Seelos is subject to a multitude of manufacturing risks, any of which could substantially increase Seelos' costs and limit supply of its product
The process of manufacturing Seelos' product candidates is complex, highly regulated, and subject to several risks. For example, the process of manufacturing
Seelos' product candidates is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even
minor deviations from normal manufacturing processes for any of Seelos' product candidates could result in reduced production yields, product defects, and other supply disruptions. If
microbial, viral, or other contaminations are discovered in Seelos' product candidates or in the manufacturing facilities in which its product candidates are made, such manufacturing facilities
may need to be closed for an extended period of time to investigate and remedy the contamination. In addition, the manufacturing facilities in which its product candidates are made could be
adversely affected by equipment failures, labor shortages, natural disasters, power failures and numerous other factors.
In addition, any adverse developments affecting manufacturing operations for Seelos' product candidates may result in shipment delays, inventory shortages, lot
failures, withdrawals or recalls, or other interruptions in the supply of Seelos' product candidates. Seelos also may need to take inventory write-offs and incur other charges and expenses for
product candidates that fail to meet specifications, undertake costly remediation efforts, or seek costlier manufacturing alternatives.
Seelos relies completely on third parties to manufacture Seelos' preclinical and clinical drug supplies, and Seelos' business, financial condition and results
of operations could be harmed if those third parties fail to provide Seelos with sufficient quantities of drug product, or fail to do so at acceptable quality levels or prices.
Seelos does not currently have, nor does Seelos plan to acquire, the infrastructure or capability internally to manufacture Seelos' preclinical and clinical drug
supplies for use in its clinical trials, and Seelos lacks the resources and the capability to manufacture any of Seelos' product candidates on a clinical or commercial scale. Seelos relies on its
manufacturers to purchase from third-party suppliers the materials necessary to produce Seelos' product candidates for Seelos' clinical trials. There are a limited number of suppliers for raw
materials that Seelos uses to manufacture its product candidates, and there may be a need to identify alternate suppliers to prevent a possible disruption of the manufacture of the materials
necessary to produce Seelos' product candidates for its clinical trials, and, if approved, ultimately for commercial sale. Seelos does not have any control over the process or timing of the
acquisition of these raw materials by Seelos' manufacturers. Although Seelos generally does not begin a clinical trial unless Seelos believes it has a sufficient supply of a product candidate to
complete such clinical trial, any significant delay or discontinuity in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to
replace a third-party manufacturer could considerably delay completion of Seelos' clinical trials, product testing and potential regulatory approval of Seelos' product candidates, which could
harm Seelos' business, financial condition and results of operations.
Seelos and its contract manufacturers are subject to significant regulation with respect to manufacturing Seelos' product candidates. The manufacturing
facilities on which Seelos relies may not continue to meet regulatory requirements.
All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including Seelos' contract manufacturers for its product candidates,
are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with
cGMP. These regulations govern manufacturing processes and procedures and the implementation and operation of quality systems to control and assure the quality of investigational products
and products approved for sale. Poor control of production processes can lead to the introduction of contaminants or to inadvertent changes in the properties or stability of Seelos' product
candidates that may not be detectable in final product testing. Seelos or its contract manufacturers must supply all necessary documentation in support of an NDA or marketing authorization
application ("MAA") on a timely basis and must adhere to GLP and cGMP regulations enforced by the FDA, the EMA or comparable foreign authorities through their facilities
inspection program. Some of Seelos' contract manufacturers may not have produced a commercially approved pharmaceutical product and therefore may not have obtained the requisite
regulatory authority approvals to do so. The facilities and quality systems of some or all of Seelos' third-party contractors must pass a pre-approval inspection for compliance with the applicable
regulations as a condition of regulatory approval of Seelos' product candidates or any of its other potential products. In addition, the regulatory authorities may, at any time, audit or inspect a
manufacturing facility involved with the preparation of Seelos' product candidates or any of Seelos' other potential products or the associated quality systems for compliance with the regulations
applicable to the activities being conducted. Although Seelos plans to oversee the contract manufacturers, Seelos cannot control the manufacturing process of, and is completely dependent on,
Seelos' contract manufacturing partners for compliance with the regulatory requirements. If these facilities do not pass a pre-approval plant inspection, regulatory approval of the products may
not be granted or may be substantially delayed until any violations are corrected to the satisfaction of the regulatory authority, if ever.
The regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturing facilities of Seelos' third-party contractors. If any such
inspection or audit identifies a failure to comply with applicable regulations or if a violation of Seelos' product specifications or applicable regulations occurs independent of such an inspection or
audit, Seelos or the relevant regulatory authority may require remedial measures that may be costly or time consuming for Seelos or a third party to implement, and that may include the
temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon Seelos or third parties
with whom Seelos contracts could materially harm Seelos' business, financial condition and results of operations.