AKAO 2017 Annual Report

51 We may be subject to costly product liability claims related to our clinical trials and product candidates and, if we are unable to obtain adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of our insurance coverage, a material liability claim could adversely affect our financial condition. Because we conduct clinical trials with human patients, we face the risk that the use of our product candidates may result in adverse side effects to patients in our clinical trials. We face even greater risks upon any commercialization of our product candidates. Although we have product liability insurance, which covers our clinical trials for up to $5 million, our insurance may be insufficient to reimburse us for any expenses or losses we may suffer, and we will be required to increase our product liability insurance coverage for our advanced clinical trials that we plan to initiate. We do not know whether we will be able to continue to obtain product liability coverage and obtain expanded coverage if we require it, on acceptable terms, if at all. We may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage. Where we have provided indemnities in favor of third parties under our agreements with them, there is also a risk that these third parties could incur liability and bring a claim under such indemnities. An individual may bring a product liability claim against us alleging that one of our product candidates or products causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit, could result in: • withdrawal of clinical trial volunteers, investigators, patients or trial sites; • the inability to commercialize our product candidates; • decreased demand for our product candidates; • regulatory investigations that could require costly recalls or product modifications; • loss of revenue; • substantial costs of litigation; • liabilities that substantially exceed our product liability insurance, which we would then be required to pay ourselves; • an increase in our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, if at all; • the diversion of management’s attention from our business; and • damage to our reputation and the reputation of our products. Product liability claims may subject us to the foregoing and other risks, which could have a material adverse effect on our business, results of operations, financial condition and prospects. If an effective distribution process is not established for plazomicin and the associated IVD assay, which includes cold-chain logistics, our business may be adversely affected. We do not currently have the infrastructure necessary for distributing pharmaceutical products to patients. We have contracted with a third-party logistics company to warehouse and distribute plazomicin, and we will require plazomicin to be maintained at a controlled temperature for some of the distribution chain. Similarly, Thermo Fisher will be responsible for warehousing and distributing the IVD assay associated with plazomicin, which will also require cold-chain logistics. If we or Thermo Fisher are unable to effectively establish and manage the distribution process of plazomicin or the associated IVD assay, the commercial launch and sales of plazomicin and the associated IVD assay may be delayed or severely compromised and our results of operations may be harmed.