Lisata Therapeutics (LSTA) Risk Analysis

As our current clinical trials progress, we may need to manage multiple late-stage clinical trials simultaneously in order to continue developing all of our current product candidates. Typically, early-stage trials involve relatively small numbers of patients in relatively few clinical sites. Late-stage (e.g., Phase 3) trials may involve very large numbers of patients in a larger number of sites and may require facilities in several countries. Therefore, the project management required to supervise and control such an extensive program is substantially larger than for early-stage programs. As the need for these resources is not known until some months before the trials begin, it is necessary to recruit large numbers of experienced and talented individuals very quickly. If the labor market does not allow this team to be recruited quickly, the sponsor is faced with a decision to delay the program or to initiate it with inadequate management resources. This may result in recruitment of inappropriate patients, inadequate monitoring of clinical investigators and inappropriate handling of data or data analysis. Consequently, it is possible that conclusions of efficacy or safety may not be acceptable to permit submission of an NDA for any one of the above reasons or a combination of several. Additionally, any such failure may result in regulatory liability for the sponsor, negative publicity, and other adverse impacts on the business or its operations.

The clinical trials of our product candidates are, and the manufacturing and marketing of our products will be, subject to extensive and rigorous review and regulation by numerous governmental authorities in the United States and in other countries where we intend to test and market our product candidates. Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for product approval will vary depending on multiple factors and may include adequate duration of response, a delay in the progression of the disease, and/or an improvement in survival. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. There are precedents for companies in the biopharmaceutical industry experiencing significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization. Data from earlier studies conducted by third-party research institutions should not be relied upon as evidence that later or larger-scale clinical trials will succeed. Some future trials may have different patient populations than current studies and will test our product candidates in different indications, among other differences. In addition, our proposed manufacturing processes for our product candidates include what we believe will be process improvements that are not part of the production processes that were previously used in the earlier conducted clinical trials being conducted by the research institutions. Accordingly, our results with our product candidates may not be consistent with the results of those clinical trials. In addition, even if such trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.

Clinical trials by their nature evaluate the safety and effectiveness of an investigational product in a relatively small sample of the potential patient population. With a limited number of patients and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered with a significantly larger number of patients exposed to the drug candidate. If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates (or any other similar drugs) after such approval, a number of potentially significant negative consequences could result, including those listed below: - regulatory authorities may require the addition of labeling statements, such as a "boxed" warning or a contraindication;- we may be required to change the way such product candidates are distributed or administered, conduct additional clinical trials or change the labeling of the product candidates;- FDA may require a Risk Evaluation and Mitigation Strategy ("REMS") to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools;- we may be subject to regulatory investigations and government enforcement actions;- we may decide to remove affected product candidates from the marketplace;- we could be sued and held liable for injury caused to individuals exposed to or taking our product candidates; and - our reputation may suffer. We believe that any of these events could prevent us from achieving or maintaining market acceptance of, affect our ability to successfully commercialize, and substantially increase the costs of commercializing, the affected products, if approved, and could significantly impact our ability to generate revenues.

We submitted an IND for certepetide on April 14, 2021, and the IND was cleared by the FDA on May 14, 2021. Still, we may not be able to file INDs, or comparable foreign CTAs in other countries or jurisdictions, for our other product candidates on the timelines we expect. For example, we may experience manufacturing delays or other delays with IND-enabling studies. Moreover, we cannot be sure that acceptance of an initial IND will result in the FDA allowing further clinical trials to begin, or that, once begun, issues will not arise that lead to the suspension or termination of clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND, we cannot guarantee that such regulatory authorities will not change their requirements in the future. These considerations also apply to new clinical trials we may submit as amendments to existing INDs or to a new IND. Any failure to file INDs on the timelines we expect or to obtain regulatory authorizations for our trials may prevent us from completing our clinical trials or commercializing our products on a timely basis, if at all.

We may not be able to initiate or complete as planned any clinical trials if we are unable to identify and enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other regulatory authorities. Some of our competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors' product candidates. Enrollment challenges in clinical trials often result in increased development costs for a product candidate, significant delays and potentially the abandonment of the clinical trial and/or product candidate. We also may be unable to engage a sufficient number of clinical trial sites to conduct our trials. Moreover, our ability to conduct trials outside of the United States may be constrained by our inability to transport research materials to or from foreign destinations or find another source of supply. Because our clinical trials for certepetide are focused on patients with specific solid tumors, our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate. For example, we cannot be certain how many patients with the cancers that certepetide is designed to target will choose to enroll in our clinical trials and/or if that number will ultimately suffice for regulatory approval. Patient enrollment in general is affected by many factors, including: - patient, physician and/or treating institution financial considerations;- size of the target patient population;- severity of the disease or disorder under investigation;- eligibility criteria for the clinical trial in question;- competing clinical trials involving patients diagnosed with the disease or disorder under investigation;- perceived risks and benefits of the product candidate under study;- approval and availability of other therapies to treat the disease or disorder that is being investigated in the clinical trial;- willingness or unwillingness to participate in a placebo controlled clinical trial;- efforts to facilitate timely enrollment in clinical trials;- patient referral practices of physicians;- the ability to monitor patients adequately during and after treatment; and - proximity and availability of clinical trial sites for prospective patients. In addition, the U.S. Congress amended the FDCA in 2022 to require sponsors of a Phase 3 clinical trial, or other "pivotal study" of a new drug or biologic to support marketing authorization, to design and submit a diversity action plan for such clinical trial. The action plan must describe appropriate diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them. Although none of our investigational product candidates has reached Phase 3 of clinical development, we or our partners must submit a diversity action plan to the FDA by the time a Phase 3 trial, or pivotal study, protocol is submitted to the agency for review, unless we or our partners are able to obtain a waiver for some or all of the requirements for a diversity action plan. Initiation of such trials may be delayed if the FDA objects to a proposed diversity action plans for any future Phase 3 trial of our product candidates, and we or our partners may experience difficulties recruiting a diverse population of patients in attempting to fulfill the requirements of any approved diversity action plan. Our inability to enroll a sufficient number of patients in any of our planned clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.

If the size of the commercial opportunities in any of our target indications is smaller than we anticipate, or if the FDA grants our candidates approval to treat only specific subpopulations or otherwise approves the products for more narrow indications of use than we are seeking, we may not be able to achieve profitability and growth. Even if we are able to successfully complete our clinical development program for our product candidates, and ultimately receive regulatory approval to market one or more of the products, we may, among other things: - obtain approval for indications that are not as broad as the indications we sought;- have the product removed from the market after obtaining marketing approval;- encounter problems with respect to the manufacturing and/or distribution of commercial supplies;- be subject to additional post-marketing testing requirements; and/or - be subject to restrictions on how the product is distributed or used.

We are dependent upon the successful development, approval and commercialization of our product candidates. Before we are able to seek regulatory approval of our product candidates, we must conduct and complete extensive clinical trials to demonstrate their safety and efficacy in humans. We have never taken a product through the regulatory approval process or successfully to U.S. or international commercialization. Clinical testing is expensive, challenging and complex to design and execute and can take many years to complete. Importantly, a failure of one or more clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of clinical trials that could delay or prevent our ability to complete our clinical trials, receive regulatory approval or commercialize our product candidates, including the following: - suspensions, delays or changes in the design, initiation, enrollment, execution or completion of required clinical trials;- adverse changes in our financial position or significant and unexpected increases in the cost of our development programs;- changes or uncertainties in, or additions to, the regulatory approval process that require us to alter our current development strategy;- clinical trial results that are negative or inconclusive as to safety and/or efficacy, which would result in the need for additional clinical trials or the termination of the product's development;- delays in our ability to manufacture our product candidates in quantities, in a form and/or at a cost that is suitable for any required clinical trials;- intellectual property constraints that prevent us from making, using, or commercializing any of our product candidates;- the supply or quality of our product candidates or other materials or equipment necessary to conduct clinical trials of these product candidates may be no longer available for purchase, insufficient or inadequate;- inability to generate sufficient non-clinical, toxicology, or other in vivo or in vitro data to support the initiation and/or continuation of clinical trials;- delays in reaching agreement on acceptable terms with prospective contract research organizations ("CROs"), contract manufacturing organizations ("CMOs"), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs, CMOs and clinical trial sites;- delays in obtaining required institutional review board approval at each clinical trial site;- inability to submit or obtain clearance for an IND or CTA with the applicable regulators for our development candidates;- imposition of a temporary or permanent clinical hold by the FDA or similar restrictions by other regulatory agencies for a number of reasons, including after review of an IND or protocol amendment, or equivalent application or amendment; as a result of a new safety finding that presents unreasonable risk to clinical trial participants; a negative finding from an inspection of our manufacturing sites, clinical trial operations (including those of any CRO involved) or clinical trial sites; developments on trials conducted by competitors or approved products post-market for related technology that raise FDA concerns about risk to patients of the technology broadly; or if the FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;- difficulty collaborating with patient groups, individual investigators and/or associated institutions;- failure by our CROs, CMOs, other third parties, or us to adhere to clinical trial requirements and international regulatory standards;- failure to perform in accordance with the FDA or international GCP requirements;- failure to reach agreement with the FDA on a satisfactory development path of our development candidates;- failure to resolve contradictory guidance issued by the FDA, EMA or other international regulatory bodies of relevance to our development program(s);- delays in having patients qualify for or complete participation in a trial or return for post-treatment follow-up;- patients dropping out of a clinical trial;- occurrence of adverse events associated with the product candidate;- changes in the standard of care on which a clinical development plan was based, which may require new or additional trials or abandoning existing trials;- transfer of manufacturing processes from one manufacturer and/or manufacturing site to another, operated by either a CMO or us, and delays or failure by our CMOs or us to qualify the transferred process and/or site;- delays in and/or the inability to complete manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing; and - the FDA may not accept clinical data from trials that are conducted in countries where the standard of care or the nature of the disease is potentially different from the United States or for other reasons. Any inability to successfully complete non-clinical and clinical development could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to, or we may elect to, conduct bridging studies to demonstrate the equivalence of our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market earlier than expected, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

Our investigational product candidate certepetide is still in clinical development. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful clinical development and eventual commercialization of certepetide and potentially one or more of our other product candidates. The success of our product candidates will depend on many factors, including the following: - successful completion of preclinical and clinical studies;- clearance of INDs, comparable foreign clinical trial applications ("CTAs") and clinical protocols for our planned clinical trials or future clinical trials;- Regulator acceptance of our development strategy and resultant clinical data;- successful initiation of clinical trials;- successful patient enrollment in and completion of clinical trials;- safety, tolerability and efficacy profiles for our product candidates that are satisfactory to regulators for marketing approval;- receipt of marketing approvals for our product candidates from applicable regulatory authorities;- the extent of any required post-marketing approval commitments to applicable regulatory authorities;- obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;- making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates, if any product candidates are approved;- establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;- acceptance of our products, if and when approved, by patients, the medical community and third-party payors;- effectively competing with other therapies;- obtaining and maintaining third-party coverage and adequate reimbursement;- maintaining a continued acceptable safety profile of our products following approval; and - factors we may not be able to control, such as potential pandemics that may limit patients, principal investigators or staff or clinical site availability (e.g. the COVID-19 pandemic). There is no guarantee that the results obtained in our current clinical studies will be sufficient to obtain regulatory approval or marketing authorization for any of our product candidates. Negative results in the development of our investigational product candidate, certepetide, in any one indication may also impact our ability to obtain regulatory approval of certepetide in other indications, either at all or within anticipated timeframes because, even though the indications are different, the underlying technology platform, manufacturing process and development process are the same. Accordingly, a failure or major issue associated with any one indication may affect the ability to obtain regulatory approval to continue or conduct clinical programs and/or obtain regulatory approval for another indication. Furthermore, although we believe based on available preclinical and clinical results that a combination of certepetide with certain anti-cancer therapeutics is more effective than the use of those therapeutics alone, this may not prove true in clinical testing of certepetide for all or any of the types of cancer. Anti-tumor activity may prove different in each of the different tumor types and/or with each of the anti-cancer therapeutic combinations we plan on evaluating. Therefore, the tumor response to certepetide plus the corresponding anti-cancer therapeutic(s) combination may be less robust in patients with some cancers compared to others. This may result in discontinuation of development of certepetide for certain tumor types and/or certain anti-cancer therapeutic(s) combinations due to insufficient clinical benefit. In addition, because we have limited financial and personnel resources and are placing significant focus on the development of our investigational product candidate, we may forego or delay pursuit of opportunities with other future product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and other future product candidates for specific indications may not yield any commercially viable future product candidates. If we do not accurately evaluate the commercial potential or target market for a particular future product candidate, we may relinquish valuable rights to those future product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such future product candidates.

To conduct pivotal Phase 3 clinical trials, we are required to have certain validated and established manufacturing controls with respect to the identity, strength, quality and purity of our product candidates when administered to patients. If we determine that the results of any Phase 2 clinical trial we may conduct support Phase 3 development, we expect to initiate and complete one or more pivotal Phase 3 clinical trials for such programs and would need to address any outstanding chemistry, manufacturing and controls ("CMC") requirements of the FDA or other relevant regulatory authority prior to initiating such trials. We may not be successful in our efforts to address any CMC issues raised by the FDA or other relevant regulatory authority. If we cannot initiate, or if we are delayed in initiating, a pivotal Phase 3 clinical program as a result of our failure to satisfy regulatory CMC concerns, the timing of completing, developing and making a regulatory submission for commercialization of our product candidates would be delayed, or we may be unable to seek regulatory approval to commercialize our products at all.

The successful development of pharmaceutical product candidates is highly uncertain. Product candidates that appear promising in research and development and early clinical trials may be delayed or fail to reach later stages of development. Decisions regarding the further development of product candidates must be made with limited and incomplete data, which makes it difficult to ensure or even accurately predict whether the allocation of limited resources and the expenditure of additional capital on specific product candidates will result in desired outcomes. Non-clinical and clinical data can be interpreted in different ways, and negative or inconclusive results or adverse events during a clinical trial could delay, limit or prevent the development of a product candidate. Clinical testing 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 preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Exploratory trends and results observed in earlier stage clinical trials, particularly trends and results observed for small subsets that were not pre-specified, may not be replicated in later stage clinical trials. Product candidates in Phase 3 clinical trials may fail to demonstrate sufficient efficacy despite having progressed through initial clinical trials, even if certain exploratory subset analyses of primary or secondary endpoints in those early trials showed trends toward efficacy or, in some analyses, nominal statistical significance. The results of clinical trials in one set of patients or line of treatment may not be predictive of those obtained in another.

All of our product candidates are in clinical development, and their risk of failure is high. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive marketing approval. If our product candidates are associated with undesirable side effects or have other unexpected, unacceptable characteristics, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many investigational products that initially showed promise in clinical or earlier stage testing have later been found to cause side effects or other safety issues that prevented further development. Even if we receive regulatory approval for a candidate with a known safety risk that is described in the product's labeling, such an approved product may not achieve market acceptance by physicians, patients, third-party payors or others in the medical community, which would materially and adversely affect our business.