Business Overview
Relmada Therapeutics is a clinical-stage, publicly traded biotechnology
company developing new chemical entities (NCEs) together with novel versions of proven drug products that potentially address
areas of high unmet medical need in the treatment of central nervous system (CNS) diseases - primarily depression and chronic
pain. The Company has a diversified portfolio of four products at various stages of development, including d-Methadone (dextromethadone,
REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist for treating depression and neuropathic pain; LevoCap ER (REL-1015),
an abuse resistant, sustained release dosage form of the opioid analgesic levorphanol; BuTab (oral buprenorphine, REL-1028), an
oral dosage form of the opioid analgesic buprenorphine; and MepiGel (topical mepivacaine, REL-1021), an orphan drug designated
topical formulation of the local anesthetic mepivacaine.
Our lead product candidate, d-Methadone, is a NCE being developed as a rapidly acting, oral agent for the
treatment of depression, neuropathic pain, and/or other potential CNS pathological conditions. We have completed Phase I single
and multiple ascending dose studies and have confirmed safety, tolerability, and dose range for a planned Phase II study in treatment-resistant
depression (TRD).
In addition to the clinical development of d-Methadone, we are focused on advancing three additional products
combining proven drug candidates with novel delivery methods to create new drugs and/or indications through the 505(b)(2) regulatory
pathway. Product development plans for several of our products, such as LevoCap ER and BuTab, require the completion of a relatively
small Phase I program before entering Phase III pivotal clinical trials using the 505(b)(2) regulatory pathway, subject to U.S.
Food and Drug Administration (FDA) approval.
We believe that our CNS-centric pipeline is diversified by mechanism of action, development stage, and regulatory
strategy, which mitigates risk while offering significant upside. Our highly experienced drug development leadership and world-class
scientific and business advisors provide the expertise to efficiently advance product development.
Our four development projects are briefly described below:
d-Methadone (dextromethadone, REL-1017)
Background
In 2014, the National Institute of Mental Health
(NIMH) estimated that 15.7 million adults aged 18 or older in the United States had at least one major depressive episode in the
past year. According to data from nationally representative surveys supported by NIMH, only about half of Americans diagnosed
with major depression in a given year receive treatment. Of those receiving treatment with as many as four different standard
antidepressants, 33% of drug-treated depression patients do not achieve adequate therapeutic benefits according to the Sequenced
Treatment Alternatives to Relieve Depression (STAR*D) trial published in the
American Journal of Psychiatry
. Accordingly,
we believe that approximately 3 million patients with such treatment-resistant depression are in need of new treatment options.
In addition to the high failure rate, none of the marketed products for depression can demonstrate rapid antidepressant
effects and most of the products take up to a month to show effectiveness. The urgent need for improved, faster acting antidepressant
treatments is underscored by the fact that severe depression can be life-threatening, due to heightened risk of suicide.
Recent studies have shown that ketamine, a drug known previously
as an anesthetic, can lift depression in many patients within hours. However, it is unlikely that ketamine itself will become a
practical treatment for most cases of depression. It must be administered through intravenous infusion, requiring a hospital setting,
and more importantly can potentially trigger adverse side effects including psychedelic symptoms (hallucinations, memory defects,
panic attacks), nausea/vomiting, somnolence, cardiovascular stimulation and, in a minority of patients, hepatoxicity. Ketamine
also hasn’t been thoroughly studied for long-term safety and effectiveness, and the FDA hasn’t approved it to treat
depression.
d-Methadone Overview and Mechanism of Action
d-Methadone’s mechanism of action, as a non-competitive NMDA channel blocker or antagonist, is fundamentally
differentiated from all currently FDA-approved antidepressants, as well as all atypical antipsychotics used adjunctively with standard,
FDA-approved antidepressants. Working through the same brain mechanisms as ketamine but potentially lacking its adverse side effects,
Relmada’s d-Methadone is being developed as a rapidly acting, oral agent for the treatment of depression, neuropathic pain,
and/or other potential CNS pathological conditions.
In chemistry an enantiomer, also known as an optical isomer, is one of
two stereoisomers that are mirror images of each other that are non-superposable (not identical), much as one’s left and
right hands are the same except for being reversed along one axis. A racemic compound, or racemate, is one that has equal amounts
of left- and right-handed enantiomers of a chiral molecule. For racemic drugs, often only one of a drug’s enantiomers is
responsible for the desired physiologic effects, while the other enantiomer is less active or inactive.
Racemic methadone has been used since the 1950s as a treatment for opioid
addiction and has remained the primary therapy for this condition for more than 40 years. Recently, methadone has been used to
manage cancer pain and other chronic pain states. Methadone is a highly lipophilic molecule that is suitable for a variety of
administration routes, with oral bioavailability close to 80% compared with 26% for morphine.
As a single isomer of racemic methadone, d-Methadone has been shown to
possess NMDA antagonist properties with virtually no traditional opioid or ketamine-like adverse events at the expected therapeutic
doses. In contrast, racemic methadone is associated with common opioid side effects that include anxiety, nervousness, restlessness,
sleep problems (insomnia), nausea, vomiting, constipation, diarrhea, drowsiness, and others. It has been shown that the left (levo)
isomer, l-Methadone, is largely responsible for methadone’s opioid activity, while the right (dextro) isomer, d-Methadone,
is much less active as an opioid while maintaining affinity for the NMDA receptor.
NMDA receptors are present in many parts of the central nervous system
and play important roles in neuronal plasticity and other functions that are important for cognitive functions such as learning
and memory. They also contribute to the maladaptive plasticity, which results in neuropathic pain. Based on these premises, d-Methadone
is potentially a platform that could be developed and could show benefits in several different indications.
d-Methadone Phase 1 Clinical Safety Studies
Summary
The safety data from two Company-funded d-Methadone Phase 1 clinical safety studies and a third study conducted
by researchers at Memorial Sloan-Kettering Cancer Center indicate that d-Methadone was safe and well tolerated in both healthy
subjects and cancer patients at all projected therapeutic doses tested.
In November 2014, Health Canada approved a Clinical Trial Application (“CTA”)
to conduct the first Phase I study with d-Methadone. This was a Single Ascending Dose (“SAD”) study and was followed
by a Multiple Ascending Dose (“MAD”) study, both in healthy volunteers. The two studies were designed to assess the
safety, tolerability and pharmacokinetics of d-Methadone in healthy, opioid-naïve subjects. The SAD study included single
escalating oral doses of d-Methadone to determine the maximum tolerated dose, defined as the highest dose devoid of significant
opioid- or ketamine-like adverse events. In the MAD study, healthy subjects received daily oral doses of d-Methadone for several
days to assess its safety, pharmacokinetics and tolerability. In March 2015, we reported that d-Methadone demonstrated a safe
profile with no dose limiting side effects after four cohorts were exposed to increasing higher doses. In April 2015, the Company
received clearance from Health Canada to continue with dose escalation and explore even higher single doses of d-Methadone. In
June 2015, the Company successfully completed the SAD study and subsequently received a No Objection Letter (NOL) from Health
Canada to conduct the MAD clinical study in August 2015. The MAD study was completed in January 2016 and the results successfully
demonstrated a potential therapeutic dosing regimen for d-Methadone with a favorable side effect and tolerability profile. The
data from these studies will inform the design of a subsequent Phase II proof-of-concept study in patients with depression and/or
other suitable indications.
d-Methadone In Vivo Study for Depression
In May 2016, we announced the results of an in vivo study showing
that administration of d-Methadone results in antidepressant-like effects in a well-validated treatment model, known as the forced
swim test (FST), providing preclinical support for its potential as a novel treatment of depression.
According to the
Journal of Visualized Experiments
, the FST
is based on the assumption that when placing an animal in a container filled with water, it will first make efforts to escape by
swimming or climbing, but eventually will exhibit “immobility” that may be considered to reflect a measure of behavioral
despair. This test has been extensively used because it involves the exposure of the animals to stress, which was shown to have
a role in the tendency for major depression. Additionally, the FST has been shown to share some of the factors that are influenced
or altered by depression in humans, including changes in food consumption and sleep abnormalities. The main advantages of this
procedure are that it is relatively easy to perform and that its results are easily and quickly analyzed. Importantly, the FST’s
sensitivity to a broad range of antidepressant drugs makes it a suitable screening test and is one of the most important features
leading to its high predictive validity.
In the Company’s FST study, male Sprague Dawley rats were administered
single doses of placebo, ketamine, or d-Methadone on day one (after habituation; 24 hours prior to forced swim testing). At all
doses tested, d-Methadone significantly decreased immobility of the rats compared to the placebo, suggesting antidepressant-like
activity. In addition, the effect of d-Methadone on immobility at the two highest doses tested was larger than the effect seen
with ketamine. Moreover, the effects of d-Methadone in the forced swim test were not caused by a stimulant effect on spontaneous
locomotor activity of the rats. Locomotor activity of lab animals is often monitored to assess the behavioral effects of drugs.
A separate in vitro electrophysiology study of d-Methadone was conducted
using 2 subtypes of cloned human NMDA receptors. The results of this study demonstrated functional antagonist activity with d-Methadone
comparable to that of both racemic ketamine and the isomer [S]-ketamine.
Combined with the results of our Phase I studies, the encouraging results of these in vivo and in vitro studies
support our belief that d-Methadone warrants further evaluation in a Phase II study as a rapidly acting, oral agent for the treatment
of depression.
LevoCap ER (REL-1015)
Our most-advanced novel version of a proven drug product, LevoCap ER (REL-1015),
is an extended release, abuse deterrent, and proprietary formulation of levorphanol (levo-3-hydroxy-N-methyl-morphinan), a unique,
broad spectrum opioid with additional “non-opioid” mechanisms of action. In particular, levorphanol binds to all three
opioid receptor subtypes involved in analgesia (mu, kappa, and delta), the NMDA receptor, and the norepinephrine and serotonin
reuptake pumps, whereas morphine, oxycodone, hydrocodone, and other opioids are highly selective for the mu receptor subtype.
Due to its multi-modal mechanism of action, levorphanol could achieve analgesia in patients resistant to other strong opioids.
In clinical studies, levorphanol has demonstrated a remarkably broad spectrum of analgesic activity against many different types
of pain including neuropathic pain, post-surgical pain, and chronic pain in patients refractory to other opioids. To our knowledge,
the analgesic tapentadol (Nucynta®) is the only other commercially available, multimodal opioid with non-opioid analgesic
benefits. However, in contrast to levorphanol’s strong opioid effects, tapentadol is a low affinity mu opioid receptor agonist
and a norepinephrine reuptake inhibitor.
Levorphanol is a potent opioid analgesic first introduced in the U.S. around
1953 for the treatment of moderate to severe pain where an opioid analgesic is appropriate. It is currently available as an immediate
release (short-acting opioid), non-abuse deterrent formulation through Sentynl Therapeutics, Inc. However, extended-release (long-acting
opioid) agents may be preferable due to better patient adherence, less dose-watching, and result in improved sleep.
Both immediate- and extended-release opioids can potentially be crushed
to produce concentrated drug with greater appeal to abusers. Intentional crushing or extracting the active ingredient from the
extended-release dosage form by addicts and recreational drug users can destroy the timed-release mechanism and result in a rapid
surge of drug into the bloodstream for the purpose of achieving a high or euphoric feeling. Serious side effects and death have
been reported from such misuse.
LevoCap ER is the first product candidate utilizing SECUREL™, Relmada’s
proprietary abuse deterrent extended release technology for opioid drugs. SECUREL dosage forms cannot be easily crushed for inhalation
or to obtain rapid euphoria from high blood levels when swallowed. It is also exceedingly difficult for intravenous abusers to
extract the active drug from the dosage form using common solvents, including alcohol.
Relmada is developing LevoCap ER under the 505(b)(2) regulatory pathway.
We have submitted a meeting request to the FDA to discuss the Phase III clinical plan for LevoCap ER.
BuTab (REL-1028)
Our second-most-advanced novel version of a proven drug product, BuTab
(REL-1028), represents novel formulations of oral, modified release buprenorphine as a potential therapeutic for both chronic
pain and opioid dependence. Buprenorphine has been widely used by the sublingual and transdermal routes of administration, but
was believed to be ineffective by the oral route because of poor oral bioavailability. We have completed a preclinical program
to better define the pharmacokinetic profile of BuTab and to assess the time course of systemic absorption of buprenorphine using
several different oral modified release formulations of buprenorphine in dogs, compared to an intravenous administration. Based
on the results of this work, we obtained approval from Health Canada and initiated a Phase I pharmacokinetic study in healthy
volunteers in the second quarter of 2015. This trial was completed in the fourth quarter of 2015. The absolute bioavailability
of BuTab relative to intravenous (IV) administration exceeded published data with non-modified buprenorphine when administered
orally and compares favorably with a currently marketed transdermal buprenorphine patch. There were no safety or tolerability
issues. The data generated by this study will guide formulation optimization and inform the design of subsequent clinical pharmacology
studies.
MepiGel (REL-1021)
MepiGel (REL-1021) is a proprietary topical dosage form of the local anesthetic
mepivacaine for the treatment of painful peripheral neuropathies, such as painful diabetic neuropathy, PHN, and painful HIV-associated
neuropathy. Mepivacaine is an anesthetic (numbing medicine) that blocks the nerve impulses that send pain signals to the brain.
It is chemically related to bupivacaine but pharmacologically related to lidocaine. Mepivacaine is currently indicated for infiltration,
nerve block and epidural anesthesia. Relmada has received two FDA Orphan Drug Designations for mepivacaine, one each for “the
treatment of painful HIV-associated neuropathy” and for “the management of postherpetic neuralgia,” or PHN.
We have selected the formulations to be advanced into clinical studies for MepiGel after the evaluation of results from in vitro
and ex vivo studies comparing various topical prototypes of mepivacaine that were conducted by MedPharm Ltd, a specialist formulation
development company recognized internationally for its expertise in topical and transdermal products. Multiple toxicology studies
were successfully conducted and completed in 2015.
Research and Development Expenses
A significant portion of our operating expenses is related to research
and development and we intend to maintain our strong commitment to research and development. Research and development expense
for the year ended June 30, 2016 and the year ended June 30, 2015, was approximately $6,206,700 and $7,872,400, respectively.
Overview of the 505(b)(2) Regulatory Pathway
The majority of our drug development pipeline is based on the application
of drug delivery technologies and/or new dosage forms/indications to existing drugs for the creation of novel products. We then
seek proprietary protection and FDA approval, and subsequently plan to commercialize these products ourselves or through partners.
We believe that research and development efforts focused on novel dose forms of FDA approved drugs is less risky than attempting
to discover new drugs, sometimes called new chemical entities (known as NCEs).
An important part of our strategy is the utilization of FDA’s 505(b)(2)
NDA process for approval. The 505(b)(2) new drug application (NDA) is one of three FDA drug approval pathways and represents an
appealing regulatory strategy for many companies. The pathway was created by the Hatch-Waxman Amendments of 1984, with 505(b)(2)
referring to a section of the Federal Food, Drug, and Cosmetic Act. The provisions of 505(b)(2) were created, in part, to help
avoid unnecessary duplication of studies already performed on a previously approved (“reference” or “listed”)
drug; the section gives the FDA express permission to rely on data not developed by the NDA applicant.
A 505(b)(2) NDA contains full safety and effectiveness reports but allows
at least some of the information required for NDA approval, such as safety and efficacy information on the active ingredient,
to come from studies not conducted by or for the applicant. This can result in a much less expensive and much faster route to
approval, compared with a traditional development path [such as 505(b)(1)], while creating new, differentiated products with tremendous
commercial value.
Overview of Orphan Drug Status
In accordance with laws and regulations pertaining to the Regulatory Agencies,
a sponsor may request that the Regulatory Agencies designate a drug intended to treat a “Rare Disease or Condition”
as an “Orphan Drug.” For example, in the United States, a “Rare Disease or Condition” is defined as one
which affects less than 200,000 people in the United States, or which affects more than 200,000 people but for which the cost
of developing and making available the product is not expected to be recovered from sales of the product in the United States.
Upon the approval of the first NDA or BLA for a drug designated as an orphan drug for a specified indication, the sponsor of that
NDA or BLA is entitled to 7 years of exclusive marketing rights in the United States unless the sponsor cannot assure the availability
of sufficient quantities to meet the needs of persons with the disease. In Europe, this exclusivity is 10 years, and in Australia
it is 5 years. However, orphan drug status is particular to the approved indication and does not prevent another company from
seeking approval of an off-patent drug that has other labeled indications that are not under orphan or other exclusivities. Orphan
drugs may also be eligible for federal income tax credits for costs associated with such as the disease state, the strength and
complexity of the data presented, the novelty of the target or compound, risk-management approval and whether multiple rounds
of review are required for the agency to evaluate the submission. There is no guarantee that a potential treatment will receive
marketing approval or that decisions on marketing approvals or treatment indications will be consistent across geographic areas.
Our Corporate History and Background
We are a clinical-stage, publicly traded biotechnology company developing
NCEs together with novel versions of proven drug products that potentially address areas of high unmet medical need in the treatment
of CNS diseases - primarily depression and chronic pain.
Currently, none of our drugs have been approved for sale in the United
States or elsewhere. We have no commercial products nor do we have a sales or marketing infrastructure. In order to market and
sell our products we must conduct clinical trials on patients and obtain regulatory approvals from appropriate regulatory agencies,
like the FDA in the United States, and similar organizations elsewhere in the world.
We have not generated revenues and do not anticipate generating
revenues for the foreseeable future. We had net loss of approximately $2,974,700 and $20,803,600 for the years ended June 30, 2016
and June 30, 2015, respectively. At June 30, 2016, we have an accumulated deficit of approximately $79,100,000.
Business Strategy
Our strategy is to leverage our considerable industry experience, understanding
of CNS markets and development expertise to identify, develop and commercialize product candidates with significant market potential
that can fulfill unmet medical needs in the treatment of both depression and chronic pain. We have assembled a management team
along with both scientific and business advisors, including recognized experts in the fields of depression and chronic pain, with
significant industry and regulatory experience to lead and execute the development and commercialization of d-Methadone and our
additional pipeline.
We plan to further develop our novel, proprietary drug products via the
505(b)(2) development pathway and also to gain exclusivity under the Hatch-Waxman Act for new indications and also orphan drug
designation in certain indications. We plan to also generate intellectual property (IP) that will further protect our products
from competition. As the drug d-Methadone is not an already approved product by the FDA, the regulatory pathway to approval will
be the more traditional NDA development, which may consist of conducting a full clinical development program. We will continue
to prioritize our product development activities after taking into account the resources we have available, market dynamics and
potential for adding value. We will continue to outsource development of our products, while retaining scientific, operational
and financial oversight and control.
We intend to seek and execute licensing and/or co-development agreements
with companies capable of supporting the final stage development of the Company’s products and their subsequent commercialization
in the U.S. and international markets. We may also develop our own internal sales and marketing capabilities to commercialize
some or all of our products to selected specialty medical segments in the U.S. while out-licensing sales and marketing for the
international market.
We may in-license late-stage or approved drugs to accelerate the pathway to become a fully integrated biopharmaceutical
company with commercial capability. Alternatively, we might consider a trade sale of our products or the entire company if we
deem that it is in the best interests of our shareholders.
Market Opportunity
We believe that the market for addressing areas of high unmet medical need
in the treatment of CNS diseases will continue to be large for the foreseeable future and that it will represent a sizable revenue
opportunity for Relmada. For example, the World Health Organization (WHO) has estimated that CNS diseases affect nearly 2 billion
people globally, making up approximately 40% of total disease burden (based on disability adjusted life years), compared with
13% for cancer and 12% for cardiovascular disease. We also believe that each of our product candidates is designed to have value
added features that will provide product related competitive advantages versus the existing drugs available on the market.
Depression
The depression treatment market is segmented on the basis of antidepressants
drugs, devices, and therapies. Antidepressants are the largest and most popular market segment. According to Research and Markets,
every year more than 5 billion antidepressant prescriptions are written globally. The antidepressants segment consists of large
pharmaceutical and generic companies, such as Eli Lilly, Pfizer, GlaxoSmithKline and Forest Laboratories. Some of the popular
drugs produced by these companies are Prozac® (Eli Lilly, Cymbalta® (Eli Lilly), Effexor® (Pfizer), and Pristiq®
(Pfizer).
Chronic Pain
The pain market is well established, with many pharmaceutical companies
marketing innovative products as well as generic versions of older, non-patent protected products. In 2014, according to data
from IMS Health, there were 328 million pain prescriptions representing $13 billion in annual sales in the U.S. Analgesics continue
to be among the most widely prescribed medications and there is little to suggest that their preeminence will change in the near
future, given the prominent role of pain in many diseases. Survey data indicate substantial patient dissatisfaction with current
pain management modalities.
Intellectual Property Portfolio and Market Exclusivity
We have secured three Orphan Drug Designations from the FDA: 1) d-Methadone
for “the treatment of postherpetic neuralgia”; 2) MepiGel for “the treatment of painful HIV-associated neuropathy”;
and MepiGel for “the management of postherpetic neuralgia.” Each would, upon NDA approval, carry 7-year FDA Orphan
Drug marketing exclusivity. In the European Union, some of our products may be eligible up to 10 years of market exclusivity,
which includes 8 years data exclusivity and 2 years market exclusivity. In addition to any granted patents, our products will
be eligible for market exclusivity to run concurrently with the term of the patent for 3 years in the U.S. (Hatch Waxman plus
pediatric exclusivity) and up to 10 years of in the E.U. We believe an extensive intellectual property estate of several patents
will protect our technology and products once our patent applications for our products are approved.
The following is a summary of our patents and patent applications:
Levorphanol:
These patents and patent applications cover
the levorphanol product.
US Patent No. 9,125,833, filed 4/28/08, granted on 9/8/15. Multimodal Abuse
Resistant and Extended Release Opioid Formulations. Owned by Relmada. Estimated expiry in 2030. This patent covers the SECUREL
technology platform and Relmada’s lead product candidate, LevoCap ER (REL-1015, levorphanol extended-release, abuse deterrent
capsules) as well as providing additional coverage for multiple opioid molecules that are prone to abuse.
EU patent No. 2,448,406, filed 2/26/10, granted on 4/20/16. Extended Release
Oral Pharmaceutical Compositions of 3-Hydroxy-N-Methylmorphinan and Method of Use. Owned by Relmada. Estimated expiry in 2030.
Patent application 12/223.327 filed 1/29/07, Abuse Resistant and Extended
Release Formulations and Method of Use Thereof. Cover US. Owned by Relmada. Currently pending.
Patent application 13/320,989 filed 2/26/10 Extended Release Oral Pharmaceutical
Compositions of 3-Hydroxy-N-Methylmorphinan and Method of Use. Owned by Relmada. Currently pending.
International patent application PCT/US16/31796 filed 5/11/16. Preserves
rights to file in US, Europe, and Asia for abrasion- and crush-resistant products. Owned by Relmada. Estimated expiry in 2036.
d-Methadone:
These patents and patent application
cover the d-Methadone product.
US Patent No. 6,008,258 filed 1/21/98, d-Methadone, a Nonopioid
Analgesic, Cover US, Patent granted, estimated expiry in 2018.
U.S. Patent Application 13/803,375, filed on 3/14/13 as an international
(PCT) application. The U.S. application was allowed on 6/23/16. d-Methadone for the Treatment of Psychiatric Symptoms. This patent
covers the use of d-Methadone for the treatment of depression. Owned by Relmada. Estimated expiry in 2033. Counterpart applications
in other countries are currently pending.
U.S. Patent Application 15/204,052, filed on 7/7/16 as a continuation of U.S. 13/803,375. d-Methadone for
the Treatment of Psychiatric Symptoms. Owned by Relmada. Currently pending.
Buprenorphine:
This patent application covers the buprenorphine
product.
Patent application 12/989,209 filed 3/9/09, Oral Pharmaceutical Compositions
of Buprenorphine and Method of Use. Cover US and EU. Owned by Relmada. Currently pending.
International patent application PCT/US16/31796 filed 5/11/16. Preserves
rights to file in US, Europe, and Asia for abrasion- and crush-resistant products. Owned by Relmada. Estimated expiry in 2036.
Mepivacaine
: This patent application covers the mepivacaine
product.
Patent application PCT/US2011/032,381 filed 4/13/11, Dermal Pharmaceutical
Composition of 1-Methyl-2,6-Pipecoloxylidide and Method of Use. Cover US, EU, Canada, China, India, Japan, and South Korea. Owned
by Relmada. Currently pending.
Key Strengths
We believe that the key elements for our market success include:
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A multiple product portfolio with a balanced risk reward profile: We have four
products at various stages of development, and each has its own development risk profile and indication. Accordingly, management
believes that we are well positioned to become a competitive player in a large unsatisfied market.
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Products are differentiated and address significant unmet needs: All four lead
development programs are well differentiated, value added CNS drugs that address significant unmet medical needs.
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Scientific support of leading experts: Our scientific and business advisors
include clinicians and scientists who are affiliated with a number of highly regarded medical institutions. The group consists
of individuals who have served as executives of leading national and international societies in depression, pain, and the
FDA.
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Efficient development strategy: The 505(b)(2) pathway lowers the risk of drug
development. Our strategy of combining proven drug candidates with novel delivery methods and pharmaceutical compositions
reduces clinical development time and costs and lowers regulatory risks, while delivering valuable products in areas of high
unmet need to the market place. Abuse resistant and once a day formulations improve the commercial potential of opioids, addressing
the risk of opioid abuse and opioid diversion by making the dosage form tamper resistant, thereby frustrating attempts at
physical manipulation of the dosage.
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Substantial IP portfolio and market protection: Upon the approval of our filed
patent applications for our products we will have secured an intellectual property portfolio comprised of several patents.
In addition, some of our drugs have also been designated as Orphan Drugs by the FDA, thereby providing seven years of market
exclusivity at launch.
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Experienced management: We combine business expertise with what we believe
is an internationally recognized research team. We believe our highly experienced drug development leadership provides us
with a significant competitive advantage in designing highly efficient clinical programs with predictable regulatory outcomes.
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Competition Overview
The pharmaceutical and biotechnology industry is characterized by intense
competition, rapid product development and technological change. Competition is intense among manufacturers of prescription pharmaceuticals
and other product areas where we may develop and market products in the future. Most of our competitors are large, well-established
pharmaceutical or healthcare companies with considerably greater financial, marketing, sales and technical resources than are
available to us. Additionally, many of our competitors have research and development capabilities that may allow such competitors
to develop new or improved products that may compete with our products. Our products could be rendered obsolete or made uneconomical
by the development of new products.
Regarding our competitive position in the industry, none of our products
have been approved for sale.
Currently, there are no FDA-approved therapies for TRD with the mechanism
of action of d-Methadone. However, products approved for other indications, for example, low doses of the anesthetic ketamine,
are being or may be increasingly used off-label for treating depression, as well as other CNS indications for which d-Methadone
may have therapeutic potential. Additionally, other treatment options, such psychotherapy and electroconvulsive therapy, are sometimes
used instead of and before antidepressant medications to treat patients with TRD.
In the field of new generation antidepressants focused on specifically
blocking the NMDA receptor channel, our principal competitor is intranasal esketamine, an isomer of ketamine, currently in Phase
III clinical trials sponsored by Johnson & Johnson subsidiary Janssen Pharmaceutica. Other potential competitors focused on
modulation of the NMDA receptor at its glycine co-agonist site include Allergan plc, which is developing rapastinel (formerly
GLYX-13) and NRX-1074 for treatment-resistant major depressive disorder (MDD). On August 28, 2015, Allergan acquired rapastinel
and NRX-1074 from Naurex, Inc. in an all-cash transaction of $571.7 million, plus future contingent payments up to $1.15 billion.
These two drug candidates are modified peptides and only one may be orally active (rapastinel is only administered intravenously;
NRX-1074 is orally bioavailable). VistaGen Therapeutics, Inc. is developing AV-101, an orally available prodrug candidate that
gains access to the CNS after systemic administration and is rapidly converted in the brain into its active metabolite, 7-chlorokynurenic
acid (7-Cl-KYNA), a well-characterized, potent and highly selective antagonist of the NMDA receptor at the glycine co-agonist
site. Cerecor Inc. is developing CERC-301, an oral and NR2B-specific NMDA antagonist.
The pain market has peculiar characteristics with regards to competition.
While there are several products in development both in the narcotic and neuropathic pain space, the market history has shown that
a new entry in the therapeutic area does not necessarily cannibalize existing products, but instead expands the market. The reasons
behind this behavior can be found in the “opioid rotation” phenomena. As there is considerable variability in the efficacy
and side effect response of patients to opioid analgesics, many patients rotate from one opioid to another, offering growth opportunity
to new entries. In the case of the neuropathic pain indication, it is mostly the limited efficacy of the existing therapies that
creates a strong demand for new entries, a model also supported by the considerable off-label use of opioids, tricyclic antidepressants,
and nonsteroidal anti-inflammatory drugs (NSAIDs) in neuropathic pain.
Because of the large CNS opportunity, the current competitive landscape
is comprised by a significant number of pharmaceutical companies, including, but not limited to, Abbott Laboratories, Acadia,
Alkermes, Allergan, AstraZeneca, Eli Lilly, Endo Pharmaceutical Holding, GlaxoSmithKline, Johnson & Johnson, Lundbeck, Mallinckrodt,
Merck, Novartis, Ono, Otsuka, Pfizer, Purdue Pharma, Roche, Sanofi, Shire, Sumitomo, Takeda and Teva. In addition, we are aware
that several companies are working on new delivery forms of pain products and abuse deterrent formulations, including Acura Pharmaceutical,
BioDelivery Science, Collegium Pharmaceutical, Egalet, Elite Pharmaceutical, Inspirion Delivery Technologies, Intellipharmaceutics
International, and KemPharm.
Government Regulation
Governmental authorities in the United States and other countries extensively
regulate, among other things, the research, development, testing, manufacture, labeling, promotion, advertising, distribution
and marketing of active pharmaceutical ingredients, excipients, controlled substances and finished pharmaceutical products such
as those being developed by Relmada.
In the United States, the FDA regulates such products under the Federal
Food, Drug and Cosmetic Act (FDCA), as amended and regulations pursuant to the FDCA.
The U.S. Drug Enforcement Agency (DEA), a division of the Department of
Justice, administers the federal Controlled Substances Act (“CSA”) of 1970, as amended. The CSA imposes various registration,
record-keeping and reporting requirements, procurement and manufacturing quotas, import and export controls, labeling and packaging
requirements, security controls, and a restriction on prescription refills on certain pharmaceutical products.
To meet its responsibilities, the DEA conducts periodic inspections of
registered establishments that handle controlled substances. Failure of companies to maintain compliance, particularly as manifested
in loss or diversion, can result in regulatory action including civil and criminal penalties, refusal to renew necessary registrations,
or initiating proceedings to revoke those registrations. If a manufacturer or distributor has its registration revoked, it can
no longer lawfully possess or distribute controlled substances meaning effectively that the operations of such an organization
must cease with respect to controlled substances. In certain circumstances, violations also can lead to criminal proceedings.
Most states impose similar controls over controlled substances under state
law as regulated by the Board of Pharmacy or other state regulatory authorities.
The U.S. Federal Trade Commission (FTC) and the Office of the Inspector
General of the U.S. Department of Health and Human Services (HHS) also regulate certain pharmaceutical marketing practices. Thus,
reimbursement practices of the HHS covering medicine and medical services are important to the success of our products.
We are also subject to United States regulation under the Controlled Substances
Act (CSA). Drug Enforcement Administration regulations require Scheduled II controlled substances to be manufactured in the United
States if the products are to be marketed in the United States. Our only products that contain Schedule II controlled substances
are LevoCap ER and d-Methadone. We are in the process of transferring all third party manufacturing of these products to the United
States, and we intend to comply with this CSA requirement.
We are also subject to numerous federal, state and local laws relating
to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal
of hazardous or potentially hazardous substances.
Failure to comply with applicable FDA, DEA, FTC, HHS and other federal
and state regulations and requirements, both before and after drug approval may subject us to administrative and judicial sanctions,
such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product
seizures, total or partial suspension of production or distribution, injunctions, fines and/or criminal prosecution.
Relmada believes that a two tiered approach can reduce overall clinical
development risks. Our approach consists of: (1) developing improved versions of proven drug candidates and filings under 505(b)(2)
which may require an abbreviated clinical development program; and (2) developing a drug in treating conditions that have not
been approved by the FDA, and filings under the traditional NDA which would require a full clinical development program. In general,
drugs for the 505(b)(2) filing possess less risks as compared to drugs filed under the traditional NDA route. As with all drugs
filed with the FDA, there is no guarantee of approval.
Please see “Company Overview” above for a status of our drug
development.
U.S. Food and Drug Administration Regulation
Our research, development and clinical programs, as well as our manufacturing
and marketing operations, are subject to extensive regulation in the United States and other countries. Most notably, all of our
products sold in the United States are subject to the FDCA as implemented and enforced by the FDA. Certain of our product candidates
in the United States require FDA pre-marketing approval of an NDA pursuant to 21 C.F.R. § 314. Foreign countries may require
similar or more onerous approvals to manufacture or market these products.
Failure by us or by our suppliers to comply with applicable regulatory
requirements can result in enforcement action by the FDA, the DEA or other regulatory authorities, which may result in sanctions
including, but not limited to: untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; customer
notifications or repair, replacement, refunds, recall, detention or seizure of our products; operating restrictions or partial
suspension or total shutdown of production; refusing or delaying our requests for NDA premarket approval of new products or modified
products; withdrawing NDA approvals that have already been granted; refusal to grant export approval for our products; or criminal
prosecution.
Corporate Information
Our principal executive office is located at 275 Madison
Avenue, Suite 702, New York, NY 10016 and our telephone number is (646) 677-3853. Our website address is
www.relmada.com.
The information contained in, or that can be accessed through, our website is not part of, and is not incorporated in, this Annual
Report. The information contained therein or connected thereto shall be deemed to be incorporated into this 10-K which it forms
a part.
Employees
As of September 9, 2016, we have six (6) full-time
employees and no part-time employees. None of these employees are covered by a collective bargaining agreement, and we believe
our relationship with our employees is good. We also engage consultants on an as-needed basis to supplement existing staff.
A
vailable Information
Reports
we file with the SEC pursuant to the Exchange Act of 1934, as amended (the “Exchange Act”), including annual and quarterly
reports, and other reports we file, can be inspected and copied at the public reference facilities maintained by the SEC at 100
F Street NE, Washington, D.C. 20549.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below, together with all of the other information included in this report, before making
an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations
could suffer. In that case, the trading price of our shares of common stock could decline, and you may lose all or part of your
investment. You should read the section entitled “Forward-Looking Statements” above for a discussion of what types
of statements are forward-looking statements, as well as the significance of such statements in the context of this Annual Report.
Risk Related to Our Business
Our product candidates are in early stages of clinical testing.
Our product candidates are still in the early stages of clinical testing.
None has gone beyond the Phase I/Phase IIa stage and FDA approval requires that a drug candidate complete a Phase III study program,
to test the safety and efficacy of the drug candidate on a large sample of patients. The timeline between a Phase I study and
a Phase III study and subsequent filing of a NDA can be several years. We will need to commit substantial time and additional
resources to conducting further nonclinical studies and clinical trials before we can submit an NDA with respect to any of these
product candidates. We cannot predict with any certainty if or when we might submit an NDA for regulatory approval of any of our
product candidates.
We have generated no revenue from commercial sales to date and our
future profitability is uncertain.
We have a limited operating history and our business is subject to all
of the risks inherent in the establishment of a new business enterprise. Our likelihood of success must be considered in light
of the problems, expenses, difficulties, complications and delays frequently encountered in connection with this. Since we began
our business, we have focused on research, development and clinical trials of product candidates, and have incurred significant
losses since inception and generated no product revenues. If we continue to incur operating losses and fail to become a profitable
company, we may be unable to continue our operations. We expect to continue to operate at a net loss for at least the next several
years as we continue our research and development efforts, continue to conduct clinical trials and develop manufacturing, sales,
marketing and distribution capabilities. There can be no assurance that the products under development by us will be approved
for sales in the US or elsewhere. Furthermore, there can be no assurance that if such products are approved they will be successfully
commercialized, and the extent of our future losses and the timing of our profitability are highly uncertain.
International commercialization of our product candidates faces significant
obstacles.
We may plan to commercialize some of our products internationally through
collaborative relationships with foreign partners. We have limited foreign regulatory, clinical and commercial resources. Future
partners are critical to our international success. We may not be able to enter into collaboration agreements with appropriate
partners for important foreign markets on acceptable terms, or at all. Future collaborations with foreign partners may not be
effective or profitable for us. We will need to obtain approvals from the appropriate regulatory, pricing and reimbursement authorities
to market any of our proposed products internationally, and we may be unable to obtain foreign regulatory approvals. Pursuing
foreign regulatory approvals will be time-consuming and expensive. The regulations can vary among countries and foreign regulatory
authorities may require different or additional clinical trials than we conducted to obtain FDA approval for our product candidates.
In addition, adverse clinical trial results, such as death or injury due to side effects, could jeopardize not only regulatory
approval, but if approval is granted, may also lead to marketing restrictions. Our product candidates may also face foreign regulatory
requirements applicable to controlled substances.
We need to raise additional capital to operate our business
.
We are a company focused on product development and have not generated
any product revenues to date. Until, and if, we receive approval from the FDA and other regulatory authorities for our product
candidates, we cannot sell our drugs and will not have product revenues. Therefore, for the foreseeable future, we will have to
fund all of our operations and capital expenditures from the net proceeds of future offerings and grants. We believe that we have
sufficient capital on hand to fund future operations until the end of the calendar year 2017. Our actual capital requirements
will depend on many factors. If we experience unanticipated cash requirements, we may need to seek additional sources of financing,
which may not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms,
we may be unable to complete planned nonclinical studies and clinical trials or obtain approval of our product candidates from
the FDA and other regulatory authorities. In addition, we could be forced to discontinue product development, reduce or forego
sales and marketing efforts and attractive business opportunities, or discontinue operations.
We have a history of losses and we may never achieve or sustain profitability.
We have incurred substantial losses since our inception, and we may not achieve profitability for the foreseeable
future, if at all. Since inception, we have an accumulated deficit of approximately $79,160,000 at June 30, 2016. The Company has
cash and cash equivalents of approximately $8,500,000 at June 30, 2016. Even if we succeed in developing and commercializing one
or more of our product candidates, we expect to incur substantial net losses and negative cash flows for the foreseeable future
due in part to increasing research and development expenses, including clinical trials, and increasing expenses from leasing additional
facilities and hiring additional personnel. As a result, we will need to generate significant revenues in order to achieve and
maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Even if we do achieve
profitability, we may not be able to sustain or increase profitability.
We have a limited operating history upon which to base an investment
decision.
Our limited operating history may limit your ability to evaluate our prospects
due to our limited historical financial data and our unproven potential to generate profits. You should evaluate the likelihood
of financial and operational success in light of the risks, uncertainties, expenses and difficulties associated with an early-stage
business, many of which may be beyond our control, including:
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our potential inability to continue to undertake nonclinical studies, pharmaceutical
development and clinical trials,
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our potential inability to obtain regulatory approvals, and
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our potential inability to manufacture, sell and market our products.
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Our operations have been limited to organizing and staffing, on a limited
basis, our company, acquiring, developing and securing our proprietary technology and undertaking nonclinical studies and early
stage clinical trials of our principal product candidates. These operations provide a limited basis for you to assess our ability
to commercialize our product candidates and the advisability of investing in our common stock.
If we fail to obtain the capital necessary to fund our operations,
we will be unable to continue or complete our product development and you will likely lose your entire investment.
The Company has cash and cash equivalents of approximately $8,500,000 at June 30, 2016, which will not be
sufficient to capitalize the development and commercialization of d-Methadone and we will need to continue to seek capital from
time to time to continue the development beyond the initial Phase I and II clinical trials and to acquire and develop other product
candidates. Our first product is not expected to be commercialized until at least 2019 and the revenues it will generate may not
be sufficient to fund our ongoing operations. The Company believes that with current cash on hand it will be able to fund operations
until the end of the calendar year 2017. Accordingly, we believe that we will need to raise substantial additional capital to fund
our continuing operations and the development and commercialization of our product candidates in or before the first half of 2017.
Our business or operations may change in a manner that would consume available funds more rapidly than anticipated and substantial
additional funding may be required to maintain operations, fund expansion, develop new or enhanced products, acquire complementary
products, business or technologies or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory
environment or a change in preferred pain treatment modalities. In addition, we may need to accelerate the growth of our sales
capabilities and distribution beyond what is currently envisioned and this would require additional capital. However, we may not
be able to secure funding when we need it or on favorable terms. If we cannot raise adequate funds to satisfy our capital requirements,
we will have to delay, scale-back or eliminate our research and development activities, clinical studies or future operations.
We may also be required to obtain funds through arrangements with collaborators, which arrangements may require us to relinquish
rights to certain technologies or products that we otherwise would not consider relinquishing, including rights to future product
candidates or certain major geographic markets. We may further have to license our technology to others. This could result in sharing
revenues that we might otherwise retain for ourselves. Any of these actions may harm our business, financial condition and results
of operations.
The amount of capital we may need depends on many factors, including the
progress, timing and scope of our product development programs; the progress, timing and scope of our nonclinical studies and
clinical trials; the time and cost necessary to obtain regulatory approvals; the time and cost necessary to further develop manufacturing
processes and arrange for contract manufacturing; our ability to enter into and maintain collaborative, licensing and other commercial
relationships; and our partners’ commitment of time and resource to the development and commercialization of our products.
We have limited access to the capital markets and even if we can
raise additional funding, we may be required to do so on terms that are dilutive to you.
We have limited access to the capital markets to raise capital. The capital
markets have been unpredictable in the recent past for other pain companies and unprofitable companies such as ours. In addition,
it is generally difficult for companies to raise capital under current market conditions. The amount of capital that a company
such as ours is able to raise often depends on variables that are beyond our control. As a result, we may not be able to secure
financing on terms attractive to us, or at all. If we are able to consummate a financing arrangement, the amount raised may not
be sufficient to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our business, results
of operations, financial condition and our continued viability will be materially adversely affected.
Risks Related to Clinical and Regulatory Matters
If we or our potential collaborators fail to obtain the necessary
regulatory approvals, or if such approvals are limited, we and our potential collaborators will not be allowed to commercialize
our drug candidates, and we will not generate product revenues.
Satisfaction of all regulatory requirements for commercialization of a
drug candidate typically takes many years, is dependent upon the type, complexity and novelty of the drug candidate, and requires
the expenditure of substantial resources for research and development. Our research and clinical approaches may not lead to drugs
that the FDA considers safe for humans and effective for indicated uses we are studying. The FDA may require additional studies,
in which case we or our collaborators would have to expend additional time and resources and would likely delay the date of potentially
receiving regulatory approval. The approval process may also be delayed by changes in government regulation, future legislation
or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory
approvals would:
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delay commercialization of, and product revenues from, our drug candidates;
and
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diminish the competitive advantages that we may have otherwise enjoyed, which
would have an adverse effect on our operating results and financial condition.
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Even if we or our collaborators comply with all FDA regulatory requirements,
our drug candidates may never obtain regulatory approval. If we or our collaborators fail to obtain regulatory approval for any
of our drug candidates we will have fewer commercial products, if any, and corresponding lower product revenues, if any. Even
if our drug candidates receive regulatory approval, such approval may involve limitations on the indications and conditions of
use or marketing claims for our products. Further, later discovery of previously unknown problems or adverse events could result
in additional regulatory restrictions, including withdrawal of products. The FDA may also require us or our collaborators to commit
to perform lengthy Phase IV post-approval clinical efficacy or safety studies. Our expending additional resources on such trials
would have an adverse effect on our operating results and financial condition.
In jurisdictions outside the United States, we or our collaborators must
receive marketing authorizations from the appropriate regulatory authorities before commercializing our drugs. Regulatory approval
processes outside the United States generally include all of the aforementioned requirements and risks associated with FDA approval.
If we or our collaborators are unable to design, conduct and complete
clinical trials successfully, our drug candidates will not be able to receive regulatory approval.
In order to obtain FDA approval for any of our drug candidates, we or our
collaborators must submit to the FDA an NDA that demonstrates with substantive evidence that the drug candidate is both safe and
effective in humans for its intended use. This demonstration requires significant research and animal tests, which are referred
to as preclinical studies, as well as human tests, which are referred to as clinical trials.
Results from Phase I clinical programs may not support moving a drug candidate
to Phase II or Phase III clinical trials. Phase III clinical trials may not demonstrate the safety or efficacy of our drug candidates.
Success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful. Results
of later clinical trials may not replicate the results of prior clinical trials and preclinical studies. Even if the results of
Phase III clinical trials are positive, we or our collaborators may have to commit substantial time and additional resources to
conducting further preclinical studies and clinical trials before obtaining FDA approval for any of our drug candidates.
Clinical trials are very expensive and difficult to design and implement,
in part because they are subject to rigorous requirements. The clinical trial process also consumes a significant amount of time.
Furthermore, if participating patients in clinical trials suffer drug-related adverse reactions during the course of such clinical
trials, or if we, our collaborators or the FDA believe that participating patients are being exposed to unacceptable health risks,
such clinical trials will have to be suspended or terminated. Failure can occur at any stage of the clinical trials, and we or
our collaborators could encounter problems that cause abandonment or repetition of clinical trials.
Our clinical trials and our future clinical trials for other drug candidates
for treatment of pain measure clinical symptoms, such as pain and physical dependence that are not biologically measurable. The
success in clinical trials and our other drug candidates designed to reduce risks of unintended use depends on reaching statistically
significant changes in patients’ symptoms based on clinician-rated scales. Due in part to a lack of consensus on standardized
processes for assessing clinical outcomes, these scores may or may not be reliable, useful or acceptable to regulatory agencies.
We have no history of developing drug candidates. We do not know whether
any of our planned clinical trials will result in marketable drugs.
In addition, completion of clinical trials can be delayed by numerous factors,
including:
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delays in identifying and agreeing on acceptable terms with prospective clinical
trial sites;
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slower than expected rates of patient recruitment and enrollment;
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unanticipated patient dropout rates;
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increases in time required to complete monitoring of patients during or after
participation in a clinical trial; and
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Any of these delays could significantly impact the timing, approval and
commercialization of our drug candidates and could significantly increase our overall costs of drug development.
Even if clinical trials are completed as planned, their results may not
support expectations or intended marketing claims. The clinical trials process may fail to demonstrate that our drug candidates
are safe and effective for indicated uses. Such failure would cause us to abandon a drug candidate and could delay development
of other drug candidates.
With respect to the Phase III clinical trial, these discussions are
not binding obligations on the part of regulatory authorities.
Regulatory authorities may revise previous guidance or decide to ignore
previous guidance at any time during the course of our clinical activities or after the completion of our clinical trials. Even
with successful clinical safety and efficacy data, including such data from a clinical trial conducted pursuant to an SPA, we
or our collaborators may be required to conduct additional, expensive clinical trials to obtain regulatory approval.
Developments by competitors may establish standards of care that
affect our ability to conduct our clinical trials as planned.
Changes in standards related to clinical trial design could affect our
ability to design and conduct clinical trials as planned. For example, regulatory authorities may not allow us to compare our
drug candidates to placebo in a particular clinical indication where approved products are available. In that case, both the cost
and the amount of time required to conduct a clinical trial could increase.
The DEA limits the availability of the active ingredients in certain
of our current drug candidates and, as a result, quotas for these ingredients may not be sufficient to complete clinical trials,
or to meet commercial demand or may result in clinical delays.
The U.S. Drug Enforcement Administration, or DEA, regulates chemical compounds
as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuse
and Schedule V substances the lowest risk. Certain active ingredients in our current drug candidates, such as oxycodone, are listed
by the DEA as Schedule II under the Controlled Substances Act of 1970. Consequently, their manufacture, research, shipment, storage,
sale and use are subject to a high degree of oversight and regulation. For example, all Schedule II drug prescriptions must be
signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription. Furthermore, the
amount of Schedule II substances that can be obtained for clinical trials and commercial distribution is limited by the DEA and
quotas for these substances may not be sufficient to complete clinical trials or meet commercial demand. There is a risk that
DEA regulations may interfere with the supply of the drugs used in clinical trials for our product candidates, and, in the future,
the ability to produce and distribute our products in the volume needed to meet commercial demand.
Conducting clinical trials of our drug candidates or commercial sales
of a drug candidate may expose us to expensive product liability claims and we may not be able to maintain product liability insurance
on reasonable terms or at all.
The risk of product liability is inherent in the testing of pharmaceutical
products. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or
be required to limit or terminate testing of one or more of our drug candidates. Our inability to obtain sufficient product liability
insurance at an acceptable cost to protect against product liability claims could prevent or inhibit the commercialization of
our drug candidates. We currently carry clinical trial insurance but do not carry product liability insurance. If we successfully
commercialize one or more of our drug candidates, we may face product liability claims, regardless of FDA approval for commercial
manufacturing and sale. We may not be able to obtain such insurance at a reasonable cost, if at all. Even if our agreements with
any current or future corporate collaborators entitle us to indemnification against product liability losses, such indemnification
may not be available or adequate should any claim arise.
If our drug candidates receive regulatory approval, we and our collaborators
will also be subject to ongoing FDA obligations and continued regulatory review, such as continued safety reporting requirements,
and we and our collaborators may also be subject to additional FDA post-marketing obligations or new regulations, all of which
may result in significant expense and limit our and our collaborators’ ability to commercialize our drugs.
Any regulatory approvals that our drug candidates receive may also be subject
to limitations on the indicated uses for which the drug may be marketed or contain requirements for y costly post-marketing follow-up
studies. In addition, if the FDA approves any of our drug candidates, the labeling, packaging, adverse event reporting, storage,
advertising, promotion and record keeping for the drug will be subject to extensive regulatory requirements. The subsequent discovery
of previously unknown problems with the drug, including but not limited to adverse events of unanticipated severity or frequency,
or the discovery that adverse events previously observed in preclinical research or clinical trials that were believed to be minor
actually constitute much more serious problems, may result in restrictions on the marketing of the drug, and could include withdrawal
of the drug from the market.
The FDA’s policies may change and additional government regulations may be enacted that could prevent
or delay regulatory approval of our drug candidates. For example, on July 9, 2012, the FDA approved a risk management program,
known as a Risk Evaluation and Mitigation Strategy, or REMS, for extended-release and long-acting opioid analgesics, or ER/LA opioid
analgesics. This will require companies affected by the REMS to make available training for health care professionals who prescribe
ER/LA opioid analgesics on proper prescribing practices and also to distribute educational materials to prescribers and patients
on the safe use of ER/LA opioid analgesics.
We cannot predict the likelihood, nature or extent of adverse government
regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not
able to maintain regulatory compliance, we may be subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution. Any of these events could prevent us from marketing
our drugs and our business could suffer drug candidates and we will not become competitive with our drug candidates being developed.
If time and resources devoted are limited or there is a failure to fund the continued development other opioid drug candidates
or there is otherwise a failure to perform as we expect, we may not achieve clinical and regulatory milestones and regulatory
submissions and related product introductions may be delayed or prevented, and revenues that we would receive from these activities
will be less than expected.
We may depend on independent investigators and collaborators, such as universities
and medical institutions, to conduct our clinical trials under agreements with us. These investigators and collaborators are not
our employees and we cannot control the amount or timing of resources that they devote to our programs. They may not assign as
great a priority to our programs or pursue them as diligently as we would if we were undertaking such activities ourselves. If
these investigators or collaborators fail to devote sufficient time and resources to our drug development programs, or if their
performance is substandard, the approval of our regulatory submissions and our introductions of new drugs will be delayed or prevented.
Our potential collaborators may also have relationships with other commercial
entities, some of which may compete with us. If outside collaborators assist our competitors to our detriment, the approval of
our regulatory submissions will be delayed and the sales from our products, if any are commercialized, will be less than expected.
We may not succeed at in-licensing drug candidates or technologies
to expand our product pipeline.
We may not successfully in-license drug candidates or technologies to expand
our product pipeline. The number of such candidates and technologies is limited. Competition among large pharmaceutical companies
and biopharmaceutical companies for promising drug candidates and technologies is intense because such companies generally desire
to expand their product pipelines through in-licensing. If we fail to carry out such in-licensing and expand our product pipeline,
our potential future revenues may suffer.
If we fail to obtain or maintain necessary U.S. Food and Drug Administration
clearances for our pain therapy products, or if such clearances are delayed, we will be unable to commercially distribute and
market our products.
Our products are subject to rigorous regulation by the FDA and numerous
other federal, state and foreign governmental authorities. The process of seeking regulatory clearance or approval to market a
pain therapy product, in particular a controlled substance is expensive and time consuming and, notwithstanding the effort and
expense incurred, clearance or approval is never guaranteed. If we are not successful in obtaining timely clearance or approval
of our products from the FDA, we may never be able to generate significant revenue and may be forced to cease operations. In particular,
the FDA permits commercial distribution of a new pain therapy product only after the product has received approval of a New Drug
Application (“NDA”) filed with the FDA pursuant to 21 C.F.R. § 314, seeking permission to market the product
in interstate commerce in the United States. The NDA process is costly, lengthy and uncertain. Any NDA application filed by the
Company will have to be supported by extensive data, including, but not limited to, technical, nonclinical, clinical trial, manufacturing
and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the product for its intended use.
Obtaining clearances or approvals from the FDA and from the regulatory
agencies in other countries could result in unexpected and significant costs for us and consume management’s time and other
resources. The FDA and other agencies could ask us to supplement our submissions, collect non-clinical data, conduct additional
clinical trials or engage in other time-consuming actions, or they could simply deny our applications. In addition, even if we
obtain an NDA approval or pre-market approvals in other countries, the approval could be revoked or other restrictions imposed
if post-market data demonstrates safety issues or lack of effectiveness. We cannot predict with certainty how, or when, the FDA
will act. If we are unable to obtain the necessary regulatory approvals, our financial condition and cash flow may be adversely
affected, and our ability to grow domestically and internationally may be limited. Additionally, even if cleared or approved,
the Company’s products may not be approved for the specific indications that are most necessary or desirable for successful
commercialization or profitability.
Our clinical trials may fail to demonstrate adequately the safety
and efficacy of our product candidates, which could prevent or delay regulatory approval and commercialization.
Before obtaining regulatory approvals for the commercial sale of any of
our product candidates, we must demonstrate through lengthy, complex and expensive nonclinical testing and clinical trials that
the product is both safe and effective for use in each target indication. Clinical trial results from the study of depression,
chronic pain (e.g., osteoarthritis and chronic low back pain) and neuropathic pain (e.g., painful diabetic neuropathy, postherpetic
neuralgia and painful HIV-associated neuropathy) are inherently difficult to predict. The primary measure of pain is subjective
and can be influenced by factors outside of our control, and can vary widely from day to day for a particular patient, and from
patient to patient and site to site within a clinical study. The results we have obtained in completed animal studies or we have
observed in published clinical trials conducted by third parties of other dosage forms of the same drug (e.g., sublingual, immediate
release oral, parenteral) may not be predictive of results from our future clinical trials. Additionally, we may suffer significant
setbacks in advanced clinical trials, even after promising results in earlier studies.
We cannot predict whether regulatory agencies will determine that
the data from our clinical trials support marketing approval.
The FDA’s and other regulatory agencies’ decision to approve
our analgesic product candidates will depend on our ability to demonstrate with substantial clinical evidence through well-controlled
clinical trials, that the product candidates are effective, as measured statistically by comparing the overall improvement in
pain in actively-treated patients against improvement in pain in the control group (usually a placebo control). However, there
is a possibility that our data may fail to show a statistically significant difference from the placebo-control or the active
control. Alternatively, there is a possibility that our data may be statistically significant, but that the actual clinical benefit
of the product candidates may not be considered to be clinically significant, clinically relevant or clinically meaningful. Consequently,
we believe that the FDA may consider additional data, such as a “responder” analysis, secondary efficacy endpoints
and even safety when evaluating whether our product can be approved. We believe that the FDA views “responders” as
patients who experience at least a 30% reduction in overall pain. We cannot predict whether the regulatory agencies will find
that our clinical trial results provide compelling “responder” or other secondary endpoint data. Even if we believe
that the data from our trials will support marketing approval in the United States or in Europe, we cannot predict whether the
agencies will agree with our analysis and approve our applications.
We may need to focus our future efforts in new therapeutic areas
where we have little or no experience.
Although our primary strategic interest is in the areas of depression and
pain management, a number of our products have potential efficacy in other therapeutic areas such as addiction. If our drug development
efforts in depression or pain management fail, or if the competitive landscape or investment climate for antidepressant or analgesic
dug development is less attractive, we may need to change the company’s strategic focus to include development of our product
candidates or of newly acquired product candidates for therapeutic areas other than depression and pain. We have very limited
drug development experience in other therapeutic areas and we may be unsuccessful in making this change from a depression and
pain management company to a company with a focus in areas other than depression and pain or a company with a focus in multiple
therapeutic areas including pain.
Our product candidates contain controlled substances, the supply
of which may be limited by U.S. government policy and the use of which may generate public controversy.
The active ingredients in our current product candidates, including levorphanol,
buprenorphine and d-Methadone are listed by the DEA, as “Controlled Substances” or schedule substances, under the
Controlled Substances Act of 1970. The DEA regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule
I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. These product
candidates are subject to DEA regulations relating to manufacturing, storage, distribution and physician prescription procedures.
For example, all regular Schedule II drug prescriptions must be signed by a physician and may not be refilled.
Some of our drug products (e.g., buprenorphine, REL-1028) have a less restrictive
controlled substance schedule (i.e., within the Schedule III to V range) than Schedule II drugs. According to the DEA, Schedule
V drugs have lower abuse potential than Schedule II, III and IV drugs, Schedule IV drugs have lower abuse potential than Schedule
II and III drugs and Schedule III drugs have lower abuse potential than Schedule II. However, despite the foregoing reduced risk
of abuse from Schedule III, IV and V drugs, when compared to Schedule II drugs, there is no assurance that such reduced risk can
be demonstrated in well controlled non-clinical and/or clinical studies in models of physical dependence, psychic dependence,
addiction or precipitated withdrawal, or in studies of addiction or abuse liability in opioid addicts, opioid ex-addicts or recreational
drug users. In the event that a reduced risk of abuse from Schedule III, IV and V drugs, when compared to Schedule II drugs is
demonstrated in well controlled non-clinical and/or clinical studies, there is no assurance that the FDA will agree to incorporation
of such favorable language in the products prescribing information.
Our LevoCap ER is a Schedule II drug in an abuse resistant, abuse deterrent
or tamper resistant dosage form. Although the dosage form is referred to as abuse resistant, abuse deterrent or tamper resistant,
a determined or persistent abuser can defeat, wholly or partially, the tamper resistance within the dosage form. In addition,
opioid addicts and recreational opioid users can over time find new methods to defeat the tamper resistance mechanism within the
dosage form.
Although our LevoCap ER is a tamper resistant dosage form, we may elect
to not seek specific language in the prescribing information to describe this feature in order to reduce the amount of data required
for our NDA, the time required to file the NDA and/or the probability of a protracted review process. The absence of such language
in the prescribing information may reduce the commercial value of the product. Even if we do seek specific language in the prescribing
information to describe the tamper resistance feature, there is no assurance that FDA will agree to any such language.
Products containing controlled substances may generate public controversy.
Opponents of these products may seek restrictions on marketing and withdrawal of any regulatory approvals. In addition, these
opponents may seek to generate negative publicity in an effort to persuade the medical community to reject these products. Political
pressures and adverse publicity could lead to delays in, and increased expenses for, and limit or restrict the introduction and
marketing of our product candidates.
Failure to comply with the Drug Enforcement Administration regulations,
or the cost of compliance with these regulations, may adversely affect our business.
A number of our products are opioids and subject to extensive regulation
by the DEA, due to their status as controlled substances or scheduled drugs. Although d-Methadone is substantially devoid of opioid
activity, the DEA may elect to designate it as a controlled substance falling under a Schedule, up to the Schedule II [C-II].
Any level of DEA scheduling for d-Methadone, particularly Schedule II, III or IV, would substantially reduce commercial interest
in d-Methadone. Additionally, d-Methadone is produced by separation from racemic methadone, a scheduled drug subject to extensive
regulation by the DEA.
The manufacture, shipment, storage, sale and use of controlled substances
are subject to a high degree of regulation, including security, record-keeping and reporting obligations enforced by the DEA.
For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not
be refilled. This high degree of regulation can result in significant costs in order to comply with the required regulations,
which may have an adverse effect on the development and commercialization of our product candidates.
The DEA limits the availability and production of all scheduled substances,
including our product candidates, through a quota system. The DEA requires substantial evidence and documentation of expected
legitimate medical and scientific needs before assigning quotas to manufacturers. In future years, we may need greater amounts
of controlled substances to sustain our Phase III development program, and we will need significantly greater amounts to implement
our commercialization plans if the FDA approves our proposed formulations. Any delay or refusal by the DEA in establishing the
procurement quota or a reduction in our quota for scheduled controlled substances or a failure to increase it over time as we
anticipate could delay or stop the clinical development or commercial sale of some of our products or product candidates. This
could have a material adverse effect on our business, results of operations, financial condition and prospects.
Some of our products for clinical trials are manufactured outside
the United States including Schedule II controlled substances.
Drug Enforcement Administration regulations require Scheduled II controlled
substances to be manufactured in the United States if the products are to be marketed in the United States. There is no guarantee
that we will secure a commercial supply agreement with a manufacturer based in the United States. Switching or adding commercial
manufacturing capability can involve substantial cost and require extensive management time and focus, as well as additional regulatory
filings. In addition, there is a natural transition period when a new manufacturing facility commences work. As a result, delays
may occur, which can materially impact our ability to meet our desired commercial timelines, thereby increasing our costs and
reducing our ability to generate revenue.
The facilities of any of our future manufacturers of controlled substances
must be approved by the FDA after we submit our NDA and before approval. We are dependent on the continued adherence of third
party manufacturers to GMP manufacturing and acceptable changes to their process. If our manufacturers cannot successfully produce
material that conforms to our specifications and the FDA’s strict regulatory requirements, they will not be able to secure
FDA approval for their manufacturing facilities. If the FDA does not approve these facilities for the commercial manufacture,
we will need to find alternative suppliers, which would result in significant delays in obtaining FDA approvals. These challenges
may have a material adverse impact on our business, results of operations, financial condition and prospects.
We manufacture some products outside the United States for development
and to conduct human clinical studies either in the US or outside the US. These products are for development purposes only, and
not for commercial manufacturing.
If the supplier of active pharmaceutical ingredient (API) or pharmaceutical
excipient fails to provide us sufficient quantities, we may not be able to obtain an alternative supply on a timely or acceptable
basis.
We currently rely on a single source for our supply of levorphanol. There
are presently no alternative sources of pharmaceutical grade levorphanol. We may also not be able to find alternative suppliers
in a timely manner that would provide levorphanol at acceptable quantities and prices. Any interruption in the supply of levorphanol
would disrupt our ability to manufacture LevoCap ER and could have a material adverse effect on our business. Currently this single
source supplies the API for research and development purposes only. There is no material agreement for commercial supply at this
time.
Our pharmaceutical excipients and other API’s are multisource, although
not all sources have an active Drug Master File (DMF) with the FDA. (A DMF is a submission to the FDA used to provide confidential
detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of
drugs to support a drug development and approval). In addition, some of the countries for our multisource APIs are not the same
as our drug manufacturing locations. Thus, any disruption in supply from our preferred vendor could result in significant delays
with our pharmaceutical development, clinical trials, NDA filing, NDA approval or commercial sale of the finished product due
to contract delays, the need to manufacture a new batch of API, out of specification API, the need for import and export permits,
and the failure of the newly sourced API to perform to the standards of the previously sourced API.
Our pain product candidates are in the early
stages of development and we have not demonstrated that any of our products can actually treat pain.
Adverse or inconclusive results from pre-clinical testing or clinical trials
of product candidates may substantially delay, or halt entirely, any further development of one or more of our products. The projected
timetables for continued development of the technologies and related product candidates by us may otherwise be subject to delay
or suspension.
Modifications to our products may require new NDA approvals.
Once a particular company product receives FDA approval or clearance, expanded
uses or uses in new indications of our products may require additional human clinical trials and new regulatory approvals or clearances,
including additional IND and NDA submissions and premarket approvals before we can begin clinical development, and/or prior to
marketing and sales. If the FDA requires new clearances or approvals for a particular use or indication, we may be required to
conduct additional clinical studies, which would require additional expenditures and harm our operating results. If the products
are already being used for these new indications, we may also be subject to significant enforcement actions.
Conducting clinical trials and obtaining clearances and approvals can be
a time consuming process, and delays in obtaining required future clearances or approvals could adversely affect our ability to
introduce new or enhanced products in a timely manner, which in turn would harm our future growth.
There is no guarantee that the FDA will grant NDA approval of our
future products and failure to obtain necessary clearances or approvals for our future products would adversely affect our ability
to grow our business.
We are currently preparing to conduct several Phase I/II clinical trials
for our drug candidates and in the future expect to submit NDAs to the FDA for approval of these products. The FDA may not approve
or clear these products for the indications that are necessary or desirable for successful commercialization. Indeed, the FDA
may refuse our requests for NDA market approval of new products, new intended uses or indications to existing or future products.
Failure to receive approval for our new products would have an adverse effect on our ability to expand our business.
We have no manufacturing capabilities and depend on other parties
for our manufacturing operations. If these manufacturers fail to meet our requirements and strict regulatory requirements, our
product development and commercialization efforts may be materially harmed.
We currently depend on contract manufacturers. We plan to enter into long-term
commercial supply agreements for our product candidates. If any manufacturer is unable to produce required quantities on a timely
basis or at all, our operations would be delayed and our business harmed. Our reliance on contract manufacturers exposes us to
additional risks, including:
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failure of our future manufacturers to comply with strictly-enforced regulatory
requirements;
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failure to manufacture to our specifications, or to deliver sufficient quantities
in a timely manner;
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the possibility that we may terminate a contract manufacturer and need to engage
a replacement;
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the possibility that our future manufacturers may not be able to manufacture
our product candidates and products without infringing the intellectual property rights of others;
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the possibility that our future manufacturers may not have adequate intellectual
property rights to provide for exclusivity and prevent competition; and
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insufficiency of intellectual property rights to any improvements in the manufacturing
processes or new manufacturing processes for our products.
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Any of these factors could result in significant delay or suspension of
our clinical trials, regulatory submissions, receipt of required approvals or commercialization of our products and harm our business.
Delays in the commencement or completion of pharmaceutical development,
manufacturing or clinical efficacy and safety testing could result in increased costs to us and delay our ability to generate
revenues.
We do not know whether our pharmaceutical development, manufacturing or
clinical efficacy and safety testing will begin on time or be completed on schedule, if at all. For example, we may encounter
delays during the manufacture of pilot scale batches including delays with our contract development or manufacturing organization,
sourcing satisfactory quantities of active pharmaceutical ingredient, narcotic import and export permits, sourcing of excipients,
contract disputes with our third party vendors and manufacturers, or failure of the product to meet specification. Similar delays
may occur a during our GMP manufacture of the product.
The commencement and completion of clinical trials can be disrupted for
a variety of reasons, including difficulties in:
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recruiting and enrolling patients to participate in a clinical trial;
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obtaining regulatory approval to commence a clinical trial;
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reaching agreement on acceptable terms with prospective clinical research organizations
and trial sites;
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manufacturing sufficient quantities of a product candidate;
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investigator fraud, including data fabrication by clinical trial personnel;
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diversion of controlled substances by clinical trial personnel; and
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A clinical trial may also be suspended or terminated by us, the FDA or
other regulatory authorities due to a number of factors, including:
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failure to conduct the clinical trial in accordance with regulatory requirements
or in accordance with our clinical protocols;
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inspection of the clinical trial operations or trial site by the FDA or other
regulatory authorities resulting in the imposition of a clinical hold;
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unforeseen safety issues; or
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inadequate patient enrollment or lack of adequate funding to continue the clinical
trial.
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In addition, changes in regulatory requirements and guidance may occur
and we may need to amend clinical trial protocols to reflect these changes, which could impact the cost, timing or successful
completion of a clinical trial. If we experience delays in the commencement or completion of our clinical trials, the commercial
prospects for our product candidates will be harmed, and our ability to generate product revenues will be delayed. Many of the
factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also lead to the denial of regulatory
approval of a product candidate.
We intend to rely on third parties to conduct our clinical trials.
If these third parties do not perform as contractually required or otherwise expected, we may not be able to obtain regulatory
approval for our product candidates.
At this time we do not have any ongoing clinical trials. However, we do
not currently intend to conduct clinical trials on our own, and instead will rely on third parties, such as contract research
organizations, medical institutions, clinical investigators and contract laboratories, to assist us with our clinical trials.
We are also required to comply with regulations and standards, commonly referred to as good clinical practices, for conducting,
recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and
that the trial participants are adequately protected. If these third parties do not successfully carry out their duties to us
or regulatory obligations or meet expected deadlines, if the third parties need to be replaced, or if the quality or accuracy
of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for
other reasons, our nonclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and
we may not be able to obtain regulatory approval for our product candidates.
Clinical trials necessary to support NDA approval of our future products
will be time consuming and expensive. Delays or failures in our clinical trials will prevent us from commercializing our products
and will adversely affect our business, operating results and prospects and could cause us to cease operations.
Initiating and completing clinical trials necessary to support NDA approval
of a new formulation of an existing product or a new product, will be time consuming and expensive and the outcome uncertain.
Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product we advance into
clinical trials may not have favorable results in later clinical trials.
Some of the trials we undertake are not designed to support final NDA approval
of the product and additional trials will have to be conducted in the future before we file an NDA. In addition, there can be
no assurance that the data generated during the trials will meet our chosen safety and effectiveness endpoints or otherwise produce
results that will eventually support the filing or approval of an NDA.
Conducting successful clinical studies may require the enrollment
of large numbers of patients, and suitable patients may be difficult to identify and recruit.
Patient enrollment in clinical trials and completion of patient participation
and follow-up depends on many factors, including the size of the patient population; the nature of the trial protocol; the attractiveness
of, or the discomforts and risks associated with, the treatments received by enrolled subjects; the availability of appropriate
clinical trial investigators; support staff; and proximity of patients to clinical sites and ability to comply with the eligibility
and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged
from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up
to assess the safety and effectiveness of our products or if they determine that the treatments received under the trial protocols
are not attractive or involve unacceptable risks or discomforts. Patients may also not participate in our clinical trials if they
choose to participate in contemporaneous clinical trials of competitive products.
Development of sufficient and appropriate clinical protocols to demonstrate
safety and efficacy are required and we may not adequately develop such protocols to support clearance and approval.
The FDA may require us to submit data on a greater number of patients than
we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable
to our clinical trials. They may also require additional data on certain categories of patients, should it emerge during the conduct
of our clinical trials that certain categories of patients are likely to be affected in different and/or additional manner than
most of the patients. In addition to FDA requirements, our clinical trial requires the approval of the institutional review board,
or IRB, at each site selected for participation in our clinical trial.
Additional delays to the completion of clinical studies may result
from modifications being made to the protocol during the clinical trial, if such modifications are warranted and/or required by
the occurrences in the given trial
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Each of such modifications has to be submitted to the FDA. This could result
in the delay or halt of a clinical trial while the modification is evaluated. In addition, depending on the magnitude and nature
of the changes made, FDA could take the position that the data generated by the clinical trial cannot be pooled because the same
protocol was not used throughout the trial. This might require the enrollment of additional subjects, which could result in the
extension of the clinical trial and the FDA delaying clearance or approval of a product.
There can be no assurance that the data generated using modified
protocols will be acceptable to FDA.
There can be no assurance that the data generated using modified protocols
will be acceptable to FDA or that if future modifications during the trial are necessary, any such modifications will be acceptable
to FDA. If FDA believes that its prior approval is required for a particular modification, it can delay or halt a clinical trial
while it evaluates additional information regarding the change.
Serious injury or death resulting from a failure of one of our drug candidates
during current or future clinical trials could also result in the FDA delaying our clinical trials or denying or delaying clearance
or approval of a product.
Even though an adverse event may not be the result of the failure of our
drug candidate, FDA or an IRB could delay or halt a clinical trial for an indefinite period of time while an adverse event is
reviewed, and likely would do so in the event of multiple such events.
Any delay or termination of our current or future clinical trials as a
result of the risks summarized above, including delays in obtaining or maintaining required approvals from IRBs, delays in patient
enrollment, the failure of patients to continue to participate in a clinical trial, and delays or termination of clinical trials
as a result of protocol modifications or adverse events during the trials, may cause an increase in costs and delays in the filing
of any product submissions with the FDA, delay the approval and commercialization of our products or result in the failure of
the clinical trial, which could adversely affect our business, operating results and prospects. Lengthy delays in the completion
of clinical trials of our products would adversely affect our business and prospects and could cause us to cease operations.
On November 29, 2006 the FDA imposed a bold warning on the label of racemic
methadone, a parent compound to our d-Methadone related to cardiac death. Although the decision was based on case reports and
not on a controlled clinical trial, as part of the development of d-Methadone we will likely have to conduct a specific study
to evaluate the effects of d-Methadone on QTc interval prolongation. QT interval is a measure of the time between the start of
the Q wave and the end of the T wave in the heart’s electrical cycle. Drugs that prolong the corrected QT interval (QTc)
are associated with an increased risk of serious disturbances in heart rhythm, leading to sudden death. QT interval studies can
be extremely costly and there is no assurance that we will have funds to undertake such a study. In addition, even if we do a
QT interval prolongation study in accordance with regulatory guidelines, there is no assurance that the results of the study will
demonstrate an absence of QT interval prolongation with d-Methadone. An adverse safety outcome from such study could result in
a similar bolded warning on the label of d-Methadone or in a decision not to approve d-Methadone, either one of which could have
serious consequences for our continued operation.
If the third parties on which we rely to conduct our clinical trials
and to assist us with pre-clinical development do not perform as contractually required or expected, we may not be able to obtain
regulatory approval for or commercialize our products.
We do not have the ability to independently conduct all the pre-clinical
and clinical trials for our products and we must rely on third parties, such as contract research organizations, medical institutions,
clinical investigators and contract laboratories to conduct such trials. If these third parties do not successfully carry out
their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or
if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory
requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended
or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our products on a timely
basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical
trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.
The future results of our current or future clinical trials may not
support our product candidate claims or may result in the discovery of unexpected adverse side effects.
Even if our clinical trials are completed as planned, we cannot be certain
that their results will support our drug candidate claims or that the FDA or foreign authorities will agree with our conclusions
regarding them. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful,
and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies. The clinical
trial process may fail to demonstrate that our drug candidates are safe and effective for the proposed indicated uses. If FDA
concludes that the clinical trials for any of our products for which we might seek clearance, have failed to demonstrate safety
and effectiveness, we would not receive FDA clearance to market that product in the United States for the indications sought.
In addition, such an outcome could cause us to abandon the product candidate and might delay development of others. Any delay
or termination of our clinical trials will delay the filing of any product submissions with the FDA and, ultimately, our ability
to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will
experience adverse side effects that are not currently part of the product candidate’s profile. In addition, our clinical
trials performed until now involve a relatively small patient population. Because of the small sample size, their results may
not be indicative of future results.
Future products may never achieve market acceptance.
Future products that we may develop may never gain market acceptance among
physicians, patients and the medical community. The degree of market acceptance of any of our products will depend on a number
of factors, including the actual and perceived effectiveness and reliability of our products; the results of any long−term
clinical trials relating to use of our products; the availability, relative cost and perceived advantages and disadvantages of
alternative technologies; the degree to which treatments using our products are approved for reimbursement by public and private
insurers; the strength of our marketing and distribution infrastructure; and the level of education and awareness among physicians
and hospitals concerning our products. Failure of any of our products to significantly penetrate current or new markets would
negatively impact our business, financial condition and results of operations.
To be commercially successful, physicians must be persuaded that
using our products for treatment of pain are effective alternatives to existing therapies and treatments.
We believe that pain doctors and other physicians will not widely adopt
our products unless they determine, based on experience, clinical data, and published peer reviewed journal articles, that the
use of our products provides an effective alternative to other means of treating pain. Patient studies or clinical experience
may indicate that treatment with our products does not provide patients with sufficient benefits in pain intensity and/or quality
of life. We believe that recommendations and support for the use of our products from influential physicians will be essential
for widespread market acceptance. Our products are still in the development stage and it is premature to attempt to gain support
from physicians at this time. We can provide no assurance that such support will ever be obtained. If our products do not receive
such support from these physicians and from long-term data, physicians may not use or continue to use, and hospitals may not purchase
or continue to purchase, our products.
Even if our products are approved by regulatory authorities, if we
or our suppliers fail to comply with ongoing FDA regulation or if we experience unanticipated problems with our products, these
products could be subject to restrictions or withdrawal from the market.
Any product for which we obtain clearance or approval, and the manufacturing
processes, reporting requirements, post-approval clinical data and promotional activities for such product, will be subject to
continued regulatory review, oversight and periodic inspections by the FDA. In particular, we and our suppliers are required to
comply with FDA’s Quality System Regulations, or QSR, and International Standards Organization, or ISO, regulations for
the manufacture of our products and other regulations which cover the methods and documentation of the design, testing, production,
control, quality assurance, labeling, packaging, storage and shipping of any product for which we obtain clearance or approval.
Regulatory bodies, such as the FDA, enforce these regulations through periodic inspections. The failure by us or one of our suppliers
to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely
and adequately respond to any adverse inspectional observations or product safety issues could result in, among other things,
enforcement actions by the FDA.
If any of these actions were to occur it would harm our reputation and cause our product sales and profitability
to suffer and may prevent us from generating revenue. Furthermore, our key component suppliers may not currently be or may not
continue to be in compliance with all applicable regulatory requirements that could result in our failure to produce our products
on a timely basis and in the required quantities, if at all.
Even if regulatory clearance or approval of a product is granted, such
clearance or approval may be subject to limitations on the intended uses for which the product may be marketed and reduce the
potential to successfully commercialize the product and generate revenue from the product. If the FDA determines that the product
promotional materials, labeling, training or other marketing or educational activities constitute promotion of an unapproved use,
it could request that we or our commercialization partners cease or modify our training or promotional materials or subject us
to regulatory enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take
action if they consider such training or other promotional materials to constitute promotion of an unapproved use, which could
result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.
In addition, we may be required to conduct costly post-market testing and
surveillance to monitor the safety or effectiveness of our products, and we must comply with adverse event and pharmacovigilance
reporting requirements, including the reporting of adverse events which occur in connection with, and whether or not directly
related to, our products. Later discovery of previously unknown problems with our products, including unanticipated adverse events
or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements,
may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the
market, voluntary or mandatory recalls, a requirement to recall, replace or refund the cost of any product we manufacture or distribute,
fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which
would adversely affect our business, operating results and prospects.
Some of our other product candidates will require Risk Evaluation
and Mitigation Strategies (REMS).
The FDA Amendments Act of 2007 implemented safety-related changes to product
labeling and requires the adoption of REMS. Some of our product candidates, the controlled substance-based and maybe others, will
require REMS. The REMS may include requirements for special labeling or medication guides for patients, special communication
plans to health care professionals and restrictions on distribution and use. We cannot predict the specific REMS to be required
as part of the FDA’s approval of any of our products. Depending on the extent of the REMS requirements, our costs to commercialize
our products may increase significantly. Furthermore, controlled substances risks that are not adequately addressed through proposed
REMS for our product candidates may also prevent or delay their approval for commercialization.
Our revenue stream will depend upon third party reimbursement.
The commercial success of our products in both domestic and international
markets will be substantially dependent on whether third-party coverage and reimbursement is available for patients that use our
products. However, the availability of insurance coverage and reimbursement for newly approved drugs to treat pain is uncertain,
and therefore, third-party coverage may be particularly difficult to obtain even if our products are approved by the FDA as safe
and efficacious. Many patients using existing approved therapies are generally reimbursed all or part of the product cost by Medicare
or other third-party payors. Medicare, Medicaid, health maintenance organizations and other third-party payors are increasingly
attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new drugs, and, as a result,
they may not cover or provide adequate payment for these products. Submission of applications for reimbursement approval generally
does not occur prior to the filing of an NDA for that product and may not be granted for as long as many months after NDA approval.
In order to obtain reimbursement arrangements for these products, we or our commercialization partners may have to agree to a
net sales price lower than the net sales price we might charge in other sales channels. The continuing efforts of government and
third-party payors to contain or reduce the costs of healthcare may limit our revenue. Initial dependence on the commercial success
of our products may make our revenues particularly susceptible to any cost containment or reduction efforts.
We are dependent on third parties for manufacturing and marketing
of our proposed proprietary products. If we are not able to secure favorable arrangements with such third parties, our business
and financial condition could be harmed.
We are not planning to manufacture any of our proposed proprietary products
for commercial sale nor do we have the resources necessary to do so. In addition, we currently do not have the capability to market
our drug products ourselves. We intend to contract with specialized manufacturing companies to manufacture our proposed proprietary
products and partner with larger pharmaceutical companies for commercialization of our products, retaining the marketing and promotion
rights for specialty medical areas. In connection with our efforts to commercialize our proposed proprietary products, we will
seek to secure favorable arrangements with third parties to distribute, promote, market and sell our proposed proprietary products.
If we are not able to secure favorable commercial terms or arrangements with third parties for distribution, marketing, promotion
and sales of our proposed proprietary products, we may have to retain promotional and marketing rights and seek to develop the
commercial resources necessary to promote or co-promote or co-market certain or all of our proprietary drug candidates to the
appropriate channels of distribution in order to reach the specific medical market that we are targeting. We may not be able to
enter into any partnering arrangements on this or any other basis. If we are not able to secure favorable partnering arrangements,
or are unable to develop the appropriate resources necessary for the commercialization of our proposed proprietary products, our
business and financial condition could be harmed. In addition, we will have to hire additional employees or consultants, since
our current employees have limited experience in these areas. Sufficient employees with relevant skills may not be available to
us. Any increase in the number of our employees would increase our expense level, and could have an adverse effect on our financial
position.
In addition, we, or our potential commercial partners, may not successfully
introduce our proposed proprietary products or our proposed proprietary products may not achieve acceptance by patients, health
care providers and insurance companies. Further, it is possible that we may not be able to secure arrangements to manufacture,
market, distribute, promote and sell our proposed proprietary products on favorable commercial terms that would permit us to make
a profit. To the extent that corporate partners conduct clinical trials, we may not be able to control the design and conduct
of these clinical trials.
We must enter into an agreement with, and depend upon, one or more
partners to assist us in commercializing our product candidates.
Because of our limited financial and other resources, we must actively
seek and enter into a collaboration with one or more partners to assist us in our product launch, if marketing approval is granted.
Any collaboration agreement we enter into may contain unfavorable terms, for example, with respect to product candidates covered,
control over decisions and responsibilities, termination rights, payment, and other significant terms. Our ability to receive
any significant revenue from our product candidates covered by the collaboration agreement will be dependent on the efforts of
our collaboration partner and may result in lower levels of income to us than if we marketed our product candidates entirely on
our own. The collaboration partner may not fulfill its obligations or commercialize our product candidates as quickly as we would
like. We could also become involved in disputes with our partner, which could lead to delays in or termination of our commercialization
programs and time-consuming and expensive litigation or arbitration. If a collaboration partner terminates or breaches its agreement
with us, or otherwise fails to complete its obligations in a timely manner, the chances of successfully developing or commercializing
our product candidates would be materially and adversely affected.
Additionally, depending upon the collaboration partner that we choose,
other companies that might otherwise be interested in developing products with us could be less inclined to do so because of our
relationship with the collaboration partner. If our ability to work with present or future strategic partners or collaborators
is adversely affected as a result of our collaboration agreement, our business prospects may be limited and our financial condition
may be adversely affected.
We may have conflicts with our partners that could delay or prevent
the development or commercialization of our product candidates.
We may have conflicts with our partners, such as conflicts concerning the
interpretation of nonclinical or clinical data, the achievement of milestones, the interpretation of contractual obligations,
payments for services, development obligations or the ownership of intellectual property developed during our collaboration. If
any conflicts arise with any of our partners, such partner may act in a manner that is adverse to our best interests. Any such
disagreement could result in one or more of the following, each of which could delay or prevent the development or commercialization
of our product candidates, and in turn prevent us from generating revenues: unwillingness on the part of a partner to pay us milestone
payments or royalties we believe are due to us under a collaboration; uncertainty regarding ownership of intellectual property
rights arising from our collaborative activities, which could prevent us from entering into additional collaborations; unwillingness
by the partner to cooperate in the development or manufacture of the product, including providing us with product data or materials;
unwillingness on the part of a partner to keep us informed regarding the progress of its development and commercialization activities
or to permit public disclosure of the results of those activities; initiating of litigation or alternative dispute resolution
options by either party to resolve the dispute; or attempts by either party to terminate the agreement.
We have no experience selling, marketing or distributing products
and no internal capability to do so.
We currently have no sales, marketing or distribution capabilities. In
order to commercialize our products, if any are approved, we intend to develop internal sales, marketing and distribution capabilities
to target particular markets for our products, as well as make arrangements with third parties to perform these services for us
with respect to other markets for our products. We may not be able to establish these capabilities internally or hire marketing
and sales personnel with appropriate expertise to market and sell our products, if approved. In addition, even if we are able
to identify one or more acceptable collaborators to perform these services for us, we may not be able to enter into any collaborative
arrangements on favorable terms, or at all. If we enter into any collaborative arrangements for the marketing or sale of our products,
our product revenues are likely to be lower than if we marketed and sold our products ourselves. In addition, any revenues we
receive would depend upon the efforts of our collaborators, which may not be adequate due to lack of attention or resource commitments,
management turnover, change of strategic focus, business combinations, and their inability to comply with regulatory requirements
or other factors outside of our control. Depending upon the terms of our collaboration, the remedies we have against an under-performing
collaborator may be limited. If we were to terminate a relationship, it may be difficult or impossible to find a replacement collaborator
on acceptable terms, if at all.
Upon commercialization of our products, we may be dependent on third
parties to market, distribute and sell our products.
Our ability to receive revenues may be dependent upon the sales and marketing
efforts of any future co-marketing partners and third-party distributors. At this time, we have not entered into an agreement
with any commercialization partner and only plan to do so after the successful completion of Phase II clinical trials and prior
to commercialization. If we fail to reach an agreement with any commercialization partner or upon reaching such an agreement that
partner fails to sell a large volume of our products, it may have a negative impact on our business, financial condition and results
of operations.
Our products will face significant competition in the markets for
such products, and if they are unable to compete successfully, our business will suffer.
Our products candidates face, and will continue to face, intense competition
from large pharmaceutical companies, specialty pharmaceutical and biotechnology companies as well as academic and research institutions.
We compete in an industry that is characterized by: (i) rapid technological change, (ii) evolving industry standards, (iii) emerging
competition and (iv) new product introductions. Our competitors have existing products and technologies that will compete with
our products and technologies and may develop and commercialize additional products and technologies that will compete with our
products and technologies. Because several competing companies and institutions have greater financial resources than us, they
may be able to: (i) provide broader services and product lines, (ii) make greater investments in research and development, (R&D
)
, and (iii) carry on larger R&D initiatives. Our competitors also have greater development capabilities than we do and
have substantially greater experience in undertaking nonclinical and clinical testing of products, obtaining regulatory approvals,
and manufacturing and marketing pharmaceutical products. They also have greater name recognition and better access to customers
than us. Our chief competitors include companies such as Purdue Pharma, Pfizer, Eli Lilly, Endo, Astra Zeneca, among others.
We are faced with intense competition and rapid technological change,
which may make it more difficult for us to achieve significant market penetration. If we cannot compete successfully for market
share against other drug companies, we may not achieve sufficient product revenues and our business will suffer.
The market for our product candidates is characterized by intense competition
and rapid technological advances. If our product candidates receive FDA approval, they will compete with a number of existing
and future drugs and therapies developed, manufactured and marketed by others. If our competitors’ existing products or
new products are more effective than or considered superior to our future products, the commercial opportunity for our product
candidates will be reduced or eliminated. Existing or future competing products may provide greater therapeutic convenience or
clinical or other benefits for a specific indication than our products, or may offer comparable performance at a lower cost. We
face competition from fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical
companies, academic institutions, government agencies and other public and private research organizations. If we are successful
in penetrating the market for pain treatment with our product candidates, other companies may be attracted to the market. Many
of our competitors have analgesics already approved or in development. In addition, many of these competitors, either alone or
together with their collaborative partners, are larger than we are and have substantially greater financial, technical, research,
marketing, sales, distribution and other resources than we do. Our competitors may develop or market products that are more effective
or commercially attractive than any that we are developing or marketing. Our competitors may obtain regulatory approvals, and
introduce and commercialize products before we do. These developments could have a significant negative effect on our financial
condition. Even if we are able to compete successfully, we may not be able to do so in a profitable manner.
Adverse events involving our products may lead the FDA to delay or
deny clearance for our products or result in product recalls that could harm our reputation, business and financial results.
Once a product receives FDA clearance or approval, the agency has the authority
to require the recall of commercialized products in the event of adverse side effects, material deficiencies or defects in design
or manufacture. The authority to require a recall must be based on an FDA finding that there is a reasonable probability that
the device would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material
deficiency in a product is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a
result of adverse side effects, impurities or other product contamination, manufacturing errors, design or labeling defects or
other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse
effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported
to FDA within 10 working days after the recall is initiated. Companies are required to maintain certain records of recalls, even
if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine
do not require notification of the FDA. If the FDA disagrees with our determinations, they could require us to report those actions
as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition,
the FDA could take enforcement action for failing to report the recalls when they were conducted.
We may be exposed to liability claims associated with the use of
hazardous materials and chemicals.
Our research and development activities involve the controlled use of hazardous
materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials
comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination
from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could
materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local
laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and
waste products may require us to incur substantial compliance costs that could materially adversely affect our business and financial
condition.
We may incur substantial liabilities and may be required to limit
commercialization of our products in response to product liability lawsuits.
The testing and marketing of medical products entail an inherent risk of
product liability. We may be held liable if serious adverse reactions from the use of our product candidates occur. If we cannot
successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization
of our product candidates. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against
potential product liability claims could prevent or inhibit the commercialization of pharmaceutical products we develop, alone
or with corporate collaborators. We currently do not carry product liability insurance. We, or any corporate collaborators, may
not be able to obtain insurance at a reasonable cost, if at all. Even if our agreements with any future corporate collaborators
entitle us to indemnification against losses, such indemnification may not be available or adequate if any claim arises.
Our business depends upon securing and protecting critical intellectual
property.
Our commercial success will depend in part on our obtaining and maintaining
patent, trade secret, copyright and trademark protection of our technologies in the United States and other jurisdictions as well
as successfully enforcing this intellectual property and defending this intellectual property against third-party challenges.
We will only be able to protect our technologies from unauthorized use by third parties to the extent that valid and enforceable
intellectual property protection, such as patents or trade secrets, cover them. In particular, we place considerable emphasis
on obtaining patent and trade secret protection for significant new technologies, products and processes. Furthermore, the degree
of future protection of our proprietary rights is uncertain because legal means afford only limited protection and may not adequately
protect our rights or permit us to gain or keep our competitive advantage. Moreover, the degree of future protection of our proprietary
rights is uncertain for products that are currently in the early stages of development because we cannot predict which of these
products will ultimately reach the commercial market or whether the commercial versions of these products will incorporate proprietary
technologies.
Our patent position is highly uncertain and involves complex legal
and factual questions.
Accordingly, we cannot predict the breadth of claims that may be allowed
or enforced in our patents or in third-party patents. For example, we or our licensors might not have been the first to make the
inventions covered by each of our pending patent applications and issued patents; we or our licensors might not have been the
first to file patent applications for these inventions; others may independently develop similar or alternative technologies or
duplicate any of our technologies; it is possible that none of our pending patent applications or the pending patent applications
of our licensors will result in issued patents; our issued patents and issued patents of our licensors may not provide a basis
for commercially viable technologies, or may not provide us with any competitive advantages, or may be challenged and invalidated
by third parties; and, we may not develop additional proprietary technologies that are patentable.
As a result, our owned and licensed patents may not be valid and we may
not be able to obtain and enforce patents and to maintain trade secret protection for the full commercial extent of our technology.
The extent to which we are unable to do so could materially harm our business.
We or our licensors have applied for and will continue to apply for patents
for certain products. Such applications may not result in the issuance of any patents, and any patents now held or that may be
issued may not provide us with adequate protection from competition. Furthermore, it is possible that patents issued or licensed
to us may be challenged successfully. In that event, if we have a preferred competitive position because of such patents, any
preferred position held by us would be lost. If we are unable to secure or to continue to maintain a preferred position, we could
become subject to competition from the sale of generic products. Failure to receive, inability to protect, or expiration of our
patents would adversely affect our business and operations.
Patents issued or licensed to us may be infringed by the products or processes
of others. The cost of enforcing our patent rights against infringers, if such enforcement is required, could be significant,
and the Company does not currently have the financial resources to fund such litigation. Further, such litigation can go on for
years and the time demands could interfere with our normal operations. There has been substantial litigation and other proceedings
regarding patent and other intellectual property rights in the pharmaceutical industry. We may become a party to patent litigation
and other proceedings. The cost to us of any patent litigation, even if resolved in our favor, could be substantial. Some of our
competitors may be able to sustain the costs of such litigation more effectively than we can because of their substantially greater
financial resources. Litigation may also absorb significant management time.
Unpatented trade secrets, improvements, confidential know-how and continuing
technological innovation are important to our scientific and commercial success. Although we attempt to and will continue to attempt
to protect our proprietary information through reliance on trade secret laws and the use of confidentiality agreements with our
corporate partners, collaborators, employees and consultants and other appropriate means, these measures may not effectively prevent
disclosure of our proprietary information, and, in any event, others may develop independently, or obtain access to, the same
or similar information.
Certain of our patent rights are licensed to us by third parties. If we
fail to comply with the terms of these license agreements, our rights to those patents may be terminated, and we will be unable
to conduct our business.
The following is a summary of our patents and patent
applications:
Levorphanol:
These patent applications cover the levorphanol
product.
US Patent No. 9,125,833, filed 4/28/08, granted on 9/8/15. Multimodal Abuse
Resistant and Extended Release Opioid Formulations. Owned by Relmada. Estimated expiry in 2030. This patent covers the SECUREL
technology platform and Relmada’s lead product candidate, LevoCap ER (REL-1015, levorphanol extended-release, abuse deterrent
capsules) as well as providing additional coverage for multiple opioid molecules that are prone to abuse.
EU patent No. 2,448,406, filed 2/26/10, granted on 4/20/16. Extended Release
Oral Pharmaceutical Compositions of 3-Hydroxy-N-Methylmorphinan and Method of Use. Owned by Relmada. Estimated expiry in 2030.
Patent application 12/223.327 filed 1/29/07, Abuse Resistant and Extended
Release Formulations and Method of Use Thereof. Cover US. Owned by Relmada. Currently pending.
Patent application 13/320,989 filed 2/26/10 Extended Release Oral Pharmaceutical
Compositions of 3-Hydroxy-N-Methylmorphinan and Method of Use. Owned by Relmada. Currently pending.
International patent application PCT/US16/31796 filed 11 May 2016.
Preserves rights to file in US, Europe, and Asia for abrasion- and crush-resistant products. Owned by Relmada. Estimated expiry
in 2036.
d-Methadone:
These patent and patent application cover the
d-Methadone product.
US Patent No. 6,008,258 filed 1/21/98, d-Methadone, a Nonopioid Analgesic,
Cover US, Patent granted, estimated expiry in 2018.
U.S. Patent Application 13/803,375, filed on 3/14/13 as an international
(PCT) application. The U.S. application was allowed on 6/23/16. d-Methadone for the Treatment of Psychiatric Symptoms. This patent
covers the use of d-methadone for the treatment of depression. Owned by Relmada. Estimated expiry in 2033. Counterpart applications
in other countries are currently pending.
U.S. Patent Application 15/204,052, filed on 7/7/16 as a continuation of U.S. 13/803,375. d-Methadone for
the Treatment of Psychiatric Symptoms. Owned by Relmada. Currently pending.
Buprenorphine:
This patent application covers the buprenorphine
product.
Patent application 12/989,209 filed 3/9/09, Oral Pharmaceutical Compositions
of Buprenorphine and Method of Use. Cover US and EU. Owned by Relmada. Currently pending.
International patent application PCT/US16/31796 filed 11 May 2016. Preserves
rights to file in US, Europe, and Asia for abrasion- and crush-resistant products. Owned by Relmada. Estimated expiry in 2036.
Mepivacaine
: This patent application covers the mepivacaine
product.
Patent application PCT/US2011/032,381 filed 4/13/11, Dermal Pharmaceutical
Composition of 1-Methyl-2,6-Pipecoloxylidide and Method of Use. Cover US, EU, Canada, China, India, Japan, and South Korea. Owned
by Relmada. Currently pending.
If we are found to be infringing on patents
or trade secrets owned by others, we may be forced to cease or alter our product development efforts, obtain a license to continue
the development or sale of our products, and/or pay damages.
Our manufacturing processes and potential products may violate proprietary
rights of patents that have been or may be granted to competitors, universities or others, or the trade secrets of those persons
and entities. As the pharmaceutical industry expands and more patents are issued, the risk increases that our processes and potential
products may give rise to claims that they infringe the patents or trade secrets of others. These other persons could bring legal
actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and marketing of the affected product
or process. If any of these actions are successful, in addition to any potential liability for damages, we could be required to
obtain a license in order to continue to conduct clinical tests, manufacture or market the affected product or use the affected
process. Required licenses may not be available on acceptable terms, if at all, and the results of litigation are uncertain. If
we become involved in litigation or other proceedings, it could consume a substantial portion of our financial resources and the
efforts of our personnel.
Our ability to protect and enforce our patents does not guaranty
that we will secure the right to commercialize our patents.
A patent is a limited monopoly right conferred upon an inventor, and his
successors in title, in return for the making and disclosing of a new and non-obvious invention. This monopoly is of limited duration
but, while in force, allows the patent holder to prevent others from making and/or using his invention. While a patent gives the
holder this right to exclude others, it is not a license to commercialize the invention, where other permissions may be required
for permissible commercialization to occur. For example, a drug cannot be marketed without the appropriate authorization from
the FDA, regardless of the existence of a patent covering the product. Further, the invention, even if patented itself, cannot
be commercialized if it infringes the valid patent rights of another party.
We rely on confidentiality agreements to protect our trade secrets.
If these agreements are breached by our employees or other parties, our trade secrets may become known to our competitors.
We rely on trade secrets that we seek to protect through confidentiality
agreements with our employees and other parties. If these agreements are breached, our competitors may obtain and use our trade
secrets to gain a competitive advantage over us. We may not have any remedies against our competitors and any remedies that may
be available to us may not be adequate to protect our business or compensate us for the damaging disclosure. In addition, we may
have to expend resources to protect our interests from possible infringement by others.
If we are unable to obtain the statutory patent extension related to the
review time in the United States, we may need to rely on the 3-year Hatch-Waxman Act marketing exclusivity, the six month pediatric
exclusivity, any approved 7- year Orphan Drug exclusivities, potential future formulation patents and up to ten years of data
exclusivity in Europe.
We may not be able to obtain or maintain orphan drug exclusivity
for our products.
The FDA Office of Orphan Products (OOPD) has granted orphan drug designation
for mepivacaine to which we have secured rights. The orphan designations cover postherpetic neuralgia (PHN) and painful HIV neuropathy.
We have also received orphan designation covering d-Methadone for PHN. If a product that has orphan drug designation subsequently
receives FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, i.e.,
for seven years, the FDA may not approve any other applications to market the same drug for the same indication, except in very
limited circumstances. We may be unable to obtain orphan drug designations for any additional product candidates or orphan exclusivity
for any of our product candidates, or our potential competitors may obtain orphan drug exclusivity for d-Methadone or mepivacaine-based
products competitive with our product candidates before we do, in which case we may be excluded from that market for the exclusivity
period. Even if we obtain orphan drug exclusivity for any of our product candidates, we may not be able to maintain it if a competitive
product is shown to be clinically superior to our product. Although obtaining FDA approval to market a product with orphan exclusivity
can be advantageous, there can be no assurance that it would provide us with a significant commercial advantage.
We may not be able to obtain Hatch-Waxman Act marketing exclusivity
or equivalent regulatory data exclusivity protection in other jurisdictions for our products.
We intend to rely, in part, on Hatch-Waxman exclusivity for the commercialization
of our products in the United States. The Hatch-Waxman Act provides marketing exclusivity to the first applicant to gain approval
of an NDA under specific provisions of the Food, Drug and Cosmetic Act for a product using an active ingredient that the FDA has
not previously approved (five years) or for a new dosage form, route or indication (three years). This market exclusivity will
not prevent the FDA from approving a competitor’s NDA if the competitor’s NDA is based on studies it has performed
and not on our studies.
There can be no assurance that European authorities will grant data exclusivity
for our products, because it does not contain a new active molecule. Even if European data exclusivity is granted for our products,
that may not protect us from direct competition. Given the well-established use of our product candidates as pain relievers, a
competitor with a generic version of our products may be able to obtain approval of their product during our product’s period
of data exclusivity, by submitting a marketing authorization application (MAA) with a less than full package of nonclinical and
clinical data.
We may undertake international operations, which will subject us
to risks inherent with operations outside of the United States.
Although we do not have any foreign operations at this time, we intend
to seek to obtain market clearances in foreign markets that we deem to generate significant opportunities. However, even with
the cooperating of a commercialization partner, conducting drug development in foreign countries involves inherent risks, including,
but not limited to: difficulties in staffing, funding and managing foreign operations; unexpected changes in regulatory requirements;
export restrictions; tariffs and other trade barriers; difficulties in protecting, acquiring, enforcing and litigating intellectual
property rights; fluctuations in currency exchange rates; and potentially adverse tax consequences.
If we were to experience any of the difficulties listed above, or any other
difficulties, any international development activities and our overall financial condition may suffer and cause us to reduce or
discontinue our international development and registration efforts.
We may not be successful in hiring and retaining key employees.
Our future operations and successes depend in large part upon the continued
service of key members of our senior management team whom we are highly dependent upon to manage our business, specifically Dr.
Sergio Traversa, our chief executive officer (CEO), Dr. Richard Mangano, our chief scientific officer (CSO), and Michael Becker,
our chief financial officer (CFO). If any of them terminate employment with us, such a departure would have a material adverse
effect on our business.
Our future success also depends on our ability to identify, attract, hire
or engage, retain and motivate other well-qualified managerial, technical, clinical and regulatory personnel. We will need to
hire additional qualified personnel with expertise in nonclinical pharmacology and toxicology, pharmaceutical development, clinical
research, regulatory affairs, manufacturing, sales and marketing. We compete for qualified individuals with numerous biopharmaceutical
companies, universities and other research institutions. Competition for such individuals, particularly in the United States,
is intense, and we may not be able to hire sufficient personnel to support our efforts. There can be no assurance that these professionals
will be available in the market, or that we will be able to retain existing professionals or to meet or to continue to meet their
compensation requirements. Furthermore, the cost base in relation to such compensation, which may include equity compensation,
may increase significantly, which could have a material adverse effect on us. Failure to establish and maintain an effective management
team and work force could adversely affect our ability to operate, grow and manage our business.
Our employees may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other
misconduct. Misconduct by employees could include intentional failures to:
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comply with FDA regulations or similar regulations of comparable foreign regulatory
authorities; provide accurate information to the FDA or comparable foreign regulatory authorities;
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comply with federal and state healthcare fraud and abuse laws and regulations
and similar laws and regulations established and enforced by comparable foreign regulatory authorities;
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report financial information or data accurately; or
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disclose unauthorized activities to us.
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In particular, sales, marketing and business arrangements in the healthcare
industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have
adopted a Code of Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take
to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting
us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or
regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our
rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant
fines or other sanctions.
Our relationships with customers and payors will be subject to applicable
anti-kickback, fraud and abuse, transparency, and other healthcare laws and regulations, which could expose us to criminal sanctions,
civil penalties, contractual damages, reputational harm, administrative burdens, and diminished profits and future earnings.
Healthcare providers, physicians and payors play a primary role in the
recommendation and prescription of any product candidates for which we may obtain marketing approval. Our arrangements with payors
and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain
the business or financial arrangements and relationships through which we market, sell and distribute any product candidates for
which we may obtain marketing approval. Restrictions under applicable federal, state and foreign healthcare laws and regulations
may affect our ability to operate, including:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly
and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce
or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for
which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;
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the federal False Claims Act, which imposes criminal and civil penalties, including
through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be
presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid,
decrease or conceal an obligation to pay money to the federal government;
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state and foreign anti-kickback and false claims laws, which may apply to sales
or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental payors, including
private insurers;
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the federal Health Insurance Portability and Accountability Act of 1996, or
HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making
false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical
Health Act of 2009 and its implementing regulations, which also imposes obligations on certain covered entity healthcare providers,
health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the
use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to
safeguarding the privacy, security and transmission of individually identifiable health information;
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laws which require pharmaceutical companies to comply with the pharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government
or otherwise restricting payments that may be made to healthcare providers; and
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federal laws requiring drug manufacturers to report information related to
payments and other transfers of value made to physicians and other healthcare providers, as well as ownership or investment
interests held by physicians and their immediate family members, including under the federal Open Payments program, as well
as other state and foreign laws regulating marketing activities.
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Managing our growth as we expand operations may strain our resources.
We expect to need to grow rapidly in order to support additional, larger,
and potentially international, pivotal clinical trials of our drug candidates, which will place a significant strain on our financial,
managerial and operational resources. In order to achieve and manage growth effectively, we must continue to improve and expand
our operational and financial management capabilities. Moreover, we will need to increase staffing and to train, motivate and
manage our employees. All of these activities will increase our expenses and may require us to raise additional capital sooner
than expected. Failure to manage growth effectively could harm our business, financial condition or results of operations.
We may not successfully manage our growth.
Our success will depend upon the expansion of our operations and the effective
management of our growth. We expect to experience significant growth in the scope of our operations and the number of our employees.
If we grow significantly, such growth will place a significant strain on our management and on our administrative, operational
and financial resources. To manage this growth, we must expand our facilities, augment our operational, financial and management
systems, internal controls and infrastructure and hire and train additional qualified personnel. Our future success is heavily
dependent upon growth and acceptance of our future products. If we are unable to scale our business appropriately or otherwise
adapt to anticipated growth and new product introduction, our business and financial condition will be harmed.
We may expand our business through the acquisition of rights to new
drug candidates that could disrupt our business, harm our financial condition and may also dilute current stockholders’
ownership interests in our company.
Our business strategy includes expanding our products and capabilities,
and we may seek acquisitions of drug candidates or technologies to do so. Acquisitions involve numerous risks, including substantial
cash expenditures; potentially dilutive issuance of equity securities; incurrence of debt and contingent liabilities, some of
which may be difficult or impossible to identify at the time of acquisition; difficulties in assimilating the acquired technologies
or the operations of the acquired companies; diverting our management’s attention away from other business concerns; risks
of entering markets in which we have limited or no direct experience; and the potential loss of our key employees or key employees
of the acquired companies.
We cannot assure you that any acquisition will result in short-term or
long-term benefits to us. We may incorrectly judge the value or worth of an acquired product, company or business. In addition,
our future success would depend in part on our ability to manage the rapid growth associated with some of these acquisitions.
We cannot assure you that we will be able to make the combination of our business with that of acquired products, businesses or
companies work or be successful. Furthermore, the development or expansion of our business or any acquired products, business
or companies may require a substantial capital investment by us. We may not have these necessary funds or they might not be available
to us on acceptable terms or at all. We may also seek to raise funds by selling shares of our preferred or common stock, which
could dilute each current stockholder’s ownership interest in the Company.
We are unable to develop our own sales, marketing and distribution
capabilities, or if we are not successful in contracting with third parties for these services on favorable terms, or at all,
our product revenues could be disappointing
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We currently have no sales, marketing or distribution capabilities. In
order to commercialize our products, if any are approved by the FDA, we will either have to develop such capabilities internally
or collaborate with third parties who can perform these services for us. If we decide to commercialize any of our drugs ourselves,
we may not be able to hire the necessary experienced personnel and build sales, marketing and distribution operations which are
capable of successfully launching new drugs and generating sufficient product revenues. In addition, establishing such operations
will take time and involve significant expense.
If we decide to enter into new co-promotion or other licensing arrangements
with third parties, we may be unable to locate acceptable collaborators because the number of potential collaborators is limited
and because of competition from others for similar alliances with potential collaborators. Even if we are able to identify one
or more acceptable new collaborators, we may not be able to enter into any collaborative arrangements on favorable terms, or at
all.
In addition, any revenues we receive would depend upon our collaborators’
efforts which may not be adequate due to lack of attention or resource commitments, management turnover, change of strategic focus,
business combinations or other factors outside of our control. Depending upon the terms of our collaboration, the remedies we
have against an under-performing collaborator may be limited. If we were to terminate the relationship, it may be difficult or
impossible to find a replacement collaborator on acceptable terms, or at all.
If we cannot compete successfully for market share against other
drug companies, we may not achieve sufficient product revenues and our business will suffer.
The market for our drug candidates is characterized by intense competition
and rapid technological advances. If our drug candidates receive FDA approval, they will compete with a number of existing and
future drugs and therapies developed, manufactured and marketed by others. Existing or future competing products may provide greater
therapeutic convenience or clinical or other benefits for a specific indication than our products, or may offer comparable performance
at a lower cost. If our products are unable to capture and maintain market share, we may not achieve sufficient product revenues
and our business will suffer.
We and our collaborators will compete for market share against fully integrated
pharmaceutical companies or other companies that are collaborating with larger pharmaceutical companies, academic institutions,
government agencies and other public and private research organizations. Many of these competitors have drugs already approved
or drug candidates in development that will or may compete against our approved drug candidates. In addition, many of these competitors,
either alone or together with their collaborative partners, operate larger research and development programs and have substantially
greater financial resources than we do, as well as significantly greater experience in:
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developing drugs;
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conducting preclinical testing and human clinical trials;
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obtaining FDA and other regulatory approvals of drugs;
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formulating and manufacturing drugs; and
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launching, marketing, distributing and selling drugs.
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Government agencies, professional and medical societies, and other groups
may establish usage guidelines that apply to our Law enforcement concerns over diversion of opioids and social issues around abuse
of opioids may make the regulatory approval process and commercialization of our drug candidates very difficult.
Media stories regarding the diversion of opioids and other controlled substances
are commonplace. Law enforcement agencies or regulatory agencies may apply policies that seek to limit the availability of opioids.
Such efforts may adversely affect the regulatory approval and commercialization of our drug candidates.
Developments by competitors may render our products or technologies
obsolete or non-competitive.
Alternative technologies and products are being developed to improve or
replace the use of opioids for pain management, several of which are in clinical trials or are awaiting approval from the FDA.
In addition, the active ingredients in nearly all opioid drugs are available in generic form. Drug companies that sell generic
opioid drugs represent substantial competition. Many of these organizations competing with us have substantially greater capital
resources, larger research and development staffs and facilities, greater experience in drug development and in obtaining regulatory
approvals and greater manufacturing and marketing capabilities than we do. Our competitors may market less expensive or more effective
drugs that would compete with our drug candidates or reach market with competing drugs before we are able to reach market with
our drug candidates. These organizations also compete with us to attract qualified personnel and partners for acquisitions, joint
ventures or other collaborations.
Business interruptions could limit our ability to operate our business.
Our operations as well as those of our collaborators on which we depend
are vulnerable to damage or interruption from computer viruses, human error, natural disasters, electrical and telecommunication
failures, international acts of terror and similar events. We have not established a formal disaster recovery plan and our back-up
operations and our business interruption insurance may not be adequate to compensate us for losses we may suffer. A significant
business interruption could result in losses or damages incurred by us and require us to cease or curtail our operations.
Unfavorable media coverage of opioid pharmaceuticals
could negatively affect our business.
Opioid drug abuse receives a high degree of media coverage. Unfavorable
publicity regarding, for example, the use or misuse of oxycodone or other opioid drugs, the limitations of abuse-resistant formulations,
public inquiries and investigations into prescription drug abuse, litigation or regulatory activity, or the independent actions
regarding the sales, marketing, distribution or storage of our drug products, could adversely affect our reputation. Such negative
publicity could have an adverse effect on the potential size of the market for our drug candidates and decrease revenues and royalties,
which would adversely affect our business and financial results.
Risks Related to Ownership of Our Common Stock
There is a limited market for our common stock
that may make it more difficult to dispose of your stock.
Our common stock is currently quoted on the OTCQB under
the symbol “RLMD”. There is a limited trading market for our common stock. Accordingly, there can be no assurance
as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell shares
of our common stock, or the prices at which holders may be able to sell their common stock.
A sale of a substantial number of shares of
our common stock may cause the price of the common stock to decline.
If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could fall. These sales also may make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem reasonable or appropriate. Stockholders who have been
issued shares in the Reverse Merger will be able to sell their shares pursuant to Rule 144 under the Securities Act of 1933, beginning
one year after the stockholders acquired their shares, subject to limitations imposed by the lock-up agreements.
We are subject to the reporting requirements
of federal securities laws, which can be expensive and may divert resources from other projects, thus impairing our ability grow.
We are a public reporting company and, accordingly, subject to the information
and reporting requirements of the Exchange Act and other federal securities laws, including compliance with the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”). The costs of preparing and filing annual and quarterly reports, proxy statements
and other information with the SEC and furnishing audited reports to stockholders would cause our expenses to be higher than they
would be if we remained privately held and did not consummate the Reverse Merger.
It may be time consuming, difficult and costly for us to develop and implement
the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting,
internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures.
If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain
the independent accountant certifications required by such act, which may preclude us from keeping our filings with the SEC current.
If we fail to establish and maintain an effective system of internal
control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our
financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.
Effective internal control is necessary for us to provide reliable financial
reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our
business as effectively as we would if an effective control environment existed, and our business and reputation with investors
may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition,
results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered
failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.
Public company compliance may make it more difficult to attract and
retain officers and directors.
The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate
governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance
costs and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules and
regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and
we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors
or as executive officers.
Our stock price may be volatile.
The market price of our Common Stock is likely to be
highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including
the following:
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changes in our industry;
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competitive pricing pressures;
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our ability to obtain working capital financing;
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additions or departures of key personnel;
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limited “public float” in the hands of a small number of persons
whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
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sales of our common stock;
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our ability to execute our business plan;
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operating results that fall below expectations;
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loss of any strategic relationship;
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regulatory developments;
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economic and other external factors;
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period-to-period fluctuations in our financial results; and
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inability to develop or acquire new or needed technology or products.
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In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market
fluctuations may also materially and adversely affect the market price of our Common Stock.
Our Common Stock may be deemed a “penny stock,” which
would make it more difficult for our investors to sell their shares.
Our common stock may be subject to the “penny stock” rules
adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock is
not listed on The NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share, other than
companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at
least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things,
that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make
suitability inquiries of investors and provide investors with certain information concerning trading in the security, including
a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks
because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers
in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse
effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find
it more difficult to dispose of our securities.
You may have difficulty trading and obtaining quotations for our
Common Stock.
Our securities are not actively traded, and the bid and asked prices for
our Common Stock on the Over-the-Counter Bulletin Board may fluctuate widely. As a result, investors may find it difficult to
dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the liquidity of the Common
Stock, and would likely reduce the market price of our Common Stock and hamper our ability to raise additional capital. There
is a limited market for our securities. Accordingly, investors may therefore bear the economic risk of an investment in the Securities
thereof, for an indefinite period of time. Even if an active market develops for the common stock, Rule 144 promulgated under
the Securities Act ("Rule 144"), which provides for an exemption from the registration requirements under the Securities
Act under certain conditions, requires, among other conditions, a one-year holding period prior to the resale (in limited amounts)
of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act.
There can be no assurance that we will fulfill any reporting requirements in the future under the Securities Exchange Act of 1934,
as amended, or disseminate to the public any current financial or other information concerning the Company, as is required by
Rule 144 as part of the conditions of its availability. Our securities have not been registered under the Securities Act.