As filed with the Securities and Exchange Commission on June 16, 2020

Registration Statement No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

DELMAR PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Nevada		2834		99-0360497
(Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

12707 High Bluff Drive, Suite 200

San Diego, CA 92130

(858) 350-4364

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

DelMar Pharmaceuticals, Inc.

12707 High Bluff Drive, Suite 200

San Diego, CA 92130

Attention: Saiid Zarrabian

President and Chief Executive Officer

(858) 350-4364

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Steven M. Skolnick, Esq. Michael J. Lerner, Esq. Lowenstein Sandler LLP 1251 Avenue of the Americas New York, New York 10020 (212) 262-6700		Leslie Marlow, Esq. Hank Gracin, Esq. Gracin & Marlow, LLP The Chrysler Building 405 Lexington Avenue, 26th Floor New York, New York 10174 (212) 907-6457

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and on completion of the business combination described in the enclosed proxy statement/prospectus/information statement.

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Amount to be Registered(1)(2)		Proposed Maximum Offering Price per Share		Proposed Maximum Aggregate Offering Price(3)		Amount of Registration Fee(4)
Common Stock, par value $0.001 per share		13,664,535		N/A		$291.25		$0.04

(1)

Represents an estimate of the maximum number of shares of common stock of DelMar Pharmaceuticals, Inc. (“DelMar”) issuable upon completion of the transactions contemplated by the Agreement and Plan of Merger dated as of June 9, 2020 among DelMar, Adgero Biopharmaceuticals Holdings, Inc. (“Adgero”) and Adgero Acquisition Corp. (the “Merger Agreement”), as described in this registration statement. The amount of DelMar common stock to be registered is based on the estimated number of shares of DelMar common stock that are expected to be issued pursuant to the merger, prior to giving effect to the proposed reverse stock split, assuming a pre-split exchange ratio of 1.5639 shares of DelMar common stock for each outstanding share of Adgero common stock. The estimated exchange ratio calculation contained herein is based upon DelMar’s and Adgero’s capitalization as of June 3, 2020, the latest practicable date prior to the date of this proxy statement/prospectus/information statement, planned issuances of shares of DelMar common stock and the number of shares of DelMar common stock issuable in the proposed merger will be adjusted to account for changes in DelMar’s and Adgero’s outstanding common stock prior to the closing of the merger.

(2)

Pursuant to Rule 416 under the Securities Act of 1933, as amended, or Securities Act, there are also being registered such additional shares of DelMar common stock that may be issued because of events such as recapitalizations, stock dividends, stock splits and reverse stock splits, and similar transactions.

(3)

Calculated in accordance with Rule 457(f) of the Securities Act. Adgero is a private company and no market exists for its equity securities. Adgero has accumulated a capital deficit; therefore, pursuant to Rule 457(f)(2) under the Securities Act, the proposed maximum offering price is one-third of the aggregate par value of Adgero’s capital stock being acquired in the proposed merger, which is calculated by taking one-third of the product of the par value of $0.0001 and the maximum number of shares of Adgero capital stock that may be exchanged in the merger, or 8,737,629 shares of Adgero capital stock (computed as of June 3, 2020, the latest practicable date prior to the date of filing this registration statement, and inclusive of all shares of Adgero capital stock issuable upon conversion of any securities convertible into or exercisable for shares of Adgero capital stock).

(4)	Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $129.80 per $1,000,000 of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

The information in this proxy statement/prospectus/information statement is not complete and may be changed. These securities described herein may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This proxy statement/prospectus/information statement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

SUBJECT TO COMPLETION, DATED JUNE 16, 2020

DELMAR PHARMACEUTICALS, INC.

12707 High Bluff Drive, Suite 200

San Diego, CA 92130

To the Stockholders of DelMar Pharmaceuticals, Inc. and Adgero Pharmaceuticals, Inc.,

On behalf of the board of directors of DelMar Pharmaceuticals, Inc. (“DelMar”), we are pleased to enclose the proxy statement/prospectus/information statement for the proposed acquisition of Adgero Biopharmaceuticals Holdings, Inc. by DelMar and the related facilitating transactions.

As previously announced, DelMar, Adgero Acquisition Corp., a wholly-owned subsidiary of DelMar incorporated in the State of Delaware (“Merger Sub”), and Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation (“Adgero”), have entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) pursuant to which Merger Sub will merge with and into Adgero, with Adgero surviving the merger and becoming a wholly-owned direct subsidiary of DelMar (the “Merger”). Following the Merger, if approved by the stockholders, DelMar will be renamed “Kintara Therapeutics, Inc.” and is sometimes referred to herein as the “combined company.” The Merger will result in a diversified biopharmaceutical company with a robust pipeline targeting rare, unmet medical needs in oncology. At the closing of the Merger, each outstanding share of Adgero common stock will be cancelled and automatically converted into shares of common stock of DelMar based on the exchange ratio described in this proxy statement/prospectus/information statement. See the section entitled “The Merger Agreement” on page 122 of the attached proxy statement/prospectus/information statement for further information on the consideration being paid to the stockholders of Adgero.

DelMar’s common stock is currently listed on the Nasdaq Capital Market, under the symbol “DMPI.” DelMar has applied to list the shares of common stock of the combined company on the Nasdaq Capital Market under the symbol “KTRA” upon the closing of the Merger.

DelMar is holding a special meeting of its stockholders in order to obtain the stockholder approvals necessary to complete the Merger and other matters. Due to concerns regarding the COVID-19 outbreak and to assist in protecting the health and well-being of our stockholders and employees, the special meeting will be held via the internet at www.viewproxy.com/delmarpharma/SM/2020 on                 , 2020, at          a.m., Eastern time, unless postponed or adjourned to a later date. At the DelMar special meeting of stockholders, DelMar will ask its stockholders to, among other things, approve the issuance of shares of DelMar common stock as consideration in the Merger and in connection with the financing transaction for the Merger described herein and to approve an amendment to DelMar Articles of Incorporation effecting a reverse stock split of DelMar common stock at a ratio in the range from 2-for-1 to 10-for-1, with such specific ratio to be determined solely by the DelMar board of directors following the special meeting and effecting a name change for the combined company to Kintara Therapeutics, Inc., each as described in this proxy statement/prospectus/information statement.

The consummation of the Merger is also conditioned on, among other things, the approval of the Merger by Adgero stockholders. No meeting of Adgero stockholders to adopt the Merger Agreement and approve the merger and related transactions will be held. Instead, all Adgero stockholders will have the opportunity to vote to adopt the Merger Agreement and approve the merger and related transactions by signing and returning to Adgero a written consent following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the Securities and Exchange Commission. Adgero will distribute a separate packet of information, including this proxy statement/prospectus/information statement, to its shareholders in connection with such written consent. Adgero stockholders, including those who are parties to support agreements, are requested to execute written consents providing such approvals. As described in this proxy statement/prospectus/information statement certain stockholders of DelMar are parties to a support agreement with Adgero whereby such stockholders agreed to vote all of their shares of common stock or Series B Preferred Stock of DelMar in favor of approving the proposals described in this proxy statement/prospectus/information statement.

After careful consideration, the DelMar and Adgero boards of directors have unanimously approved the Merger Agreement and the related transactions and the board of directors of DelMar has approved the other proposals described in this proxy statement/prospectus/information statement, and determined that it is advisable to consummate the Merger. The board of directors of DelMar recommends that its stockholders vote “FOR” the proposals described in this proxy statement/prospectus/information statement and the Adgero board of directors unanimously recommends that its stockholders sign and return to Adgero the written consent indicating their adoption of the Merger Agreement and approval of the Merger and related transactions.

More information about DelMar, Adgero and the proposed merger and related transactions is contained in this proxy statement/prospectus/information statement. We urge you to read the accompanying proxy statement/prospectus/information statement, including the financial statements and annexes and other documents referred to herein, carefully and in their entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 22 OF THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT.

On behalf of our boards of directors, we thank you for your support and look forward to the successful completion of the Merger.

 

Sincerely,		Sincerely,
Saiid Zarrabian   President and Chief Executive Officer		John Liatos   Interim Chief Executive Officer and Chief Financial Officer
DelMar Pharmaceuticals, Inc.		Adgero Biopharmaceuticals Holdings, Inc.

This proxy statement/prospectus/information statement is dated                 , 2020 and is first being mailed to the stockholders of DelMar and stockholders of Adgero on or about that date.

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT OR ANY OF THE SECURITIES TO BE ISSUED IN THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

DELMAR PHARMACEUTICALS, INC.

12707 High Bluff Drive, Suite 200

San Diego, CA 92130

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON            , 2020

To the Stockholders of DelMar Pharmaceuticals, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the “special meeting”) of DelMar Pharmaceuticals, Inc., a Nevada corporation (“DelMar,” “we,” “our” or “us”), will be held on            , 2020, at              a.m., Eastern time. Due to concerns regarding the COVID-19 outbreak and to assist in protecting the health and well-being of our shareholders and employees, the special meeting will be held via the internet. Stockholders will be able to listen, vote and ask questions regardless of location via the internet at www.viewproxy.com/delmarpharma/SM/2020 by using the virtual control number assigned to you during registration. You will not be able to attend the special meeting in person. Only stockholders who hold shares of DelMar common stock, $0.001 par value per share (“DelMar Common Stock”) or Series B Preferred Stock of DelMar, $0.001 par value per share (“Series B Preferred Stock”), at the close of business on             , 2020, the record date for the special meeting, are entitled to vote at the special meeting and any adjournments or postponements of the special meeting.

The special meeting is being held for the following purposes:

 

1.

The “Nasdaq Proposal”— to approve, pursuant to the rules of the Nasdaq Stock Market as described herein, the issuance of (i) shares of DelMar Common Stock issuable to holders of outstanding Adgero Common Stock, pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 9, 2020 (as may be amended from time to time, the “Merger Agreement”), by and among DelMar, Adgero Biopharmaceuticals Holdings, Inc. (“Adgero”) and Adgero Acquisition Corp. (“Merger Sub”), pursuant to which Merger Sub will merge with and into Adgero, with Adgero surviving as a wholly-owned subsidiary of DelMar (the “Merger”), (ii) shares of DelMar Common Stock underlying warrants to purchase DelMar Common Stock that will be issued in exchange for currently outstanding warrants to purchase Adgero Common Stock, pursuant to the terms of the Merger Agreement, (iii) shares of DelMar Common Stock issuable upon conversion of shares of Series C Convertible Preferred Stock of DelMar to be issued to investors in a private placement, which shares of preferred stock will be convertible into shares of DelMar Common Stock, (iv) any shares of DelMar Common Stock issuable as dividends on the Series C Convertible Preferred Stock, (v) shares of DelMar Common Stock issuable to SternAegis Ventures (or its designees) in consideration of advisory services rendered in connection with the Merger and (vi) shares of DelMar Common Stock underlying warrants to purchase Series C Convertible Preferred Stock issued to the placement agent in connection with the private placement (all as described in more detail herein);

 

2.

The “Reverse Stock Split Proposal”—to approve, pursuant to Nevada Revised Statutes (“NRS”) 78.2055, a reverse stock split of only the outstanding shares of DelMar Common Stock and other outstanding securities of DelMar (with no change to the authorized capital stock of DelMar) at a ratio in the range of 2-for-1 to 10-for-1, with such ratio to be determined in the discretion of DelMar’s board of directors and with such reverse stock split to be effected at such time and date as determined by DelMar’s board of directors in its sole discretion;

 

3.

The “Name Change Proposal”—to approve an amendment to DelMar’s Articles of Incorporation, as amended, to change DelMar’s corporate name to Kintara Therapeutics, Inc.;

 

4.

The “Plan Amendment Proposal”—to approve an amendment to DelMar’s 2017 Omnibus Equity Incentive Plan to increase the number of shares of DelMar Common Stock authorized for issuance to 6,700,000; and

5.

The “Adjournment Proposal”—to approve the adjournment of the special meeting to a later date or time, if necessary, to solicit additional proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve the Nasdaq Proposal.

After careful consideration, DelMar’s board of directors has unanimously determined that the forms, terms and provisions of the Merger Agreement, including the Merger, are advisable and in the best interests of DelMar and its stockholders, and unanimously recommends you vote “FOR” Proposals 1 through 4, as well as the Adjournment Proposal.

DelMar will transact no other business at the special meeting, except such business as may properly be brought before the special meeting or any adjournment or postponement thereof. Please refer to the proxy statement/prospectus/information statement of which this notice is a part for further information with respect to the business to be transacted at the special meeting.

The approval of the Nasdaq Proposal, the Plan Amendment Proposal and the Adjournment Proposal requires the affirmative vote of the holders of a majority of votes cast by the stockholders present in person or represented by proxy and entitled to vote thereon at the special meeting. The approval of the Reverse Stock Split Proposal and the Name Change Proposal requires the affirmative vote of holders of a majority of the issued and outstanding shares of DelMar Common Stock and DelMar Series B Preferred Stock that are entitled to vote, voting together as a single class.

Completion of the Merger is conditioned upon, among other things, approval of the Nasdaq Proposal. Further, the consummation of the Merger is conditioned on, among other things, the approval of the Merger by the Adgero stockholders.

Your attention is directed to the proxy statement/prospectus/information statement accompanying this notice (including the financial statements and annexes attached thereto) for a more complete description of the proposed Merger and related transactions and each of our proposals. We encourage you to read this proxy statement/prospectus/information statement carefully in its entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 22 of the accompanying proxy statement/prospectus/information statement. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Alliance Advisors LLC, at 866-619-8907; banks and brokers can call collect at 866-619-8907.

Your vote is very important, regardless of the number of shares of DelMar Common Stock or DelMar Series B Preferred Stock that you own. Even if you plan to attend the special meeting, we request that you complete, sign, date and return the enclosed proxy card in the envelope provided, or submit your proxy by telephone or the Internet prior to the special meeting, and thus ensure that your shares will be represented and voted at the special meeting if you later become unable to attend. If your shares are held in a stock brokerage account or by a bank or other nominee, please follow the instructions that you receive from your broker, bank or other nominee to vote your shares.

 

		By Order of the Board of Directors,
		Saiid Zarrabian
, 2020		President and Chief Executive Officer

TABLE OF CONTENTS

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT			i
FREQUENTLY USED TERMS			ii
QUESTIONS AND ANSWERS ABOUT THE MERGER			1
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT			10
Parties to the Merger			10
The Merger Agreement			10
Certain Agreements Related to the Merger			13
Interests of Certain Persons in the Merger			14
Reasons for the Approval of the Merger			15
Opinion of Ladenburg			15
Regulatory Approvals Required for the Merger			16
Accounting Treatment of the Merger			16
Material U.S. Federal Income Tax Consequences of the Merger			16
Ownership Following the Merger and the Private Placement			17
Comparison of the Rights of Holders of DelMar Stock and Adgero Stock			19
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			20
RISK FACTORS			22
Risks Related to Adgero			22
Risks Related to the Merger			48
Risks Related to DelMar			60
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			86
THE SPECIAL MEETING OF DELMAR STOCKHOLDERS			96
The DelMar Special Meeting			96
Date, Time and Place of the Special Meeting			96
Purpose of the Special Meeting			96
Recommendation of the DelMar Board of Directors			96
Record Date and Voting			97
Voting Your Shares			97
Who Can Answer Your Questions About Voting Your Shares			98
Quorum and Vote Required for the Proposals			98
Abstentions and Broker Non-Votes			98
Revocability of Proxies			99
Appraisal or Dissenters’ Rights			99
Solicitation of Proxies			99
THE MERGER			100
The Background of the Merger			100
DelMar’s Reasons for the Merger			103
Adgero’s Reasons for the Merger			106
Interests of DelMar’s Directors and Officers in the Merger			108
Interests of Adgero’s Directors and Officers in the Merger			108
Certain Adgero Unaudited Projected Financial Information			109
Opinion of Ladenburg			110
Regulatory Approvals Required for the Merger			118
Accounting Treatment of the Merger			118
Appraisal Rights and Dissenters’ Rights			118
THE MERGER AGREEMENT			122

CERTAIN AGREEMENTS RELATED TO THE MERGER			138
Support Agreements			138
Private Placement			138
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER			139
PROPOSAL NO. 1—THE NASDAQ PROPOSAL			142
PROPOSAL NO. 2—THE REVERSE STOCK SPLIT PROPOSAL			145
PROPOSAL NO. 3—THE NAME CHANGE PROPOSAL			154
PROPOSAL NO. 4—THE PLAN AMENDMENT PROPOSAL			155
PROPOSAL NO. 5—THE ADJOURNMENT PROPOSAL			162
INFORMATION ABOUT ADGERO			163
ADGERO’S EXECUTIVE COMPENSATION			187
ADGERO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			192
CERTAIN ADGERO RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			198
INFORMATION ABOUT DELMAR			200
DELMAR’S EXECUTIVE COMPENSATION			235
DELMAR MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			239
MANAGEMENT AFTER THE MERGER			249
DESCRIPTION OF DELMAR’S SECURITIES			256
COMPARISON OF RIGHTS OF HOLDERS OF DELMAR STOCK AND ADGERO STOCK			263
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			272
LEGAL MATTERS			277
CHANGE IN ACCOUNTANTS			277
EXPERTS			278
ADDITIONAL INFORMATION			278
WHERE YOU CAN FIND MORE INFORMATION			279
INDEX TO FINANCIAL STATEMENTS			F-1
ADGERO FINANCIAL STATEMENTS			F-3
DELMAR FINANCIAL STATEMENTS			F-28
ANNEX A: Merger Agreement			A-1
ANNEX B: Form of Certificate of Amendment			B-1
ANNEX C: Form of Certificate of Designation of Series C Preferred Stock
ANNEX D: Opinion of Ladenburg Thalmann & Co. Inc.			D-1
ANNEX E: 2017 Omnibus Equity Incentive Plan			E-1
ANNEX F: Form of Amendment to 2017 Omnibus Equity Incentive Plan			F-1
ANNEX G: Section 262 of the DGCL			G-1

ABOUT THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

This document, which forms part of a registration statement on Form S-4 filed with the SEC, by DelMar (File No. 333-            ) (the “Registration Statement”), constitutes a prospectus of DelMar under Section 5 of the Securities Act of 1933, as amended, with respect to the shares of DelMar Common Stock to be issued if the Merger described below is consummated. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, with respect to the special meeting of DelMar stockholders at which DelMar stockholders will be asked to consider and vote upon the DelMar Proposals and certain other related matters. This document also serves as an information statement of Adgero for use in soliciting the written consent of its stockholders for the adoption of the Merger Agreement and the approval of the Merger and related transactions.

You should rely only on the information contained in this proxy statement/prospectus/information statement. Neither DelMar nor Adgero has authorized anyone to provide you with information that is different from that contained in this proxy statement/prospectus/information statement. This proxy statement/prospectus/information statement is dated as of the date set forth above on the cover page of this proxy statement/prospectus/information statement, and you should not assume that the information contained in this proxy statement/prospectus/information statement is accurate as of any date other than such date. Neither the mailing of this proxy statement/prospectus/information statement to DelMar stockholders or Adgero stockholders nor the issuance by DelMar of shares of DelMar Common Stock as consideration pursuant to the Merger Agreement will create any implication to the contrary.

This proxy statement/prospectus/information statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

The information concerning DelMar contained in this proxy statement/prospectus/information statement has been provided by DelMar, and the information concerning Adgero contained in this proxy statement/prospectus/information statement has been provided by Adgero.

 

-i-

FREQUENTLY USED TERMS

In this document:

“Adgero” means Adgero Biopharmaceuticals Holdings, Inc., a Delaware corporation.

“Adgero Common Stock” means Adgero’s common stock, par value $0.0001 per share.

“Adgero Support Agreement” means the Stockholder Support Agreement, dated as of June 9, by and among DelMar and the Key Adgero Stockholders.

“Adgero Warrants” means the warrants to purchase shares of Adgero Common Stock, each of which is outstanding immediately prior to the Closing.

“Closing” means the consummation of the Merger.

“Closing Date” means the date on which the Closing occurs.

“Code” means the Internal Revenue Code of 1986, as amended.

“combined company” means DelMar following the Closing of the Merger (at which time, subject to stockholder approval, DelMar will be renamed Kintara Therapeutics, Inc.).

“Conversion Price” means the conversion price of the Investment Shares, which will equal the lesser of (i) the closing price of the DelMar Common Stock on Nasdaq on the date immediately preceding the signing of the applicable binding agreements for the applicable closing date of the Private Placement for which the Investment Shares are issued or (ii) the average closing price of the DelMar Common Stock on Nasdaq for the five trading days immediately preceding the signing of the applicable binding agreements for the applicable closing date of the Private Placement for which the Investment Shares are issued, rounded up to the nearest whole cent.

“Conversion Shares” means the shares of DelMar Common Stock issuable upon conversion of the Investment Shares.

“DelMar” means DelMar Pharmaceuticals, Inc., a Nevada corporation.

“DelMar Articles” means the Articles of Incorporation of DelMar, as amended.

“DelMar Bylaws” means the Bylaws of DelMar, as amended.

“DelMar Common Stock” means DelMar’s common stock, par value $0.001 per share.

“DelMar Series B Preferred Stock” means DelMar’s Series B Preferred Stock, par value $0.001 per share.

“DelMar special meeting” means the special meeting of DelMar stockholders to consider and vote upon the DelMar Proposals and related matters.

“DelMar Stockholder Approval” means the approval by the stockholders of DelMar of Proposals 1 and 2.

“DelMar Support Agreement” means the Stockholder Support Agreement, dated as of June 9, by and among Adgero and the Key DelMar Stockholders.

“DGCL” means the Delaware General Corporation Law.

 

-ii-

“Dividend Shares” means the shares of DelMar Common Stock issuable as dividends on the Investment Shares.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Exchange Ratio” means 1.5639 shares of DelMar Common Stock per share of Adgero Common Stock, based on the number of total voting shares outstanding of DelMar and Adgero on June 3, 2020, and subject to adjustment based upon the number of total voting shares outstanding of DelMar and Adgero immediately prior to the Closing and the reverse stock split described herein, such that stockholders of Adgero and DelMar immediately prior to the Merger will own 49.5% and 50.5% of the total voting shares outstanding of the combined company immediately after the Closing of the Merger.

“GAAP” means United States generally accepted accounting principles.

“Investment Shares” means shares of Series C Preferred Stock to be issued to the Investors in the Private Placement.

“Investors” means investors in the Private Placement

“Key Adgero Stockholders” means each of the current directors and executive officers of Adgero who own in the aggregate approximately 22.9% of Adgero’s outstanding voting securities as of June 9, 2020.

“Key DelMar Stockholders” means each of the current directors and executive officers of DelMar who own in the aggregate approximately 1.0% of DelMar’s outstanding voting securities as of June 9, 2020 (on an as converted basis).

“Maximum Offering Amount” means gross proceeds from the Private Placement in an aggregate amount of $20 million.

“Merger” means, pursuant to the Merger Agreement, the merging of Merger Sub with and into Adgero, with Adgero surviving the Merger as a wholly-owned subsidiary of DelMar.

“Merger Agreement” means the Agreement and Plan of Merger and Reorganization, dated as of June 9, 2020, as may be amended from time to time, by and among DelMar, Adgero and Merger Sub.

“Merger Shares” means, based on the Exchange Ratio and pursuant to the Merger Agreement, an aggregate of 11,365,499 shares of DelMar Common Stock issuable (i) to holders of outstanding Adgero Common Stock and (ii) upon conversion of warrants to purchase DelMar Common Stock that will be issued in exchange for currently outstanding Adgero Warrants.

“Merger Sub” means Adgero Acquisition Corp., a Delaware corporation.

“Minimum Offering Amount” means gross proceeds from the Private Placement in an aggregate amount of $10 million.

“Nasdaq” means the Nasdaq Capital Market.

“NRS” means the Nevada Revised Statutes.

“Over-allotment Amount” means gross proceeds from the Private Placement in an aggregate amount of $30 million.

“Placement Agent” means SternAegis Ventures (through Aegis Capital Corp.).

 

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“Placement Agent Warrants” means warrants to purchase shares of Series C Preferred Stock, at an exercise price of $1,000 per share and exercisable for five years from the initial closing of the Private Placement in connection with the consummation of the Merger, in an amount equal to ten percent of the number of Investment Shares sold in the Private Placement.

“Placement Agent Warrant Shares” means shares of DelMar Common Stock issuable upon conversion of, and payable as dividends on, the shares of Series C Preferred Stock underlying the Placement Agent Warrants.

“Private Placement” means the sale of the Investment Shares to the Investors, for an aggregate purchase price of a minimum of $10 million and up to a maximum of $20 million, with an over-allotment option of up to an additional $10 million, in a private placement.

“prospectus” means the prospectus included in the Registration Statement on Form S-4 (Registration No. 333-            ) filed with the SEC.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Series C Preferred Stock” means shares of Series C Convertible Preferred Stock, par value $0.001, of DelMar, convertible into shares of DelMar Common Stock at the Conversion Price, to be issued in the Private Placement.

“Success Fee Shares” means restricted shares of DelMar Common Stock issuable to SternAegis (or its designees), in consideration of advisory services rendered in connection with the Merger, in an amount equal to five percent of the number of shares of DelMar Common Stock issued to Adgero stockholders upon the consummation of the Merger.

“total voting shares outstanding” means the shares of DelMar Common Stock (including shares of DelMar Series B Preferred Stock on as-converted basis) immediately following the Closing, and excludes (i) outstanding shares of DelMar Series A Preferred Stock which are non-voting, (ii) the Investment Shares and the related Conversion Shares and Dividend Shares, issuable in the Private Placement, (iii) shares of DelMar Common Stock issuable upon the exercise of DelMar warrants to be issued in exchange for Adgero Warrants in connection with the Merger, (iv) shares of DelMar Common Stock issuable upon the exercise of outstanding options and warrants to purchase shares of DelMar Common Stock, (v) the Placement Agent Warrant Shares, (vi) the Success Fee Shares and (vii) potential future issuances of DelMar securities.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

The following questions and answers briefly address some commonly asked questions regarding the proposed Merger and about the proposals to be presented at the DelMar special meeting of stockholders and to be presented to the Adgero stockholders for approval via written consent, including with respect to the proposed Merger. The following questions and answers may not include all the information that is important to DelMar stockholders. Stockholders are urged to read carefully this entire proxy statement/prospectus/information statement, including the financial statements and annexes attached hereto and the other documents referred to herein. Except where indicated, the information in this proxy statement/prospectus/information statement does not give effect to the closing of the Private Placement or the proposed reverse stock split of DelMar Common Stock described in Proposal No. 2 in this proxy statement/prospectus/information statement.

 

Q:	Why am I receiving this proxy statement/prospectus/information statement?

 

A:

On June 9, 2020, DelMar, Adgero and Merger Sub entered into the Merger Agreement pursuant to which Merger Sub will merge with and into Adgero, with Adgero surviving the Merger as a wholly-owned subsidiary of DelMar. A copy of the Merger Agreement is attached to this proxy statement/prospectus/information statement as Annex A.

Subject to the terms and conditions of the Merger Agreement, at the Closing, (a) each outstanding share of Adgero Common Stock (other than any shares held as treasury stock that will be cancelled), will be converted into approximately 1.5639 shares of DelMar Common Stock and (b) each outstanding warrant to purchase Adgero Common Stock will be assumed by DelMar and converted into a warrant exercisable for that number of shares of DelMar Common Stock equal to the product of (i) the aggregate number of shares of Adgero Common Stock for which such warrant was exercisable and (ii) the Exchange Ratio (rounded down to the nearest whole share), as described in the section entitled “The Merger Agreement—Merger Consideration.” All outstanding Adgero stock options, whether vested or unvested, that have not been exercised will be cancelled for no consideration as it is anticipated that none of the options will be in-the-money at the time of the Merger.

The Exchange Ratio in the Merger Agreement was negotiated so that the existing stockholders of Adgero would own 49.5% of the total voting shares outstanding of DelMar and the existing stockholders of DelMar would own 50.5% of the total voting shares outstanding of DelMar immediately after the Merger (less the effect of the payment of cash in lieu of any fraction share of DelMar Common Stock). Accordingly, based on the number of voting securities of each company outstanding at June 3, 2020, it is estimated that the Exchange Ratio will be approximately 1.5639, so that each outstanding share of Adgero Common Stock will be converted into approximately 1.5639 shares of DelMar Common Stock and each Adgero Warrant will be converted into a warrant to purchase approximately 1.5639 shares of DelMar Common Stock. The actual Exchange Ratio will be fixed prior to Closing to reflect DelMar’s and Adgero’s capitalization on the Closing Date of the Merger. For a more detailed discussion of the Exchange Ratio, please see the section entitled “The Merger Agreement—Exchange Ratio.”

This proxy statement/prospectus/information statement and its annexes contain important information about the proposed Merger and the proposals to be acted upon at the special meeting. You should read this proxy statement/prospectus/information statement and its annexes carefully and in their entirety. This document also constitutes a prospectus of DelMar with respect to the Merger Shares issuable in connection with the Merger. This document also serves as an information statement of Adgero for use in soliciting the written consent of its stockholders for the adoption of the Merger Agreement and the approval of the Merger and related transactions.

 

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Q:	What matters will stockholders consider at the DelMar special meeting?

 

A:	At the DelMar special meeting of stockholders, DelMar will ask its stockholders to vote in favor of the following proposals (the “DelMar Proposals”):

 

•

Proposal 1—to approve, pursuant to the rules of the Nasdaq Stock Market, the issuance of (i) the Merger Shares pursuant to the terms of the Merger Agreement, (ii) the Conversion Shares, (iii) the Dividend Shares, (iv) the Success Fee Shares and (v) the Placement Agent Warrant Shares (the “Nasdaq Proposal”);

 

•

Proposal 2—to approve, pursuant to NRS 78.2055, a reverse stock split of only the outstanding shares of DelMar Common Stock and other outstanding securities of DelMar Common Stock (with no change to the authorized capital stock of DelMar), at a ratio in the range from 2-for-1 to 10-for-1, with such ratio to be determined by the DelMar board of directors and with such reverse stock split to be effected at such time and date as determined by the DelMar board of directors in its sole discretion (the “Reverse Stock Split Proposal”);

 

•

Proposal 3—to approve an amendment to the DelMar Articles to change DelMar’s corporate name to Kintara Therapeutics, Inc. (the “Name Change Proposal”);

 

•

Proposal 4—to amend DelMar’s 2017 Omnibus Equity Incentive Plan to increase the number of shares of DelMar Common Stock authorized for issuance to 6,700,000 (the “Plan Amendment Proposal”); and

 

•

Proposal 5—to adjourn the special meeting, if necessary, to another time or place to solicit additional proxies if there are not sufficient votes in favor of Proposal 1 (the “Adjournment Proposal”).

 

Q:	What will happen upon the consummation of the Merger?

 

A:

On the Closing Date, Merger Sub will merge with and into Adgero, with Adgero surviving the Merger as a wholly-owned subsidiary of DelMar and Merger Sub will cease to exist. The Merger will have the effects specified under Delaware law. As consideration for the Merger, each outstanding share of Adgero Common Stock will be exchanged for shares of DelMar Common Stock based upon the Exchange Ratio and each outstanding Adgero Warrant will be assumed by DelMar, as described in the section entitled “The Merger Agreement—Merger Consideration.”

 

Q:	Why are the companies proposing to merge?

 

A:	DelMar and Adgero believe that the combined company will have several potential advantages, including: (i) a diverse pipeline of oncology product candidates, (ii) a product candidate that has demonstrated anti-cancer activities, (iii) operational synergies and (iv) an experienced management team.

For a more complete discussion of DelMar’s and Adgero’s reasons for the Merger, please see the sections entitled “The Merger—DelMar’s Reasons for the Merger” and “The Merger—Adgero’s Reasons for the Merger.”

 

Q:	What equity stake will current DelMar stockholders and Adgero stockholders have in DelMar after the Closing of the Merger and prior to the consummation of the Private Placement?

 

A:	It is anticipated that, upon the consummation of the Merger, the ownership of DelMar will be as follows:

 

•

Current DelMar stockholders will own 50.5% of the total voting shares outstanding; and

 

•

Current Adgero stockholders will own 49.5% of the total voting shares outstanding.

The numbers of shares and percentage interests set forth above do not take into account (i) currently outstanding shares of DelMar Series A Preferred Stock which are non-voting (ii) the Investment Shares and related Conversion Shares and Dividend Shares, issuable in the Private Placement in the Minimum Offering Amount, the

 

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Maximum Offering Amount or the Over-allotment Amount (iv) shares of DelMar Common Stock issuable upon the exercise of warrants to be issued in exchange for Adgero Warrants in connection with the Merger, (v) shares of DelMar Common Stock issuable upon the exercise of outstanding options and warrants, (vi) the Placement Agent Warrant Shares, (vii) the Success Fee Shares and (viii) potential future issuances of DelMar securities.

 

Q:	What equity stake will current DelMar stockholders and Adgero stockholders have in DelMar after the Closing of the Merger and after consummation of the Private Placement?

 

A:	It is anticipated that, upon the consummation of the Merger and the Private Placement, the ownership of DelMar will be as follows:

If the Minimum Offering Amount is raised in the Private Placement:**

 

•

Current DelMar stockholders will own approximately 33.0% of the total voting shares outstanding; and

 

•

Current Adgero stockholders will own approximately 32.3% of the total voting shares outstanding.

If the Maximum Offering Amount is raised in the Private Placement:**

 

•

Current DelMar stockholders will own approximately 24.5% of the total voting shares outstanding; and

 

•

Current Adgero stockholders will own approximately 24.0% of the total voting shares outstanding.

If the Over-allotment Amount is raised in the Private Placement:**

 

•

Current DelMar stockholders will own approximately 19.5% of the total voting shares outstanding; and

 

•

Current Adgero stockholders will own approximately 19.0% of the total voting shares outstanding.

**When referring to the Private Placement, “total voting shares outstanding” excludes (i) outstanding shares of DelMar Series A Preferred Stock which are non-voting (ii) the Dividend Shares (iii) shares of DelMar Common Stock issuable upon the exercise of DelMar warrants to be issued in exchange for Adgero Warrants in connection with the Merger, (iv) shares of DelMar Common Stock issuable upon the exercise of outstanding options and warrants to purchase shares of DelMar Common Stock, (v) the Placement Agent Warrant Shares, (vi) the Success Fee Shares and (vii) potential future issuances of DelMar securities.

 

Q:	Who will be the officers and directors of the combined company if the Merger is consummated?

 

A:

The Merger Agreement provides that, immediately following the consummation of the Merger, the board of directors of DelMar will be comprised of up to seven directors. Four of the directors will designated by DelMar, two of the directors will be nominated by Adgero and approved by DelMar and the remaining director will be an independent director designated mutually by DelMar and Adgero. The individuals currently identified to serve as directors of DelMar following the consummation of the Merger are: Saiid Zarrabian, Robert J. Toth, Jr., Robert E. Hoffman, Laura Johnson, each a current director or a nominee to stand for election to the board of directors at DelMar’s 2020 Annual Meeting of Stockholders and each of whom is designated by DelMar, and John Liatos and Keith Murphy , current directors of Adgero and designated by Adgero. The seventh director is expected to be appointed following the Merger by the then current board of directors of DelMar.

Immediately following the consummation of the Merger, the following individuals will be the officers of DelMar: Saiid Zarrabian, President and Chief Executive Officer, Scott Praill, Chief Financial Officer, Dennis Brown, Ph.D., Chief Scientific Officer, each of whom is currently an officer of DelMar serving in the same role, and John Liatos, Senior Vice President, Business Development and Steven Rychnovsky, Ph.D., Vice President, Research and Development, each a current officer of Adgero.

Please see the section entitled “Management After the Merger.”

 

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Q:	What conditions must be satisfied to complete the Merger?

 

A:

There are a number of closing conditions in the Merger Agreement, including that DelMar’s stockholders approve the issuance of the Merger Shares, the Conversion Shares and the Dividend Shares and that DelMar raises gross proceeds of at least $10 million in the Private Placement. In addition, Adgero stockholders must adopt the Merger Agreement and approve the Merger and the transactions contemplated thereby. For a summary of the conditions that must be satisfied or waived prior to completion of the Merger, please see the section entitled “The Merger Agreement—Conditions to the Closing of the Merger.”

 

Q:	What vote is required to approve the proposals presented at the DelMar special meeting of stockholders?

 

A:

The approval of the Reverse Stock Split Proposal and the Name Change Proposal requires the affirmative vote of holders of a majority of the issued and outstanding shares of DelMar Common Stock and DelMar Series B Preferred Stock that are entitled to vote, voting together as a single class. Accordingly, abstentions and broker non-votes, if any, will have the effect of a vote “AGAINST” the Reverse Stock Split Proposal and the Name Change Proposal.

The approval of each of the Nasdaq Proposal, the Plan Amendment Proposal and the Adjournment Proposal requires the affirmative vote of the holders of a majority of votes cast by the stockholders present in person or represented by proxy and entitled to vote thereon at the special meeting. Accordingly, abstentions and broker non-votes, if any, will have no effect on the outcome of the Nasdaq Proposal, the Plan Amendment Proposal and the Adjournment Proposal.

 

Q:	Do Adgero’s stockholders need to approve the Merger?

 

A:

Yes. The adoption of the Merger Agreement and the approval of the Merger and related transactions by the stockholders of Adgero requires the affirmative vote of the holders of at least a majority of the outstanding shares of Adgero Common Stock. Contemporaneously with the execution of the Merger Agreement, the Key Adgero Stockholders entered into the Adgero Support Agreement pursuant to which, among other things and subject to the terms and conditions therein, the Key Adgero Stockholders agreed to vote all shares of Adgero Common Stock beneficially owned by such stockholders at the time of the stockholder vote in favor of adoption and approval of the Merger Agreement and the approval of the transactions contemplated by the Merger Agreement, including the Merger, and any other matter necessary to consummate such transactions, and not to (a) transfer any of their shares of Adgero Common Stock (or enter into any arrangement with respect thereto) or (b) enter into any voting arrangement that is inconsistent with the Adgero Support Agreement. Collectively, as of June 9, 2020, the Key Adgero Stockholders held approximately 22.9% of the outstanding shares of capital stock of Adgero. For further information, please see the section entitled “Certain Agreements Related to The Merger—Support Agreements.”

 

Q:	How many votes do DelMar stockholders have at the special meeting of stockholders?

 

A:

Each share of DelMar Common Stock is entitled to one vote at the special meeting for each share of DelMar Common Stock held of record as of the record date. Each share of DelMar Series B Preferred Stock is convertible into 0.25 shares of DelMar Common Stock and entitles its holder to vote with the DelMar Common Stock on an as-converted basis. As of the close of business on the record date, there were              outstanding shares of DelMar Common Stock and              outstanding shares of DelMar Series B Preferred Stock convertible into              shares of DelMar Common Stock.

 

Q:	What interests do DelMar’s current officers and directors have in the Merger?

 

A:	DelMar’s board of directors and executive officers may have interests in the Merger that are different from, in addition to or in conflict with, yours.

 

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As of June 9, 2020, DelMar’s directors and executive officers beneficially owned approximately 1.0% of the shares of DelMar Common Stock (on an as converted basis). Saiid Zarrabian, currently DelMar’s President and Chief Executive Officer, Scott Praill, currently DelMar’s Chief Financial Officer, and Dennis Brown, Ph.D., currently DelMar’s Chief Scientific Officer, will continue as the President and Chief Executive Officer, Chief Financial Officer and Chief Scientific Officer, of DelMar, respectively, following the consummation of the Merger. Additionally, Saiid Zarrabian, Robert J. Toth, Jr., Robert E. Hoffman, currently members of the DelMar’s board of directors, are expected to continue as directors of DelMar following the consummation of the Merger. DelMar’s directors and executive officers have also entered into the DelMar Support Agreement in connection with the Merger.

For more information, please see the sections entitled “The Merger—Interests of DelMar’s Directors and Officers in the Merger” and “Certain Agreements Related to the Merger—Support Agreements.”

 

Q:	What interests do Adgero’s current officers and directors have in the Merger?

 

A:	Adgero’s board of directors and executive officers may have interests in the Merger that are different from, in addition to or in conflict with, yours and the Adgero Stockholders.

As of June 9, 2020, Adgero’s directors and executive officers own approximately 22.9% of the outstanding shares of Adgero Common Stock, John Liatos, currently Adgero’s interim Chief Executive Officer and Chief Financial Officer, and Steven Rychnovsky, Ph.D., currently Adgero’s Vice President, Operations and Product Development, will continue as DelMar’s Senior Vice President, Business Development and Vice President, Research and Development, respectively, following the consummation of the Merger. Additionally, Keith Murphy and Mr. Liatos, currently members of the Adgero’s board of directors, are expected to become directors of DelMar following the consummation of the Merger. Adgero’s directors and executive officers have also entered into the Adgero Support Agreement in connection with the Merger. Additionally, the 530,000 shares of outstanding restricted stock of Adgero, of which 525,000 were issued to directors and officers of Adgero will no longer be subject to transfer restrictions or forfeiture and will be fully vested in connection with the Closing of the Merger.

In addition, Adam Stern, a member of the Adgero board of directors, is an affiliate of the Placement Agent and SternAegis Ventures. In connection with the Merger, SternAegis Ventures (or its designees) is entitled to receive the Success Fee Shares. The Success Fee Shares will be payable upon the Closing of the Merger and will be subject to a two-year lock-up period. In connection with the Private Placement, the Placement Agent is entitled to receive cash compensation in an amount equal to ten percent of the gross proceeds raised in the Private Placement, and the Placement Agent Warrants. The Placement Agent is also entitled to receive a non-accountable expense allowance equal to 3% of the gross proceeds raised in each closing of the Private Placement and is entitled to a right of first refusal for a period of six months from the Closing of the Merger to act as a lead or co- placement agent for any proposed private offering of DelMar securities. Upon the Closing, it is anticipated that DelMar will enter into a nonexclusive financial advisory agreement with the Placement Agent, on terms to be decided by the parties, pursuant to which the Placement Agent may provide certain advisory services to DelMar with respect to potential merger and acquisition and other transactions.

For more information, please see the sections titled “The Merger—Interests of Adgero’s Directors and Officers in the Merger” and “Certain Agreements Related to the Merger—Support Agreements.”

 

Q:	What are the material U.S. federal income tax consequences of the Merger to Adgero’s United States stockholders?

 

A:	Each of DelMar and Adgero intends to take the position that the Merger is characterized as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, for U.S. federal

 

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income tax purposes. Assuming the Merger is so characterized, in general, the material tax consequences to U.S. Holders (as defined herein) of Adgero Common Stock would be as follows:

 

•

Each U.S. Holder of Adgero Common Stock should not generally recognize gain or loss upon the exchange of Adgero Common Stock for DelMar Common Stock pursuant to the Merger, except to the extent of cash received in lieu of a fractional share of DelMar Common Stock described below; and

 

•

Each U.S. Holder of Adgero Common Stock should recognize gain or loss to the extent any cash received in lieu of a fractional share of DelMar Common Stock exceeds or is less than the basis of such fractional share.

However, there are many requirements that must be satisfied in order for the Merger to be treated as a reorganization under Section 368(a) of the Code, some of which are based upon factual determinations, and the reorganization treatment could be affected by actions taken after the Merger. If the Merger failed to qualify as a reorganization under Section 368(a) of the Code, U.S. Holders of Adgero Common Stock generally would recognize the full amount of gains and losses realized on the exchange of their Adgero Common Stock for DelMar Common Stock in the Merger.

The discussion of the material U.S. federal income tax consequences contained in this proxy statement/prospectus/information statement is intended to provide only a general discussion and is not a complete analysis or description of all potential U.S. federal income tax consequences of the Merger that may vary with, or are dependent on, individual circumstances. In addition, the discussion does not address the effects of any foreign, state or local tax laws. Accordingly, you should consult your tax advisor for a full understanding of the tax consequences of the Merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For more information, please see the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q:	Do DelMar stockholders have appraisal rights if they object to the proposed Merger?

 

A:	No. There are no appraisal rights available to holders of shares of DelMar Common Stock and DelMar Series B Preferred Stock in connection with the Merger.

 

Q:	What will happen to DelMar if, for any reason, the Merger does not close?

 

A:	There are certain circumstances under which the Merger Agreement may be terminated. Please see the section entitled “The Merger Agreement—Termination of the Merger Agreement” for information regarding the parties’ specific termination rights.

If, as a result of the termination of the Merger Agreement or otherwise, DelMar is unable to complete the Merger by August 31, 2020 or obtain the approval to extend the deadline for DelMar to consummate the Merger, the DelMar board of directors may elect to, among other things, attempt to complete another strategic transaction like the Merger, attempt to purchase additional assets, enter into collaboration or joint venture agreements or attempt to sell or otherwise dispose of the various assets of DelMar.

 

Q:	Do Adgero stockholders have appraisal rights if they object to the proposed Merger?

 

A:

Yes. Adgero stockholders are entitled to appraisal rights in connection with the Merger under Delaware law. For more information about such rights, see the provisions of Section 262 of the DGCL, attached hereto as Annex G, and the section entitled “The Merger—Appraisal Rights and Dissenters’ Rights.”

 

Q:	When is the Merger expected to be completed?

 

A:

It is currently anticipated that the Merger will be consummated promptly following the DelMar special meeting of stockholders, provided that all other conditions to the consummation of the Merger have been satisfied or waived, including raising gross proceeds of at least $10 million in the Private Placement. For a description of the conditions to the completion of the Merger, please see the section entitled “The Merger Agreement—Conditions to the Closing of the Merger.”

 

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Q:	When and where will the special meeting of DelMar stockholders be held?

 

A:

The DelMar special meeting will be held in a virtual meeting format only. The special meeting will be held on            , 2020 at          a.m. Eastern time. In order to participate in the special meeting live via the Internet, you must register at www.viewproxy.com/delmarpharma/SM/2020 by     Eastern Time by             , 2020. On the day of the DelMar special meeting, if you have properly registered, you may enter the special meeting by logging in using the event password you received via email in your registration confirmation at www.viewproxy.com/delmarpharma/SM/2020. You will not be able to attend the DelMar special meeting in-person.

If you are a registered holder, you must register using the virtual control number included in your proxy materials or your proxy card. If you hold your shares beneficially through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the Special Meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the Special Meeting (but will not be able to vote your shares) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.viewproxy.com/delmarpharma/SM/2020.

 

Q:	What do I need to do now?

 

A

You are urged to carefully read and consider the information contained in this proxy statement/prospectus/information statement, including the financial statements and annexes attached hereto, and to consider how the Merger will affect you. If you are a DelMar stockholder, you should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus/information statement on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

If you are an Adgero stockholder, you may execute and return your written consent to Adgero in accordance with the instructions provided.

 

Q:	How do I vote?

 

A:

If you were a holder of DelMar Common Stock or DelMar Series B Preferred Stock on            , 2020, the record date for the special meeting of stockholders, you may provide your proxy instructions in one of three different ways. First, you can mail your signed proxy card in the enclosed return envelope. Second, you may provide your proxy instructions via the Internet by following the instructions on your proxy card or voting instruction form. You may also vote your shares at the special meeting via live webcast. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the special meeting of DelMar stockholders.

 

Q:	What happens if I do not return a proxy card or otherwise provide proxy instructions, as applicable?

 

A:

Signed and dated proxies received by DelMar without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each of the DelMar Proposals presented to DelMar’s stockholders in accordance with the recommendation of DelMar’s board of directors. The proxyholders may use their discretion to vote on any other matters which properly come before the DelMar special meeting.

 

Q:	May I vote in person at the special meeting of stockholders of DelMar?

 

A:

Due to the public health impact of the coronavirus outbreak (“COVID-19”) and to support the health and well-being of DelMar’s stockholders, the DelMar special meeting will be held in a virtual meeting format only. If your shares of DelMar Common Stock or DelMar Series B Preferred Stock are registered directly in your name with the DelMar transfer agent, you are considered to be the stockholder of record with respect to those shares,

 

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and the proxy materials and proxy card are being sent directly to you by DelMar. If you are a DelMar stockholder of record, you must register using the virtual control number included in your proxy materials or your proxy card (if you received a printed copy of the proxy materials) in order to vote at the special meeting. If you hold your shares beneficially through a bank or broker, you are considered the beneficial owner of shares held in “street name” and you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the special meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the special meeting, so long as you demonstrate proof of stock ownership, but you will not be able to vote your shares. Even if you plan to attend the DelMar special meeting live via the internet, DelMar encourages you to vote in advance by internet or mail so that your vote will be counted if you later decide not to attend the special meeting live via the internet.

For more information, please see the section entitled “The Special Meeting of DelMar Stockholders—Voting Your Shares.”

 

Q:	If my DelMar shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A:

If you are a beneficial owner of shares of DelMar Common Stock and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the New York Stock Exchange (the “NYSE”), deems the particular proposal to be a “routine” matter and how your broker or nominee exercises any discretion they may have in the voting of the shares that you beneficially own. Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholder, such as mergers, stockholder proposals, elections of directors (even if not contested), executive compensation (including any advisory stockholder votes on executive compensation and on the frequency of stockholder votes on executive compensation), and certain corporate governance proposals, even if management-supported.

For any DelMar Proposal that is considered a “routine” matter, your broker or nominee may vote your shares in its discretion either for or against the proposal even in the absence of your instruction. For any DelMar Proposal that is considered a “non-routine” matter for which you do not give your broker instructions, the shares will be treated as broker non-votes. Broker non-votes occur when a beneficial owner of shares held in street name does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Broker non-votes will not be considered to be shares “entitled to vote” at the special meeting and will not be counted as having been voted on the applicable proposal.

 

Q:	May I change my vote after I have submitted a proxy or provided proxy instructions?

 

A:	Yes. DelMar stockholders of record, other than those stockholders who are parties to the DelMar Support Agreement, may change their vote at any time before their proxy is voted at the DelMar special meeting, as applicable, in one of the following ways:

 

•

filing with the Secretary of DelMar, a letter revoking the proxy;

 

•

submitting another signed proxy with a later date; or

 

•

attending the DelMar special meeting and voting online, provided you file a written revocation with the Secretary of the DelMar special meeting prior to the voting of such proxy.

 

Q:	What is the quorum requirement for the special meeting of stockholders?

 

A:	The holders of at least 33.3% of the outstanding shares of DelMar Common Stock and DelMar Series B Preferred Stock, voting together as a class, as of the record date, represented in person or by proxy, will

 

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constitute a quorum for the transaction of business at the DelMar special meeting. Proxies marked as abstentions and broker non-votes, if any, will be included to determine the number of shares present at the special meeting. In the absence of a quorum, a majority of DelMar’s stockholders, present in person or represented by proxy, and voting thereon will have the power to adjourn the special meeting. As of the record date for the special meeting,              shares of DelMar Common Stock and              shares of DelMar Series B Preferred Stock would be required to achieve a quorum.

 

Q:	What risks should I consider in deciding whether to vote in favor of the DelMar Proposals or to execute and return the written consent approving the Merger Agreement and the transactions contemplated thereby, as applicable?

 

A:

You should carefully review this proxy statement/prospectus/information statement, including the section entitled “Risk Factors,” which sets forth certain risks and uncertainties related to the Merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of DelMar and Adgero, as an independent company, is subject.

 

Q:	Who will solicit and pay the cost of soliciting proxies?

 

A:

DelMar will bear all costs and expenses in connection with the solicitation of proxies, including the costs of preparing, printing and mailing this proxy statement/prospectus/information statement for the DelMar special meeting. DelMar has engaged Alliance Advisors LLC to serve as information agent and assist in the solicitation of proxies for the DelMar special meeting and will pay an aggregate initial fee of approximately $15,000, plus any additional fees to be determined at the conclusion of the solicitation and reimbursement of reasonable out-of-pocket expenses.

 

Q:	Who can help answer my questions?

 

A:	If you are a DelMar stockholder and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact DelMar’s proxy solicitor:

Alliance Advisors LLC

200 Broadacres Drive, 3^rd Floor

Bloomfield, NJ 07003

866-619-8907

You may also contact DelMar at:

DelMar Pharmaceuticals, Inc.

12707 High Bluff Drive, Suite 200

San Diego, CA 92130

If you are an Adgero stockholder and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact:

Adgero Biopharmaceuticals Holdings, Inc.

4365 US 1 South, Suite 211,

Princeton, NJ 08540

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement/prospectus/information statement may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding DelMar, DelMar’s management team’s, Adgero and Adgero’s management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Actual results may differ materially from DelMar’s and Adgero’s current expectations depending upon a number of factors. These factors include, among others:

 

•

the inherent uncertainty associated with financial projections, restructuring in connection with, and successful consummation of, the Merger;

 

•

subsequent integration of DelMar’s and Adgero’s businesses and the ability to recognize the anticipated synergies and benefits of the Merger;

 

•

the inability to complete the Merger due to the failure to obtain approval of the stockholders of DelMar or Adgero or to satisfy other conditions to the Closing in the Merger Agreement and/or the failure the complete the Private Placement;

 

•

the combined company’s financial and business performance following the Merger, including plans to develop and commercialize additional products;

 

•

changes in Adgero’s and DelMar’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

 

•

developments and projections relating to the combined company’s competitors or industry;

 

•

the impact of health epidemics, including the COVID-19 pandemic, on the business of DelMar and Adgero;

 

•

the ability to protect and maintain the combined company’s intellectual property protection and not infringe on the rights of others;

 

•

developments and projections relating to the combined company’s competitors or industry;

 

•

future regulatory, judicial and legislative changes in DelMar’s or Adgero’s industry;

 

•

access to available financing (including the Private Placement in connection with the Merger) on a timely basis and on reasonable terms;

 

•

the receipt of required regulatory approvals for the Merger;

 

•

the diversion of management time on Merger-related issues;

 

•

the inability to maintain the listing of DelMar Common Stock on Nasdaq following the Merger;

 

•

the outcome of any legal proceedings that may be instituted against DelMar following announcement of the proposed Merger and transactions contemplated thereby; and

 

•

other risks and uncertainties described in this proxy statement/prospectus/information statement, including those in the section entitled “Risk Factors.”

 

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These forward-looking statements are based on information available as of the date of this proxy statement/prospectus/information statement, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Except as expressly required by law, including the securities laws of the United States, DelMar and Adgero disclaim any intent or obligation to update or revise these forward-looking statements.

 

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RISK FACTORS

The combined company will face a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below before deciding how to vote your shares of stock. In addition, you should consider the risks associated with the business of DelMar and Adgero because these risks may also affect the combined company. You should also read and consider the other information in this proxy statement/prospectus/information statement. Please see the section entitled “Where You Can Find More Information.”

Risks Related to Adgero

Risks Related to Adgero’s Financial Position and Capital Requirements

Adgero is a biopharmaceutical company that will face many risks frequently encountered by clinical-stage businesses.

Marketing approval of Adgero’s therapeutic product candidate, the REM-001 Therapy product, consisting of three parts, the laser light source, the light delivery device and the drug REM-001 (collectively, the “REM-001 Therapy”), requires extensive clinical testing data to support the safety and efficacy requirements needed for regulatory approval. Although Adgero believes substantial clinical safety and efficacy data exists for Adgero’s REM-001 Therapy in cutaneous metastatic breast cancer (“CMBC”), from the trials completed by Miravant Medical Technologies, and its wholly-owned subsidiaries, a former public pharmaceutical and research development company (collectively, “Miravant”), Adgero’s interactions with the Food and Drug Administration (the “FDA”) in 2017 indicated that further clinical trials by Adgero are needed prior to approval in this indication. In any other indications Adgero may pursue, Adgero will need to undertake extensive clinical testing to demonstrate the safety and efficacy of the REM-001 Therapy or any other product candidates Adgero develops. In addition, since REM-001 was previously manufactured and tested in the clinical studies conducted by Miravant, Adgero intends to use very similar or the same procedures to manufacture Adgero’s clinical drug supply and based on Adgero’s interaction with FDA Adgero believes that Adgero’s manufacturing plan is in alignment with the FDA expectations. However, the FDA may later determine that Adgero’s proposed approach is not acceptable and may request more extensive approaches be employed. Similarly, the other two components of the REM-001 Therapy, namely the laser and light delivery device, or their equivalents, were used previously by Miravant in certain clinical studies. Adgero intends to use the same lasers, or commercially available FDA cleared lasers that are functionally equivalent to the previously used devices, in Adgero’s clinical trials and Adgero intends to manufacture Adgero’s light delivery devices using the same general design that Miravant used. Based on Adgero’s recent interactions with FDA, Adgero believes this approach should be acceptable, but FDA may later determine this proposed approach is not acceptable and may request that more extensive approaches be employed.

The likelihood of success of Adgero’s business plan must be considered in light of the problems, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding clinical-stage businesses and the regulatory and competitive environment in which Adgero operates. Biopharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk and is a capital-intensive business.

Accordingly, investors should consider Adgero’s prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the clinical stages of development. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that Adgero cannot assure you that Adgero will be able to:

 

•

successfully implement or execute Adgero’s current business plan, or that Adgero’s business plan is sound;

 

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receive FDA approval of clinical trial protocols so that anticipated additional clinical trials of REM-001 Therapy commence;

 

•

successfully complete clinical trials and obtain regulatory approval for the marketing of REM-001 Therapy;

 

•

successfully contract for and manufacture clinical drug product and subsequently establish a commercial drug supply;

 

•

successfully contract for and manufacture light delivery devices for clinical trials and establish a commercial light delivery device supply;

 

•

receive FDA approval to use existing lasers (or lasers that are functionally equivalent) or light delivery devices in clinical trials and for commercial supply;

 

•

secure market exclusivity and/or adequate intellectual property protection for REM-001 Therapy;

 

•

achieve broad market acceptance of REM-001 Therapy in the medical community and with third party payors and consumers;

 

•

attract and retain an experienced management and advisory team; and

 

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raise sufficient funds in the capital markets to effectuate its business plan including clinical development, product development/manufacture regulatory approval and commercialization for REM-001 Therapy.

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

Adgero is a biopharmaceutical company with a limited operating history and has never generated any product revenue.

Adgero is a biopharmaceutical company with a limited operating history. Adgero was founded in March 2015 and its operations to date have been limited to organizing and staffing its company. Adgero has not yet successfully completed a large-scale, pivotal clinical trial, obtained marketing approval, manufactured its REM-001 Therapy at commercial scale, or conducted sales and marketing activities that will be necessary to successfully commercialize its REM-001 Therapy. Consequently, predictions about Adgero’s future success or viability may not be as accurate as they could be if it had a longer operating history or a history of successfully developing and commercializing its product candidates.

Adgero’s ability to generate revenue and achieve and maintain profitability will depend upon its ability to successfully complete the development of its REM-001 Therapy and to obtain the necessary regulatory approvals. Adgero has never generated any product revenue, and has no product candidates approved for commercial sale.

Adgero has incurred operating losses in each year since its inception and expects to continue to incur substantial losses for the foreseeable future. Adgero may never become profitable or, if achieved, be able to sustain profitability.

Adgero expects to continue to incur substantial expenses and losses without corresponding revenues unless and until Adgero is able to obtain regulatory approval and successfully commercialize REM-001 Therapy. To date, Adgero has not generated any revenue from REM-001 Therapy and it expects to incur significant expense to complete its clinical program for REM-001 Therapy in the United States and elsewhere. Adgero may never be able to obtain regulatory approval for the marketing of REM-001 Therapy in any indication in the United States or internationally. Even if it is able to commercialize REM-001 Therapy or any other product candidate, there can be no assurance that it will generate significant revenues or ever achieve profitability. Adgero’s net loss for

 

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the year ended December 31, 2019 and for the three months ended March 31, 2020 was approximately $1,771,508 and $352,140, respectively. At March 31, 2020, Adgero’s accumulated deficit since inception was approximately $15,330,431.

Until Adgero obtains FDA approval for the REM-001 Therapy, which is not expected until after completion of a Phase 3 trial and submission and successful review of a new drug application and associated pre-marketing approval for Adgero’s device, it expects that its research and development expenses will continue to increase as it advances its clinical trials for indications for the treatment of CMBC and potentially other cutaneous metastatic cancers and locally advanced basal cell carcinomas. Adgero may elect to pursue FDA approval for REM-001 Therapy in other indications including cutaneous metastatic cancers other than CMBC as well as locally advanced basal cell carcinomas such as in patients with Basal Cell Carcinoma Nevus Syndrome (“BCCNS”) other indications it deems appropriate, which will result in significant additional research and development expenses. As a result, Adgero expects to continue to incur substantial losses for the foreseeable future, and these losses will be increasing. Adgero is uncertain when or if it will be able to achieve or sustain profitability. If Adgero achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable would impair Adgero’s ability to sustain operations and adversely affect its ability to raise capital.

Adgero will require additional capital to fund its operations, and if Adgero fails to obtain necessary financing, it may not be able to complete the development and commercialization of its REM-100 Therapy. Adgero’s cash or cash equivalent will only fund its operations for a limited time and it will need to raise additional capital to support its development and commercialization efforts.

Adgero expects to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize the REM-100 Therapy. Even with the expected cash reserves of the combined company, Adgero will require substantial additional capital to complete the development and potential commercialization of the REM-100 Therapy. Adgero is currently operating at a loss and expects its operating costs will increase significantly as it incurs costs related to the clinical trials for REM-001 Therapy. At March 31, 2020, Adgero had a cash and cash equivalents balance of approximately $515,769 and certificates of deposit of $900,168.

Adgero does not currently have any arrangements or credit facilities in place as a source of funds, and there can be no assurance that it will be able to raise sufficient additional capital on acceptable terms, or at all. Adgero or the combined company may seek, in addition to the Private Placement, additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting Adgero’s ability to take specific actions, such as incurring additional debt, and could increase its expenses and require that its assets secure such debt.

Equity financing, if obtained, could result in dilution to existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, Adgero may be required to delay, scale back or eliminate the development of business opportunities and its operations and financial condition may be materially adversely affected. Adgero can provide no assurances that any additional sources of financing will be available to it on favorable terms, if at all. In addition, if Adgero is unable to secure sufficient capital to fund its operations, it might have to enter into strategic collaborations that could require it to share commercial rights to REM-001 Therapy with third parties in ways that it currently does not intend or on terms that may not be favorable to Adgero. If Adgero chooses to pursue additional indications and/or geographies for REM-001 Therapy or otherwise expand more rapidly than it presently anticipates it may also need to raise additional capital sooner than expected.

 

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

Adgero’s plan to achieve marketing approval of REM-001 Therapy depends partly on the accuracy of its preliminary efficacy analysis of REM-001 Therapy CMBC trial data. While Adgero believes the results of its preliminary efficacy analysis accurately reflect the actual clinical trial results, a detailed analysis overseen by regulatory experts may yield different results.

Adgero plans to utilize existing REM-001 Therapy clinical trial data as supportive data when seeking marketing approval of REM-001 Therapy for the treatment of CMBC. Between February 1996 and January 1999, Miravant, with support from certain corporate partners, conducted four clinical trials for the treatment of CMBC using REM-001 Therapy. As part of Adgero’s review of REM-001 Therapy’s data package, Adgero noted that while Miravant’s investigators had done a safety analysis of all treated patients, these reports indicated an efficacy analysis was only performed on two of their four clinical trials. Notably, there had been no efficacy analysis on the other two trials which constituted approximately half of the CMBC patients who were treated with REM-001 Therapy. Adgero originally performed a preliminary efficacy analysis on the data from all four CMBC trials, including the two that had not previously been analyzed. Adgero then engaged regulatory experts who were either former FDA employees with directly related experience in reviewing similar oncology treatments who were then acting as independent consultants or individuals who have provided senior regulatory guidance to major pharmaceutical or medical device companies in situations that led to regulatory approval. These individuals guided Adgero in conducting a second more in-depth analysis that yielded results consistent with Adgero’s original analysis. Following that, Adgero compiled a briefing document and submitted questions to FDA. While Adgero believes the results of Adgero’s preliminary efficacy analysis, and subsequent analysis conducted under the guidance of these experts which was consistent with its original preliminary analysis, accurately reflect the actual clinical trial results and that the age of the underlying data from the clinical studies is not material, a more in-depth review may yield different conclusions. Such differing results may negatively impact Adgero’s ability to pursue or achieve, or result in delays to obtain, marketing approval of REM-001 Therapy. There can be no certainty that results from Adgero’s analyses done to date or results from future analyses that it may undertake will be sufficiently complete to satisfy FDA requests or that any results will be favorable to Adgero.

Adgero’s REM-001 Therapy clinical trial data may not be deemed acceptable by the FDA to support its new drug applications.

In seeking regulatory approval for REM-001, Adgero intends to rely at least in part upon data gathered by Miravant Medical Technologies in its initial Phase 1 studies and in four later Phase 2/3 clinical studies that were conducted approximately 20 years ago. Based on Adgero’s initial interactions with the FDA, Adgero believes the agency will accept these results as supportive data but Adgero cannot ultimately be certain that the FDA will accept data that old to support its new drug applications. Also based on Adgero’s initial interactions with the FDA, it believes its plans for manufacturing investigational test materials will lead to investigational test materials that FDA will recognize as being sufficiently comparable to Miravant’s materials and also suitable for further investigational trials but FDA may later raise questions about the similarity of Miravant’s investigational testing material versus its manufactured investigational testing material, or may raise questions about the processes and methods under which this old data was collected or may raise additional concerns regarding the elapsed time period. If the FDA does not accept this data, Adgero will have to incur significant costs which may require additional capital to redo some or all of the Miravant studies or supplement these studies with additional studies.

Adgero depends entirely on the success of REM-001 Therapy, which has not received FDA approval for the treatment of CMBC, its lead indication. If Adgero is unable to obtain regulatory approval for and generate revenues from REM-001 Therapy, Adgero’s ability to create stockholder value will be limited.

Adgero does not generate revenues from any FDA approved drug products. Its only product candidate is REM-001 Therapy, which it believes has previously demonstrated safety and efficacy results in patients suffering

 

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from CMBC in four late stage (Phase 2/3) clinical trials completed by Miravant. However, Adgero is not currently actively engaged in clinical trials for this or any other product candidate. Moreover, there can be no assurance that any positive clinical results obtained for REM-001 Therapy in prior clinical studies will be repeated in future clinical studies, or that such results will be sufficient to obtain regulatory approval. If Adgero does not obtain regulatory approval, or the approval process for REM-001 Therapy takes longer than it anticipates, its expenses and need for additional capital will increase. Most drug candidates that reach clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval. Therefore, Adgero’s business currently depends entirely on the successful development, regulatory approval and commercialization of REM-001 Therapy, which may never occur.

If Adgero is not able to obtain any required regulatory approvals for REM-001 Therapy, it will not be able to commercialize its only product candidate, REM-001 Therapy, and it will not be able to generate revenue.

Adgero will need to successfully complete additional clinical trials for REM-001 Therapy before it can apply for its marketing approval, including conducting a pivotal Phase 3 clinical trial (or equivalent) in CMBC patients with the goal of submitting a New Drug Application (“NDA”) for REM-001 Therapy. However, it may never commence this trial, and if it does, there can be no assurance that the trial will be successful. Even if this clinical trial is successful, Adgero may be required to conduct additional clinical trials to establish REM-001 Therapy’s safety and efficacy before the NDA for REM-001 Therapy in CMBC can be approved, if at all.

Clinical trials are expensive, difficult to design and implement, can take many years to complete and are 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 Adgero’s clinical trials can occur at any stage of testing. Adgero may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent its ability to receive regulatory approval for or commercialize REM-001 Therapy. 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 and other regulatory authorities in the United States and other countries, which regulations differ from country to country. Adgero is not permitted to market REM-001 Therapy, including the REM-001 drug and associated device components, as a prescription pharmaceutical product in the United States until it receives approval of an NDA from the FDA, or in any foreign countries until it receives 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 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 to the FDA and even fewer are eventually approved for commercialization. Adgero has not submitted an NDA to the FDA or comparable applications to other regulatory authorities. If Adgero’s development efforts for REM-001 Therapy, including regulatory approval, are not successful for its planned indications, or if adequate demand for REM-001 Therapy is not generated, its business will be materially adversely affected.

Adgero’s 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:

 

•

the FDA or comparable foreign regulatory authorities or institutional review boards (“IRBs”), may disagree with the design or implementation of Adgero’s clinical trials;

 

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Adgero may not be able to provide acceptable evidence of its product candidate’s safety and efficacy;

 

•

the results of Adgero’s clinical trials may not be satisfactory or may not meet the level of statistical or clinical significance required by the FDA, European Medicines Agency (“EMA”), or other regulatory agencies for marketing approval;

 

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the dosing of REM-001 Therapy in a particular clinical trial may not be at an optimal level;

 

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patients in Adgero’s clinical trials may suffer adverse effects for reasons that may or may not be related to REM-001 Therapy;

 

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the data collected from clinical trials may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

 

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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which Adgero contracts for clinical and commercial supplies; and

 

•

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering Adgero’s clinical data or product data insufficient for approval.

Failure to obtain regulatory approval for REM-001 Therapy for the foregoing or any other reasons will prevent Adgero from commercializing this product candidate as a prescription product and generating revenue. Adgero cannot guarantee that regulators will agree with its assessment of the results of the clinical trials conducted by Miravant or that Adgero may 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 Adgero’s data is insufficient for approval and require additional clinical trials or other studies. In addition, varying interpretations of the data obtained from clinical testing could delay, limit or prevent regulatory approval of Adgero’s product candidate.

Adgero is a clinical-stage company and has not submitted an NDA or received regulatory approval to market REM-001 Therapy in any jurisdiction. Adgero has only limited experience in filing the applications necessary to gain regulatory approvals and expects to rely on consultants and clinical CROs with expertise in this area to assist Adgero in this process. Securing FDA approval requires the submission of pre-clinical, clinical, and/or pharmacokinetic data, information about the product development and product manufacturing processes and inspection of facilities and supporting information to the FDA for each therapeutic indication to establish a product candidate’s safety and efficacy for each indication. REM-001 Therapy may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude Adgero 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 the regulatory approval policy 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 Adgero may seek approval, but the failure to obtain approval in one jurisdiction may negatively impact Adgero’s ability to seek approval in a different jurisdiction. Failure to obtain regulatory marketing approval for REM-001 Therapy in any indication will prevent Adgero from commercializing the product candidate, and generating revenue.

Adgero has limited experience as a company conducting clinical trials.

Adgero is a clinical stage company and its success is dependent upon its ability to obtain regulatory approval for and commercialization of its clinical product candidate, and it has not demonstrated an ability to perform the functions necessary for the approval or successful commercialization of any product candidate. The successful commercialization of any product candidate may require Adgero to perform a variety of functions, including:

 

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continuing to undertake preclinical development and successfully enroll subjects in clinical trials;

 

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participating in regulatory approval processes;

 

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formulating and manufacturing products; and

 

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conducting sales and marketing activities.

Adgero has limited experience conducting and enrolling subjects in clinical trials. While certain members of Adgero’s management and staff have significant experience in conducting clinical trials, to date, Adgero has not successfully completed any clinical trials as a company. Until recently, Adgero’s operations have been limited primarily to organizing and staffing its company, acquiring, developing and securing its proprietary technology and preparing for clinical trials of the REM-100 Therapy. These operations provide a limited basis to assess Adgero’s ability to develop and commercialize its clinical product candidate.

Although Adgero has recruited a team that has significant experience with managing clinical trials, it has limited experience as a company in conducting its own clinical trials. In part because of this lack of experience, Adgero cannot guarantee that planned clinical trials will be completed on time, if at all. Large-scale trials require significant additional financial and management resources, monitoring and oversight, and reliance on third-party clinical investigators, consultants or contract research organizations, or CROs. Relying on third-party clinical investigators, CROs and manufacturers, which are all also subject to governmental oversight and regulations, may also cause Adgero to encounter delays that are outside of its control.

Coronavirus could adversely impact Adgero’s business, including Adgero’s clinical trials.

In December 2019, a novel strain of coronavirus (“COVID-19”), was reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus has spread to multiple countries, including the United States. As the COVID-19 coronavirus continues to spread around the globe, Adgero will likely experience disruptions that could severely impact its business and clinical trials, including:

 

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delays or difficulties in enrolling patients in planned clinical trials;

 

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delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

 

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diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as clinical trial sites and hospital staff supporting the conduct of Adgero’s clinical trials;

 

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interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;

 

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limitations in employee resources that would otherwise be focused on the conduct of clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

 

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delays in receiving approval from local regulatory authorities to initiate planned clinical trials;

 

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delays in clinical sites receiving the supplies and materials needed to conduct clinical trials;

 

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interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in clinical trials;

 

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changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require changes in the ways in which clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

 

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delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

 

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delay in the timing of interactions with the FDA due to absenteeism by federal employees or by the diversion of their efforts and attention to approval of other therapeutics or other activities related to COVID-19; and

 

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refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.

In addition, the outbreak of COVID-19 could disrupt Adgero’s operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others in office or laboratory facilities, or due to quarantines. COVID-19 illness could also impact members of Adgero’s board of directors resulting in absenteeism from meetings of the directors or committees of directors, and making it more difficult to convene the quorums of the full board of directors or its committees needed to conduct meetings for the management of Adgero’s affairs.

The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact Adgero’s business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Adgero does not have a clinical supply of REM-001. Moreover, Adgero does not have its own manufacturing facilities nor has it contracted with third-parties to manufacture product for it. If Adgero is unable to contract with suitable third party manufacturers, or if third party manufacturers fail to meet applicable regulatory requirements or to supply Adgero for any reason, Adgero will be unable to complete clinical trials for REM-001 Therapy and its business will be materially impaired.

Adgero does not have a clinical supply of REM-001. Adgero’s plan calls for the use of a third-party manufacturer to produce the product for it. If and when approved, Adgero intends to have a third-party manufacture commercial supplies of the product as well. Adgero has not yet completed the transfer of the technology or manufactured the product at these facilities and its failure to timely do so will delay the commencement of its clinical trials and may also impact the timing for the submission of its NDA for REM-001 Therapy.

Adgero does not have a clinical supply of light delivery devices for use with REM-001 Therapy. Moreover, Adgero does not have its own manufacturing facilities nor has it contracted a third-party to manufacture these devices for it. If Adgero is unable to contract a third-party manufacturer, or if a third-party manufacturer fails to meet applicable regulatory requirements or to supply it for any reason, it will be unable to complete clinical trials for REM-001 Therapy and its business will be materially impaired.

Adgero does not have a clinical supply of REM-001 Therapy light delivery devices. Adgero’s plan calls for the use of a third-party manufacturer to produce these devices for it. Adgero has not yet contracted a third-party manufacturer and its failure to timely do so will delay the commencement of Adgero’s clinical trials and the submission of its NDA for REM-001 Therapy.

Adgero is planning to use laser light devices that are functionally equivalent to the Miravant devices in its planned clinical trials. Adgero does not have its own manufacturing facilities for conducting these activities nor has it contracted a third-party to manufacture these devices for it. If Adgero is unable to contract a third-party manufacturer, or if a third-party manufacturer fails to meet applicable regulatory requirements or to supply it for any reason, Adgero will be unable to complete clinical trials for REM-001 Therapy and its business will be materially impaired.

Adgero’s plan relies on using laser light devices that are functionally equivalent to the Miravant devices. Adgero’s plan calls for the use of a third-party manufacturer to produce new laser devices for it. Adgero has not

 

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yet contracted such a third-party and its failure to timely do so will delay the commencement of its clinical trials and the submission of its NDA for REM-001 Therapy.

REM-001 Therapy is Adgero’s only product candidate. If Adgero fails to successfully commercialize REM-001 Therapy, it may need to acquire additional product candidates or its business will be materially adversely affected.

Adgero has never commercialized any product candidates and does not have any other compounds in pre-clinical testing, lead optimization or lead identification stages beyond REM-001 Therapy. Adgero cannot be certain that REM-001 Therapy will prove to be sufficiently effective and safe to meet applicable regulatory standards for any indication. If Adgero fails to successfully commercialize REM-001 Therapy as a treatment for CMBC or any other indication, whether as a stand-alone therapy or in combination with other treatments, its business would be materially adversely affected.

Even if Adgero receives regulatory approval for REM-001 Therapy, it still may not be able to successfully commercialize it and the revenue that it generates from its sales, if any, may be limited.

If approved for marketing, the commercial success of REM-001 Therapy will depend upon its acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance of REM-001 Therapy will depend on a number of factors, including:

 

•

demonstration of clinical safety and efficacy;

 

•

relative convenience, burden and ease of administration;

 

•

the prevalence and severity of any adverse effects;

 

•

the willingness of physicians to prescribe REM-001 Therapy and of the target patient population to try new therapies;

 

•

efficacy of REM-001 Therapy compared to competing products;

 

•

the introduction of any new products that may in the future become available to treat indications for which REM-001 Therapy may be approved;

 

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new procedures or methods of treatment that may reduce the incidences of any of the indications in which REM-001 Therapy may show utility;

 

•

pricing and cost-effectiveness;

 

•

the inclusion or omission of REM-001 Therapy in applicable treatment guidelines;

 

•

the effectiveness of Adgero’s or any future collaborators’ sales and marketing strategies;

 

•

limitations or warnings contained in FDA-approved labeling;

 

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Adgero’s ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors; and

 

•

the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement.

If REM-001 Therapy is approved, but does not achieve an adequate level of acceptance by physicians, health care payors and patients, Adgero may not generate sufficient revenue and Adgero may not be able to achieve or sustain profitability. Adgero’s efforts to educate the medical community and third-party payors on the benefits of REM-001 Therapy may require significant resources and may never be successful.

In addition, even if Adgero obtains regulatory approvals, the timing or scope of any approvals may prohibit or reduce its ability to commercialize REM-001 Therapy successfully. For example, if the approval process takes

 

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too long, Adgero may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval Adgero ultimately obtains may be limited or subject to restrictions or post-approval commitments that render REM-001 Therapy not commercially viable. For example, regulatory authorities may approve REM-001 Therapy for fewer or more limited indications than Adgero requests, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve REM-001 Therapy with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Further, the FDA or comparable foreign regulatory authorities may place conditions on approvals such as risk management plans and the requirement for 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 must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guidelines, 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 REM-001. 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 REM-001 Therapy.

To obtain regulatory approval to market REM-001 Therapy in indications other than CMBC, costly and lengthy clinical trials will be required, and the results of the studies and trials are highly uncertain.

As part of the regulatory approval process, Adgero must conduct, at its own expense, clinical trials on humans for each indication that Adgero intends to pursue. Adgero expects the number of nonclinical studies and clinical trials that the regulatory authorities will require will vary depending on the disease or condition the drug is being developed to address and regulations applicable to the particular drug. Generally, the number and size of clinical trials required for approval varies based on the nature of the disease and size of the expected patient population that may be treated with a drug. Adgero must demonstrate that its drug candidates are safe and efficacious for use in the targeted human patients in order to receive regulatory approval for commercial sale, and regulatory approval for one indication does not guaranty regulatory approval of the same drug for another indication. If Adgero does not obtain regulatory approval for any indication for which it is sought, its business may be materially adversely impacted.

Even if Adgero obtains marketing approval for REM-001 Therapy, Adgero will be subject to ongoing obligations and continued regulatory review, which will result in significant additional expense. Additionally, REM-001 Therapy could be subject to labeling and other restrictions and withdrawal from the market and Adgero may be subject to penalties if Adgero fails to comply with regulatory requirements or if Adgero experiences unanticipated problems with REM-001 Therapy.

Even if Adgero obtains United States regulatory approval of REM-001 Therapy for an indication, the FDA may still impose significant restrictions on its 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, and post-market surveillance to monitor safety and efficacy. REM-001 Therapy 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 (“cGCPs”) for any clinical trials that Adgero conducts 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 Good Manufacturing Practices (“cGMP”), requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.

The FDA has the authority to require a risk evaluation and mitigation strategy (“REMS”) as part of an NDA or after approval, which may impose further requirements or restrictions on the distribution or use of an approved

 

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drug, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria or requiring patient testing, monitoring and/or enrollment in a registry.

With respect to sales and marketing activities by Adgero or any future partner, 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. Adgero may also be subject, directly or indirectly through Adgero’s customers and partners, 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, its proposed sales, marketing, and scientific/educational grant programs. If Adgero participates 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, Adgero 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 REM-001 Therapy is approved for an indication, Adgero’s 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 Adgero receives marketing approval for REM-001 Therapy, physicians may nevertheless legally prescribe its products to their patients in a manner that is inconsistent with the approved label. If Adgero is found to have promoted such off-label uses, Adgero 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 Adgero 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 Adgero or its manufacturers fail to comply with applicable regulatory requirements, Adgero may be subject to the following administrative or judicial sanctions:

 

•

restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;

 

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issuance of warning letters or untitled letters;

 

•

clinical holds;

 

•

injunctions or the imposition of civil or criminal penalties, monetary fines, restitution, or disgorgement;

 

•

suspension or withdrawal of regulatory approval;

 

•

refusals of government contracts;

 

•

suspension of any ongoing clinical trials;

 

•

refusal to approve pending applications or supplements to approved applications filed by Adgero, or suspension or revocation of product license approvals;

 

•

suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or

 

•

product seizure or detention or refusal to permit the import or export of product.

 

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The occurrence of any event or penalty described above may inhibit Adgero’s ability to commercialize REM-001 Therapy and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase Adgero’s product liability exposure.

If Adgero fails to obtain or maintain adequate coverage and reimbursement for its REM-001 Therapy, its ability to generate revenue could be limited.

The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of REM-001 Therapy that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only on a limited basis, Adgero may not be able to successfully commercialize the REM-001 Therapy. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow Adgero to establish or maintain adequate pricing that will allow it to realize a sufficient return on Adgero’s investment.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and Adgero believes the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause it to price the REM-001 Therapy on less favorable terms that it currently anticipates. In many countries, particularly the countries of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, Adgero may be required to conduct a clinical trial that compares the cost-effectiveness of its clinical product candidate to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that it is able to charge for its clinical product candidate. Accordingly, in markets outside the United States, the reimbursement for its products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for the REM-001 Therapy. Adgero expects to experience pricing pressures in connection with the sale of its clinical product candidate due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected for new products entering the marketplace.

Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside Adgero’s control.

Adgero may encounter delays in enrolling, or be unable to enroll, a sufficient number of participants to complete any of its clinical trials, especially in light of COVID-19. Once enrolled, Adgero may be unable to retain a sufficient number of participants to complete any of its trials. Late-stage clinical trials of its REM-001 Therapy may require the enrollment and retention of large numbers of subjects. Subject enrollment and retention in clinical trials depends on many factors, including the size of the subject population, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of subjects to clinical sites and the eligibility criteria for the study.

 

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Delays or failures in planned subject enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on its ability to develop its clinical product candidate, or could render further development impossible.

Adgero currently has no sales and marketing organization. If Adgero is unable to secure a sales and marketing partner or establish satisfactory sales and marketing capabilities, it may not successfully commercialize REM-001 Therapy.

At present, Adgero has no sales or marketing personnel. In order to commercialize products that are approved for commercial sales, it must either collaborate with third parties that have such commercial infrastructure or develop Adgero’s own sales and marketing infrastructure. If Adgero is not successful entering into appropriate collaboration arrangements, or recruiting sales and marketing personnel or in building a sales and marketing infrastructure, it will have difficulty successfully commercializing REM-001 Therapy, which would adversely affect its business, operating results and financial condition.

Adgero may not be able to enter into collaboration agreements on terms acceptable to it or at all. In addition, even if Adgero enters into such relationships, it may have limited or no control over the sales, marketing and distribution activities of these third parties. Adgero’s future revenues may depend heavily on the success of the efforts of these third parties. If Adgero elects to establish a sales and marketing infrastructure it may not realize a positive return on this investment. In addition, Adgero 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 Adgero’s efforts to commercialize REM-001 Therapy without strategic partners or licensees include:

 

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Adgero’s inability to recruit and retain adequate numbers of effective sales and marketing personnel;

 

•

the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe REM-001 Therapy;

 

•

the lack of complementary products to be offered by sales personnel, which may put Adgero at a competitive disadvantage relative to companies with more extensive product lines; and

 

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unforeseen costs and expenses associated with creating an independent sales and marketing organization.

REM-001 Therapy may exhibit adverse side effects that prevent its widespread adoption or that may necessitate its withdrawal from the market.

The REM-001 Therapy may exhibit undesirable and unintended side effects that may prevent or limit its commercial adoption and use. In the four clinical trial conducted by Miravant, there were a total of 17 serious adverse events, a large portion of which were related to necrosis of treated lesions. One such side effect upon the use of Adgero’s REM-001 Therapy drug and device components as potential therapeutic agents may be a period of photosensitivity for a certain period of time after receiving REM-001 Therapy. This period of photosensitivity is generally dose dependent and typically declines over time. A second such side effect is pain that arises from the treatment or results from the treatment. Treatment related pain has been experienced by some patients and it is often treated with analgesics but in some cases more aggressive treatment can be required. Even upon receiving approval by the FDA and other regulatory authorities, Adgero’s products may later exhibit adverse side effects that prevent widespread use or necessitate withdrawal from the market. The manifestation of such side effects could cause its business to suffer.

Adgero faces competition from other biotechnology and pharmaceutical companies and its operating results will suffer if Adgero fails to compete effectively.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapidly evolving technology and intense research and development efforts. Adgero has competitors in a number of jurisdictions

 

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that have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than it has. Established competitors may invest heavily to quickly discover and develop novel compounds that could make REM-001 Therapy 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 Adgero to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to REM-001 Therapy. If Adgero is not able to compete effectively against its current and future competitors, its business will not grow and its financial condition and operations will suffer.

Adgero has competition in the CMBC field including IGEA Medical S.p.A. in Europe, which is developing an electro-chemotherapy treatment for CMBC. Pinnacle Biologics Inc., a subsidiary of Advanz Pharma, sells Photofrin, a first generation photodynamic therapy (“PDT”) product for treatment of certain endobronchial non-small-cell lung cancers and esophageal cancers. Photofrin is currently in Phase 2 studies for the treatment of mesothelioma, recurrent glioma and lung cancer. To Adgero’s knowledge, there is no reported development program for Photofrin in CMBC.

There are numerous therapies currently used to treat CMBC patients including chemotherapy, radiation therapy, surgical excision, hyperthermia, cryotherapy, electro-chemotherapy, topical drugs and intra-lesional chemotherapy injections, but, to Adgero’s knowledge, there are no PDT therapies currently approved by the FDA for the treatment of CMBC or similar cutaneous cancers. Some topical PDT agents have been approved by FDA for actinic keratosis which is a precancerous skin condition and they have been approved in some other countries for some conditions that Adgero believes pose low medical risk such as basal cell cancer and acne. Additionally, Rogers Sciences Inc. is a medical device company that is developing a light delivery device for use with PDT treatment of cutaneous cancers that they are currently clinically testing in a Phase 2 study in CMBC patients.

In the BCCNS field there are approved drugs in the US, including vismodegib (Eviredge), Odomzo (sonidegib), imiquimod and topical fluorouracil that are sometimes use off-label. PellePharm also recently completed a Phase 3 trial in BCCNS but, to Adgero’s knowledge, has not received marketing approval.

Recently enacted and future legislation may increase the difficulty and cost for Adgero to obtain marketing approval of and commercialization of REM-001 Therapy and may affect the prices it 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 REM-001 Therapy, restrict or regulate post-approval activities and affect Adgero’s ability to profitably sell REM-001 Therapy. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. Adgero does 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 REM-001 Therapy, 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 Adgero to more stringent product labeling and post-marketing testing and other requirements.

In the United States, the Medicare Modernization Act (the “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, Adgero expects 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 it receives for REM-001 Therapy and could seriously harm its business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment

 

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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.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the “Health Care Reform Law”), 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. Effective October 1, 2010, 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. Substantial provisions affecting compliance have also been enacted, which may require Adgero to modify its business practices with healthcare practitioners and incur substantial costs to ensure compliance. Despite initiatives to repeal the Health Care Reform Law, at this time it appears the implementation of the Health Care Reform Law will continue. Although it is too early to determine the full effect of the Health Care Reform Law, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase Adgero’s regulatory burdens and operating costs.

In addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the “ATRA”) which delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. The ATRA, among other things, also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Adgero expects 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 any future profitability.

Adgero’s future growth depends, in part, on its ability to penetrate foreign markets, where it would be subject to additional regulatory burdens and other risks and uncertainties.

Adgero’s future profitability will depend, in part, on its ability to commercialize REM-001 Therapy in foreign markets for which it intends to rely on collaborations with third parties. If Adgero commercializes REM-001 Therapy in foreign markets, it would be subject to additional risks and uncertainties, including:

 

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Adgero’s customers’ ability to obtain reimbursement for REM-001 Therapy in foreign markets;

 

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Adgero ‘s inability to directly control commercial activities because it is relying on third parties;

 

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the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;

 

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different medical practices and customs in foreign countries affecting acceptance in the marketplace;

 

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import or export licensing requirements;

 

•

longer accounts receivable collection times;

 

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longer lead times for shipping;

 

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language barriers for technical training;

 

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•

reduced protection of intellectual property rights in some foreign countries;

 

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foreign currency exchange rate fluctuations; and

 

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the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Foreign sales of REM-001 Therapy 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 Adgero’s results of operations.

If Adgero markets REM-001 Therapy in a manner that violates healthcare fraud and abuse laws, or if Adgero violates government price reporting laws, it 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 Adgero intends to ensure that its promotional materials are consistent with its label, regulatory agencies may disagree with its 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 its 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. Adgero’s 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

 

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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.

Adgero is, and will be, completely dependent on third parties to manufacture REM-001 Therapy, and its commercialization of REM-001 Therapy 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 Adgero with sufficient quantities of REM-001 or REM-001 Therapy device components or fail to do so at acceptable quality levels or prices.

Adgero does not currently have, nor does it plan to acquire, the capability or infrastructure to manufacture the active pharmaceutical ingredient (“API”) in REM-001 drug product, as well as the other related device components, for use in its clinical trials, if required, or for commercial product, if any. In addition, Adgero does not have the capability to produce REM-001 drug product or the other related device components for commercial distribution. As a result, it will be obligated to rely on contract manufacturers to manufacture these materials for any clinical trials it commences, and if and when REM-001 Therapy is approved it will also rely on contract manufacturers for commercialization. Adgero has engaged a contract manufacturer for the clinical supply of its API for the REM-001 drug product. However, Adgero has not yet entered into an agreement with any contract manufacturer for the clinical supply of REM-001 drug product or the device components and it may not be able to engage a contract manufacturer for such supply on favorable terms to it, or at all.

The facilities used by any future contract manufacturers, if any, to manufacture REM-001 drug product and its related device components must be approved by the FDA pursuant to inspections that will be conducted after Adgero submits its NDA to the FDA. Adgero does not control the manufacturing process of, and is completely dependent on, any future contract manufacturing partners, if any, for compliance with cGMPs for manufacture of both active drug substances and finished drug and device components. These cGMP regulations cover all aspects of the manufacturing, testing, quality control and record keeping relating to the drug and device components of REM- 001 Therapy. If any future contract manufacturers cannot successfully manufacture material that conforms to Adgero‘s specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of the elements of REM-001 Therapy or if it withdraws any such approval in the future, Adgero may need to find alternative manufacturing facilities, which would significantly impact Adgero’s ability to develop, obtain regulatory approval for or market REM-001 Therapy, if approved.

Adgero’s future contract manufacturers, if any, 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. Although Adgero will have supply and quality agreements in place with its contract manufacturers, it will not have direct control over its contract manufacturers’ compliance with these regulations and standards. Failure by any of Adgero’s contract manufacturers to comply with applicable regulations could result in sanctions being imposed on it, including fines, injunctions, civil penalties, failure to grant approval to market REM-001 Therapy, delays, suspensions or withdrawals of approvals, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect Adgero’s business. In addition, Adgero will not have control over the ability of its future contract manufacturers, if any, to maintain adequate quality control, quality assurance and qualified personnel. Failure by its future contract manufacturers, if any, to comply with or maintain any of these standards could adversely affect its ability to develop, obtain regulatory approval for or market REM-001 Therapy.

If, for any reason, these third parties are unable or unwilling to perform, Adgero may not be able to terminate its agreements, if any, with them, or it may be costly to do so, and Adgero may not be able to locate

 

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alternative manufacturers or formulators or enter into favorable agreements with them and Adgero cannot be certain that any such third parties will have the manufacturing capacity to meet future requirements. If these future manufacturers or any alternate manufacturer of finished drug product experiences any significant difficulties in its respective manufacturing processes for Adgero’s API or finished REM-001 product and the other device components or should cease doing business with Adgero, Adgero could experience significant interruptions in the supply of REM-001 and the other device components or may not be able to create a supply of these items at all. Were Adgero to encounter manufacturing issues, its ability to produce a sufficient supply of REM-001 or the other device components might be negatively affected. Adgero’s inability to coordinate the efforts of its future third party manufacturing partners, if any, or the lack of capacity available at its third party manufacturing partners, could impair its ability to supply REM-001 and the other device components at required levels. Because of the significant regulatory requirements that Adgero would need to satisfy in order to qualify a new bulk or finished product manufacturer, if Adgero faces these or other difficulties with its future manufacturing partners, if any, Adgero could experience significant interruptions in the supply of REM-001 and the device components if it decided to transfer the manufacture of them 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 Adgero’s operations and result in lost sales. Additionally, Adgero will rely on third parties to supply the raw materials needed to manufacture its 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 REM-001 Therapy, increase Adgero’s cost of goods sold and result in lost sales.

Adgero cannot guarantee that its future manufacturing and supply partners, if any, will be able to reduce the costs of commercial scale manufacturing of REM-001 and the other device components over time. If the commercial-scale manufacturing costs of these items are higher than expected, these costs may significantly impact Adgero’s operating results. In order to reduce costs, Adgero’s future manufacturing partners, if any, will need to develop and implement process improvements. However, in order to do so, such partners 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. Adgero cannot be sure that these necessary approvals will be granted in a timely fashion or at all. Adgero also cannot guarantee that it will be able to enhance and optimize output in its commercial manufacturing process. If Adgero cannot enhance and optimize output, it may not be able to reduce Adgero’s costs over time.

In the event the FDA requires Adgero to conduct further clinical trials with REM-001 Therapy, which it will be required for approval in any indication, Adgero expects that it will rely on third parties to conduct clinical trials for REM-001 Therapy. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, Adgero may not be able to obtain regulatory approval for or commercialize REM-001 Therapy and its business would be substantially harmed.

Adgero expects to enter into agreements with clinical CROs to conduct and manage its clinical programs including contracting with clinical sites to perform its clinical studies. Adgero plans to rely heavily on these parties for execution of clinical studies for REM-001 Therapy and will control only certain aspects of their activities. Nevertheless, it will be responsible for ensuring that each of its studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and its reliance on clinical CROs and clinical sites will not relieve it of its regulatory responsibilities. Adgero and its clinical 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 enforces these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If Adgero or its clinical CROs fail to comply with applicable cGCPs, the clinical data generated in its clinical trials may be deemed unreliable and the FDA or comparable

 

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foreign regulatory authorities may require it to perform additional clinical trials before approving its marketing applications. Adgero cannot assure that, upon inspection, the FDA will determine that any of its clinical trials comply with cGCPs. In addition, Adgero’s clinical trials must be conducted with products produced under cGMP regulations and will require a large number of test subjects. Adgero’s failure or the failure of its clinical CROs or clinical sites to comply with these regulations may require it to repeat clinical trials, which would delay the regulatory approval process and could also subject it to enforcement action up to and including civil and criminal penalties.

Although Adgero intends to design the clinical trials for REM-001 Therapy in consultation with CROs, Adgero expects that the clinical CROs will manage all of the clinical trials conducted at contracted clinical sites. As a result, many important aspects of its product development programs would be outside of its direct control. In addition, the clinical CROs and clinical sites may not perform all of their obligations under arrangements with it or in compliance with regulatory requirements. If the clinical CROs or clinical sites do not perform clinical trials in a satisfactory manner, breach their obligations to it or fail to comply with regulatory requirements, the development and commercialization of REM-001 Therapy for the subject indication may be delayed or its development program materially and irreversibly harmed. Adgero cannot control the amount and timing of resources these clinical CROs and clinical sites will devote to its program or REM-001 Therapy. If Adgero is unable to rely on clinical data collected by its CROs, Adgero could be required to repeat, extend the duration of, or increase the size of its clinical trials, which could significantly delay commercialization and require significantly greater expenditures.

If any of Adgero’s relationships with these clinical CROs or clinical sites terminate, it may not be able to enter into arrangements with alternative clinical CROs or clinical sites. If clinical 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 Adgero’s clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and Adgero may not be able to obtain regulatory approval for or successfully commercialize REM-001 Therapy. As a result, Adgero’s financial results and the commercial prospects for REM-001 Therapy would be harmed, Adgero’s costs could increase and Adgero’s ability to generate revenue could be delayed.

Any termination or suspension of, or delays in the commencement or completion of, any necessary studies of REM-001 Therapy for any indications could result in increased costs to Adgero, delay or limit its ability to generate revenue and adversely affect its commercial prospects.

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

 

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the FDA failing to grant permission to proceed and placing the clinical study on hold;

 

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subjects failing to enroll or remain in trials at expected rates;

 

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a facility manufacturing any REM-001 Therapy component being ordered by the FDA or other government or regulatory authorities to temporarily or permanently shut down due to violations of cGMP requirements or other applicable requirements, or cross-contaminations of product candidates in the manufacturing process;

 

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any changes to the manufacturing process that may be necessary or desired;

 

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subjects choosing an alternative treatment for the indications for which Adgero is developing REM-001 Therapy, or participating in competing clinical studies;

 

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subjects experiencing severe or unexpected drug-related adverse effects;

 

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reports from clinical testing on similar technologies and products raising safety and/or efficacy concerns;

 

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•

third-party clinical investigators losing their license or permits necessary to perform Adgero’s clinical trials, not performing Adgero’s clinical trials on its anticipated schedule or employing methods consistent with the clinical trial protocol, cGMP requirements, or other third parties not performing data collection and analysis in a timely or accurate manner;

 

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inspections of clinical study sites by the FDA or IRBs finding regulatory violations that require Adgero to undertake corrective action, result in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study, or that prohibit Adgero from using some or all of the data in support of Adgero’s marketing applications;

 

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third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case Adgero may need to find a substitute contractor, and Adgero may not be able to use some or any of the data produced by such contractors in support of its marketing applications;

 

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one or more IRBs refusing to approve, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; reaching agreement on acceptable terms with prospective clinical CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different clinical CROs and trial sites;

 

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deviations of the clinical sites from trial protocols or dropping out of a trial;

 

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adding new clinical trial sites;

 

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the inability of the clinical CRO to execute any clinical trials for any reason; and

 

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government or regulatory delays or “clinical holds” requiring suspension or termination of a trial.

Product development costs for REM-001 Therapy will increase if Adgero has delays in testing or approval or if Adgero needs to perform more or larger clinical studies than planned. Additionally, changes in regulatory requirements and policies may occur and Adgero may need to amend study protocols to reflect these changes. Amendments may require Adgero to resubmit its study protocols to the FDA and IRBs for reexamination, which may impact the costs, timing or successful completion of that study. If Adgero experiences delays in completion of, or if Adgero, the FDA or other regulatory authorities, an IRB, or other reviewing entities, or any of Adgero’s clinical study sites suspend or terminate any of its clinical studies of REM-001 Therapy, its commercial prospects may be materially harmed and its ability to generate product revenues will be delayed. Any delays in completing its clinical trials will increase its costs, slow down Adgero’s development and approval process and jeopardize its ability to commence product sales and generate revenues. Any of these occurrences may harm Adgero’s 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 REM-001 Therapy. In addition, if one or more clinical studies are delayed, Adgero’s competitors may be able to bring products to market before Adgero does, and the commercial viability of REM-001 Therapy 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 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. The results of any clinical trials conducted by Adgero may not replicate those of earlier clinical trials conducted by Miravant. Adgero cannot assure investors that the FDA will view the results of the four Phase 2 and/or Phase 3 clinical trials for the treatment of CMBC using REM-001 Therapy, conducted by Miravant, with support from certain corporate partners, between February 1996 and January 1999 (collectively, the “Miravant CMBC Trials”) as positively as Adgero does or that

 

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any future trials of REM-001 Therapy in any indication 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 REM-001 Therapy may not be successful.

In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for REM-001 Therapy. 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 varying patient characteristics including demographic factors and health status.

Adgero may not obtain or maintain the benefits associated with orphan drug designation.

Adgero has been in ongoing discussions with FDA seeking an orphan drug designation for REM-001 in treatment of CMBC and FDA continues to request further information to support designation of CMBC as an orphan indication. There is no assurance that the FDA will grant this or any future application for orphan drug designation for REM-001, which would make Adgero 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. 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.

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 the 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. In addition to the potential period of exclusivity, orphan designation makes a company eligible for tax credits for clinical research expenses and potential exemption from the FDA application user fee. There can be no assurance that Adgero will receive orphan drug designation for REM-001 in the indication of CMBC or in any other indication, if Adgero elects to seek such other applications.

Although Adgero may pursue expedited regulatory approval pathways for REM-001 Therapy, 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 Adgero believes there may be an opportunity to accelerate the development of REM-001 Therapy through one or more of the FDA’s expedited programs, such as special protocol assessment, fast track, breakthrough therapy, accelerated approval or priority review, and Adgero may pursue one or more of these expedited programs, Adgero cannot be assured that REM-001 Therapy or any other product candidates that Adgero may develop will qualify for such programs.

 

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If Adgero applies for any expedited program for REM-001 Therapy, the FDA may determine that REM-001 Therapy, Adgero’s proposed target indication or other aspects of Adgero’s clinical development plans do not qualify for such expedited program. Even if Adgero is successful in obtaining a designation or access to any expedited program, Adgero 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 Adgero believes that the designation is no longer supported by data from Adgero’s clinical development program. Additionally, qualification for any expedited review procedure does not ensure that Adgero will ultimately obtain regulatory approval for REM-001 Therapy or any other product candidate that Adgero may develop.

The Federal Food, Drug and Cosmetic Act directs the FDA to meet with sponsors, pursuant to a sponsor’s written request, for the purpose of reaching agreement on the design and size of clinical trials intended to form the primary basis of an efficacy claim in an NDA. If an agreement is reached, the FDA will reduce the agreement to writing and make it part of the administrative record. This agreement is called a special protocol assessment (“SPA”). Adgero’s plan is to work closely with the FDA in developing any Phase 3 trial Adgero may run in CMBC and Adgero may seek a SPA, but there is no assurance that this classification will be granted. Furthermore, even if Adgero receives an SPA and completes a Phase 3 trial that meets the criteria defined in the clinical plan, the FDA may later add additional requirements for approval or it may decline to grant marketing approval altogether.

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

Adgero’s ability to successfully market REM-001 Therapy 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 its products and related treatments. Countries in which pharmaceutical or medical device products are sold through reimbursement schemes under national health insurance programs frequently require that manufacturers and sellers of pharmaceutical products or medical devices 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. Adgero may not be able to sell REM-001 Therapy 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 Adgero’s development of products including:

 

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failing to approve or challenging the prices charged for health care products;

 

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introducing reimportation schemes from lower priced jurisdictions;

 

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limiting both coverage and the amount of reimbursement for new therapeutic products;

 

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denying or limiting coverage for products that are approved by the regulatory agencies but are considered to be experimental or investigational by third-party payors; and

 

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refusing to provide coverage when an approved product is used in a way that has not received regulatory marketing approval.

Adgero’s business and operations would suffer in the event of system failures.

Adgero’s computer systems and those of its service providers, including its CROs, are vulnerable to damage from computer viruses, unauthorized access, natural disasters (including hurricanes), terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in Adgero’s or their operations, it could result in a material disruption of its development programs. For example, the loss of preclinical or clinical trial data from completed, ongoing or planned trials could result in delays in its regulatory approval efforts and significantly increase Adgero’s costs to recover or reproduce the data. To the extent that any

 

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disruption or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of personal, confidential or proprietary information, Adgero could incur liability and the further development of its clinical product candidate could be delayed.

Risks Relating to Adgero’s Intellectual Property Rights

It is difficult and costly to protect Adgero’s intellectual property rights, and Adgero cannot ensure the protection of these rights.

Adgero’s commercial success may depend, in part, on obtaining and maintaining patent protection for its 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 biopharmaceutical 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 Adgero’s intellectual property. Accordingly, Adgero cannot predict the breadth of claims that may be allowable or enforceable in Adgero’s patents (including patents owned by Adgero). Adgero currently have eight issued patents and two patents it does not believe are relevant to its current product development objectives. The issued patents expire within the next year or two. The existing patents and related technologies may be challenged, invalidated or circumvented by third parties and might not protect Adgero against competitors with similar products or technologies.

The degree of future protection for Adgero’s proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect Adgero’s rights, permit Adgero to gain or keep Adgero’s competitive advantage, or provide Adgero 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 REM-001 Therapy, or important to Adgero’s business. Adgero cannot be certain that any patent application owned by a third party will not have priority over patent applications filed by Adgero, or that Adgero will not be involved in interference, opposition or invalidity proceedings before United States or foreign patent offices.

Adgero also relies on trade secrets to protect technology, especially in cases when Adgero believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. While Adgero require employees, academic collaborators, consultants and other contractors to enter into confidentiality agreements, Adgero may not be able to adequately protect Adgero’s trade secrets or other proprietary or licensed information. Typically, research collaborators and scientific advisors have rights to publish data and information in which Adgero may have rights. If Adgero cannot maintain the confidentiality of its proprietary technology and other confidential information, Adgero’s ability to receive patent protection and Adgero’s ability to protect valuable information owned by Adgero may be imperiled. Enforcing a claim that a third-party entity illegally obtained and is using any of its 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, Adgero’s competitors may independently develop equivalent knowledge, methods and know-how.

If Adgero fails to obtain or maintain patent protection or trade secret protection for REM-001 Therapy or Adgero technologies, third parties may be able to use its proprietary information, which could impair Adgero’s ability to compete in the market and adversely affect Adgero’s ability to generate revenues and attain profitability.

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

 

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REM-001 Therapy may infringe the intellectual property rights of others, which could increase Adgero’s costs and delay or prevent Adgero’s development and commercialization efforts.

Adgero’s success depends in part on avoiding infringement of the proprietary technologies of others. The biopharmaceutical 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 Adgero’s 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, Adgero may be unaware of third-party patents that may be infringed by commercialization of REM-001 Therapy or any future product candidate. There may be certain issued patents and patent applications claiming subject matter that Adgero may be required to license in order to research, develop or commercialize REM-001 Therapy, and Adgero does 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:

 

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result in costly litigation;

 

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divert the time and attention of Adgero’s technical personnel and management;

 

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prevent Adgero from commercializing a product until the asserted patent expires or is held finally invalid or not infringed in a court of law;

 

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require Adgero to cease or modify Adgero’s use of the technology and/or develop non-infringing technology; or

 

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require Adgero to enter into royalty or licensing agreements.

Adgero acquired all of the rights, assets and technology related to REM-001 Therapy from St. Cloud Investments, LLC (“St. Cloud”), a creditor of Miravant, who acquired the same through foreclosure, and Adgero believes that St. Cloud owned all of such rights prior to its acquisition. Although no third party has asserted a claim of infringement or other claim against Adgero, others may hold or claim to hold proprietary or other rights that could prevent REM-001 Therapy from being developed or marketed. Any legal action against Adgero claiming damages and seeking to enjoin commercial activities relating to REM-001 Therapy or Adgero’s processes could subject Adgero to potential liability for damages and require Adgero to obtain a license to continue to manufacture or market REM-001 Therapy or any future product candidates. Adgero cannot predict whether it 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, Adgero cannot be sure that it could redesign REM-001 Therapy 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 Adgero from developing and commercializing REM-001 Therapy or a future product candidate, which could harm Adgero’s business, financial condition and operating results.

A number of companies, including several major pharmaceutical companies, have conducted research on PDT therapies which resulted in the filing of many patent applications that could be interpreted as pertaining to Adgero’s planned applications. If Adgero were to challenge the validity of these or any issued United States patent in court, Adgero would need to overcome a statutory presumption of validity that attaches to every issued United States patent. This means that, in order to prevail, Adgero would have to present clear and convincing evidence as to the invalidity of the patent’s claims. If Adgero 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, Adgero 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 Adgero’s favor on questions of infringement, validity or enforceability.

 

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Adgero does not hold any patents covering its laser light source or light delivery device.

Adgero’s laser light source and light delivery device are not currently covered by any patents; Adgero has no patents pending, and does not currently intend to seek patent protection for these devices. As a result, competitors may be able to offer and sell products or drug delivery technology, as the case may be, using the same technology as Adgero’s laser light source and/or light delivery devices, so long as these competitors do not infringe any other valid patents that it or third parties hold.

While Adgero plans to protect its proprietary information related to its laser light source and light delivery device as trade secrets through certain agreements with its employees, consultants, agents and other organizations to which Adgero disclosed its proprietary information, Adgero cannot give any assurance that these agreements will provide effective protection for its proprietary information in the event of unauthorized use or disclosure of such information. If other laser light sources or light delivery devices are approved and marketed, Adgero will be unable to prevent them from competing with REM-001 Therapy in the marketplace using a different drug molecule that is not encompassed by any of its owned or licensed patents. Adgero expects that the presence of one or more competing products would reduce its market share and could negatively impact price levels and third party reimbursement policies for REM-001 Therapy, any of which would materially affect its business.

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

As is commonplace in Adgero’s industry, Adgero employs and plans to employ individuals who were previously employed at other pharmaceutical companies, including Adgero’s competitors or potential competitors. Although no claims against Adgero are currently pending, Adgero may be subject in the future to claims that its 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 its employees or it has 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 Adgero is successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

General Adgero-Related Risks

Adgero will need to grow the size of its organization, and it may experience difficulties in managing this growth.

Adgero currently has three full-time employees. As Adgero’s development and commercialization plans and strategies develop, it will need to expand the size of its employee and consultant base for managerial, operational, sales, marketing, financial and other resources. 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, its management may have to divert a disproportionate amount of its attention away from Adgero’s day-to-day activities and devote a substantial amount of time to managing these growth activities. Adgero’s future financial performance and its ability to commercialize REM-001 Therapy and any other future product candidates and its ability to compete effectively will depend, in part, on its ability to effectively manage Adgero’s future growth.

Adgero’s success will depend in part on its ability to manage its operations as it advances its product candidate through clinical trials and to expand its development or regulatory capabilities or contract with third parties to provide these capabilities for it. Failure to achieve any of these goals could have a material adverse effect on Adgero’s business, financial condition or results of operations.

 

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If Adgero is not successful in attracting and retaining highly qualified personnel, it may not be able to successfully implement its business strategy. In addition, the loss of the services of certain key employees, including, John Liatos, Adgero’s (interim) CEO & Chief Financial Officer and Steven Rychnovsky, PhD, Adgero’s Vice President of Operations and Product Development, would adversely impact Adgero’s business prospects.

Adgero’s ability to compete in the highly competitive pharmaceuticals industry depends in large part upon its ability to attract highly qualified managerial, scientific and medical personnel.

Adgero’s management team has expertise in many different aspects of drug development and commercialization. However, it will need to hire additional personnel as it further develops REM-001 Therapy. Competition for skilled personnel in our market is intense and competition for experienced scientists may limit Adgero’s ability to hire and retain highly qualified personnel on acceptable terms. Despite its efforts to retain valuable employees, members of its management, scientific and medical teams may terminate their employment with Adgero on short notice. Adgero entered into an employment agreement with John Liatos, Adgero’s interim Chief Executive Officer and Chief Financial Officer, in October 2017, as amended in 2018. While certain of these arrangements provide for a term of employment, Adgero’s Chief Financial Officer, and Vice President of Operations and Product Development still may leave Adgero’s employment at any time, with appropriate notice, which generally would be 60 days notice. The loss of the services of any of Adgero’s executive officers or other key employees could potentially harm its business, operating results or financial condition. In particular, Adgero believes that the loss of the services of John Liatos, Adgero’s (interim) CEO & Chief Executive Officer and Chief Financial Officer, and Steven Rychnovsky, PhD, Adgero’s Vice President of Operations and Product Development, would have a material adverse effect on our business. Adgero’s success also depends on its 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 biopharmaceutical companies with which Adgero competes for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than it does. 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 Adgero has have to offer. If Adgero is unable to continue to attract and retain high-quality personnel, the rate and success at which it can develop and commercialize product candidates would be limited.

If product liability lawsuits are brought against Adgero, Adgero may incur substantial liabilities and may be required to limit commercialization of REM-001 Therapy.

Adgero faces a potential risk of product liability as a result of the clinical testing of REM-001 Therapy and will face an even greater risk if it commercializes REM-001 Therapy or any other future product. For example, Adgero may be sued if any product Adgero develops, including REM-001 Therapy, or any materials that it uses in its 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. Claims could also be asserted under state consumer protection acts. If Adgero cannot successfully defend itself against product liability claims, Adgero may incur substantial liabilities or be required to limit commercialization of REM-001 Therapy. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

 

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decreased demand for REM-001 Therapy or any future products that Adgero may develop;

 

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injury to Adgero’s reputation;

 

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withdrawal of clinical trial participants;

 

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costs to defend the related litigation;

 

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a diversion of management’s time and Adgero’s resources;

 

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substantial monetary awards to trial participants or patients;

 

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product recalls, withdrawals or labeling, marketing or promotional restrictions;

 

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the inability to commercialize REM-001 Therapy; and

 

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a decline in the value of Adgero’s stock.

Adgero’s 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 it develops. Adgero intends to obtain product liability insurance covering its clinical trials. Although it will maintain such insurance, any claim that may be brought against it could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by Adgero’s insurance or that is in excess of the limits of Adgero’s insurance coverage. Adgero’s insurance policies will also have various exclusions, and it may be subject to a product liability claim for which it has no coverage. Adgero may have to pay any amounts awarded by a court or negotiated in a settlement that exceed its coverage limitations or that are not covered by its insurance, and it may not have, or be able to obtain, sufficient capital to pay such amounts.

Risks Related to the Merger

The Exchange Ratio will not be adjusted in the event of any change in DelMar’s stock price.

Except for adjustments based on the number of outstanding securities of DelMar and Adgero immediately prior to the Closing and as a result of the reverse stock split described herein, the Exchange Ratio is fixed. This means that the Exchange Ratio is not expected to change materially. Upon completion of the Merger, each issued and outstanding share of Adgero Common Stock (other than treasury shares held by Adgero) will be converted into the right to receive approximately 1.5639 shares of DelMar Common Stock and each Adgero Warrant will be converted into a warrant exercisable for that number of shares of DelMar Common Stock equal to the product of (i) the aggregate number of shares of Adgero Common Stock for which such warrant was exercisable and (ii) the Exchange Ratio, rounded down to the nearest whole share. Therefore, the value of the Merger Shares will depend on the market price of the DelMar Common Stock at the Closing of the Merger.

The market price of the DelMar Common Stock has fluctuated in the past and also since the date of the announcement of the Merger Agreement and may continue to fluctuate from the date of this proxy statement/prospectus/information statement to the date of the DelMar special meeting, the Closing of the Merger and thereafter. The market value of the Merger Shares to be issued at the Closing will not be known at the time of the DelMar special meeting. Therefore, current and historical market prices of DelMar Common Stock may not reflect the value that Adgero stockholders will receive in the Merger, and the current stock price quotations for DelMar Common Stock may not provide meaningful information to DelMar stockholders in determining whether to approve the DelMar Proposals or to Adgero stockholders in determining whether to approve the Merger Agreement and the transactions contemplated thereby. DelMar Common Stock is traded on The Nasdaq Capital Market under the symbol “DMPI.”

Changes in the market price of DelMar Common Stock may result from a variety of factors that are beyond the control of DelMar or Adgero, including changes in their businesses, operations and prospects, regulatory considerations, governmental actions, and legal proceedings and developments. You are urged to obtain up-to-date prices for DelMar Common Stock.

Failure to complete the Merger could negatively impact the stock price and the future business and financial results of DelMar.

The parties’ respective obligations to complete the Merger are subject to the satisfaction or waiver of a number of conditions set forth in the Merger Agreement, including the receipt of at least $10 million in gross

 

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proceeds in the Private Placement. There can be no assurance that the conditions to completion of the Merger will be satisfied or waived or that the Merger will be completed. If the Merger is not completed for any reason, the ongoing businesses of DelMar and Adgero may be materially and adversely affected and, without realizing any of the benefits of having completed the Merger, DelMar and Adgero would be subject to a number of risks, including the following:

 

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DelMar and Adgero may experience negative reactions from the financial markets, including negative impacts on the trading price of DelMar Common Stock, which could affect DelMar’s ability to secure sufficient financing in the future on attractive terms (or at all) as a standalone company, and from their respective customers, vendors, regulators and employees;

 

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Adgero may be required to pay DelMar a termination fee of $500,000 if Adgero fails to consummate the Merger under specified circumstances, and DelMar may be required to pay Adgero a termination fee of $500,000 if DelMar fails to consummate the Merger under specified circumstances;

 

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DelMar and Adgero will be required to pay certain expenses incurred in connection with the Merger, whether or not the Merger is completed;

 

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the Merger Agreement places certain restrictions on the operation of each of DelMar’s and Adgero’s respective businesses prior to the Closing of the Merger, and such restrictions, the waiver of which is subject to the consent of the other parties, may prevent DelMar or Adgero, as applicable, from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Merger that DelMar or Adgero would have made, taken or pursued if these restrictions were not in place; and

 

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matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by DelMar and Adgero management and the expenditure of significant funds in the form of fees and expenses, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to either DelMar or Adgero as an independent company.

In addition, each of DelMar and Adgero could be subject to litigation related to any failure to complete the Merger or related to any proceeding to specifically enforce DelMar’s and Adgero’s obligations under the Merger Agreement.

If any of these risks materialize, they may materially and adversely affect DelMar’s and Adgero’s business, financial condition, financial results and stock prices.

For a description of the circumstances under which a termination fee is payable, please see the section entitled “The Merger Agreement—Termination Fees.”

There can be no assurance that DelMar will be able to raise sufficient capital in the Private Placement to consummate the Merger or for use by the combined company following the Merger.

DelMar intends to raise capital for use by the combined company through the issuance and sale of the Investment Shares in the Private Placement. The closing of the sale of the Investment Shares is contingent upon, among other customary closing conditions, the substantially concurrent closing of the Merger. In addition, pursuant to the terms of the Private Placement, DelMar agreed that, within 60 calendar days after the consummation of the final closing of the Private Placement (the “Filing Deadline”), DelMar will file with the SEC (at DelMar’s sole cost and expense) a registration statement registering the resale of the Conversion Shares and the Dividend Shares (the “Resale Registration Statement”), and DelMar shall use its commercially reasonable efforts to have the Resale Registration Statement declared effective within 90 calendar days of the filing of the Resale Registration Statement (which period shall be increased by an additional 30 calendar days in the event the SEC notifies DelMar that it intends to review the Resale Registration Statement). Please see the section entitled “Certain Agreements Related to the Merger—Private Placement.”

 

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In addition, in the event DelMar raises gross proceeds in excess of $10 million but less than the Maximum Offering Amount in the Private Placement, DelMar may not have sufficient capital for all planned expenditures of the combined company and will likely need to raise additional capital. Based on planned expenditures, DelMar expects that its cash and cash equivalents at March 31, 2020, plus the net proceeds from the Private Placement (assuming the Minimum Offering Amount of $10 million) to be sufficient to meet its operating and capital requirements until the first half of calendar year 2021 or for at least nine months after the Closing of the Merger, until the first half of calendar year 2021 or at least nine months after the Closing of the Merger (assuming the Maximum Offering Amount of $20 million) and until the second half of calendar year 2021 or at least fifteen months after the Closing of the Merger (assuming an Over-allotment Amount of $30 million). The forecasts of the period of time through which the combined company’s current financial resources will be adequate to support its operations, and the costs to support our general and administrative, and research and development activities, including clinical studies, are forward-looking statements and involve risks and uncertainties. After the Merger and the Private Placement, especially if DelMar only raises the Minimum Offering Amount, the combined company will likely need to raise additional capital to continue to fund its clinical trials and operations. The combined company will likely seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to the combined company’s stockholders and certain of those securities may have rights senior to those of the holders of DelMar Common Stock. If the combined company raises additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict its operations, fund raising capabilities or otherwise. The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of the combined company’s clinical development programs following the Merger. Funding may not be available when needed, at all, or on terms acceptable to the combined company. Lack of necessary funds may require the combined company among other things, to delay, scale back or eliminate some or all of the combined company’s planned clinical trials.

In the event that the sale of the Investment Shares in the Private Placement is not consummated, other financing may not be available on acceptable terms, in a timely manner or at all. If DelMar is unable to secure financing, the Merger may be delayed or not be completed. If the Merger is delayed or not completed, DelMar may be unable to secure sufficient financing on attractive terms (or at all) as a standalone company and may not have sufficient capital for all planned expenditures of DelMar. In the event the Merger and the Private Placement is not consummated, based on current planned expenditures, DelMar expects that its cash and cash equivalents at March 31, 2020, to be sufficient to meet its operating and capital requirements until the fourth quarter of calendar year 2020. Please see the section entitled “The Merger Agreement—Termination Fees.”

The parties may not realize the anticipated benefits and cost savings of the Merger.

While DelMar and Adgero will continue to operate independently until the completion of the Merger, the success of the Merger will depend, in part, on DelMar’s and Adgero’s ability to realize the anticipated benefits and cost savings from combining DelMar’s and Adgero’s businesses. The parties’ ability to realize these anticipated benefits and cost savings is subject to certain risks, including, among others:

 

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the parties’ ability to successfully combine their respective businesses;

 

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the risk that the combined businesses will not perform as expected;

 

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the extent to which the parties will be able to realize the expected synergies, which include realizing potential savings from re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an optimized operating model between both companies and leveraging scale, and creating value resulting from the combination of DelMar’s and Adgero’s businesses;

 

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the possibility that the aggregate consideration being paid for Adgero is greater than the value DelMar will derive from the Merger;

 

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the possibility that the combined company will not achieve the free cash flow that the parties have projected;

 

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the reduction of cash available for operations and other uses;

 

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the assumption of known and unknown liabilities of Adgero; and

 

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the possibility of costly litigation challenging the Merger.

If DelMar and Adgero are not able to successfully integrate their businesses within the anticipated time frame, or at all, the anticipated cost savings, synergies operational efficiencies and other benefits of the Merger may not be realized fully or may take longer to realize than expected, and the combined company may not perform as expected.

Integrating DelMar’s and Adgero’s businesses may be more difficult, time-consuming or costly than expected.

DelMar and Adgero have operated and, until completion of the Merger will continue to operate, independently, and there can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s or both companies’ ongoing businesses or unexpected integration issues, such as higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, issues that must be addressed in integrating the operations of DelMar and Adgero in order to realize the anticipated benefits of the Merger so the combined business performs as expected include, among others:

 

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combining the companies’ separate operational, financial, reporting and corporate functions;

 

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integrating the companies’ technologies, products and services;

 

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identifying and eliminating redundant and underperforming operations and assets;

 

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harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes;

 

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addressing possible differences in corporate cultures and management philosophies;

 

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maintaining employee morale and retaining key management and other employees;

 

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attracting and recruiting prospective employees;

 

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consolidating the companies’ corporate, administrative and information technology infrastructure;

 

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coordinating sales, distribution and marketing efforts;

 

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managing the movement of certain businesses and positions to different locations;

 

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maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors;

 

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coordinating geographically dispersed organizations; and

 

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effecting potential actions that may be required in connection with obtaining regulatory approvals.

In addition, at times, the attention of certain members of each company’s management and each company’s resources may be focused on completion of the Merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and, consequently, the business of the combined company.

DelMar and Adgero will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Uncertainty about the effect of the Merger on employees, vendors and customers may have an adverse effect on DelMar or Adgero and consequently on the combined company after the closing of the Merger. These

 

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uncertainties may impair DelMar’s and Adgero’s ability to retain and motivate key personnel and could cause customers and others that deal with DelMar and Adgero, as applicable, to defer or decline entering into contracts with DelMar or Adgero, as applicable, or making other decisions concerning DelMar or Adgero, as applicable, or seek to change existing business relationships with DelMar or Adgero, as applicable. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the Merger, DelMar’s and Adgero’s businesses could be harmed. Furthermore, the Merger Agreement places certain restrictions on the operation of DelMar’s and Adgero’s businesses prior to the closing of the Merger, which may delay or prevent DelMar and Adgero from undertaking certain actions or business opportunities that may arise prior to the consummation of the Merger. Please see the section entitled “The Merger Agreement—Covenants; Conduct of Business Pending the Merger” for a description of the restrictive covenants applicable to DelMar and Adgero.

Third parties may terminate or alter existing contracts or relationships with DelMar or Adgero.

Each of DelMar and Adgero has contracts with customers, vendors and other business partners which may require DelMar or Adgero, as applicable, to obtain consents from these other parties in connection with the Merger. If these consents cannot be obtained, the counterparties to these contracts and other third parties with which DelMar and/or Adgero currently have relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their relationships with either party in anticipation of the Merger, or with the combined company following the Merger. The pursuit of such rights may result in DelMar and Adgero suffering a loss of potential future revenue, incurring liabilities in connection with a breach of such agreements or losing rights that are material to its business. Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the Merger. The adverse effect of such disruptions could also be exacerbated by a delay in the completion of the Merger or the termination of the Merger.

The Merger is subject to a number of closing conditions and, if these conditions are not satisfied, the Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed. In addition, the parties have the right to terminate the Merger Agreement under other specified circumstances, in which case the Merger would not be completed.

The Merger is subject to a number of closing conditions and, if these conditions are not satisfied or waived (to the extent permitted by law), the Merger will not be completed. These conditions include, among others: (i) the absence of certain legal impediments, (ii) effectiveness of the registration statement on Form S-4 relating to the Merger, (iii) obtaining all governmental authorizations, (iv) obtaining the DelMar Stockholder Approval, (v) the approval of the Merger Agreement and the Merger by Adgero stockholders, (vi) the receipt of at least $10 million of gross proceeds in the Private Placement and (vii) the listing of the Merger Shares, Conversion Shares, the Dividend Shares, the Placement Agent Warrant Shares and the Success Fee Shares on Nasdaq. In addition, each party’s obligation to complete the Merger is subject to the accuracy of the other parties’ representations and warranties in the Merger Agreement (subject in most cases to “material adverse effect” qualifications), the other parties’ compliance, in all material respects, with their respective covenants and agreements in the Merger Agreement.

The conditions to the Closing may not be fulfilled and, accordingly, the Merger may not be completed. In addition, if the Merger is not completed by August 31, 2020, any party may choose not to proceed with the Merger. Moreover, the parties can mutually decide to terminate the Merger Agreement at any time prior to the consummation of the Merger, before or after receipt of the DelMar Stockholder Approval and the approval of the Merger Agreement and the Merger by Adgero stockholders and each party may elect to terminate the Merger Agreement in certain other circumstances, as described in the section entitled “The Merger Agreement—Termination of the Merger Agreement.” If the Merger Agreement is terminated, DelMar or Adgero, as applicable, may incur substantial fees and expenses in connection with termination of such Agreement and neither of them will realize the anticipated benefits of the Merger. For a description of the circumstances under which a termination fee is payable, please see the section entitled “The Merger Agreement—Termination Fees.”

 

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DelMar or Adgero may waive one or more of the closing conditions to the Merger without re-soliciting stockholder approval.

Each of DelMar and Adgero has the right to waive certain of the closing conditions to the Merger. Any such waiver may not require re-solicitation of stockholders, in which case stockholders of DelMar and stockholders of Adgero will not have the chance to change their votes as a result of any such waiver and DelMar and Adgero will have the ability to complete the Merger without seeking further stockholder approval. Any determination whether to waive any condition to the Merger, whether stockholder approval would be re-solicited as a result of any such waiver or whether this proxy statement/prospectus/information statement would be amended as a result of any waiver will be made DelMar or Adgero, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time, and any such waiver could have an adverse effect on the combined company.

Both DelMar’s stockholders and Adgero’s stockholders will have a reduced ownership and voting interest after the Merger and the Private Placement and will exercise less influence over management.

After the completion of the Merger and the Private Placement, DelMar’s stockholders and Adgero’s stockholders will own a smaller percentage of the combined company than they currently own of DelMar and Adgero, respectively. Upon completion of the Merger, it is expected that DelMar stockholders will own 50.5% of the total voting shares outstanding of DelMar, and Adgero stockholders will own 49.5% of the total voting shares outstanding of DelMar, in each case immediately after consummation of the Merger and not giving effect to the closing of the Private Placement and certain other related issuances. As of the result of the Private Placement and depending on the amount of gross proceeds received by DelMar in the Private Placement, the percentages set forth above will be further reduced by the securities issued in such offering. Consequently, DelMar stockholders, as a group, and Adgero stockholders, as a group, will each have reduced ownership and voting power in the combined company compared to their current ownership and voting power in DelMar and Adgero, respectively. In particular, upon consummation of the Merger and the Private Placement, Adgero stockholders, as a group, and DelMar stockholders, as a group, respectively, will have less than a majority of the ownership and voting power of DelMar and, therefore, will be able to exercise less collective influence over the management and policies of DelMar than they currently exercise over the management and policies of their respective company.

The Merger Agreement limits DelMar’s and Adgero’s ability to pursue alternatives to the Merger.

The Merger Agreement contains provisions that make it more difficult for DelMar and Adgero to enter into alternative transactions. The Merger Agreement contains certain provisions that restrict DelMar’s and Adgero’s ability to solicit or facilitate proposals from third parties with respect to transactions involving the financing or sale of DelMar or Adgero, as applicable, or provide non-public information to, or otherwise participate or engage in discussions or negotiations with, third parties or take certain other actions that would reasonably be expected to lead to a third-party acquisition proposal. Further, there are only limited exceptions to DelMar’s and Adgero’s agreement that its board of directors will not change its recommendation in favor of the adoption of the Merger Agreement. However, at any time prior to the receipt of the DelMar Stockholder Approval and the approval of the Merger Agreement and the Merger by Adgero stockholders, in response to an unsolicited superior proposal made by a third party, DelMar’s and Adgero’s board of directors, as applicable, may make an adverse recommendation change, and terminate the Merger Agreement to enter into an alternative acquisition agreement,

if it concludes in good faith, after consultation with their respective outside financial advisors and outside legal counsel, that the failure to take such action would be inconsistent with the fiduciary duties of DelMar’s or Adgero’s board of directors under the circumstances and under applicable law. Please see the section entitled “The Merger Agreement—Non-Solicitation.”

DelMar may be required to pay a termination fee of $500,000 to Adgero if the Merger is not consummated under specified circumstances. Please see the section entitled “The Merger Agreement—Termination Fees”, including as described above, for a description of the circumstances under which such a termination fee is

 

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payable. Upon obtaining the DelMar Stockholder Approval, DelMar’s right to terminate the Merger Agreement in response to a superior proposal will cease.

In addition, Adgero may be required to pay DelMar a termination fee of $500,000 if the Merger is not consummated under specified circumstances. Please see the section entitled “The Merger Agreement—Termination Fees”, including as described above, for a description of the circumstances under which such a termination fee is payable. Upon adoption of the Merger Agreement by Adgero’s stockholders, Adgero’s right to terminate the Merger Agreement in response to a superior proposal will cease.

While DelMar and Adgero believe these provisions are reasonable, customary and not preclusive of other offers, the provisions might discourage a third party that has an interest in acquiring all or a significant part of DelMar or Adgero from considering or proposing such an acquisition, even if such party were prepared to pay consideration with a higher per-share value than the currently proposed merger consideration or if such party were prepared to enter into an agreement that may be more favorable to DelMar or Adgero or their respective stockholders.

The Adgero Forecasts considered by DelMar and Ladenburg may not be realized, which may adversely affect the market price of DelMar Common Stock following the completion of the Merger.

In performing its financial analyses and rendering its opinion related to the Merger, Ladenburg relied on, among other things, certain information, including the Adgero Forecasts. Please see the sections entitled “The Merger—Opinion of Ladenburg” and “The Merger—Certain Adgero Unaudited Projected Financial Information.” The Adgero Forecasts were prepared by, or at the direction of, the management of DelMar. None of these projections or forecasts were prepared with a view towards public disclosure or compliance with the published guidelines of the SEC, U.S. generally accepted accounting principles (“GAAP”) or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts. These projections and forecasts are inherently based on various estimates and assumptions that are subject to the judgment of those preparing them. These projections and forecasts are also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of DelMar. There can be no assurance that Adgero’s financial condition, including its cash flows or results of operations will be consistent with those set forth in such projections and forecasts, which could have an adverse impact on the market price of DelMar Common Stock or the financial position of DelMar following the Merger.

Executive officers and directors of DelMar and Adgero may have interests in the Merger that are different from, or in addition to, the rights of their respective stockholders.

Executive officers of DelMar and Adgero negotiated the terms of the Merger Agreement and the DelMar board of directors and the Adgero board of directors each approved the Merger Agreement and the Merger and recommend that each stockholder vote in favor of the proposals at each respective meeting. These executive officers and directors may have interests in the Merger that are different from, or in addition to, the DelMar or Adgero stockholders. These interests include the continued employment of certain executive officers of DelMar and Adgero by DelMar following the Merger, the continued service of certain directors DelMar and Adgero as directors of DelMar following the Merger, the indemnification of DelMar and Adgero executive officers and directors by DelMar and the compensation payable to the Placement Agent and SternAegis Ventures. Stockholders should be aware of these interests when they consider their board of directors’ recommendation that stockholders vote in favor of the Merger. For a description of the interests of DelMar’s executive officers and directors in the Merger, please see the section entitled “The Merger—Interests of DelMar’s Directors and Officers in the Merger.” For a description of the interests of Adgero’s executive officers and directors in the Merger, please see the section entitled “The Merger—Interests of Adgero’s Directors and Officers in the Merger.”

 

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The shares of DelMar Common Stock to be received by Adgero stockholders as a result of the Merger will have rights that are different from the rights of shares of Adgero Common Stock.

Following completion of the Merger, Adgero stockholders will no longer be Adgero stockholders, but will instead be DelMar stockholders governed by Nevada law, the DelMar Articles and the DelMar Bylaws. There will be important differences between the current rights as an Adgero stockholder and the rights as a DelMar stockholder. Please see the section entitled “Comparison of the Rights of Holders of DelMar Stock and Adgero Stock” for a description of the different rights of DelMar Common Stock, on the one hand, and Adgero Common Stock, on the other hand.

The Series C Preferred Stock will have rights, preferences and privileges that will not be held by, and will be preferential to, the rights of holders of DelMar Common Stock, which could adversely affect the liquidity and financial condition of DelMar, and may result in the interests of the holders of Series C Preferred Stock differing from those of the holders of DelMar Common Stock.

The Series C Preferred Stock will rank on parity with the shares of DelMar Series A Preferred Stock and DelMar Series B Preferred Stock with respect to liquidation preferences. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series C Preferred Stock will be entitled to receive distributions out of DelMar’s assets in an amount per share equal to $1,000 plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of DelMar Common Stock.

In addition, holders of Series C Preferred Stock will be entitled to dividends, payable in shares of DelMar Common Stock at a rate of 10%, 15%, 20% and 25% of the number of shares of DelMar Common Stock issuable upon conversion of the Series C Preferred Stock, on the 12th, 24th, 36th and 48th month, anniversary of the initial closing of the Private Placement to occur in connection with the Closing of the Merger. Dividends will be payable in shares of DelMar Common Stock and will only be payable to those holders that continue to hold Series C Preferred Stock on the respective anniversary dates of the closing of the Private Placement of the Minimum Offering Amount.

These dividend obligations to the holders of Series C Preferred Stock could limit DelMar’s ability to obtain additional financing, which could have an adverse effect on its financial condition. The preferential rights described above could also result in divergent interests between the holders of shares of Series C Preferred Stock and the holders of DelMar Common Stock.

Any issuance of DelMar Common Stock upon conversion of the Series C Preferred Stock will cause dilution to then existing DelMar stockholders and may depress the market price of DelMar Common Stock.

The Series C Preferred Stock accrues dividends in shares of DelMar Common Stock at an initial minimum rate of 10% per annum and following the forty eight month anniversary of the initial closing of the Private Placement to occur in connection with the Closing of the Merger, such dividend rate could increase to as high as 25% per annum. We may have different closing dates for the Private Placement, and if we have more than one closing of the Private Placement, subsequent issuances of the Series C Preferred Stock will be issued as a separate identifiable classes of Series C Preferred Stock. Each class of Series C Preferred Stock will have a Conversion Price that will be equal to the lesser of (i) the closing price of DelMar Common Stock on Nasdaq on the date immediately preceding the signing of the applicable binding agreements for the applicable closing date of the Private Placement for which the Series C Preferred Stock is issued or (ii) the average closing price of the DelMar Common Stock on Nasdaq for the five trading days immediately preceding the signing of the applicable binding agreements for the applicable closing date of the Private Placement for which the Series C Preferred Stock is issued, subject to adjustment.

The issuance of DelMar Common Stock upon conversion of the Series C Preferred Stock and as payment of dividends on the Series C Preferred Stock will result in immediate and substantial dilution to the interests of holders of DelMar Common Stock, and such dilution will increase over time in connection with the accrual of dividends on the Series C Preferred Stock.

 

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The combined company may incur future indebtedness that will rank senior to the Series C Preferred Stock or issue additional series of preferred stock that rank on a parity with, or senior to, the Series C Preferred Stock as to dividend payments and liquidation preference.

The combined company may incur substantial amounts of additional debt and other obligations that will rank senior to the Series C Preferred Stock, and the terms of the Series C Preferred Stock do not limit the amount of such debt or other obligations that we may incur. The terms of the Series C Preferred Stock will not prohibit the combined company from issuing additional series of preferred stock that would rank on parity with the Series C Preferred Stock. DelMar’s Articles allow for the board of directors to create new series of preferred stock without further approval by its stockholders, which could adversely affect the rights of the holders of the Series C Preferred Stock and DelMar Common Stock. The issuances of other series of preferred stock could have the effect of reducing the amounts available to the Series C Preferred Stock in the event of liquidation. If the combined company issues preferred stock with voting rights that dilute the voting power of DelMar Common Stock, the market price of DelMar Common Stock could decrease, adversely affecting the value of the Series C Preferred Stock. Additional issuances and sales of preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for DelMar Common Stock to decline and may adversely affect the combined company’s ability to raise additional capital in the financial markets at times and prices favorable to it.

DelMar, Adgero and, subsequently, the combined company may have difficulty attracting, motivating and retaining executives and other key employees in light of the proposed Merger.

The combined company’s success after the Merger will depend in part on each of DelMar’s and Adgero’s ability to retain key executives and other employees. Uncertainty about the effect of the Merger on DelMar’s and Adgero’s employees may have an adverse effect on each company separately and consequently, the combined business. This uncertainty may impair the combined company’s ability to attract, retain and motivate key personnel. Employee retention may be particularly challenging during the pendency of the Merger, as DelMar’s and Adgero’s employees may experience uncertainty about their future roles in the combined business.

Additionally, Adgero’s officers and employees hold Adgero Common Stock and Adgero Warrants, and, if the Merger is completed, these officers and employees will be entitled to the DelMar Common Stock in respect of such shares and warrants.

Furthermore, if any of DelMar or Adgero’s key employees depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial security or a desire not to become employees of the combined business, DelMar or Adgero, as applicable, may have to incur significant costs in retaining such individuals or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent, and the combined company’s ability to realize the anticipated benefits of the Merger may be materially and adversely affected. No assurance can be given that the combined company will be able to attract or retain key employees to the same extent that DelMar or Adgero has been able to attract or retain employees in the past.

Because the Merger will result in an ownership change under Section 382 of the Code for Adgero, Adgero’s premerger net operating loss (“NOL”) carryforwards and certain other tax attributes will be subject to limitations. The NOL carryforwards and other tax attributes of DelMar and of the combined organization may also be subject to limitations as a result of ownership changes.

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code (“Section 382”), the corporation’s NOL carryforwards and certain other tax attributes arising before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The Merger will result in an

 

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ownership change for Adgero and, accordingly, Adgero’s NOL carryforwards and certain other tax attributes will be subject to limitations (or disallowance) on their use after the Merger. DelMar’s NOL carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger. Additional ownership changes in the future could result in additional limitations on DelMar’s, Adgero’s and the combined company’s NOL carryforwards. Consequently, even if the combined company achieves profitability, it may not be able to utilize a material portion of DelMar’s, Adgero’s or the combined company’s NOL carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

DelMar and Adgero will incur significant transaction and Merger-related transition costs in connection with the Merger.

DelMar and Adgero expect that they will incur significant, non-recurring costs in connection with consummating the Merger and integrating the operations of the two companies post-closing. DelMar and/or Adgero may incur additional costs to retain key employees. DelMar and/or Adgero will also incur significant fees and expenses relating to financing arrangements and legal services (including any costs that would be incurred in defending against any potential class action lawsuits and derivative lawsuits in connection with the Merger if any such proceedings are brought), accounting and other fees and costs, associated with consummating the Merger. Some of these costs are payable regardless of whether the Merger is completed. In addition, Adgero may be required to pay a termination fee of $500,000 and DelMar may be required to pay a termination fee of $500,000 if the Merger Agreement is terminated under specified circumstances described in this proxy statement/prospectus/information statement. Though DelMar and Adgero continue to assess the magnitude of these costs, additional unanticipated costs may be incurred in the Merger and the integration of the businesses of DelMar and Adgero.

The unaudited pro forma financial information included in this proxy statement/prospectus/information statement is preliminary and the combined company’s actual financial position or results of operations after the Merger may differ materially.

The unaudited pro forma financial information in this proxy statement/prospectus/information statement is presented for illustrative purposes only and is not necessarily indicative of what the combined company’s actual financial position or results of operations would have been had the Merger been completed on the dates indicated. The unaudited pro forma financial information reflects adjustments, which are based upon estimates, to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition-date fair values. The purchase price allocation reflected in this document is preliminary, and a final determination of the fair value of assets acquired and liabilities assumed will be based on the actual net tangible and intangible assets and liabilities of Adgero that existed as of the date of the completion of the Merger. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma information reflected in this proxy statement/prospectus/information statement. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

The opinion of Ladenburg will not be updated to reflect changes in circumstances between the signing of the Merger Agreement on June 9, 2020 and the completion of the Merger.

DelMar has not obtained an updated opinion from Ladenburg as of the date of this proxy statement/prospectus/information statement, and DelMar does not anticipate asking Ladenburg to update its opinion. Changes in the operations and prospects of DelMar, general market and economic conditions and other factors that may be beyond the control of DelMar, and on which Ladenburg’s opinion was based in part, may significantly alter the prices of the shares of DelMar Common Stock by the Closing Date. The opinion does not speak as of the time the Merger will be completed or as of any date other than the date of such opinion. Because Ladenburg will not be updating its opinion, which was issued in connection with the signing of the Merger Agreement on June 9, 2020, the opinion will not address the fairness of the Exchange Ratio, from a financial point of view, to the stockholders of DelMar at the date of the Closing. The DelMar board of directors’

 

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recommendation that DelMar stockholders vote “FOR” the proposals included herein, however, is made as of the date of this proxy statement/prospectus/information statement. For a description of the opinion that DelMar received from Ladenburg, please see the section entitled “The Merger—Opinion of Ladenburg.”

DelMar and Adgero may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on DelMar’s or Adgero’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed, which may adversely affect DelMar’s or Adgero’s or, if the Merger is completed but delayed, the combined company’s business, financial position and results of operations. As of the date of proxy statement/prospectus/information statement, no such lawsuits have been filed in connection with the Merger and we cannot predict whether any will be filed.

The lack of a public market for Adgero shares makes it difficult to determine the fair market value of the Adgero shares, and Adgero stockholders may receive consideration in the Merger that is less than the fair market value of the Adgero shares and/or DelMar may pay more than the fair market value of the Adgero shares.

Adgero is privately held and its capital stock is not traded in any public market. The lack of a public market makes it extremely difficult to determine Adgero’s fair market value. Because the percentage of DelMar’s equity to be issued to Adgero stockholders was determined based on negotiations between the parties, it is possible that the value of the DelMar Common Stock to be received by Adgero stockholders will be less than the fair market value of Adgero, or DelMar may pay more than the aggregate fair market value for Adgero.

Additional Risks Relating to the Combined Company after Completion of the Merger

The combined company will be subject to the risks that each of DelMar and Adgero faces.

Following completion of the Merger, the combined company will be subject to numerous risks and uncertainties, including the risks faced by each of DelMar and Adgero, which are described in the documents that DelMar has filed with the SEC, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2019 of DelMar filed with the SEC on September 9, 2019, as updated by Quarterly Reports on Form 10-Q of DelMar and future filings after the date of this proxy statement/prospectus/information statement with the SEC by DelMar, and in the sections of this proxy statement/prospectus/information statement entitled “Risk Factors—Risks Related to Adgero” and entitled “Risk Factors—Risks Related to DelMar.” If any such risks actually occur, the business, financial condition, results of operations or cash flows of the combined company could be materially adversely affected.

The market price for shares of DelMar Common Stock may be affected by factors different from those affecting the market price for shares of Adgero Common Stock.

Upon completion of the Merger, holders of Adgero Common Stock will become holders of DelMar Common Stock. DelMar’s and Adgero’s respective business differ, and accordingly the results of operations of the combined company , and the market price of the common stock of the combined company, will be affected by factors different from those currently affecting the results of operations of DelMar and Adgero. For a discussion of the businesses of DelMar and Adgero and of certain factors to consider in connection with those businesses, please see the sections entitled “Information About Adgero,” “Information About DelMar,”“Risk Factors—Risks Related to Adgero” and “Risk Factors—Risks Related to DelMar.”

 

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The market price for shares of DelMar Common Stock may decline as a result of the Merger, including as a result of some DelMar stockholders adjusting their portfolios.

The market value of DelMar Common Stock at the time of consummation of the Merger may vary significantly from the price of DelMar Common Stock on the date the Merger Agreement was executed, the date of this proxy statement/prospectus/information statement and the date of the DelMar special meeting. Following consummation of the Merger, the market price of DelMar Common Stock may decline if, among other things, the operational cost savings estimates in connection with the integration of DelMar’s and Adgero’s businesses are not realized, or if the costs related to the Merger are greater than expected, or if the financing related to the Merger is on unfavorable terms. The market price also may decline if DelMar does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the Merger on DelMar’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

In addition, sales of DelMar Common Stock by DelMar’s stockholders after the completion of the Merger may cause the market price of DelMar Common Stock to decrease. Based on the number of shares of DelMar Common Stock outstanding as of June 3, 2020, the latest practicable date before the date of this proxy statement/prospectus/information statement, approximately 22,498,727 shares of DelMar Common Stock are expected to be issued and outstanding immediately after the Closing of the Merger (not taking into account any securities issuable in connection with the Private Placement). Many DelMar stockholders and Adgero stockholders may decide not to hold the shares of DelMar Common Stock that they receive in the Merger. Other DelMar stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of DelMar Common Stock that they receive in the Merger. Such sales of DelMar Common Stock could have the effect of depressing the market price for DelMar Common Stock and may take place promptly following the Closing of the Merger.

Any of these events may make it more difficult for DelMar to sell equity or equity-related securities, dilute your ownership interest in DelMar and have an adverse impact on the price of DelMar Common Stock.

DelMar does not expect to declare any cash dividends in the foreseeable future.

After the completion of the Merger, DelMar does not anticipate declaring any cash dividends to holders of DelMar Common Stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

The Merger may not be accretive, and may be dilutive, to the combined company’s earnings per share, which may negatively affect the market price of shares of DelMar Common Stock.

DelMar and Adgero currently believe the Merger will result in a number of benefits, including cost savings, operating efficiencies, and stronger demand for their respective products and services, and that the Merger will be accretive to the combined company’s earnings. This belief is based, in part, on preliminary current estimates that may materially change. In addition, future events and conditions, including adverse changes in market conditions, additional transaction and integration-related costs and other factors such as the failure to realize some or all of the anticipated benefits of the Merger, could decrease or delay the accretion that is currently anticipated or could result in dilution. Any dilution of, or decrease in or delay of any accretion to, the combined company’s earnings per share could cause the price of shares of DelMar Common Stock to decline or grow at a reduced rate.

 

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Provisions of Nevada law or the DelMar Articles could delay or prevent an acquisition of DelMar, even if the acquisition would be beneficial to its stockholders, and could make it more difficult for stockholders to change DelMar’s management.

The DelMar Articles contain provisions that may discourage an unsolicited takeover proposal that stockholders may consider to be in their best interests. DelMar is also subject to anti-takeover provisions under Nevada law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include: limitations on the ability to engage in any “combination” with an “interested stockholder” (each, as defined in the NRS) for two years from the date the person first becomes an “interested stockholder”; being subject to Sections 78.378 to 78.3793 of the NRS and allowing an “acquiring person” to obtain voting rights in “control shares” without shareholder approval; the ability of the DelMar board of directors to issue shares of currently undesignated and unissued preferred stock without prior stockholder approval; advance notice requirements for stockholder proposals or nominations of directors; limitations on the ability of stockholders to call special meetings; the requirement that certain amendments to the DelMar Articles be approved by 76% of the voting power of the outstanding shares of DelMar capital stock; and the ability of the DelMar board of directors to amend the DelMar Bylaws without stockholder approval. For more information, please see the section entitled “Description of DelMar’s Securities–Anti-Takeover Effects of Nevada Law and Our Articles of Incorporation, as amended, and Bylaws.”

Risks Related to DelMar

An investment in DelMar Common Stock involves a high degree of risk. In determining whether to purchase DelMar Common Stock, an investor should carefully consider all of the material risks described below, together with the other information contained in this proxy statement/prospectus/information statement before making a decision to purchase DelMar’s securities.

Risks Related to DelMar’s Business

DelMar has expressed substantial doubt about its ability to continue as a going concern.

As discussed in Note 1 to the condensed consolidated interim financial statements for the nine months ended March 31, 2020, DelMar’s financial statements for the nine months ended March 31, 2020, include an explanatory paragraph that such financial statements were prepared assuming that DelMar will continue as a going concern. A going concern basis assumes that DelMar will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business.

For the nine months ended March 31, 2020, DelMar reported a loss of $5,302,904, and a negative cash flow from operations of $5,348,629. DelMar had an accumulated deficit of $65,893,587 and had cash and cash equivalents of $4,973,378 as of March 31, 2020. DelMar is in the development stage and has not generated any revenues to-date. DelMar does not have the prospect of achieving revenues until such time that its product candidate is commercialized, or partnered, which may not ever occur. In the near future, DelMar will require additional funding to maintain its clinical trials, research and development projects, and for general operations. These circumstances indicate substantial doubt exists about DelMar’s ability to continue as a going concern within one year from the date of filing of its condensed consolidated financial statements for the nine months ended March 31, 2020.

Consequently, management is pursuing various financing alternatives to fund DelMar’s operations so DelMar can continue as a going concern. However, the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements but the ultimate impact of the COVID-19 pandemic on DelMar’s ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and any new information which may emerge concerning the severity of the

 

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COVID-19 pandemic. DelMar may not be able to raise sufficient additional capital and may tailor its drug candidate development program based on the amount of funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.

The financial statements for the nine months ended March 31, 2020 do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Such adjustments could be material.

DelMar has a limited operating history and a history of operating losses and expects to incur significant additional operating losses.

DelMar is an early stage company and there is limited historical financial information upon which to base an evaluation of its performance. DelMar’s prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. DelMar expects to incur substantial additional net expenses over the next several years as its research, development and commercial activities increase.

The amount of future losses and when, if ever, DelMar will achieve profitability are uncertain. DelMar’s ability to generate revenue and achieve profitability will depend on, among other things, successful completion of the preclinical and clinical development of DelMar’s product candidate; obtaining necessary regulatory approvals from the FDA and international regulatory agencies; successful manufacturing, sales and marketing arrangements; and raising sufficient funds to finance DelMar’s activities. If DelMar is unsuccessful at some or all of these undertakings, DelMar’s business, prospects and results of operations may be materially adversely affected.

DelMar will need to raise additional capital, which may cause dilution to DelMar’s stockholders, restrict its operations or require DelMar to relinquish rights to technologies or product candidates.

Until such time, if ever, as DelMar can generate substantial product revenues, DelMar expects to finance its cash needs through a combination of public or private equity offerings, debt financings and/or license and development agreements with collaboration partners. As of March 30, 2020, DelMar had cash and cash equivalents $4,973,378 which DelMar expects to fund its planned operations into the fourth quarter of calendar 2020. DelMar will also need to raise additional capital to fund its operations. DelMar does not have any committed external source of funds. To the extent that DelMar raises additional capital through the sale of equity or convertible debt securities, then-existing stockholders’ interests may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect their rights as common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit DelMar’s ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in fixed payment obligations.

If DelMar raises funds through collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties, DelMar may have to relinquish valuable rights to DelMar’s technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to DelMar. If DelMar is unable to raise additional funds through equity or debt financings when needed, DelMar may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market product candidates that DelMar would otherwise prefer to develop and market itself.

 

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DelMar’s inability to obtain additional financing could adversely affect DelMar’s ability to meet its obligations under DelMar’s planned clinical studies and could negatively impact the timing of DelMar’s clinical results.

DelMar’s ability to meet DelMar’s obligations and continue the research and development of DelMar’s product candidate is dependent on DelMar’s ability to continue to raise adequate financing. DelMar may not be successful in obtaining such additional financing in the amount required at any time, or for any period, or, if available, that it can be obtained on terms satisfactory to DelMar. In the event that DelMar is unable to obtain such additional financing, DelMar may be unable to meet DelMar’s obligations under DelMar’s planned clinical studies and DelMar may have to tailor its drug candidate development programs based on the amount of funding DelMar raises which could negatively impact the timing of DelMar’s clinical results. In addition, DelMar could be required to cease its operations.

DelMar faces significant risks related to the COVID-19 pandemic, or the widespread outbreak of any other communicable disease, which could have material and adverse impacts on DelMar’s business, financial condition, liquidity and results of operations.

DelMar faces risks related to health epidemics or outbreaks of communicable diseases, including the recent outbreak around the world of the highly transmissible and pathogenic coronavirus, COVID-19. The outbreak of such communicable diseases could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China and on March 11, 2020 was declared a pandemic by the World Health Organization. The ultimate impact of the COVID-19 pandemic on DelMar’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or DelMar, may determine are needed.

To date, many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of COVID-19 and have closed non-essential businesses. As local jurisdictions continue to put restrictions in place, DelMar’s ability to continue to operate DelMar’s business may also be limited. Such events may result in a period of business, supply and drug product manufacturing disruption, and in reduced operations, any of which could materially affect DelMar’s business, financial condition and results of operations.

DelMar is currently conducting clinical studies in multiple countries where there has been a COVID-19 outbreak. Changes in circumstances surrounding COVID-19, such as additional travel limitations imposed by governmental authorities could result in new patients being unable to be enrolled in DelMar’s studies, or existing patients being unable to continue to receive treatment, could impact the cost of DelMar’s studies as DelMar may have to enroll additional patients in order to obtain the data necessary to be able to conclude its studies. DelMar cannot predict whether any of its clinical testing sites will withdraw from participation in any of DelMar’s studies temporarily, or permanently. In addition, even if DelMar able to fully enroll and treat all patients in its studies, obtaining full data could be impacted by an inability to ship and analyze samples, or otherwise complete data assessment. Further, if the patients enrolled in DelMar’s clinical studies become infected with COVID-19, DelMar may have more adverse events and deaths in its clinical studies as a result. DelMar may also face difficulties enrolling patients in its clinical studies if the patient populations that are eligible for DelMar’s clinical studies are impacted by the coronavirus disease. Vulnerable patients, such as the cancer patients enrolled in DelMar’s clinical studies, may be at a higher risk of contracting COVID-19 and may experience more severe symptoms from the disease, adversely affecting DelMar’s chances for regulatory approval, or requiring further clinical studies. The continued spread of COVID-19 globally, and the resulting travel restrictions in place by governments to help stop the spread of COVID-19, could adversely impact DelMar’s clinical study operations,

 

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including the ability of DelMar’s principal investigators and site staff to travel to its clinical study sites, and DelMar’s ability to recruit and retain principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography.

In addition, the continued impact resulting from the COVID-19 outbreak in areas where DelMar has manufacturing operations for its clinical drug supply, or where DelMar’s suppliers or distributors operate, or if the COVID-19 outbreak in these areas were to increase in severity, and the measures taken by the governments of countries affected, could adversely affect DelMar’s business, financial condition, or results of operations by limiting DelMar’s ability to manufacture or ship materials, or by forcing temporary closure of facilities that it relies upon.

The spread of COVID-19, which has caused a broad impact globally, may materially affect DelMar economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing DelMar’s ability to access capital, which could in the future negatively affect DelMar’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect DelMar business and the value of DelMar Common Stock.

While the DelMar Common Stock is expected to be listed on Nasdaq, there is no guarantee as to how long such listing will be maintained.

DelMar Common Stock is listed for trading on Nasdaq. DelMar must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days. If a company’s common stock trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice, advising that such company has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements. Thereafter, if such a company does not regain compliance with the bid price requirement, a second 180-day compliance period may be available, provided (i) it meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, including stockholder equity requirements, which DelMar may be unable to satisfy (except for the bid price requirement), and (ii) it provides written notice to Nasdaq of its intention to cure this deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event the company does not regain compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, and if it appears to the Staff of the Listing Qualifications Department of The Nasdaq Stock Market LLC (the “Nasdaq Staff”) that the company will not be able to cure the deficiency, or if the company is not otherwise eligible, the Nasdaq Staff will provide the company with written notification that its securities are subject to delisting from Nasdaq. At that time, the company may appeal the delisting determination to a Hearings Panel.

On September 26, 2019, the Nasdaq Staff notified DelMar that it did not comply with the minimum $1.00 per share bid price requirement for continued listing, as set forth in Nasdaq Listing Rule 5550(a)(2), and DelMar had 180 calendar days, or until March 24, 2020, within which to regain compliance. On March 25, 2020, DelMar received a written notice from the Nasdaq Staff confirming the Company’s eligibility for continued listing of DelMar Common Stock on Nasdaq pursuant to an additional 180 calendar day extension through September 21, 2020. On April 20, 2020, DelMar received a written notice from the Nasdaq Staff stating that, in response to the COVID-19 pandemic and related market conditions, Nasdaq had filed a rule change with the SEC to suspend the compliance period for the minimum closing bid price requirement from April 16, 2020 through June 30, 2020. As a result, DelMar has until December 7, 2020 to regain compliance. To regain compliance, the closing bid price of DelMar Common Stock must be at least $1.00 per share for a minimum of ten consecutive business days or more at the discretion of the Nasdaq Staff.

If DelMar is unable to regain compliance with the minimum closing bid price requirement by December 7, 2020, or if DelMar fails to meet any of the other continued listing requirements, including stockholder equity

 

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requirements, DelMar’s securities may be delisted from Nasdaq and trade on the OTC Markets Group Inc. or other small trading markets, which could reduce the liquidity of DelMar Common Stock materially and result in a corresponding material reduction in the price of DelMar Common Stock. In addition, delisting could harm DelMar’s ability to raise capital through alternative financing sources on terms acceptable to DelMar, or at all, and may result in the potential loss of confidence by investors, employees and business development opportunities. Such a delisting likely would impair your ability to sell or purchase DelMar Common Stock when you wish to do so. Further, if DelMar was to be delisted from Nasdaq, DelMar Common Stock may no longer be recognized as a “covered security” and DelMar would be subject to regulation in each state in which it offers securities. Thus, delisting from Nasdaq could adversely affect DelMar’s ability to raise additional financing through the public or private sale of equity securities, would significantly impact the ability of investors to trade DelMar securities and would negatively impact the value and liquidity of DelMar Common Stock.

DelMar is seeking stockholder approval of a Reverse Stock Split of DelMar Common Stock for the purpose of maintaining the listing of DelMar Common Stock on the Nasdaq Capital Market, but DelMar may not obtain stockholder approval or it may not have the desired result.

DelMar is seeking stockholder approval of a reverse stock split of DelMar Common Stock for the purpose of raising the per share trading price of the DelMar Common Stock and maintaining the listing of DelMar Common Stock on the Nasdaq Capital Market. However, there is no assurance that DelMar’s stockholders will approve the Reverse Stock Split Proposal, or even if they do, that it will have the desired result and that DelMar will be able to maintain its listing on the Nasdaq Capital Market. Even if DelMar effects the Reverse Stock Split and maintains its listing, shares of DelMar Common Stock may still have a relatively low trading price, which could hinder DelMar’s ability to attract institutional or other potential investors. Furthermore, the price per share of DelMar Common Stock after the Reverse Stock Split, if approved and implemented, may not reflect the Reverse Stock Split and the price per share following the effective time of the Reverse Stock Split may not be maintained for any period of time following the Reverse Stock Split. In many cases, the market price of a company’s shares declines after a reverse stock split. Accordingly, the total market capitalization of DelMar Common Stock following the contemplated Reverse Stock Split may be lower than before the Reverse Stock Split. Similarly, the trading liquidity of the DelMar Common Stock could be adversely affected by the reduced number of shares outstanding after the Reverse Stock Split.

In the event that DelMar’s stockholders do not approve the Reverse Stock Split Proposal, DelMar’s board of directors may take action to effect a reverse split of DelMar Common Stock and a corresponding decrease to DelMar’s authorized capital stock, without stockholder approval pursuant to NRS 78.207 if required to comply with the Nasdaq minimum bid price requirement and if deemed to be in the interests of DelMar.

If DelMar is unable to effectively implement or maintain a system of internal control over financial reporting, DelMar may not be able to accurately or timely report its financial results and its stock price could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations require DelMar’s to evaluate the effectiveness of DelMar’s internal control over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of DelMar’s internal control over financial reporting in DelMar’s Annual Report on Form 10-K for that fiscal year. Management determined that as of March 31, 2020 and in past periods, DelMar’s disclosure controls and procedures and internal control over financial reporting were not effective due to material weaknesses in DelMar’s internal control over financial reporting related to DelMar’s limited number of employees in DelMar’s accounting department and inadequate segregation of duties over authorization, review and recording of transactions, as well as the financial reporting of such transactions. Any failure to implement new or improved controls necessary to remedy the material weaknesses described above, or difficulties encountered in the implementation or operation of these controls, could harm DelMar’s operations, decrease the reliability of DelMar’s financial reporting, and cause DelMar to fail to meet DelMar’s financial reporting obligations, which could adversely affect DelMar’s business and reduce DelMar’s stock price.

 

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DelMar is an early-stage company and may never achieve commercialization of its candidate products or profitability.

DelMar is an early stage of development and commercialization of its technologies and product candidate. DelMar has not yet begun to market any products and, accordingly, have not begun or generate revenues from the commercialization of DelMar’s product. DelMar’s product will require significant additional clinical testing and investment prior to commercialization. A commitment of substantial resources by DelMar’s and, potentially, DelMar’s partners to conduct time-consuming research and clinical studies will be required if DelMar is to complete the development of DelMar’s product candidate. There can be no assurance that DelMar’s product candidate will meet applicable regulatory standards, obtain required regulatory approvals, be capable of being produced in commercial quantities at reasonable costs or be successfully marketed. DelMar’s product candidate is not expected to be commercially available for several years, if at all.

DelMar is currently focused on the development of a single product candidate.

DelMar’s product development efforts are currently focused on a single product, VAL-083, for which DelMar is researching multiple indications. If VAL-083 fails to achieve clinical endpoints or exhibits unanticipated toxicity or if a superior product is developed by a competitor, DelMar’s prospects for obtaining regulatory approval and commercialization may be negatively impacted. In the long-term, DelMar hopes to establish a pipeline of product candidates, and DelMar has identified additional product candidates that DelMar may be able to acquire or license in the future. However, at this time DelMar does not have any formal agreements granting DelMar any rights to such additional product candidates.

Even if DelMar is able to commercialize any product candidate that we develop, the product may become subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives that could harm DelMar’s business.

The commercial success of DelMar’s current or future product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of DelMar’s product candidate will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities (such as Medicare and Medicaid), private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, DelMar may not be able to successfully commercialize DelMar’s products. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow DelMar to establish and maintain pricing sufficient to realize a meaningful return on DelMar’s investment.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, DelMar might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues DelMar is able to generate from the sale of the product in that country. Adverse pricing limitations may hinder Delmar’s ability to recoup DelMar’s investment in one or more product candidates, even if DelMar’s product candidates obtain marketing approval.

DelMar’s ability to commercialize VAL-083 or any other product candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused

 

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on cost containment, both in the United States and elsewhere. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect DelMar’s ability to sell Delmar’s product candidate profitably. These payors may not view DelMar’s products, if any, as cost-effective, and coverage and reimbursement may not be available to DelMar’s customers, or may not be sufficient to allow Delmar’s products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause DelMar to decrease the price DelMar might establish for products, which could result in lower than anticipated product revenues. If the prices for DelMar’s products, if any, decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement, DelMar’s prospects for revenue and profitability will suffer.

There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable non- U.S. regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers DelMar’s costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. DelMar cannot be sure that coverage will be available for any product candidate that DelMar, or third-parties, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of DelMar’s product candidates for which DelMar obtain marketing approval could have a material adverse effect on DelMar’s operating results, DelMar’s ability to raise capital needed to commercialize products and DelMar’s overall financial condition.

Pursuant to the terms of the DelMar Series B Preferred Stock and the Valent Technologies, LLC (“Valent”) Patent Assignment Agreement, DelMar may be required to pay royalties.

Pursuant to the terms of the Valent Patent Assignment Agreement and the DelMar Series B Preferred Stock Certificate of Designation and the related Series B Preferred Royalty Agreement, DelMar will be required to pay royalties if DelMar receives revenue or milestone payments from product sales, or the partnering of VAL-083. If DelMar obtains FDA or EMA approval of VAL-083, and/or if DelMar generates sales of such products, or DelMar receives any proceeds from the licensing or other disposition of VAL-083, DelMar is required to pay to the holders of DelMar Series B Preferred Stock, subject to certain vesting requirements, a low, single-digit royalty. In addition, DelMar is also required to pay a future royalty on all revenues derived from the development and commercialization of VAL-083 to Valent. The royalty payment rights will expire when the patents covering the applicable product expire.

DelMar is dependent on obtaining certain patents and protecting DelMar’s proprietary rights.

DelMar’s success will depend, in part, on DelMar’s ability to obtain patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties or having third parties circumvent DelMar’s rights. DelMar has filed and is actively pursuing patent applications for its products. The patent positions of biotechnology, biopharmaceutical and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions. Thus, there can be no assurance that any of DelMar’s patent applications will result in the issuance of patents, that DelMar will develop additional proprietary products that are patentable, that any patents issued to DelMar or those that already have been issued will provide DelMar with any competitive advantages or will not be challenged by any third parties, that the patents of others will not

 

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impede DelMar’s ability to do business or that third parties will not be able to circumvent DelMar’s patents. Furthermore, there can be no assurance that others will not independently develop similar products, duplicate any of DelMar’s products not under patent protection, or, if patents are issued to DelMar, design around the patented products DelMar developed or will develop.

DelMar may be required to obtain licenses from third parties to avoid infringing patents or other proprietary rights. No assurance can be given that any licenses required under any such patents or proprietary rights would be made available, if at all, on terms DelMar finds acceptable. If DelMar does not obtain such licenses, DelMar could encounter delays in the introduction of products or could find that the development, manufacture or sale of products requiring such licenses could be prohibited.

A number of pharmaceutical, biopharmaceutical and biotechnology companies and research and academic institutions have developed technologies, filed patent applications or received patents on various technologies that may be related to or affect DelMar’s business. Some of these technologies, applications or patents may conflict with DelMar’s technologies or patent applications. Such conflict could limit the scope of the patents, if any, that DelMar may be able to obtain or result in the denial of DelMar’s patent applications. In addition, if patents that cover DelMar’s activities are issued to other companies, there can be no assurance that DelMar would be able to obtain licenses to these patents at a reasonable cost or be able to develop or obtain alternative technology. If DelMar does not obtain such licenses, DelMar could encounter delays in the introduction of products, or could find that the development, manufacture or sale of products requiring such licenses could be prohibited. In addition, DelMar could incur substantial costs in defending DelMar in suits brought against DelMar on patents it might infringe or in filing suits against others to have such patents declared invalid.

Patent applications in the U.S. are maintained in secrecy and not published if either: (i) the application is a provisional application or (ii) the application is filed and DelMar requests no publication, and certify that the invention disclosed “has not and will not” be the subject of a published foreign application. Otherwise, U.S. applications or foreign counterparts, if any, publish 18 months after the priority application has been filed. Since publication of discoveries in the scientific or patent literature often lag behind actual discoveries, DelMar cannot be certain that it or any licensor were the first creator of inventions covered by pending patent applications or that DelMar or such licensor was the first to file patent applications for such inventions. Moreover, DelMar might have to participate in interference proceedings declared by the U.S. Patent and Trademark Office (the “USPTO”) to determine priority of invention, which could result in substantial cost to DelMar, even if the eventual outcome were favorable to DelMar. There can be no assurance that DelMar’s patents, if issued, would be held valid or enforceable by a court or that a competitor’s technology or product would be found to infringe such patents.

Moreover, DelMar may be subject to third-party preissuance submissions of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging DelMar’s patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, DelMar’s patent rights, allow third parties to commercialize DelMar’s technology or products and compete directly with DelMar, without payment to DelMar, or result in DelMar’s inability to manufacture or commercialize products without infringing third-party patent rights.

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

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and DelMar’s patents may be challenged in courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate, or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit DelMar’s ability to stop others from using or

 

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commercializing similar or identical technology and products, or limit the duration of the patent protection of DelMar’s technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, DelMar’s owned and licensed patent portfolio may not provide DelMar with sufficient rights to exclude others from commercializing products similar or identical to DelMar’s.

In addition, the protection of intellectual property rights in China (where DelMar’s clinical product candidate, VAL-083, is manufactured pursuant to a collaboration agreement with the only manufacturer presently licensed by the CFDA to manufacture VAL-083 for the China market, and where VAL-083 is approved for the treatment of CML and lung cancer) is relatively weak compared to the United States, which may negatively affect DelMar’s ability to generate royalty revenue from sales of VAL-083 in China.

Much of DelMar’s know-how and technology may not be patentable. To protect DelMar’s rights, DelMar requires employees, consultants, advisors and collaborators to enter into confidentiality agreements. There can be no assurance, however, that these agreements will provide meaningful protection for DelMar’s trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. Further, DelMar’s business may be adversely affected by competitors who independently develop competing technologies, especially if DelMar obtains no, or only narrow, patent protection.

DelMar may be unable to protect its patents and proprietary rights.

DelMar’s future success will depend to a significant extent on DelMar’s ability to:

 

•

obtain and keep patent protection for DelMar’s products and technologies on an international basis;

 

•

enforce DelMar’s patents to prevent others from using DelMar’s inventions;

 

•

maintain and prevent others from using DelMar’s trade secrets; and

 

•

operate and commercialize products without infringing on the patents or proprietary rights of others.

DelMar can provide no assurance that DelMar’s patent rights will afford any competitive advantages and these rights may be challenged or circumvented by third parties. Further, patents may not be issued on any of DelMar’s pending patent applications in the U.S. or abroad. Because of the extensive time required for development, testing and regulatory review of a product candidate, it is possible that before a product candidate can be commercialized, any related patent may expire, or remain in existence for only a short period following commercialization, reducing or eliminating any advantage of the patent.

If DelMar sues others for infringing DelMar’s patents, a court may determine that such patents are invalid or unenforceable. Even if the validity of DelMar’s patent rights is upheld by a court, a court may not prevent the alleged infringement of DelMar’s patent rights on the grounds that such activity is not covered by DelMar’s patent claims.

In addition, third parties may sue DelMar for infringing their patents. In the event of a successful claim of infringement against DelMar, DelMar may be required to:

 

•

defend litigation or administrative proceedings;

 

•

pay substantial damages;

 

•

stop using DelMar’s technologies and methods;

 

•

stop certain research and development efforts;

 

•

develop non-infringing products or methods; and

 

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obtain one or more licenses from third parties.

 

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If required, DelMar can provide no assurance that DelMar will be able to obtain such licenses on acceptable terms, or at all. If DelMar is sued for infringement, DelMar could encounter substantial delays in development, manufacture and commercialization of DelMar’s product candidates. Any litigation, whether to enforce DelMar’s patent rights or to defend against allegations that DelMar infringed third-party rights, will be costly, time consuming, and may distract management from other important tasks.

As is commonplace in the biotechnology and pharmaceutical industry, DelMar employs individuals who were previously employed at other biotechnology or pharmaceutical companies, including DelMar’s competitors or potential competitors. To the extent DelMar’s employees are involved in research areas which are similar to those areas in which they were involved at their former employers, DelMar may be subject to claims that such employees and/or DelMar has inadvertently or otherwise used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims, which could result in substantial costs and be a distraction to management and which may have a material adverse effect on DelMar, even if DelMar is successful in defending such claims.

DelMar is subject to various government regulations.

The manufacture and sale of human therapeutic and diagnostic products in the U.S., Canada and foreign jurisdictions are governed by a variety of statutes and regulations. These laws require approval of manufacturing facilities, controlled research and testing of products and government review and approval of a submission containing manufacturing, preclinical and clinical data in order to obtain marketing approval based on establishing the safety and efficacy of the product for each use sought, including adherence to current cGMP during production and storage, and control of marketing activities, including advertising and labeling.

VAL-083 and any other products DelMar may develop will require significant development, preclinical and clinical testing and investment of substantial funds prior to its commercialization. The process of obtaining required approvals can be costly and time-consuming, and there can be no assurance that DelMar will successfully develop any future products that will prove to be safe and effective in clinical studies or receive applicable regulatory approvals. Markets other than the U.S. and Canada have similar restrictions. Potential investors and shareholders should be aware of the risks, problems, delays, expenses and difficulties which DelMar may encounter in view of the extensive regulatory environment which controls DelMar’s business.

DelMar may request priority review for DelMar’s product candidate in the future. The FDA may not grant priority review for DelMar’s product candidate. Moreover, even if the FDA designated such product for priority review, that designation may not lead to a faster regulatory review or approval process and, in any event, would not assure FDA approval.

DelMar may be eligible for priority review designation for DelMar’s product candidate if the FDA determines such product candidate offers major advances in treatment or provides a treatment where no adequate therapy exists. A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten months. The FDA has broad discretion with respect to whether or not to grant priority review status to a product candidate, so even if DelMar believes a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. Thus, while the FDA has granted priority review to other oncology disease products, DelMar’s product candidate, should DelMar determine to seek priority review, may not receive similar designation. Moreover, even if DelMar’s product candidate is designated for priority review, such a designation does not necessarily mean a faster regulatory review process or necessarily confer any advantage with respect to approval compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee approval within an accelerated timeline or thereafter.

 

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DelMar believes it may in some instances be able to secure approval from the FDA or comparable non-U.S. regulatory authorities to use accelerated development pathways. If DelMar is unable to obtain such approval, DelMar may be required to conduct additional preclinical studies or clinical studies beyond those that it contemplates, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals.

DelMar anticipates that it may seek an accelerated approval pathway for its product candidate. Under the accelerated approval provisions in the Federal Food, Drug, and Cosmetic Act (“FDCA”), and the FDA’s implementing regulations, the FDA may grant accelerated approval to a product designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the product has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical benefit, the FDA may withdraw its approval of the drug.

Prior to seeking such accelerated approval, DelMar will seek feedback from the FDA and will otherwise evaluate DelMar’s ability to seek and receive such accelerated approval. There can also be no assurance that after DelMar’s evaluation of the feedback and other factors DelMar will decide to pursue or submit a New Drug Application (“NDA”), for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance that after subsequent FDA feedback that DelMar will continue to pursue or apply for accelerated approval or any other form of expedited development, review or approval, even if DelMar initially decides to do so. Furthermore, if DelMar decides to submit an application for accelerated approval or under another expedited regulatory designation (e.g., breakthrough therapy designation), there can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. The FDA or other non-U.S. authorities could also require DelMar to conduct further studies prior to considering DelMar’s application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for any of DelMar’s product candidates that DelMar decides to seek accelerated approval for would result in a longer time period to commercialization of such product candidate, could increase the cost of development of such product candidate and could harm DelMar’s competitive position in the marketplace.

DelMar has conducted, and may in the future conduct, clinical studies for certain of DelMar’s product candidates at sites outside the United States, and the FDA may not accept data from studies conducted in such locations.

DelMar has conducted and may in the future choose to conduct one or more of DelMar’s clinical studies outside the United States. Although the FDA may accept data from clinical studies conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example, the clinical study must be well designed and conducted and performed by qualified investigators in accordance with ethical principles. The study population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. Generally, the patient population for any clinical studies conducted outside of the United States must be representative of the population for whom DelMar intends to seek approval in the United States. In addition,

 

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while these clinical studies are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the studies also complied with all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from studies conducted outside of the United States. If the FDA does not accept the data from any of DelMar’s clinical studies that DelMar determines to conduct outside the United States, it would likely result in the need for additional studies, which would be costly and time-consuming and delay or permanently halt DelMar’s development of the product candidate.

In addition, the conduct of clinical studies outside the United States could have a significant impact on DelMar. Risks inherent in conducting international clinical studies include:

 

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foreign regulatory requirements that could restrict or limit DelMar’s ability to conduct DelMar’s clinical studies;

 

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administrative burdens of conducting clinical studies under multiple foreign regulatory schema;

 

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foreign exchange fluctuations; and

 

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diminished protection of intellectual property in some countries.

If DelMar’s clinical studies fail to demonstrate safety and efficacy to the satisfaction of the FDA and comparable non-U.S. regulators, DelMar may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of DelMar’s product candidate.

DelMar is not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Comparable non-U.S. regulatory authorities, such as the EMA, impose similar restrictions. DelMar may never receive such approvals. DelMar must complete extensive preclinical development and clinical studies to demonstrate the safety and efficacy of DelMar’s product candidate in humans before DelMar will be able to obtain these approvals.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. DelMar has not previously submitted an NDA to the FDA or similar drug approval filings to comparable non-U.S. regulatory authorities for any product candidate.

Any inability to successfully complete preclinical and clinical development could result in additional costs to DelMar and impair DelMar’s ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if (1) DelMar is required to conduct additional clinical studies or other testing of DelMar’s product candidate beyond the studies and testing that DelMar contemplates, (2) DelMar is unable to successfully complete clinical studies of DelMar’s product candidate or other testing, (3) the results of these studies or tests are unfavorable, uncertain or are only modestly favorable, or (4) there are unacceptable safety concerns associated with DelMar’s product candidate, DelMar, in addition to incurring additional costs, may:

 

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be delayed in obtaining marketing approval for DelMar’s product candidates;

 

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not obtain marketing approval at all;

 

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obtain approval for indications or patient populations that are not as broad as DelMar intended or desired;

 

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obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings;

 

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be subject to additional post-marketing testing or other requirements; or

 

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be required to remove the product from the market after obtaining marketing approval.

 

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If DelMar experiences any of a number of possible unforeseen events in connection with clinical studies of DelMar’s product candidates, potential marketing approval or commercialization of DelMar’s product candidates could be delayed or prevented.

DelMar may experience numerous unforeseen events during, or as a result of, clinical studies that could delay or prevent marketing approval of DelMar’s product candidate, including:

 

•

clinical studies of DelMar’s product candidate may produce unfavorable or inconclusive results;

 

•

DelMar may decide, or regulators may require DelMar, to conduct additional clinical studies or abandon product development programs;

 

•

the number of patients required for clinical studies of DelMar’s product candidate may be larger than DelMar anticipates, patient enrollment in these clinical studies may be slower than DelMar anticipates or participants may drop out of these clinical studies at a higher rate than DelMar anticipates;

 

•

data safety monitoring committees may recommend suspension, termination or a clinical hold for various reasons, including concerns about patient safety;

 

•

regulators or IRBs may suspend or terminate the study or impose a clinical hold for various reasons, including noncompliance with regulatory requirements or concerns about patient safety;

 

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patients with serious, life-threatening diseases included in DelMar’s clinical studies may die or suffer other adverse medical events for reasons that may not be related to DelMar’s product candidate;

 

•

participating patients may be subject to unacceptable health risks;

 

•

patients may not complete clinical studies due to safety issues, side effects, or other reasons;

 

•

changes in regulatory requirements and guidance may occur, which require DelMar to amend clinical study protocols to reflect these changes;

 

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DelMar’s third-party contractors, including those manufacturing DelMar’s product candidate or components or ingredients thereof or conducting clinical studies on DelMar’s behalf, may fail to comply with regulatory requirements or meet their contractual obligations to DelMar in a timely manner or at all;

 

•

regulators or institutional review boards, or IRBs may not authorize DelMar or its investigators to commence a clinical study or conduct a clinical study at a prospective study site;

 

•

DelMar may experience delays in reaching or fail to reach agreement on acceptable clinical study contracts or clinical study protocols with prospective study sites;

 

•

patients who enroll in a clinical study may misrepresent their eligibility to do so or may otherwise not comply with the clinical study protocol, resulting in the need to drop the patients from the clinical study, increase the needed enrollment size for the clinical study or extend the clinical study’s duration;

 

•

DelMar may have to suspend or terminate clinical studies of DelMar’s product candidate for various reasons, including a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of a product candidate;

 

•

regulators or IRBs may require that DelMar or its investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or their respective standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate or findings of undesirable effects caused by a chemically or mechanistically similar drug or drug candidate;

 

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the FDA or comparable non-U.S. regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which DelMar enters into agreements for clinical and commercial supplies;

 

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•

the FDA or comparable non-U.S. regulatory authorities may disagree with DelMar’s clinical study design or DelMar’s interpretation of data from preclinical studies and clinical studies;

 

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the supply or quality of raw materials or manufactured product candidate or other materials necessary to conduct clinical studies of DelMar’s product candidate may be insufficient, inadequate, delayed, or not available at an acceptable cost, or DelMar may experience interruptions in supply; and

 

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the approval policies or regulations of the FDA or comparable non-U.S. regulatory authorities may significantly change in a manner rendering DelMar’s clinical data insufficient to obtain marketing approval.

Product development costs for DelMar will increase if DelMar experiences delays in testing or pursuing marketing approvals and DelMar may be required to obtain additional funds to complete clinical studies and prepare for possible commercialization of DelMar’s product candidate. DelMar does not know whether any preclinical tests or clinical studies will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical study delays also could shorten any periods during which DelMar may have the exclusive right to commercialize DelMar’s product candidate or allow DelMar’s competitors to bring products to market before DelMar does and impair its ability to successfully commercialize DelMar’s product candidate and may harm DelMar’s business and results of operations. In addition, many of the factors that cause, or lead to, clinical study delays may ultimately lead to the denial of marketing approval of DelMar’s product candidate.

If DelMar experiences delays or difficulties in the enrollment of patients in clinical studies, it may not achieve DelMar’s clinical development on DelMar’s anticipated timeline, or at all, and DelMar’s receipt of necessary regulatory approvals could be delayed or prevented.

DelMar may not be able to initiate or continue clinical studies for VAL-083 or any other product candidate if DelMar is unable to locate and enroll a sufficient number of eligible patients to participate in clinical studies. Patient enrollment is a significant factor in the timing of clinical studies, and is affected by many factors, including:

 

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the size and nature of the patient population;

 

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the severity of the disease under investigation;

 

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the proximity of patients to clinical sites;

 

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the eligibility criteria for the study;

 

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the design of the clinical study;

 

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efforts to facilitate timely enrollment;

 

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competing clinical studies; and

 

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clinicians’ and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications DelMar is investigating.

DelMar’s inability to enroll a sufficient number of patients for DelMar’s clinical studies could result in significant delays or may require DelMar to abandon one or more clinical studies altogether. Enrollment delays in DelMar’s clinical studies may result in increased development costs for DelMar’s product candidate, delay or halt the development of and approval processes for DelMar’s product candidate and jeopardize DelMar’s ability to achieve DelMar’s clinical development timeline and goals, including the dates by which DelMar will commence, complete and receive results from clinical studies. Enrollment delays may also delay or jeopardize DelMar’s ability to commence sales and generate revenues from DelMar’s product candidate. Any of the foregoing could cause DelMar’s value to decline and limit DelMar’s ability to obtain additional financing, if needed.

 

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Positive results in previous clinical studies of VAL-083 may not be replicated in future clinical studies, which could result in development delays or a failure to obtain marketing approval.

Positive results in previous clinical studies of VAL-083 may not be predictive of similar results in future clinical studies. Also, interim results during a clinical study do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical studies even after achieving promising results in early-stage development. Accordingly, the results from the completed preclinical studies and clinical studies for VAL-083 may not be predictive of the results DelMar may obtain in later stage studies. DelMar’s clinical studies may produce negative or inconclusive results, and DelMar may decide, or regulators may require DelMar, to conduct additional clinical studies. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical studies have nonetheless failed to obtain FDA or EMA, or other regulatory agency, approval for their products.

FDA approval of VAL-083 or future product candidates may be denied.

There can be no assurance that the FDA will ultimately approve DelMar’s NDA. The FDA may deny approval of VAL-083 for many reasons, including:

 

•

DelMar may be unable to demonstrate to the satisfaction of the FDA that DelMar’s products are safe and effective for its intended uses;

 

•

the FDA may disagree with DelMar’s interpretation of data from the clinical studies;

 

•

DelMar may be unable to demonstrate that any clinical or other benefits DelMar’s products outweigh any safety or other perceived risks; or

 

•

DelMar may not be able to successfully address any other issues raised by the FDA.

If VAL-083 fails to receive FDA approval, DelMar’s business and prospects will be materially adversely impacted.

DelMar expects to rely on orphan drug status to develop and commercialize its product candidate, but DelMar’s orphan drug designations may not confer marketing exclusivity or other expected commercial benefits as anticipated.

Market exclusivity afforded by orphan drug designation is generally offered as an incentive to drug developers to invest in developing and commercializing products for unique diseases that impact a limited number of patients. The FDA may grant orphan drug designation to drugs 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. Qualification to maintain orphan drug status is generally monitored by the regulatory authorities during the orphan drug exclusivity period, currently seven years from the date of approval in the United States.

DelMar has been granted orphan drug designation in the United States for GBM, ovarian cancer, and medulloblastoma, and in Europe for GBM. DelMar expects to rely on orphan drug exclusivity for DelMar’s product candidate. It is possible that the incidence and prevalence numbers for GBM could change. Should the incidence and prevalence of GBM patients materially increase, it is possible that the orphan drug designation, and related market exclusivity, in the United States could be lost. Further, while DelMar has been granted this orphan designation, the FDA can still approve different drugs for use in treating the same indication or disease, which would create a more competitive market for DelMar and DelMar’s revenues will be diminished.

Further, it is possible that another company also holding orphan drug designation for the same product candidate will receive marketing approval for the same indication before DelMar does. If that were to happen, DelMar’s applications for that indication may not be approved until the competing company’s period of

 

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exclusivity expires. Even if DelMar is the first to obtain marketing authorization for an orphan drug indication, there are circumstances under which a competing product may be approved for the same indication during the seven-year period of marketing exclusivity, such as if the later product is shown to be clinically superior to the orphan product, or if the later product is deemed a different product than DelMar’s. Further, the seven-year marketing exclusivity would not prevent competitors from obtaining approval of the same product candidate as DelMar’s for indications other than those in which DelMar has been granted orphan drug designation, or for the use of other types of products in the same indications as DelMar’s orphan product.

If the market opportunities for DelMar’s product candidate are smaller than DelMar believes they are, DelMar’s revenues may be adversely affected and its business may suffer. Because the target patient populations of our product candidate are small, DelMar must be able to successfully identify patients and capture a significant market share to achieve and maintain profitability.

DelMar focuses its research and product development on treatments for orphan cancer indications. DelMar’s projections of both the number of people who have failed other therapies or have limited medical options, are based on estimates. These estimates may prove to be incorrect and new studies may change the estimated incidence or prevalence. The number of patients in the United States, Europe and elsewhere may turn out to be lower than expected or may not be otherwise amenable to treatment with DelMar’s products, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect DelMar’s results of operations and DelMar’s business. Additionally, because DelMar’s target patient populations are small, DelMar will be required to capture a significant market share to achieve and maintain profitability.

DelMar may be required to suspend or discontinue clinical studies due to unexpected side effects or other safety risks that could preclude approval of DelMar’s products.

DelMar’s clinical studies may be suspended at any time for a number of reasons. For example, DelMar may voluntarily suspend or terminate DelMar’s clinical studies if at any time DelMar believes that they present an unacceptable risk to the clinical study patients. In addition, the FDA or other regulatory agencies may order the temporary or permanent discontinuation of DelMar’s clinical studies at any time if they believe that the clinical studies are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the clinical study patients.

Administering any product candidate to humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical studies of DelMar’s product candidates and could result in the FDA or other regulatory authorities denying further development or approval of DelMar’s product candidates for any or all targeted indications. Ultimately, some or all of DelMar’s product candidates may prove to be unsafe for human use. Moreover, DelMar could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse health effects or even death as a result of participating in DelMar’s clinical studies.

DelMar may not receive regulatory approvals for DelMar’s product candidate or there may be a delay in obtaining such approvals.

DelMar’s product and DelMar’s ongoing development activities are subject to regulation by regulatory authorities in the countries in which DelMar or its collaborators and distributors wish to test, manufacture or market DelMar’s products. For instance, the FDA will regulate the product in the U.S. and equivalent authorities, such as the EMA, will regulate in Europe. Regulatory approval by these authorities will be subject to the evaluation of data relating to the quality, efficacy and safety of the product for its proposed use, and there can be no assurance that the regulatory authorities will find DelMar’s data sufficient to support product approval of VAL-083 or any future product candidates.

The time required to obtain regulatory approval varies between countries. The FDA is required to facilitate the development and expedite the review of drugs and biologics that are intended for the treatment of a serious or

 

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life-threatening disease or condition and which demonstrate the potential to address unmet medical needs for the condition. Filling an unmet medical need is defined as providing a therapy where none exists or providing a therapy that may be potentially better than available therapy. Under the fast track program, the sponsor of a new drug or biologic candidate may request the FDA to designate the product for a specific indication as a fast track product concurrent with or after the filing of the IND for the product candidate. The FDA must determine if the product candidate qualifies for fast track designation within 60 days after receipt of the sponsor’s request. In the U.S., for products without “Fast Track” status, it can take over eighteen (18) months after submission of an application for product approval to receive the FDA’s decision. Even with Fast Track status, FDA review and decision can take over twelve (12) months.

In December 2017, the FDA granted Fast Track designation for VAL-083 in patients with rGBM.

Different regulators may impose their own requirements and may refuse to grant, or may require additional data before granting, an approval, notwithstanding that regulatory approval may have been granted by other regulators. Regulatory approval may be delayed, limited or denied for a number of reasons, including insufficient clinical data, the product not meeting safety or efficacy requirements or any relevant manufacturing processes or facilities not meeting applicable requirements as well as case load at the regulatory agency at the time.

DelMar may fail to comply with regulatory requirements.

DelMar’s success will be dependent upon DelMar’s ability, and DelMar’s collaborative partners’ abilities, to maintain compliance with regulatory requirements, including cGMP, and safety reporting obligations. The failure to comply with applicable regulatory requirements can result in, among other things, fines, injunctions, civil penalties, total or partial suspension of regulatory approvals, refusal to approve pending applications, recalls or seizures of products, operating and production restrictions and criminal prosecutions.

Even if DelMar’s product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for the product candidate may be smaller than DelMar estimates.

DelMar has never commercialized a product. Even if VAL-083 or any other product candidate is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies.

Efforts to educate the medical community and third-party payors on the benefits of DelMar’s product candidate may require significant resources and may not be successful. If DelMar’s product candidate is approved but does not achieve an adequate level of market acceptance, DelMar may not generate significant revenues and DelMar may not become profitable. The degree of market acceptance of VAL-083 or any other product candidate, if approved for commercial sale, will depend on a number of factors, including:

 

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the efficacy and safety of the product;

 

•

the potential advantages of the product compared to alternative treatments;

 

•

the prevalence and severity of any side effects;

 

•

the clinical indications for which the product is approved;

 

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whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy;

 

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•

limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling;

 

•

DelMar’s ability to offer the product for sale at competitive prices;

 

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DelMar’s ability to establish and maintain pricing sufficient to realize a meaningful return on DelMar’s investment;

 

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the product’s convenience and ease of administration compared to alternative treatments;

 

•

the willingness of the target patient population to try, and of physicians to prescribe, the product;

 

•

the strength of sales, marketing and distribution support;

 

•

the approval of other new products for the same indications;

 

•

changes in the standard of care for the targeted indications for the product;

 

•

the timing of market introduction of DelMar’s approved products as well as competitive products and other therapies;

 

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availability and amount of reimbursement from government payors, managed care plans and other third-party payors;

 

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adverse publicity about the product or favorable publicity about competitive products; and

 

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potential product liability claims.

The potential market opportunities for DelMar’s product candidate are difficult to estimate precisely. DelMar’s estimates of the potential market opportunities are predicated on many assumptions, including industry knowledge and publications, third-party research reports and other surveys. While DelMar believes that its internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain and the reasonableness of these assumptions has not been assessed by an independent source. If any of the assumptions proves to be inaccurate, the actual markets for our product candidate could be smaller than our estimates of the potential market opportunities.

If our product candidate receives marketing approval and DelMar, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, our ability to market the drug could be compromised.

Clinical studies of our product candidate are conducted in carefully defined subsets of patients who have agreed to enter into clinical studies. Consequently, it is possible that our clinical studies may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of our product candidate, DelMar, or others, discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse events could occur:

 

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regulatory authorities may withdraw their approval of the drug or seize the drug;

 

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DelMar may be required to recall the drug or change the way the drug is administered;

 

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additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular drug;

 

•

DelMar may be subject to fines, injunctions or the imposition of civil or criminal penalties;

 

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regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;

 

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DelMar may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients;

 

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•

DelMar could be sued and held liable for harm caused to patients;

 

•

the drug may become less competitive; and

 

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DelMar’s reputation may suffer.

Any of these events could have a material and adverse effect on DelMar’s operations and business and could adversely impact DelMar’s stock price.

Any product candidate for which DelMar obtains marketing approval, along with the manufacturing processes, qualification testing, post-approval clinical data, labeling and promotional activities for such product, will be subject to continual and additional requirements of the FDA and other regulatory authorities.

These requirements include submissions of safety and other post-marketing information, reports, registration and listing requirements, good manufacturing practices, or GMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, and recordkeeping. Even if marketing approval of DelMar’s product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of pharmaceutical products to ensure such products are marketed only for the approved indications and in accordance with the provisions of the approved labeling.

In addition, later discovery of previously unknown problems with DelMar’s products, manufacturing processes, or failure to comply with regulatory requirements, may lead to various adverse results, including:

 

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restrictions on such products, manufacturers or manufacturing processes;

 

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restrictions on the labeling or marketing of a product;

 

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restrictions on product distribution or use;

 

•

requirements to conduct post-marketing clinical studies;

 

•

requirements to institute a risk evaluation mitigation strategy, or REMS, to monitor safety of the product post-approval;

 

•

warning letters issued by the FDA or other regulatory authorities;

 

•

withdrawal of the products from the market;

 

•

refusal to approve pending applications or supplements to approved applications that DelMar submits;

 

•

recall of products, fines, restitution or disgorgement of profits or revenue;

 

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suspension, revocation or withdrawal of marketing approvals;

 

•

refusal to permit the import or export of DelMar’s products; and

 

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injunctions or the imposition of civil or criminal penalties.

If DelMar is unable to establish sales, marketing and distribution capabilities or enter into acceptable sales, marketing and distribution arrangements with third parties, DelMar may not be successful in commercializing any product candidates that DelMar develops, if and when those product candidates are approved.

DelMar does not have a sales, marketing or distribution infrastructure and have limited experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any approved product, DelMar must either develop a sales and marketing organization, outsource these functions to third parties, or license DelMar’s product candidates to others. If approved, DelMar may seek to license VAL-083 to a large pharmaceutical company with greater resources and experience than DelMar. DelMar may not be able

 

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license the VAL-083 on reasonable terms, if at all. The development of sales, marketing and distribution capabilities will require substantial resources, will be time-consuming and could delay any product launch. DelMar expects that DelMar will commence the development of these capabilities prior to receiving approval of DelMar’s product candidate. If the commercial launch of a product candidate for which DelMar recruits a sales force and establish marketing and distribution capabilities is delayed or does not occur for any reason, DelMar could have prematurely or unnecessarily incurred these commercialization costs. Such a delay may be costly, and DelMar’s investment could be lost if DelMar cannot retain or reposition DelMar’s sales and marketing personnel. In addition, DelMar may not be able to hire or retain a sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that DelMar plans to target. If DelMar is unable to establish or retain a sales force and marketing and distribution capabilities, DelMar’s operating results may be adversely affected. If a potential partner has development or commercialization expertise that DelMar believes is particularly relevant to DelMar’s product candidate, then DelMar may seek to collaborate with that potential partner even if DelMar believes it could otherwise develop and commercialize the product independently.

DelMar expects to seek one or more strategic partners for commercialization of DelMar’s product candidate outside the United States. As a result of entering into arrangements with third parties to perform sales, marketing and distribution services, DelMar’s product revenues or the profitability of these product revenues may be lower, perhaps substantially lower, than if DelMar were to directly market and sell products in those markets. Furthermore, DelMar may be unsuccessful in entering into the necessary arrangements with third parties or may be unable to do so on terms that are favorable to DelMar. In addition, DelMar may have little or no control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market DelMar’s products effectively.

If DelMar does not establish sales and marketing capabilities, either on its own or in collaboration with third parties, DelMar will not be successful in commercializing its product candidate.

DelMar faces substantial competition from other pharmaceutical and biotechnology companies and its operating results may suffer if DelMar fails to compete effectively.

The development and commercialization of new drug products is highly competitive. DelMar expects that it will face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to VAL-083 and any other product candidates that DelMar may seek to develop or commercialize in the future. Specifically, due to the large unmet medical need, global demographics and relatively attractive reimbursement dynamics, the oncology market is fiercely competitive and there are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment of cancer. DelMar’s competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have fewer or more tolerable side effects or are less costly than any product candidates that DelMar is currently developing or that DelMar may develop, which could render DelMar’s product candidates obsolete and noncompetitive.

All of the top ten global pharmaceutical companies and many of the mid-size pharmaceutical companies have a strong research and development and commercial presence in oncology. Smaller companies also focus on oncology, including companies such as ARIAD Pharmaceuticals, Inc., Agios Pharmaceuticals, Inc., BIND Therapeutics, Inc., Clovis Oncology, Inc., Endocyte, Inc., Epizyme, Inc., ImmunoGen, Inc., Incyte Corporation, Infinity Pharmaceuticals, Inc., MacroGenics, Inc., Merrimack Pharmaceuticals, Inc., OncoMed Pharmaceuticals, Inc., Onconova Therapeutics, Inc., Pharmacyclics, Inc., Puma Biotechnology, Inc., Seattle Genetics, Inc. and TESARO, Inc.

Several companies are marketing and developing oncology immunotherapy products. Companies with approved marketed oncology products for GBM are Merck (Temodar ^®) and Genentech (Avastin ^®). Companies with oncology immunotherapy product candidates in clinical development include, but are not limited to, Northwest Biotherapeutics (DCVax-L), Celldex Therapeutics (Rindopepimut (CDX-110)) and ImmunoCellular Therapeutics (ICT-107).

 

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DelMar’s commercial opportunity could be reduced or eliminated if DelMar’s competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that DelMar may develop. DelMar’s competitors also may obtain FDA or other marketing approval for their products before DelMar is able to obtain approval for DelMar’s, which could result in DelMar’s competitors establishing a strong market position before DelMar is able to enter the market.

Many of DelMar’s existing and potential future competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical studies, obtaining marketing approvals and marketing approved products than DelMar does. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of DelMar’s competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with DelMar in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, DelMar’s programs.

If DelMar is unable to or delayed in obtaining state regulatory licenses for the distribution of its product, DelMar would not be able to sell its product candidate.

The majority of states require manufacturer and/or wholesaler licenses for the sale and distribution of drugs into that state. The application process is complicated, time consuming and requires dedicated personnel or a third-party to oversee and manage. If DelMar is delayed in obtaining these state licenses, or denied the licenses, even with FDA approval, DelMar would not be able to sell or ship product into that state which would adversely affect its sales and revenues.

DelMar relies on key personnel and members of management and, if DelMar is unable to retain or motivate key personnel or management, or hire qualified personnel, DelMar may not be able to grow effectively.

DelMar is dependent on certain members of DelMar’s management, scientific and drug development staff and consultants, the loss of services of one or more of whom could materially adversely affect DelMar.

DelMar currently has two full-time employees, and retain the services of approximately 15 persons on an independent contractor/consultant and contract-employment basis. DelMar’s ability to manage growth effectively will require DelMar to continue to implement and improve DelMar’s management systems and to recruit and train new employees. Although DelMar has done so in the past and expect to do so in the future, there can be no assurance that DelMar will be able to successfully attract and retain skilled and experienced personnel.

DelMar’s success depends in large part upon DelMar’s ability to attract and retain highly qualified personnel. DelMar competes in its hiring efforts with other pharmaceutical and biotechnology companies, as well as universities and nonprofit research organizations, and DelMar may have to pay higher salaries to attract and retain personnel, which would be very costly.

DelMar may be subject to foreign exchange fluctuation.

DelMar’s functional and reporting currency is the United States dollar. DelMar maintains bank accounts in United States and Canadian dollars. A portion of DelMar’s expenditures are in foreign currencies, most notably in Canadian dollars, and therefore DelMar is subject to foreign currency fluctuations, which may, from time to time, impact DelMar’s financial position and results. DelMar may enter into hedging arrangements under specific circumstances, typically through the use of forward or futures currency contracts, to minimize the impact of increases in the value of the Canadian dollar. In order to minimize DelMar’s exposure to foreign exchange fluctuations DelMar may hold sufficient Canadian dollars to cover DelMar’s expected Canadian dollar expenditures.

 

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Product liability lawsuits against DelMar could divert DelMar’s resources, cause DelMar to incur substantial liabilities and limit commercialization of any products that DelMar may develop.

DelMar faces an inherent risk of product liability claims as a result of the clinical testing of DelMar’s product candidate despite obtaining appropriate informed consents from DelMar’s clinical study participants. DelMar will face an even greater risk if DelMar commercially sells any product that DelMar may develop. For example, DelMar may be sued if any product DelMar develops allegedly causes injury or is found to be otherwise unsuitable during clinical 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 or a breach of warranties. Claims could also be asserted under state consumer protection acts. If DelMar cannot successfully defend DelMar against product liability claims, DelMar may incur substantial liabilities or be required to limit commercialization of DelMar’s product candidate. Regardless of the merits or eventual outcome, liability claims may result in:

 

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decreased demand for DelMar’s product candidate or products that DelMar may develop;

 

•

injury to DelMar’s reputation and significant negative media attention;

 

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withdrawal of clinical study participants;

 

•

significant costs to defend resulting litigation;

 

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substantial monetary awards to study participants or patients;

 

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loss of revenue;

 

•

reduced resources of DelMar’s management to pursue its business strategy; and

 

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the inability to commercialize any products that DelMar may develop.

Although DelMar maintains general liability insurance, this insurance may not fully cover potential liabilities that DelMar may incur. The cost of any product liability litigation or other proceeding, even if resolved in DelMar’s favor, could be substantial. DelMar will need to increase its insurance coverage if and when DelMar begin selling any product candidate that receives marketing approval. In addition, insurance coverage is becoming increasingly expensive. If DelMar is unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of DelMar’s product candidate, which could adversely affect its business, financial condition, results of operations and prospects.

Risks Related to DelMar’s Dependence on Third Parties

DelMar relies on third parties to conduct clinical studies for DelMar’s product candidate. Any failure by a third-party to meet its obligations with respect to the clinical development of DelMar’s product candidate may delay or impair DelMar’s ability to obtain regulatory approval for its product candidate.

DelMar relies on academic institutions and private oncology centers to conduct DelMar’s clinical studies. DelMar’s reliance on third parties to conduct clinical studies could, depending on the actions of such third parties, jeopardize the validity of the clinical data generated and adversely affect DelMar’s ability to obtain marketing approval from the FDA or other applicable regulatory authorities.

Such clinical study arrangements provide DelMar with information rights with respect to the clinical data, including access to and the ability to use and reference the data, including for DelMar’s own regulatory filings, resulting from the clinical studies. If investigators or institutions breach their obligations with respect to the clinical studies of DelMar’s product candidate, or if the data proves to be inadequate, then DelMar’s ability to design and conduct any future clinical studies may be adversely affected.

 

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DelMar relies, and expects to continue to rely, on third parties to conduct DelMar’s clinical studies, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies.

DelMar currently relies on third-party clinical research organizations, or CROs, to conduct DelMar’s clinical studies. DelMar expects to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct DelMar’s clinical studies. DelMar’s agreements with these third parties generally allow the third-party to terminate the agreement at any time. If DelMar is required to enter into alternative arrangements because of any such termination the introduction of its product candidates to market could be delayed.

DelMar’s reliance on these third parties for research and development activities will reduce DelMar’s control over these activities but will not relieve DelMar of its responsibilities. For example, DelMar designs its clinical studies and will remain responsible for ensuring that each of DelMar’s clinical studies are conducted in accordance with the general investigational plan and protocols for the study. Moreover, the FDA requires DelMar to comply with standards, commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical studies to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of study participants are protected. DelMar’s reliance on third parties that DelMar does not control does not relieve DelMar of these responsibilities and requirements. DelMar is also required to register ongoing clinical studies and post the results of completed clinical studies on a government-sponsored database, Clinicaltrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Furthermore, these third parties may also have relationships with other entities, some of which may be DelMar’s competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct DelMar’s clinical studies in accordance with regulatory requirements or DelMar’s stated protocols, DelMar will not be able to obtain, or may be delayed in obtaining, marketing approvals for DelMar’s product candidates and will not be able to, or may be delayed in DelMar’s efforts to, successfully commercialize DelMar’s product candidates.

DelMar also expects to rely on other third parties to store and distribute drug supplies for DelMar’s clinical studies. Any performance failure on the part of DelMar’s distributors could delay clinical development or marketing approval of DelMar’s product candidate or commercialization of DelMar’s products, producing additional losses and depriving DelMar of potential product revenue.

DelMar may seek to enter into collaborations with third parties for the development and commercialization of DelMar’s product candidate. If DelMar fails to enter into such collaborations, or such collaborations are not successful, DelMar may not be able to capitalize on the market potential of DelMar’s product candidate.

DelMar may seek third-party collaborators for development and commercialization of DelMar’s product candidate. DelMar’s likely collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies, non-profit organizations, government agencies, and biotechnology companies. DelMar is currently party to a limited number of such arrangements and have limited control over the amount and timing of resources that DelMar’s collaborators dedicate to the development or commercialization of DelMar’s product candidate. DelMar’s ability to generate revenues from these arrangements will depend on its collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

Collaborations involving DelMar’s product candidate currently pose, and will continue to pose, the following risks to DelMar:

 

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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

 

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•

collaborators may not pursue development and commercialization of DelMar’s product candidate or may elect not to continue or renew development or commercialization programs based on preclinical or clinical study results, changes in the collaborators’ strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

 

•

collaborators may delay clinical studies, provide insufficient funding for a clinical study program, stop a clinical study or abandon a product candidate, repeat or conduct new clinical studies or require a new formulation of a product candidate for clinical testing;

 

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collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with DelMar’s product candidate if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than DelMar’s;

 

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collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;

 

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collaborators may not properly maintain or defend DelMar’s intellectual property rights or may use DelMar’s proprietary information in such a way as to invite litigation that could jeopardize or invalidate DelMar’s intellectual property or proprietary information or expose DelMar to potential litigation;

 

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collaborators may infringe the intellectual property rights of third parties, which may expose DelMar to litigation and potential liability;

 

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disputes may arise between the collaborators and DelMar that result in the delay or termination of the research, development or commercialization of DelMar’s product candidate or that result in costly litigation or arbitration that diverts management attention and resources; and

 

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collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

Collaboration agreements may not lead to development or commercialization of DelMar’s product candidate in the most efficient manner or at all. If a collaborator of DelMar’s were to be involved in a business combination, the continued pursuit and emphasis on DelMar’s product development or commercialization program could be delayed, diminished or terminated.

If DelMar is not able to establish collaborations, DelMar may have to alter DelMar’s development and commercialization plans.

DelMar’s drug development programs and the potential commercialization of DelMar’s product candidate will require substantial additional cash to fund expenses. DelMar may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of DelMar’s product candidate.

DelMar faces significant competition in seeking appropriate collaborators. Whether DelMar reaches a definitive agreement for a collaboration will depend, among other things, upon DelMar’s assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of preclinical studies or clinical studies, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to DelMar’s ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be

 

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available to collaborate on and whether such a collaboration could be more attractive than the one with DelMar for DelMar’s product candidate. DelMar may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

DelMar may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If DelMar is unable to do so, DelMar may have to curtail the development of DelMar’s product candidate, reduce or delay its development program, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase DelMar’s expenditures and undertake development or commercialization activities at DelMar’s own expense. If DelMar elects to increase DelMar’s expenditures to fund development or commercialization activities on DelMar’s own, DelMar may need to obtain additional capital, which may not be available to DelMar on acceptable terms or at all. If DelMar does not have sufficient funds, DelMar may not be able to further develop DelMar’s product candidate or bring it to market and generate product revenue.

DelMar currently manufactures its clinical supplies at a single location. Any disruption at this facility could adversely affect DelMar’s business and results of operations.

DelMar has engaged a single manufacturer to produce GMP active pharmaceutical ingredient and a single manufacturer to produce drug product for DelMar’s clinical studies. In addition, DelMar has relied on DelMar’s manufacturing partner, Guangxi Wuzhou Pharmaceutical Company, for the manufacture of clinical supply of VAL-083 for DelMar’s preclinical and Phase 2 clinical studies to-date. If DelMar’s manufacturer’s facility were damaged or destroyed, or otherwise subject to disruption, it would require substantial lead-time to replace DelMar’s clinical supply. In such event, DelMar would be forced to rely entirely on other third-party contract manufacturers for an indefinite period of time. DelMar does not currently have established relationships with any back-up manufacturers. At this time no drug product has been manufactured by a third-party back-up manufacturer. Any disruptions or delays by DelMar’s third-party manufacturers or Guangxi Wuzhou Pharmaceutical Company or their failure to meet regulatory compliance could impair DelMar’s ability to develop VAL-083, which would adversely affect DelMar’s business and results of operations.

DelMar relies on these third-party manufacturers to provide drug product supply for DelMar’s clinical studies. There is no assurance that such a supplier will be able to meet DelMar’s needs from a technical, timing, or cost-effective manner. DelMar’s failure to enter into appropriate agreements with such a third-party manufacturer would delay, or halt, DelMar’s clinical studies.

DelMar may become subject to liabilities related to risks inherent in working with hazardous materials.

DelMar’s discovery and development processes involve the controlled use of hazardous and radioactive materials. DelMar is subject to federal, provincial and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although DelMar believes that DelMar’s safety procedures for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, DelMar could be held liable for any damages that result and any such liability could exceed DelMar’s resources. DelMar is not specifically insured with respect to this liability. Although DelMar believes that DelMar is in compliance in all material respects with applicable environmental laws and regulations and currently do not expect to make material capital expenditures for environmental control facilities in the near-term, there can be no assurance that DelMar will not be required to incur significant costs to comply with environmental laws and regulations in the future, or that DelMar’s operations, business or assets will not be materially adversely affected by current or future environmental laws or regulations.

 

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Risks Related to DelMar Common Stock

The market price of DelMar Common Stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of DelMar Common Stock is highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond DelMar’s control, including:

 

•

variations in DelMar’s quarterly operating results;

 

•

announcements that DelMar’s revenue or income are below analysts’ expectations;

 

•

general economic slowdowns;

 

•

sales of large blocks of DelMar Common Stock; and

 

•

announcements by DelMar or its competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments.

Because DelMar became public by means of a reverse acquisition, DelMar may not be able to attract, or maintain, the attention of brokerage firms.

Because DelMar became public through a “reverse acquisition”, securities analysts of brokerage firms may not provide or continue to provide coverage of DelMar since there is little incentive to brokerage firms to recommend the purchase of DelMar Common Stock. No assurance can be given that brokerage firms will want to conduct any follow-on offerings on behalf of DelMar in the future.

The DelMar Articles allow for DelMar’s board of directors to create new series of preferred stock without further approval by DelMar’s stockholders, which could adversely affect the rights of the holders of DelMar Common Stock.

DelMar’s board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. DelMar’s board of directors has the authority to issue up to 5,000,000 shares of DelMar’s preferred stock (of which 278,530 shares have been designated Series A Preferred Stock and are issued and outstanding, and 1,000,000 shares have been designated as Series B Preferred Stock, of which 648,613 shares are issued and outstanding, as of June 3, 2020) without further stockholder approval. As a result, DelMar’s board of directors could authorize the issuance of additional series of preferred stock that would grant to holders the preferred right to DelMar’s assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of DelMar Common Stock. In addition, DelMar’s board of directors could authorize the issuance of a series of preferred stock that has greater voting power than DelMar Common Stock or that is convertible into DelMar Common Stock, which could decrease the relative voting power of DelMar Common Stock or result in dilution to our existing stockholders. Although DelMar has no present intention to issue any additional shares of preferred stock or to create any additional series of preferred stock, DelMar may issue such shares in the future.

DelMar’s issuance of DelMar Common Stock upon exercise of warrants, Performance Share Units, or options, or conversion of Series B Preferred Stock may depress the price of DelMar Common Stock.

As of June 3, 2020, DelMar had 11,429,228 shares of DelMar Common Stock issued and outstanding, outstanding warrants to purchase 10,209,456 shares of DelMar Common Stock, 648,613 outstanding shares of DelMar Series B Preferred Stock that are convertible into 162,177 shares of DelMar Common Stock and outstanding options to purchase 1,577,949 shares of DelMar Common Stock (of which 799,199 options are subject to stockholder approval of the increase in the number of shares authorized for issuance under DelMar’s 2017 Omnibus Equity Incentive Plan (the “2017 Plan”), as amended, at DelMar’s 2020 Annual Meeting of stockholders). All outstanding warrants and options are convertible or exercisable into one share of DelMar Common Stock. Each share of DelMar Series B Preferred Stock is convertible into 0.25 shares of DelMar Common Stock, rounded up to the nearest whole share. The issuance of shares of DelMar Common Stock upon exercise of outstanding warrants or options could result in substantial dilution to DelMar’s stockholders, which may have a negative effect on the price of DelMar Common Stock.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following information does not give effect to the Private Placement or the proposed reverse stock split of DelMar Common Stock described in Proposal No. 2 in this proxy statement/prospectus/information statement.

The following unaudited pro forma condensed combined financial statements give effect to the acquisition of Adgero by DelMar and were prepared in accordance with the regulations of the SEC. The unaudited pro forma condensed combined balance sheet as of March 31, 2020 assumes that the Merger took place on March 31, 2020 and combines the historical balance sheets of DelMar and Adgero as of March 31, 2020. The unaudited pro forma condensed combined statement of operations for the nine months ended March 31, 2020 and for the year ended June 30, 2019 assume that the Merger took place as of July 1, 2018, and combine the historical statement of operations of DelMar and Adgero for the nine months ended March 31, 2020 and for the year ended June 30, 2019, respectively. Adgero’s fiscal year end is December 31. Therefore, we have prepared Adgero’s statement of operations for the twelve month period ended June 30, 2019 and for the nine month period ended March 31, 2020 to coincide with the fiscal year end of DelMar. The historical financial statements of DelMar and Adgero, which are provided elsewhere in this proxy statement/prospectus/information statement, have been adjusted to give pro forma effect to events that are (i) directly attributable to the merger, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results.

The unaudited pro forma condensed combined financial statements are based on the assumptions and adjustments that are described in the accompanying notes. The unaudited pro forma condensed combined financial statements and pro forma adjustments have been prepared based on preliminary estimates of fair value of assets acquired and liabilities assumed. Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position. The actual amounts recorded as of the Closing of the Merger may differ materially from the information presented in these unaudited pro forma condensed combined financial statements as a result of the amount, if any, of capital raised by DelMar between entering the Merger Agreement and Closing of the Merger; the amount of cash used by Adgero’s operations between the signing of the Merger Agreement and the Closing of the Merger; the timing of the Closing of the Merger; and other changes in the Adgero assets and liabilities that occur prior to the Closing of the Merger.

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the acquisition. The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had DelMar and Adgero been a combined company during the specified period. The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the DelMar historical audited financial statements for the years ended June 30, 2019 and 2018 and unaudited condensed interim financial statements for the nine months ended March 31, 2020 and the Adgero historical audited financial statements for the years ended December 31, 2019 and 2018, and unaudited condensed interim financial statements for the three months ended March 31, 2020 included elsewhere in this proxy statement/prospectus/information statement.

 

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Unaudited Pro Forma Condensed Combined Balance Sheet

March 31, 2020

(US dollars in thousands)

 

		March 31, 2020
		DelMar				Adgero				Pro Forma Adjustments				Note				Pro Forma Combined
ASSETS
Current assets
Cash and cash equivalents		$	4,973			$	516			$	—							$	5,489
Certificate of deposit			—				900				—								900
Prepaid expenses and other current assets			115				4				—								119
Interest, taxes and other receivables			10				—				—								10
Total current assets			5,098				1,420				—								6,518
Property and equipment, net			—				196				—								196
Intangible assets, net			4				18				—								22
Total assets		$	5,102			$	1,634			$	—							$	6,736
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		$	1,086			$	791			$	940				C			$	2,867
											50				D
Related party payables			296				—				—								296
Total liabilities			1,382				791				990								3,163
Stockholders’ equity
Series A Preferred Stock			279				—				—								279
Series B Convertible Preferred Stock			4,525				—				—								4,525
Common Stock			11				1				11				A				22
											—				B
											(1	)			E
Additional paid-in capital			56,395				16,172				9,308				A				66,169
											466				B
											(16,172	)			E
Warrants			8,383				—				281				A				8,664
Accumulated deficit			(65,894	)			(15,330	)			(50	)			D, E				(76,107	)
											5,167				D, E
Accumulated other comprehensive income			21				—				—								21
Total stockholders’ equity			3,720				843				(990	)							3,573
Total liabilities and stockholders’ equity		$	5,102			$	1,634			$	—							$	6,736

 

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Unaudited Pro Forma Condensed Combined Statement of Operations and Comprehensive Loss

For the Nine Months Ended March 31, 2020

(US dollars in thousands, except share and per share amounts)

 

		Nine Months Ended March 31, 2020
		DelMar				Adgero				Pro Forma Adjustments				Note				Pro Forma Combined
Statements of Operations Data
Operating expenses
Research and development			2,332				474				—								2,806
General and administrative			3,045				562				—								3,607
Total operating expenses			5,377				1,036				—								6,413
Loss from operations			(5,377	)			(1,036	)											(6,413	)
Other income (expense)
Foreign exchange gain (loss)			1				—				—								1
Interest income			74				26				—								100
Registration rights penalty			—				(7	)			—								(7	)
Total other income (expense)			75				19				—								94
Net and comprehensive loss		$	(5,302	)		$	(1,017	)		$	—							$	(6,319	)
Series B Preferred dividend			(6	)			—				—								(6	)
Net loss attributable to common shareholders		$	(5,308	)		$	(1,017	)		$	—							$	(6,325	)
Basic and fully diluted loss per share		$	(0.52	)		$	(0.15	)		$	—							$	(0.29	)
Basic and fully diluted number of shares			10,116,541				6,762,537				11,933,774				A,B				22,050,315

 

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