Provention Bio, Inc. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018

OR

FOR THE TRANSITION PERIOD FROM _______TO ______.

Commission file number 001-38552

PROVENTION BIO, INC.

(Exact name of registrant as specified in its charter)

P.O. Box 666 Oldwick, New Jersey 08858
(Address of registrant’s principal executive offices)

(908) 336-0360
(Registrant’s telephone number, including area code)

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

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

None

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 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 website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]. No [  ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. [  ].

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

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

As of June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s common stock was not publicly traded. The registrant’s common stock began trading on the Nasdaq Capital Market on July 24, 2018. As of December 31, 2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $56.8 million, based on the closing price of the registrant’s common stock on December 31, 2018.

As of March 15, 2019, the number of outstanding shares of common stock of the registrant was 37,361,562.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of Provention Bio, Inc.’s definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year are incorporated by reference into Part III of this Form 10-K and certain documents are incorporated by reference into Part IV.

PROVENTION BIO, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “goals,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

PART I

ITEM 1. Business

Our Company

Overview

We are a clinical stage biopharmaceutical company, focused on the development and commercialization of novel therapeutics and solutions aimed at intercepting and preventing immune-mediated diseases. Since our inception, we have devoted substantially all of our efforts to research and development, business planning, recruiting management and technical staff, acquiring operating assets, partnering and raising capital. Our business is subject to significant risks and uncertainties and we will be dependent on raising substantial additional capital before it becomes profitable and it may never achieve profitability.

We have not generated any revenue to date and through December 31, 2018, we had an accumulated deficit of $35.8 million. We have financed our operations through a private offering of Series A Convertible Redeemable Preferred Stock in April 2017, and our initial public offering, or IPO, in July 2018.

In April 2017, we completed our private placement of Series A Convertible Redeemable Preferred Stock. We issued an aggregate 11,381,999 shares of Series A Convertible Redeemable Preferred Stock at $2.50 per share. We received net proceeds of $26.7 million.

In July 2018, we issued and sold an aggregate of 15,969,563 shares of common stock in our IPO at a public offering price of $4.00 per share. In connection with the IPO, we issued to MDB, the underwriter in the IPO, and its designees warrants to purchase 1,596,956 shares of Common Stock at an exercise price of $5.00 per share. We received net proceeds from the IPO of $59.3 million, after deducting underwriting discounts and commissions and other offering expenses. Upon the closing of the IPO, all of our shares of Series A Convertible Redeemable Preferred Stock outstanding at the time of the IPO were automatically converted into an aggregate of 11,381,999 shares of common stock. In addition, the warrants issued in connection with the Series A Convertible Redeemable Preferred Stock also converted to warrants for the purchase of an aggregate of 558,740 shares of our common stock.

We expect that over the next several years we will continue to incur losses from operations as we increase our expenditures in research and development in connection with clinical trials and other development activities. If adequate funds are not available to us on a timely basis, or at all, we may be required to terminate or delay certain development activities.

Strategy

Provention preferentially sources, repositions, transforms and advances underdeveloped or deprioritized clinical-stage, or nearly clinical-stage, therapeutic candidates targeting the interception and prevention of immune-mediated disease. Our “predict” and “pre-empt” therapeutic approach focuses on identifying at-risk patients and intervening before the targeted disease begins, re-appears, exacerbates or progresses. We believe our experience and expertise in translational medicine, immunology, and the design and execution of rapid go/no-go clinical trials makes us unique in the field of immune-mediated disease.

We have access to relevant in-licensing opportunities from industry-leading pharmaceutical companies; innovative, development-stage biotechnology companies; and world-renowned academic centers. To date, we have obtained exclusive worldwide rights to an enterovirus vaccine platform, targeting the prevention of coxsackie virus B (CVB) infections and T1D onset, from Vactech Ltd., or Vactech, a Finnish biotechnology company; two Phase 2 clinical-stage candidates from affiliated entities of Janssen Pharmaceuticals, Inc., or Janssen, a small molecule targeting an upstream pathological mechanism believed to drive Crohn’s disease and a human monoclonal antibody (mAb) targeting a pathological mechanism believed to be actively involved in the progression of UC, severe influenza, and certain emerging viral diseases; two product candidates from MacroGenics, Inc., a Phase 3 clinical-stage candidate for the interception of T1D and a Phase 1 candidate for the potential treatment of SLE; and a Phase 2 clinical-stage candidate from Amgen, Inc. targeting celiac disease.

Our activities are subject to significant risks and uncertainties, including the need for additional capital, as described below. The company has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and will need to raise additional capital to finance its operations.

Our Focus and Pipeline

Inflammation is a natural consequence of most infections, as it is the immune system’s first response to invading pathogens in the event of injury or acute illness. Most of the time, this response is beneficial and well-controlled; helping to repair tissue damage and clear pathogens from the body. In addition to directly damaging tissues and organs, an infection can sometimes result in a potentially fatal acute pathological immune reaction. In such instances, a patient’s life is at risk primarily from the excessive immune response and release of toxic immune mediators. When patients have the requisite genetic predisposition, infections can sometimes also trigger chronic autoimmune responses that persist and progress long after the original insult has subsided. These sustained responses have been linked to an increased susceptibility to chronic conditions like inflammatory bowel disease, diabetes, cancer, and certain neurological disorders.

Provention’s “predict” and “preempt” therapeutic approach is to intercept the underlying pathological immune and inflammatory responses in susceptible individuals. Provention’s pipeline includes:

The table below summarizes the current status and anticipated milestones for our principal product candidates:

Provention intends to leverage its distinctive competences and drug development strategy; advance its carefully selected portfolio of product candidates; in-license or acquire additional targeted development assets and apply its disease interception and prevention approach to multiple autoimmune and immune-mediated inflammatory diseases.

OUR PRODUCT CANDIDATES

PRV-031 (teplizumab; anti-CD3 antibody) for T1D

Type 1 Diabetes Background Information

T1D is the end result of immune-mediated destruction of the insulin-producing beta cells of the pancreas and is one of the most common and serious chronic conditions occurring in childhood. T1D patients require life-long dependence on insulin products delivered through multiple daily injections or continuous infusion pumps. T1D has various clinical complications that ultimately reduce the average life-expectancy. The disease is believed to occur in genetically susceptible individuals upon exposure to environmental triggers. In addition, because of a similar genetic predisposition, patients with T1D are at high risk of developing celiac disease. Celiac disease is characterized by autoimmunity in the gut and other organs triggered by consumption of gluten and can lead to malnutrition and other complications including a form of cancer called lymphoma. There is no approved therapy for celiac disease.

Lack of insulin secretory capacity has serious consequences, even when patients receive insulin replacement therapy. The complications of T1D include eye disease, nerve damage, kidney disease and heart disease. Diabetic retinopathy has a prevalence of approximately 80% among patients with T1D and is the leading cause of vision impairment and blindness among adults. Moreover, about 60% to 70% of people with diabetes present some form of neuropathy that can induce numbness, weakness and blood pressure dysregulation. In addition, diabetic nephropathy is the leading cause of chronic kidney disease and affects about 30% of T1D patients. Diabetes can also cause severe heart complications and adults with diabetes are two to four times more likely to die from heart disease than adults without diabetes.

In summary, people with T1D experience substantial morbidity and mortality owing to chronic complications.

Current Treatment Options and Their Limitations

So far, no curative treatment exists for T1D. Patients with T1D still need to use daily insulin injections to manage blood sugar to a normal range. However, it is estimated that fewer than one-third of people with T1D in the U.S. achieve target blood glucose levels and insulin injections often cause hypoglycemia (low blood sugar). While insulin injections or infusion allow a person with T1D to stay alive, they do not cure the disease, nor do they necessarily reduce the risk of serious effects and long-term complications of T1D.

While pancreatic and islet cell transplantation offer the ability to normalize glucose levels and remove the dependence on insulin products, there are significant risks. First, is the risk associated with mandatory immunosuppression, which commonly results in the development of infections that may be life-threatening. Furthermore, pancreas transplantation may be associated with technical complications (vascular thrombosis, pancreatitis, infection, fistulas) as well as acute and chronic organ rejection. Islet cell transplantation can provide better glycemic control and protect patients from hypoglycemic episodes, but only approximately 50% of patients are insulin-free after three years of follow-up.

New approaches are therefore still required and could significantly enhance patient care. In particular, there is a strong need for new preventive or curative treatments. Among the different possible strategies, primary prevention through vaccination seems to be the best candidate considering the potential efficacy and safety balance that needs to be achieved.

Type 1 Diabetes Market

According to the International Diabetes Federation, 8.8% of the adult population worldwide has diabetes, among whom 10-15% have T1D. It is estimated that 5 million people in the U.S. are expected to have T1D by 2050, including nearly 600,000 young patients (<15 years). The cost of T1D in the U.S. is estimated to be $14.4 billion each year. Moreover, the incidence of T1D is increasing worldwide and it is estimated that nearly 90,000 children are diagnosed each year. In the period between 2005 and 2020, epidemiologists predict a 70% increase in the incidence of T1D in children in Europe, with the age of onset decreasing and the number of cases in children younger than five years old doubling.

Overview of T1D Biology and PRV-031 Mechanism of Action

T1D is an autoimmune disease. Specialized white blood cells of our immune system, known as self-reactive T cells (also called auto-reactive), are triggered, presumably by CVB viral infection in at least 50% of cases, to attack and destroy beta cells of the pancreas, thus causing a decline in the natural production of insulin. Simultaneously, another type of T cell (called regulatory T cells or Tregs), which normally suppress the activity of the self-reactive T cells, fail to do so effectively.

PRV-031 (teplizumab, previously known as MGA-031), is a humanized mAb that binds with high specificity to a cell surface protein called CD3. The CD3 protein is a co-receptor that helps activate T cells and direct different kinds of immune responses. Experimental data suggest that binding of PRV-031 to CD3 triggers events that differentially inhibit the activation of self-reactive T cells without affecting regulatory T cells. This restores the important state of immune tolerance and may prevent self-reactive T cells from attacking beta cells in the pancreas. If administered shortly after diagnosis, we believe PRV-031 has the potential to intercept the T1D disease process and slow or prevent the complete destruction of insulin-producing pancreatic beta cells. If successful, we believe PRV-031 could slow or stop the progression of T1D in responding patients and potentially delay or prevent dependence on insulin products.

Clinical Development Program

We plan to commence a Phase 3 study in the second quarter of 2019 in pediatric and adolescent patients with early onset T1D and a minimum level of pancreatic beta-cell function based on C-peptide levels at study entry. The study will be a randomized, controlled, multi-center study conducted in North America and Europe. The primary endpoint will evaluate the effect of PRV-031, as compared with placebo, in preserving beta cell function, measured by C-peptide secretion. Secondary endpoints will measure insulin use, HbA1c levels, and hypoglycemic episodes. We expect to enroll approximately 300 patients.

PRV-031 is currently being tested in a Phase 2 clinical trial (Teplizumab for Prevention of Type 1 Diabetes In Relatives “At-Risk”), conducted at TrialNet sites and sponsored by the National Institute of Diabetes and Digestive and Kidney diseases (NIDDK), part of the National Institutes of Health (NIH). In this study, researchers are exploring whether teplizumab can prevent T1D in children and adults who are at high risk for, but do not yet have, clinical-stage disease. Enrollment in the trial has been completed and preliminary results are expected to be released mid-2019.

In addition, we believe that combination therapy may enhance the therapeutic benefit of PRV-031 by increasing efficacy, enhancing the durability of response, or restoring insulin production by beta cells. Combination therapies may include beta-cell autoantigens, tolerogenic cytokines, other modalities which could enhance better depletion of self-reactive lymphocytes or increasing the function of regulatory T cells, or agents that could restore beta cell function or mass. In this light, Provention is collaborating with Intrexon, to explore the combination of PRV-031 and the oral administration of a Lactococcus lactis strain genetically engineered to secrete human proinsulin and human interleukin-10, an anti-inflammatory cytokine. Provention also plans to explore other combination therapies as the Phase 3 program progresses.

Clinical Evaluation of PRV-031

To date, clinical development of PRV-031 has included both academic and biopharmaceutical sponsors. More than 1,000 subjects have been enrolled in PRV-031 clinical studies, with over 800 subjects receiving PRV-031 in those studies. This represents studies with various doses, formulations, and indications and includes earlier smaller investigator-sponsored studies. The enrollment of patients by therapeutic indication includes: 989 (estimated) T1D patients, eight renal or renal-pancreatic allograft rejection patients, 20 induction immunotherapy in pancreatic islet transplant recipients, 11 psoriatic arthritis patients, one plaque psoriasis patient and 64 high-risk patients for the prevention or delay of onset of developing T1D.

In T1D patients, nine studies have been conducted, of which eight involved intravenous dosing (two Phase 1, three Phase 2, two Phase 3 and an extension study) and one subcutaneous dosing (Phase 1). In addition, the “At Risk” study in subjects at high risk of developing T1D has completed enrollment with preliminary results anticipated in mid-2019.

Among the T1D studies of PRV-031, five studies (Study 1, Study 2, Study 3, Study 4 “AbATE”, and Study 5 “Delay”) were completed under the direction of Dr. Kevan Herold (currently at Yale University) and collaborators. Studies 2, 3 and 4 were sponsored by the Immune Tolerance Network. Four additional studies were conducted by MacroGenics: three with intravenous administration (“Protégé”, “Protégé Extension”, and “Protégé Encore”) and 1 with subcutaneous administration (SUBCUE) of PRV-031. Among these studies, “Protégé” and “Protégé Encore” were Phase 3 studies. Protégé was the largest completed study for treatment of T1D, which enrolled 516 subjects (aged 8 to 35 years and T1D diagnosis within 12 weeks of study entry) and randomized into three PRV-031 dosing regimens compared to placebo.

Dr. Herold led five small Phase 1/2 studies of PRV-031 in T1D patients aged 8 to 30 years. PRV-031 showed promising immunological and clinical activities in these studies and was well tolerated. In particular, PRV-031 treatment preserved normal insulin production as indicated by C-peptide levels and it also reduced the use of insulin products.

Protégé was a Phase 3 randomized, controlled study conducted in 83 centers in North America (U.S., Canada, Mexico), India, Israel, and Europe (Czech Republic, Estonia, Germany, Latvia, Poland, Romania, Spain, Sweden, Ukraine). Patients aged 8 to 35 years with recently diagnosed T1D (≤12 weeks) were followed for 12 months (Protégé) and continued to 24 months (Protégé Extension). Three dose regimens of PRV-031 were administered to 417 patients as intravenous infusions for 6 to 14 days; 99 patients received placebo. At 12 months, the primary efficacy endpoint, the proportion of patients with insulin use <0.5 U/kg per day and HbA1c <6.5%, ranged from 13.7% to 20.8% patients in the PRV-031 groups, depending on dosing regimen, and 20.4% in the placebo group. The difference between PRV-031-treated patients and placebo-treated patients was not significant. The change in HbA1c from baseline also did not show a significant difference between PRV-031 and placebo. However, subgroup analyses indicated the following findings:

Protégé Encore was a Phase 3 randomized, controlled study conducted in 125 centers in 16 countries. Patients aged 8 to 35 years with recently diagnosed T1D were to be followed for 24 months. Three dose regimens of PRV-031, given as intravenous infusions for 6 to 14 days, were compared with placebo. The primary endpoint, the proportion of patients with insulin use <0.5 U/kg per day and HbA1c <6.5% at 12 months, was not met. Study enrollment was stopped at 254 patients (400 planned) when the Protégé study showed that the primary endpoint was not met. Efficacy analyses were not conducted in this study.

A summary of the C-peptide data in the completed Phase 2 studies and Phase 3 Protégé study are shown in the table below. All these studies have shown consistent and significant C-peptide benefit. Furthermore, subgroup analysis of the Protégé data indicated that younger patients (8-17 years) with minimum baseline beta cell function (C-peptide >0.2 pmol/mL) along with even more robust data in early onset T1D (diagnosis <6 weeks, Study 1), informed the inclusion criteria that will be applied in the planned Phase 3 study, PROTECT.

* Full 9.0 mg/m²/course 14-Day regimen was explored in 205 treated patients and 98 placebos; ** Delay study based on 12-month time-point. All other studies based on 24-month time-points

SUBCUE was a Phase 1 randomized, controlled study to evaluate the safety and tolerability, PK, and PD of subcutaneously injected PRV-031. Patients aged 18 to 35 years who were diagnosed with T1D within 12 months were to be given three dosing regimens of PRV-031 or placebo. Patients were to be followed for 91 days. However, the study was stopped after one subject was enrolled, upon the Protégé study results.

The majority of data for PRV-031 comes from two completed Phase 3 studies: Protégé and Protégé Encore. In PRV-031 and placebo-treated subjects, there were no major differences in the overall adverse events (AEs) (99.7% and 100%) and serious adverse events (13.2% [85 out of 645 subjects] and 9.4% [15 out of 160 subjects]), although there were more severe adverse events in PRV-031 subjects (63% and 30%). In the Protégé study, 261 of 415 (62.9%) subjects had severe adverse events compared with placebo, 28 out of 98 subjects (28.6%). In Protégé Encore, 121 of 192 (63%) subjects had severe adverse events compared with placebo, 16 out of 62 subjects (25.8%).

The most common AEs were decreased white blood cells including lymphopenia, leukopenia and neutropenia. Leukopenia/lymphopenia (decreased white blood cells) and rash were experienced most frequently by PRV-031-treated subjects. Lymphopenia was expected based on the mechanism of action of PRV-031 and was observed in approximately 70% of type-1 diabetes patients who received PRV-031; lymphopenia was reported in approximately 14% of placebo subjects. It was commonly mild to moderate and resolved within 14 days. In the Protégé study, approximately 50% and 20% of PRV-031- and placebo-treated patients, respectively, reported rash or pruritus. In PRV-031-treated patients, the rash was predominantly mild to moderate and usually resolved within one to two weeks. Laboratory abnormalities were also reported as AEs. The main differences in PRV-031 and placebo subjects were changes in lymphocyte counts (30.1% and 9.4%) and liver function test (alanine aminotransferase, 30.9% and 14.1%). These abnormalities usually resolved within 14 days of dose completion and did not cause significant or lasting clinical concern. Cytokine release syndrome, which may include symptoms of rash, headache, nausea, vomiting, and chills/fever, occurred in fewer than 6% of PRV-031-treated patients and was mild to moderate in severity.

The most common serious adverse events (SAEs) reported in the Protégé and Protégé Encore studies were related to diabetes control including diabetic ketoacidosis, hypoglycemic seizures/unconsciousness, hyperglycemia, hypoglycemia (consistent with the underlying disorder) and were reported in 6.2% and 2.5% of PRV-031 and placebo subjects, respectively. Three deaths were observed and categorized by the principal investigator (in accordance with International Conference on Harmonisation (ICH)/Good Clinical Practice (GCP) guidelines) and included in the Investigator Brochure for PRV-031 filed with the FDA. The relationship between each death and PRV-031 is listed in the Investigator Brochure as follows: one death, “none” one death “not related” and one death “unlikely.” The specific causes of deaths were (1) unknown for which the relationship was listed as “none” in the Investigator Brochure, (2) anterior myocardial infarction with ventricular tachycardia and cardio-respiratory arrest for which the relationship was listed as “not related” in the Investigator Brochure and (3) diabetic ketoacidosis for which the relationship was listed as “unlikely” in the Investigator Brochure. AEs of infections (most commonly gastroenteritis) were reported in 3.6% and 2.5% of PRV-031 and placebo subjects, respectively. Fifteen of 85 SAEs and 5 of 15 SAEs were deemed related to PRV-031 and placebo treatment, respectively.

The following table reflects all the SAEs reported in the Investigator Brochure for the Protégé and Protégé Encore studies:

*Note: there are 112 events observed in 85 subjects

** Note: subject may have more than one adverse event

*** Note: because the cause of death was unknown, “death” is reported as an adverse event

The most common severe adverse event occurring in at least 10% of subjects in both treatment groups in the Protégé study was decreased white blood cell counts (lymphopenia/neutropenia) observed in 47% [196 out of 415 subjects] and 10% [10 out of 98 subjects] of PRV-031 and placebo subjects, respectively. In Protégé Encore, lymphopenia/neutropenia was also the most frequently observed severe adverse event, occurring in 24% [46 out of 192 subjects] and 6% of PRV-031 [4 out of 62 subjects] and placebo subjects, respectively. This severe adverse event is consistent with the mechanism of action of PRV-031.

Overall, infections were not increased following PRV-031 treatment. However, in Protégé there were 10 cases of herpes zoster infections (a virus that usually causes chicken pox or shingles) in PRV-031-treated patients that were possibly dose-related, and none in the placebo group. All of these cases resolved. In the Protégé Encore study, only one patient, who was randomized to placebo had herpes zoster. A link between PRV-031 and herpes infections remains unclear. Other herpes virus infections (e.g., cytomegalovirus and Epstein-Barr virus) were not increased with PRV-031 treatment.

Phase 3 Clinical Trial of PRV-031 in Pediatric Patients New Onset T1D (PROTECT Study)

The planned PROTECT study (PROvention T1D trial Evaluating C-peptide with Teplizumab) is a Phase 3, randomized, double-blind, placebo-controlled, multicenter study in pediatric and adolescent patients (8-17 years) with early-onset T1D. Patients with minimum beta-cell cell function (C-peptide >0.2 pmol/mL) and within 6 weeks of T1D diagnosis will receive 2 courses of teplizumab, 6 months apart. Each course will consist of 12 days of teplizumab administered intravenously. The primary endpoint is the change in C-peptide at 18 months. Secondary endpoints including insulin use, HbA1C levels, hypoglycemic events and safety will also be evaluated. The study will enroll approximately 300 patients with 2:1 randomization (200 active: 100 placebo) and enrollment is expected to commence in the second quarter of 2019.

Pre-Clinical Evaluation of PRV-031

PRV-031 binds specifically to human T cells with CD3 on the surface. It also binds to CD3+ T cells in chimpanzees, an endangered species that is inappropriate for extensive experimentation, but does not bind to CD3+ T cells of any other animal species. Due to this lack of feasible animal models, nonclinical pharmacology, pharmacokinetic, and toxicology studies are limited. Nonetheless, consistent with its mechanism of action and binding to CD3, PRV-031-treated chimpanzees showed reversible reductions in circulating T cells and a dose-dependent increase in various immune signaling molecules (TNF-α, IL-6, IL-10 and IFN-γ). At very high PRV-031 doses, approximately 450-fold higher than the highest daily dose administered in humans (826 μg/m²), chimpanzees developed B cell lymphoproliferative disease (similar to lymphoma) and Epstein-Barr virus-like infection. In human tissues, PRV-031 binds to T cells in multiple human tissues without unanticipated binding to other cell types. These results indicate that PRV-031 has a low probability of producing unexpected and unintended toxicities in human clinical studies.

PRV-015 (human anti-interleukin 15 monoclonal antibody) for gluten-free diet non-responsive celiac disease

Overview

Celiac disease is a systemic autoimmune disease triggered by gluten consumption in genetically susceptible individuals. Currently, approximately 1% of the European and North American population is affected by celiac disease. Gluten is ubiquitous in food and elicits autoimmune responses in celiac patients, with damage to the mucosal lining of the small intestine. Celiac disease causes debilitating symptoms and serious medical complications, as the small bowel damage can lead to nutrient malabsorption and results in a range of subsequent intestinal and extra-intestinal clinical manifestations. The stimulation of intestinal lymphocytes for decades can lead to the development of lymphoma, with increased mortality.

The pro-inflammatory cytokine interleukin 15 (IL-15) has been identified as a major mediator in the pathophysiology of celiac disease. PRV-015, a fully human monoclonal antibody, binds to and inhibits IL-15 and has emerged as a leading candidate for the treatment of nonresponsive celiac disease, in which patients continue to have disease activity despite ongoing gluten free diet (GFD). PRV-015 was initially developed by Genmab A/S as HuMax-IL15, and by Amgen Inc and Celimmune LLC as AMG 714. PRV-015 has undergone clinical testing in approximately 250 subjects who have received PRV-015 across two Phase 1 (healthy volunteers and psoriasis, rheumatoid arthritis) and three Phase 2 studies (celiac disease, refractory celiac disease type II, rheumatoid arthritis). No serious adverse events deemed related to PRV-015 were observed that would preclude further clinical development. PoM and/or PoC was demonstrated in rheumatoid arthritis, celiac disease and refractory celiac disease Type II. The effect of PRV-015 in celiac disease was evidenced by reduction in inflammation and symptoms after a controlled gluten challenge in a Phase 2a study with 63 celiac patients. Provention plans to initiate a 220-patient Phase 2b study in gluten free diet non-responsive celiac disease in 2020, after completion of chronic toxicology studies.

Celiac Disease Background Information

Celiac disease is a systemic autoimmune disease triggered by gluten consumption in genetically susceptible individuals. Currently approximately 1% of the western population is affected by celiac disease. This prevalence has been reported to be doubling every 20 years. Gluten, the antigen responsible for celiac disease, is the main protein present in some of the most common cereals (wheat, barley, rye). Modern diets are increasingly enriched with gluten and it is also used as an additive in processed foods, cosmetics and oral medications. Gluten is also present in trace amounts in foods labeled as “gluten-free”, as a tableting excipient, and in products such as toothpaste and lipstick. As little as 50mg/day of gluten triggers the disease. A normal diet contains >10 g/day, 200 times the amount that causes damage and intestinal histological abnormalities. As such, celiac patients face enormous challenges to follow a strict gluten-free diet (GFD).

The pathophysiology of celiac disease is characterized by an abnormal immune response to gluten. Humans lack enzymes to fully digest gluten, which against the right genetic background triggers inflammation and autoimmunity in the intestine and in other organs. An adaptive immune response is triggered when gluten peptides are deamidated in the extracellular space, by the enzyme tissue transglutaminase (tTG), normally an intracellular enzyme that is released by damaged cells. This deamidation renders gluten peptides high-avidity binders to HLA-DQ2 and HLA-DQ8, which present these peptides to intestinal CD4+ T cells, thereby activating these T cells and initiating the inflammatory cascade. The innate immune system’s intraepithelial lymphocytes (IELs), primarily CD8+, are able to directly lyse and destroy intestinal epithelial cells, damaging the mucosal lining of the small intestine, in response to IL-15 release stimulated by gluten peptides. In healthy individuals, the activated T cells are controlled by regulatory T cells (Tregs), but this does not happen in celiac disease as IL-15 confers the effector CD4+ T cells resistance to suppression by Tregs.

Celiac disease causes debilitating symptoms and serious medical complications. In many patients, gastrointestinal symptoms derived from intestinal mucosal damage dominate the patient reported symptoms at diagnosis. The normal villi (absorptive finger-like prolongations) present in the gut of healthy individuals are lost in active celiac disease as a result of mucosal atrophy and crypt enlargement. Small bowel damage often leads to nutrient malabsorption that can result in a range of further clinical manifestations (anemia, osteopenia, failure to thrive in children). In addition, extra-intestinal symptoms and systemic manifestations are often present, such as dermatitis, infertility, or neurological and skeletal disorders. Mortality is increased in subjects with persistent intestinal mucosal damage.

The most serious complication of celiac disease is the development of an in situ small bowel T cell lymphoma after many years of exposure, voluntary or inadvertent, to gluten. This malignant complication of celiac disease, which appears to be independent of gluten and unresponsive to a strict GFD, is termed Type II refractory celiac disease (RCD-II) when the % of aberrant IELs is >20% and Type I refractory celiac disease (RCD-I) when the % is <20%. In RCD-II, aberrant IELs proliferate in what represents a slow-growing non-Hodgkin lymphoma localized (in situ) in the small bowel, primarily in the epithelial compartment. RCD-II affects approximately 0.5% of celiac patients and can lead to overt and systemic enteropathy-associated T cell lymphoma (EATL), with very poor prognosis and >80% mortality in 5 years.

Current Treatment Options and Their Limitations

Celiac disease is the only common autoimmune disorder with no approved medication. The only current available strategy for the management of celiac disease is a lifelong total avoidance of gluten. While simple in theory, the ubiquity of gluten in foodstuffs, medications, household substances, cosmetics, and gluten-free items makes total avoidance of gluten difficult – if not impossible.

The main challenge to the successful maintenance of a gluten-free diet is that cereal flours are widely used in the food industry and are present in numerous food products either naturally or as additives. Although gluten-free products can be purchased, commercially manufactured gluten-free products may be difficult to find, tend to be less flavorful and are more expensive than regular gluten containing foods. In addition, labeling of food products is deficient in many countries. Even in countries with superior labeling guidelines foods labeled “gluten-free” may nevertheless contain gluten. For example, in northern European countries amounts of up to 100 parts per million (ppm) are permitted in gluten-free products designated apt for celiac sufferers.

For these reasons, celiac sufferers are regularly exposed to gluten contamination in the food and beverages they consume. This exposure to gluten contamination and the associated physiological and psychological consequences results in a self-limitation of social activities and/or a reduction in the variety of foods consumed. Thus, the only currently available management option of a gluten-free diet presents both a considerable challenge and substantial burden for patients. A study by Shah and collaborators (2014) found the burden of celiac disease and gluten free diet on patient quality of life to be very high, second only to end-stage renal disease – a condition that requires multiple, weekly dialysis treatments.

As a result of the difficulty in maintaining total avoidance of gluten while on a GFD, gluten contamination causes 50% or more of all diagnosed celiac patients on a GFD to continue to experience disease activity. Patients who continue to have symptoms despite attempting to maintain a GFD are deemed to have diet “non-responsive celiac disease” or NRCD. Non-responsive celiac disease has been defined as “persistent symptoms, signs or laboratory abnormalities typical of celiac disease despite 6–12 months of dietary gluten avoidance”. As requested by patient support groups and experts, alternative treatment options that can be administered independently or in combination with a GFD, as well as treatments for refractory celiac disease, are required in order to improve the quality of life for celiac patients.

Overview of IL-15 Biology and PRV-015 Mechanism of Action

IL-15 is a pro-inflammatory cytokine that serves as a potent growth, survival, and activation factor for T cells, particularly intestinal intraepithelial lymphocytes (IELs), and for natural killer (NK) cells. Increased expression of IL-15 has been demonstrated in a variety of inflammatory conditions, including celiac disease, rheumatoid arthritis (RA), and psoriasis. IL-15 is considered a central regulator of celiac disease immunopathology and a non-redundant driver of lymphomagenesis in RCD-II.

Substantial evidence suggests a pathophysiological role for IL-15 in celiac disease:

Innate immunity:

Adaptive immunity:

By activating the intraepithelial lymphocytes (IELs), IL-15 is believed to be the main mediator in the mucosal damage that ensues in response to gluten exposure in celiac disease. The expression of IL-15 in the intestinal epithelium is necessary for villous atrophy in animal models of celiac disease and circumstantial evidence suggests this to be the case in humans, as well. In addition, IL-15 renders effector T cells resistant to inhibition by regulatory T cells (Tregs), promoting loss of tolerance to food antigens.

One of the studied mouse models of celiac disease is an IL-15-transgenic mouse, in which IL-15 overexpression by gut epithelial cells leads to celiac-like disease, including T and B cell-mediated pathology. IEL apoptosis has been observed in this animal model after treatment with anti-IL-15 or anti-IL-15-receptor mAbs.

Figure 1. Multiple actions of IL-15 in the pathophysiology of celiac and refractory celiac disease

PRV-015 (formerly AMG 714 and HuMax-IL15), is a fully human immunoglobulin (IgG1κ) monoclonal antibody which binds to and inhibits the function of IL-15 in all its forms (cis, trans, soluble IL-15 bound to IL-15Rα). PRV-015 inhibits IL-15-induced T cell proliferation and shows a dose-dependent inhibition of IL-15-induced TNF-α production. PRV-015 underwent preclinical testing and was subsequently evaluated in a Phase 1 and Phase 2 study in subjects with rheumatoid arthritis, in a Phase 1 study in healthy volunteers and in patients with psoriasis, and in two Phase 2a studies in celiac disease and refractory celiac disease Type-II.

Phase 2b Clinical Trial of PRV-015 in Celiac Disease (PROACTIVE Study)

Provention Bio and its partner Amgen intend to conduct chronic toxicology studies in 2019; a Phase 2b clinical study (the PROACTIVE study) in approximately 220 patients with gluten-free diet non-responding celiac disease (NRCD); and, should regulators require it, a potential small pediatric bridging study. We expect to commence the Phase 2b PROACTIVE study in the first half of 2020. The pediatric study, if required, would be expected to commence in 2021.

The PROACTIVE study (PROvention Amgen Celiac ProtecTIVE Study) will be a Phase 2b, randomized, double-blind, placebo-controlled, parallel-group, multicenter study in adult patients with NRCD. PRV-015 will be administered every two weeks via subcutaneous route (SC). The hypothesis of this study is that PRV-015 will be superior to the gluten free diet (GFD) at intercepting the effects of contaminating gluten exposure in celiac patients following a GFD, as measured by symptoms and objective signs of intestinal inflammation after 24 weeks of treatment. Approximately 220 subjects are planned to be enrolled.

Pre-clinical Evaluation of PRV-015

The nonclinical development of PRV-015 consisted of a series of in vitro studies demonstrating the binding properties of PRV-015 against human IL-15; in vitro and in vivo studies providing proof-of-concept for the benefit of blocking the IL-15 pathway in celiac disease; and a series of Good Laboratory Practices (GLP) studies evaluating the nonclinical safety profile of Hu714MuXHu, the PRV-015 surrogate molecule which is active in macaques.

Pharmacology

PRV-015 was found to be efficacious in a mouse model of celiac disease triggered by the transgenic expression of human IL-15 in the gut epithelium. In this model, PRV-015 prevented IEL activation and proliferation, as well as histological abnormalities. In addition, PRV-015 was able to induce apoptosis of human IELs in ex vivo culture of small intestinal explants from active celiac disease and RCD-II patients. In this culture experiment, PRV-015 resulted in a suppression of IL-15-driven anti-apoptotic signaling via JAK3 and STAT5.

Toxicology

In vitro studies demonstrated that PRV-015 had high binding affinity for human IL-15, but lower affinity for macaque IL-15. Additionally, PRV-015 neutralized human IL-15 but did not efficiently neutralize macaque IL-15. To enable preclinical and toxicology studies in macaques, a surrogate antibody, Hu714MuXHu, was developed by Amgen by fusing the F(ab) portion of a mouse anti-human IL-15 monoclonal antibody known to neutralize macaque IL-15, M111, with human IgG1 Fc. Hu714MuXHu was shown to neutralize macaque IL-15 with approximately the same potency as PRV-015 neutralizes human IL-15.

There was a decrease in natural killer (NK) cell counts and NK cell activity following administration of Hu714MuXHu to monkeys, reflecting a pharmacodynamic response to IL-15 blockade in this species, given the known role of IL-15 in NK cell biology in animal models (rodents and non-human primates). Of note, no changes in absolute or relative numbers of NK cells were observed in any of the human studies. This difference between observations in preclinical and clinical studies appears related to a differential sensitivity of human versus cynomolgus monkey NK cells to IL-15 deprivation. Human NK cells are not dependent on IL-15 for their survival, possibly due to the redundant role of IL-2 on human NK cells.

Pharmacokinetics of PRV-015

The pharmacokinetics (PK) of PRV-015 was consistent with a typical human immunoglobulin G1 antibody with no apparent target-mediated disposition within the investigated dosing range. The mean half-life in human studies has been 20-22 days, potentially enabling monthly dosing.

There was no development of anti-drug antibodies (ADA) to PRV-015 in healthy volunteers, patients with psoriasis or patients with refractory celiac disease. Only one (1) sample in the rheumatoid arthritis patients, in the RA phase 2b study, was positive for ADA. Approximately 14% of patients with celiac disease developed ADA in the Phase 2a study, with an additional 10% presenting pre-existing ADA, a reflection of the abnormal antibody responses which characterize celiac disease. The ADA were not associated with injection reactions or adverse events, and they were non-neutralizing, with no impact on PK.

Clinical Proof of Mechanism for PRV-015

PRV-015 was clinically effective in RA, albeit the Phase 2b missed the primary endpoint, with a clinical response in approximately 60% of patients in both Phase 1 and Phase 2 studies versus a response of approximately 30% in the placebo groups. PRV-015 also led to decreases in inflammatory biomarkers such as C-reactive protein (CRP) and erythrocyte sedimentation rate (ESR). PRV-015 was not effective in psoriasis, suggesting PRV-015’s action is selective, unlike that of broad systemic immune suppressants.

PRV-015 was clinically effective in celiac disease in a Phase 2 study. Upon gluten challenge, PRV-015 did not prevent gluten-induced architectural mucosal injury, and thus missed the primary endpoint, yet the high dose of PRV-015, 300 mg, showed statistically significant attenuation of gluten’s effects on the change from baseline in intestinal inflammation, in patient-reported symptom questionnaires (the Celiac Disease Patient Reported Endpoint, CeD PRO, a registrational endpoint in NRCD) and in diarrhea, compared with placebo. The totality of the results from the patients who had gluten challenge indicate that 300 mg AMG 714 given every two weeks can ameliorate the inflammation and symptoms caused by substantial gluten exposure, the first demonstration of such dual benefit in intestinal inflammation and symptoms for any experimental medication for celiac disease. The results suggest that PRV-015 can be a potential adjunctive treatment for nonresponsive celiac disease to the GFD to ameliorate or resolve persistent inflammation seen in the majority of celiac patients already on GFD.

PRV-015 was clinically effective in refractory celiac disease Type II. In the Phase 2a study, the primary endpoint (reduction in intestinal intra-epithelial lymphocytes, IEL) was not achieved, yet PRV-015 showed statistically significant benefit over placebo in reducing T cell receptor clonality (no increase in clonality with PRV-015) and symptoms (diarrhea). Other endpoints, such as histology, did not reach statistically significant differences between groups, but the results consistently favored PRV-015 numerically. PRV-015 was well tolerated, with no observed immunogenicity.

Summary data of the Phase 2a study as presented at Digestive Disease Week in June 2018 is shown below:

PRV-015 data demonstrated:

Summary of clinical studies

Safety of PRV-015

Approximately 250 subjects have been exposed to PRV-015 to date, including approximately 200 subjects for 12 weeks of biweekly dosing. In all studies to date, PRV-015 was generally well tolerated by healthy volunteers, patients with active RA, and patients with celiac disease or RCD-II. While PRV-015 could, theoretically, increase susceptibility to infections as is the case with immune modulators, PRV-015 has not demonstrated this effect in the six clinical trials completed to date. No deaths or clinically significant changes in laboratory parameters were observed, including no NK cell depletion.

The only adverse events clearly increased in PRV-015-treated patients have been injection site reactions, which were more commonly reported in subjects exposed to PRV-015, in a dose-dependent fashion (up to ~52% on PRV-015 vs ~26% in placebo in the celiac Phase 2a study), and nasopharyngitis (most cases with suspected allergic origin at a single site in RCD-II). In the population which will be studied in Phase 2b, celiac disease, there were no serious adverse events (SAE) in the Phase 2a study, while there were 6 SAEs (5 on PRV-015 and 1 on placebo) in the refractory celiac disease Type II, a much sicker patient population with immune suppression at baseline. Of the five SAE on PRV-015 in RCD-II patients, two were infections (both resolved while on PRV-015) and two were mild balance disorders (one unrelated to PRV-015, resolved while on drug; one leading to discontinuation).

Celiac Disease Market

There is no approved drug for celiac disease. The annual healthcare utilization by gluten free diet non-responsive celiac patients in 2013 was $18,206, for $4,796 in matched controls due to the extra costs of uncontrolled celiac disease investigations and treatment of complications. Given the large prevalence (15-20 million patients world-wide, 1% of the population in the Western world and 0.5% in Asia), and the unmet need (50% of patients on gluten-free diet continue to suffer from disease activity due to contaminating gluten in the diet), non-responsive celiac disease is considered a substantial opportunity for pharmaceutical development of an effective and well-tolerated adjunctive treatment to the gluten-free diet.

PRV-6527 (Small Molecule CSF-1R Inhibitor) for Crohn’s Disease

Overview

Crohn’s disease, a type of chronic IBD characterized by inflammation of the gastrointestinal (GI) tract, can affect any part of the GI tract from the mouth to the anus but is more commonly found towards the end of the small intestine. It can also affect the eyes, skin, and joints. Myeloid cells, which originate in the bone marrow, are specialized immune cells, also called antigen-presenting cells believed to play a central role in Crohn’s disease. CSF-1 binds to its receptor (CSF-1R) on myeloid cells and drives the differentiation and maturation of these cells into inflammatory dendritic cells and macrophages, which then populate the gut and other tissues. In the gut, these differentiated myeloid cells present antigens from intestinal bacteria (the microbiome) to white blood cells and trigger inflammatory processes. We believe that an inhibitor of CSF-1R will “intercept” the differentiation of these inflammatory cells, preventing their migration from the bone marrow to the intestinal mucosa (i.e., the gut lining) in Crohn’s disease. It is anticipated that significant clinical benefits, such as preventing the relapse or progression of Crohn’s disease, as well as durable benefit (extended pharmacodynamic effect) may result from targeting the upstream pathologic mechanism, since antigen-presenting cells are the necessary initiators of the abnormal immune response.

PRV-6527 (previously known as JNJ-40346527) is a highly potent and selective small-molecule oral inhibitor of CSF-1R. It was developed by Janssen Pharmaceuticals and has undergone clinical testing in 178 subjects to date, across Phase 1 (healthy volunteers; 94 received single dose up to 600 mg or two doses of 450 mg) and two Phase 2 studies (rheumatoid arthritis [RA] 63 patients received 200 mg/day for 12 weeks; and Hodgkin’s lymphoma (HL); 21 patients received 150 mg/day to 650 mg/day for at least three weeks). No serious adverse events deemed related to PRV-6527 were observed that would preclude further clinical development and PoM was demonstrated based on inhibition of CSF-1R signaling and myeloid cell counts in blood. While clinical data in the RA study was inconclusive and did not demonstrate efficacy in this disease, unpublished data indicate that PRV-6527 ameliorates Crohn’s-like disease in mouse models, and that CSF-1R and its pathway are upregulated in Crohn’s disease. In the first quarter of 2018, Provention initiated a Phase 2a proof-of-concept (PoC) study in the first quarter of 2018 in approximately 80 patients with Crohn’s disease to demonstrate both a clinical and histologic/tissue (gut mucosa) anti-inflammatory effect after 12 weeks of treatment with PRV-6527. This study will evaluate doses and dosing duration that were previously tested by Janssen. While biologic PoM was demonstrated in previous clinical trials, this does not necessarily predict a similar outcome in the Crohn’s disease study. We expect to report top line data from this Phase 2a PoC study in the second half of 2019.

Crohn’s Disease Background Information

Crohn’s disease is a chronic, immune-mediated IBD characterized as a relapsing, remitting disease that occurs most commonly in the terminal ileum and the colon, with clinical manifestations such as abdominal cramps and diarrhea, and systemic features such as cachexia, fever, anemia, and weight loss. Because the disease affects all layers of the GI tract from the mucosal lining to the muscular wall, complications may include bowel fistulas, abscesses and luminal strictures, which often require multiple surgeries and cumulatively can lead to short gut syndrome. Studies suggest that 15 years after diagnosis, approximately 70% of patients with Crohn’s disease will have undergone at least one major intra-abdominal surgery, 35% of patients will have required two such operations, and 20% will have required at least three operations. Patients with IBD also suffer from reduced quality of life and have an increased risk for clinical depression.

Current Treatment Options and Their Limitations

The current standard of medical care for Crohn’s disease includes treatment with anti-inflammatory agents, corticosteroids, immunomodulators such as azathioprine or its active metabolite 6-mercaptopurine, methotrexate, biologic agents such as tumor necrosis factor-alpha (TNF-α) antagonists, anti-integrin therapies, and anti-interleukin (IL) 12/23 therapy. Among these commonly prescribed agents, only the biologic agents and the corticosteroid budesonide are approved for the treatment of Crohn’s disease. Only about 40-50% of patients respond to biologic therapy after the acute induction phase and an even smaller proportion, approximately 20%, achieve remission after 52 weeks of treatment. Thus, the majority of patients do not attain long-term clinical benefit. In a systematic review of treatments for Crohn’s disease, approximately 25% of patients fail to respond initially to biologic therapy, and another 25% stop responding over time, including those who respond to dose escalation. Furthermore, the majority of biologic therapies are expensive and administered parenterally with poor tolerability in many patients.

Thus, there continues to be a significant unmet need for safe, effective and durable treatments for patients with moderate to severe Crohn’s disease. This is particularly important since the disease largely affects younger patients during their most formative and productive years. We believe that oral treatment with a novel mechanism of action such as PRV-6527 may provide additional benefit, as it may work in patients who did not respond to anti-TNF agents, and since it circumvents the inconvenience of infusions and injections required to administer biologic therapies.

Overview of CSF-1R Biology and PRV-6527’s Mechanism of Action

CSF-1R is a tyrosine kinase receptor present on the surface of myeloid cells. CSF-1R is the receptor for two important molecules in the biology of myeloid cells: (a) CSF-1, a key growth factor for the development and differentiation of myeloid precursors in the bone marrow that are believed to give rise to pro-inflammatory macrophages and dendritic cells in gut tissue; and (b) IL-34, a signaling molecule believed to modulate inflammation in IBD.

Pro-inflammatory Function of CSF-1

Mac: macrophage; DC: dendritic cell.

Inflammatory macrophages and dendritic cells are known to be important disease drivers in Crohn’s disease via production of IL-12 and IL-23, which in turn stimulate interferon-γ (IFN-γ)-producing white blood cells. Blood CSF-1 and mucosal IL-34 are reported to be elevated in patients with IBD, and the genes for CSF-1R, CSF-1, and IL-34 are expressed at higher levels in inflamed biopsy tissues compared with non-lesional biopsies of patients with IBD. The CSF-1R messenger ribonucleic acid (mRNA) signature (the gene set modulated by CSF-1R) features prominently in Crohn’s patients’ gut tissue, especially in patients not responding to anti-TNF medications. IL-34 has been shown to enhance production of TNF-α and other pro-inflammatory signaling molecules (IL-6) by myeloid cells, and inhibition of IL-34 in IBD mucosal explants represses the expression of these molecules, all of which support the role of this pathway in the inflammatory process. In addition, co-morbidities of Crohn’s disease such as osteoporosis and fibrosis are associated with CSF-1R-dependent macrophage function, which in conjunction with the biologic data, suggests that inhibition of CSF-1R in Crohn’s disease may reduce inflammation, improve clinical symptoms and prevent progressive tissue damage.

Though not seen in completed studies, there is a theoretical risk that PRV-6527 may reduce anti-inflammatory macrophages (M2), in addition to inflammatory macrophages (M1), which could impact its efficacy and safety profile.

Phase 2a Proof-of-Concept Clinical Trial of PRV-6527 in Crohn’s Disease

Provention initiated a PoC study in the first quarter of 2018 in patients with Crohn’s disease to demonstrate both a clinical and tissue (gut mucosa) anti-inflammatory effect after 12 weeks of treatment. This Phase 2a clinical study is a randomized, double-blind, placebo-controlled, parallel-group, multicenter study in adult patients with moderately to severely active Crohn’s disease. The hypothesis of this study is that PRV-6527 will be superior to placebo in treating these patients, as measured by the change from baseline in the Crohn’s Disease Activity Index (CDAI) score after 12 weeks of treatment. The study is ongoing and approximately 80 subjects are planned to be enrolled.

To demonstrate PoC, the primary endpoint will be clinical effect, measured by CDAI, at Week 12. PoM will be assessed in secondary endpoints, including mucosal changes on endoscopy and the presence of inflammatory myeloid cells on histological examination of gut biopsy tissue.

PRV-6527 Study Design

Pre-clinical Evaluation of PRV-6527

Single- and repeat-dose toxicology studies have been conducted at doses of up to 250 mg/kg for durations of up to six months in rats, and at doses of up to 125 mg/kg for durations up to nine months in dogs. PRV-6527 was well-tolerated in these studies. Toxicological findings included changes in hematologic and chemistry parameters and fibrinoid vasculitis. The data support the doses selected for the Crohn’s disease study.

Clinical Proof of Mechanism for PRV-6527

Three clinical trials in normal healthy volunteers and patients with RA and HL, while not clinically effective, provided evidence of tolerability, favorable pharmacology, and PoM for PRV-6527 in terms of effective inhibition of the CSF-1R pathway in human diseases.

The Phase 1 study with 120 normal healthy volunteers (94 active; 26 placebo) characterized the safety, tolerability, and pharmacokinetics (PK) of PRV-6527. Single doses of up to 600 mg, and two doses of 450 mg were administered. This study was conducted from January 26, 2010, to January 3, 2011, at the Janssen Clinical Pharmacology Unit in Belgium. Results showed that PRV-6527 was well tolerated with a long half-life of 2 to 4 days. In addition, pharmacodynamics (PD) were also studied, and PK/PD relationships were described.

The Phase 2a study 40346527ARA2001 in 96 patients with RA (63 active; 33 placebo) characterized the efficacy, safety, PK and PD of PRV-6527. Patients received 100 mg twice a day (200 mg/day) orally for 12 weeks. This study was conducted from May 30, 2012, to April 30, 2013, in Argentina, Bulgaria, Chile, Czech Republic, Hungary, Poland, Russia, South Korea and Ukraine. Proof of mechanism (PoM) was demonstrated by a reduction in peripheral blood myeloid cells. Despite the demonstration of PoM, the primary efficacy endpoint, defined as the change from baseline to week 12 in the 28-joint Disease Activity Score with C-reactive protein (DAS28-CRP), was not met. There was a substantial placebo effect in the study, which made it difficult to discern a potential effect and thus rendered the efficacy results uninterpretable.

The Phase 2a study 40346527HKL1001 in 21 patients with HL (all received active drug) characterized the safety, efficacy, PK and PD of PRV-6527. Patients received 150 to 650 mg/day for at least three weeks. Three deaths were reported during conduct of this study. The cause of death in all cases was disease progression. This study was conducted from July 6, 2012, to August 14, 2013, in Germany and France. The results from the study provided additional PoM for the functional inhibition of CSF-1R. Limited clinical efficacy activity was observed with PRV-6527 as monotherapy in the treatment of relapsed or refractory HL. Of the 20 evaluable patients, 11 (55.0%) achieved stable disease (duration of 1.5 to 8 months) and 8 (40.0%) had progressive disease.

In all studies to date, PRV-6527 was generally well tolerated by healthy volunteers, patients with active RA, and patients with relapsed or refractory HL. While theoretically increasing susceptibility to infections, as is the case with immune modulators, PRV-6527 has not demonstrated this effect in completed clinical trials. The most frequent treatment-emergent adverse events in PRV-6527-treated patients affected the following organ systems or resulted in the following symptoms and changes:

Crohn’s Disease Market

Crohn’s disease and UC are the two main types of IBD. The market size of IBD is predicted to reach $9.3 billion by 2019, with Crohn’s disease accounting for approximately 65% and UC for approximately 35% of the market. Treatment is dominated by biologics with suboptimal efficacy. Mechanistically, most of the existing treatments exert their efficacy from inhibiting a variety of downstream inflammatory mediators rather than interfering with the source of inflammation. However, PRV-6527 targets the source of inflammation. This upstream effect is predicted to block the whole inflammatory cascade, and in conjunction with the predicted extended PD or biologic effect, could result in an improvement in the efficacy and durability of response. Furthermore, biologics for Crohn’s disease are delivered via intravenous infusion or injected subcutaneously, whereas novel oral medications can offer a disruptive opportunity.

PRV-300 (Anti-TLR3 Human Monoclonal Antibody) for Ulcerative Colitis

Overview

UC is the most common form of IBD. It is a “relapsing-remitting” disease with chronic destructive inflammation and epithelial injury in the gastrointestinal tract. There is considerable morbidity associated with UC, which often leads to surgical removal of the colon and a severely reduced quality of life. Substantial unmet medical needs and suffering remain despite current anti-inflammatory and immune suppressive therapeutics.

TLRs are sensor molecules of the innate immune system, which detect certain microbial pathogens and initiate protective immune responses. TLR3 is the main sensor for double-stranded RNA (dsRNA), which is found in various phases of replication and propagation of multiple common viruses. There is increasing evidence that TLR3 plays an important role in the pathologic response to emerging viral infections and the excessive immune response they trigger. TLR3 has also been implicated in chronic pathologic inflammation triggered by non-viral RNA (i.e., dsRNA and mRNA originating from damaged human cells in the absence of an infection). This appears to be the case in inflammatory disorders such as UC.

Monoclonal antibodies (mAbs) are manmade immune proteins used to treat various diseases. PRV-300 (previously known as CNTO 3157 and JNJ-42915925) is a first-in-class, fully human, IgG4κ mAb that binds the extracellular domain of TLR3 with high specificity and affinity. Binding of PRV-300 to TLR3 blocks the binding of RNA molecules to the cell surface and the endosomal TLR3 receptor, thereby inhibiting TLR3-specific intracellular signaling that leads to production of inflammatory mediators (e.g., cytokines and chemokines) that are known to contribute to UC activity. In addition, TLR3 protein levels and the TLR3 pathway mRNA signature are significantly increased in intestinal biopsies from active UC compared with those from controls and inactive UC, Also, the blockade of TLR3 significantly reduced pathology in mouse models of colitis. Therefore, the blockade of TLR3 with PRV-300 may provide an effective therapy to intercept the upstream stages in the pathophysiology of UC and potentially prevent relapse or exacerbation.

PRV-300 was developed by Janssen Pharmaceuticals and has undergone clinical testing in 155 subjects across three Phase 1 studies: a) 47 healthy volunteers received single intravenous doses of 0.003 mg/kg to 10 mg/kg and 13 patients with asthma received 3 mg/kg or 10 mg/kg intravenously weekly for 4 weeks; b) 47 healthy volunteers received a single dose of 100 mg, 300 mg or 600 mg subcutaneously and eight patients received a 300 mg single dose intravenously; and c) nine healthy subjects received a single dose of 10 mg/kg intravenously, and 31 patients with asthma received 10 mg/kg followed by 3 mg/kg weekly for three weeks, intravenously. No serious adverse events deemed related to PRV-300 were observed that would preclude further clinical development and PoM was demonstrated based on inhibition of TLR3-dependent cytokine release in the peripheral blood of dosed subjects. While clinical efficacy was not demonstrated in allergic asthma in a rhinovirus (common cold) challenge model, several lines of evidence suggest a plausible beneficial role for the blockade of this pathway in the interception of disease exacerbation and chronicity, and prevention of relapse in UC. These data include in vivo, ex vivo, histologic and gene expression analyses.

We initiated a Phase 1b study in the first quarter of 2018 in patients with UC to evaluate the effect of PRV-300 on endoscopic and histologic endpoints, and a biopsy-based mucosal mRNA signature. The latter will provide a benchmark against which we may be able to assess the efficacy of PRV-300. This study will test doses that were previously tested by Janssen, but with more doses and longer dosing duration. While biologic PoM was demonstrated in previous clinical trials, this does not necessarily predict a similar outcome in our study. Enrollment of 37 patients was completed in the third quarter of 2018 and top line results are expected in the second quarter of 2019.

Ulcerative Colitis Background Information

UC is characterized by recurring inflammation episodes of the mucosal layer of the colon. It commonly involves the rectum and may extend to other parts of the colon as well. Symptoms include diarrhea (sometimes >10 bowel movements/day), which may be associated with blood and abdominal pain. Patients with distal disease may have constipation with blood and mucus discharge. Complications include life-threatening toxic “megacolon” and bowel perforation. Systemic effects in joints, eye, skin, blood, and lung are also common.

Pathophysiological Changes in UC compared with Crohn’s disease

The overall prevalence of UC in pediatric and adult populations in 2009 was 34 and 263 per 100,000, respectively, in the U.S. The etiology of UC is unknown; however, abnormal immune responses to contents in the gut, including intestinal microbes, are thought to drive disease in genetically predisposed individuals. Consistent with this notion, genome-wide association studies (GWAS) have implicated pathways involved in microbial sensing and response in the pathogenesis of UC.

Current Treatment Options and Their Limitations

Mesalamine is effective for both the induction and maintenance of remission in mild to moderate UC patients. For the approximately 50% of patients who fail mesalamine therapy, the next line of treatment is either conventional corticosteroids or multimatrix budesonide, which delivers the drug to the colon. For non-responders to corticosteroids and budesonide, azathioprine or 6-mercaptopurine, though not approved for UC, are often prescribed. Their efficacy is modest and there may be toxicities in the form of non-Hodgkin’s lymphoma, drug-induced pancreatitis, skin cancer, bone marrow suppression, infection, and other side effects. The next line of therapy are biologic agents, including TNF-α drugs such as infliximab and its biosimilars, adalimumab and its biosimilars, and golimumab, which are approved for the induction and maintenance of remission in patients with UC and Crohn’s disease. These agents have black box warnings for tuberculosis and other opportunistic infections, as well as lymphoma. Vedolizumab, an mAb against α4β7 integrin, was subsequently approved for the induction and maintenance of remission in UC and Crohn’s disease. While early safety data showed a low incidence of serious infections and malignancies, hypersensitivity reactions including anaphylaxis, dyspnea and bronchospasm have been reported, and due to the mechanism of action, increased risk for infections and progressive multifocal leukoencephalopathy must be advised and monitored. More recently, the oral Janus Kinase (JAK) inhibitor tofacitinib has been approved for UC. Tofacitinib is a potent immunesuppressant with “black box” warnings for increasing the susceptibility for serious infections, cancer and intestinal perforations.

Overall, despite these options, 40% to 55% of patients have no response to therapy, and 65% to 80% of patients do not experience a full remission. In addition, patients who respond to biologic drugs can stop responding over time. Thus, there continues to be a significant unmet need for safe and effective treatments that bring long-lasting improvement to patients with moderate to severe UC. More targeted drugs, such as PRV-300, are potentially safer and longer-acting and may offer a better benefit/risk profile.

Overview of TLR3 Biology

TLRs are a family of microbe-sensing receptors responsible for initiating innate and adaptive immune responses to conserved microbe-associated molecular patterns. Upon sensing the presence of microbes, all human TLRs trigger signaling cascades that result in the activation of the pro-inflammatory “master switch” nuclear factor kappa B (NF-κB). NF-κB is a transcription factor that regulates the expression of a large number of genes involved in inflammation, including cytokines such as TNF, IL-6 and IL-12, all of which are known to contribute to the disease process in UC. The nucleic acid-sensing TLRs (TLR3, 7, 8 and 9) trigger interferon (IFN) generation. Once activated, IFN response pathways help defend against viral infection, but they are also implicated in contributing to autoimmune diseases. In particular, TLR3, a sensor for microbial and necrotic cell ribonucleic acid (RNA), can also directly trigger intestinal epithelial cell death through the activation of apoptotic pathways. It is believed that through activation of cell death and pro-inflammatory pathways in response to intestinal microbial RNA, as well as RNA released upon necrotic cell death, TLR3 plays an important role in the initiation and perpetuation of the dysregulated innate and adaptive immune responses characteristic of UC.

The Role of TLR3 in UC Inflammatory Pathways

Overview of PRV-300 Mechanism of Action

PRV-300 is a human mAb directed against the extracellular domain of human TLR3. PRV-300 binds TLR3 on the surfaces of human epithelial cells and becomes internalized within endosomes, where it remains active and prevents TLR3 signaling. PRV-300 therefore inhibits dsRNA-induced activation of the immune system yet does not have detectable effects on the function of other TLRs. Importantly, PRV-300 does not trigger “cytokine storm” after being evaluated in an in vitro cytokine-release human whole-blood assay. This assay showed no evidence that PRV-300 induced a cytokine response similar to that of an anti-CD28 mAb super agonist.

Antibody Blockade of TLR3 Signaling Attenuates DSS-Induced Colitis

It has been reported that gut bacterial RNA or RNA released from dying cells can act as endogenous triggers to stimulate TLR3 signaling in IBD. Administration of a TLR3 stimulant in vivo caused intestinal mucosal sloughing that was not observed in TLR3-deficient (TLR3 KO) mice. Likewise, TLR3 KO mice and anti-TLR3 antibody treated mice were partially protected from intestinal symptoms in a mouse model of UC, where inflammation is induced by oral ingestion of the toxicant dextran sulfate sodium (DSS). In this model of IBD, TLR3 signals are presumed to arise from inflammation-mediated cell death of both intestinal and bacterial cells in the gut triggered by DSS, and these stimuli contribute to the perpetuation of inflammation, leading to IBD/UC-like disease. The efficacy of anti-TLR3 antibody to reduce disease severity in this model was demonstrated by reduced intestinal tissue damage after the anti-mouse TLR3 mAb CNTO 5429 was administered intraperitoneally before and during DSS ingestion. The ability of anti-TLR3 to reduce disease severity in this model as well as in the T-cell adoptive transfer model of colitis (not shown) strongly suggest that PRV-300 has the potential to provide benefit to patients with UC. Finally, the TLR3 mRNA signature (the gene set modulated by TLR3) features prominently in UC patients’ gut tissue, especially in patients not responding to anti-TNF medications, further enhancing PRV-300’s rationale in UC.

Figure 2. Effects of TLR3 Blockade in Mouse Model

Phase 1b Proof of Mechanism Clinical Trial of PRV-300 in Ulcerative Colitis

In light of the human safety data and biological evidence that suggests that TLR3 contributes to the pathophysiology of UC, Provention initiated a clinical study of PRV-300 in adult patients with moderately to severely active UC. This Phase 1b study is a randomized, double-blind, placebo-controlled, parallel-group, multicenter study that will enroll approximately 36 patients. The primary objective is to evaluate the safety and tolerability of PRV-300 administered over 12 weeks in subjects with active UC.

Phase 1b Trial Design Schema

Evaluation of Pharmacology and Proof of Mechanism for PRV-300

The clinical development program to date for PRV-300 included studies in healthy adult volunteers and adult patients with stable (mild to moderate) asthma. These studies characterized the PK, PD and immunogenicity of PRV-300, with clear demonstration of its mechanism of biologic effect.

CNTO3157ASH1001 was a Phase 1 study that characterized the safety, tolerability, PK/PD, and immunogenicity of single ascending and multiple ascending doses of PRV-300 in healthy volunteers. In Part 1, 62 healthy subjects (15 placebo: 47 active) received a single intravenous dose of PRV-300 at 0.003, 0.01, 0.03, 0.1, 0.3, 1, 1.5, 3, or 10 mg/kg, or placebo. In Part 2, 17 stable asthmatic patients (4 placebo:13 active) received weekly intravenous doses of PRV-300 at 3 mg/kg or 10 mg/kg, or placebo. This study was conducted from June 18, 2010, to January 20, 2012, in Belgium and the United Kingdom.

CNTO3157NAP1001 was a Phase 1 study that characterized the PK and safety of PRV-300 following an escalating (100 mg, followed by 300 mg, followed by 600 mg) single subcutaneous dose in healthy male Japanese and Caucasian subjects (60 subjects; 12 placebo:47 active) and a single intravenous dose (300 mg) in healthy male Caucasian subjects (8 subjects; open label, all active). This study was conducted from January 10, 2014, to August 29, 2014, in the U.S. (enrolling Japanese Americans and Caucasian Americans).

CNTO3157ASH1002 was a Phase 1b study that characterized the safety, PK/PD, and immunogenicity of a single intravenous dose of PRV-300 (10 mg/kg) compared with placebo followed by inoculation with human rhinovirus type 16 (HRV-16) in healthy subjects (Part 1, 13 subjects, 4 placebo:9 active). The study also evaluated the effects of pretreatment with PRV-300 (10 mg/kg initial dose followed by three weekly infusions of 3 mg/kg) or placebo on the respiratory manifestations of experimental infection with HRV 16 in adult patients with stable asthma (Part 2, 63 patients, 32 placebo:31 active). This study was conducted from September 24, 2012, to November 17, 2014, in Belgium, Canada, Denmark, Germany, the Netherlands and the United Kingdom.

Clinical Evaluation of PRV-300

In the limited number of subjects who received PRV-300, it has been well tolerated. No deaths, drug-related serious adverse events, or discontinuations due to adverse events have occurred. In subjects who received subcutaneous PRV-300 or placebo, mild injection site reactions were the most frequently reported adverse events. In the CNTO3157ASH1001 study, the largest conducted to date, no serious adverse events deemed related to PRV-300 were observed in either healthy subjects and mild asthmatic patients who received PRV-300 that would preclude further clinical development. Adverse events reported in this study did not exhibit a dose-dependent relationship.

Preclinical Evaluation of PRV-300

Good Laboratory Practice (GLP) toxicology studies were completed in mice and monkeys. In mice, doses of PRV-300 up to 200 mg/kg, administered either intravenously or subcutaneously weekly for three months were well tolerated with no dose-limiting toxicity reported.

In monkey studies, doses of 10 mg/kg IV or 75 mg/kg subcutaneously every three days for six months were associated with microscopic observations of perivascular/vascular inflammation at the end of dosing. Similar findings were reported at higher (50 mg/kg) intravenous doses in kidneys in the three-month GLP monkey toxicity studies. In all cases, the findings were reversible and were not considered to be a direct PRV-300-related effect, but an immune-mediated reaction related to formation of immune complexes and monkey anti-PRV-300 antibodies.

Since PRV-300 is an immune modulator that could theoretically increase susceptibility to infections, viral resistance studies were conducted against common pathogens, including influenza, herpes simplex, and mouse cytomegalovirus (MCMV) reactivation. PRV-300 was administered to BALB/c mice (50, 100 or 200 mg/kg/week) and to non-drug treated TLR3 KO mice. There were no effects on MCMV reactivation or herpes simplex type-1 (HSV-1) susceptibility. A transient delay in influenza-specific IgM response was demonstrated without toxicologically relevant impact on influenza clearance or IgG production. There were no overt immune toxicologic risks identified in PRV-300-treated mice or TLR3 KO mice in all three viral resistance mouse models.

Pharmacokinetics and immunogenicity

The half-life of the 10 mg/kg dose of PRV-300 was 12 and 18 days, upon single and multiple intravenous administration, respectively. PRV-300 was minimally immunogenic, as <5% of subjects generated anti-drug antibody, which was deemed not clinically relevant as there was no apparent effect on PK parameters.

Pharmacodynamic data / Proof of mechanism

Pharmacodynamic data showed that PRV-300 inhibits ex vivo TLR3-dependent (Poly I:C induced) cytokine release in the blood of subjects who received PRV-300. In the Phase 1b asthma study, IL-12p70, IP-10 and MIP-1b were significantly inhibited at the 10 mg/kg dose, with ≥80% inhibition for up to 60 days after the fourth dose at 10 mg/kg, suggesting an extended pharmacodynamic effect.

In CNTO3157ASH1002, there was no statistical difference between placebo and treatment groups in attenuating the respiratory manifestations of HRV-16 infection, with a trend towards worsening symptoms in PRV-300-treated patients. However, there was a numeric improvement in pulmonary function in PRV-300-treated asthmatics in the absence of acute HRV-16 infection, providing support to the testing in UC.

Ulcerative Colitis Market

UC is the most common form of IBD. The market for UC treatments is predicted to reach $3 billion by 2020 and is currently dominated by anti-inflammatory and immune suppressant agents. Mechanistically, most of the existing agents act by inhibiting end-stage mediators rather than the source of inflammation. PRV-300 is a differentiated, targeted drug acting in the early phase (i.e., recognition and initiation) of the inflammatory immune response and appears well suited for patients with demonstrated hyperactive pathways.

Life-Cycle Opportunities in Crohn’s Disease and Other Gastrointestinal Disorders

In addition to our initial indication in UC, a substantial body of evidence supports the potential use of PRV-300 in patients with Crohn’s disease, a second indication that may be explored as part of life-cycle management of PRV-300:

In addition to Crohn’s disease, TLR3 activation by rotaviral infection has been reported to induce intestinal mucosal erosion in vivo, an effect reversed by anti-TLR3 treatment. Finally, TLR3 has also been shown to be the mediator of crypt cell death in a mouse model of radiation-induced gastrointestinal syndrome.

Life-Cycle Opportunities in Serious and Emerging Viral Diseases

TLR3 is involved in the immune response not only to dsRNA viruses, but also non-dsRNA viruses that use dsRNA as an intermediary in their replication. Potentially attractive life-cycle expansion opportunities for PRV-300 in the infectious disease space include severe influenza in the hospitalized setting (associated with high seasonal mortality), acute and chronic respiratory syncytial virus (RSV) pathology and emerging viral diseases (e.g., pandemic or avian flu).

Excessive TLR3 signaling contributes to morbidity and mortality in models of certain viral infections including West Nile virus, phlebovirus, vaccinia virus and influenza A virus (IAV). For example, the immune-mediated pathology in IAV is suggested to be a result of exaggerated cytokine release in response to ongoing infection, either from airway epithelial cells or from the resultant increase in infiltrating immune cells. The cytokines implicated include CXCL10 (IP-10), IL-6, IFN-γ, TNF-α, CCL-2 and CCL-5, which are downstream products of activation of key viral pattern recognition receptors (PRRs), including TLR3 and RIG-1. Emerging evidence suggests RIG-1 signaling is required for maximal/protective viral clearance and pro-inflammatory responses, while TLR3 is more involved in pro-inflammatory/detrimental responses. The balance of protective and pro-inflammatory responses is exemplified in the figure below.

Pro-inflammatory Responses Associated with Excessive TLR3 Signaling

A role for TLR3 in driving pathogenic inflammation during IAV infection is supported by evidence in a TLR3 KO mouse model and in humans infected with influenza A. TLR3-deficient mice have increased survival and reduced virus-induced inflammatory pathology compared to wild-type mice despite delayed viral clearance. Furthermore, antibody blockade of TLR3 significantly enhanced survival when it is given either prophylactically or therapeutically, administered upon the first appearance of clinical symptoms. While there was no effect on viral replication in the lung, cytokine levels (including IL-6, RANTES and IP-10) were decreased in animals that received an anti-TLR3 antibody, to an extent similar to that in TLR3 KO mice. Furthermore, TLR3 KO mice showed less pneumonia, bronchiolitis, and alveolitis compared with wild type mice upon viral infection, supporting the beneficial role of TLR3 blockade in ameliorating disease.

In humans, TLR3 levels were increased in the lungs of patients who died of H1N1, a subtype of IAV subtype, in 2009. In these cases, TLR3-dependent cytokines in the blood were elevated in response to the infection, suggesting that increased expression of TLR3 and stimulation in a more advanced disease stage may exacerbate tissue inflammation. Thus, inhibition of TLR3 signaling may have a therapeutic potential in the treatment or prevention of severe influenza-induced lung pathology.

There is evidence to suggest that an association may exist between TLR3 deficiency and infections with certain pathogenic viruses, including herpes simplex (HSV-1) and coxsackie viruses. A rare dominant-negative TLR3 allele, P554S, has been associated with increased susceptibility to herpes simplex encephalitis upon primary infection with HSV-1 in childhood, although subjects with this allele do not have recurrent HSV-1 nor an increased susceptibility to other infections. A common TLR3 variant allele with reduced in vitro activity, L412F, was found in one patient with recurrent HSV-2 infections. In mice, TLR3 has been shown to be redundant for defense against HSV in the periphery, but critical for defense within the CNS. Additionally, a protective role for TLR3 against human coxsackie virus infections has been suggested by a recent analysis of 57 viral myocarditis patients, in which the P554S allele was found and the L412F variant was found at a higher prevalence than in a cohort of control patients, although the prevalence of L412F in the control cohort in this study was much lower than the prevalence reported for the general population. In mice, TLR3 deficiency is linked to decreased survival following coxsackie virus challenge. The extent to which the administration of an antibody against TLR3 mimics genetic deficiency of TLR3 remains unknown, although no such infections have been seen in clinical trials conducted to date.

Thus, evidence from both in vivo and in vitro studies supports the hypothesis that blockade of TLR3 may be effective in microbial diseases in which the innate pro-inflammatory response drives pathology to a greater extent than the virus, such as in influenza.

Provention plans to explore the possibility of conducting proof-of-concept studies of PRV-300 in pandemic flu (e.g., or avian or swine) in conjunction with relevant collaborators and/or government agencies. PRV-300 has been shown to prevent immune pathology and to improve survival and other outcomes in a mouse model of swine flu. Pandemic flu and other viral diseases that can be studied in animal models could potentially lead to accelerated approvals and stockpiling under FDA’s Animal Efficacy Rule (“Animal Rule”) guidance without an immediate need for human clinical studies. The FDA Animal Rule applies to the development and testing of drugs and biologicals to reduce or prevent serious/life-threatening conditions caused by exposure to lethal agents, where human efficacy trials are not feasible or ethical.

PRV-3279 (humanized CD32B x CD79B Dual Affinity Biologic for Systemic Lupus Erythematosus and other autoimmune diseases

Overview

SLE is a chronic autoimmune disorder that can affect nearly every major organ system, causing inflammation, tissue injury, organ damage, and in some patients, organ failure. The prognosis of SLE is highly variable in individual patients, often waxing and waning throughout their lifetime. The natural history of SLE ranges from relatively benign disease to rapidly progressive and even fatal disease. Comorbidities, such as infections, malignancies, hypertension, lipid disorders and diabetes increase the risk of disability and death in patients with SLE. Organ systems commonly affected by SLE include the central nervous system, kidneys, gastrointestinal system, mucous membranes, heart, skin, hematologic system, musculoskeletal system and lungs, with specific organ involvement defining subsets of the disease (e.g., lupus nephritis). According to the Lupus Foundation of America, at least 1.5 million Americans are afflicted by SLE and more than 16,000 new cases of lupus are reported annually. It is estimated that 5 million people throughout the world suffer from some form of lupus. Lupus affects primarily women of childbearing age (15–44 years). However, men, children, and teenagers can also develop lupus.

The pathogenesis of SLE is characterized by an abnormal overactivation of B cells and subsequent pathologic production of auto-antibodies (antibodies that attack one’s own cells and tissues). Uncontrolled activation of B cells is normally terminated when the activating stimulus is exhausted and when a negative feedback loop is triggered by the engagement of an inhibitory Fc receptor (FcR) known as FcgammaRIIb (CD32B). Mutations in the CD32B gene in humans are associated with an increased likelihood of SLE, and reduced expression of CD32B is apparent in B cells from SLE patients. It is thought that activation of this inhibitory pathway could ameliorate the overactive B cell-driven pathology of SLE and other autoimmune diseases. In addition, the excess auto-antibodies produced bind to target antigens and form immune complexes.

When the B cell receptor (BCR) (which is the “Y” shaped molecule, resembling an antibody in the figure below) is bound and activated by an antigen, it initiates a cascade of biochemical changes necessary for the activation of the CD32B inhibitory pathway, thus triggering the negative feedback loop. CD79B is a subunit of the BCR that plays a key role in this process when it is close to CD32B. Therefore, if a pharmacologic treatment is to activate the CD32B inhibitory pathway, it also has to simultaneously bind to CD79B. PRV-3279 (formerly MGD010), is a humanized CD32B x CD79B DART protein developed originally by MacroGenics as a bi-specific therapy with these properties, and thus a potential treatment for SLE and other similar diseases. It is designed to simultaneously bind to CD32B and CD79B on B cells.

PRV-3279 and related molecules have shown inhibitory effects on BCR-induced B cell proliferation and antibody secretion (including B cells obtained from SLE patients) as well as beneficial effects in mouse models of autoimmunity. PRV-3279 is expected to boost the negative feedback loop on B cells by robustly engaging the available CD32B and CD79B.

PRV-3279 has been studied in humans and was shown to be well tolerated. PoM and PRV-3279’s inhibitory effect on antibody immune responses were demonstrated in a Phase 1a single ascending dose study in healthy volunteers, including a cohort demonstrating inhibition of the immunogenicity of the hepatitis A vaccine. Immunogenicity of PRV-3279 was also observed, but had no impact on mechanistic effects, safety or pharmacokinetics, and decreased with increasing doses of PRV-3279, possibly a reflection of its mechanism of action.

We plan to continue developing PRV-3279 for the treatment of SLE in the PREVAIL (PRV-3279 EVAluation In Lupus) study. PREVAIL will be a multiple ascending dose (MAD) Phase 1b/2a study in two parts: Part 1 will be a Phase 1b study in approximately 16 healthy volunteers, and Part 2 will be a Phase 2a study in SLE patients. Part 2 will have a treatment duration of at least 12 weeks and will evaluate clinical and biomarker endpoints. We expect to initiate the Phase 1b portion of the trial in the third quarter of 2019. Our ultimate goal is to determine if PRV-3279 can intercept the pathophysiology of SLE by preventing the production of auto-antibodies by abnormally active B cells.

Current Treatment Options for SLE and Their Limitations

The treatment and management of SLE depends on disease severity and disease manifestations. Hydroxychloroquine plays a central role in the long-term treatment of SLE and is the cornerstone of SLE therapy. Corticosteroids, nonsteroidal anti-inflammatory drugs (NSAIDs), and immunosuppressive agents (e.g., azathioprine, cyclophosphamide, cyclosporine, methotrexate, and mycophenolate mofetil) have also been used in the treatment and management of SLE. These treatments are only modestly effective and present safety and/or immune suppression concerns with prolonged use. The B cell-depleting antibody rituximab (Rituxan®), while not approved for treatment of SLE, appears to be beneficial in certain subsets of patients.

In 2011, the FDA approved belimumab (Benlysta®), an antibody that targets B lymphocyte stimulator (BLyS), for the treatment of mild to moderate SLE in combination with standard therapy, providing additional clinical validation of the therapeutic benefit of B cell-targeted therapy for autoimmune diseases. However, the modest therapeutic benefit of belimumab and delayed onset of disease intervention indicate the need for additional therapeutic strategies to inhibit overactive B cells. We believe PRV-3279 can fulfill that requirement and is uniquely differentiated to allow for rapid inhibition of activated B cells (potentially more effective than belimumab), while sparing non-activated B cells from depletion or inactivation (potentially safer than rituximab).

Overview of CD32B Biology

CD32B is expressed widely on the surface of human B cells. In addition to its expression on B cells, CD32B is also expressed on other immune cells such as dendritic cells, macrophages, neutrophils, and mast cells. It is a single-chain protein with a portion that sits outside of the cell membrane, which can be bound by chemical signals.

CD32B is the only known inhibitory FcR in the immune system. It plays an important role not only for innate and adaptive immune responses, but also in the maintenance of immune tolerance and controlling autoimmunity. Mice deficient in CD32B have increased antibody responses due in part to chronic B cell activation, and as a result, develop autoimmune disease similar to human SLE. In contrast, B cell-specific overexpression of CD32B reduces the incidence and severity of lupus in a mouse lupus model. In humans, mutations and decreased expression of the CD32B gene are associated with an increased likelihood of SLE. These results underscore the important role of CD32B in regulating the antibody immune response and suggest that drug-mediated engagement of CD32B could provide therapeutic benefit in autoimmune diseases by dampening the effects of chronically activated B cells and reducing the production of auto-antibodies. In particular, preventing the production of auto-antibodies could intercept the disease course in lupus nephritis, a subtype of lupus driven by accumulation of auto-antibodies and immune complexes (a mass of antibodies and other molecules) in the kidneys.

Mechanism of Action of PRV-3279

PRV-3279 is in a new class of bispecific scaffold antibody-like molecules called DARTs. It is designed to simultaneously bind to CD32B and CD79B on B cells. The simultaneous binding of both CD32B and CD79B triggers CD32B-coupled immunoreceptor tyrosine-based inhibitory motif (ITIM) signaling, which leads to the suppression of B cells activated to produce auto-antibodies, while not causing broad B cell depletion.

To prolong its half-life in the body, PRV-3279 contains a human IgG1 Fc region (a specific antibody fragment) that is manipulated to eliminate its effector function. As a molecule designed to inhibit immune responses, PRV-3279 does not activate any part of the immune system either in the body or in laboratory tests. PRV-3279 also does not bind to platelets, a unique feature compared to competing molecules targeting CD32B that are associated with toxicity due to binding to platelets.

Proposed Multiple Ascending Dose Phase 1b/2a study of PRV-3279 in Healthy Volunteers and Patients with Lupus

Provention plans to conduct a two-part study in SLE, the PREVAIL (PRV-3279 EVAluation In Lupus) study. PREVAIL will be a Phase 1b/2a randomized, double-blind, placebo-controlled study to evaluate the safety, tolerability, PK, PD, and immunogenicity of multiple ascending doses of PRV-3279 in approximately 16 healthy adult volunteers (Part 1) and the efficacy of PRV-3279 in patients with lupus (Part 2). We expect to initiate the Phase 1b portion of the trial in the second half of 2019.

Our ultimate goal is to determine if PRV-3279 can intercept the pathophysiology of SLE by preventing the production of auto-antibodies by abnormally active B cells. Part 2 will have a treatment duration of at least 12 weeks and endpoints will include lupus clinical assessments and biomarker measurements. Clinical endpoints will include the Systemic Lupus Erythematosus Disease Activity Index 2000 (SLEDAI-2K), the British Isles Lupus Assessment Group (BILAG) score, urine protein to creatinine ratio, and daily glucocorticoid use. Additional biomarkers will include urinary/renal markers (e.g., serum creatinine, estimated glomerular filtration rate) and blood/circulating markers (e.g., auto-antibodies, complement [C3 and C4], B cell function/phenotype, including CD32B expression/response relationship).

Preclinical Evaluation of PRV-3279

The only nonhuman species that PRV-3279 binds to is chimpanzees. An initial non-GLP study with PRV-3279 in chimpanzees demonstrated it to be well tolerated at all doses, with an assigned no observed-adverse-effect level (NOAEL) of 10 mg/kg.

Due to the lack of target binding, chronic four-week and three-month repeat-dose GLP toxicology studies were performed using a surrogate DART molecule similar to PRV-3279 that was designed to target human CD32B and mouse CD79B in a transgenic mouse line that expresses human CD32B. A NOAEL at the highest dose of 50 mg/kg was assigned in the three-month study. These studies support the advancement of PRV-3279 in long-term efficacy studies in humans (up to three months).

Clinical Evaluation and Proof of Mechanism for PRV-3279

To date, one clinical study has been completed with PRV-3279: a First in Human (FIH) Phase 1a double-blind, placebo-controlled study to evaluate the safety, tolerability, PK, PD, and immunogenicity of PRV-3279 in healthy adult volunteers. The study was conducted at a single site in the U.S., from February 2015 to February 2017.

A total of 49 subjects were randomized; 12 received placebo and 37 received PRV-3279 intravenously at escalating doses from 0.1 mg/kg to 10 mg/kg in six cohorts. PRV-3279 was well tolerated over the range of doses, with only mild adverse events that resolved quickly, including headache, somnolence (sleepiness), upper respiratory tract infection, folliculitis and night sweats. Target binding and PoM were demonstrated by measuring functional B cell inhibition at doses of 1 mg/kg or higher, without broader B cell activation or depletion observed.

Subsequently, PoM was further confirmed in a dose escalation extension of the study in which single doses of PRV-3279 at 3 mg/kg and 10 mg/kg (16 subjects) were compared with placebo (8 subjects) for the ability to affect B cell responses to a hepatitis A vaccine, which was administered to participants who had no previous hepatitis A immunity, on day 2 of the study. At both doses, PRV-3279 reduced the proportion of volunteers who generated an immune response against the vaccine, as well as the amount of antibody they produced, in both cases as compared to placebo.

Pharmacokinetics and Immunogenicity of PRV-3279

PRV-3279 exhibited an approximate half-life of seven days after a single dose. A majority (~86%) of study participants developed antibodies against PRV-3279 (i.e., immunogenicity) after receiving the 3 mg/kg dose, but no detrimental effect was observed on the pharmacokinetics of PRV-3279. The proportion of participants developing antibodies against PRV-3279 decreased with increasing dose (29% in the 10 mg/kg dose) and such antibodies did not occur in the multiple dose chimpanzee study, suggesting that PRV-3279 may limit its own immunogenicity at therapeutic doses, which is consistent with its mechanism of action.

SLE Market and Other Opportunities for PRV-3279

Sales of therapies to treat SLE are expected to climb to nearly $2 billion in 2019, approximately 17% annual growth from 2009. This growth is driven primarily by the entry and uptake of novel treatments that target B cells such as belimumab and off-label use of rituximab. The uptake of belimumab has been driven largely by safety rather than substantial efficacy, supporting the unmet need and potential for novel and safe non-depleting B cell therapies with greater efficacy.

In addition to SLE, PRV-3279 has the potential to treat other B cell- and auto-antibody-driven autoimmune diseases. Such diseases include multiple sclerosis and RA, where B cell therapies rituximab and recently approved ocrelizumab (Ocrevus®) have sales in excess of $1 billion. Several niche/orphan indications may also be explored, including T1D (potentially in combination with Provention’s PRV-031), Sjogren’s syndrome, vasculitis (e.g., polymyalgia rheumatica, giant cell arteritis, Behçets disease), myasthenia gravis, pemphigus, neuromyelitis optica, anti-NMDA receptor encephalitis, Guillain-Barré syndrome, chronic inflammatory demyelinating polyneuropathy, Grave’s ophthalmopathy, IgG4-related disease, and idiopathic thrombocytopenic purpura.

PRV-101 (Coxsackie Virus B Vaccine) for acute infection and Type 1 Diabetes

Overview of Coxsackie Virus Infection of the Pancreas, T1D and PRV-101’s Mechanism of Action

Longitudinal studies of more than 200,000 children studied for up to two decades in Finland by Provention’s technology licensor, Vactech, and its collaborators, identified CVB infection as a likely environmental trigger in the onset of T1D and T1D-associated celiac disease. CVB infection is very common and is responsible for various symptoms and complications ranging from mild respiratory disease, gastrointestinal disturbances and hand-foot-mouth disease to life-threatening cardiomyopathy and meningitis. However, in patients with a certain genetic background, CVB also may be responsible for the development of autoimmunity. The T1D association with CVB infection was also observed in additional independent cohorts in 15 countries, including in North America and Australasia. These epidemiological observations have been substantiated by biological experimentation. Insulin-producing beta cells in the pancreas express specialized receptors associated with the transport, storage and release of insulin. These receptors appear to be used by CVB to preferentially infect these cells. Infection by enteroviruses can be detected in the pancreatic beta cells of approximately 60% of type-1 diabetes patients and in the gut of most patients with T1D-associated celiac disease. All enteroviruses from the pancreas of T1D patients sequenced to date for strain identification have been found to be CVB. Importantly, if mothers have a CVB infection just prior to or during pregnancy, a 50% reduction in T1D-associated auto-antibodies has been observed in their offspring, presumably due to protection by maternal antibodies passed on to the fetus. This observation strongly suggests the potential efficacy of CVB vaccination for children and/or mothers, resulting in the development of protective antibodies potentially capable of preventing or delaying the onset of T1D.

An analysis of stool samples collected from these individuals identified enterovirus infections prior to the first detection of T1D auto-antibodies. Enterovirus RNA was also detected in stool samples. Examination of antibodies present in DIPP children who developed at least two islet cell auto-antibodies (sign of incipient T1D) and/or progressed to T1D confirmed that among all enteroviruses, only CVB was associated with initiation of beta cell autoimmunity.

Enterovirus RNA in Blood is Linked to the Development of T1D

OR: odd ratio; CI: confidence interval; EV: enterovirus

The relationship between islet cell auto-antibodies and the presence of CVB has subsequently also been observed in other cohorts collected in European countries and in a prospective study carried out in Europe, North America and Australia. In addition to these studies, the T1D and CVB association has been shown in several studies carried out in various geographic regions.

Importantly, the additional finding of an almost 50% reduction in the CVB-infection-associated risk of islet auto-antibodies in the offspring of mothers with anti-CVB antibodies supports the hypothesis that a CVB vaccine may be effective in preventing the disease.

Proposed Phase 1 First in Human Clinical Trial of PRV-101

PRV-101 is expected to be a polyvalent (more than one strain) prophylactic CVB vaccine intended for acute CVB infection and the prevention of CVB-induced T1D. We believe that, if successful, PRV-101 may prevent up to 50% of T1D cases. The vaccine is currently in an IND-enabling stage, requiring manufacturing and nonclinical studies prior to initiation of FIH studies. Animal safety and efficacy modeling studies completed to date by Vactech demonstrate that CVB triggers diabetes in two animal models of T1D and that vaccination against CVB protects mice from acute infection as well as prevents the onset of diabetes triggered by CVB infection.

We plan to commence a Phase 1 FIH study in the first half of 2020 in healthy adult volunteers, with top-line data by the end of 2020. The primary objective of this Phase 1 FIH study is to evaluate the safety and tolerability of multiple doses of PRV-101 administered at two different dose levels in adult healthy volunteers. A secondary objective is to evaluate the immunogenicity (ability to elicit antibodies) of PRV-101 to CVB.

Preclinical Data for PRV-101

The mechanism of action and efficacy of PRV-101 is supported by the results of several in vivo studies. Inactivated CVB-based viral vaccines efficiently protect mice from CVB infections and from viral spread to the pancreas, as seen for CVB1 and CVB3 vaccines. Similar experiments conducted with a vaccine covering all six CVB serotypes demonstrated that it can induce a strong neutralizing anti-CVB response in mice and protect the animals against multiple CVB infections from the corresponding live viruses. Independent experiments confirm that CVB infection can accelerate T1D onset in T1D susceptible NOD (Non-obese diabetic) or SOCS-1-Tg (suppressor of cytokine signaling 1 transgenic) mice, suggesting that protection from CVB infection would therefore protect against T1D development. This hypothesis has been recently confirmed in experiments conducted by the Karolinska Institute (Sweden) and the University of Tampere (Finland), demonstrating that a CVB1 vaccine indeed protected SOCS-1-Tg mice against T1D induced by CVB1. These mice develop T1D after CVB1 infection as a consequence of a direct infection of insulin-producing beta cells in the pancreas. A three-injection vaccination course induced robust neutralizing antibody responses against CVB1 and protected mice from both CVB1 infection and CVB1-driven T1D. CVB1 infection led to a loss of insulin-producing cells in unvaccinated mice, which also was prevented by the vaccine. These data strongly support the development of PRV-101 for the prevention of T1D.

Formalin-Inactivated CVB1 Vaccine is Effective Against CVB1-Induced T1D in a Mouse Model. As seen in the left panel below, CVB1 infection led to loss of insulin-producing cells, and this pathology was completely prevented by the CVB1 vaccine (right panel). In this experiment, while 50% of unvaccinated mice develop T1D as a consequence of CVB1 infection, all vaccinated mice were protected (not shown).

Important from a safety point of view, the formalin-inactivated CVB1 vaccines did not cause any undesirable effects in the pancreas. There was no vaccine-induced pancreatic pathological change, islet autoimmunity or diabetes in the vaccinated mice.

Finally, maternal CVB infection during gestation in mice protects the offspring from CVB infection and subsequent T1D development, presumably through transfer of specific antibodies from the mother to the fetus, corroborating previous findings in humans in the DIPP study and further supporting the use of a prophylactic vaccine to protect against CVB-associated-T1D.

IND-Enabling Program to Support FIH Study

The planned CVB vaccine toxicology program will consist of non-GLP and GLP safety and immunogenicity studies conducted in mice. These studies are designed to identify and characterize potential toxicities associated with PRV-101 treatment, including those arising from the immune responses induced by the product. They will mirror the administration regimen that will be used in the proposed FIH study by same route of administration.

Pharmacology studies will be conducted to determine the exact composition of the vaccine. It is currently considered that such CVB vaccine should ideally be a polyvalent vaccine (encompassing several CVB serotypes). After completion of these studies, Provention will undertake Good Manufacturing Practice (GMP)-manufacturing of the final vaccine for clinical trials.

CVB Infection Market

Enteroviruses are responsible for an estimated 10 to 15 million symptomatic infections in the U.S. annually. CVB contributes to a major part of the healthcare costs of enteroviruses as they cause the most serious complications and are among the most frequently reported enteroviral infections according to the CDC. Acute CVB infection is usually asymptomatic or causes common cold-type symptoms. It often leads also to a febrile illness associated by rash, hand-foot-mouth disease and/or mild GI distress. However, CVB infections cause also more severe manifestations including pericarditis, myocarditis, meningitis and pancreatitis.

Significant Contracts and Agreements Related to Research and Development Activities

License and Acquisition Agreements

Vactech License

In April 2017, we entered into a License Agreement, pursuant to which Vactech granted us exclusive global rights for the purpose of developing and commercializing the group B coxsackie virus vaccine (CVB) platform technology. In consideration of the licenses and other rights granted by Vactech, we issued two million shares of our common stock to Vactech. We recorded the issuance of the shares at their estimated fair value of approximately $1.70 per share for a total of $3.4 million as a license fee expense included as part of research and development expenses for the year ended December 30, 2017. We paid Vactech a total of approximately $0.5 million for transition and advisory services during the first 18 months of the term of the agreement. Vactech is obligated to transition its intellectual property, provide reference samples, assist with the technology transfer to a third-party contract manufacturer, and participate on our scientific advisory board. In addition, we may be obligated to make a series of contingent milestone payments to Vactech totaling up to an additional $24.5 million upon the achievement of certain clinical development and regulatory filing milestones. In addition, we have agreed to pay Vactech tiered single-digit royalties on net sales of any approved product based on the CVB platform technology and three additional payments totaling $19.0 million upon the achievement of certain annual net sales levels. The Vactech Agreement may be terminated by us on a country by country basis without cause (in which case the exclusive global rights to the technology will transfer back to Vactech) and by either party upon a material breach or insolvency of the other party. If we terminate the agreement with respect to two or more specified European countries, the agreement will be deemed terminated with respect to all of the EU, and if we terminate the agreement with respect to the United States, the agreement will be deemed terminated with respect to all of North America and expires upon the expiration of our last obligation to make royalty payments to Vactech.

Janssen License CSF-1R

In April 2017, we entered into a License, Development and Commercialization Agreement, pursuant to which Janssen Pharmaceutica NV granted us exclusive global rights for the purpose of developing and commercializing JNJ-40346527 (renamed PRV-6527), a colony stimulating factor 1 receptor (CSF-1R) inhibitor for inflammatory bowel diseases including Crohn’s Disease and UC. We are obligated to conduct a single Phase 2a proof-of-mechanism and proof-of-concept clinical trial for the Crohn’s Disease indication. Janssen will supply product for the clinical trial. At the conclusion of the Phase 2a study, Janssen will have an option to buy back the rights for future development for a one-time payment of $50.0 million and future single-digit royalties on future net sales for a period of 10 years from first sale or expiration of the intellectual property, whichever is shorter. If Janssen does not exercise its option to buy-back the rights, all rights will remain with us and we will be obligated to make contingent milestone payments to Janssen totaling $35.0 million upon the achievement of certain clinical and regulatory milestones for the first indication and an additional $20.0 million upon the achievement of certain clinical and regulatory milestones for a second indication. In addition, we have agreed to pay Janssen tiered single-digit royalties on net sales of any approved product based on the CSF-1R technology and three additional payments totaling $100.0 million upon the achievement of certain annual net sales levels. The CSF-1R License Agreement may be terminated by us without cause (in which case the exclusive global rights to the technology will transfer back to Janssen) and by either party upon a material breach and expires upon the expiration of our last obligation to make royalty payments to Janssen. Janssen will supply drug product for our Phase 2a study. Janssen will also allow us to access their proprietary benchmark data, which includes imaging, tissue and biomarker data.

Janssen License TLR3

In April 2017, we entered into a License, Development and Commercialization Agreement, pursuant to which Janssen Sciences Ireland UC granted us exclusive global rights for the purpose of developing and commercializing JNJ-42915925 (renamed PRV-300), an anti-TLR3 antibody. We will develop PRV-300 for UC and will start a Phase 1b trial in early 2018. Janssen will supply product for the clinical trial. We are obligated to make contingent milestone payments to Janssen totaling $31.0 million upon the achievement of certain clinical and regulatory milestones for the first indication and an additional $17.0 million upon the achievement of certain clinical and regulatory milestones for a second indication. In addition, we have agreed to pay Janssen a single-digit royalty on net sales of any approved product based on the CSF-1R technology and three additional payments totaling $60.0 million upon the achievement of certain annual net sales levels. We are obligated to use commercially reasonable efforts to develop and market TLR3. The TLR3 License Agreement may be terminated by us without cause (in which case the exclusive global rights to the technology will transfer back to Janssen) and by either party upon a material breach or insolvency of the other party and expires upon the expiration of our last obligation to make royalty payments to Janssen. Janssen will supply drug product for the Phase 1b study. Janssen will also allow us to access their proprietary benchmark data, which includes imaging, tissue and biomarker data.

Intravacc Development Services Agreement

In March 2018, we entered into a Development Services Agreement with The Institute of Translational Vaccinology (“Intravacc”), pursuant to which Intravacc will provide services related to process development, non-GMP and GMP manufacturing of our polyvalent coxsackie virus B vaccine (CVB), including providing proprietary technology for manufacturing purposes. We will pay Intravacc approximately 10 million euros for their services over the development and manufacturing period which we expect will last for approximately 18 to 24 months. Each party retains its existing intellectual property and will share newly developed intellectual property via a fully-paid non-exclusive license between the parties for all development work through phase 1 clinical trials. Any future use, including commercial use, of Intravacc’s technology will be subject to a separate nonexclusive license agreement. The Intravacc Development Services Agreement may be terminated by us with ninety days notice without cause and by either party upon a material breach or insolvency of the other party.

MacroGenics Agreements

In May 2018, we entered into a License Agreement with MacroGenics, Inc., pursuant to which MacroGenics granted us exclusive global rights for the purpose of developing and commercializing MGD010 (renamed PRV-3279), a humanized protein and a potential treatment for SLE and other similar diseases. As partial consideration for the MacroGenics License Agreement, we granted MacroGenics a warrant to purchase 270,299 shares of our common stock at an exercise price of $2.50 per share. We are obligated to make contingent milestone payments to MacroGenics totaling $42.5 million upon the achievement of certain developmental and approval milestones for the first indication, and an additional $22.5 million upon the achievement of certain regulatory approvals for a second indication. In addition, we are obligated to make contingent milestone payments to MacroGenics totaling $225.0 million upon the achievement of certain sales milestones. We have also agreed to pay MacroGenics a single-digit royalty on net sales of the product. Further, we are required to pay MacroGenics a low double-digit percentage of certain consideration to the extent received in connection with a future grant of rights to PRV-3279 by us to a third party. We are obligated to use commercially reasonable efforts to develop and seek regulatory approval for PRV-3279. The license agreement may be terminated by either party upon a material breach or bankruptcy of the other party, by Provention without cause upon prior notice to MacroGenics, and by MacroGenics in the event that we challenge the validity of any licensed patent under the agreement, but only with respect to the challenged patent.

In May 2018, we entered into an Asset Purchase Agreement with MacroGenics pursuant to which we acquired MacroGenics’ interest in teplizumab (renamed PRV-031), a humanized mAb for the treatment of T1D. As partial consideration for the MacroGenics Asset Purchase Agreement, we granted MacroGenics a warrant to purchase 2,162,389 shares of our common stock at an exercise price of $2.50 per share. We are obligated to pay MacroGenics contingent milestone payments totaling $170.0 million upon the achievement of certain regulatory approval milestones. In addition, we are obligated to make contingent milestone payments to MacroGenics totaling $225.0 million upon the achievement of certain sales milestones. We have also agreed to pay MacroGenics a single-digit royalty on net sales of the product. We have also agreed to pay third-party obligations, including low single-digit royalties, a portion of which is creditable against royalties payable to MacroGenics, aggregate milestone payments of up to approximately $1.3 million and other consideration, for certain third-party intellectual property under agreements we are assuming pursuant to the Asset Purchase Agreement. Further, we are required to pay MacroGenics a low double-digit percentage of certain consideration to the extent it is received in connection with a future grant of rights to PRV-031 by us to a third party. We are obligated to use reasonable commercial efforts to develop and seek regulatory approval for PRV-031.

Amgen License and Collaboration Agreement

In November 2018, we entered into a License and Collaboration Agreement (the “Amgen Agreement”) with Amgen, Inc. (“Amgen”) for PRV-015 (formerly AMG 714), a novel anti-IL-15 monoclonal antibody being developed for the treatment of gluten-free diet non-responsive celiac disease (NRCD). Under the terms of the agreement, we will conduct and fund a Phase 2b trial in NRCD and lead the development and regulatory activities for the program. Amgen has agreed to make an equity investment of up to $20.0 million in the Company, subject to certain terms and conditions set forth in the agreement. The equity investment will coincide with our future financing events or receipt of non-dilutive milestone payment from a third party including but not limited to Janssen related to our CSF-1R program. Amgen is also responsible for the manufacturing of PRV-015. Upon completion of the Phase 2b trial, a $150.0 million milestone payment is due from Amgen to us, plus an additional regulatory milestone payment, and single digit royalties on future sales. If Amgen elects not to pay the $150.0 million milestone, AMG 714 rights will be transferred to us pursuant to a termination license agreement from Amgen and us. We will be obligated to make certain contingent milestone payments to Amgen and other third parties totaling up to $70.0 million upon the achievement of certain clinical and regulatory milestones and a low double-digit royalty on net sales of any approved product based on the IL-15 technology. The agreement may be terminated by us without cause (in which case the exclusive global rights to the technology will transfer back to Amgen) and by either party upon a material breach. The agreement expires upon the expiration of Amgen’s last obligation to make royalty payments to Provention (or, our last obligation to make royalty payments to Amgen, if the program rights are transferred to us).

AGC Biologics Agreement

In February 2019, we entered into services agreement with AGC Biologics (“AGC”) to manufacture and supply teplizumab, PRV-031, for our anticipated clinical supply needs. We may terminate the agreement or any statement of work thereunder with approximately12 months’ prior written notice to AGC. If we provide less than 12 months’ notice of termination, we may incur cancellation fee depending on the timing of such notice. AGC may terminate the agreement if we do not, over a specified period, purchase and take delivery from AGC of a specified minimum quantity of API for teplizumab. Each party also has the right to terminate the agreement for other customary reasons such as material breach and bankruptcy. The agreement contains provisions relating to compliance by AGC with current Good Manufacturing Practices, cooperation by AGC in connection with potential marketing applications for PRV-031, indemnification, confidentiality, dispute resolution and other customary matters for an agreement of this kind.

Parexel Services Agreement

In February 2019, we entered into a services agreement with Parexel pursuant to which we retained Parexel to perform implementation and management services in connection with the PROTECT study of PRV-031. We may terminate the services agreement or any work order for any reason and without cause with 90 days’ written notice. Either party may terminate the agreement in the event of a material breach or, bankruptcy petition by the other party or, if any approval from a regulatory authority is revoked, suspended or expires without renewal. We currently anticipate that aggregate costs relating to all work orders under the Parexel Services Agreement for the PROTECT study will be approximately $43.0 million over the period of the study.

Intellectual Property

We believe that our current patent applications and any future patents and other proprietary rights that we own, or control through licensing, are and will be essential to our business. We believe that these intellectual property rights will affect our ability to compete effectively with others. We also rely and will rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop, maintain and strengthen our competitive position. We seek to protect these, in part, through confidentiality agreements with certain employees, consultants, advisors and other parties. Our success will depend in part on our ability, and the ability of our licensor, to obtain, maintain (including making periodic filings and payments) and enforce patent protection for our/their intellectual property, including those patent applications to which we have secured exclusive rights.

We plan to spend considerable resources and focus in the future on obtaining U.S. and foreign patents. We have and will continue to actively protect our intellectual property. No assurances can be given that any of our patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims. In addition, any issued patents may be contested, circumvented, found unenforceable or invalid, and we may not be able to successfully enforce our patent rights against third parties. No assurance can be given that others will not independently develop a similar or competing technology or design around any patents that may be issued to us. We intend to expand our international operations in the future and our patent portfolio, copyright, trademark and trade secret protections may not be available or may be limited in foreign countries.

PRV-300 (TLR3 Antagonist)

Through our agreement with Janssen Sciences Ireland UC we have a licensed patent portfolio that includes: i) 135 issued patents, including 8 U.S. patents, 79 patents in European countries, and 48 patents in other ex-U.S. jurisdictions); and ii) 37 pending patent applications, including one pending U.S. patent application, two pending European patent applications, and 34 pending patent applications in other ex-U.S. jurisdictions.

These issued patents and patent applications disclose antibodies that bind TLR3 and that function as TLR3 antagonists, and use of these antibodies in treating various disorders, including respiratory disorders, inflammatory conditions, and metabolic disorders, as well as in reduction of cholesterol.

The issued patents generally have terms of 20 years from their respective priority filing dates, subject to available extensions, and thus the issued patents are set to expire no earlier than dates ranging from 2029 and 2031. In the event that patents issue based on the pending patent applications, although there can be no assurance that any of the patent application will be granted, such patents would be expected to expire between 2029 and 2031, absent any patent term adjustments or extensions.

PRV-101 (CBV/T1D)

Through our agreement with Vactech, we have a licensed patent portfolio that includes 3 pending U.S. patent applications and 38 patents in various European countries. The pending U.S. patent applications and the European country patents disclose use of a coxsackie virus B vaccine composition in the prevention or treatment of T1D.

The patents issued in the U.S. and various European countries generally have terms of 20 years from their respective priority filing dates, subject to available extensions, and are thus set to expire no earlier than 2032.

PRV-031 (teplizumab anti-CD3 antibody)

Through our agreement with MacroGenics, Inc., we have acquired a patent portfolio that includes eight issued patents, including three U.S. patents and five ex-U.S. patents in Australia, Israel, Mexico and Singapore. The issued patents are set to expire no earlier than dates ranging from 2019 and 2028.

These issued patents disclose humanized antibodies that bind to CD3, and use of these antibodies in treating autoimmune disorders, including T1D and rheumatoid arthritis.

PRV-3279 (CD32B/CD79B diabody)

Through our agreement with MacroGenics, Inc., we have a licensed patent portfolio that includes: i) 153 issued patents, including ten U.S. patents, three European patents to be validated, 75 patents in European countries, and 65 patents in other ex-U.S. jurisdictions; and ii) 78 pending patent applications, including eight pending U.S. patent applications, four pending European patent applications, and 66 pending patent applications in other ex-U.S. jurisdictions.

The patents and patent applications disclose a platform technology for making diabodies, specific anti-CD32B antibodies, specific anti-CD79B antibodies, specific diabodies that co-ligate both CD32B and CD79B, as well as use of these antibodies and diabodies in treating various disorders, including cancer, autoimmune disorder, inflammatory disorder, and IgE-mediated allergic disorder.

The issued patents in the U.S. and various ex-U.S. countries generally have terms of 20 years from their respective priority filing dates, subject to available extensions, and are thus set to expire no earlier than dates ranging from 2023 and 2034. In the event that the pending patent applications issue as patents, although there can be no assurance that the patent applications will issue, the patents would be set to expire no earlier than dates ranging from 2023 and 2037.

PRV-6527 (CSF-1R)

Through our agreement with Janssen Pharmaceutica NV, we have licensed a patent portfolio that includes: i) 73 issued patents, including one U.S. patent, one patent in European countries, and 71 patents in other ex-U.S. jurisdictions; and ii) three pending patent applications, one pending U.S. patent application, one pending European patent application, and one pending patent applications in other ex-U.S. jurisdictions. The issued patents are set to expire no earlier than dates ranging from 2027 and 2030. In the event that the pending patent applications issue as patents, although there can be no assurance that the patent applications will issue, the patents would be set to expire no earlier than dates ranging from 2027 and 2030.

PRV-015 (IL-15)

Through our agreement with Amgen, Inc., we have licensed a patent portfolio that includes: i) 78 issued patents, including seven U.S. patents, 42 patents in European countries, and 29 patents in other ex-U.S. jurisdictions; and ii) 18 pending patent applications, including three pending U.S. patent applications, one pending European patent application, and 14 pending patent applications in other ex-U.S. jurisdictions.

The patents and patent applications relate to anti-IL-15 antibodies, manufacturing conditions and dosages.

The issued patents are set to expire no earlier than dates ranging from 2022 and 2027. In the event that the pending patent applications issue as patents, although there can be no assurance that the patent applications will issue, the patents would be set to expire no earlier than dates ranging from 2026 and 2037.

Sales and Marketing

We are a clinical stage company without a history of revenue or manufacturing, late stage clinical development or marketing experience. Because late stage clinical development, as well as establishing a full manufacturing and distribution structure, is expensive and time consuming, we intend to explore alternative commercialization strategies, including:

We expect that partnering with pharmaceutical or biotherapeutic companies may accelerate product acceptance into our target market areas and gain the sales and marketing advantages of the partner’s distribution infrastructure. We intend to continue to strengthen our market position and solidify our leadership position in immunotherapy by continuing to improve our technology, broadening our clinical and therapeutic applications, identifying new clinical and therapeutic applications and forming strategic relationships with our licensors.

Manufacturing

We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of any of our product candidates. Although we rely and intend to continue to rely upon third–party contract manufacturers to produce our products and product candidates, we have recruited personnel and consultants with experience to manage these third–party contract manufacturers. In certain cases, our collaboration partners for each respective program are responsible for providing clinical drug supply or drug product for those program’s clinical trials. In other cases, we have engaged third-party manufacturers to provide services related to process development, non-GMP and GMP manufacturing and other related services.

The table below lists the third-party responsible for manufacturing drug supply for each of our programs:

See Note 5 to our Financial Statements— License and other agreements for more information.

Competition

Provention faces substantial competition from well-established large pharmaceutical companies, as well as innovative new entrants. Nevertheless, we believe the company’s strategic intent is sufficiently differentiated in that Provention is focusing on intercepting or potentially preventing the onset and progression of immune-mediated and inflammatory diseases by selecting and developing product candidates that are aimed at relevant and predominantly upstream pathophysiological targets.

The symptomatic treatment of T1D is a highly competitive market with large incumbents such as Sanofi, Novo Nordisk and Eli Lilly providing insulin and blood glucose monitoring products and working on new ways to manage the disease. Our goal is to delay or prevent the onset of T1D and spare patients the need to live with blood glucose monitoring and daily insulin injections and this therapy’s many complications and clinically relevant shortfalls. We believe our enteroviral vaccine approach is unique in that it aims to prevent the onset of T1D prior to the rise of auto-antibodies programmed to attack insulin producing beta cells. We are aware of competitive vaccine technologies in development that are attempting to alter the autoimmune cycle once these auto-antibodies have been detected. However, we believe our vaccine approach may intercept the process prior to this cycle being initiated.

The market for IBD (Crohn’s disease and UC) is currently led by large pharmaceutical companies serving the autoimmune market with anti-TNF biologics. Among these companies are AbbVie, Eli Lilly, Johnson & Johnson and Pfizer. New drugs are continually being developed in this highly-competitive space by large pharma and early to mid-stage biotech companies. However, many of these drugs used both for CD and UC- focus on attempting to bring about remission or treating the symptoms of advanced stages of IBD, by neutralizing the inflammatory signals that are released once the immune system has been pathologically activated. Provention is using a novel approach intended to intercept the autoimmune cycle before these inflammatory signals are received and have an opportunity to trigger significant tissue damage. Provention’s drugs target “upstream” mechanisms of action that may provide benefit for a wider patient population, including patients that have already been treated with anti-TNF drugs that failed to adequately or sustainably control their disease. One of our assets is a small molecule intended for oral administration, which is potentially a significant further differentiating factor in Crohn’s disease, a crowded market currently dominated by injectable biologics.

The market for lupus is currently led by large pharmaceutical companies commercializing older, off-patent products such as steroids, immunosuppressive agents including azathioprine, cyclosphosphamide, cyclosporine and mycophenolate. In addition, Glaxo SmithKline (GSK) and Roche offer recently approved B cell-targeted agents. GSK received approval for belimumab (Benlysta®) in 2011, the first drug approval in lupus in 50 years. Despite modest efficacy and slow onset of effect, belimumab’s annual sales are currently approximately $600 million. Roche’s rituximab (Rituxan®), a blockbuster drug, is used off-label in lupus despite not having been approved in SLE. The lupus field is competitive and new experimental drugs are being tested in late stage trials by large pharmaceutical companies and early to mid-stage biotech companies and include: the anti-interferon alpha receptor anifrolumab (MedImmune/Astra Zeneca), anti-CD19 XmAb5871 (Xencor) and calcineurin inhibitor voclosporin (Aurinia Pharmaceuticals). We expect that PRV-3279 will be differentiated from the competition because of greater and faster-onset efficacy, better safety (PRV-3279 does not deplete B cells and is not expected to be immune-suppressive), and less gastrointestinal side effects (since PRV-3279 is a highly specific mAb with likely minimal off-target side effects).

PRV-015 has the potential to be the first drug ever approved for celiac disease since it is the only medication which has shown simultaneous improvement in symptoms and inflammation to date, and since most clinical-stage products are early in development and have not established proof-of-concept. Competition includes experimental medications in development by Innovate (INN-202/larazotide acetate, Phase 2b study completed in 2014; Phase 3 announced), ImmunogenX (IMGX-003/latiglutenase, Phase 2b study completed in 2016 missed primary endpoint, phase 2a announced), ImmusanT (NexVax 2, phase 2a on-going), Zedira/Dr. Falk (ZED1227, phase 2a on-going), Cour (NP-GLI, Phase 1/2 on-going) and PvP Biologics (KumaMax, Phase 1 on-going).

Government Regulation

Our business activities, including the manufacturing, research, development and marketing of our product candidates, are subject to extensive regulation by numerous governmental authorities in the United States and other countries. Before marketing in the United States, any new drug developed by us or our collaborators must undergo rigorous preclinical testing, clinical trials and an extensive regulatory clearance process implemented by the United States Food and Drug Administration (FDA) under the Federal Food, Drug, and Cosmetic Act, as amended. The FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, import, export, sale and distribution of biopharmaceutical products. The regulatory review and approval process, which includes preclinical testing and clinical trials of each product candidate, is lengthy, expensive and uncertain. Moreover, government coverage and reimbursement policies will both directly and indirectly impact our ability to successfully commercialize any future approved products, and such coverage and reimbursement policies will be impacted by enacted and any applicable future healthcare reform and drug pricing measures. In addition, we are subject to state and federal laws, including, among others, anti-kickback laws, false claims laws, data privacy and security laws, and transparency laws that restrict certain business practices in the pharmaceutical industry.

In the United States, drug product candidates intended for human use undergo laboratory and animal testing until adequate proof of safety is established. Clinical trials for new product candidates are then typically conducted in humans in three sequential phases that may overlap. Phase 1 trials involve the initial introduction of the product candidate into healthy human volunteers. The emphasis of Phase 1 trials is on testing for safety or adverse effects, dosage, tolerance, metabolism, distribution, excretion and clinical pharmacology. Phase 2 involves studies in a limited patient population to determine the initial efficacy of the compound for specific targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse side effects and safety risks. Once a compound shows evidence of effectiveness and is found to have an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to more fully evaluate clinical outcomes. Before commencing clinical investigations in humans, we or our collaborators must submit an Investigational New Drug Application (IND) to the FDA.

Regulatory authorities, Institutional Review Boards and Data Monitoring Committees may require additional data before allowing clinical studies to commence, continue or proceed from one phase to another, and could demand that studies be discontinued or suspended at any time if there are significant safety issues. We have in the past and may in the future rely on assistance from our third-party collaborators and contract service providers to file our INDs and generally support our development and regulatory activities approval process for our potential products. Clinical testing must also meet requirements for clinical trial registration, institutional review board oversight, informed consent, health information privacy, and good clinical practices, or GCPs. Additionally, the manufacture of our drug product, must be done in accordance with current good manufacturing practices (GMPs).

To establish a new product candidate’s safety and efficacy, the FDA requires companies seeking approval to market a drug product to submit extensive preclinical and clinical data, along with other information, for each indication for which the product will be labeled. The data and information are submitted to the FDA in the form of a New Drug Application (NDA), or Biologics License Application (BLA) which must be accompanied by payment of a significant user fee unless a waiver or exemption applies. Generating the required data and information for regulatory approval takes many years and requires the expenditure of substantial resources. Information generated in this process is susceptible to varying interpretations that could delay, limit or prevent regulatory approval at any stage of the process. The failure to demonstrate adequately the quality, safety and efficacy of a product candidate under development would delay or prevent regulatory approval of the product candidate. Under applicable laws and FDA regulations, each NDA or BLA submitted for FDA approval is given an internal administrative review within 60 days following submission of the NDA or BLA. If deemed sufficiently complete to permit a substantive review, the FDA will “file” the NDA or BLA. The FDA can refuse to file any NDA and BLA that it deems incomplete or not properly reviewable. The FDA has established internal goals of eight months from submission for priority review of NDAs or BLAs that cover product candidates that offer major advances in treatment or provide a treatment where no adequate therapy exists, and 12 months from submission for the standard review of NDAs and BLAs. However, the FDA is not legally required to complete its review within these periods, these performance goals may change over time and the review is often extended by FDA requests for additional information or clarification. Moreover, the outcome of the review, even if generally favorable, may not be an actual approval but a “complete response letter” that describes additional work that must be done before the NDA or BLA can be approved. Before approving an NDA or BLA, the FDA can choose to inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility complies with GMPs. The FDA may also audit sites at which clinical trials have been conducted to determine compliance with GCPs and data integrity. The FDA’s review of an NDA or BLA may also involve review and recommendations by an independent FDA advisory committee, particularly for novel indications. The FDA is not bound by the recommendation of an advisory committee.

In addition, delays or rejections may be encountered based upon changes in regulatory policy, regulations or statutes governing product approval during the period of product development and regulatory agency review.

Before receiving FDA approval to market a potential product, we or our collaborators must demonstrate through adequate and well-controlled clinical studies that the potential product is safe and effective in the patient population that will be treated. In addition, under the Pediatric Research Equity Act, or PREA, an NDA or BLA or supplement thereto must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective, unless a waiver applies. If regulatory approval of a potential product is granted, this approval will be limited to those disease states and conditions for which the product is approved. Marketing or promoting a drug for an unapproved indication is generally prohibited. Furthermore, FDA approval may entail ongoing requirements for risk management, including post-marketing, or Phase 4, studies. Even if approval is obtained, a marketed product, its manufacturer and its manufacturing facilities are subject to payment of significant annual fees and continuing review and periodic inspections by the FDA. Discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on the product or manufacturer, including labeling changes, warning letters, costly recalls or withdrawal of the product from the market.

Any drug is likely to produce some toxicities or undesirable side effects in animals and in humans when administered at sufficiently high doses and/or for sufficiently long periods of time. Unacceptable toxicities or side effects may occur at any dose level at any time in the course of studies in animals designed to identify unacceptable effects of a product candidate, known as toxicological studies, or during clinical trials of our potential products. The appearance of any unacceptable toxicity or side effect could cause us or regulatory authorities to interrupt, limit, delay or abort the development of any of our product candidates. Further, such unacceptable toxicity or side effects could ultimately prevent a potential product’s approval by the FDA or foreign regulatory authorities for any or all targeted indications or limit any labeling claims and market acceptance, even if the product is approved.

In addition, as a condition of approval, the FDA may require an applicant to develop a Risk Evaluation and Mitigation Strategy, or REMS. A REMS uses risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use (ETASU). ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.

Any trade name that we intend to use for a potential product must be approved by the FDA irrespective of whether we have secured a formal trademark registration from the U.S. Patent and Trademark Office. The FDA conducts a rigorous review of proposed product names and may reject a product name if it believes that the name inappropriately implies medical claims or if it poses the potential for confusion with other product names. The FDA will not approve a trade name until the NDA or BLA for a product is approved. If the FDA determines that the trade names of other products that are approved prior to the approval of our potential products may present a risk of confusion with our proposed trade name, the FDA may elect to not approve our proposed trade name. If our trade name is rejected, we will lose the benefit of any brand equity that may already have been developed for this trade name, as well as the benefit of our existing trademark applications for this trade name.

We and our collaborators and contract manufacturers also are required to comply with the applicable FDA GMP regulations. GMP regulations include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Manufacturing facilities are subject to inspection by the FDA. These facilities must be approved before we can use them in commercial manufacturing of our potential products and must maintain ongoing compliance for commercial product manufacture. The FDA may conclude that we or our collaborators or contract manufacturers are not in compliance with applicable GMP requirements and other FDA regulatory requirements, which may result in delay or failure to approve applications, warning letters, product recalls and/or imposition of fines or penalties.

If a product is approved, we must also comply with post-marketing requirements, including, but not limited to, compliance with advertising and promotion laws enforced by various government agencies, including the FDA’s Office of Prescription Drug Promotion, through such laws as the Prescription Drug Marketing Act, federal and state anti-fraud and abuse laws, including anti-kickback and false claims laws, healthcare information privacy and security laws, post-marketing safety surveillance, and disclosure of payments or other transfers of value to healthcare professionals and entities. In addition, we are subject to other federal and state regulation including, for example, the implementation of corporate compliance programs.

If we elect to distribute our products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of pharmaceutical products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain.

Outside of the United States, our ability to market a product is contingent upon receiving a marketing authorization from the appropriate regulatory authorities, including the European Medicines Agency. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. At present, foreign marketing authorizations are applied for at a national level, although within the European Community (EC), centralized registration procedures are available to companies wishing to market a product in more than one EC member state. If the regulatory authority is satisfied that adequate evidence of safety, quality and efficacy has been presented, marketing authorization will be granted. This foreign regulatory development and approval process involves all of the risks associated with achieving FDA marketing approval in the U.S. as discussed above. In addition, foreign regulations may include applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals and entities.

Reimbursement

Potential sales of any of our product candidates, if approved, will depend, at least in part, on the extent to which such products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly limiting coverage and/or reducing reimbursements for medical products and services. A third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our future revenues and results of operations. Decreases in third-party reimbursement or a decision by a third-party payor to not cover a product candidate, if approved, or any future approved products could reduce physician usage of our products, and have a material adverse effect on our sales, results of operations and financial condition.

In the United States, the Medicare Part D program provides a voluntary outpatient drug benefit to Medicare beneficiaries for certain products. We do not know whether our product candidates, if approved, will be eligible for coverage under Medicare Part D, but individual Medicare Part D plans offer coverage subject to various factors such as those described above. Furthermore, private payors often follow Medicare coverage policies and payment limitations in setting their own coverage policies.

Healthcare Laws and Regulations

Sales of our product candidates, if approved, or any other future product candidate will be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we might conduct our business. The healthcare laws and regulations that may affect our ability to operate include the following:

Also, many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, as well as state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.

Additionally, to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.

Segments and Geographic Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating and reporting segment.

Employees

As of March 1, 2019, we had 13 full-time employees. We are a virtual company and all of our employees work remotely. None of our employees are represented by a labor union or covered by a collective bargaining agreement, and we believe our relationship with our employees is good. Additionally, we utilize independent contractors and other third parties to assist with various aspects of our drug and product development.

Our Corporate Information

We were incorporated under the laws of the State of Delaware in 2016. We are a virtual company and do not own or lease any office space. We maintain a mailing address at P.O. Box 666, Oldwick, NJ 08858 and our telephone number is (908) 336-0360. Our Internet website is http://www.proventionbio.com.

Available Information

We make available free of charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act. We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s public reference room. You can review our electronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov. We also make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. The information contained on, or that can be accessed through, our website is not a part of or incorporated by reference in this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

Certain factors may have a material adverse effect on our business, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors in its entirety, in addition to other information contained in this Annual Report on Form 10-K, as well as our other public filings with the SEC. The risks and uncertainties described below are those we currently believe to be material, but they are not the only ones we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified or that we currently consider not to be material, actually occur or become material risks, our business and financial condition could be materially and adversely affected.

Risks Related to Our Business

We are a clinical stage biopharmaceutical company with a limited operating history.

We are a clinical-stage biopharmaceutical company newly-formed in October 2016 and have a limited operating history. We do not lease or own any corporate office or laboratory space and our employees all work remotely. We outsource our information technology, payroll and certain other functions.

We have acquired or in-licensed five clinical stage assets and a late stage preclinical enteroviral vaccine platform as described herein, which will be our product candidates unless we in-license or acquire additional development assets. Marketing approval of our product candidates will require extensive clinical testing data to support safety and efficacy requirements, as well as pharmaceutical development, manufacturing and preclinical data, all of which are needed for regulatory approval. The likelihood of success of our business plan must be considered in light of the challenges, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which we operate. Biopharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk, and is a capital-intensive business.

Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially clinical-stage biopharmaceutical companies such as ours. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, you should consider that we cannot assure you that we will be able to:

If we cannot successfully execute any one of the foregoing, our business may not succeed, and your investment will be adversely affected.

We expect to incur substantial expenses and may never become profitable or be able to sustain profitability.

We expect to incur substantial expenses without corresponding revenues unless and until we are able to obtain regulatory approval and successfully commercialize our product candidates. We expect to incur significant expense to complete our clinical programs for our product candidates in the United States and elsewhere. We may never be able to obtain regulatory approval for the marketing of our product candidates in any indication in the United States or internationally. Even if we are able to commercialize our product candidates, there can be no assurance that we will generate significant revenues or ever achieve profitability.

We expect to have significant research and development expenses as we advance clinical trials for our product candidates. As a result, we expect to incur substantial losses for the foreseeable future, and these losses will be increasing. We are uncertain when or if we will be able to achieve or sustain profitability. If we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable may impair our ability to sustain operations and adversely affect our business and our ability to raise capital.

We will need to raise additional funding. The proceeds from our initial public offering will only fund our operations for a limited time. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate certain or all of our product development programs or commercialization efforts.

We expect our operating costs to be substantial as we incur costs related to the clinical trials for our product candidates and that we will operate at a loss for the foreseeable future. For the years ended December 31, 2018 and 2017, we had a net loss of $26.8 million and $9.5 million, respectively, and as of December 31, 2018, we had an accumulated deficit of $35.8 million and $58.5 million in cash and cash equivalents. We believe our current cash and cash equivalents will be sufficient to fund projected operating requirements into the middle of 2020. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We will need substantial additional capital to fund the clinical development program for all of our product candidates. In particular, the PROTECT study, a pivotal Phase 3 clinical trial of PRV-031 in T1D, is expected to commence during the second quarter of 2019 with top-line data, based on current estimates, not available until 2022. In addition, we will need to produce additional drug supply in order to complete the PROTECT study.

We do not have any prospective financing arrangements or credit facilities as a source of future funds, and there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, or at all. In the event that we are able to raise capital, subject to certain terms and conditions set forth in the Amgen Agreement described above, Amgen has agreed to make an equity investment of up to $20.0 million in our securities. This equity investment is expected coincide with our potential future financing events, if any, or potential receipt of non-dilutive milestone payment from a third party including but not limited to Janssen related to our CSF-1R program. We may seek additional capital through a combination of private equity offerings, public equity offerings, debt financings and strategic collaborations. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, could increase our expenses and require that our assets secure such debt. Moreover, any debt we incur must be repaid regardless of our operating results. If we choose to pursue additional indications and/or geographies for our product candidates, in-license or acquire additional development assets, or otherwise expand more rapidly than we presently anticipate, we may also need to raise additional capital sooner than expected.

If we do not raise additional capital when required or on acceptable terms, we may need to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or cease operations altogether, relinquish or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize

Our forecast of the period of time through which our financial resources will adequately support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this Risk Factors section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.

Our operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. These factors include:

Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization

We depend entirely on the success of our product candidates, one of which did not meet its primary endpoint in a prior phase 3 clinical trial and three of which have not yet demonstrated efficacy for their target indication or any other indications in Phase 2 clinical trials. If we are unable to generate revenues from our product candidates, our ability to create stockholder value will be limited.

Our product candidates are either in various stages of clinical development or late stages of preclinical development. We do not generate revenues from any approved drug products and have no other product candidates in development. We will be conducting human clinical trials of our product candidates for T1D, our two product candidates for inflammatory bowel diseases (IBD), our product candidate for lupus and our product candidate for celiac disease.

Our clinical trials in Crohn’s Disease (CD) and UC are being conducted entirely in Europe, and Clinical Trial Applications (CTA) (foreign equivalent of an IND) have been submitted in all intended countries. The CD study is being conducted in seven European countries, all of which have provided regulatory authority approval. The UC study is being conducted in three European countries, all of which have provided regulatory authority approval. Both product assets have active Investigational New Drug Applications (IND) with the FDA for indications other than CD and UC in the United States. We do not have any clinical trial sites in the United States and have had no interactions with the FDA, and for that reason have not submitted INDs to the FDA for any of the IBD, CD or UC indications. However, Janssen Pharmaceuticals studied two of our investigational products under INDs in other indications, and Provention Bio owns an inactive IND for PRV-300 in asthma, which was transferred as part of the license agreement with Janssen.

We will be submitting amendments to the INDs for PRV-031 and PRV-3279 and other regulatory authorities for the clinical developments in T1D and B-cell directed immune diseases, respectively. We will be submitting an IND or CTA to the FDA, European Medicines Authority (EMA), or other international regulatory authorities seeking approval to initiate Phase 1 clinical trials in humans in the United States, European Union or other countries for a coxsackie virus B (CVB) vaccine for the prevention of acute CVB infection, which has been linked to the development of T1D and T1D-associated celiac disease. We intend to conduct toxicology studies for PRV-015 and commence human clinical trials of our other product candidates for T1D, celiac disease and lupus and will be required to submit our clinical trial protocols and receive approvals from the regulatory authorities before we can commence any clinical trials. Nonclinical study results for our product candidates, including toxicology studies, may not support the filing of an IND or foreign equivalent for the product candidate.

Moreover, we may not be successful in obtaining acceptance from the regulatory authorities to start our clinical trials. If we do not obtain such acceptance, the time in which we expect to commence clinical programs for any product candidate will be extended and such extension will increase our expenses and increase our need for additional capital. Moreover, there is no guarantee that our clinical trials will be successful or that we will continue clinical development in support of an approval from the regulatory authorities for any indication. We note that most drug candidates never reach the clinical development stage and even those that do commence clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval. Therefore, our business currently depends entirely on the successful development, regulatory approval and commercialization of our product candidates, which may never occur.

We may encounter substantial delays in completing our clinical studies which in turn will require additional costs, or we may fail to demonstrate adequate safety and efficacy to the satisfaction of applicable regulatory authorities.

It is impossible to predict if or when any of our product candidates will prove safe or effective in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical studies can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or ECs of the institutions in which such trials are being conducted, by an independent Safety Review Board, or SRB, for such trial or by the FDA, EMA, or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA, or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions.

Clinical study delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Further, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval. If the results of our clinical studies are inconclusive or if there are safety concerns or adverse events associated with our other product candidates, we may:

Additionally, our product candidates could potentially cause other adverse events that have not yet been predicted. The inclusion of ill patients in our clinical studies may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using. As described above, any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize our products.

If we are not able to obtain any required regulatory approvals for our product candidates, we will not be able to commercialize our product candidates and our ability to generate revenue will be limited.

We must successfully complete clinical trials for our product candidates before we can apply for marketing approval. Even if we complete our clinical trials, it does not assure marketing approval. Our clinical trials may be unsuccessful, which would materially harm our business. Even if our initial clinical trials are successful, we are required to conduct additional clinical trials to establish our product candidates’ safety and efficacy, before a marketing application (New Drug Application, or NDA or Biologics License Application, or BLA, or their foreign equivalents) can be filed with the FDA, EMA, or comparable foreign regulatory authorities for marketing approval of our product candidates.

Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in early phases of pre-clinical and clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates. The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA, EMA, and other regulatory authorities in the United States, European Union, and other countries, where regulations differ from country to country. We are not permitted to market our product candidates as prescription pharmaceutical products in the United States until we receive approval of an NDA or a BLA from the FDA, or in any foreign countries until we receive the requisite approval from such countries. In the United States, the FDA generally requires the completion of clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA or a BLA is approved. Regulatory authorities in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result in the submission of an NDA or a BLA to the FDA or other regulatory authorities and even fewer are eventually approved for commercialization. We have not submitted an NDA or a BLA to the FDA or comparable applications to other regulatory authorities. If our development efforts for our product candidates, including regulatory approval, are not successful for their planned indications, or if adequate demand for our product candidates is not generated, our business will be materially adversely affected.

Our success depends on the receipt of regulatory approval and the issuance of such regulatory approvals is uncertain and subject to a number of risks, including the following:

Failure to obtain regulatory approval for our product candidates for the foregoing, or any other reasons, will prevent us from commercializing our product candidates, and our ability to generate revenue will be materially impaired. We cannot guarantee that regulators will agree with our assessment of the results of the clinical trials we intend to conduct in the future or that such trials will be successful. The FDA, EMA and other regulators have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional clinical trials, or pre-clinical or other studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of our product candidates.

We are a clinical stage company and we have not submitted an NDA, a BLA, or received regulatory approval to market our product candidates in any jurisdiction. We have only limited experience in filing the applications necessary to gain regulatory approvals and expect to rely on consultants and third party CROs with expertise in this area to assist us in this process. Securing regulatory approvals to market a product requires the submission of pre-clinical, clinical, and/or pharmacokinetic data, information about product manufacturing processes and inspection of facilities and supporting information to the appropriate regulatory authorities for each therapeutic indication to establish a product candidate’s safety and efficacy for each indication. Our product candidates may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude us from obtaining regulatory approval or prevent or limit commercial use with respect to one or all intended indications.

The process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon, among other things, the type, complexity and novelty of the product candidates involved, the jurisdiction in which regulatory approval is sought and the substantial discretion of the regulatory authorities. Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application. Regulatory approval obtained in one jurisdiction does not necessarily mean that a product candidate will receive regulatory approval in all jurisdictions in which we may seek approval, but the failure to obtain approval in one jurisdiction may negatively impact our ability to seek approval in a different jurisdiction. Failure to obtain regulatory marketing approval for our product candidates in any indication will prevent us from commercializing the product candidate, and our ability to generate revenue will be materially impaired.

Even if we obtain marketing approval for any of our product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates could be subject to labeling and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates.

Even if we obtain regulatory approval for any of our product candidates for an indication, the FDA, EMA, or foreign equivalent may still impose significant restrictions on their indicated uses or marketing or the conditions of approval or impose ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase 4 clinical trials, post-market surveillance to monitor safety and efficacy and a REMS. In particular, we intend to initially seek regulatory approval for our CVB vaccine product candidate for the prevention of acute CVB infection. The results of longitudinal studies demonstrating the connection between CVB and T1D and T1D-associated celiac disease will be necessary to expand the indicated use of this vaccine to T1D. These studies must be completed and submitted to the FDA or EMA prior to receiving approval in the United States or European Union to market the CVB vaccine to prevent T1D. Such studies will be costly and time consuming and may not demonstrate to the FDA’s satisfaction the connection between the CVB virus and the onset of T1D.

Our product candidates will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, as well as continued compliance with current Good Clinical Practices regulations, or cGCPs, for any clinical trials that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current cGMP, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.

With respect to sales and marketing activities by us or any future licensor, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. We may also be subject, directly or indirectly through our customers and licensors, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries.

In addition, if any of our product candidates are approved for a particular indication, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability and government fines. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant sanctions. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed.

If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to the following administrative or judicial sanctions:

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials, as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/ or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

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

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our product candidates. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

In the United States, the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for our product candidates and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 or, collectively, the Health Care Reform Law, is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Health Care Reform Law revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law imposed a significant annual fee on companies that manufacture or import branded prescription drug products.

The Health Care Reform Law remains subject to legislative efforts to repeal, modify or delay the implementation of the law. However, if the Health Care Reform Law is repealed or modified, or if implementation of certain aspects of the Health Care Reform Law are delayed, such repeal, modification or delay may materially adversely impact our business, strategies, prospects, operating results or financial condition. We are unable to predict the full impact of any repeal, modification or delay in the implementation of the Health Care Reform Law on us at this time. Due to the substantial regulatory changes that will need to be implemented by CMS and others, and the numerous processes required to implement these reforms, we cannot predict which healthcare initiatives will be implemented at the federal or state level, the timing of any such reforms, or the effect such reforms or any other future legislation or regulation will have on our business.

In addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted. We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects and reduce or eliminate our profitability.

If we fail to successfully commercialize any of our product candidates, we may need to acquire additional product candidates and our business will be adversely affected.

We have never developed and obtained approval for any product candidates or commercialized any product candidates. We have limited product candidates and do not have any other compounds in pre-clinical testing, lead optimization or lead identification stages beyond our product candidates. We cannot be certain that any of our product candidates will prove to be sufficiently effective and safe to meet applicable regulatory standards for any indication. If we fail to successfully commercialize any of our product candidates for their targeted indications, whether as stand-alone therapies or in combination with other therapeutic agents, and if we are unable to acquire additional product candidates in the future, our business will be adversely affected.

Even if we receive regulatory approval for any of our product candidates, we may not be able to successfully commercialize the product and the revenue that we generate from its sales, if any, may be limited.

If approved for marketing, the commercial success of our product candidates will depend upon each product’s acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance for any of our product candidates will depend on a number of factors, including:

If any of our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, health care payors, and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.

In addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize our product candidates successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render our product candidates not commercially viable. For example, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve any of our product candidates with a label that does not include the labeling claims necessary or desirable for the successful commercialization for that indication. Further, the FDA or comparable foreign regulatory authorities may place conditions on approvals or require risk management plans or a Risk Evaluation and Mitigation Strategy, REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA may also require a REMS for an approved product when new safety information emerges. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our product candidates. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of our product candidates.

We currently have no sales and marketing organization. If we are unable to establish satisfactory sales and marketing capabilities or secure a sales and marketing partner, we may not successfully commercialize any of our product candidates.

At present, we have no sales or marketing personnel. In order to commercialize products that are approved for commercial sales, we must either develop our own sales and marketing infrastructure or collaborate with third parties that have such commercial infrastructure. If we are not successful entering into appropriate collaboration arrangements or recruiting sales and marketing personnel or in building a sales and marketing infrastructure, we will have difficulty successfully commercializing our product candidates, which would adversely affect our business, operating results and financial condition.

We may not be able to enter into collaboration agreements on terms acceptable to us or at all. In addition, even if we enter into such relationships, we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues may depend heavily on the success of the efforts of these third parties. If we elect to establish a sales and marketing infrastructure we may not realize a positive return on this investment. In addition, we will have to compete with established and well-funded pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts to commercialize our product candidates without strategic partners or licensees include:

Janssen has the right to assume control over the distribution activities of our CSF-1R inhibitor product candidate.

Pursuant to the license agreement covering our CSF-1R inhibitor product candidate, Janssen reserves the right to assume control over all distribution activities with respect to this product, including pricing and marketing decisions, for a one-time fee, and has the option of buying back the rights to this product for a one-time fee and royalty payments. There can be no assurance that Janssen’s strategic direction will be in line with ours should it exercise its right to assume control of distribution activities, or that their decisions will have a positive impact on our results of operations. Moreover, we may not realize the full economic benefit of this agreement in the event Janssen exercises its option to buy back the rights to the CSF-1R inhibitor product candidate.

Amgen has the right to assume control over the activities of our anti-IL-15 mAb product candidate.

Pursuant to the Amgen Agreement covering our anti-IL-15 mAb product candidate, Amgen reserves the right to assume control over all activities with respect to this product, including pricing and marketing decisions after payment of the $150.0 million milestone. There can be no assurance that Amgen’s strategic direction will be in line with ours should it assume control of activities, or that their decisions will have a positive impact on our results of operations. Moreover, we may not realize the full economic benefit of this agreement.

We face competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have existing competitors and will have potential new competitors in a number of jurisdictions, many of which have or will have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop novel compounds that could make any of our product candidates obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to our product candidates. If we are not able to compete effectively against our current and future competitors, our business will not grow, and our financial condition and operations will suffer.

Our potential competitors both in the United States and throughout the world include companies developing and/or marketing drugs and therapeutic solutions for immune-mediated diseases, including oncological, autoimmune and inflammatory diseases, as well as companies working in our specific fields, including T1D, enteroviral and emerging viral diseases, lupus, and inflammatory bowel diseases, such as Crohn’s disease and UC.

Our product candidates may face competition sooner than expected.

We intend to seek data exclusivity or market exclusivity for our anti-TLR3 human monoclonal antibody and CVB vaccine product candidates provided under the Federal Food, Drug and Cosmetic Act, or FDCA, and similar laws in other countries. We believe that these product candidates will qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which was enacted as part of the Health Care Reform Law. Under the BPCIA, an application for a biosimilar product or BLA cannot be submitted to the FDA until four years, or if approved by the FDA, until 12 years, after the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. The law is complex and is subject to interpretation and implementation by the FDA. While it is uncertain when any such processes may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological product candidates. There is also a risk that Congress could repeal or amend the BPCIA to shorten this exclusivity period, potentially creating the opportunity for biosimilar competition sooner than anticipated after the expiration of our patent protection. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference product in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Our product candidates that are not, or are not considered, biologics that would qualify for exclusivity under the BPCIA may be eligible for market exclusivity as drugs under the FDCA. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA, submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.

Even if, as we expect, our product candidates are considered to be reference products eligible for 12 years of exclusivity under the BPCIA or five years of exclusivity under the FDCA, another company could market competing products if the FDA approves a full BLA or full NDA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of the products. Moreover, an amendment or repeal of the BPCIA could result in a shorter exclusivity period for our product candidates, which would have a material adverse effect on our business.

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

Our future profitability will depend, in part, on our ability to commercialize our product candidates in international markets for which we intend to rely on collaborations with third parties. If we commercialize any of our product candidates in international markets, we would be subject to additional risks and uncertainties, including:

International sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs, any of which may adversely affect our results of operations.

If we market any of our product candidates in a manner that violates healthcare fraud and abuse laws, or if we violate government price reporting laws, we may be subject to civil or criminal penalties.

The FDA enforces laws and regulations which require that the promotion of pharmaceutical products be consistent with the approved prescribing information. While physicians may prescribe an approved product for a so-called “off label” use, it is unlawful for a pharmaceutical company to promote its products in a manner that is inconsistent with its approved label and any company which engages in such conduct can subject that company to significant liability. Similarly, industry codes in the EU and other foreign jurisdictions prohibit companies from engaging in off-label promotion and regulatory agencies in various countries enforce violations of the code with civil penalties. While we intend to ensure that our promotional materials are consistent with our label, regulatory agencies may disagree with our assessment and may issue untitled letters, warning letters or may institute other civil or criminal enforcement proceedings. In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar state laws. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws.

The U.S. Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted broadly to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not, in all cases, meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, recent health care reform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the U.S. Anti-Kickback Statute and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the U.S. False Claims Act. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid.

Over the past few years, several pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as: allegedly providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicare or Medicaid for non-covered, off-label uses; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates. Most states also have statutes or regulations similar to the U.S. Anti-Kickback Statute and the U.S. False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include substantial civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, substantial criminal fines and imprisonment.

We will be completely dependent on third parties to manufacture our product candidates, and our commercialization of our product candidates could be halted, delayed or made less profitable if those third parties fail to obtain manufacturing approval from the FDA or comparable foreign regulatory authorities, fail to provide us with sufficient quantities of our product candidates or fail to do so at acceptable quality levels or prices.

We do not currently have, nor do we plan to acquire, the capability or infrastructure to manufacture the bulk drug substance or the active pharmaceutical ingredient, or API, in our product candidates for use in our clinical trials or for commercial products, if any. As a result, we will be obligated to rely on contract manufacturers, if and when any of our product candidates are approved for commercialization. We have not entered into an agreement with any contract manufacturers for commercial supply and may not be able to engage a contract manufacturer for commercial supply of any of our product candidates on acceptable terms to us, or at all.

The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA, EMA or comparable foreign regulatory authorities pursuant to inspections that will be conducted after we submit an NDA or BLA to the FDA or their equivalents to other relevant regulatory authorities. We will not control the manufacturing process of, and will be completely dependent on, our contract manufacturers for compliance with cGMPs for manufacture of both active drug substances and finished drug products. These cGMP regulations cover all aspects of the manufacturing, testing, quality control and record keeping relating to our product candidates. If our contract manufacturers do not successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, EMA or other regulatory authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA, EMA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Our contract manufacturers will be subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory requirements. We will not have control over our contract manufacturers’ compliance with these regulations and standards. Failure by any of our contract manufacturers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure to grant approval to market any of our product candidates, delays, suspensions or withdrawals of approvals, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. In addition, we will not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Failure by our contract manufacturers to comply with or maintain any of these standards could adversely affect our ability to develop, obtain regulatory approval for or market any of our product candidates.

If, for any reason, these third parties are unable or unwilling to perform, we may not be able to terminate our agreements with them, and we may not be able to locate alternative manufacturers or formulators or enter into favorable agreements with them and we cannot be certain that any such third parties will have the manufacturing capacity to meet future requirements. If these manufacturers or any alternate manufacturer of finished drug product experiences any significant difficulties in its respective manufacturing processes for our API or finished products or should cease doing business with us, we could experience significant interruptions in the supply of any of our product candidates or may not be able to create a supply of our product candidates at all. Were we to encounter manufacturing issues, our ability to produce a sufficient supply of any of our product candidates might be negatively affected. Our inability to coordinate the efforts of our third-party manufacturers, or the lack of capacity available at our third-party manufacturers, could impair our ability to supply any of our product candidates at required levels. Because of the significant regulatory requirements that we would need to satisfy in order to qualify a new bulk or finished product manufacturer, if we face these or other difficulties with our current manufacturers, we could experience significant interruptions in the supply of any of our product candidates if we decided to transfer the manufacture of any of our product candidates to one or more alternative manufacturers in an effort to deal with the difficulties.

Any manufacturing problem or the loss of a contract manufacturer could be disruptive to our operations and result in lost sales. Additionally, we rely on third parties to supply the raw materials needed to manufacture our potential products. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to a future contract manufacturer caused by problems at suppliers could delay shipment of any of our product candidates, increase our cost of goods sold and result in lost sales.

We cannot guarantee that our future manufacturers and suppliers will be able to reduce the costs of commercial scale manufacturing of any of our product candidates over time. If the commercial-scale manufacturing costs of any of our product candidates are higher than expected, these costs may significantly impact our operating results. In order to reduce costs, we may need to develop and implement process improvements. However, in order to do so, we will need, from time to time, to notify or make submissions with regulatory authorities, and the improvements may be subject to approval by such regulatory authorities. We cannot be sure that we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee that we will be able to enhance and optimize output in our commercial manufacturing process. If we cannot enhance and optimize output, we may not be able to reduce our costs over time.

We have no experience manufacturing PRV-031. As a result, if we encounter manufacturing issues, delays or increased costs in the PROTECT study may occur.

We have no experience manufacturing PRV-031. Our current PRV-031 drug supply will not fully supply the PROTECT study to completion and we will need to produce new drug supply to complete the PROTECT study. Further, the PROTECT study will need to include data from a sufficient number of subjects dosed with this new drug supply in this clinical trial to demonstrate safety and efficacy in order to obtain regulatory approval.

We currently rely on a single third-party manufacturer to supply us with PRV-031 drug substance on a purchase order basis. In order to obtain regulatory approval for PRV-031, this third-party manufacturer will be required to consistently produce the active pharmaceutical ingredient used in PRV-031 in commercial quantities and of specified quality on a repeated basis and document its ability to do so. This is referred to as process validation. If this third-party manufacturer is unable to satisfy this requirement, our business will be materially and adversely affected.

Our third-party manufacturer has not made any lots of PRV-031 to date. The manufacturing processes for PRV-031 have never been tested at commercial scale, and the process validation requirement has not yet been satisfied. These manufacturing processes and our third-party manufacturer’s facility will be subject to inspection and approval by the FDA before we can commence the manufacture and sale of PRV-031. If our third-party manufacturer is unable to pass such inspection and otherwise satisfactorily complete the FDA approval regimen, our business will be materially and adversely affected.

Also, as we or any manufacturer we engage scales up manufacturing of any approved product, we may encounter unexpected issues relating to the manufacturing process or the quality, purity and stability of the product, and we may be required to refine or alter our manufacturing processes to address these issues. Resolving these issues could result in significant delays and may result in significantly increased costs. If we experience significant delays or other obstacles in producing any approved product for commercial scale, our ability to market and sell any approved products may be adversely affected and our business could suffer.

Changes in product candidate manufacturing or formulation may result in additional costs or delay.

As product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results. During the course of a development program, sponsors may also change the contract manufacturers used to produce the product candidates. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of clinical trials. Such changes may also require additional testing, notification or approval by the FDA, EMA or other regulatory authorities. This could delay completion of clinical trials; require the conduct of bridging clinical trials or studies, or the repetition of one or more clinical trials; increase clinical trial costs; delay approval of our product candidates and jeopardize our ability to commence product sales and generate revenue.

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

We will rely on third-party CROs and vendors to conduct and manage our clinical programs including contracting with clinical sites to perform our clinical studies. We plan to rely heavily on these parties for execution of clinical studies for our product candidates and will control only certain aspects of their activities. Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs and clinical sites will not relieve us of our regulatory responsibilities. We and our CROs will be required to comply with cGCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any products in clinical development. The FDA and its foreign equivalents enforce these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA or other regulatory authorities will determine that any of our clinical trials comply with cGCPs. In addition, our clinical trials must be conducted with products produced under cGMP regulations and will require a large number of test subjects. Our failure or the failure of our CROs or clinical sites to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

Although we intend to design the clinical trials for our product candidates in consultation with CROs, we expect that the CROs will manage all of the clinical trials conducted at contracted clinical sites. As a result, many important aspects of our drug development programs would be outside of our direct control. In addition, the CROs and clinical sites may not perform all of their obligations under arrangements with us or in compliance with regulatory requirements. If the CROs or clinical sites do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development and commercialization of any of our product candidates for the subject indication may be delayed or our development program materially and irreversibly harmed. We cannot control the amount and timing of resources these CROs and clinical sites will devote to our program or any of our product candidates. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical trials, which could significantly delay commercialization and require significantly greater expenditures.

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

Any termination or suspension of, or delays in the commencement or completion of, any necessary studies of any of our product candidates for any indications could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

The commencement and completion of clinical studies can be delayed for a number of reasons, including delays related to:

Product development costs for any of our product candidates will increase if we have delays in testing or approval or if we need to perform more or larger clinical studies than planned. Additionally, changes in regulatory requirements and policies may occur and we may need to amend study protocols to reflect these changes. Amendments may require us to resubmit our study protocols to the FDA, comparable foreign regulatory authorities, and IRBs for reexamination, which may impact the costs, timing or successful completion of that study. If we experience delays in completion of, or if we, the FDA or other regulatory authorities, the IRB, or other reviewing entities, or any of our clinical study sites suspend or terminate any of our clinical studies of any of our product candidates, its commercial prospects may be materially harmed and our ability to generate product revenues will be delayed. Any delays in completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical studies may also ultimately lead to the denial of regulatory approval of our product candidates. In addition, if one or more clinical studies are delayed, our competitors may be able to bring products to market before we do, and the commercial viability of any of our product candidates could be significantly reduced.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing of drug product candidates is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. We cannot assure you that the FDA, EMA or comparable foreign regulatory authorities will view the results as we do or that any future trials of any of our product candidates will achieve positive results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Any future clinical trial results for our product candidates may not be successful.

In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for any of our product candidates. For example, such trials could result in increased variability due to varying site characteristics, such as local standards of care, differences in evaluation period and surgical technique, and due to varying patient characteristics including demographic factors and health status.

Even though we may obtain or apply for orphan drug designation for a product candidate, we may not be able to obtain orphan drug marketing exclusivity.

The treatment of recent-onset T1D is an orphan indication, and PRV-031 has been designated as an orphan drug in this indication by the FDA. Some of the subsets of lupus erythematosus are orphan indications (e.g., lupus nephritis). One of the potential life-cycle opportunities for PRV-300 is the interception and treatment of emerging viral diseases, and the use of PRV-300 in some of these diseases (e.g., pandemic or avian flu) may qualify for orphan designation based on epidemiology and other factors.

However, there is no guarantee that the FDA, EMA or its foreign equivalents will grant any future application for orphan drug designation for PRV-300 or any of our other product candidates, which would make us ineligible for the additional exclusivity and other benefits of orphan drug designation.

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 for which there is no reasonable expectation that the cost of developing and making a drug available in the Unites States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA or a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of regulatory review and approval process. In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product. If a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan drug exclusivity. There can be no assurance that we will receive orphan drug designation for any of our product candidates in the indications for which we think they might qualify, if we elect to seek such applications.

Although we may pursue expedited regulatory approval pathways for a product candidate, it may not qualify for expedited development or, if it does qualify for expedited development, it may not actually lead to a faster development or regulatory review or approval process.

Although we believe there may be an opportunity to accelerate the development of certain of our product candidates through one or more of the FDA’s expedited programs, such as fast track, breakthrough therapy, accelerated approval or priority review, we cannot be assured that any of our product candidates will qualify for such programs.

For example, a drug may be eligible for designation as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Although breakthrough designation or access to any other expedited program may expedite the development or approval process, it does not change the standards for approval. If we apply for breakthrough therapy designation or any other expedited program for our product candidates, the FDA may determine that our proposed target indication or other aspects of our clinical development plans do not qualify for such expedited program. Even if we are successful in obtaining a breakthrough therapy designation or access to any other expedited program, we may not experience faster development timelines or achieve faster review or approval compared to conventional FDA procedures. Access to an expedited program may also be withdrawn by the FDA if it believes that the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited review procedure does not ensure that we will ultimately obtain regulatory approval for such product candidate.

Third-party coverage and reimbursement and health care cost containment initiatives and treatment guidelines may constrain our future revenues.

Our ability to successfully market our product candidates will depend in part on the level of reimbursement that government health administration authorities, private health coverage insurers and other organizations provide for the cost of our products and related treatments. Countries in which any of our product candidates are sold through reimbursement schemes under national health insurance programs frequently require that manufacturers and sellers of pharmaceutical products obtain governmental approval of initial prices and any subsequent price increases. In certain countries, including the United States, government-funded and private medical care plans can exert significant indirect pressure on prices. We may not be able to sell our product candidates profitably if adequate prices are not approved or coverage and reimbursement is unavailable or limited in scope. Increasingly, third-party payors attempt to contain health care costs in ways that are likely to impact our development of products including:

Moreover, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their commercial products. There have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Risks Relating to Our Intellectual Property Rights

We depend on rights to certain pharmaceutical compounds that are licensed to us. We do not control these pharmaceutical compounds and any loss of our rights to them could prevent us from selling our products.

We are dependent on licenses from third parties for all but three of our pharmaceutical compounds. We do not own the patents that underlie these licenses. Our rights to use the pharmaceutical compounds we license are subject to the continuation of and compliance with the terms of those licenses. Thus, the patents and patent applications applicable to our product candidates were not written by us or our attorneys, and we did not have control over the drafting and prosecution. The former patent owners and our licensors might not have given the same attention to the drafting and prosecution of these patents and applications as we would have if we had been the owners of the patents and applications and had control over the drafting. Moreover, under certain of our licenses, patent prosecution activities remain under the control of the licensor. We cannot be certain that drafting of the licensed patents and patent applications, or patent prosecution, by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Our rights to develop and commercialize the product candidates we license are subject to the validity of the owner’s intellectual property rights. Enforcement of our licensed patents or defense or any claims asserting the invalidity of these patents is often subject to the control or cooperation of our licensors. Legal action could be initiated against the owners of the intellectual property that we license and an adverse outcome in such legal action could harm our business because it might prevent such companies or institutions from continuing to license intellectual property that we may need to operate our business. In addition, such licensors may resolve such litigation in a way that benefits them but adversely affects our ability to develop and commercialize our product candidates.

In addition, our rights to practice the inventions claimed in the licensed patents and patent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Our licenses may be terminated by the licensor if we are in material breach of certain terms or conditions of the license agreement or in certain other circumstances. Certain of our licenses contained in our agreements with Janssen and Vactech contain provisions that allow the licensor to terminate the license if (i) we breach any payment obligation or other material provision under the agreement and fail to cure the breach within a fixed time following written notice of termination, (ii) we or any of our affiliates, licensees or sublicensees directly or indirectly challenge the validity, enforceability, or extension of any of the licensed patents, (iii) we declare bankruptcy or dissolve, (iv) we fail to maintain a licensed product in active development or fail to use commercially reasonable efforts to develop or commercialize a licensed product. Our rights under the licenses are subject to our continued compliance with the terms of the license, including the payment of royalties due under the license. Termination of these licenses could prevent us from marketing some or all of our products. Because of the complexity of our products and the patents we have licensed, determining the scope of the license and related royalty obligations can be difficult and can lead to disputes between us and the licensor. An unfavorable resolution of such a dispute could lead to an increase in the royalties payable pursuant to the license. If a licensor believed we were not paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might attempt to revoke the license. If such an attempt were successful, we might be barred from producing and selling some or all of our products.

It is difficult and costly to protect our intellectual property rights, and we cannot ensure the protection of these rights.

Our commercial success will depend, in part, on obtaining and maintaining patent protection for our technologies, products and processes, successfully defending these patents against third-party challenges and successfully enforcing these patents against third party competitors. The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowable or enforceable in our patents. We currently own 8 issued patents, license 389 issued patents, and license 149 pending patents for our product candidates, in which the pending applications may never be approved by United States or foreign patent offices. The existing patents and patent applications relating to our product candidates and related technologies may be challenged, invalidated or circumvented by third parties and might not protect us against competitors with similar products or technologies.

The degree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights, permit us to gain or keep our competitive advantage, or provide us with any competitive advantage at all. For example, others have filed, and in the future are likely to file, patent applications covering products and technologies that are similar, identical or competitive to any of our product candidates, or important to our business. We cannot be certain that any patent application owned by a third party will not have priority over patent applications filed by us, or that we will not be involved in interference, opposition or invalidity proceedings before United States or foreign patent offices.

In the future we may rely on know-how and trade secrets to protect technology, especially in cases when we believe patent protection is not appropriate or obtainable. However, know-how and trade secrets are difficult to protect. While we intend to require employees, academic collaborators, consultants and other contractors to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary or licensed information. Typically, research collaborators and scientific advisors have rights to publish data and information in which we may have rights. If we cannot maintain the confidentiality of our proprietary technology and other confidential information, our ability to receive patent protection and our ability to protect valuable information owned by us may be imperiled. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts are sometimes less willing to protect trade secrets than patents. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

If we fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.

We may also rely on the trademarks we may develop to distinguish our products from the products of our competitors. We cannot guarantee that any trademark applications filed by us or our licensors will be approved. Third parties may also oppose such trademark applications, or otherwise challenge our use of the trademarks. In the event that the trademarks we use are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot provide assurance that competitors will not infringe the trademarks we use, or that we will have adequate resources to enforce these trademarks.

Our product candidates may infringe the intellectual property rights of others, which could increase our costs and delay or prevent our development and commercialization efforts.

Our success depends in part on avoiding infringement of the proprietary technologies of others. The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Identification of third-party patent rights that may be relevant to our proprietary technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Additionally, because patent applications are maintained in secrecy until the application is published, we may be unaware of third-party patents that may be infringed by commercialization of any of our product candidates or any future product candidate. There may be certain issued patents and patent applications claiming subject matter that we may be required to license in order to research, develop or commercialize any of our product candidates, and we do not know if such patents and patent applications would be available to license on commercially reasonable terms, or at all. Any claims of patent infringement asserted by third parties would be time-consuming and may:

Third parties may hold proprietary rights that could prevent any of our product candidates from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to any of our product candidates or our processes could subject us to potential liability for damages and require us to obtain a license to continue to manufacture or market any of our product candidates or any future product candidates. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. In addition, we cannot be sure that we could redesign our product candidates or any future product candidates or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing and commercializing any of our product candidates or a future product candidate, which could harm our business, financial condition and operating results.

A number of companies, including several major pharmaceutical companies, have conducted, or are conducting, research in immune-mediated diseases within the therapeutic fields in which we intend to operate, which has resulted, or may result, in the filing of many patent applications related to this research. If we were to challenge the validity of these or any issued United States patent in court, we would need to overcome a statutory presumption of validity that attaches to every issued United States patent. This means that, in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s claims. If we were to challenge the validity of these or any issued United States patent in an administrative trial before the Patent Trial and Appeal Board in the United States Patent and Trademark Office, we would have to prove that the claims are unpatentable by a preponderance of the evidence. There is no assurance that a jury and/or court would find in our favor on questions of infringement, validity or enforceability.

We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.

As is commonplace in our industry, we will employ individuals who were previously employed at other pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject in the future to claims that our employees or prospective employees are subject to a continuing obligation to their former employers (such as non-competition or non-solicitation obligations) or claims that our employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

General Company-Related Risks

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

As our development and commercialization plans and strategies continue to develop, we intend to expand the size of our employee and consultant/contractor base. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our future financial performance and our ability to commercialize our product candidates and any other future product candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage our future growth.

Future capital raises may dilute our existing stockholders’ ownership and/or have other adverse effects on our operations.

If we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced, and these stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. If we raise additional funds by issuing debt securities, these debt securities would have rights senior to those of our common stock and the terms of the debt securities issued could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or candidate products, or to grant licenses on terms that are not favorable to us.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of our co-founders would adversely impact our business prospects.

Our management team has expertise in many different aspects of drug development and commercialization. However, our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We will need to hire additional personnel as we further develop our product candidates. Competition for skilled personnel in our market is intense and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our management, scientific and medical teams may terminate their employment with us on short notice. We have entered into employment agreements with certain of our executive officers. However, these employment arrangements will provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. Moreover, there can be no assurance that anyone we expect to employ in a key management position will be available to join our team when we expect them to, if at all. The loss of the services of any of our executive officers or other key employees, or our inability to hire targeted executives, could potentially harm our business, operating results or financial condition. In particular, we believe that the loss of the services of our co-founders would have a material adverse effect on our business. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.

Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize product candidates would be limited.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face a potential risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any of our product candidates or any other future product. For example, we may be sued if any product we develop, including any of our product candidates, or any materials that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. In the US, claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We maintain product liability insurance covering our clinical trials. Although we will maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

We may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.

We are a virtual company and 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.

We are a virtual company and 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, 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 our Common Stock

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for stockholders.

The market price of our common stock could be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed in this “Risk Factors” section of this Annual Report on Form 10-K and others such as:

In addition, the stock markets in general, and the markets for biopharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the market price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.

An active, liquid and orderly market for our common stock may not develop, which could result in substantial losses for stockholders.

Prior to our IPO, there was no public market for shares of our common stock. Although our common stock is listed on The Nasdaq Capital Market (the “Nasdaq”), the market for our shares has demonstrated varying levels of trading activity and an active public market for our shares may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications, or technologies using our shares as consideration.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the market price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company,” we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our reporting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

If we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may decline.

We may from time to time issue additional shares of common stock at a discount from the current market price of our common stock. As a result, our stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock. If we issue common stock or securities convertible into common stock, our common stockholders would experience additional dilution and, as a result, our stock price may decline.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 36% of our voting stock as of December 31, 2018. Therefore, these stockholders will have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to decline.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in our prospectus lapse, the market price of our common stock could decline. As of December 31, 2018, we had outstanding shares totaling 37,351,562 shares of common stock. Of these shares, approximately 15,969,563 shares of our common stock became freely tradable, without restriction, in the public market immediately following the IPO in July 2018. In addition, in December 2018, another 11,381,999 shares of our common stock became tradeable when the lock-up expired.

A final lock-up agreement pertaining to the IPO will expire on July 3, 2019 and 14,588,384 shares of common stock (including 4,588,384 warrants convertible into common stock) will be eligible for sale in the public market, all of which shares are held by directors, executive officers and other affiliates and will be subject to Rule 144 under the Securities Act. MDB may, however, in its sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements, subject to certain requirements.

In addition, as of December 31, 2018, 8,447,808 shares of common stock that are either subject to outstanding options, reserved for future issuance under our equity incentive plans or subject to outstanding warrants will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.

The holders of approximately 11,381,999 shares of our common stock, or approximately 30% of our total outstanding common stock, as of December 31, 2018, will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to vesting schedules and to the lock-up agreements described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could have a material adverse effect on the market price of our common stock.

We are incurring significant increased costs as a result of becoming a public company that reports to the Securities and Exchange Commission (SEC) and our management is required to devote substantial time to meet compliance obligations.

As a newly public company, we are incurring significant legal, accounting and other expenses that we did not incur as a private company. We are subject to reporting requirements of the Exchange Act and the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq that impose significant requirements on public companies, including requiring the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. In addition, on July 21, 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that are expected to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. In addition, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

Our amended and restated certificate of incorporation and bylaws contains provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions include the following:

In addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial.

We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our bylaws became effective immediately prior to the completion of the IPO and our indemnification agreements that we have entered into with our directors and officers provide that:

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation will provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws, any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

We do not intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not intend to pay any cash dividends on our common stock for the foreseeable future. We intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future. Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.

If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decrease.

Beginning with our annual report for the year ending December 31, 2019, Section 404 of the Sarbanes-Oxley Act will require that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting which will need to be attested to by our independent registered public accounting firm once our status as an emerging growth company ceases.

If we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or, once required, provide an attestation report from our independent registered public accounting firm, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease. We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions or other remedies.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

We are a virtual company and do not own or lease any office space. We maintain a mailing address at P.O. Box 666, Oldwick, NJ 08858.

ITEM 3. Legal Proceedings

We are not a party to any pending legal proceedings.

ITEM 4. Mine Safety Disclosures

Not applicable.

PART II

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

Market Information

Our common stock has been publicly traded on The Nasdaq Capital Market under the symbol “PRVB” since July 24, 2018. Prior to that time, there was no public market for our common stock. The following table sets forth, for the periods indicated, the reported high and low sales prices of our common stock on The Nasdaq Capital Market.

Holders of Record

As of March 1, 2019, there were approximately 89 holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name. The actual number of holders of our Common Stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees.

Dividends

We have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects, then applicable contractual restrictions and any other factors deemed relevant by our board of directors.

Equity Compensation Plans

The information required by this item will be set forth in our Proxy Statement for the 2019 Annual Meeting of Stockholders and is incorporated in this Annual Report on Form 10-K by reference.

Recent Sales of Unregistered Securities

During the year ended December 31, 2018, there were no sales of the Company’s securities that were not reported in a Current Report on Form 8-K or the Company’s Quarterly Report on Form 10-Q.

Use of Proceeds from Initial Public Offering of Common Stock

The offer and sale of the shares in the IPO was registered under the Securities Act pursuant to registration statements on Form S-1 (File No. 333-224801), which was filed with the Securities and Exchange Commission, or the SEC, on May 9, 2018 and amended subsequently and declared effective on July 3, 2018, and Form S-1MEF (File No. 333-226198), which was filed with the SEC on July 16, 2018 and was effective on filing with the SEC. These registration statements, collectively, registered a maximum offering amount of $65.5 million of our common stock in connection with our IPO, pursuant to which we sold 15,969,563 shares of common stock to the public at a price of $4.00 per share. The IPO closed on July 19, 2018, generating net proceeds of approximately $59.3 million after deducting underwriting commissions of approximately $3.7 million and other offering expenses of $0.8 million payable by us. The offering terminated before all of the securities registered on the registration statements had been sold.

MDB Capital Group, LLC acted as sole book-running manager for the offering. Dougherty & Company LLC acted as qualified independent underwriter for the offering. Anthony DiGiandomenico, a member of our board of directors, is a co-founder of MDB and Cameron Gray, a member of our board of directors, is a managing director of MDB.

As of December 31, 2018, we have used approximately $10.9 million of the net offering proceeds primarily to fund ongoing development activities for PRV-6527, PRV-300, PRV-031, PRV-101, PRV-3279 and for working capital and other general corporate purposes. We are holding a significant portion of the balance of the net proceeds from the offering in a variety of capital preservation investments, including short-term, investment grade, interest bearing investments in U.S. government securities. There has been no material change in our planned use of the net proceeds from the offering as described in our final prospectus filed with the SEC on July 17, 2018 pursuant to Rule 424(b) under the Securities Act.

We have not used any of the net proceeds from the offering to make payments by us, directly or indirectly, to any director or officer of ours (other than payment in the ordinary course of business of salaries and/or director fees) or to any of their associates, or to any persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than the underwriting commission paid to MDB Capital Group and underwriter warrants issued to MDB, a portion of which was assigned to Cameron Gray, one of our directors.

Issuer Purchases of Equity Securities

There were no repurchases of equity securities during the fourth quarter of 2018.

ITEM 6. Selected Financial Data

The following selected financial data should be read together with our financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10-K. We have derived the statements of operations data for the years ended December 31, 2018 and 2017, and the period from October 4, 2016 (inception) through December 31, 2016 and the balance sheet data as of December 31, 2018, 2017, and 2016 from our audited financial statements included elsewhere in this Annual Report on Form 10-K, which have been audited by EisnerAmper LLP, an independent registered accounting firm. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period, and our results for any interim period are not necessarily indicative of results to be expected for a full fiscal year.