Adhera Therapeutics, Inc. - Annual Report: 2016 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

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

For the fiscal year ended December 31, 2016

Commission File Number 000-13789

MARINA BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:

(626) 964-5788

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.006 par value

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [  ] No [X]

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 [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes[  ] No [X]

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $4.42 million as of June 30, 2016 based upon the closing price of $0.16 per share on the OTCQB tier of the OTC Markets on June 30, 2016.

As of March 23, 2017, there were 97,187,131 shares of the registrant’s $0.006 par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the registrant’s fiscal year ended December 31, 2016, to be filed by the registrant with the Securities and Exchange Commission not later than 120 days from the end of the registrant’s fiscal year ended December 31,2016, in conjunction with the registrant’s annual meeting of stockholders, are incorporated by reference in Part III of this Annual Report on Form 10-K.

MARINA BIOTECH, INC.

Table of Contents

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and regulations promulgated thereunder. These forward-looking statements reflect our current views with respect to future events or our financial performance, and involve certain known and unknown risks, uncertainties and other factors, including those identified below, those discussed in Item 1A of this report under the heading “Risk Factors,” and those discussed in our other filings with the Securities and Exchange Commission, which may cause our or our industry’s actual or future results, levels of activity, performance or achievements to differ materially from those expressed or implied by any forward-looking statements or from historical results. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act. Forward-looking statements include information concerning our possible or assumed future results of operations and statements preceded by, followed by, or that include the words “may,” “will,” “could,” “would,” “should,” “believe,” “expect,” “plan,” “anticipate,” “intend,” “estimate,” “predict,” “potential” or similar expressions.

Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements after the date of this Annual Report on Form 10-K or to conform them to actual results, new information, future events or otherwise, except as otherwise required by securities and other applicable laws.

The following factors, among others, could cause our or our industry’s future results to differ materially from historical results or those anticipated:

These factors are the important factors of which we are currently aware that could cause actual results, performance or achievements to differ materially from those expressed in any of our forward-looking statements. We operate in a continually changing business environment, and new risk factors emerge from time to time. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We cannot assure you that projected results or events will be achieved or will occur.

PART I

ITEM 1. Business.

Overview

We are a biopharmaceutical company engaged in the discovery, acquisition, development and commercialization of proprietary drug therapeutics for addressing significant unmet medical needs in the U.S., Europe and additional international markets. Our primary therapeutic focus is the disease intersection of hypertension, arthritis, pain, and oncology allowing for innovative combination therapies of the plethora of already approved drugs and the proprietary novel oligotherapeutics of Marina Biotech, Inc. (“Marina”). Our approach is meant to reduce the risk associated with developing a new drug de novo and also accelerate time to market by shortening the clinical development program through leveraging what is already known or can be learned in our proprietary Patient Level Database (PLD).

We currently have three clinical development programs underway: (i) our next generation celecoxib program drug candidates IT-102 and IT-103, each of which is a fixed dose combination (“FDC”) of celecoxib and either lisinopril (IT-102) or olmesartan (IT-103), (ii) CEQ508, an oral delivery of small interfering RNA (“siRNA”) against beta-catenin, combined with IT-102 to suppress polyps in the precancerous syndrome and orphan indication of Familial Adenomatous Polyposis (a precancerous syndrome) (“FAP”); and (iii) CEQ508 combined with IT-103 to treat Colorectal Cancer (“CRC”).

Our preclinical pipeline also includes potentially the best in class oligotherapeutics for bladder cancer, Inflammatory Bowel Disease (“IBD”), and Duchenne muscular dystrophy (“DMD”). Preclinical proof of concept studies have been completed with respect to bladder cancer and IBD.

Although we intend to retain ownership and control of product candidates by advancing their development, we will also consider partnerships with pharmaceutical or biopharmaceutical companies in order to reduce time to market and to balance the risks associated with drug discovery and development, thereby maximizing our stockholders’ value. Our partnering objectives include generating revenue through license fees, milestone-related development fees and royalties by licensing rights to our product candidates, which would be a source of non-dilutive capital.

We may engage in licensing activities associated with our delivery platforms (SMARTICLES and tkRNAi). However, since our strategy is to be a late-stage biopharmaceutical company with the goal of a commercial product launch and profitability within the next several years, the development and licensing of these platforms for the therapeutic assets of third parties will not be the primary focus of our company.

Background

As further described below under “Merger with IThenaPharma”, on November 15, 2016, Marina entered into an Agreement and Plan of Merger with IThenaPharma, Inc., a Delaware corporation (“IThena” or “IThenaPharma”), IThena Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of IThena (“Merger Sub”), and Vuong Trieu, Ph.D. as the IThena Representative (the “Merger Agreement”), pursuant to which, among other things, Merger Sub merged with and into IThena, with IThena surviving as a wholly owned subsidiary of Marina (such transaction, the “Merger”). As a result of the Merger, the former holders of IThena common stock immediately prior to the completion of the Merger owned approximately 65% of the issued and outstanding shares of Marina common stock immediately following the completion of the Merger.

Marina was incorporated under the laws of the State of Delaware under the name Nastech Pharmaceutical Company on September 23, 1983, and IThena was incorporated under the laws of the State of Delaware on September 3, 2014. IThena is deemed to be the accounting acquirer in the Merger, and thus the historical financial statements of IThena will be treated as the historical financial statements of our company and will be reflected in our quarterly and annual reports for periods ending after the effective time of the Merger. Accordingly, beginning with this Annual Report on Form 10-K for the fiscal year ended December 31, 2016, we will report the results of IThena and Marina and their respective subsidiaries on a consolidated basis.

Prior to the Merger, Marina’s pipeline consisted of oligonucleotide-based therapeutics. That pipeline included CEQ508, a product in clinical development for the treatment of FAP, for which Marina received both Orphan Drug Designation (“ODD”) and Fast Track Designation (“FTD”) from the U.S. Food and Drug Administration (“FDA”), as well as preclinical programs for the treatment of type 1 myotonic dystrophy (“DM1”) and DMD. The IThena pipeline of celecoxib FDCs is now incorporated into the combined company. We currently plan to develop IT-102/IT-103 – next generation celecoxib – together with CEQ508, as a therapeutic enhancer for therapies against FAP and CRC. We are also developing IT-102/IT-103 for the treatment of combined arthritis / hypertension and the treatment of pain requiring a high dose of celecoxib.

Prior to the completion of the Merger, Marina acquired/in-licensed and further developed nucleic acid chemistry and delivery-related technologies in order to establish a novel and differentiated drug discovery platform. We believe that this platform, which we now control, allows us to distinguish ourselves from others in the nucleic acid therapeutics area in that we are the only company capable of creating a wide variety of therapeutics targeting coding and non-coding RNA via multiple mechanisms of action such as RNA interference (“RNAi”), messenger RNA translational inhibition, exon skipping, microRNA (“miRNA”) replacement, miRNA inhibition, and steric blocking in order to modulate gene expression either up or down depending on the specific mechanism of action.

The breadth of our discovery platform allows us to offer to our partners the most appropriate nucleic acid-based therapeutic approach necessary to effectively modulate targets for a specific disease indication, many of which are considered undruggable by traditional methodologies. Each approach, i.e. siRNA, miRNA or single-strand oligonucleotide, has its advantages and disadvantages, and we can screen across multiple mechanisms of action to identify the most effective therapeutic. Our licensees, namely ProNAi Therapeutics, Inc. (“ProNAi”), Mirna Therapeutics, Inc. (“Mirna”) and MiNA Therapeutics, Ltd. (“MiNA”), are focused on oncology and have clinical programs in recurrent or refractory non-Hodgkin’s lymphoma and unresectable primary liver cancer or solid cancers with liver involvement.

We believe that we possess a unique industry-leading nucleic acid-based drug discovery platform, which is protected by a strong intellectual property (“IP”) position and validated through: (1) licensing agreements for our SMARTICLES delivery technology with Mirna, ProNAi and MiNA for unique nucleic acid payloads – microRNA mimics, DNA interference oligonucleotides and small-activating RNA, respectively; (2) Mirna and ProNAi’s respective clinical experience with SMARTICLES; (3) a licensing agreement with Novartis Institutes for Biomedical Research, Inc. (“Novartis”) for our CRN technology; (4) a licensing agreement with Protiva Biotherapeutics, Inc. (“Arbutus”), a wholly-owned subsidiary of Arbutus Biopharma Corporation (formerly Tekmira Pharmaceuticals Corporation), for our Unlocked Nucleobase Analog (“UNA”) technology; (5) licensing agreements with two large international companies (i.e., Novartis and Monsanto company (“Monsanto”)) for certain chemistry and delivery technologies; and (6) the FAP phase 1b/2a clinical trial with our TransKingdom RNA™ interference (“tkRNAi”) platform.

Following the Merger, we have reorganized the acquired Marina platform into a strong pipeline of preclinical and clinical drug candidates, which we believe will unlock their value. An example is the recent validation of the tkRNAi beta-catenin program against FAP following completion of our statistical analysis of our phase I data showing the achievement of statistical significant proof of concept knockdown of beta-catenin without side effects. This tkRNAi platform is now being developed further for IBD and other disease indications, as well as therapeutic microbiome.

Recent Developments

Merger with IThenaPharma

On November 15, 2016, Marina entered into the Merger Agreement with IThenaPharma, Merger Sub and Vuong Trieu, as the IThena representative, pursuant to which, among other things, Merger Sub merged with and into IThenaPharma, with IThenaPharma surviving as a wholly owned subsidiary of Marina.

Pursuant to the Merger Agreement, at the effective time of the Merger, without any action on the part of any shareholder, each issued and outstanding share of IThenaPharma’s common stock, other than shares to be cancelled pursuant to the Merger Agreement, was converted into the right to receive 10.510708 shares of Marina common stock (the “Exchange Ratio”). IThenaPharma shareholders were not entitled to receive fractional shares in the Merger. Instead, a holder of IThenaPharma’s common stock that would otherwise have been entitled to receive a fractional share of Marina common stock in the Merger received one full additional share of Marina common stock.

In addition, in connection with the Merger, each outstanding IThenaPharma warrant was assumed by Marina and converted into a warrant representing the right to purchase shares of Marina common stock, with the number of shares underlying such warrant and the exercise price thereof being adjusted by the Exchange Ratio, with any fractional shares rounded down to the next lowest number of whole shares.

As a result of the Merger, the former holders of IThenaPharma common stock immediately prior to the completion of the Merger owned approximately 65% of the issued and outstanding shares of Marina common stock immediately following the completion of the Merger.

Autotelic LLC License Agreement

In connection with the Merger Agreement and the closing of the Merger, on November 15, 2016, Marina entered into a License Agreement with Autotelic LLC, a stockholder of IThenaPharma that became the holder of 23,123,558 shares of Marina common stock as a result of the Merger, and an entity of which Dr. Trieu, the Chairman of our Board of Directors (the “Board) serves as Chief Executive Officer, pursuant to which (A) Marina licensed to Autotelic LLC certain patent rights, data and know-how relating to FAP and nasal insulin, for human therapeutics other than for oncology-related therapies and indications, and (B) Autotelic LLC licensed to Marina certain patent rights, data and know-how relating to IT-102 and IT-103, in connection with individualized therapy for pain using a non-steroidal anti-inflammatory drug and an anti-hypertensive without inducing intolerable edema, and treatment of certain aspects of proliferative disease, but not including rights to IT-102/IT-103 for TDM guided dosing for all indications using an Autotelic Inc.TDM Device. Marina also granted a right of first refusal to Autotelic LLC with respect to any license by Marina of the rights licensed by or to Marina under the License Agreement in any cancer indication outside of gastrointestinal cancers.

The License Agreement shall immediately terminate, all rights granted by a licensor under the License Agreement shall immediately revert forthwith to the applicable licensor, all benefits which have accrued under the License Agreement shall automatically be transferred to the applicable licensor, and all rights, title and interest in the licensed intellectual property shall immediately revert back to the applicable licensor if: (i) the applicable licensee makes a general assignment for the benefit of its creditors prior to the two (2) year anniversary of the date of the License Agreement; (ii) the applicable licensee applies for or consents to the appointment of a receiver, a custodian, a trustee or liquidator of all or a substantial part of its intellectual property prior to the two (2) year anniversary of the date of the License Agreement; (iii) prior to the two (2) year anniversary of the date of the License Agreement, and without the consent of the applicable licensor, the applicable licensee effects a Change of Control Transaction (as defined in the License Agreement); (iv) the applicable licensee ceases operations; or (v) the applicable licensee fails to take any material steps, as reasonably determined by the applicable licensor, to develop the licensed intellectual property prior to the one (1) year anniversary of the date of the License Agreement (each of the foregoing items (i) through (v), a “Termination Event”). Upon the occurrence of any Termination Event, the applicable licensee shall immediately discontinue all use of the licensed intellectual property.

Master Services Agreement

In connection with the Merger Agreement and the closing of the Merger, on November 15, 2016, Marina entered into a Master Services Agreement with Autotelic Inc., a stockholder of IThenaPharma that became the holder of 5,255,354 shares of Marina common stock as a result of the Merger, and an entity of which Dr. Trieu serves as Chairman of the Board, pursuant to which Autotelic Inc. agreed to provide certain business functions and services from time to time during regular business hours at Marina’s request (the “Master Services Agreement”). The Master Services Agreement has a term of ten years, though either party can terminate it by giving to the other party ninety (90) days’ prior written notice of such termination (provided that the final day of the term shall be on the last day of the calendar month in which the noticed termination date falls). The resources available to us through Autotelic Inc. include, without limitation, regulatory, clinical, preclinical, manufacturing, formulation, legal, accounting and information technology (“IT”).

As partial consideration for the services to be performed by Autotelic Inc. under the Master Services Agreement, during the period prior to the date on which we have completed an equity offering of either common or preferred stock in which the gross proceeds therefrom is no less than $10 million, we shall issue to Autotelic Inc. warrants to purchase shares of our common stock (the “MSA Warrants”), with the number of shares of common stock for which such MSA Warrants are exercisable, and the exercise price for such MSA Warrants, being based on the closing price of our common stock; provided, that in no event shall such price be lower than the lower of (x) $0.28 per share or (y) the lowest exercise price of any warrants that have been issued by us in a capital raising transaction (and that would otherwise reduce the exercise price of any other outstanding warrants issued by us) during the period beginning on November 15, 2016 and ending on the date of the issuance of the MSA Warrants.

Line Letter

In connection with the Merger, Marina entered into a Line Letter dated November 15, 2016 with Dr. Trieu, our Chairman of the Board, for an unsecured line of credit in an amount not to exceed $540,000, to be used for current operating expenses. Dr. Trieu will consider requests for advances under the Line Letter until April 30, 2017. Dr. Trieu shall have the right at any time for any reason in his sole and absolute discretion to terminate the line of credit available under the Line Letter or to reduce the maximum amount available thereunder without notice; provided, that Dr. Trieu agreed that he shall not demand the repayment of any advances that are made under the Line Letter prior to the earlier of: (i) May 15, 2017; and (ii) the date on which (x) we make a general assignment for the benefit of our creditors, (y) we apply for or consents to the appointment of a receiver, a custodian, a trustee or liquidator of all or a substantial part of our assets or (z) we cease operations. Dr. Trieu has advanced an aggregate of $250,000 under the Line Letter. Advances made under the Line Letter shall bear interest at the rate of five percent (5%) per annum, shall be evidenced by the Demand Promissory Note issued to Dr. Trieu, and shall be due and payable upon demand by Dr. Trieu.

Dr. Trieu shall have the right, exercisable by delivery of written notice thereof (the “Election Notice”), to either: (i) receive repayment for the entire unpaid principal amount advanced under the Line Letter and the accrued and unpaid interest thereon on the date of the delivery of the Election Notice (the “Outstanding Balance”) or (ii) convert the Outstanding Balance into such number of shares of our common stock as is equal to the quotient obtained by dividing (x) the Outstanding Balance by (y) $0.10 (such price, the “Conversion Price”, and the number of shares of common stock to be issued pursuant to the foregoing formula, the “Conversion Shares”); provided, that in no event shall the Conversion Price be lower than the lower of (x) $0.28 per share or (y) the lowest exercise price of any securities that have been issued by us in a capital raising transaction (and that would otherwise reduce the exercise price of any other outstanding warrants issued by us) during the period between November 15, 2016 and the date of the delivery of the Election Notice.

We look for continued support beyond the current Line Letter from Dr. Trieu, who has expressed strong interest in the success of our programs and is working diligently to help move our assets through regulatory/clinical development into sales/marketing.

Appointment/Resignation of Directors; Appointment of Officers

Pursuant to the Merger Agreement, and in connection with the Merger, Dr. Trieu was appointed to the Board, to serve until our 2017 annual meeting of stockholders or until his earlier death, resignation or removal. In connection with his appointment as a member of the Board, Dr. Trieu was also appointed to serve as Chairman of the Board.

On December 8, 2016, the Board elected Philippe P. Calais, Ph.D. Pharm. as a member of the Board to fill the vacancy created by the resignation of Joseph W. Ramelli as a director, such election to be effective January 1, 2017.

On December 8, 2016, the Board appointed Mr. Ramelli, who had served as our interim Chief Executive Officer, to serve as our Chief Executive Officer, effective immediately. At the same time, Mr. Ramelli resigned as a member of the Board effective immediately.

On February 10, 2017, the Board approved the appointment of Larn Hwang, Ph.D. to serve as our Chief Scientific Officer, and Mihir Munsif to serve as our Chief Operating Officer, in each case, effective February 13, 2017. Dr. Hwang will lead the further development of Marina’s therapeutic pipeline and Mr. Munsif will lead the manufacturing of our drug products on commercial scale.

On February 21, 2017, we appointed Seymour Fein MD as our Chief Medical Officer. Having taken more than twenty drugs from development on through FDA approval, Dr. Fein is in a unique position to lead the regulatory and clinical development of our pipeline.

Arrangements with LipoMedics

On February 6, 2017, we entered into a License Agreement (the “License Agreement”) with LipoMedics, Inc. (“LipoMedics”) pursuant to which, among other things, we provided to LipoMedics a license to our SMARTICLES platform for the delivery of nanoparticles including small molecules, peptides, proteins and biologics. This represents the first time that our SMARTICLES technologies have been licensed in connection with nanoparticles delivering small molecules, peptides, proteins and biologics. On the same date, we also entered into a Stock Purchase Agreement with LipoMedics pursuant to which we issued to LipoMedics an aggregate of 862,068 shares of our common stock for a total purchase price of $250,000.

Under the terms of the License Agreement, we could receive up to $90 million in success-based milestones. In addition, if LipoMedics determines to pursue further development and commercialization of products under the License Agreement, LipoMedics agreed, in connection therewith, to purchase shares of our common stock for an aggregate purchase price of $500,000, with the purchase price for each share of common stock being the greater of $0.29 or the volume weighted average price of our common stock for the thirty (30) trading days immediately preceding the date on which LipoMedics notifies us that it intends to pursue further development or commercialization of a licensed product.

If LipoMedics breaches the License Agreement, we shall have the right to terminate the License Agreement effective sixty (60) days following delivery of written notice to LipoMedics specifying the breach, if LipoMedics fails to cure such material breach within such sixty (60) day period; provided, that if LipoMedics advises us in writing within such sixty (60) day period that such breach cannot reasonably be cured within such period, and if in our reasonable judgment, LipoMedics is diligently seeking to cure such breach during such period, then such period shall be extended an additional sixty (60) days for an aggregate of 120 days after written notice of termination, and if LipoMedics fails to cure such material breach by the end of such 120-day period, the License Agreement shall terminate in its entirety. LipoMedics may terminate the License Agreement by giving thirty (30) days’ prior written notice to us.

Vuong Trieu, Ph.D., the Chairman of our Board of Directors, is the Chairman of the Board and Chief Operating Officer of LipoMedics. Lipomedics is a leader in nanomedicine in the field of oncology and its pipeline includes phospholipid paclitaxel nanoparticles and others. These products are potentially billion dollar products and we are looking forward to continued interaction with Lipomedics to accelerate its development program and expand the SMARTICLES delivery platform.

Issuance of Shares to Service Providers

In February 2017, we entered into two privately negotiated transactions pursuant to which we committed to issue an aggregate of 6,153,684 shares of our common stock for an effective price per share of $0.29 to settle aggregate liability of approximately $948,000, which is reflected in accrued expenses as of December 31, 2016. In addition, in February 2017, we issued 0.3 million shares of our common stock to a consultant providing investment advisory services.

Issuance of Shares to Novosom

On November 15, 2016, Marina agreed to issue to Novosom Verwaltungs GmbH (“Novosom”) 1.5 million shares of common stock upon the closing of the Merger in consideration of Novosom’s agreement that the consummation of the Merger would not constitute a “Liquidity Event” under that certain Asset Purchase Agreement dated as of July 27, 2010 between and among Marina, Novosom and Steffen Panzner, Ph.D., and thus that no additional consideration under such agreement would be due to Novosom as a result of the consummation of the Merger.

Liquidity

We have sustained recurring losses and negative cash flows from operations. At December 31, 2016, we had an accumulated deficit of approximately $2 million, negative working capital of approximately $2.7 million, and $105,347 in cash. We have been funded through a combination of licensing payments and debt and equity offerings.

We believe that our current cash resources, including the remaining balance available to us under the Line Letter, will enable us to fund our intended operations through the 3^rd or 4^th quarter of 2017. Our ability to execute our operating plan beyond such date depends on our ability to obtain additional funding.

The volatility in our stock price, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations. There can be no assurance that we will be successful in any such endeavors. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our Strategy

Our mission is to improve the lives of patients and assist their caretakers by delivering novel therapies that improve outcomes while reducing the undesirable side effects of many current therapies. We intend to pursue this initially through the development, approval, launch and marketing of IT-102 and IT-103. We believe we have assembled a strong team with in-depth domain knowledge in drug development and commercialization. The key elements to our long-term business strategy are described below:

Product Candidates

We currently have two late stage arthritis pain/hypertension drug candidates, IT-102 and IT-103. IT-102 will commence a BE registration trial for combined arthritis pain/hypertension where ACE is required in the second half of 2017, and ongoing manufacturing of exhibit batches and clinical trial batches as part of the CMC package for the New Drug Application (“NDA”), which is expected in the first half of 2018. Sales and marketing build out to begin during 2018, for a potential launch of the product in the first half of 2019. IT-103 will commence a BE registration trial for combined arthritis pain/hypertension where Angiotensin II receptor blockers (“ARB”) is required in the first half of 2018. The oncology programs targeting beta-catenin against FAP and CRC will progress along their developmental timeline following a meeting with the FDA to obtain concurrence on trial design and endpoints during 2017. Additionally we have programs for IBD and bladder cancer with completed animal proof of concept. These programs will be developed as resources allow. In subsequent sections we will discuss in detail our three leading programs (IT-102, IT-103, and M101).

The potential annual market size of IT-102 and IT-103 was projected to be $170M and $250M, respectively. With the FAP potential market size of $400M, we are projecting the total addressable market for our lead clinical candidates to be ~$820M annually .

IT-102/IT-103

IT-102 is a fixed-dose combination formulation of celecoxib, a cyclooxygenase (COX) - 2 selective inhibitor, and lisinopril, an ACE inhibitor, indicated in patients for whom treatment with both celecoxib and lisinopril is appropriate. IT-103 is the same as IT-102, except lisinopril was replaced by olmesartan- an Angiotensin II receptor blockers (“ARB”). IT-103 is for patients for whom treatment with both celecoxib and olmesartan is appropriate. These FDCs will allow rapid access to market through a short clinical program. The initial approval based on pivotal BE trial and a small phase III trial will be for combined arthritis pain and hypertension for patients already taking both drugs. Exploiting the suppression of celecoxib induced edema, we anticipate that they can eventually replace all of celecoxib prescriptions with or without hypertension once our phase III trial is completed with positive demonstration of edema suppression. This trial will be conducted post approval for label change and will target the highest edema risk patients- the elderly patients whose pill burden is greater than five per day. The inherent lower risk of GI bleeding with celecoxib can push IT-102 and IT-103 to also capture market shares of other pain medications such as ibuprofen and indomethacin.

The rationale for IT-102/IT-103 drug development is based on the coexistence of arthritis pain and hypertension in populations, as well as association of hypertension and edema with celecoxib treatment. Additionally, the preference for and improved compliance with a single tablet makes the proposed FDC formulation a very useful drug for treatment of two common conditions of increasing frequency in the aging population.

Arthritis/Hypertension

Arthritis and hypertension often coexist due to common risk factors. Firstly, both conditions are age related. The risk of developing osteoarthritis (“OA”) increases from the age of 40 onwards, with 25% of the population over the age of 45 presenting with clinical symptoms (Hunter et al, 2006). It has been reported that approximately 50% of patients with OA suffer from hypertension. Data from the 2009 Behavioral Risk Factor Surveillance System indicated that the top 2 most prevalent conditions in those over 70 years of age were hypertension (60.7%) and arthritis (55%) (Hunter et al, 2011). The prevalence of hypertension in rheumatoid arthritis (“RA”) in most large studies lies between 52% and 73%, with the age ranging from 51 to 66 years (Fernandes et al, 2015).

Hypertension is one of the most important modifiable risk factors for the development of cardiovascular disease in the general population (Yusuf et al, 2004). It affects about 1 billion individuals worldwide (Kearney et al, 2005) and about 30% of the adult population in the United States (Nwankwo et al, 2013). Despite its high prevalence and the impact of its complications, control of hypertension is far from adequate both in the general population (Chobanian et al, 2003; Oliveria et al, 2002; Primatesta et al, 2006; Luepker et al, 2006) and in arthritis patients (Panoulas et al, 2007). The poor control rates in the general population, where only a third of the people with hypertension have their blood pressure under control (Wang et al, 2005), is attributed to poor access to health care and medications, as well as a lack of adherence to long-term therapy for a usually asymptomatic condition. In the general population, anti-hypertensive therapy has been associated with a reduction of 40% in strokes, 20% in myocardial infarction and >50% in heart failure (Neal et al, 2000), which emphasizes the importance of optimal blood pressure control in any population, including arthritis patients.

Effective simultaneous control of arthritis and hypertension is greatly facilitated by FDC, as most hypertension patients require multiple medications for effective management. However, adherence to concomitant hypertension therapy decreases as the number of medications increases. As the pill burden increases from 1 to ≥10, patient adherence rapidly decreases from 58.8% to 24.5%, respectively (Resnic et al., 2006). A single FDC tablet results in 20% higher patient adherence than observed with a 2-tablet combination therapy (Dezii et al, 2009). In addition, coupling the treatment for asymptomatic hypertension with painful arthritis will not only improve compliance to the long-term therapy of hypertension, but also reduce the renal adverse events associated with NSAIDs/celecoxib treatment. So far, there is no such FDC available in the US. Therefore, there is an urgent need for a celecoxib/anti-hypertensive FDC such as IT-102.

Celecoxib side effects

Hypertension and other cardiovascular risks are associated with celecoxib treatment. Clinical trials and observational studies have shown that nonselective and COX-2 selective NSAIDs are associated with increased cardiovascular risks and events (Cheng et al, 2002; Boers et al, 2001; Mukherjee et al, 2001; Solomon et al, 2005). That is why cardiovascular thrombotic events, hypertension, congestive heart failure and edema are listed in the warnings and precautions of the CELEBREX^Ò package insert (CELEBREX^® Package Insert, 2016). Two randomized, placebo-controlled trials, Adenoma Prevention with Celecoxib (APC) trial and Prevention of Spontaneous Adenomatous Polyps (PreSAP) trial, showed a nearly 2-fold-increased cardiovascular risk in celecoxib treatment groups compared with the control group. Both dose groups in APC trial, celecoxib at 200 or 400mg twice daily, showed significant systolic blood pressure (SBP) elevations at 1 and 3 years from 2 to 5.2 mmHg; however, no significant elevation of SBP was observed in the 400 mg once daily group in the PreSAP trial (Solomon et al, 2006). This trend for a dose-related increase in cardiovascular events and blood pressure raises the possibility that lower doses or other dose intervals may be associated with less cardiovascular risk.

Celecoxib has been intensively evaluated on its blood pressure effects. A post hoc analysis on the renal safety of celecoxib with data from more than 50 clinical studies involving more than 13,000 subjects showed that celecoxib had no clinically detectable effect on blood pressure (Whelton 2000). In the Celecoxib Long-term Arthritis Safety Study (CLASS) with more than 8000 OA and RA patients, there were 2.7% of patients in the celecoxib group (400 mg, b.i.d, N=3987) that showed either new-onset or aggravated hypertension (Whelton 2006). A meta-analysis on the adverse events of celecoxib in OA and RA patients, which included data from 39,605 randomized patients in 31 trials, showed that the proportion of any patient having hypertension or aggregated hypertension was only 1-2% with celecoxib and there was no significant difference between celecoxib and placebo group (Moore 2005).

The large meta-analysis of 31 randomized controlled trials in patients with OA or RA found that celecoxib was associated with a significantly higher incidence of edema (at any site) than placebo (2.6% vs 1.4%: RR 1.9, 95% CI 1.4, 2.7) (Moore et al, 2005). Similarly, a pooled analysis of renal adverse event data from seven 12-week North American trials involving 9,666 patients with OA or RA found that the overall incidence of renal adverse events with celecoxib (4.3%) was greater than that with placebo (2.5%; p<0.05) and was not significantly different from that with NSAIDs (4.1%) (Whelton et al, 2000). The most common renal adverse events with celecoxib were peripheral edema (2.1%), hypertension (0.8%) and aggravated hypertension (0.6%) (Whelton et al, 2000).

Proprietary Patient Level Data Analyses

We have also compared the edema in patient populations receiving celecoxib alone and celecoxib in combination with a variety of antihypertensives. To support this study a proprietary database was created which contains: 1) Claims data from Symphony pertaining to anti-hypertensives, Statins, COX-2 inhibitors, and non-steroidal anti-inflammatory drugs (“NSAIDS”). The data span the most recent 36 months and 2) registry data from the ACC reporting blood pressure (systolic/diastolic), peripheral edema flags (yes, no, missing), heart rate, LDL, glucose level, ejection fraction, glomerular filtration rate, height, weight, body mass index, and the like.

Symphony dataset is True Patient Level data - All Data Sources be it RX or MX claims is tied back to individual patients which is tracked and then encrypted based on first name, last name, gender, date of birth and zip code to give an accurate picture of patient level informatics year over year regardless of insurance changes. The source of Managed Markets Rx claims data comes from various providers, including Intelligent network services (Switch Data) as well as direct data feeds from pharmacies that do not use Switches so it does not create payer biases.

The definition of the Symphony database is as follow: 1) Takes Celebrex, Anti-hypertensive (“AH”), Statin or NSAID or have OA, RA or some other form of arthritis for 36 months, 2) Time Frame of Jan 1, 2012 – Dec 31, 2014 (3 years), 3) Number of files: 201, 4) File Size: 561 GB zipped (~ 2.5 TB), 5) Unique Patients: 162 million, 6) Patients on Celebrex: 4.3 million, 7) Patients that have OA 16.3 million (15.4 million only OA), 8) Patients that have RA :2.3 million (1.4 million only RA).

The definition for the ACC registry is as follow: 1) Have 3+ BP readings, 2) Time Frame: Jan 1, 2012 – Dec 31, 2014 (3 years), 3) Number of files: 2, 4) Size: 590 MB, 51 MB, 5) Unique Patients: 1.58 million, 6) Patients with BP readings: 1.58 million, 7) Patients with Edema Flag True:870K.

The analysis also showed that there was no impact of celecoxib consumed on the change in blood pressure readings, even at a dose of 400 mg/day (Qazi 2017). Therefore, we confirmed that celecoxib has minimum impact on blood pressure at doses in treatment of arthritis pain. However, the effect of celecoxib on edema is higher than reported in controlled clinical trials. Incidence of edema increased from 20-25% for celecoxib alone to 25-35% when celecoxib was combined with any drug suggestive of drug induced edema. Coadministration with either ACE (i.e. lisinopril) or ARB (i.e. olmesartan) reduced the edema to 10-15%. The edema rate was then measured in the aforementioned database. The incidence of edema was higher for OA patients than RA, other arthritis, or arthritis free patients. The incidence of edema increased when patients were taking Celebrex for all groups except for RA and no arthritis free patients. Overall OA seems to be susceptible to Celebrex induced edema- the frequency of which is higher among patients on the ACC registry which would have prior cardiovascular history.

Manufacturing

Formulation work up for IT-102 is completed. The formulation was designed by considering the following characteristics: 1) Single free dose of individual drugs is already marketed in form of hard capsule and tablet, 2) Reference Listed Drug of Celecoxib (Celecoxib®) is hard capsule in High Density Polyethylene (“HDPE”) bottles, 3) Reference Listed Drug of Lisinopril (Zestril®) is uncoated tablet in HDPE bottles. Based on these characteristics, an oral dosage form suitable for administration to the adult was favored. Tablets were preferred to capsules in order to increase the quantity of drug substance available per unit. Celecoxib/Lisinopril FDC tablets are white circular biconvex bi-layered tablets of different size. Consequently, the size and weight increase with dosage strength. Celecoxib/Lisinopril FDC tablet drug products are supplied as 100/2.5 mg, 100/5.0 mg, 100/10.0 mg, 100/20.0 mg, 200/2.5 mg, 200/5.0 mg, 200/10.0 mg, and 200/20.0 mg tablets in HDPE bottles. The constituents were chosen to achieve the following objectives: 1) using of well-known and compatible excipients, which allow a world-wide registration of the product, 2) satisfactory chemical stability of the active substance, 3) satisfactory dissolution rate. The objective was to obtain a mean upper than 75% at 30 minutes with slight variation inter and intra batches, and 4) a quantity of excipients as low as possible to obtain a tablet as small as possible.

Pilot scale manufacturing at 10,000 tablets per batch was performed. The dissolution profiles of RLDs and pilot product (200/20 mg FDC bi-layer tablet) were similar with the results of celecoxib and lisinopril. Additionally, the dissolution profiles were considered similar using the similarity factor (f2) following the guidance for industry “Dissolution testing of immediate release solid oral dosage forms”, FDA, CDER, August 1997. With similarity in dissolution we are expecting to have similarity in BE trial.

IT-102 manufacturing has been transferred to an FDA inspected current good manufacturing practices (“cGMP”) contract manufacturing organization and the exhibit batches and the clinical trial materials batches are being manufactured for clinical trial. This would complete the manufacturing portion of the NDA dossier to be submitted to the FDA to support the marketing approval of IT-102. IT-103 is at the beginning of this process.

Clinical Study Plan for IT-102 (Celebrex/lisinopril)

One BE study is planned to compare and assess the safety and pharmacokinetic characteristics between co-administered 200 mg celecoxib and 20 mg or 2.5 mg lisinopril and IT-102 (200/20 mg or 200/2.5 mg celecoxib/lisinopril) monotherapy in healthy volunteers aged between 20 and 50 years. The study could be completed in six months.

This is going to be a single-dose, cross-over study of 60 subjects divided into two cohorts and treated over four periods. One tablet of IT-102 at the highest dose (FDC tablet of 200 mg celecoxib/20 mg lisinopril) or the lowest dose (FDC tablet of 200 mg celecoxib/2.5 mg lisinopril) will be administered once orally as the test drug. Co-administration once daily of one tablet each of 200 mg celecoxib and 20 mg lisinopril or one tablet each of 200 mg celecoxib and 2.5 mg lisinopril will be used as the comparator for the highest and lowest dose of the FDC, respectively.

For comparison of IT-102 with the comparator (co-administration of dose matched celecoxib and lisinopril), the 90% confidence intervals of the geometric mean ratios for the primary pharmacokinetic parameters (AUC and C_max) will be used for determination of BE according to the FDA’s criteria. Adverse events (AEs) will also be assessed and compared between IT-102 and the comparator.

Phase III Safety and Efficacy Study Plan. The purpose of this study is to evaluate the effect of celecoxib on the efficacy and safety of lisinopril in subjects with OA and hypertension requiring antihypertensive therapy. One multi-site, randomized, double-blind, placebo-controlled, 4-arm, 2-week phase 3 clinical study is planned to demonstrate the efficacy and safety of IT-102. It is planned to recruit 150 to 250 patients with OA and hypertension randomized into four arms, which are IT-102 (200 mg celecoxib/20 mg lisinopril), celecoxib (200 mg), lisinopril (20 mg) and placebo. The primary endpoint is demonstration that the reduction in blood pressure by IT-102 (200 mg celecoxib/20 mg lisinopril) is at least 50% of the reduction by lisinopril (20 mg) alone in the patients with OA and hypertension. The study is not planned to demonstrate pain reduction. AEs will also be assessed and compared among IT-102 and the comparator groups. The study could be completed in 12 months.

Both BE and phase III studies are to be conducted concurrently and followed by NDA submission of IT-102 for FDA approval by the 505(b)2 pathway.

IT-103 will undergo the same clinical developmental plan as IT-102, as summarized below:

Competition

The competition for IT-102/IT-103 is expected to come from the oral anti-arthritic market, or more specifically the traditional non-selective NSAIDs (such as naproxen and diclofenac), traditional NSAID/gastroprotective agent combination products or combination product packages (such as Vimovo®, Arthrotec®, Prevacid® and NapraPAC™) and the only COX-2 inhibitor in the U.S. market, Celebrex® (including generic versions of Celebrex®). Currently Kitov is developing a celecoxib/amlodipine FDC using the same regulatory pathway outlined for IT-102/IT-103. We feel that IT-102/IT-103 are superior to Kitov’s drug candidate due to compatibility in drug half-life, no known drug-drug interaction, and no common adverse events (especially edema). Our advantages in comparison to Kitov’s drug candidate are shown below:

M101

M101 is being developed as beta-catenin siRNA/celecoxib combination against FAP. This is a combination of IT-102 and CEQ508 (tkRNAi beta-catenin shRNA). Celecoxib was originally approved for FAP, however, it was removed from the market due to fear of cardiovascular risks during the VIOXX withdrawal. But with the PRECISION trial showing that celecoxib is as safe as ibuprofen and naproxen, we anticipate higher acceptance of celecoxib. Furthermore, with the addition of lisinopril to control edema and hypertension, we anticipate that high doses of celecoxib would be safe and effective against FAP. Additionally, the systemic suppression of COX-2 directly and beta-catenin indirectly with celecoxib will be augmented by targeted and local suppression of beta-catenin by beta-catenin shRNA (CEQ508). Together we anticipate a synergistic and safe and effective suppression of polyps in FAP. Since the completion of the phase I proof of concept study for CEQ508, we will move forward to registration phase III trial once we have FDA acceptance of Special Protocol Assessment (“SPA”).

FAP is an autosomal dominant disorder with an estimated incidence of approximately 1:10,000 persons and is a well described form of hereditary colorectal cancer (Bisgaard 1994, Neklason 2008, Steinbach 2000). FAP is caused by a heterozygous mutation in the Adenomatous Polyposis Coli (APC) gene located on chromosome 5, which results in low levels of functional APC protein required to regulate intracellular levels of beta-catenin. This dysregulation and accumulation of beta-catenin initiates an activation of downstream target genes, resulting in uncontrolled cellular proliferation, hyperplasia, adenoma formation, and an increased risk of colon cancer development (Kinzler 1996). In addition, the APC gene also plays a role in chromosome segregation through microtubule binding and cell polarity. Almost all of the cancer- causing mutations in the APC gene create a truncated gene devoid of its C-terminal region. Loss of the C-terminal region leads to chromosome instability, a hallmark of cancer (Kinzler 1996, Hanahan 2000). Typically, FAP results in the formation of hundreds to thousands of polyps in the large and small intestine. While these polyps start out benign, malignant transformation into colon cancer occurs 100% of the time when untreated. When the frequency of polyp formation exceeds the criteria for polypectomy as assessed by the physician, surgical intervention including a partial or complete colectomy is performed. Colectomies are typically performed in the late teenage years or early twenties. By age 35, 95% of individuals with FAP have developed polyps. Without surgical intervention, the mean age of colon cancer onset is 39 years of age (range of 34-43 years) (Trimbath 2002). In Attenuated FAP, the APC mutation resides in the 3’UTR (untranslated region) of the APC gene, resulting in a less severe phenotype of FAP. Patients usually develop fewer (<100) polyps, and the age at which polyp formation occurs is later than FAP. Colon cancer develops in these individuals as well but at a slower rate, typically after 40 years of age.

Duodenal/periampullary adenocarcinoma is the next leading cause of death in FAP patients following colorectal cancer (Vasen 2008). FAP patients are also at increased risk of developing other malignancies, including hepatoblastoma, pancreatic, thyroid, biliary tree, and brain tumors. Additionally, the risk of cancer forming in the remaining stump of the rectum and small intestine, after colectomy, remains high (Trimbath 2002, Vasen 2008).

Celecoxib for treatment of FAP

Cyclooxygenase (COX) inhibiting NSAIDs has been thoroughly investigated as a potential chemopreventive drug. Overexpression of COX-2 has been identified in colorectal adenomas and carcinomas. This overexpression was linked with reduced apoptosis, enhanced cell growth, tumor angiogenesis, tissue invasion and metastasis. This is likely attributed to the mechanism of COX-2, whereby expression of COX-2 prevents degradation of β-catenin protein increasing proliferation and survival. As such, the COX-2 specific inhibitor, celecoxib, has been utilized for the treatment of FAP patients.

In a randomized, double-blind, placebo-controlled study, treatment of celecoxib at 100 mg or 400 mg twice daily was compared against placebo for six months. Significant reduction in mean number of colorectal polyps (28% vs 4.5%, p = 0.003) and polyp burden assessed as the sum of polyp diameters (30.7% vs 4.9%, p = 0.001) was observed in patients treated with 400 mg twice daily compared with placebo (Steinbach et al. 2000). No significant reduction was observed in patients treated with 100 mg twice daily in terms of mean number of colorectal polyps (11.9%, p = 0.33) and polyp burden (14.6%, p = 0.09). In a similar study, 400 mg twice daily treatment of celecoxib showed significant reduction in area of duodenal polyposis (30.8% vs 8.3%, p = 0.049) of patients with >5% coverage at baseline compared to placebo (Phillips et al. 2002). No significant reduction was observed from treatment at 100 mg (26.6%, p = 0.252).

Evaluation of celecoxib for treatment of FAP was also evaluated in children with APC gene mutations and/or adenomas with a family history of FAP. Children were evaluated in a phase I, dose-escalation trial in three successive cohorts of six children (Lynch et al. 2010). Random assignment of subjects in a 2:1 generic:placebo ratio was conducted for cohort 1 (4 mg/kg/day) to cohort 2 (8 mg/kg/day) to cohort 3 (16 mg/kg/day). Colonoscopies were performed at baseline and month 3. At month 3, a 39.1% increase in number of polyps was observed in placebo patients whereas a 44.2% reduction was seen in the highest dose celecoxib group (p = 0.01). This corresponds with the adult dose of 400 mg BID and was shown to be safe and well tolerated. Reduction in number of polyps was also observed in the 8 mg/kg/day group (adult dose of 200 mg BID), with a 44.2% decrease. However, an increase of 69.7% was observed in patients treated at 4 mg/kg/day (adult dose 100 mg BID). In line with results observed in adult patients, high dose of celecoxib is most effective in treating patients with FAP.

Together, these studies have shown that celecoxib is effective in treating FAP at high doses (400 mg twice daily). However, although therapeutically effective, the high dose of celecoxib results in higher risk of cardiovascular adverse events. The increased risk has lowered the attractiveness of celecoxib as an effective treatment for FAP. However, should the risk be diminished, a novel and previously FDA approved drug would be available for treatment of a disease that currently has no effective treatment. This gap is to be filled with IT-102.

IT-102 is a fixed-dose combination of celecoxib, a COX-2 selective inhibitor, and lisinopril, an ACE inhibitor. The combination of an antihypertensive agent, e.g. lisinopril, with celecoxib is intended to suppress the cardiovascular side effects associated with high dose of celecoxib to offer a safe and tolerable therapeutic option for the medical management of FAP patients. Coupled with local and target suppression of beta-catenin by CEQ508 – we believe that M101 should be a safe and effective agent against FAP.

CEQ508 for treatment of FAP

TransKingdom RNA™ interference (tkRNAi) platform. tkRNAi is a broad-reaching platform that can be used to develop highly specific drug products for a diverse set of diseases. The tkRNAi platform involves the modification of bacteria to deliver shRNA to cells of the gastrointestinal tract. A significant advantage of the tkRNAi platform is oral (by mouth) delivery making this platform extremely patient friendly while harnessing the full potential of the RNAi process. The tkRNAi platform has demonstrated in vivo mRNA down-regulation of both inflammatory and cancer targets, thus providing a unique opportunity to develop RNAi-based therapeutics against inflammation and oncology diseases such as Crohn’s Disease, ulcerative colitis and colon cancer. For our own clinical pipeline, we have used the tkRNAi platform to discover and develop CEQ508 for the treatment of FAP as a beta-catenin siRNA knockdown.

Phase I proof of concept (“POC”) was conducted and the trial closed at meeting both its primary and secondary endpoints. START-FAP is a phase I dose-escalating study to evaluate safety and tolerability of single daily doses of CEQ508 in adult patients with FAP. Six patients with FAP were orally administered (3 each in Cohort 1 and 2) with CEQ-508 (108 and 109 colony forming units [CFU]/day for 28 days). The primary objective was to establish general safety for orally administered CEQ508 and to determine the maximum tolerated dose. The secondary objective was the effectiveness of CEQ508 on the gene expression of the target gene beta-catenin. Gene expression was evaluated in GI tissues (duodenum, ileum, right and left colon, antrum) taken during endoscopy examinations at baseline and at end-of-treatment (EOT). Expression levels were measured using qPCR and analyzed with ViiA™ 7 Real-Time system (Life Technologies, Carlsbad, CA). Ct values of β-catenin were normalized to two of three housekeeping genes (EIF2B1, HPRT1, GUSβ). A mixed Nested-ANOVA model was used to evaluate beta-catenin knockdown in normal mucosa and polyps. This phase I trial of bacterial delivery of RNAi investigational agent CEQ508 in FAP patients demonstrated an acceptable safety profile and was well-tolerated at the two bacterial dose levels tested, with no MTD having been identified. Without hitting MTD, START-FAP achieved both primary endpoint of safety and secondary endpoint of beta-catenin knockdown.

Analysis of Ct values stratifying by tissue type showed a decrease in β-catenin expression moving down the gastrointestinal tract (Duodenum > Ileum > Colon > Antrum). A Mixed nested-ANOVA model was developed to compare the levels of β-catenin in the normal mucosa and polyps taken at baseline and EOT. Factors in the model included: an overall treatment effect (baseline or CEQ-508 treated); tissue (Duodenum, Ileum, Colon, Antrum); interaction term for treatment x tissue; replicate (1, 2, or 3) nested in treatment and tissue to take into account pseudo-replication of Ct values performed in triplicate for each sample; and a random factor identifying each patient to control from multiple measurements taken from each patient and the patient to patient variation was expressed as percentage of total variation accounted for by the random factor.

A statistical model was generated to test whether CEQ508 was successful in suppressing beta-catenin expression. The model developed by pooling data from both cohorts for normal mucosa samples explained a significant proportion of variation (R-squared = 0.64, P<0.0001; Patient to patient variation accounted for 48% of the total variation). No significant reduction in overall β-catenin expression was observed in EOT samples. Modeling of pooled data for polyp samples explained a significant proportion of variation (R-squared = 0.54, P<0.0001; Patient to patient variation accounted for 6% of the total variation). Significant reduction was observed in overall β-catenin expression in EOT samples (F_1,113.1 = 6.87, P=0.01). Furthermore, significant reduction of β-catenin expression in the Duodenum was observed in EOT samples (Linear Contrast, Effect size = 0.363, 22.2% decrease, T = 2.75, P=0.007).

Evaluation of individual cohorts was also examined. The model for cohort 1 in normal mucosa explained a significant proportion of variation (R-squared = 0.84, P<0.0001; Patient to patient variation accounted for 80% of the total variation). Nonstatistical significant reduction was observed in overall β-catenin expression in EOT samples (F_1,46 = 6.03, P=0.018). Therefore, component analyses were deemed irrelevant and cohort 1 was declared not effective. The model for cohort 2 in polyps explained a significant proportion of variation (R-squared = 0.69, P<0.0001; Patient to patient variation accounted for 8.2% of the total variation). Significant reduction was observed in overall β-catenin expression at EOT (; F_1,86.06 = 13.13, P=0.0005). There was a significant reduction of β-catenin expression in the Duodenum (Linear Contrast, Effect size = 0.72, 39.3% decrease, T = 5.3, P<0.0001) and Ileum (Effect size = 0.49, 28.8% decrease, T = 2.57, P=0.012).

Together, the data indicate a higher expression of β-catenin in the small intestine (duodenum, ileum) compared to the large intestine (colon, antrum). Additionally, the mixed nest-ANOVA model shows effective decrease in β-catenin mRNA from treatment of CEQ508. The models indicate that treatment at 10⁸ CFU/day may not be effective enough at lowering β-catenin expression. However, significant effects were observed within the Duodenum and Ileum after treatment of 10⁹ CFU/day of CEQ508. Furthermore, decrease in β-catenin was observed only in the polyps while not significant effects were observed within the normal mucosa. This shows that CEQ508 is a therapeutically effective and specifically targeted novel treatment for patients with FAP. In addition, CEQ508 was granted orphan drug designation and fast track designation by the FDA.

Clinical Program for M101: Combination of celecoxib and CEQ508

We believe that the effectiveness of CEQ508 and celecoxib justify the combination as M101. We plan to meet with the FDA to discuss an SPA with a clearly defined clinical design and endpoints for regulatory approval. The meeting is planned for 2017 and the trial may start in 2018 or 2019. If successful, we anticipate a potential launch of the product in 2023.

Partnering and Licensing Agreements

Autotelic LLC – In connection with the Merger Agreement and the closing of the Merger, on November 15, 2016, Marina entered into a License Agreement with Autotelic LLC pursuant to which (A) Marina licensed to Autotelic LLC certain patent rights, data and know-how relating to FAP and nasal insulin, for human therapeutics other than for oncology-related therapies and indications, and (B) Autotelic LLC licensed to Marina certain patent rights, data and know-how relating to IT-102 and IT-103, in connection with individualized therapy of pain using a non-steroidal anti-inflammatory drug and an anti-hypertensive without inducing intolerable edema, and treatment of certain aspects of proliferative disease, but not including rights to IT-102/IT-103 for TDM guided dosing for all indications using an Autotelic Inc. TDM Device. Marina also granted a right of first refusal to Autotelic LLC with respect to any license by Marina of the rights licensed by or to Marina under the License Agreement in any cancer indication outside of gastrointestinal cancers.

LipoMedics Inc. – On February 6, 2017, we entered into a License Agreement (the “License Agreement”) with LipoMedics, Inc. (“LipoMedics”) pursuant to which, among other things, we provided to LipoMedics a license to our SMARTICLES platform for the delivery of nanoparticles including small molecules, peptides, proteins and biologics. Under the terms of the License Agreement, we could receive up to $90 million in success-based milestones.

Hongene Biotechnology – In September 2015, Marina entered into a license agreement with Hongene, a leader in process development and analytical method development of oligonucleotide therapeutics, regarding the development and supply of certain oligonucleotide constructs using our CRN technology. We could receive double digit percentage royalties on the sales of research reagents using our CRN technology.

MiNA – On December 17, 2014, Marina entered into a license agreement with MiNA regarding the development and commercialization of small activating RNA-based therapeutics utilizing MiNA’s proprietary oligonucleotides and our SMARTICLES nucleic acid delivery technology. MiNA will have full responsibility for the development and commercialization of any products arising under the agreement. MiNA paid an upfront fee of $0.5 million in January 2015 and an accelerated milestone payment of $200,000 in November 2015. We could receive up to an additional $49 million in clinical and commercialization milestone payments, as well as royalties on sales, based on the successful development of MiNA’s potential product candidates.

Rosetta – On April 1, 2014, Marina entered into a strategic alliance with Rosetta to identify and develop miRNA-based products designed to diagnose and treat various neuromuscular diseases and dystrophies. Under the terms of the alliance, Rosetta will apply its industry leading miRNA discovery expertise for the identification of miRNAs involved in the various dystrophy diseases. If the miRNA is determined to be correlative to the disease, Rosetta may further develop the miRNA into a diagnostic for patient identification and stratification. If the miRNA is determined to be involved in the disease pathology and represents a potential therapeutic target, Marina may develop the resulting miRNA-based therapeutic for clinical development. The alliance is exclusive as it relates to neuromuscular diseases and dystrophies, with both companies free to develop and collaborate outside this field both during and after the terms of the alliance.

Novartis – On August 2, 2012, Marina and Novartis entered into a worldwide, non-exclusive License Agreement for the CRN technology for the development of both single and double-stranded oligonucleotide therapeutics. Novartis made a $1.0 million one-time payment for the non-exclusive license. In addition, in March 2009, Marina granted to Novartis a worldwide, non-exclusive, irrevocable, perpetual, royalty-free, fully paid-up license, with the right to grant sublicenses, to the DiLA2-based siRNA delivery platform in consideration of a one-time, non-refundable fee of $7.25 million. Novartis may terminate this agreement immediately upon written notice.

Monsanto – On May 3, 2012, Marina and Monsanto entered into a worldwide exclusive Intellectual Property License Agreement for Marina’s delivery and chemistry technologies. Marina and Monsanto also entered into a Security Agreement pursuant to which Marina granted to Monsanto a security interest in that portion of its IP that is the subject of the License Agreement in order to secure the performance of Marina’s obligations under the License Agreement. Monsanto paid $1.5 million in initiation fees, and may be required to pay royalties on product sales in the low single digit percentages. Monsanto may terminate the License Agreement at any time in whole or as to any rights granted thereunder upon three months’ prior written notice.

ProNAi – On March 13, 2012, Marina entered into an Exclusive License Agreement with ProNAi regarding the development and commercialization of ProNAi’s proprietary DNAi-based therapeutics utilizing SMARTICLES. The License Agreement provides that ProNAi will have full responsibility for the development and commercialization of any products arising under the License Agreement. Under terms of the License Agreement, ProNAi may be required to pay up to $14 million for each gene target in upfront, clinical and commercialization milestone payments, as well as royalties in the single digit percentages on sales, with ProNAi having the option to select any number of gene targets. Either party may terminate the License Agreement upon the occurrence of a default by the other party (subject to standard cure periods), or upon certain events involving the bankruptcy or insolvency of the other party. ProNAi may also terminate the License Agreement without cause upon ninety (90) days’ prior written notice. ProNAi’s clinical compound utilizing SMARTICLES, PNT2258, is a first-in-class, 24-base, single-stranded, chemically-unmodified DNA oligonucleotide drug targeting BCL2, which proceeded to a phase 2 clinical study. In June 2016, ProNAi suspended the development of PNT2258 based on its review of the interim results from a phase 2 trial of PNT2258.

Mirna – We have a License Agreement with Mirna regarding the development and commercialization of miRNA-based therapeutics utilizing Mirna’s proprietary miRNAs and SMARTICLES. The License Agreement provides that Mirna will have full responsibility for the development and commercialization of any products arising under the License Agreement and that Marina will support pre-clinical and process development efforts. Under terms of the License Agreement, Mirna could be required to pay up to $63 million in upfront, clinical and commercialization milestone payments, as well as royalties in the low single digit percentages on sales, based on the successful development of Mirna’s product candidates. Either party may terminate the License Agreement upon the occurrence of a default by the other party. Mirna may also terminate the License Agreement without cause upon 60 days prior written notice. The License Agreement provides Mirna additional rights to its lead program, MRX34. Mirna also has exclusivity on several additional miRNA targets. Mirna’s clinical compound utilizing SMARTICLES, MRX34, is a double-stranded miRNA “mimic” of the naturally occurring tumor suppressor miR-34, which inhibits cell cycle progression and induces cancer cell death. Mirna has voluntarily halted the phase 1 trial of MRX34 for the treatment of patients with unresectable primary liver cancer or solid cancers with liver involvement.

Novosom – On July 27, 2010, Marina acquired the intellectual property of Novosom AG (“Novosom”) of Halle, Germany for SMARTICLES. Marina is required to pay to Novosom an amount equal to 30% of the value of each upfront (or combined) payment actually received in respect of the license of liposomal-based delivery technology or related product or disposition of the liposomal-based delivery technology by Marina, up to $3.3 million, which amount will be paid in shares of common stock, or a combination of cash and shares of common stock, at Marina’s discretion. To date Marina, has issued an aggregate of 2.5 million shares of common stock to Novosom representing additional consideration of $1.2 million as a result of license agreements and amendments thereto that Marina has entered into.

Valeant Pharmaceuticals – On March 23, 2010, Marina acquired intellectual property related to the CRN chemistry from Valeant Pharmaceuticals North America (“Valeant”). Subject to meeting certain milestones triggering the obligation to make any such payments, we may be obligated to make a product development milestone payment of $5.0 million and $2.0 million within 180 days of FDA approval of a NDA for our first and second CRN related product, respectively. To date, we had not made any such milestone payments but have milestone obligations of $0.1 million based on CRN licenses to date. Valeant is entitled to receive earn-outs based upon a percentage in the low single digits of future commercial sales and earn-outs based upon a percentage in the low double digits of future revenue from sublicensing. We are required to pay Valeant an annual amount equal to $50,000 per assigned patent which shall be creditable against other payment obligations. The term of our financial obligations under the agreement shall end, on a country-by-country basis, when there no longer exists any valid claim in such country. We may terminate the agreement upon 30-day notice, or upon 10-day notice in the event of adverse results from clinical studies.

Proprietary Rights and Intellectual Property

We rely primarily on patents and contractual obligations with employees and third parties to protect our proprietary rights. We have sought, and intend to continue to seek, appropriate patent protection for important and strategic components of our proprietary technologies by filing patent applications in the U.S. and certain foreign countries. There can be no assurance that any of our patents will guarantee protection or market exclusivity for our products and product candidates. We also use license agreements both to access external technologies and to convey certain intellectual property rights to others. Our financial success will be dependent in part on our ability to obtain commercially valuable patent claims and to protect our intellectual property rights and to operate without infringing upon the proprietary rights of others. As of March 9, 2017, we owned or controlled 140 issued or allowed patents, and approximately 73 pending U.S. and foreign patent applications, to protect our proprietary technologies.

The patents listed in the table above will expire generally between 2019 and 2035, subject to any potential patent term extensions and/or supplemental protection certificates that would extend the terms of the patents in countries where such extensions may become available.

Competition

The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement from government and other third-party payors. While we believe that our technology, knowledge, experience and scientific resources provide us with certain competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

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

The commercial opportunity for our product candidates could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drugs that we may develop. Our competitors also may obtain FDA or other regulatory approval for their product candidates 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. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic drugs.

Our main competition for the celecoxib FDCs is Kitov – which already been discussed in the sections on IT-102/IT-103. With respect to our RNAi technologies, there are a number of small, mid-sized and large biotechnology companies, as well as public and private research institutions, that compete, or that may compete, with us. Our competition is typically focused on a single nucleic acid mechanism of action, i.e. RNAi or mRNA translational inhibition or exon skipping or miRNA replacement therapy. Some of these companies only have a proprietary position around either chemistry or delivery and in fewer cases, their proprietary position arises from their belief that they can patent biology, i.e. miRNA targets. We believe we are the only company in the position of having proprietary chemistry and delivery technologies sufficient to pursue multiple nucleic acid mechanisms of action, i.e. RNAi and mRNA translational inhibition and exon skipping and miRNA replacement therapy. Such single mechanism of action competitors include: Alnylam Pharmaceuticals, Arcturus Therapeutics, Benitec Biopharma, Dicerna Pharmaceuticals, Isis Pharmaceuticals (“Isis”), miRagen Therapeutics, Mirna, PhaseRx Pharmaceuticals, Quark Pharmaceuticals, Regulus Therapeutics, RXi Pharmaceuticals, Sarepta Therapeutics (“Sarepta”) and Silence Therapeutics.

Government Regulation

Government authorities in the U.S. and other countries extensively regulate the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of drugs and biologic products. All of our foreseeable product candidates (including those for human use that may be developed by our partners based on our licensed technologies) are expected to be regulated as drug products.

In the U.S., the FDA regulates drug products under the Federal Food, Drug and Cosmetic Act (the “FDCA”), and other laws within the Public Health Service Act. Failure to comply with applicable U.S. requirements, both before and after approval, may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, and/or criminal prosecutions. Before our drug products are marketed they must be approved by the FDA. The steps required before a novel drug product is approved by the FDA include: (1) pre-clinical laboratory, animal, and formulation tests; (2) submission to the FDA of an Investigational New Drug Application (“IND”) for human clinical testing, which must become effective before human clinical trials may begin; (3) adequate and well-controlled clinical trials to establish the safety and effectiveness of the product for each indication for which approval is sought; (4) submission to the FDA of a New Drug Application (“NDA”); (5) satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug product is produced to assess compliance with cGMP and FDA review; and finally (6) approval of an NDA.

Pre-clinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. The results of the pre-clinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions, such as the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. There can be no assurance that submission of an IND will result in FDA authorization to commence clinical trials. Once an IND is in effect, each clinical trial to be conducted under the IND must be submitted to the FDA, which may or may not allow the trial to proceed.

Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified physician-investigators and healthcare personnel. Clinical trials are typically conducted in three defined phases, but the phases may overlap or be combined. Phase 1 usually involves the initial administration of the investigational drug or biologic product to healthy individuals to evaluate its safety, dosage tolerance and pharmacodynamics. Phase 2 usually involves trials in a limited patient population, with the disease or condition for which the test material is being developed, to evaluate dosage tolerance and appropriate dosage; identify possible adverse side effects and safety risks; and preliminarily evaluate the effectiveness of the drug or biologic for specific indications. Phase 3 trials usually further evaluate effectiveness and test further for safety by administering the drug or biologic candidate in its final form in an expanded patient population. Our product development partners, the FDA, or we may suspend clinical trials, if any, at any time on various grounds, including any situation where we or our partners believe that patients are being exposed to an unacceptable health risk or are obtaining no medical benefit from the test material.

Assuming successful completion of the required clinical testing, the results of the pre-clinical trials and the clinical trials, together with other detailed information, including information on the manufacture and composition of the product, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. Before approving an application, the FDA will usually inspect the facilities where the product is manufactured, and will not approve the product unless cGMP compliance is satisfactory. If the FDA determines the NDA is not acceptable, the FDA may outline the deficiencies in the NDA and often will request additional information. If the FDA approves the NDA, certain changes to the approved product, such as adding new indications, manufacturing changes or additional labeling claims are subject to further FDA review and approval. The testing and approval process requires substantial time, effort and financial resources, and we cannot be sure that any approval will be granted on a timely basis, if at all.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in the U.S. for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same drug for the same indication, except in very limited circumstances, for seven years. The FDA granted orphan drug designation to CEQ508 for the treatment of FAP in December 2010.

In addition, regardless of the type of approval, we and our partners are required to comply with a number of FDA requirements both before and after approval. For example, we and our partners are required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with certain requirements concerning advertising and promotion for products. In addition, quality control and manufacturing procedures must continue to conform to cGMP after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers must continue to expend time, money and effort in all areas of regulatory compliance, including production and quality control to comply with cGMP. In addition, discovery of problems, such as safety problems, may result in changes in labeling or restrictions on a product manufacturer or NDA holder, including removal of the product from the market.

Product Liability

We currently do not carry product liability insurance as no patients are currently being treated with our products. We may renew our product liability insurance portfolio if patient access to our products is resumed.

Environmental Compliance

Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specific waste products. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous materials. The cost of compliance with these laws and regulations could be significant and may adversely affect capital expenditures to the extent we are required to procure expensive capital equipment to meet regulatory requirements. At this time, we are not conducting any R&D activities that require compliance with federal, state or local laws.

Employees

As of the date of this report, we have four employees, all of whom are officers of our company, and all of whom – other than Mr. Ramelli, our Chief Executive Officer – spend a portion of their time working for other entities that are affiliated with our company. Compensation is paid to all of our employees by Autotelic Inc. as per the terms of the Master Services Agreement. None of our employees are covered by collective bargaining agreements.

Company Information

We are a reporting company and are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or e-mail the SEC at publicinfo@sec.gov for more information on the operation of the public reference room. Our SEC filings are also available at the SEC’s website at http://www.sec.gov. Our Internet address is http://www.marinabio.com. There we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

ITEM 1A. Risk Factors.

Risks Relating To Being A Pre-Commercialization Drug Development Company

Our cash and other sources of liquidity are only sufficient to fund our intended operations through the 3^rd or 4^th quarter of 2017. We will require substantial additional funding to continue our operations beyond that date. If additional capital is not available, we may have to curtail or cease operations, or take other actions that could adversely impact our shareholders.

Our business does not generate the cash necessary to finance our operations. We incurred net operating losses of $837,143 and $1,108,564 in the years ended December 31, 2016 and 2015, respectively. We will require significant additional capital to:

Our future capital needs depend on many factors, including:

We believe that our currently available cash and cash equivalents will be sufficient to fund our intended operations through the 3^rd or 4^th quarter of 2017. We will need to raise substantial additional funds through public or private equity offerings, debt financings or additional strategic alliances and licensing arrangements to continue our operations past that date. We may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions, as well as market conditions for pre-commercialization biotechnology companies, may make it difficult for us to seek financing from the capital markets, and the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities, further dilution to our stockholders will result, which may substantially dilute the value of their investment. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants that could limit our flexibility to conduct future business activities and, in the event of insolvency, could be paid before holders of equity securities received any distribution of corporate assets. We may be required to relinquish rights to our technologies or drug candidates, or grant licenses through alliance, joint venture or agreements on terms that are not favorable to us, in order to raise additional funds. If adequate funds are not available, we may have to further delay, reduce or eliminate one or more of our planned activities with respect to our business, or terminate our operations. These actions would likely reduce the market price of our common stock.

We have no history of profitability and there is a potential for fluctuation in operating results.

We have experienced significant operating losses since inception. We currently have no revenues from product sales and will not have any such revenues unless and until a marketable product is successfully developed by us or our partners, receives regulatory approvals, and is successfully manufactured and distributed to the market. We expect that the continued operation of our business will cause us to continue to experience losses prior to the commercialization of our drug candidates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Statement Regarding Forward-Looking Statements”.

We and our partners are engaged in the business of developing and commercializing novel therapeutic products. The process of developing such products requires significant research and development efforts, including basic research, pre-clinical and clinical development, and regulatory approval. These activities, together with our sales, marketing, general and administrative expenses, have resulted in operating losses in the past, and there can be no assurance that we can achieve profitability in the future. Our ability to achieve profitability depends on our ability, alone or with our partners, to develop drug candidates, conduct pre-clinical development and clinical trials, obtain necessary regulatory approvals, and manufacture, distribute, market and sell drug products. We cannot assure you of the success of any of these activities or predict if or when we will ever become profitable.

There is substantial doubt about our ability to continue as a going concern, which may affect our ability to obtain future financing or engage in strategic transactions, and may require us to curtail our operations.

Our financial statements as of December 31, 2016 were prepared under the assumption that we will continue as a going concern. The independent registered public accounting firm that audited our 2016 consolidated financial statements, in their report, included an explanatory paragraph referring to our recurring losses and expressing substantial doubt in our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. At December 31, 2016, we had cash of $105,347. and had $290,000 available under our credit line with Dr. Trieu. Our ability to continue as a going concern depends on our ability to raise substantial additional funds through public or private equity offerings, debt financings or additional strategic alliances and licensing arrangements. There can be no assurance that we will be successful in any such endeavors.

If we are unable to raise sufficient additional capital, we may seek to merge with or be acquired by another entity, or to sell our assets to another entity, and that transaction may adversely affect our business and the value of our securities.

If we are unable to raise sufficient additional capital to continue our business, we may seek to merge or combine with, or otherwise be acquired by, another entity with a stronger cash position, complementary work force, or product candidate portfolio or for other reasons. There are numerous risks associated with merging, combining or otherwise being acquired. These risks include, among others, incorrectly assessing the quality of a prospective acquirer or merger-partner, encountering greater than anticipated costs in integrating businesses, facing resistance from employees and being unable to profitably deploy the assets of the new entity. The operations, financial condition, and prospects of the post-transaction entity depend in part on our and our acquirer/merger-partner’s ability to successfully integrate the operations related to our product candidates, business and technologies. We may be unable to integrate operations successfully or to achieve expected cost savings, and any cost savings that are realized may be offset by losses in revenues or other charges to operations. As a result, our stockholders may not realize the full value of their investment.

We are dependent on our key personnel, and if we are unable to retain such personnel, or to attract and retain other highly qualified personnel, then we may be unable to successfully develop our business.

Our ability to compete in the highly competitive biotechnology industry depends upon our ability to attract and retain highly qualified personnel. We are dependent on our management and scientific personnel, including Joseph W. Ramelli, our Chief Executive Officer, Vuong Trieu, Ph.D., the Chairman of our Board of Directors, Larn Hwang, Ph.D., our Chief Scientific Officer, and Mihir Munsif, our Chief Operating Officer. There can be no assurance that we will be able to retain the services of any of the foregoing persons, or of any of our other current and future personnel, regardless of whether or not such persons have entered into employment agreements with our company.

If we are unable to attract or retain qualified personnel, or if we are unable to adequately replace such personnel if we lose their services for any reason, our business could be seriously harmed. In addition, if we have to replace any of these individuals, we may not be able to replace the knowledge that they have about our operations.

If we make strategic acquisitions, we will incur a variety of costs and might never realize the anticipated benefits.

We have limited experience in independently identifying acquisition candidates and integrating the operations of acquisition candidates with our company. If appropriate opportunities become available, and we have sufficient resources to do so, we might attempt to acquire approved products, additional drug candidates, technologies or businesses that we believe are a strategic fit with our business. If we pursue any transaction of that sort, the process of negotiating the acquisition and integrating an acquired product, drug candidate, technology or business might result in operating difficulties and expenditures and might require significant management attention that would otherwise be available for ongoing development of our business, whether or not any such transaction is ever consummated. Moreover, we might never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, or impairment expenses related to goodwill, and impairment or amortization expenses related to other intangible assets, which could harm our financial condition.

Failure of our internal control over financial reporting could harm our business and financial results.

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.

We depend on our information technology and infrastructure.

We rely on the efficient and uninterrupted operation of information technology systems to manage our operations, to process, transmit and store electronic and financial information, and to comply with regulatory, legal and tax requirements. We also depend on our information technology infrastructure for electronic communications among our personnel, contractors, consultants and vendors. System failures or outages could compromise our ability to perform these functions in a timely manner, which could harm our ability to conduct business or delay our financial reporting. Such failures could materially adversely affect our operating results and financial condition.

In addition, we depend on third parties and applications on virtualized (cloud) infrastructure to operate and support our information systems. These third parties vary from multi-disciplined to boutique providers. Failure by these providers to adequately deliver the contracted services could have an adverse effect on our business, which in turn may materially adversely affect our operating results and financial condition. All information systems, despite implementation of security measures, are vulnerable to disability, failures or unauthorized access. If our information systems were to fail or be breached, such failure or breach could materially adversely affect our ability to perform critical business functions and sensitive and confidential data could be compromised.

Our business and operations could suffer in the event of system failures.

Our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such events could cause interruption of our operations, and could result in a material disruption of our development programs. For example, the loss of pre-clinical trial data or data from completed or ongoing clinical trials for our product candidates, if any, could result in delays in our regulatory filings and development efforts and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our business operations could be delayed.

We may be unable to adequately protect our information technology systems from cyber-attacks, which could result in the disclosure of confidential information, damage our reputation, and subject us to significant financial and legal exposure.

Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include wrongful conduct by hostile foreign governments, industrial espionage, the deployment of harmful malware, denial-of-service, and other means to threaten data confidentiality, integrity and availability. A successful cyber-attack could cause serious negative consequences for our company, including the disruption of operations, the misappropriation of confidential business information and trade secrets, and the disclosure of corporate strategic plans. To date, we have not experienced threats to our data and information technology systems. However, although we devote resources to protect our information technology systems, we realize that cyber-attacks are a threat, and there can be no assurance that our efforts will prevent information security breaches that would result in business, legal or reputational harm to us, or would have a material adverse effect on our operating results and financial condition.

Risks Related to the Development and Regulatory Approval of Our Drug Candidates

The development of pharmaceutical products is uncertain and may never lead to marketable products.

The future success of our operations will depend on the successful development, by us or our partners, of products based on our proprietary technologies. With respect to products based on our RNAi technologies, neither we, nor any other company, has received regulatory approval to market siRNA, antagomir or miRNA mimics as therapeutic agents. The scientific discoveries that form the basis for our efforts to discover and develop new RNA-based drugs are relatively new. The scientific evidence to support the feasibility of developing drugs based on these discoveries is both preliminary and limited.

Relatively few RNA-based product candidates have ever been tested in animals or humans, none of which have received regulatory approval. We have only limited data suggesting that we can introduce typical drug-like properties and characteristics into oligonucleotides, such as favorable distribution within the body or tissues or the ability to enter cells and exert their intended effects. In addition, RNA-based compounds may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory studies, and they may interact with human biological systems in unforeseen, ineffective or harmful ways. We may make significant expenditures developing RNA-based technologies without success, and thus may never develop a marketable product utilizing our RNA-based technologies. If neither we nor any of our partners develops and commercializes drugs based upon our RNA-based technologies, our RNA-based technologies will not become profitable, and we may be required to change the scope and direction of, or cease pursuing, our RNA-based activities.

If we or our partners are unable to develop and commercialize product candidates utilizing our technologies, our business will be adversely affected.

A key element of our business strategy is to discover, develop and commercialize a portfolio of new products through internal efforts and through those of our current or future strategic partnerships. Whether or not any product candidates are ultimately identified, research programs to identify new disease targets and product candidates require substantial technical, financial and human resources. These research programs may initially show promise in identifying potential product candidates, yet fail to yield a successful commercial product for many reasons, including the following:

Clinical trials of product candidates utilizing our technologies would be expensive and time-consuming, and the results of any of these trials would be uncertain.

Before obtaining regulatory approval for the sale of any product candidates, we and our partners must conduct expensive and extensive pre-clinical tests and clinical trials to demonstrate the safety and efficacy of such product candidates. Pre-clinical and clinical testing is a long, expensive and uncertain process, and the historical failure rate for product candidates is high. The length of time generally varies substantially according to the type of drug, complexity of clinical trial design, regulatory compliance requirements, intended use of the drug candidate and rate of patient enrollment for the clinical trials.

A failure of one or more pre-clinical studies or clinical trials can occur at any stage of testing. We and our partners may experience numerous unforeseen events during, or as a result of, the pre-clinical testing and the clinical trial process that could delay or prevent the receipt of regulatory approval or the commercialization of our product candidates, including:

Further, even if the results of pre-clinical studies or clinical trials are initially positive, it is possible that different results will be obtained in the later stages of drug development or that results seen in clinical trials will not continue with longer term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early phase 1 or phase 2 clinical trials may not be repeated in larger phase 2 or phase 3 clinical trials. It is expected that all of the drug candidates that may be developed by us or our partners based on our technologies will be prone to the risks of failure inherent in drug development. The clinical trials of any or all of the drug candidates of us or our partners could be unsuccessful, which would prevent the commercialization of these drugs. The FDA conducts its own independent analysis of some or all of the pre-clinical and clinical trial data submitted in a regulatory filing and often comes to different and potentially more negative conclusions than the analysis performed by the drug sponsor. The failure to develop safe, commercially viable drugs approved by the FDA would substantially impair our ability to generate product sales and sustain our operations and would materially harm our business and adversely affect our stock price. In addition, significant delays in pre-clinical studies and clinical trials will impede the regulatory approval process, the commercialization of drug candidates and the generation of revenue, as well as substantially increase development costs.

Our product candidates may cause undesirable side effects or have other properties that could halt their development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.

It is possible that the FDA or foreign regulatory authorities may not agree with any future assessment of the safety profile of our product candidates. Undesirable side effects caused by any of our product candidates could cause us or our partners to interrupt, delay or discontinue development of our product candidates, could result in a clinical hold on any clinical trial, or could result in the denial of regulatory approval of our product candidates by the FDA or foreign regulatory authorities. This, in turn, could prevent us from commercializing our product candidates and generating revenues from their sale. In addition, if any of our products cause serious or unexpected side effects or are associated with other safety risks after receiving marketing approval, a number of potential significant negative consequences could result, including: (i) regulatory authorities may withdraw their approval of this product; (ii) we may be required to recall the product, change the way it is administered, conduct additional clinical trials or change the labeling of the product; (iii) the product may be rendered less competitive and sales may decrease; (iv) our reputation may suffer generally both among clinicians and patients; (v) regulatory authorities may require certain labeling statements, such as warnings or contraindications or limitations on the indications for use, or impose restrictions on distribution in connection with approval, if any; or (vi) we may be required to change the way the product is administered or conduct additional preclinical studies or clinical trials.

If preliminary data demonstrate that any of our product candidates has an unfavorable safety profile and is unlikely to receive regulatory approval or be successfully commercialized, we may voluntarily suspend or terminate future development of such product candidate.

Any one or a combination of these events could prevent us from obtaining approval and achieving or maintaining market acceptance of the affected product or could substantially increase the costs and expenses of commercializing the product candidate, which in turn could delay or prevent us from generating significant revenues from the sale of the product.

Even if regulatory approvals are obtained for our products, such products will be subject to ongoing regulatory obligations and continued regulatory review. If we or a partner fail to comply with continuing U.S. and foreign regulations, the approvals to market drugs could be lost and our business would be materially adversely affected.

Following any initial FDA or foreign regulatory approval of any drugs we or a partner may develop, such drugs will continue to be subject to extensive and ongoing regulatory review, including the review of adverse drug experiences and clinical results that are reported after such drugs are made available to patients. This would include results from any post marketing studies or vigilance required as a condition of approval. The manufacturer and manufacturing facilities used to make any drug candidates will also be subject to periodic review and inspection by regulatory authorities, including the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including withdrawal of the drug from the market. Marketing, advertising and labeling also will be subject to regulatory requirements and continuing regulatory review. The failure to comply with applicable continuing regulatory requirements may result in fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and other adverse consequences.

We and our partners are subject to extensive U.S. and foreign government regulation, including the requirement of approval before products may be marketed.

We, our present and future collaborators, and the drug product candidates developed by us or in collaboration with partners are subject to extensive regulation by governmental authorities in the U.S. and other countries. Failure to comply with applicable requirements could result in, among other things, any of the following actions: warning letters, fines and other civil penalties, unanticipated expenditures, delays in approving or refusal to approve a product candidate, product recall or seizure, interruption of manufacturing or clinical trials, operating restrictions, injunctions and criminal prosecution.

Our product candidates and those of our partners cannot be marketed in the U.S. without FDA approval or clearance, and they cannot be marketed in foreign countries without applicable regulatory approval. Neither the FDA nor any foreign regulatory authority has approved any of the product candidates being developed by us or our partners based on our technologies. These product candidates are in pre-clinical and clinical development and will have to be approved by the FDA or applicable foreign regulatory authorities before they can be marketed in the U.S. or abroad. Obtaining regulatory approval requires substantial time, effort, and financial resources, and may be subject to both expected and unforeseen delays, including, without limitation, citizen’s petitions or other filings with the FDA, and there can be no assurance that any approval will be granted on a timely basis, if at all, or that delays will be resolved favorably or in a timely manner. If our product candidates are not approved in a timely fashion, or are not approved at all, our business and financial condition may be adversely affected.

In addition, both before and after regulatory approval, we, our collaborators and our product candidates are subject to numerous requirements by the FDA and foreign regulatory authorities covering, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, distribution and export. These requirements may change and additional government regulations may be promulgated that could affect us, our collaborators or our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. There can be no assurance that neither we nor any of our partners will be required to incur significant costs to comply with such laws and regulations in the future or that such laws or regulations will not have a material adverse effect upon our business.

We may use hazardous chemicals and biological materials in our business. Any disputes relating to improper use, handling, storage or disposal of these materials could be time-consuming and costly.

Our research and development operations may involve the use of hazardous and biological, potentially infectious, materials. Such use subjects us to the risk of accidental contamination or discharge or any resultant injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials and specific waste products. We could be subject to damages, fines or penalties in the event of an improper or unauthorized release of, or exposure of individuals to, these hazardous materials, and our liability could be substantial. The costs of complying with these current and future environmental laws and regulations may be significant, thereby impairing our business.

We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.

Failure to comply with foreign regulatory requirements governing human clinical trials and marketing approval for drugs could prevent the sale of drug candidates based on our technologies in foreign markets, which may adversely affect our operating results and financial condition.

The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement for marketing drug candidates based on our technologies outside the U.S. vary greatly from country to country. We have, and our partners may have, limited experience in obtaining foreign regulatory approvals. The time required to obtain approvals outside the U.S. may differ from that required to obtain FDA approval. We may not be able to obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA. Failure to comply with these regulatory requirements or obtain required approvals could restrict the development of foreign markets for our drug candidates and may have a material adverse effect on our financial condition or results of operations.

Risks Related to our Dependence on Third Parties

We may become dependent on our collaborative arrangements with third parties for a substantial portion of our revenue, and our development and commercialization activities may be delayed or reduced if we fail to initiate, negotiate or maintain successful collaborative arrangements.

We are, in part, dependent on partners to develop and commercialize products based on our technologies and to provide the regulatory compliance, sales, marketing and distribution capabilities required for the success of our business. If we fail to secure or maintain successful collaborative arrangements, our development and commercialization activities will be delayed, reduced or terminated, and our revenues could be materially and adversely impacted.

The potential future milestone and royalty payments and cost reimbursements from collaboration agreements could provide an important source of financing for our research and development programs, thereby facilitating the application of our technology to the development and commercialization of our products. These collaborative agreements might be terminated either by us or by our partners upon the satisfaction of certain notice requirements. Our partners may not be precluded from independently pursuing competing products and drug delivery approaches or technologies. Even if our partners continue their contributions to our collaborative arrangements, of which there can be no assurance, they may nevertheless determine not to actively pursue the development or commercialization of any resulting products. Our partners may fail to perform their obligations under the collaborative arrangements or may be slow in performing their obligations. In addition, our partners may experience financial difficulties at any time that could prevent them from having available funds to contribute to these collaborations. If our collaborators fail to conduct their commercialization, regulatory compliance, sales and marketing or distribution activities successfully and in a timely manner, or if they terminate or materially modify their agreements with us, the development and commercialization of one or more product candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue such development and commercialization on our own.

An interruption in the supply of raw and bulk materials needed for the development of our product candidates, or the manufacture of our approved products, could cause product development and/or sales to be slowed or stopped.

We and our partners may obtain supplies of critical raw and bulk materials used in research and development efforts from several suppliers, and long-term contracts may not be in place with any or all of these suppliers. There can be no assurance that sufficient quantities of product candidates or approved products could be manufactured if our suppliers are unable or unwilling to supply such materials. Any delay or disruption in the availability of raw or bulk materials could slow or stop research and development, or sales, of the relevant product.

We rely on third parties to conduct clinical trials, and those third parties may not perform satisfactorily, including failing to meet established timelines for the completion of such clinical trials.

We are, and anticipate that we and certain of our partners will continue to be, dependent on contract research organizations, third-party vendors and investigators for performing or managing pre-clinical testing and clinical trials related to drug discovery and development efforts. These parties are not employed by us or our partners, and neither we nor our partners can control the amount or timing of resources that they devote to our programs. If they fail to devote sufficient time and resources to our drug development programs or if their performance is substandard, it will delay, and potentially materially adversely affect, the development and commercialization of our product candidates. Moreover, these parties also may have relationships with other commercial entities, some of which may compete with us and our partners. If they assist our competitors, it could harm our competitive position.

If we or our partners lose our relationship with any one or more of these parties, there could be a significant delay in both identifying another comparable provider and then contracting for its services. An alternative provider may not be available on reasonable terms, if at all. Even if we locate an alternative provider, is it likely that this provider may need additional time to respond to our needs and may not provide the same type or level of service as the original provider. In addition, any alternative provider will be subject to current Good Laboratory Practices (“cGLP”) and similar foreign standards and neither we nor our partners have control over compliance with these regulations by these providers. Consequently, if these providers do not adhere to these practices and standards, the development and commercialization of our product candidates could be delayed.

We have limited experience in marketing, selling distributing or commercializing our products, and we may need to rely on marketing partners or contract sales companies.

Even if we are able to develop our products and obtain necessary regulatory approvals, we only have limited experience in marketing, selling, distributing or commercializing our products. Accordingly, we will be dependent on our ability to build this capability ourselves, which would require the investment of significant financial and management resources, or to find collaborative marketing partners or contract sales companies for commercial sale of our internally-developed products. Even if we find a potential marketing partner, of which there can be no assurance, we may not be able to negotiate a licensing contract on favorable terms to justify our investment or achieve adequate revenues.

We have limited manufacturing experience or resources, and we must incur significant costs to develop this expertise or rely on third parties to manufacture our products.

We have limited manufacturing experience. Some of our product candidates utilize specialized formulations whose scale-up and manufacturing could be very difficult. We also have limited experience in such scale-up and manufacturing, requiring us to depend on a limited number of third parties, who might not be able to deliver in a timely manner, or at all. In order to develop products, apply for regulatory approvals and commercialize our products, we will need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities.

There are a limited number of manufacturers that supply the materials needed for the development of our product candidates. There are risks inherent in pharmaceutical manufacturing that could affect the ability of our contract manufacturers to meet our delivery time requirements or provide adequate amounts of material to meet our needs. Included in these risks are synthesis and purification failures and contamination during the manufacturing process, which could result in unusable product and cause delays in our development process, as well as additional expense to us. To fulfill our supply requirements, we may also need to secure alternative suppliers. In addition to the manufacture of the materials necessary to develop our products, we may have additional manufacturing requirements related to the technology required to deliver our product candidates to the relevant cell or tissue type. In some cases, the delivery technology we utilize is highly specialized or proprietary, and for technical and legal reasons, we may have access to only one or a limited number of potential manufacturers for such delivery technology. Failure by these manufacturers to properly formulate our product candidates for delivery could also result in unusable product and cause delays in our discovery and development process, as well as additional expense to us.

The manufacturing process for any products based on our technologies that we or our partners may develop is subject to the FDA and foreign regulatory authority approval process, and we or our partners will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory authority requirements on an ongoing basis. If we are unable to obtain or maintain contract manufacturing for these product candidates or approved products, or to do so on commercially reasonable terms, we may not be able to successfully develop and commercialize our products.

To the extent that we enter into manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner and consistent with regulatory requirements, including those related to quality control and quality assurance. The failure of a third-party manufacturer to perform its obligations as expected could adversely affect our business in a number of ways.

If a third-party manufacturer with whom we contract fails to perform its obligations, we may be forced to manufacture the materials ourselves, for which we may not have the capabilities or resources, or enter into an agreement with a different third-party manufacturer, which we may not be able to do on reasonable terms, if at all. In addition, if we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget, or to sell approved products in sufficient quantities. Furthermore, a manufacturer may possess technology related to the manufacture of our product candidates or approved products that such manufacturer owns independently. This would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our products.

Risks Related to our Intellectual Property and Other Legal Matters

If we are unable to adequately protect our proprietary technology from legal challenges, infringement or alternative technologies, our competitive position may be hurt and our operating results may be negatively impacted.

Our business is based upon the development and delivery of novel therapeutics, and we rely on the issuance of patents, both in the U.S. and internationally, for protection against competitive technologies. Although we believe we exercise the necessary due diligence in our patent filings, our proprietary position is not established until the appropriate regulatory authorities actually issue a patent, which may take several years from initial filing or may never occur.

Moreover, even the established patent positions of pharmaceutical companies are generally uncertain and involve complex legal and factual issues. Although we believe our issued patents are valid, third parties may infringe our patents or may initiate proceedings challenging the validity or enforceability of our patents. The issuance of a patent is not conclusive as to its claim scope, validity or enforceability. Challenges raised in patent infringement litigation we initiate or in proceedings initiated by third parties may result in determinations that our patents have not been infringed or that they are invalid, unenforceable or otherwise subject to limitations. In the event of any such determinations, third parties may be able to use the discoveries or technologies claimed in our patents without paying us licensing fees or royalties, which could significantly diminish the value of these discoveries or technologies. As a result of such determinations, we may be enjoined from pursuing commercialization of potential products or may be required to obtain licenses, if available, to the third party patents or to develop or obtain alternative technology. Responding to challenges initiated by third parties may require significant expenditures and divert the attention of our management and key personnel from other business concerns.

Furthermore, it is possible others will infringe or otherwise circumvent our issued patents and that we will be unable to fund the cost of litigation against them or that we would elect not to pursue litigation. In addition, enforcing our patents against third parties may require significant expenditures regardless of the outcome of such efforts. We also cannot assure you that others have not filed patent applications for technology covered by our pending applications or that we were the first to invent the technology. There may also exist third party patents or patent applications relevant to our potential products that may block or compete with the technologies covered by our patent applications and third parties may independently develop IP similar to our patented IP, which could result in, among other things, interference proceedings in the U.S. Patent and Trademark Office to determine priority of invention.

In addition, we may not be able to protect our established and pending patent positions from competitive technologies, which may provide more effective therapeutic benefit to patients and which may therefore make our products, technology and proprietary position obsolete.

We also rely on copyright and trademark protection, trade secrets, know-how, continuing technological innovation and licensing opportunities. In an effort to maintain the confidentiality and ownership of our trade secrets and proprietary information, we have typically required our employees, consultants, advisors and others to whom we disclose confidential information to execute confidentiality and proprietary information agreements. However, it is possible that these agreements may be breached, invalidated or rendered unenforceable, and if so, there may not be an adequate corrective remedy available. Furthermore, like many companies in our industry, we may from time to time hire scientific personnel formerly employed by other companies involved in one or more areas similar to the activities we conduct. In some situations, our confidentiality and proprietary information agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants or advisors have prior employment or consulting relationships. Although we have typically required our employees and consultants to maintain the confidentiality of all confidential information of previous employers, we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of their prior affiliations. Finally, others may independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets. Our failure to protect our proprietary information and techniques may inhibit or limit our ability to exclude certain competitors from the market and execute our business strategies.

If we are unable to adequately protect our proprietary intellectual property from legal challenges, infringement or alternative technologies, we will not be able to compete effectively in the drug discovery, development and commercialization business.

Because intellectual property rights are of limited duration, expiration of intellectual property rights and licenses will negatively impact our operating results.

Intellectual property rights, such as patents and license agreements based on those patents, generally are of limited duration. Therefore, the expiration or other loss of rights associated with IP and IP licenses can negatively impact our business, and the future sales of our approved products, if any.

Our patent applications may be inadequate in terms of priority, scope or commercial value.

We apply for patents covering our discoveries and technologies as we deem appropriate and as our resources permit. However, we or our partners may fail to apply for patents on important discoveries or technologies in a timely fashion or at all. Also, our pending patent applications may not result in the issuance of any patents. These applications may not be sufficient to meet the statutory requirements for patentability, and therefore we may be unable to obtain enforceable patents covering the related discoveries or technologies we may want to commercialize. In addition, because patent applications are maintained in secrecy for approximately 18 months after filing, other parties may have filed patent applications relating to inventions before our applications covering the same or similar inventions. In addition, foreign patent applications are often published initially in local languages, and until an English language translation is available it can be impossible to determine the significance of a third party invention. Any patent applications filed by third parties may prevail over our patent applications or may result in patents that issue alongside patents issued to us, leading to uncertainty over the scope of the patents or the freedom to practice the claimed inventions.

Although we have acquired and in-licensed a number of issued patents, the discoveries or technologies covered by these patents may not have any therapeutic or commercial value. Also, issued patents may not provide commercially meaningful protection against competitors. Other parties may be able to design around our issued patents or independently develop products having effects similar or identical to our patented product candidates or approved products. In addition, the scope of our patents is subject to considerable uncertainty and competitors or other parties may obtain similar patents of uncertain scope.

We have depended on technologies we license, and if we lose the right to license such technologies or we fail to license new technologies in the future, our ability to develop new products would be harmed.

We have depended on licenses from third parties for certain of our key technologies relating to fundamental chemistry technologies. Our licenses impose various development, funding, royalty, diligence, sublicensing, insurance and other obligations on us. If our license with respect to any of these technologies is terminated for any reason, the development of the products contemplated by the licenses would be delayed, or suspended altogether, while we seek to license similar technology (which licenses may not be available on commercially acceptable terms or at all) or develop new non-infringing technology. If our existing license is terminated, the development of the products contemplated by the licenses could be delayed or terminated and we may not be able to negotiate additional licenses on acceptable terms, if at all, which would have a material adverse effect on our business.

We may be required to defend lawsuits or pay damages for product liability claims.

Our business inherently exposes us to potential product liability claims. We may face substantial product liability exposure in human clinical trials that we may initiate and for products that we sell, or manufacture for others to sell, after regulatory approval. The risk exists even with respect to those drugs that are approved by regulatory agencies for commercial distribution and sale and are manufactured in facilities licensed and regulated by regulatory agencies. Any product liability claims, regardless of their merits, could be costly, divert management’s attention, delay or prevent completion of our clinical development programs, and adversely affect our reputation, the demand for our products and our stock price. We currently do not have product liability insurance. We will need to obtain such insurance as we believe is appropriate for our stage of development and may need to obtain higher levels of such insurance if we were ever to market any of our product candidates. Any product liability insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have a material adverse effect on our business.

Risks Related to the Commercialization of our Product Candidates

Our product development efforts may not result in commercial products.

The results of our operations depend, to a significant degree, upon our and any collaborators’ ability to successfully develop and commercialize pharmaceutical products. The development and commercialization process for pharmaceutical products is both time consuming and costly and involves a high degree of business risk. Successful product development in the pharmaceutical industry is highly uncertain, and very few research and development projects result in a commercial product. Product candidates that appear promising in the early phases of development, such as in preclinical testing or in early human clinical trials, may fail to reach the market for a number of reasons, such as:

There can be no assurance that any of our product candidates, even if approved, will ever be successfully commercialized by us or by one of our partners, and delays or additional expenses in any part of the process or the inability to obtain regulatory approval in a timely or cost-effective manner could adversely affect our operating results by restricting introduction of new products by us and/or our partners.

Even if we are successful in developing and commercializing a product candidate, it is possible that the commercial opportunity for such product candidate will be limited.

The product candidates based on our technologies that are being developed are based on novel technologies and therapeutic approaches. Key participants in pharmaceutical marketplaces, such as physicians, third-party payors and consumers, may not accept such products. Accordingly, while we believe there will be a commercial market for our product candidates, potentially in the near to intermediate term, there can be no assurance that this will be the case.

Risks Related to our Industry

If we or any of our independent contractors, consultants, collaborators, manufacturers, vendors or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions, which could result in penalties and affect our ability to develop, market and sell our product candidates and may harm our reputation.

We are or may in the future be subject to federal, state and foreign healthcare laws and regulations pertaining to, among other things, fraud and abuse and patients’ rights. These laws and regulations include:

If our operations are found to be in violation of any such health care laws and regulations, we may be subject to penalties, including administrative, civil and criminal penalties, monetary damages, disgorgement, imprisonment, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA or foreign regulatory authorities, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.

Any drugs based on our technologies that we or any of our partners develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could have a material adverse effect on our business and financial results.

Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other third-party payors. In many jurisdictions, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. Obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. If we are not currently capturing the scientific and clinical data that will be required for reimbursement approval, we may be required to conduct additional trials, which may delay or suspend reimbursement approval. Additionally, in the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates and approved products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

Even if we succeed in bringing one or more products to the market, these products may not be considered cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. Because our programs are in the early stages of development, we are unable at this time to determine their cost effectiveness or the likely level or method of reimbursement. Increasingly, the third-party payors, such as government and private insurance plans, who reimburse patients or healthcare providers, are requiring that drug companies provide them with predetermined discounts from list prices, and are seeking to reduce the prices charged or the amounts reimbursed for pharmaceutical products. If the coverage provided for any products we develop is inadequate in light of our development and other costs, our return on investment could be adversely affected.

We expect that certain of the drugs based on our technologies that we or a partner develop may need to be administered under the supervision of a physician on an outpatient basis. Under currently applicable law, drugs that are not usually self-administered may be eligible for coverage by Medicare if they:

There may be significant delays in obtaining coverage for newly-approved products, and coverage may be more limited than the purposes for which the drug is approved by the FDA or foreign regulatory authorities. Moreover, eligibility for coverage does not imply that any drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent.

Reimbursement may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other services and may reflect budgetary constraints or imperfections in Medicare data. Net prices for products 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 products from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates. However, no uniform policy requirement for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for new drugs that we develop and for which we obtain regulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our financial condition.

We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare and legislative and regulatory proposals to broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number of legislative and regulatory changes in the healthcare system in the United States and other major healthcare markets have been proposed in recent years, and such efforts have expanded substantially in recent years. These developments have included prescription drug benefit legislation that was enacted and took effect in January 2006, healthcare reform legislation recently enacted by certain states, and major healthcare reform legislation that was passed by Congress and enacted into law in the United States in 2010. The U.S. Congress and the new Trump administration have similarly expressed concerns over the pricing of pharmaceutical products and there can be no assurance as to how this scrutiny will impact future pricing of pharmaceutical products generally. Future developments could, directly or indirectly, affect our ability to sell our products, if approved, at a favorable price.

For example, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act (PPACA), contains provisions that affect companies in the pharmaceutical industry and other healthcare related industries by imposing additional costs and changes to business practices. Provisions affecting pharmaceutical companies include the following:

There have been judicial and Congressional challenges, and amendments to certain aspects of the PPACA. More recently, President Trump has suggested that he plans to seek repeal of all or portions of the PPACA and he has indicated that he wants Congress to replace the PPACA with new legislation. We expect there will be additional challenges and amendments to the PPACA in the future, including potential repeal of the PPACA in full or in part. The full effect of the U.S. healthcare reform legislation on our business activities, both currently and after one or more of our products has entered the commercialization phase, is unknown. The financial impact of the U.S. healthcare reform legislation will depend on a number of factors, including but not limited to, the policies reflected in implementing regulations and guidance and changes in sales volumes for products affected by the new system of rebates, discounts and fees. The legislation may also have a positive impact on our future net sales, if any, by increasing the aggregate number of persons with healthcare coverage in the United States.

Moreover, we cannot predict what healthcare reform initiatives may be adopted in the future, and whether (or to what extent) existing legislation may be modified or repealed. Further federal and state legislative and regulatory developments are likely, and we expect ongoing initiatives in the United States to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from product candidates based on our technologies that are successfully developed and for which regulatory approval is obtained, and may affect our overall financial condition and ability to develop drug candidates.

The pharmaceutical market is intensely competitive. If we are unable to compete effectively with existing drugs, new treatment methods and new technologies, we may be unable to commercialize successfully any drugs that we develop.

The pharmaceutical market is intensely competitive and rapidly changing. Many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private research organizations are pursuing the development of novel drugs or treatments for the same diseases and conditions that we are targeting or expect to target. Many of our competitors have:

Products based on our technologies may face intense competition from drugs or treatments that have already been approved and accepted by the medical community for the treatment of the conditions for which we may develop drugs or treatments, or from new drugs that enter the market. We believe a significant number of drugs are currently under development, and may become commercially available in the future, for the treatment of conditions for which we and our partners may try to develop drugs. These drugs may be more effective, safer, less expensive, or marketed and sold more effectively, than any products we and our partners develop.

If we and our partners successfully develop product candidates based on our technologies, and obtain approval for them, we will face competition based on many different factors, including:

Our competitors may develop or commercialize products with significant advantages over any products we develop based on any of the factors listed above or on other factors. Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business. Competitive products may make any products we develop obsolete or noncompetitive before we can recover the expenses of developing and commercializing our product candidates. Such competitors could also recruit our future employees, which could negatively impact our level of expertise and the ability to execute on our business plan. Furthermore, we also face competition from existing and new treatment methods that reduce or eliminate the need for drugs, such as the use of advanced medical devices. The development of new medical devices or other treatment methods for the conditions we are targeting could make our product candidates noncompetitive, obsolete or uneconomical.

We may be unable to compete successfully against other companies that are working to develop novel drugs and technology platforms using technology similar to ours.

In addition to the competition we face from competing drugs in general with respect to our operations, we have also faced competition from other biotechnology and pharmaceutical companies and medical institutions that are working to develop novel drugs using technology that competes more directly with our technologies. For example, there are a number of companies with programs in the nucleic acid therapeutics field, including: Alnylam Pharmaceuticals, Arbutus, Arcturus Therapeutics, Benitec Biopharma, Dicerna Pharmaceuticals, Isis Pharmaceuticals, miRagen Therapeutics, Mirna, PhaseRx Pharmaceuticals, Quark Pharmaceuticals, Regulus Therapeutics, RXi Pharmaceuticals, Sarepta Therapeutics and Silence Therapeutics. With respect to IT-102/IT-103, our primary competitor is Kitov, which is developing a celecoxib/amlodipine FDC using the same regulatory pathway that we are using for IT-102/IT-103. Any of the aforementioned companies may develop its technology more rapidly and more effectively than us.

In addition to competition with respect to our technology and with respect to specific products, we and our partners face substantial competition from third parties, both in academic laboratories and in the corporate sector, to discover and develop safe and effective means to deliver the drugs based on our technologies that are developed to the relevant cell and tissue types. If safe and effective means of delivery were developed by our competitors, our ability to successfully commercialize a competitive product would be adversely affected.

Many of our competitors, either alone or together with their partners, have substantially greater R&D capabilities and financial, scientific, technical, manufacturing, sales, marketing, distribution, regulatory and other resources and experience than us. They may also have more established relationships with pharmaceutical companies. Even if we and/or our partners are successful in developing products based on our technologies, in order to compete successfully we may need to be first to obtain IP protection for, or to commercialize, such products, or we may need to demonstrate that such products are superior to, or more cost effective than, products developed by our competitors (including therapies that are based on different technologies). If we are not first to protect or market our products, or if we are unable to differentiate our products from those offered by our competitors, any products for which we are able to obtain approval may not be successful.

Universities and public and private research institutions are also potential competitors. While these organizations primarily have educational objectives, they may develop proprietary technologies related to the drug delivery field or secure protection that we may need for development of our technologies and products. We may attempt to license one or more of these proprietary technologies, but these licenses may not be available to us on acceptable terms, if at all.

Risks Related to our Common Stock

The trading price of our common stock has been volatile, and investors in our common stock may experience substantial losses.

The trading price of our common stock has been volatile and may become volatile again in the future. The trading price of our common stock could decline or fluctuate in response to a variety of factors, including:

The stock markets in general, and the markets for the securities of companies in our industry in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

Our executive officers and directors control a large percentage of the outstanding shares of our common stock, and thus can significantly influence our corporate actions.

As of the date of this report, Dr. Vuong Trieu, the Chairman of our Board of Directors, directly or indirectly beneficially owns 40,376,121 shares of our common stock, which represents approximately 41.5% of our issued and outstanding shares of our common stock. Further, as of the date of this report, our executive officers and directors as a group (including Dr. Trieu) beneficially own approximately 48.7% of our outstanding shares of common stock. Accordingly, Dr. Trieu individually, and our executive officers and directors as a group, can significantly influence most, if not all, of our corporate actions, including the election of directors, the appointment of officers, and potential merger or acquisition transactions. The concentration of the ownership of the shares of our common stock by our executive officers and directors may also serve to limit the trading volume of our common stock.

We may not be able to achieve secondary trading of our stock in certain states because our common stock is not nationally traded.

Because our common stock is not listed for trading on a national securities exchange, our common stock is subject to the securities laws of the various states and jurisdictions of the U.S. in addition to federal securities law. This regulation covers any primary offering we might attempt and all secondary trading by our stockholders. If we fail to take appropriate steps to register our common stock or qualify for exemptions for our common stock in certain states or jurisdictions of the U.S., the investors in those jurisdictions where we have not taken such steps may not be allowed to purchase our stock or those who presently hold our stock may not be able to resell their shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on our stockholders.

Our common stock is traded on the OTCQB, which may limit the ability of our stockholders to sell their securities, and may cause volatility in the price of our common stock.

Our common stock currently trades on the OTCQB. Securities trading on the OTCQB often experience a lack of liquidity as compared to securities trading on a national securities exchange. Such securities also have experienced extreme price and volume fluctuations in recent years, which have particularly affected the market prices of many smaller companies like ours. We anticipate that our common stock will be subject to the lack of liquidity and this volume and price volatility that is characteristic of the OTCQB.

Our common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.

Our common stock may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act. The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account.

Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

Various restrictions in our charter documents and Delaware law could prevent or delay a change in control of us that is not supported by our board of directors.

We are subject to a number of provisions in our charter documents and Delaware law that may discourage, delay or prevent a merger, acquisition or change of control that a stockholder may consider favorable. These anti-takeover provisions include:

Section 203 of the Delaware General Corporation Law prohibits a merger, consolidation, asset sale or other similar business combination between us and any stockholder of 15% or more of our voting stock for a period of three years after the stockholder acquires 15% or more of our voting stock, unless (1) the transaction is approved by our board of directors before the stockholder acquires 15% or more of our voting stock, (2) upon completing the transaction the stockholder owns at least 85% of our voting stock outstanding at the commencement of the transaction, or (3) the transaction is approved by our board of directors and the holders of 66 2/3% of our voting stock, excluding shares of our voting stock owned by the stockholder.

We have never paid dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.

We have not paid any dividends on our common stock and do not expect to do so in the foreseeable future. In addition, the terms of any financing arrangements that we may enter into may restrict our ability to pay any dividends.

A significant number of shares of our common stock are subject to options, warrants and conversion rights, and we expect to sell additional shares of our common stock in the future. The issuance of these shares, which in some cases may occur on a cashless basis, will dilute the interests of other security holders and may depress the price of our common stock.

At December 31, 2016, there were outstanding warrants to purchase up to approximately 24.5 million shares common stock, almost all of which have an exercise price of less than $1.00. If any of these warrants are exercised on a cashless basis, we will not receive any cash as a result of such exercises. At December 31, 2016, there were also outstanding 1,020 shares of Series C Convertible Preferred Stock, which shares are convertible into 6.8 million shares of common stock at an assumed conversion price of $0.75 per share of common stock, and 60 shares of Series D Stock, which shares are convertible into 750,000 shares of common stock at an assumed conversion price of $0.40 per share of common stock. In addition, we may issue a significant number of additional shares of common stock (and securities convertible into or exercisable for common stock) from time to time to finance our operations, to fund potential acquisitions, or in connection with additional stock options or restricted stock granted to our employees, officers, directors and consultants. The issuance of common stock (or securities convertible into or exercisable for common stock), including the issuance of securities as described in this report, and the exercise or conversion of securities exercisable for or convertible into common stock, will have a dilutive impact on other stockholders and could have a material negative effect on the market price of our common stock.

There are outstanding a significant number of shares available for future sales under Rule 144.

A significant number of shares of our common stock may be deemed “restricted shares” and, in the future, may be sold in compliance with Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Any sales of such shares of our common stock under Rule 144 could have a depressive effect on the market price of our common stock. In general, under Rule 144, a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144. A person who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average weekly trading volume of our common stock during the four calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.

Our Board of Directors has the ability to issue “blank check” Preferred Stock.

Our Certificate of Incorporation authorizes the issuance of up to 100,000 shares of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by our Board of Directors. At March 30, 2017, 90,000 shares had been designated as Series A Junior participating preferred stock and 1,000 shares had been designated as Series B Preferred Stock, none of which are issued and outstanding. Also at March 30, 2017, 1,200 shares had been designated as Series C Convertible Preferred Stock (of which 1,020 were outstanding as of such date) and 220 shares had been designated as Series D Convertible Preferred Stock (of which 60 were outstanding as of such date). Our Board is empowered, without shareholder approval, to issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our common stock. In the event of such issuances, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any additional shares of our preferred stock, there can be no assurance that we will not do so in the future.

ITEM 1B. Unresolved Staff Comments.

Not applicable.

ITEM 2. Properties.

We do not own or lease any real property or facilities that are material to our current business operations. To the extent that facilities are necessary to conduct our current business operations, we utilize the facilities of Autotelic Inc. through the Master Services Agreement with Autotelic Inc. As we seek to expand our business operations, we may seek to lease facilities of our own in order to support our development, operational and administrative needs under our current operating plan. There can be no assurance that such facilities will be available, or that they will be available on suitable terms. Our inability to obtain such facilities could have a material adverse effect on our future plans and operations.

ITEM 3. Legal Proceedings.

We are subject to various legal proceedings and claims that arise in the ordinary course of business. Our management currently believes that resolution of such legal matters will not have a material adverse impact on our financial position, results of operations or cash flows.

ITEM 4. Mine Safety Disclosures.

Not applicable.

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

The common stock of Marina has traded on the OTCQB under the symbol “MRNA” since September 17, 2014. The table below sets forth, for each of the quarterly periods indicated, the range of high and low bid prices of Marina’s common stock, as reported by the OTC Markets. The prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Prior to the Merger, the common stock of IThena did not trade on any market or exchange.

On March 30, 2017, the closing price of our common stock reported by the OTC Markets was $0.25 per share.

Holders

As of March 30, 2017, there were 277 holders of record of our common stock.

Dividends

Payment of dividends and the amount of dividends depend on matters deemed relevant by our Board, such as our results of operations, financial condition, cash requirements, future prospects and any limitations imposed by law, credit agreements and debt securities. To date, we have not paid any cash dividends or stock dividends on our common stock. In addition, we currently anticipate that we will not pay any cash dividends in the foreseeable future. Furthermore, the terms of any financing arrangements that we may enter into may restrict our ability to pay any dividends.

ITEM 6. Selected Financial Data.

Not applicable.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the two year period ended December 31, 2016 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2016, as compared to the year ended December 31, 2015. This discussion should be read in conjunction with our consolidated financial statements for the two year period ended December 31, 2016 and related notes included elsewhere in this annual report on Form 10-K. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A. Risk Factors.”

BACKGROUND AND MERGER

Overview

We are a biopharmaceutical company engaged in the discovery, acquisition, development and commercialization of proprietary drug therapeutics for addressing significant unmet medical needs in the U.S., Europe and additional international markets. Our primary therapeutic focus is the disease intersection of hypertension, arthritis, pain, and oncology allowing for innovative combination therapies of the plethora of already approved drugs and the proprietary novel oligotherapeutics of Marina. Our approach is meant to reduce the risk associated with developing a new drug de novo and also accelerate time to market by shortening the clinical development program through leveraging what is already known or can be learned in our proprietary Patient Level Database (PLD).

We currently have three clinical development programs underway: (i) our next generation celecoxib program drug candidates IT-102 and IT-103, each of which is an FDC of celecoxib and either lisinopril (IT-102) or olmesartan (IT-103), (ii) CEQ508, an oral delivery of siRNA against beta-catenin, combined with IT-102 to suppress polyps in the precancerous syndrome and orphan indication of FAP; and (iii) CEQ508 combined with IT-103 to treat CRC.

Our preclinical pipeline also includes potentially the best in class oligotherapeutics for bladder cancer, IBB and DMD. Preclinical proof of concept studies have been completed with respect to bladder cancer and IBD.

Although we intend to retain ownership and control of product candidates by advancing their development, we will also consider partnerships with pharmaceutical or biopharmaceutical companies in order to reduce time to market and to balance the risks associated with drug discovery and development, thereby maximizing our stockholders’ value. Our partnering objectives include generating revenue through license fees, milestone-related development fees and royalties by licensing rights to our product candidates, which would be a source of non-dilutive capital.

We may engage in licensing activities associated with our delivery platforms (SMARTICLES and tkRNAi). However, since our strategy is to be a late-stage biopharmaceutical company with the goal of a commercial product launch and profitability within the next several years, the development and licensing of these platforms for the therapeutic assets of third parties will not be the primary focus of our company.

Merger with IThenaPharma

Merger with IThenaPharma

On November 15, 2016, Marina entered into the Merger Agreement with IThenaPharma, Merger Sub and Vuong Trieu, as the IThena representative, pursuant to which, among other things, Merger Sub merged with and into IThenaPharma, with IThenaPharma surviving as a wholly owned subsidiary of Marina.

Pursuant to the Merger Agreement, at the effective time of the Merger, without any action on the part of any shareholder, each issued and outstanding share of IThenaPharma’s common stock, other than shares to be cancelled pursuant to the Merger Agreement, was converted into the right to receive 10.510708 shares of Marina common stock (the “Exchange Ratio”). IThenaPharma shareholders were not entitled to receive fractional shares in the Merger. Instead, a holder of IThenaPharma’s common stock that would otherwise have been entitled to receive a fractional share of Marina common stock in the Merger received one full additional share of Marina common stock.

In addition, in connection with the Merger, each outstanding IThenaPharma warrant was assumed by Marina and converted into a warrant representing the right to purchase shares of Marina common stock, with the number of shares underlying such warrant and the exercise price thereof being adjusted by the Exchange Ratio, with any fractional shares rounded down to the next lowest number of whole shares.

As a result of the Merger, the former holders of IThenaPharma common stock immediately prior to the completion of the Merger owned approximately 65% of the issued and outstanding shares of Marina common stock immediately following the completion of the Merger.

IThena is deemed to be the accounting acquirer in the Merger, and thus the historical financial statements of IThena will be treated as the historical financial statements of our company and will be reflected in our quarterly and annual reports for periods ending after the effective time of the Merger. Accordingly, beginning with this Annual Report on Form 10-K for the fiscal year ended December 31, 2016, we will report the results of IThena and Marina and their respective subsidiaries on a consolidated basis.

Autotelic LLC License Agreement

In connection with the Merger Agreement and the closing of the Merger, on November 15, 2016, Marina entered into a License Agreement with Autotelic LLC, a stockholder of IThenaPharma that became the holder of 23,123,558 shares of Marina common stock as a result of the Merger, and an entity of which Dr. Trieu, the Chairman of our Board of Directors serves as Chief Executive Officer, pursuant to which (A) Marina licensed to Autotelic LLC certain patent rights, data and know-how relating to FAP and nasal insulin, for human therapeutics other than for oncology-related therapies and indications, and (B) Autotelic LLC licensed to Marina certain patent rights, data and know-how relating to IT-102 and IT-103, in connection with individualized therapy for pain using a non-steroidal anti-inflammatory drug and an anti-hypertensive without inducing intolerable edema, and treatment of certain aspects of proliferative disease, but not including rights to IT-102/IT-103 for TDM guided dosing for all indications using an Autotelic Inc. TDM Device. Marina also granted a right of first refusal to Autotelic LLC with respect to any license by Marina of the rights licensed by or to Marina under the License Agreement in any cancer indication outside of gastrointestinal cancers.

The License Agreement shall immediately terminate, all rights granted by a licensor under the License Agreement shall immediately revert forthwith to the applicable licensor, all benefits which have accrued under the License Agreement shall automatically be transferred to the applicable licensor, and all rights, title and interest in the licensed intellectual property shall immediately revert back to the applicable licensor if: (i) the applicable licensee makes a general assignment for the benefit of its creditors prior to the two (2) year anniversary of the date of the License Agreement; (ii) the applicable licensee applies for or consents to the appointment of a receiver, a custodian, a trustee or liquidator of all or a substantial part of its intellectual property prior to the two (2) year anniversary of the date of the License Agreement; (iii) prior to the two (2) year anniversary of the date of the License Agreement, and without the consent of the applicable licensor, the applicable licensee effects a Change of Control Transaction (as defined in the License Agreement); (iv) the applicable licensee ceases operations; or (v) the applicable licensee fails to take any material steps, as reasonably determined by the applicable licensor, to develop the licensed intellectual property prior to the one (1) year anniversary of the date of the License Agreement (each of the foregoing items (i) through (v), a “Termination Event”). Upon the occurrence of any Termination Event, the applicable licensee shall immediately discontinue all use of the licensed intellectual property.

Master Services Agreement

In connection with the Merger Agreement and the closing of the Merger, on November 15, 2016, Marina entered into a Master Services Agreement with Autotelic Inc., a stockholder of IThenaPharma that became the holder of 5,255,354 shares of Marina common stock as a result of the Merger, and an entity of which Dr. Trieu serves as Chairman of the Board, pursuant to which Autotelic Inc. agreed to provide certain business functions and services from time to time during regular business hours at Marina’s request (the “Master Services Agreement”). The Master Services Agreement has a term of ten years, though either party can terminate it by giving to the other party ninety (90) days’ prior written notice of such termination (provided that the final day of the term shall be on the last day of the calendar month in which the noticed termination date falls). The resources available to us through Autotelic Inc. include, without limitation, regulatory, clinical, preclinical, manufacturing, formulation, legal, accounting and information technology.

As partial consideration for the services to be performed by Autotelic Inc. under the Master Services Agreement, during the period prior to the date on which we have completed an equity offering of either common or preferred stock in which the gross proceeds therefrom is no less than $10 million, we shall issue to Autotelic Inc. warrants to purchase shares of our common stock (the “MSA Warrants”), with the number of shares of common stock for which such MSA Warrants are exercisable, and the exercise price for such MSA Warrants, being based on the closing price of our common stock; provided, that in no event shall such price be lower than the lower of (x) $0.28 per share or (y) the lowest exercise price of any warrants that have been issued by us in a capital raising transaction (and that would otherwise reduce the exercise price of any other outstanding warrants issued by us) during the period beginning on November 15, 2016 and ending on the date of the issuance of the MSA Warrants.

Line Letter

In connection with the Merger, Marina entered into a Line Letter dated November 15, 2016 with Dr. Trieu, our Chairman of the Board, for an unsecured line of credit in an amount not to exceed $540,000, to be used for current operating expenses. Dr. Trieu will consider requests for advances under the Line Letter until April 30, 2017. Dr. Trieu shall have the right at any time for any reason in his sole and absolute discretion to terminate the line of credit available under the Line Letter or to reduce the maximum amount available thereunder without notice; provided, that Dr. Trieu agreed that he shall not demand the repayment of any advances that are made under the Line Letter prior to the earlier of: (i) May 15, 2017; and (ii) the date on which (x) we make a general assignment for the benefit of our creditors, (y) we apply for or consents to the appointment of a receiver, a custodian, a trustee or liquidator of all or a substantial part of our assets or (z) we cease operations. Dr. Trieu has advanced an aggregate of $250,000 under the Line Letter. Advances made under the Line Letter shall bear interest at the rate of five percent (5%) per annum, shall be evidenced by the Demand Promissory Note issued by us to Dr. Trieu, and shall be due and payable upon demand by Dr. Trieu.

Dr. Trieu shall have the right, exercisable by delivery of written notice thereof (the “Election Notice”), to either: (i) receive repayment for the entire unpaid principal amount advanced under the Line Letter and the accrued and unpaid interest thereon on the date of the delivery of the Election Notice (the “Outstanding Balance”) or (ii) convert the Outstanding Balance into such number of shares of our common stock as is equal to the quotient obtained by dividing (x) the Outstanding Balance by (y) $0.10 (such price, the “Conversion Price”, and the number of shares of common stock to be issued pursuant to the foregoing formula, the “Conversion Shares”); provided, that in no event shall the Conversion Price be lower than the lower of (x) $0.28 per share or (y) the lowest exercise price of any securities that have been issued by us in a capital raising transaction (and that would otherwise reduce the exercise price of any other outstanding warrants issued by us) during the period between November 15, 2016 and the date of the delivery of the Election Notice.

We look for continued support beyond the current Line Letter from Dr. Trieu, who has expressed strong interest in the success of our programs and is working diligently to help move our assets through regulatory/clinical development into sales/marketing.

Appointment / Resignation of Directors; Appointment of Officers

Pursuant to the Merger Agreement, and in connection with the Merger, Dr. Trieu was appointed to the Board, to serve until our 2017 annual meeting of stockholders or until his earlier death, resignation or removal. In connection with his appointment as a member of the Board, Dr. Trieu was also appointed to serve as Chairman of the Board.

On December 8, 2016, the Board elected Philippe P. Calais, Ph.D. Pharm. as a member of the Board to fill the vacancy created by the resignation of Joseph W. Ramelli as a director, such election to be effective January 1, 2017.

On December 8, 2016, the Board appointed Mr. Ramelli, who had served as our interim Chief Executive Officer, to serve as our Chief Executive Officer, effective immediately. At the same time, Mr. Ramelli resigned as a member of the Board effective immediately.

On February 10, 2017, the Board approved the appointment of Larn Hwang, Ph.D. to serve as our Chief Scientific Officer, and Mihir Munsif to serve as our Chief Operating Officer, in each case, effective February 13, 2017. Dr. Hwang will lead the further development of our therapeutic pipeline and Mr. Munsif will lead the manufacturing of our drug products on commercial scale.

On February 21, 2017, we appointed Seymour Fein MD as our Chief Medical Officer. Having taken more than twenty drugs from development on through FDA approval, Dr. Fein is in a unique position to lead the regulatory and clinical development of our pipeline.

Arrangements with LipoMedics

On February 6, 2017, we entered into a License Agreement (the “License Agreement”) with LipoMedics, Inc. (“LipoMedics”) pursuant to which, among other things, we provided to LipoMedics a license to our SMARTICLES platform for the delivery of nanoparticles including small molecules, peptides, proteins and biologics. This represents the first time that our SMARTICLES technologies have been licensed in connection with nanoparticles delivering small molecules, peptides, proteins and biologics. On the same date, we also entered into a Stock Purchase Agreement with LipoMedics pursuant to which we issued to LipoMedics an aggregate of 862,068 shares of our common stock for a total purchase price of $250,000.

Under the terms of the License Agreement, we could receive up to $90 million in success-based milestones. In addition, if LipoMedics determines to pursue further development and commercialization of products under the License Agreement, LipoMedics agreed, in connection therewith, to purchase shares of our common stock for an aggregate purchase price of $500,000, with the purchase price for each share of common stock being the greater of $0.29 or the volume weighted average price of our common stock for the thirty (30) trading days immediately preceding the date on which LipoMedics notifies us that it intends to pursue further development or commercialization of a licensed product.

If LipoMedics breaches the License Agreement, we shall have the right to terminate the License Agreement effective sixty (60) days following delivery of written notice to LipoMedics specifying the breach, if LipoMedics fails to cure such material breach within such sixty (60) day period; provided, that if LipoMedics advises us in writing within such sixty (60) day period that such breach cannot reasonably be cured within such period, and if in our reasonable judgment, LipoMedics is diligently seeking to cure such breach during such period, then such period shall be extended an additional sixty (60) days for an aggregate of 120 days after written notice of termination, and if LipoMedics fails to cure such material breach by the end of such 120-day period, the License Agreement shall terminate in its entirety. LipoMedics may terminate the License Agreement by giving thirty (30) days’ prior written notice to us.

Vuong Trieu, Ph.D., the Chairman of our Board of Directors, is the Chairman of the Board and Chief Operating Officer of LipoMedics. Lipomedics is a leader in nanomedicine in the field of oncology and its pipeline includes phospholipid paclitaxel nanoparticles and others. These products are potentially billion dollar products and we are looking forward to continued interaction with Lipomedics to accelerate its development program and expand the SMARTICLES delivery platform.

Issuance of Shares to Service Providers

In February 2017, we entered into two privately negotiated transactions pursuant to which we committed to issue an aggregate of 6,153,684 shares of our common stock for an effective price per share of $0.29 to settle aggregate liability of approximately $948,000, which is reflected in accrued expenses as of December 31, 2016. In addition, in February 2017, we issued 0.3 million shares of our common stock to a consultant providing investment advisory services.

Issuance of Shares to Novosom

On November 15, 2016, Marina agreed to issue to Novosom Verwaltungs GmbH (“Novosom”) 1.5 million shares of common stock upon the closing of the Merger in consideration of Novosom’s agreement that the consummation of the Merger would not constitute a “Liquidity Event” under that certain Asset Purchase Agreement dated as of July 27, 2010 between and among Marina, Novosom and Steffen Panzner, Ph.D., and thus that no additional consideration under such agreement would be due to Novosom as a result of the consummation of the Merger.

CASH POSITION AND LIQUIDITY

Liquidity

The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2016, we had an accumulated deficit of approximately $2 million. We anticipate that we will continue to incur operating losses as we execute our business plan. In addition, we have had and will continue to have negative cash flows from operations. We have funded our losses primarily through the sale of common and preferred stock and warrants, revenue provided from our license agreements and loans provided by Dr. Trieu pursuant to the Line Letter and, to a lesser extent, equipment financing facilities and secured loans. In 2015 and 2016, we funded operations with a combination of the issuance of preferred stock and license-related revenues. At December 31, 2016, we had negative working capital of approximately $2,667,000 and a cash balance of approximately $105,000. Our operating activities consume the majority of our cash resources.

We believe that our current cash resources, including the remaining balance available to us under the Line Letter, will enable us to fund our intended operations through the 3^rd or 4^th quarter of 2017. Our ability to execute our operating plan beyond that date depends on our ability to obtain additional funding. The volatility in our stock price, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations. There can be no assurance that we will be successful in any such endeavors. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Funding of Operations

Line Letter with Vuong Trieu

In connection with the Merger, Marina entered into a Line Letter dated November 15, 2016 with Dr. Trieu, the president of IThena, pursuant to which Dr. Trieu offered to Marina an unsecured line of credit in an amount not to exceed $540,000, to be used for current operating expenses. As of December 31, 2016, Dr. Trieu had advanced an aggregate of $250,000 to us under the Line Letter.

February 2017 Stock Issuances

On February 6, 2017, we entered into a Stock Purchase Agreement with LipoMedics Inc. pursuant to which we issued to LipoMedics Inc. an aggregate of 862,068 shares of our common stock for a total purchase price of $250,000 ($0.29 per share). In addition, in February 2017, we entered into two privately negotiated transactions pursuant to which we committed to issue an aggregate of 6,153,684 shares of our common stock for an effective price per share of $0.29 to settle aggregate liability of approximately $948,000, which is reflected in accrued expenses as of December 31, 2016.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

Principles of Consolidation — We consolidate our financial statements with our wholly-owned subsidiaries, IThena, Cequent, MDRNA and Atossa, and eliminate any inter-company balances and transactions.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Estimates having relatively higher significance include revenue recognition, R&D costs, stock-based compensation, valuation of warrants, valuation and estimated lives of identifiable intangible assets, impairment of long-lived assets, valuation of features embedded within note agreements and amendments, and income taxes. Actual results could differ from those estimates.

Fair Value of Financial Instruments — We consider the fair value of cash, accounts receivable, accounts payable and accrued liabilities not to be materially different from their carrying value. These financial instruments have short-term maturities. We follow authoritative guidance with respect to fair value reporting issued by the Financial Accounting Standards Board (“FASB”) for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance does not apply to measurements related to share-based payments. The guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Our cash is subject to fair value measurement and is determined by Level 1 inputs. We measure the liability for committed stock issuances with a fixed share number using Level 1 inputs. We measure the liability for price adjustable warrants and certain features embedded in notes, using the Black-Scholes option pricing model (“Black-Scholes”), using Level 3 inputs.

Our determination of the fair value of price adjustable securities as of the reporting date is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the security, the risk-free interest rate, the likelihood of financing at a range of prices, the likelihood of the sale of our company at a range of prices, and the likelihood of insolvency. Other reasonable assumptions for these variables could provide differing results. In addition, Black-Scholes requires the input of an expected life for the securities for which we have used the remaining contractual life. The fair value liability is revalued each balance sheet date utilizing Black-Scholes with the decrease or increase in fair value being reported in the statement of operations as other income or expense, respectively. The primary factor affecting the fair value liability is our stock price.

Identifiable intangible assets — Intangible assets associated with in-process R&D (“IPR&D”) acquired in business combinations are not amortized until approval is obtained in the United States, the European Union, or in a series of other countries, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.

Impairment of long-lived assets — We review all of our long-lived assets for impairment indicators throughout the year and perform detailed testing whenever impairment indicators are present. In addition, we perform detailed impairment testing for indefinite-lived intangible assets, specifically IPR&D, at least annually at December 31. When necessary, we record charges for impairments. Specifically:

Revenue Recognition — Revenue is recognized when persuasive evidence that an arrangement exists, delivery has occurred, collectability is reasonably assured, and fees are fixed or determinable. Deferred revenue expected to be recognized within the next 12 months is classified as current. Substantially all of our revenues are generated from licensing arrangements that do not involve multiple deliverables and have no ongoing influence, control or R&D obligations. Our license arrangements may include upfront non-refundable payments, development milestone payments, patent-based or product sale royalties, and commercial sales, all of which are treated as separate units of accounting. In addition, we may receive revenues from sub-licensing arrangements. For each separate unit of accounting, we have determined that the delivered item has value to the other party on a stand-alone basis, we have objective and reliable evidence of fair value using available internal evidence for the undelivered item(s) and our arrangements generally do not contain a general right of return relative to the delivered item.

Revenue from licensing arrangements is recorded when earned based on the specific terms of the contracts. Upfront non-refundable payments, where we are not providing any continuing services as in the case of a license to our IP, are recognized when the license becomes available to the other party.

Milestone payments typically represent nonrefundable payments to be received in conjunction with the uncertain achievement of a specific event identified in the contract, such as initiation or completion of specified development activities or specific regulatory actions such as the filing of an IND. We believe a milestone payment represents the culmination of a distinct earnings process when it is not associated with ongoing research, development or other performance on our part and it is substantive in nature. We recognize such milestone payments as revenue when it becomes due and collection is reasonably assured.

Royalty and earn-out payment revenues are generally recognized upon commercial product sales by the licensee as reported by the licensee.

Stock-based Compensation — We use Black-Scholes as our method of valuation for stock-based awards. Stock-based compensation expense is based on the value of the portion of the stock-based award that will vest during the period, adjusted for expected forfeitures. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual or updated results differ from our current estimates, such amounts will be recorded in the period the estimates are revised. Black-Scholes requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results. Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the award and expected stock price volatility over the term of the award. Stock-based compensation expense is recognized immediately for immediately vested portions of the grant, with the remaining portions recognized on a straight-line basis over the applicable vesting periods based on the fair value of such stock-based awards on the grant date. Forfeiture rates have been estimated based on historical rates and compensation expense is adjusted for general forfeiture rates in each period. Beginning in September 2014, we did not use historical forfeiture rates and did not apply a forfeiture rate as the historical forfeiture rate was not believed to be a reasonable estimate of the probability that the outstanding awards would be exercised in the future. Given the specific terms of the awards and the recipient population, we expect these options will all be exercised in the future.

Non-employee stock compensation expense is recognized immediately for immediately vested portions of the grant, with the remaining portions recognized on a straight-line basis over the applicable vesting periods. At the end of each financial reporting period prior to vesting, the value of the unvested stock options, as calculated using Black-Scholes, is re-measured using the fair value of our common stock, and the stock-based compensation recognized during the period is adjusted accordingly.

Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or pledged. The effect on deferred tax assets and liabilities of a change in tax rates in recognized in income in the period that includes the enactment date. Tax benefits in excess of stock-based compensation expense recorded for financial reporting purposes relating to stock-based awards will be credited to additional paid-in capital in the period the related tax deductions are realized. Our policy for recording interest and penalties associated with audits is to record such items as a component of loss before taxes.

We assess the likelihood that our deferred tax assets will be recovered from existing deferred tax liabilities or future taxable income. Factors we considered in making such an assessment include, but are not limited to, estimated utilization limitations of operating loss and tax credit carry-forwards, expected reversals of deferred tax liabilities, past performance, including our history of operating results, our recent history of generating tax losses, our history of recovering net operating loss carry-forwards for tax purposes and our expectation of future taxable income. We recognize a valuation allowance to reduce such deferred tax assets to amounts that are more likely than not to be ultimately realized. To the extent that we establish a valuation allowance or change this allowance, we would recognize a tax provision or benefit in the consolidated statements of operations. We use our judgment to determine estimates associated with the calculation of our provision or benefit for income taxes, and in our evaluation of the need for a valuation allowance recorded against our net deferred tax assets.

CONSOLIDATED RESULTS OF OPERATIONS

Comparison of Annual Results of Operations 

* Change not meaningful.

** Includes the accounts of IThena for the year ended December 31, 2016 and the accounts of Marina from November 15, 2016 (the date of Merger) to December 31, 2016

Comparison of Fiscal Years 2016 and 2015

Revenue. We recorded no revenue for the years ended December 31, 2016 or 2015.

Personnel expense. Personnel expense was $333,097 and $473,188 for the years ended December 31, 2016 and 2015, respectively, a decrease of 30%. The decrease was due primarily to the additional manpower contributed in the early stage during 2015 for concept and testing of scientific theories.

Consulting expense. Consulting expense was $23,655 and $177,751 for the years ended December 31, 2016 and 2015, respectively, a decrease of 87%. The decrease was due to outsourced consulting occurring primarily in 2015, when IThena acquired a subset of Symphony Claims data & Cardiology Outpatient Registry data to conduct outsourced analysis related to IT-102. IThena incurred fewer consulting expenses in 2016, including the engagement of business development consultants to expand the market overseas.

Research and Development. R&D expense consists primarily of costs of clinical development and pre-clinical studies, outside services, laboratory supplies and other costs. R&D expenses decreased 66% from $322,317 in 2015 to $108,858 in 2016, due to outsourced research to a third party primarily in 2015 to analyze the patient data related to IT-102 and other product candidates, and IThena initiated formulation work on IT-102 in 2015 of which a final report was delivered.

Amortization. Amortization expense relates to intangible assets acquired in the November 15, 2016 merger, and are amortized over a 6-year period. Total amortization expense was $49,189 and $0 for the years ended December 31, 2016 and 2015, respectively.   

General and administrative. General and administrative (“G&A”) expense consists primarily of salaries and other personnel-related expenses, and non-employee members of our Board of Directors, professional fees (such as accounting and legal), and corporate insurance. G&A costs increased by 81% from $134,322 in 2015 to $242,931 in 2016 primarily due to increased G&A costs as a result of the merger between Marina and IThena.

Change in fair value liability for price adjustable securities. The fair value liability is revalued each balance sheet date utilizing probability adjusted Black-Scholes computations, with the decrease or increase in fair value being reported in the statement of operations as other income or expense, respectively. The change associated with this mark-to-fair value requirement increased from a loss of $75,100 and $0 for the years ended December 31, 2016 and 2015, respectively. The change was primarily a result of the increase in our stock price and stock price volatility as a result of the merger on November 15, 2016.  

Interest and other expense. In 2016, interest expense of $3,513 consisted primarily of interest accrued under the notes payable we entered into on June 20, 2016 and the convertible note payable to related party we entered into on November 15, 2016.

Off-Balance Sheet Arrangements

At December 31, 2016, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

ITEM 8. Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Marina Biotech, Inc.

We have audited the accompanying consolidated balance sheets of Marina Biotech, Inc. and subsidiaries (collectively, the “Company”) as of December 31, 2016 and December 31, 2015, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Marina Biotech, Inc. and subsidiaries as of December 31, 2016 and December 31, 2015, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations and has had recurring negative working capital. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS