Scholar Rock Holding (SRRK) risk factors, FY2024 10-K

Other

1. 01Summary of the Material Risks Associated with Our Business

Risks Related to Product Development, Regulatory Approval and Commercialization

1. 02commercialize apitegromab, SRK-181, SRK-439 or any future product candidates, and our business could be materially harmed
2. 03The regulatory approval process for our product candidates in the U.S., EU and other jurisdictions will be lengthy, time-consuming and inherently unpredictable and we may fail to receive or be delayed in receiving regulatory approval of apitegromab, SRK-181, SRK-439 and future product candidates
3. 04Furthermore, we intend to commercialize apitegromab globally, if approved. In order to do so, we must build, on a territory-by-territory basis, marketing, sales, distribution, managerial and other capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so
4. 05Our clinical development strategy depends on the continued use and availability of certain third-party approved drug therapies
5. 06The results or success of preclinical studies and early-stage clinical trials of our product candidates may not be predictive of future results or replicated in later preclinical studies or clinical trials of our product candidates in the same indications or other indications
6. 07If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected
7. 08Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our future clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates
8. 09Our failure or any failure by these third parties to comply with these regulations would delay the regulatory approval process. Moreover, our business may be implicated if any of these third parties violate federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws
9. 10We have received Rare Pediatric Disease designation for apitegromab for the treatment of SMA. However, a marketing application for apitegromab, if approved, may not meet the eligibility criteria for a rare pediatric disease priority review voucher
10. 11We may seek Fast Track designation, Breakthrough Therapy designation or PRIME designation for certain of our product candidates
11. 12Receiving and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in receiving or maintaining regulatory approval of our product candidates in other jurisdictions
12. 13for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval
13. 14Even if a product candidate we develop 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
14. 15If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market apitegromab, we may not be successful in commercializing apitegromab if and when it is approved
15. 16Competing therapies may exist or could emerge that adversely affect the amount of revenue we are able to generate from the sale of apitegromab, if approved, or any of our future product candidates, if successfully developed and approved
16. 17for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market

Risks Related to Our Business and Operations

1. 18Because we rely on a limited number of third-party manufacturing and supply partners, our supply of research and development, preclinical and clinical development materials, and, if approved, commercial materials, may become limited or interrupted or may not be of satisfactory quantity or quality
2. 19Our reliance on third parties, such as manufacturers, third-party logistics providers, specialty distributors, specialty pharmacies, and patient service providers, may subject us to risks relating to manufacturing scale-up and may cause us to undertake substantial obligations, including financial obligations
3. 20We will need to continue to grow our organization in certain areas, including our personnel, systems and relationships with third parties, in order to develop and potentially commercialize our product candidates, and we may experience difficulties in managing this growth
4. 21Our internal computer systems, or those used by our contract research organizations, or other contractors or consultants, may fail or suffer security breaches, incidents or compromises
5. 22Our employees, independent contractors, consultants, commercial partners, vendors and distributors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements
6. 23Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations
7. 24Failure to comply with health care privacy and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business
8. 25Artificial intelligence presents risks and challenges that can impact our business including by posing security risks to our confidential information, proprietary information, and personal data
9. 26data sources are used to train artificial intelligence models, or the output of artificial intelligence systems reproduce or incorporate third party intellectual property rights, in each case without the right to do so
10. 27Additional laws and regulations governing international operations, including certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, could negatively impact or restrict our operations
11. 28If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business
12. 29If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates
13. 30Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, if approved, which could make it difficult for us to sell any product candidates profitably
14. 31EU drug marketing and reimbursement regulations may materially affect our ability to market and receive coverage for our products in the European Member States
15. 32We may seek to enter into collaborations in the future with third parties, including for apitegromab, SRK-181, SRK-439 or potential product candidates. If we are unable to enter into such collaborations, or if these collaborations are not successful, our business could be adversely affected
16. 33potential commercialization. Accordingly, we may enter into collaborations with other companies to provide us with important technologies, capabilities and funding for our programs and underlying technology
17. 34Additionally, if one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the biotechnology or pharmaceutical industry, including within the business and financial communities, could be adversely affected

Risks Related to Our Intellectual Property

1. 35Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection
2. 36We depend on intellectual property licensed from third parties. Failure to comply with our obligations under any of these licenses or termination of any of these licenses could result in the loss of significant rights, which would harm our business
3. 37Because our programs may involve additional product candidates that may require the use of additional proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, in-license or use these proprietary rights
4. 38As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain
5. 39challenge and subsequent invalidation or significant narrowing of claim scope in proceedings before the USPTO, or during litigation, under the revised criteria which could also make it more difficult to obtain patents
6. 40Third-party claims of intellectual property infringement may prevent or delay our product discovery and development efforts
7. 41Additionally, the Unitary Patent/Unified Patent Court system in Europe became fully operational in June 2023
8. 42We may incur substantial costs as a result of litigation or other proceedings relating to our patents or the patents of our licensors, and we may be unable to protect our rights to our products and technology
9. 43Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or the USPTO
10. 44We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world
11. 45Patent terms may result in inadequate protection for our product candidates, and we may be unable to obtain patent term extensions and data exclusivity for our product candidates, resulting in material harm to our business
12. 46If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed
13. 47Third parties may assert that our employees or consultants have wrongfully used, disclosed, or misappropriated their confidential information or trade secrets
14. 48If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected

Risks Related to Our Financial Condition and Capital Requirements

1. 49We have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future
2. 50We will require additional capital to fund our operations and if we fail to obtain necessary capital, we will not be able to complete the development and commercialization of apitegromab, SRK-181, SRK-439 and any future product candidates
3. 51Changes in tax law could adversely affect our business and financial condition
4. 52Our ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation
5. 53with which the Company has financial or business relationships, but could also include factors involving financial markets or the financial services industry generally
6. 54Our current investment policy focuses on preservation of capital. However, we could recognize losses on securities held in our investment portfolio, particularly if interest rates increase or economic and market conditions deteriorate
7. 55The terms of our loan and security agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business

Risks Related to Our Common Stock

1. 56The price of our stock is volatile, and you could lose all or part of your investment
2. 57We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock
3. 58Our Board members, management, and their affiliates, own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval
4. 59We are a “smaller reporting company” as defined in the Exchange Act, and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies, including reduced disclosure obligations regarding executive compensation
5. 60We expect to continue to incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives
6. 61We have broad discretion in the use of our existing cash, cash equivalents and marketable securities and may not use them effectively
7. 62Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management
8. 63If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline
9. 64We may be subject to securities litigation, which is expensive and could divert management attention
10. 65We have issued a substantial number of warrants and equity awards from our equity plans which are exercisable into shares of our common stock which could result in substantial dilution to the ownership interests of our existing stockholders
11. 66Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall
12. 67The sale or issuance of our common stock to, or through, Jefferies may cause significant dilution and the sale of the shares of common stock acquired by Jefferies, or the perception that such sales may occur, could cause the price of our common stock to fall