukraine could adversely impact our business, in particular with respect to enrollment and data collection in any clinical trials of our product candidates conducted in Ukraine, Russia or Belarus.

 

The ongoing military conflict in Ukraine could disrupt our clinical trials and increase our costs in this region. Although the length and impacts of any military action are highly unpredictable, clinical trial sites in Ukraine, Russia and Belarus and neighboring countries could suspend or terminate their participation in trials, and patients and physicians could be forced to evacuate or voluntarily choose to relocate far from clinical trial sites, making them unavailable and potentially making data collection more difficult or not possible. Any such difficulties at clinical trial sites, or the unavailability of such clinical trial sites, could result in delays in enrolling or completing clinical trials, the need to identify alternative clinical trial sites, and increased overall development costs. Furthermore, the United States and its European allies have imposed significant sanctions against Russia and Belarus, including embargoes, sanctions and other restrictions targeting major Russian financial institutions. Our ability to conduct future clinical trials or purchases from suppliers located in Russia, Belarus and parts of Ukraine and elsewhere in the region has become restricted under applicable sanctions laws. All of the foregoing could impede the execution of our clinical development plans, which could materially harm our business.

 

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

 

The global credit and financial markets have experienced extreme volatility and disruptions in recent years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflicts in the Middle East and between Russia and Ukraine, terrorism or other geopolitical events. Sanctions imposed by the United States, the United Kingdom, and other countries in response to such conflicts, including the ones in the Middle East and in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us

15

 


 

to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves, or on less favorable terms than we would otherwise choose. In addition, one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our clinical development goals on schedule and on budget.

 

Uncertainty about global economic conditions could result in increased costs related to the manufacture of our product candidates and, if our drug candidates are approved and made available for sale, customers may postpone purchases of our drug candidates in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material adverse effect on demand for our drug candidates.

 

Exchange rate fluctuations may adversely affect our results of operations and financial condition.

 

Owing to the international scope of our operations, fluctuations in exchange rates, particularly between the pound sterling and the U.S. dollar, may adversely affect us. Although we are based in the United Kingdom, we source our active pharmaceutical ingredient, or API, and other raw materials and our research and development, manufacturing, consulting and other services worldwide, including from the United States, the European Union and India. Any weakening of the pound sterling against the currencies of such other jurisdictions makes the purchase of such goods and services more expensive for us. Further, potential future revenue may be derived from abroad, particularly from the United States. As a result, our business and the price of our ADSs may be affected by fluctuations in foreign exchange rates not only between the pound sterling and the U.S. dollar, but also the currencies of other countries, which may have a significant impact on our results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.

 

Our business may be negatively impacted by future changes in applicable regulatory regimes.

 

We may face new regulatory costs and challenges that could have an adverse effect on our operations. The regulatory frameworks applicable to our operations and the development of our product candidates, including those with respect to the FDA and the EMA, can change at any time as a result of political decisions. Any changes to the applicable regulatory frameworks could have a material impact on our plans and development strategy, including our supply of investigational medicinal products. Furthermore, the implications of the withdrawal of the United Kingdom from the European Union and any other significant European political changes could result in disruption that could in turn delay the approval of new medicines at the EMA.

 

Risks Related to Development of Our Product Candidates

 

Initial success in the completed and ongoing early-stage clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.

 

NUC-3373 is currently being evaluated in three ongoing clinical trials: a Phase 1b/2 trial (NuTide:302) in combination with approved anticancer agents including leucovorin, irinotecan, oxaliplatin, and bevacizumab in patients with metastatic colorectal cancer; a randomized Phase 2 trial (NuTide:323) in combination with leucovorin, irinotecan, and bevacizumab for the second-line treatment of patients with advanced colorectal cancer; and a Phase 1b/2 modular trial (NuTide:303) in combination with the PD-1 inhibitor pembrolizumab for patients with advanced solid tumors and in combination with docetaxel for patients with lung cancer. Favorable results obtained from our Phase 1 clinical trial of NUC-3373 in patients with advanced solid tumors, our ongoing Phase 1b/2 clinical trial of NUC-3373 in patients with metastatic colorectal cancer, our ongoing Phase 2 randomized NuTide:323 study investigating NUFIRI + bev versus the global standard of care, 5-FU in combination with leucovorin, irinotecan and bevacizumab, or FOLFIRI + bev, and our ongoing Phase 1b/2 modular trial of NUC-3373 in patients with advanced solid tumors may not be replicated in any future clinical trials. Similarly, while NUC-7738 is currently being evaluated in the Phase 2 part of a Phase 1/2 clinical trial in patients with advanced solid tumors which is evaluating NUC-7738 as a monotherapy and in combination with the PD-1 inhibitor pembrolizumab, favorable results obtained to date may not be replicated in any future clinical trials. In addition, data generated in these early-stage trials in particular are not the basis on which marketing approval by the FDA or a comparable foreign regulatory authority would be sought. Furthermore, the results of our clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for marketing approval. Statistical significance means that an effect is unlikely to have occurred by chance. Clinical trial results are considered statistically significant when the probability of the results occurring by chance, rather than from the efficacy of the product candidate, is sufficiently low. There can be no assurance that any of our clinical trials will ultimately be successful or support further clinical development of any of our product candidates. There is a high failure rate for drugs proceeding through clinical trials. A number of companies in the

16

 


 

pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies.

 

Preliminary and interim data from our clinical trials that we may announce or publish from time to time may change as patient enrollment continues, patient data are further examined and more patient data become available.

 

From time to time, we may announce or publish preliminary or interim data from our clinical studies, which include preliminary or interim data from our clinical trials, including those from the Phase 1b/2 clinical trial in patients with metastatic colorectal cancer, Phase 2 clinical trial of NUC-3373 for the second-line treatment of patients with advanced colorectal cancer, the Phase 1b/2 modular clinical trial of NUC-3373 in patients with advanced solid tumors, the Phase 2 part of the Phase 1/2 trial of NUC-7738 for patients with advanced solid tumors, and any future clinical trials of any of product candidates. Preliminary and interim data from a clinical trial are not always entirely representative of final data. Preliminary and interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues, patient data are further examined, more patient data become available, and we prepare and issue our final clinical trial report. As a result, preliminary and interim data should be viewed with caution until the final data are available. Material adverse changes in the final data compared to the preliminary or interim data could significantly harm our business prospects.

 

We are relatively early in our development efforts. If we are unable to successfully develop and commercialize our product candidates or experience significant delays in doing so, our business will be harmed.

 

We currently do not have any products that have gained marketing approval. We have invested substantially all of our efforts and financial resources identifying and developing our ProTides, such as NUC-3373 and NUC-7738, as well as Acelarin for which we discontinued the NuTide:121 clinical trial in March 2022. Our ability to generate product revenues, which may not occur for several years, if ever, will depend on the successful development and eventual commercialization of our product candidates: NUC-3373, for which a Phase 1b/2 clinical trial in patients with metastatic colorectal cancer, Phase 2 clinical trial of NUC-3373 for the second-line treatment of patients with advanced colorectal cancer and Phase 1b/2 modular clinical trial of NUC-3373 in combination with the PD-1 inhibitor pembrolizumab, in patients with advanced solid tumors or in combination with docetaxel in patients with lung cancer are ongoing; and NUC-7738, for which the Phase 2 part of the Phase 1/2 trial is ongoing which is evaluating NUC-7738 as a monotherapy and in combination with the PD-1 inhibitor pembrolizumab for patients with advanced solid tumors. We currently do not generate any revenues from sales of any products, and we may never be able to develop or commercialize a marketable drug. Each of our product candidates will require development, management of development and manufacturing activities, marketing approval in multiple jurisdictions, obtaining manufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenues from drug sales.

 

We have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. For example, to execute our business plan, we will need to successfully:

execute development activities for our product candidates, including successful enrollment in and completion of clinical trials;
manage our spending as costs and expenses increase due to preclinical development, clinical trials, marketing approvals and commercialization;
obtain required marketing approvals for the development and commercialization of our product candidates;
obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates and ensure that we do not infringe the valid patent rights of third parties;
protect, leverage and expand our intellectual property portfolio;
establish and maintain clinical and commercial manufacturing capabilities or make arrangements with third-party manufacturers for clinical and commercial manufacturing;
build and maintain robust sales, distribution and marketing capabilities, either on our own or in collaboration with strategic partners, if our product candidates are approved;
gain acceptance for our product candidates, if approved, by patients, the medical community and third-party payors;
compete effectively with other therapies;

17

 


 

obtain and maintain healthcare coverage and adequate reimbursement;
maintain a continued acceptable safety profile for our product candidates following approval, if approved; and
develop and maintain any strategic relationships we elect to enter into, if any.

 

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would harm our business. If we do not receive marketing approvals for our product candidates, we may not be able to continue our operations.

 

If we experience delays or difficulties in the enrollment of patients in clinical trials, development of our product candidates may be delayed or prevented.

 

Identifying and qualifying patients to participate in clinical trials for our product candidates is critical to our success. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials. Patient enrollment may be affected by many factors including:

the severity of the disease under investigation;
the size of the patient population for a product indication;
the eligibility criteria for the clinical trial in question;
the perceived risks and benefits of the product candidate under study;
the efforts to facilitate timely enrollment in clinical trials;
the patient referral practices of physicians;
the availability of competing therapies and clinical trials;
the proximity and availability of clinical trial sites for prospective patients; and
Congress also recently amended the Federal Food, Drug, and Cosmetic Act, or FD&C Act, to require sponsors of a Phase 3 clinical trial, or other “pivotal study” of a new drug to support marketing authorization, to design and submit a diversity action plan for such clinical trial. The action plan must describe appropriate diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them. Although none of our product candidates has reached Phase 3 of clinical development, we must submit a diversity action plan to the FDA by the time we submit a Phase 3 trial, or pivotal study, protocol to the agency for review, unless we are able to obtain a waiver for some or all of the requirements for a diversity action plan. It is unknown at this time how the diversity action plan may affect the planning and timing of any future Phase 3 trial for our product candidates or what specific information the FDA will expect in such plans. However, initiation of such trials may be delayed if the FDA objects to our proposed diversity action plans for any future Phase 3 trial for our product candidates, and we may experience difficulties recruiting a diverse population of patients in attempting to fulfill the requirements of any approved diversity action plan.

 

If we experience delays or difficulties in the enrollment of patients in clinical trials, for any reason, our clinical trials may be delayed or terminated. Any delays in completing our clinical trials will increase our costs, delay or prevent our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenue.

 

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and may experience delays in obtaining, or ultimately be unable to obtain, the approval of our product candidates.

 

The risk of failure in drug development is high. NUC-3373 is currently being studied in two Phase 1b/2 trials and a Phase 2 trial, and NUC-7738 is in the Phase 2 part of a Phase 1/2 trial. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in patients. Clinical trials are expensive, difficult to design and implement and can take several years to complete, and their outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Further, the results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, and interim results of a clinical trial do not

18

 


 

necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketing approval.

 

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates. Clinical trials may be delayed, suspended or prematurely terminated because costs are greater than we anticipate or for a variety of reasons, such as:

a pandemic, which may affect the ability to initiate and/or complete preclinical studies or conduct ongoing clinical trials, and may delay initiation of planned and future clinical trials;
delay or failure in reaching agreement with the FDA, the EMA or a comparable foreign regulatory authority on a trial design that we are able to execute;
delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial;
delays in reaching, or failure to reach, agreement on acceptable terms with prospective trial sites and prospective CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
inability, delay, or failure in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical programs;
delay or failure in recruiting and enrolling suitable subjects to participate in a trial;
delay or failure in having subjects complete a trial or return for post-treatment follow-up;
clinical sites and investigators deviating from the clinical protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;
failure to initiate or delay of or failure to complete a clinical trial as a result of an Investigational New Drug Application, or IND, being placed on clinical hold by the FDA, or for other reasons;
lack of adequate funding to continue a clinical trial, including unforeseen costs due to enrollment delays, requirements to conduct additional clinical trials and increased expenses associated with the services of our CROs and other third parties;
clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
regulators, or a Data Safety Monitoring Board, or DSMB, if one is used for our clinical trials, may require that we suspend or terminate our clinical trials for various reasons, including noncompliance with regulatory requirements, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, or a finding that the participants are being exposed to unacceptable health risks;
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient;
the FDA or other regulatory authorities may require us to submit additional data or impose other requirements before permitting us to initiate a clinical trial; or
there may be changes in governmental regulations or administrative actions.

Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval for our product candidates. The FDA may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after it has

19

 


 

reviewed and commented on the design for our clinical trials. For example, the FDA published guidance in 2022 on “Project Optimus”, an initiative to reform dose selection in oncology drug development. If the FDA does not believe we have sufficiently demonstrated that the selected doses for our investigational products maximize not only the efficacy of the investigational product, but the safety and tolerability as well, our ability to initiate new studies may be delayed. Even if we conducted the additional studies or generated the additional information requested, the FDA could disagree that we have satisfied their requirements, all of which will cause significant delays and expense to our programs.

 

In addition, even though NUC-3373 is a transformation of a chemotherapeutic agent that has been widely used for many years and there is a clear unmet medical need in each of the indications that we are currently pursuing in the clinic, there can be no assurance that the FDA will permit us to move more quickly to the initiation of pivotal clinical trials in large patient populations. Furthermore, NUC-7738 is a transformation of 3’-deoxyadenosine, a nucleoside analog that has never been successfully developed or approved as a chemotherapy, which may result in the need for more preclinical studies or clinical trials than would be the case for transformations of approved chemotherapeutic agents.

 

If we are required to conduct additional clinical trials or other studies of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other studies, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval for our product candidates at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings that would reduce the potential market for our products or inhibit our ability to successfully commercialize our products;
be subject to additional post-marketing restrictions or requirements, including confirmatory trials; or
have the product removed from the market after obtaining marketing approval.

 

Our product development costs will also increase if we experience delays in preclinical and clinical development or receiving the requisite marketing approvals. We do not know whether any of our preclinical studies or clinical trials will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

 

We face regulation and potential liability related to the privacy of health information we obtain from clinical trials sponsored by us or our collaborators.

 

The regulatory environment surrounding information security and privacy is increasingly demanding, and these laws and regulations are increasing in complexity and number, and may change frequently and sometimes conflict. We are subject to numerous regulations governing the protection of personal and confidential information of our clinical trial subjects, clinical investigators, and employees, including in relation to medical records, credit card data and financial information, which encompass state privacy and confidentiality laws (including state laws requiring disclosure of breaches), federal and state consumer protection and employment laws, the Health Insurance Portability and Accountability Act, or HIPAA, and European and other foreign data protection laws. For example, the European Union General Data Protection Regulation, or GDPR, is applicable in all E.U. member states and member states of the European Economic Area, or E.E.A. Following the United Kingdom’s withdrawal from the European Union, the data protection obligations of the GDPR continue to apply to U.K.-related processing of personal data in substantially unvaried form and fashion (retained in U.K. law as the “U.K. GDPR”).

 

We are subject to the GDPR and/or U.K. GDPR when conducting clinical trials involving U.K.- or E.E.A.-based data subjects (whether the trials are conducted directly by us or through a clinical vendor or collaborator) or offering approved products (or any other products or services) to U.K. or E.E.A. based data subjects (regardless of whether involving a U.K. or E.E.A. based subsidiary or operation), when monitoring of their behavior of data subjects in the United Kingdom or E.E.A. and/or when acting through a U.K.- or E.E.A.-based subsidiary, operation or other establishment.

 

The GDPR (and U.K. GDPR) sets out a number of requirements that must be complied with when handling personal data (i.e. data relating to an identified or identifiable living individual) in these circumstances, including: having an appropriate lawful basis for processing, and a relevant condition if processing ‘special category’ personal data (which

20

 


 

includes personal data related to health, biometric data used for unique identification purposes and genetic information); the obligation to appoint data protection officers in certain circumstances; accountability and record-keeping obligations; transparency obligations for data controllers; the obligation to carry out ‘data protection impact assessments’ in certain circumstances; rights for data subjects (such as rights for individuals to be “forgotten”, rights to data portability, rights to object etc.); a stringent standard of data subject consent; and the obligation to notify certain significant personal data breaches to the relevant Supervisory Authority(ies) and affected individuals. In addition, the GDPR provides a very broad definition of what constitutes personal data (for example, the GDPR expressly clarifies that it applies to ‘pseudonymized’ (i.e., key-coded) data). A number of opinions from Supervisory Authorities has further supported a very wide interpretation of the concept of personal data and, thus, the application of the GDPR. Recent decisions by E.U. supervisory authorities and the Court of Justice of the E.U. have confirmed that the rights granted to individuals under the GDPR must be applied broadly, and the law itself must be interpreted strictly, to guarantee the protection of the rights of individuals.

 

The GDPR and U.K. GDPR also impose strict rules on the transfer of personal data out of the E.E.A. and United Kingdom to U.S. and other Third Countries. Recent legal developments have created further complexity and uncertainty regarding transfers of personal data from the E.E.A. and United Kingdom to the United States (although there have also been some positive developments on this front). A new ‘adequacy decision’ for the ‘E.U.-U.S. Data Privacy Framework’, which allows personal data to be transferred from the E.E.A to U.S. entities who self-certify under the Data Privacy Framework, was adopted by the European Commission on July 10, 2023. The UK-US Data Bridge (the UK extension to the Data Privacy Framework) came into force shortly after on October 12, 2023. While the Data Privacy Framework and Data Bridge, in principle, makes it easier to transfer personal data from the E.E.A. and United Kingdom respectively to the United States, a legal challenge has already been issued in Europe against the Data Privacy Framework and other prominent European privacy campaigners have indicated their intention to challenge the decision in 2024. Similarly, the U.K. Information Commissioner’s Office issued an Opinion highlighting areas of the Data Bridge that could leave it open to challenge.

 

As the Data Privacy Framework is limited to transfers to certified participants in the U.S., many transfers continue to rely on the standard contractual clauses. Use of the standard contractual clauses must be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain. In May 2023, the Irish Data Protection Commission issued a €1.2 billion fine against Meta for transferring personal data to the United States in reliance on standard contractual clauses, on the basis that the personal data was not sufficiently protected in the United States. In light of all of these developments, it is expected that the uncertainty surrounding data transfers will continue into 2024 and beyond.

 

As the legal challenges continue and/or supervisory authorities increase their enforcement activities, we could suffer additional costs, complaints, and/or regulatory scrutiny, investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results and generally increase compliance risk.

 

The GDPR also provides that E.E.A. member states may make their own further laws and regulations to introduce specific requirements related to the processing of: “special categories of personal data”, including personal data related to health, biometric data used for unique identification purposes and genetic information; as well as personal data related to criminal offences or convictions. This fact may lead to greater divergence on the law that applies to the processing of such data types across the E.E.A. and U.K., compliance with which as and where applicable may increase our costs and could increase our overall risk.

 

In the past 12 months, the European data protection authorities have been particularly active in seeking to regulate Artificial Intelligence, in the absence of comprehensive A.I. regulation. Until the A.I. Act becomes applicable in the E.U., we expect to see this focus continue and so any use of A.I. within the healthcare sector will be subject to a heightened risk under European privacy laws.

 

Now that the United Kingdom is no longer a member of the European Union, there is increasing scope for divergence in application, interpretation and enforcement of the data protection law between the United Kingdom and European Union. On March 8, 2023, the U.K. Government presented the ‘Data Protection and Digital Information Bill’ to Parliament, which seeks to amend various aspects of the United Kingdom’s data protection regime. The Bill is still being debated in Parliament and there is no indication as of yet for when the Bill will pass into law. As currently drafted, the Bill will result in only minor changes to the substance of the U.K. GDPR, and so the United Kingdom will remain very closely aligned with the European Union in this regard. However, any changes relating to the U.K. and E.U. position regarding aspects of data protection law may lead to additional compliance costs and could increase our overall risk. There are also concerns that changes to the U.K.

21

 


 

regime, in particular changes to the data transfer rules, could increase the risk of the European Commission’s adequacy decision in respect of the U.K. being invalidated or withdrawn when it is reviewed in 2025 (or earlier, in the event of a legal challenge). It should be noted that a U.K. general election is expected in the second half of 2024: depending on the stage of the legislative procedure that the Bill has reached by that time and/or the outcome of the election, there is a possibility that the Bill may never become law.

 

Alongside the GDPR, the European Union has a number of new laws currently going through the legislative process, including the European Health Data Space (EHDS) Regulation. The EHDS Regulation is likely to, for example, require us to make health data available to other organizations in this sector (in an anonymized form) and to the patients themselves. This law is approaching the final stages of the E.U. legislative procedure and so we may have to devote substantial resources to understanding and preparing for it.

 

These laws and regulations are increasing in complexity and number, and new regulatory guidance and case law means the regulatory landscape changes frequently. Complying with these numerous, complex and often changing regulations is expensive and difficult. Failure by us, any partners, our service providers, or our employees or contractors to comply with the GDPR could result in regulatory investigations, enforcement notices and/or fines of up to the higher of €20 million or up to 4% of our total worldwide annual turnover. Further, following the withdrawal of the United Kingdom from the European Union, we now have to comply with the GDPR and U.K. GDPR separately, each regime separately having the ability to fine up to the higher of €20 million / £17.5 million or 4% of global turnover. In addition, the value of fines issued by supervisory authorities has increased substantially in recent years: numerous multi-million € / £ fines have been issued by supervisory authorities across the E.E.A. and by the U.K. Information Commissioner’s Office, and the first €1.2 billion fine was issued against Meta by the Irish supervisory authority in May 2023. Guidance from the European Data Protection Board has indicated that turnover will be taken into account when defining the starting amount of fines, resulting in higher fines for larger organizations. Therefore, we expect the amount of fines to continue to rise. In addition to administrative fines, a wide variety of other potential enforcement powers are available to competent authorities in respect of potential and suspected violations of the GDPR, including extensive audit and inspection rights, and powers to order temporary or permanent bans on all or some processing of personal data carried out by non-compliant actors.

 

In addition to the foregoing, a breach of privacy laws or data security laws, particularly those resulting in a significant cybersecurity incident or breach involving the misappropriation, corruption, modification, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, could have a material adverse effect on our business, reputation and financial condition. In addition, widely publicized security breaches are increasingly being followed in the European Union by attempts to bring large ‘class action’ style claims; this trend is likely to continue in light of recent decisions by the European Court of Justice confirming data subjects’ right to compensation even for minor non-material damage. Although such ‘class action’ style claims have yet to succeed in any significant compensation orders, defending these claims is costly and could still result in substantial liability for compensation and legal fees. As a data controller, we are accountable for any third-party service providers we engage to process personal data on our behalf, including our CROs. We attempt to mitigate the associated risks by performing security assessments and due diligence of our vendors and requiring all such third-party providers with data access to sign agreements, and obligating them to only process data according to our instructions and to take sufficient security measures to protect such data. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws by our third-party processors could have a material adverse effect on our business and result in the fines, penalties and/or other enforcement actions outlined above.

 

We strive to comply with all applicable laws, but they may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction. Despite our efforts, we may not have fully complied in the past and may not in the future. If we become liable under laws or regulations applicable to us, we could be required to pay significant fines and penalties (including those described above), our reputation may be harmed and we may be forced to change the way we operate. That could require us to incur significant expenses or to discontinue certain services, which could negatively affect our business.

 

Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain ProTide candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our performance.

 

Because we have limited resources and access to capital to fund our operations, we must decide which ProTides to pursue and the resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management

22

 


 

and financial resources toward particular ProTides or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our ProTides or misread trends in the biopharmaceutical industry, in particular for our lead ProTides, then our business may be adversely affected.

 

We may not be successful in our efforts to use and expand our technology platform to build a pipeline of additional ProTide candidates.

 

A key element of our strategy is to use and expand our proprietary ProTide technology to build a pipeline of additional ProTide candidates and progress these ProTide candidates through clinical development for the treatment of cancer. Although our research and development efforts to date have resulted in a pipeline of ProTide candidates directed at the treatment of many solid tumors and hematological malignancies, we may not be able to develop ProTide candidates that are safe and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.

 

Risks Related to Marketing Approval of Our Product Candidates

 

If we are not able to obtain, or if there are delays in obtaining, required marketing approvals, we will not be able to commercialize our product candidates and our ability to generate revenue will be impaired.

 

Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution, import and export are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries.

 

These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, current good manufacturing practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, including periodic inspections by FDA and other regulatory authorities, requirements regarding the distribution of samples to physicians and recordkeeping. Before we can commercialize any of our product candidates, each such product candidate must be approved by the FDA pursuant to an NDA in the United States, by the EMA pursuant to an MAA in the European Union, and by similar regulatory authorities outside the United States prior to commercialization.

 

The process of obtaining marketing approvals, both in the United States and abroad, is expensive and takes several years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have limited experience in planning and conducting the clinical trials required for marketing approvals, and we expect to rely on third-party CROs to assist us in this process. Obtaining marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing facilities by the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. Because a number of our clinical trials will be in combination with other approved therapies, there may also be undesirable or unintended side effects, toxicities or other characteristics resulting from the other therapy or from its combination with our product candidate.

 

In addition, because our product candidates are transformations of nucleoside analogs, including those that are approved chemotherapeutic agents and those that have never been approved as chemotherapeutic agents, our product candidates could be negatively impacted by the identification of any new undesirable or unintended side effects, toxicities or other characteristics in such existing nucleoside analogs, in particular in those that have never been approved as chemotherapeutic agents.

23

 


 

Regulatory authorities have substantial discretion in the new drug approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical studies or clinical trials. Our product candidates could be delayed in receiving, or fail to receive, marketing approval for many reasons, including the following:

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials or require that we perform additional clinical trials, including toxicology trials;
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;
the results of our clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for marketing approval;
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission to obtain marketing approval in the United States or elsewhere;
third-party manufacturers or our clinical or commercial product candidates may be unable to meet the FDA’s cGMP requirements or similar requirements of foreign regulatory authorities; and
the approval requirements or policies of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

 

In addition, even if we were to obtain approval, regulatory authorities may approve our product candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, may approve a product candidate with restrictions on distribution or other REMS elements, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could harm the commercial prospects for our product candidates.

 

If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be impaired.

 

Our product candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

 

Undesirable side effects caused by our product candidates could cause us or the FDA or other regulatory authorities to interrupt, delay or halt our clinical trials and could result in more restrictive labels or the delay or denial of marketing approval by the FDA or other regulatory authorities of our product candidates. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims.

 

Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of patients, rare and severe side effects of our product candidates may only be uncovered with a significantly larger number of patients exposed to the product candidate. If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates or any other similar drugs after such approval, a number of potentially significant negative consequences could result, including:

regulatory authorities may withdraw or limit their approval of such product candidates;
regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication;
we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

24

 


 

we may be required to change the way such product candidates are distributed or administered, conduct additional clinical trials or change the labeling of the product candidates;
regulatory authorities may require a REMS plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools;
we may be subject to regulatory investigations and government enforcement actions;
we may decide to remove such product candidates from the marketplace after they are approved;
we could be sued and held liable for injury caused to individuals exposed to or taking our product candidates; and
our reputation may suffer.

 

In addition, the patient profile in the indications for which we are currently developing our product candidates, with many patients already seriously ill at the time of initiation of treatment, may result in an increased risk of claims that undesirable side effects or poor prognoses or outcomes are related to our product candidates. Regardless of whether or not such side effects or prognoses or outcomes are ultimately determined to be related to our product candidates, the claims themselves could result in some or all of the foregoing negative consequences.

 

We believe that any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidates and could substantially increase the costs of commercializing our product candidates, if approved, and significantly impact our ability to successfully commercialize our product candidates and generate revenues.

 

A Fast Track Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process and does not increase the likelihood that our product candidates will receive marketing approval.

 

If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA Fast Track Designation. The FDA has broad discretion whether to grant this designation. Even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program. Many drugs that have received Fast Track Designation have failed to obtain drug approval.

 

Any product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

 

If the FDA or a comparable foreign regulatory authority approves any of our product candidates, activities such as the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. The FDA or a comparable foreign regulatory authority may also impose requirements for costly post-marketing preclinical studies or clinical trials and surveillance programs to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding use of their products, and if we promote our products beyond their approved indications or in a way that is inconsistent with the FDA-approved labeling, we may be subject to enforcement actions or prosecution arising from that off-label promotion. Violations of the FD&C Act relating to the promotion of prescription drugs may also lead to investigations alleging violations of federal and state healthcare fraud and abuse and other laws, as well as state consumer protection laws.

 

Drug manufacturers and manufacturers’ facilities are also required to continuously comply with FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations and corresponding foreign regulatory manufacturing requirements. As such, we and our third-party suppliers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA or other marketing authorization application.

 

25

 


 

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

restrictions on such products, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
warning or untitled letters;
withdrawal of the products from the market;
refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of our products;
product seizure; or
injunctions or the imposition of civil or criminal penalties.

 

Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties. Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

 

The FDA’s or other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay marketing approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained.

 

Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

 

Although we do not currently have any drugs on the market, once we begin commercializing our product candidates, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the U.S. federal and state governments and the foreign governments in the jurisdictions in which we conduct our business. Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable U.S. federal and state healthcare laws and regulations include the following:

the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under a federal healthcare program such as Medicare and Medicaid; a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
the federal false claims laws, including, without limitation, the civil False Claims Act (which can be enforced by private citizens through qui tam actions), impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; in addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

26

 


 

HIPAA imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
the federal physician payment transparency requirements under the Physician Payments Sunshine Act, enacted as part of the Affordable Care Act, or ACA, require manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report to the Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value to physicians, teaching hospitals, and certain advanced non-physician health care practitioners, as well as and the ownership and investment interests of physicians and their immediate family members in such manufacturers;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which also imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
some state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and
state and foreign laws that govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

 

Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.

 

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion of our products from government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and the curtailment or restructuring of our operations. In addition, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

 

Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

 

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we otherwise may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

 

In addition, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the ACA was enacted in the United States, substantially changing the way healthcare is financed by both governmental and private insurers and significantly affecting the pharmaceutical industry. The ACA contained a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement adjustments and changes to fraud and abuse laws. As another

27

 


 

example, the 2021 Consolidated Appropriations Act signed into law on December 27, 2020 incorporated extensive health care provisions and amendments to existing laws, including a requirement that all manufacturers of drugs products covered under Medicare Part B report the product’s average sales price to the federal government.

 

As another example, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s AMP, for single source and innovator multiple source drugs, beginning January 1, 2024. Payment methodologies may also be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their products. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. By way of example, in August 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (which were first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits CMS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. CMS has begun to implement these new authorities and entered into the first set of agreements with pharmaceutical manufacturers to conduct price negotiations in October 2023. However, the IRA’s impact on the biopharmaceutical industry in the United States remains uncertain, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated federal lawsuits against CMS arguing the program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing. For that and other reasons, it is currently unclear how the IRA will be effectuated, or the impact of the IRA on our business.

 

In addition, individual states in the U.S. have also passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmacy benefit managers, or PBMs and other members of the health care and pharmaceutical supply chain, an important decision that has led to more aggressive efforts by states in this area. The U.S. Federal Trade Commission, or FTC, in mid-2022 also launched sweeping investigations into the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such entities’ operations, pharmacy networks, or financial arrangements. During the current congressional session, numerous PBM reforms are being considered in both the Senate and the House of Representatives; they include diverse legislative proposals such as eliminating rebates; divorcing service fees from the price of a drug, discount, or rebate; prohibiting spread pricing; limiting administrative fees; requiring PBMs to report formulary placement rationale; promoting transparency. Significant efforts to change the PBM industry as it currently exists in the U.S. may affect the entire pharmaceutical supply chain and the business of other stakeholders, including pharmaceutical developers like us.

 

In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or E.U. member state level may result in significant additional requirements or obstacles that may increase our operating costs.

 

We expect that the ACA and the IRA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we will receive for any approved product. Any reduction in payments from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize any of our products for which we receive marketing approval.

 

Legislative and regulatory proposals have also been made in recent years to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products, and the FDA’s statutory authorities are periodically amended by Congress. For example, Congress recently provided the FDA with additional authorities related to the accelerated approval pathway for human drugs and biologics. Under these recent amendments to the FD&C Act, the agency may require a sponsor of a product granted accelerated approval to have a confirmatory trial underway prior to approval. The

28

 


 

amendments also give the FDA the option of using expedited procedures to withdraw product approval if the sponsor’s confirmatory trial fails to verify the claimed clinical benefits of the product. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed or what the impact of such changes on the marketing approvals, if any, of our product candidates, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing conditions and other requirements.

 

Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

 

Our future profitability may depend, in part, on our ability to commercialize our product candidates in foreign markets. In order to market and sell our products in the European Union and many other jurisdictions, we or our third-party collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and economic areas and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The marketing approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. Additionally, a failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the marketing approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. Obtaining foreign marketing approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

 

We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we obtain approval of our product candidates and ultimately commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

our customers’ ability to obtain reimbursement for our product candidates in foreign markets;
our inability to directly control commercial activities because we are relying on third parties;
the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;
different medical practices and customs in foreign countries affecting acceptance in the marketplace;
import or export licensing requirements;
longer accounts receivable collection times;
longer lead times for shipping;
language barriers for technical training;
reduced or no protection on pharmaceutical products or their use in some foreign countries;
the unwillingness of courts in some foreign jurisdictions to enforce patents even when valid and infringed in that country;
the possibility of pre-grant or post-grant review proceedings in certain foreign countries that allow a petitioner to hold up patent rights for an extended period or permanently by challenging the patent filing at the patent office of that country;
the possibility of a compulsory license issued by a foreign country that allows a third-party entity or a government to manufacture, use or sell our products with a government-set low royalty to us;
the existence of additional potentially relevant third-party intellectual property rights;
foreign currency exchange rate fluctuations;

29

 


 

an increase in restrictions on trade or other protectionist measures; and
the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

 

Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.

 

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

 

In some countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our financial results would suffer.

 

We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.

 

Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010, or the Bribery Act, the Foreign Corrupt Practices Act, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act, and other anti-corruption laws that apply in countries where we do business. The Bribery Act, the FCPA and these other laws generally prohibit us and our employees and intermediaries from authorizing, promising, offering, soliciting, requesting, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to or from persons in the public or private sector to obtain or retain business or gain some other business advantage.

 

Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense. We and those acting on our behalf operate in a number of jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we participate in collaborations and relationships with third parties whose corrupt or illegal activities could potentially subject us to liability under the Bribery Act, FCPA or local anticorruption laws, even if we do not explicitly authorize or have actual knowledge of such activities. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

 

Compliance with the Bribery Act, the FCPA and these other laws is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, anti-corruption laws present particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials under anti-corruption laws. Certain payments to health care providers in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to enforcement actions.

 

Our operations are also subject to the Criminal Finances Act 2017, or CFA 2017, which contains offences of failing to prevent the facilitation of tax evasion in the United Kingdom and abroad. This legislation makes organizations accountable for any part played by their personnel in deliberately and dishonestly facilitating tax evasion by others, where those organizations have not made reasonable efforts to prevent such facilitation.

 

We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United States and the United Kingdom, and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. Such Trade Control laws include restrictions or prohibitions on the sale or supply of certain products and services to embargoed countries or sanctioned countries, governments, persons and entities.

 

There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA, the CFA 2017 or other legal requirements, including Trade Control laws. If we are not in compliance with the Bribery Act, the FCPA, the CFA 2017 and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and

30

 


 

liquidity. Likewise, any investigation of any potential violations of the Bribery Act, the FCPA, the CFA 2017, other anti-corruption laws or Trade Control laws by United States, United Kingdom or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition. Further, the failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting.

 

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

 

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations, and the operations of our contracted third parties, may involve the use of hazardous and flammable materials, including chemicals and biological materials. The risk of contamination or injury from these materials cannot be eliminated. In the event of contamination or injury resulting from the use of hazardous materials, we could be held liable for any resulting damages, and the amount of the liability could exceed our resources or those of our contracted third parties. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

 

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, this insurance may not provide adequate coverage. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our discovery, preclinical development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

 

Risks Related to Our Dependence on Third Parties

 

We rely on, and expect to continue to rely on, third parties to conduct our clinical trials for our product candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain marketing approval for or commercialize our product candidates, and our business could be substantially harmed.

 

We do not have the ability to independently conduct clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct or otherwise support clinical trials for our product candidates. We expect to rely heavily on these parties for performance of clinical trials for our product candidates. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards.

 

We, our investigators, and our CROs will be required to comply with regulations, including good clinical practice, or GCP, and other related requirements for conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial patients are adequately informed of the potential risks of participating in clinical trials and their rights are protected. These regulations are enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any drugs in clinical development. The FDA enforces GCPs through periodic inspections of clinical trial sponsors, principal investigators and trial sites. If we, our investigators or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be called into question and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before considering our marketing applications for approval. We cannot assure you that, upon inspection, the FDA will determine that any of our future clinical trials will comply with GCPs.

 

In addition, our clinical trials must be conducted with product candidates produced under cGMPs. Our failure or the failure of our investigators or CROs to comply with these requirements may require us to repeat clinical trials, which would delay the marketing approval process and could also subject us to enforcement action. We also are required to register certain clinical trials and post the results of such completed clinical trials involving product candidates for which we receive marketing approval on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

 

Although we intend to design the clinical trials for our product candidates, CROs and individual site investigators will administer the clinical trials. As a result, many important aspects of our development programs, including their conduct and timing, will be outside of our direct control. Our reliance on third parties to conduct future clinical trials will also result in less direct control over the management of data developed through clinical trials than would be the case if we were relying

31

 


 

entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may:

have staffing difficulties;
fail to comply with contractual obligations;
experience regulatory compliance issues;
undergo changes in priorities or become financially distressed;
make errors in the design, management or retention of our data or data systems; or
form relationships with other entities, some of which may be our competitors.

 

These factors may adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost increases that are beyond our control. If the CROs do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development, marketing approval and commercialization of our product candidates may be delayed, we may not be able to obtain marketing approval and commercialize our product candidates, or our development program may be irreversibly harmed. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of any clinical trials we conduct and this could significantly delay commercialization and require significantly greater expenditures.

 

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such CROs are associated with may be extended, delayed or terminated and we may not be able to obtain marketing approval for or successfully commercialize our product candidates. As a result, we believe that our financial results and the commercial prospects for our product candidates in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.

 

We contract with third parties for the manufacture and shipment of our product candidates for preclinical studies and clinical trials and expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

 

We do not currently own or operate, nor do we have any plans to establish in the future, any manufacturing facilities or personnel. We rely, and expect to continue to rely, on third parties for the manufacture and shipment of our product candidates for preclinical studies and clinical trials, as well as for the commercial manufacture of our drugs if any of our product candidates receive marketing approval. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

 

The facilities used to manufacture our product candidates must be evaluated by the FDA pursuant to inspections that will be conducted after we submit our marketing applications to the FDA to ensure compliance with cGMP. We do not control the manufacturing and shipment process of, and will be completely dependent on, our contract manufacturers for compliance with cGMPs in connection with the manufacture and shipment of our product candidates. If our contract manufacturers cannot successfully manufacture and ship material that conforms to our specifications and the regulatory requirements of the FDA or others, we will not be able to use the products produced at their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority finds that these facilities do not comply with cGMP, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain marketing approval for or market our product candidates, if approved. Further, our failure, or the failure of our third-party manufacturers, to comply with these or other applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, if approved, operating restrictions and criminal prosecutions.

 

We may be unable to establish any agreements with third-party manufacturers or do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

32

 


 

reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possible termination or non-renewal of the agreement by the third party at a time that is costly or inconvenient for us.

 

Our product candidates and any other drugs that we may develop may compete with other product candidates and approved drugs for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

 

Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. If our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement.

 

Our current and anticipated future dependence upon others for the manufacture and shipment of our product candidates or drugs may adversely affect our future profit margins and our ability to commercialize any drugs that receive marketing approval on a timely and competitive basis.

 

We, or our third-party manufacturers, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity, which would delay or prevent us from developing our product candidates and commercializing approved products, if any.

 

In order to conduct large-scale clinical trials of our product candidates, we will need to manufacture them in large quantities. We, or any of our manufacturing partners, may be unable to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If we, or any manufacturing partners, are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing, and clinical trials of that product candidate may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business.

 

The third parties upon which we rely for the supply of the active pharmaceutical ingredients, formulations, and drug products for certain of our product candidates are our sole sources of supply and have limited capacity, and the loss of any of these suppliers could harm our business.

 

The API, formulations and drug products for certain of our product candidates are supplied to us from single-source suppliers with limited capacity. Our ability to successfully develop our product candidates, and to ultimately supply our commercial drugs in quantities sufficient to meet the market demand, depends in part on our ability to obtain the API, formulations and drug products in accordance with cGMP requirements and in sufficient quantities for commercialization and clinical trials.

 

We do not know whether our suppliers will be able to meet our demand, either because of the nature of our agreements with those suppliers, our current experience with those suppliers or our relative importance as a customer to those suppliers. It may be difficult for us to assess their ability to timely meet our demand in the future based on past performance. While our suppliers have generally met our demand for their products on a timely basis in the past, they may subordinate our needs in the future to their other customers.

 

For all of our product candidates, we intend to identify and qualify additional manufacturers to provide API, formulations and drug products prior to submission of an NDA to the FDA or an MAA to the EMA. Establishing additional or replacement suppliers for the API, formulations and drug products for our product candidates, if required, may not be accomplished quickly. If we are able to find a replacement supplier, such replacement supplier would need to be qualified, or we may have to perform comparative studies comparing the drug product from a new manufacturer to the product used in any completed clinical trials. All of this may require additional marketing approval, which could result in further delay. While we seek to maintain adequate inventory of the API, formulations and drug products for our product candidates, any interruption or delay in the supply of components or materials, or our inability to obtain such API, formulation and drug product from alternate sources at acceptable prices in a timely manner could impede, delay, limit or prevent our development efforts.

33

 


 

 

We have entered into, and may in the future enter into, collaborations with third parties to discover or develop product candidates. If these collaborations are not successful, our business could be adversely affected.

 

We have, and may potentially in the future, enter into collaborations with third parties. On December 31, 2021, our research, collaboration and license agreement with Cardiff University and University College Cardiff Consultants Ltd., or Cardiff Consultants, for the design, synthesis, characterization and evaluation of ProTides, as amended, or the Cardiff Agreement, expired pursuant to its terms. In connection with the expiration, we exercised our right under the Cardiff Agreement to extend the license of the ProTide-related intellectual property owned or controlled by Cardiff University as of the date of the Cardiff Agreement or owned or controlled by Cardiff University during the term of that Agreement, which we refer to as the Cardiff intellectual property, granted to NuCana under the Cardiff Agreement for a period of three months from the expiration of the Cardiff Agreement in order to continue evaluating additional ProTides generated under the Cardiff Agreement. This period expired on March 31, 2022. See “Collaboration and License Agreements–Cardiff University License” in this Annual Report for more information on the terms of our agreement and its expiration. While we chose not to further renew the Cardiff Agreement, the expiration of the Cardiff Agreement may result in a reduction in our ability to identify and develop additional ProTides.

 

In any collaboration that we may enter into, we would expect to have limited control over the amount and timing of resources that our collaborators dedicate to the collaboration efforts, including, if applicable, the development of ProTides. Our ability to generate potential additional ProTides from any such arrangements will depend on our and our collaborators’ abilities to successfully perform the functions assigned to each of us in these arrangements. In addition, our collaborators have the ability to abandon research or development projects and terminate applicable agreements. Our prior collaboration and any collaborations we enter into in the future, may pose several risks, including the following:

collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;
collaborators may not perform their obligations as expected;
the clinical trials conducted as part of, or as a result of, these collaborations may not be successful;
collaborators may not pursue development or commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding or external factors, such as an acquisition, that divert resources or create competing priorities;
collaborators may delay clinical trials, provide insufficient funding for clinical trials, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
we may not have access to, or may be restricted from disclosing, certain information regarding product candidates being developed or commercialized under a collaboration and, consequently, may have limited ability to inform our shareholders about the status of such product candidates;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
product candidates developed in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;
a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of any such product candidate;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development of any product candidates, may cause delays or termination of the research, development or commercialization of such product candidates, may lead to additional responsibilities for us with respect to such product candidates or may result in litigation or arbitration, any of which would be time-consuming and expensive;

34

 


 

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;
disputes may arise with respect to the ownership of intellectual property developed pursuant to our collaborations;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and
collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.

 

If our collaborations do not result in the successful development and commercialization of products, or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements, our development of product candidates could be delayed and we may need additional resources to develop our product candidates. In addition, if one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of us in the business and financial communities could be adversely affected. All of the risks relating to product development, regulatory approval and commercialization described in this Annual Report also apply to the activities of our collaborators.

 

We may in the future decide to collaborate with pharmaceutical and biotechnology companies and other organizations for the development and potential commercialization of our product candidates. These relationships, or those like them, may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing shareholders or disrupt our management and business. In addition, we could face significant competition in seeking appropriate collaborators and the negotiation process is time-consuming and complex. Our ability to reach a definitive collaboration agreement will depend, among other things, upon our assessment of the collaborator’s resources and expertise and the terms and conditions of the proposed collaboration. If we license rights to product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and strategy.

 

If we fail to comply with our obligations under our license and collaboration agreement with Cardiff ProTides Ltd., we could lose rights to licensed and assigned intellectual property that are necessary for developing and commercializing certain potential product candidates.

 

We entered into an exclusive, worldwide assignment, license and collaboration agreement with Cardiff ProTides Ltd., or Cardiff ProTides, for certain of the patents related to Acelarin and other potential ProTides. This agreement imposes various development, commercialization, royalty payment, diligence and other obligations on us. Among other obligations, we are specifically required to: pay Cardiff ProTides potential milestone payments; pay Cardiff ProTides royalties equal to mid- to high-single digit percentages of sales of such products, including sales by sublicensees; use commercially reasonable efforts to bring products to market; provide development and financial reports to Cardiff ProTides; file, prosecute, defend and maintain patent rights; indemnify Cardiff ProTides against certain claims and maintain insurance coverage; and direct future medicinal chemistry work related to certain compounds to Cardiff ProTides on a preferential basis.

 

If we breach any of these obligations, Cardiff ProTides may have the right to terminate the license and require us to assign back to Cardiff ProTides the intellectual property which was assigned to us under this agreement, which would result in our being unable to develop, manufacture and sell products that are covered by the licensed intellectual property or the assigned intellectual property or in a competitor’s gaining access to the licensed intellectual property or the assigned intellectual property.

 

Risks Related to the Commercialization of Our Product Candidates

 

Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

 

If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become

35

 


 

profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

the timing of our receipt of any marketing approvals;
the terms of any approvals and the countries in which approvals are obtained;
the efficacy and safety and potential advantages and disadvantages compared to alternative treatments;
the prevalence and severity of any side effects associated with our products or with any product that is used in combination with our product;
the indications for which our products are approved;
adverse publicity about our products or favorable publicity about competing products;
the approval of other products for the same indications as our products;
our ability to offer our products for sale at competitive prices;
the convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the success of our physician education programs;
the strength of our marketing and distribution;
the availability of third-party coverage and adequate reimbursement, including patient cost-sharing programs such as copays and deductibles; and
any restrictions on the use of our products together with other medications.

 

We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

 

The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as, or similar to, our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

 

Specifically, there are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology companies. If NUC-3373 is approved, it would compete with (a) existing chemotherapies, including 5-FU, (b) existing targeted therapies or immunotherapies and, if approved, targeted therapies or immunotherapies in clinical trials for the treatment of patients with cancer and (c) multiple approved drugs or drugs that may be approved in the future for indications for which we may develop NUC-3373. If NUC-7738 is approved, it would compete with existing chemotherapies and multiple approved drugs or drugs that may be approved in the future for indications for which we may develop NUC-7738. Existing chemotherapies with which we may compete, including 5-FU and gemcitabine, are no longer under patent and are produced by numerous generic pharmaceutical manufacturers. As a result, these chemotherapies are and will continue to be substantially less expensive to patients than many other potential therapies, including our ProTide candidates, if approved.

 

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, more convenient or less expensive or have fewer or less severe side effects than any products that we may develop. Our competitors also may obtain FDA or other marketing approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market or slow our marketing approval. Some of the important competitive factors affecting the success of

36

 


 

all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price and the availability of reimbursement from government and other third-party payors.

 

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies, conducting clinical trials, obtaining marketing approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel and in establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

 

Even if we are able to commercialize any product candidates, such drugs may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies.

 

The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product candidate in a particular country but then be subject to price regulations that delay our commercial launch of the product candidate, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product candidate in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

 

Our ability to successfully commercialize any product candidates, if approved, will depend in part on the extent to which coverage and adequate reimbursement for these product candidates and related treatments will be available from government authorities, private health insurers and other organizations. In the United States, the principal decisions about coverage and reimbursement for new medicines under Medicare are made by CMS, an agency within the U.S. Department of Health and Human Services, or HHS. Private payors ultimately determine which drugs they will cover and the amount of reimbursement they will provide for a covered drug. While there is no uniform system among payors for making coverage and reimbursement decisions, private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement. Reimbursement agencies in Europe may be more conservative than CMS. For example, a number of cancer drugs are generally covered and paid for in the United States but have not been approved for reimbursement in certain European countries. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of payments for particular drugs. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for drugs. We may also need to conduct expensive pharmacoeconomic studies, in addition to the costly studies required to obtain FDA or other comparable regulatory approvals, in order to demonstrate the medical necessity and cost-effectiveness of the product in order to secure coverage and reimbursement. We cannot be sure that coverage will be available for any product candidate that we commercialize and, if coverage is available, the level of payments. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. In addition, as noted above, the IRA of 2022 included multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States, including new authorities for CMS to negotiate certain drug prices starting for payment year 2026. Although CMS has recently begun to implement these new authorities, their impact on the pharmaceutical industry in the United States and on drug development activities remains uncertain.

 

There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and

37

 


 

private payors for any approved drugs that we develop could compromise our operating results, our ability to raise capital needed to commercialize drugs and our overall financial condition.

 

We currently have no marketing capability or sales force. If we are unable to establish effective sales or marketing capabilities or enter into agreements with third parties to sell or market our product candidates, we may not be able to effectively sell or market our product candidates, if approved, or generate product revenues.

 

We currently have no marketing capability or sales force, but we intend to commercialize or participate in the commercialization of our product candidates for which we receive regulatory approval in major markets, such as the United States and Europe. This may necessitate building a specialized sales force and other commercial capabilities in such markets. To achieve commercial success for any approved product candidate for which we retain sales and marketing responsibilities, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any drug launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

 

Factors that may inhibit our efforts to commercialize our product candidates on our own include:

our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future drugs;
the lack of complementary drugs to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.

 

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our drug revenues or the profitability of these drug revenues to us are likely to be lower than if we were to market and sell any product candidates that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so when needed or on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates that receive marketing approval or any such commercialization may experience delays or limitations.

 

Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer cybersecurity incidents, which could result in a material disruption of our product development programs, and could subject us to liability.

 

We utilize information technology systems and networks, including those licensed from and therefore operated and
hosted by third parties, to process, transmit and store electronic information in connection with our business activities. As the use of digital technologies has increased, cybersecurity incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication, and are becoming increasingly difficult to detect. These threats pose a risk to the security of our systems and networks and the confidentiality, availability, reliability, adequacy, and integrity of our data. There can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigating their effects.

 

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third-party contractors and consultants are vulnerable to damage or disruption from hacking, computer viruses, malware, including ransomware, software bugs, unauthorized access, natural disasters, terrorism, war, and telecommunication, equipment, and electrical failures.

 

We have measures in place that are designed to prevent, and if necessary, to detect and respond to such cybersecurity incidents and breaches of privacy and security mandates. Our measures to prevent, detect, respond to, and minimize such risks may be unsuccessful. While we have not, to our knowledge, experienced any significant system failure, accident, or

38

 


 

material cybersecurity incident to date, if such an event were to occur and cause interruptions in our operations or the operations of those third parties with which we contract, it could result in legal harm and a material disruption of our programs and our business operations, as well as our financial condition. For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our product candidates could result in delays in our development and regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Such a loss could also expose us to regulatory enforcement, civil liability and reputational damage. To the extent that any disruption or cybersecurity incident results in a loss of or damage to our data or applications, or inappropriate disclosure, loss, corruption, modification, or theft of confidential or proprietary information, personal data, clinical trial data, or health information, in addition to incurring liability, the further development of our product candidates could be delayed, or our competitive position could be compromised. Additionally, such disruptions or cybersecurity incidents could result in enforcement actions by United States, United Kingdom, or foreign regulatory authorities, regulatory penalties, and other legal liabilities such as but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business operations and collaborations, diversion of management efforts and damage to our reputation, all of which could harm our business and operations.

 

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop. If we are unable to obtain adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage, a material liability claim could adversely affect our financial condition.

 

We face an inherent risk of product liability exposure related to the evaluation of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

decreased demand for any product candidates or products that we may develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants;
significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced resources of our management to pursue our business strategy; and
the inability to successfully commercialize any products that we may develop.

 

Although we maintain product liability insurance coverage, our product liability insurance may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

 

Risks Related to Our Intellectual Property

 

If we are unable to obtain and maintain intellectual property protection for our technology and products, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired. In addition, if we infringe the valid patent rights of others, we may be prevented from making, using or selling our products or may be subject to damages or penalties.

 

Our success depends in large part on our ability to obtain and maintain patents in the United States and other countries that adequately protect our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the United States and in foreign countries that cover our novel product candidates and their uses, pharmaceutical formulations and dosages, and processes for the manufacture of them. Our patent portfolio currently includes both patents and patent applications.

 

The patent prosecution process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may choose not to seek patent

39

 


 

protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. Under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope. It is also possible that we will fail to identify patentable aspects of our research and development before it is too late to obtain patent protection.

 

We currently solely own or exclusively license our patents and patent applications and we have the right to control the prosecution of the in-licensed patent applications. In the future, we may choose to in-license additional patents or patent applications from third parties that we conclude are useful or necessary for our business goals. We may not have the right to control the preparation, filing, prosecution or maintenance of such patent applications. Therefore, if we do license additional patents or patent applications in the future, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

 

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or, in some cases, not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

 

Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent and Trademark Office, or USPTO, developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, became effective on March 16, 2013. The Leahy-Smith Act also created certain new administrative adversarial proceedings, discussed below. It is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

 

The U.S. Supreme Court has issued opinions in patent cases in the last few years that many consider may weaken patent protection in the United States, either by narrowing the scope of patent protection available in certain circumstances, holding that certain kinds of innovations are not patentable or generally otherwise making it easier to invalidate patents in court. Additionally, there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact our ability to obtain patent protection for our proprietary technology or our ability to enforce our proprietary technology. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

 

Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.

 

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and in other countries. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. In particular, third parties, such as generics companies, may seek to develop or acquire intellectual property rights proximate to our patents, including with respect to formulation and process matters, and may be able to do so in a non-infringing manner. Additionally, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed

40

 


 

patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Likewise, a court could uphold and enforce a third-party patent that it rules we have infringed, which would subject us to damages or prevent us from making, using or selling our products.

 

During patent prosecution in the United States and in most foreign countries, a third party can submit prior art or arguments to the reviewing patent office to attempt to prevent the issuance of a competitor’s patent. For example, our pending patent applications may be subject to a third-party pre-issuance submission of prior art to the USPTO or Third Party Observations in Europe. Such submission may convince the receiving patent office not to issue the patent. In addition, if the breadth or strength of protection provided by our patents and patent applications is reduced by such third-party submission, it could affect the value of our resulting patent or dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. We may also seek to have issued patents re-issued for purposes of strengthening our patent position; however, such requests for reissuance may not result in the issuance of the new patent and could result in loss of the originally issued patent.

 

The risks described here pertaining to our patents and other intellectual property rights also apply to any intellectual property rights that we currently license or may license in the future. In some cases, we may not have control over the prosecution, maintenance or enforcement of the patents that we license, and our licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain and enforce the licensed patents.

 

Third parties seeking to acquire intellectual property rights in our technology and products may be successful in securing such rights through the grant of patent applications in the United States and in other jurisdictions; if we are forced to defend our granted intellectual property rights for any of our product candidates, we may become involved in costly litigation or other administrative proceedings before the USPTO or comparable non-U.S. regulatory authorities, which could delay or prevent the development and commercialization of our current or future product candidates.

 

Biopharmaceutical drug development is inherently uncertain in a rapidly evolving technological environment such as ours in which there may be numerous patent applications pending in multiple jurisdictions at any given time, many of which are confidential when filed, with regard to the same or similar technologies. Any patents issued to third parties may contain claims that conflict with our patents and that may place restrictions on the commercial viability of our products and technologies. For example, we are aware of several issued, allowed or pending patent applications in several countries, including the United States, filed by BrightGene Bio-Medical Technology Co., Ltd., or BrightGene, a pharmaceutical company based in Suzhou, China, directed to various aspects of a process for the manufacture of Acelarin. While we believe that BrightGene’s process patent filings are invalid, challenging such filings could compel us to engage in costly patent litigation or certain other administrative proceedings before the USPTO, in U.S. federal courts, or in the courts or patent offices of other countries. These activities could result in substantial cost to us and could result in diversion of the efforts of our management and technical personnel.

 

In addition, BrightGene has also pursued patent claims to the composition of matter of Acelarin in the United States and several other foreign countries. We believe that their claims to the composition of matter of Acelarin are invalid. BrightGene’s claims to Acelarin in the United States were rejected by the USPTO as lacking novelty over our prior filed patents. Patents have been issued to BrightGene with composition of matter claims directed to Acelarin in Japan and Canada which we believe are invalid for the same reasons stated by the USPTO. To address these patents in Japan and Canada, and any equivalent patents that may be issued in other jurisdictions, may require oppositions, patent litigation or other administrative proceedings as necessary, which may be costly and time-consuming. If we do not choose to challenge any such granted patent, or are not successful in the challenge, then there is the possibility of a patent infringement lawsuit by BrightGene, which may also be costly and time-consuming for us to challenge in order to establish the invalidity of its patents. These activities could also result in substantial cost to us and could result in significant diversion of the efforts of our management and technical personnel.

 

An adverse outcome of any such litigation or proceeding could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties (which licenses may not be available at all or on reasonable terms) or require us to cease using our technology, which could delay or prevent the development and commercialization of our current or future product candidates. If we engage in patent litigation or other administrative proceedings to defend our patents, there is no guarantee that we will be successful in defending our patents, which would result in a loss of the challenged patent right to us and thus adversely affect our business.

41

 


 

 

We may become involved in administrative adversarial proceedings in the USPTO or in the patent offices of foreign countries brought by a third party to attempt to cancel or invalidate our patent rights, which could be expensive, time consuming and cause a loss of patent rights.

 

The Leahy-Smith Act created for the first time new procedures to challenge issued patents in the United States, including post-grant review and inter partes review proceedings, which some third parties have been using to cause the cancellation of selected or all claims of issued patents of competitors. For a patent with a priority date of March 16, 2013 or later, a petition for post-grant review can be filed by a third party in a nine-month window from issuance of the patent. A petition for inter partes review can be filed immediately following the issuance of a patent if the patent was filed prior to March 16, 2013. A petition for inter partes review can be filed after the nine-month period for filing a post-grant review petition has expired for a patent with a priority date of March 16, 2013 or later. Post-grant review proceedings can be brought on any ground of challenge, whereas inter partes review proceedings can only be brought to raise a challenge based on published prior art. These administrative adversarial actions at the USPTO review patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts, use a lower burden of proof than used by U.S. federal courts and interpret patent claims using a “broadest reasonable construction” instead of “plain and ordinary meaning,” which is used in court litigation. Because of these differences between U.S. administrative and judicial adversarial patent proceedings, it is generally considered easier for a competitor or third party to have a U.S. patent cancelled in a patent office post-grant review or inter partes review proceeding than invalidated in a litigation in a U.S. federal court. If any of our patents are challenged by a third party in such a U.S. patent office proceeding, there is no guarantee that we will be successful in defending the patent, which would result in a loss of the challenged patent right to us.

 

Opposition or invalidation procedures are also available in most foreign countries. Many foreign authorities, such as the authorities at the European Patent Office, or EPO, have only post-grant opposition proceedings. However, certain countries, such as India, have both pre-grant and post-grant opposition proceedings. These procedures have been used frequently against pharmaceutical patents in foreign countries. For example, in some foreign countries, these procedures are used by generic companies to hold up an innovator’s patent rights as a means to allow the generic company to enter the market. This activity is particularly prevalent in India, China and South America and may become more prevalent in Africa and other parts of Asia as certain countries reach more established economies. If any of our patents are challenged in a foreign opposition or invalidation proceeding, we could face significant costs to defend our patents and may not be successful. Further, in many foreign jurisdictions, the losing party must pay the attorneys’ fees of the winning party, which can be substantial.

 

We may have to file one or more lawsuits in court to prevent a third party from selling a product or using a product in a manner that infringes our patent, which could be expensive, time consuming and unsuccessful, and ultimately result in the loss of our proprietary market.

 

Because competition in our industry is intense, competitors may infringe or otherwise violate our issued patents, patents of our licensors or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement lawsuits, which can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties to as