Item 1. Business.
GENERAL ORGANIZATION AND
BUSINESS
Boston Therapeutics, Inc. (the
“Company”) was formed as a Delaware corporation on August 24, 2009, under the name Avanyx Therapeutics, Inc. On November
10, 2010, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Boston Therapeutics,
Inc., a New Hampshire corporation (“BTI”) providing for the merger of BTI into the Company with the Company being the
surviving entity (the “Merger”), the issuance by the Company of 4,000,000 shares of common stock to the stockholders
of BTI in exchange for 100% of the outstanding common stock of BTI, and the change of the Company’s name to Boston Therapeutics,
Inc. Boston Therapeutics, headquartered in Lawrence, MA, (OTCQB: BTHE) is a leader in the field of complex carbohydrate chemistry.
The Company's initial product pipeline is focused on developing and commercializing therapeutic molecules for diabetes: BTI-320,
a non- systemic, non-toxic, investigative therapeutic compound designed to reduce post-meal glucose elevation, SUGARDOWN
®,
a dietary supplement designed to manage post-meal sugar spikes and IPOXYN, an investigative intravenous fluid therapy for the
prevention of necrosis and a treatment for ischemia, with an initial target indication of lower limb ischemic events often associated
with diabetes.
The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. The Company has limited resources and operating history.
As shown in the accompanying financial statements, the Company has an accumulated deficit of approximately $18.2 million and $687,185
cash on hand as of December 31, 2016. We raised $2,152,000 in gross proceeds from private placements during the year ended December
31, 2016. Management anticipates that our cash resources will be sufficient to fund our planned operations into the second quarter
of 2017. There is no guarantee that the Company will be successful in raising capital or if it is successful, that such capital
will be on acceptable terms. The future of the Company is dependent upon its ability to obtain financing and upon future profitable
operations from the development of its new business opportunities.
The Company may seek to raise
additional capital through public or private debt or public or private equity financings, and partnerships or
licensing opportunities in order to fund our operations. There can be no assurance that the Company will be successful in
accomplishing its objectives. Without such additional capital, the Company may be required to cease operations.
These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be
necessary in the event the Company cannot continue operations.
Overview
We are a pre-clinical and clinical-stage
pharmaceutical company focused on the development, outsourced contract manufacture and commercialization of carbohydrate-based
therapeutic drugs and dietary supplements designed to address blood sugar management and inflammatory diseases in a safe and efficient
manner.
Currently, our lead pharmaceutical
drug candidates are:
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BTI-320
, a non-systemic, carbohydrate-based compound designed to reduce post-meal elevation
of blood glucose levels in Type 2 diabetic patients, pre diabetic patients; and
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I
POXYN
, a carbohydrate-based, injectable drug intended to prevent necrosis, or cell death, and to treat hypoxic conditions,
such as diabetic foot ulcers and other vascular/neurological complications.
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Following Phase II clinical
trial results reported in 2013 and the recent Phase IIb clinical trial concluded in October 2014, the U.S. Food and Drug Administration
(“FDA”) accepted the Investigational New Drug Application (or IND) which we filed for BTI-320 to treat Type 2 diabetes
and weight management in 2014. The filing has been brought current and Joslin Diabetes Center in Boston MA will serve as the lead
clinic in the first phase of a potential multi-center, multi-country trial expected to commence in 2017. The trial is expected to enroll up to 30 patients with the expansion to 360 patients in the 24 week
study which is being designed as a randomized, placebo-controlled, double blind international multi-center study with two treatment
arms. The trial will employ precision medical monitoring and will target the primary efficacy endpoint of Post Prandial sugar reduction
resulting in a mean change in HbA1c levels from baseline at 24 weeks. It is anticipated to be conducted at a number of international
centers located in the U.S., Europe, Asia and Australia. In addition, we are technically supporting an additional clinical trial
in at risk pre-diabetic patients that is being carried out in Hong Kong and has received up to $400,000 of reimbursement support
employing a state of the art retinal image analysis to evaluate the compounds effection of reduction of stroke risk.
We are in negotiation with
Conroy Chi-Heng Cheng pursuant to which Mr. Cheng or an affiliate to Mr. Cheng will fund such trial. There is no guarantee
that we will be able to successfully close such financing. Mr. Cheng is a director and a shareholder of the Company and a
director of Advance Pharmaceutical Company (“Advance Pharmaceutical”), a Hong Kong based, privately held company.
On June 24, 2011, prior to his election to the Company’s Board, the Company entered into a definitive Licensing and
Manufacturing Agreement with Advance Pharmaceutical. In addition, CJY Holdings Limited, a Company controlled by Mr.
Cheng’s brother, Cheng Chi Him, holds a significant amount of convertible debentures payable by the Company.
Development of IPOXYN is in
the pre-clinical planning stage by Boston Therapeutics and no work has been done to date due to lack of financial resources. The
Company is exploring a partnering alliance for the participation with and funded program in China. We anticipate activity will
occur with support funding later this year.
In addition, we currently test
market and sell SUGARDOWN
®
, a non-systemic, carbohydrate-based dietary supplement designed to support healthy blood
glucose levels, over the Internet and by purchase order, as well as through a piloting program in specialty independent pharmacies.
Novelty of Complex Carbohydrate
Science
Carbohydrate molecules, which
are essential to the transmission and recognition of cellular information, have been shown to play an important role in major diseases
including cancer, cardiovascular disease, Alzheimer’s disease, inflammatory disease and viral infections. We believe this
offers a largely untapped area for treatment by utilizing:
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in the case of BTI-320 and SUGARDOWN®, modified mannan (a polymer found in plants) to lower
the rise in post-prandial blood glucose (PPG, or post-meal blood sugar), and
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in the case of IPOXYN, stabilized hemoglobin as modified by carbohydrate chemistry to deliver oxygen
to cells in hypoxic condition.
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We use naturally occurring,
available processed plant materials as starting material to create proprietary complex carbohydrates with specific molecular weights
and other pharmaceutical properties. These complex carbohydrate molecules are then formulated into acceptable pharmaceutical material.
Using these novel carbohydrate-based candidate compounds that largely bind and inhibit enzymes, we are undertaking the focused
pursuit of developing therapies for metabolic diseases like diabetes and other serious diseases in which enzymes have a demonstrated
role in causing the disease.
Our newly restructured
management team, including most notably our Board Member and Chief Executive Officer Carl W. Rausch, has played a leading
role in the development of complex carbohydrate science in Asia and a pipeline of carbohydrate-based therapeutics with other
protein chemistries to address a variety of unmet medical needs. We believe this expertise is particularly valuable as we
progress the specialty process and clinical development of our products and the Company works to expand, to partner and to
build market awareness of the technologies and the introductory sales of SUGARDOWN®.
BTI-320 and SUGARDOWN®
Mechanisms of Action
Diabetes is a chronic disease
in which a patient’s inability to produce the hormone insulin in sufficient amounts or at all. This defect leads to high
levels of glucose in the blood stream, which in turn can cause complications such as heart, kidney and retina dysfunction and death.
The modified mannan in BTI-320 tablet form, works to lower the immediate rise in post-meal blood glucose in several ways. First,
we believe it binds to long-chain starch polysaccharides in food and to the digestive enzymes that cleave these large sugars into
glucose. Second, it temporarily coats the inside of the small intestine to slow the absorption of glucose. Together, these mechanisms
have been shown to lower the rate of absorption of glucose from the small intestine into the blood. And even delay the exposure
time to a region lower in the gut.
BTI-320 is intended to reduce
the amount of glucose available for absorption into the bloodstream. Most anti-diabetes drugs, also called hypoglycemic drugs,
force blood sugar levels down systemically by targeting organs such as the pancreas and the body’s cells, increasing the
risk of side effects as has been evidenced in recent FDA findings and concerns for cardiac insult, kidney disease, and even brain
dysfunction.. In contrast, BTI-320 targets enzymes in the mouth and small intestine to reduce the uptake of glucose during the
digestion of carbohydrate foods. We believe this preemptive, non-systemic approach to blood sugar management provides for a broader
safety profile as well as the ability to work with other systemic blood lowering agents like insulin. All this leads to lower prescription
drug dosing and longer term effectiveness. The BTI-320 profile is enhanced due to its GRAS (Generally Regarded as Safe) classification.
SUGARDOWN® has a similar mechanism of action and designation.
In February 2013, we reported
positive results from a Phase II clinical study conducted at Dartmouth-Hitchcock Medical Center that evaluated the safety and efficacy
of BTI-320. The study evaluated BTI-320 in 24 patients with Type 2 diabetes between the ages of 18 and 75 with a body mass index
(BMI) of 25-40 kg/m2 and with a HbA1c (a lab test that shows the average level of blood glucose over the previous three months)
of less than or equal to 9 percent. The primary endpoint of this study was to demonstrate a reduction of incremental area under
the curve (AUC) of post-meal blood glucose by 20%.
In this study, forty-five percent
(45%) of patients responded positively with a forty percent (40%) reduction of post-meal glucose in the blood compared to baseline
in a dose-dependent manner. Additionally, results showed the effect of BTI-320 does not correlate with duration of diabetes, and
worked safely regardless of concurrent diabetes medications. There was no severe hypoglycemia (low blood sugar episodes), gastrointestinal
side effects were mild and satiety (fullness) was observed. In the article published in the July/August 2013 issue of the peer
reviewed journal,
Endocrine Practice
, there were no serious adverse events (SAEs) from the data analysis of the open-label
dose escalation crossover trial on patients with Type 2 diabetes.
In 2012, with Advance Pharmaceutical,
we conducted a clinical study glycemic test at the University of Sydney in Australia. The results showed the
post-meal incremental area under the curve (iAUC) for glucose and insulin were significantly lower following consumption
of SUGARDOWN® prior to a high carbohydrate meal of rice in a dose-dependent manner. This resulted in a reduction of up to
61 percent in post-meal elevation of blood glucose compared with the rice consumed alone. On average, there was a 32
percent reduction in the post-meal iAUC for glucose and a 24 percent reduction in post-meal insulin response for the
volunteers in the study. No severe adverse effects were reported or observed during the study. SUGARDOWN® was tested in
healthy, but overweight, adults with a mean body mass index (BMI) value of 27.3 kg/m2. This clinical study indicated
that SUGARDOWN® can maintain healthy glucose levels even after meals, when sugar tends to spike. (Studies are under
monograph review)
In October 2014, we reported
results from a pilot Phase IIb study of BTI-320 in patients with Type 2 diabetes conducted in the U.S. by Accumed Research Associates.
The trial enrolled 23 patients with Type 2 diabetes diagnosed for at least one year and who were on a stable daily dose of Metformin
for at least three months. The patients were administered BTI-320 and Metformin using a randomized, double-blind, placebo-controlled,
dose-ranging, three-way cross-over study design. Of the 23 patients that completed the trial, 15 patients did not demonstrate a
measurable difference in response by reporting a significant reduction from normal to the rice test meal. The remaining eight patients
responded to BTI-320 with up to a 34% reduction in post meal blood glucose levels. Patients were given one to two BTI-320 tablets,
half of the dose of the Dartmouth study and one third the dose of the University of Sydney trial. The results of the trial showed
BTI-320 as safe and well tolerated, with no serious adverse events reported and provided information on different patient populations
to be used to design the appropriate designed protocols for future clinical trials. This also reflects the need for continuous
glucose monitoring as a way to capture the post prandial effect on sugar reduction, and effect not seen with the present medications
in the US.
In 2016, Advance
Pharmaceuticals completed and reported the 60 patient proof of concept trial, and reflected no increases in fructosmanine
and short term measure of glycation of plasma protein, and a significant decrease in the Post Prandial blood glucose acute rise
in blood sugar in high risk Asia pre-diabetic patients. The trial was fully reported on Clinicaltrials.gov and the abstract was
accepted for the June 2017 American Diabetic Association meeting in June. The data sets are embargoed and the manuscript is being
prepared for submission for publication.
We except to commence further trials
in 2017, which are subject to structuring a funding arragement with Mr. Cheng or an affiliate of Mr. Cheng. There is no
guarantee that we will be able to successfully close such financing. We except to advance a proof of concept trial for
vascular effect by the proprietary analysis of retinal vasculature in 2017. This study being performed with grant funds from
the Hong Kong granting agency, will potentially demonstrate the broad risk reduction effect for vascular diseases that can be
effected by the reduction in post prandial sugar. The Company is in talks to secure rights for the use of the proprietary
technology and thus help secure the strong predictive effect on risk reduction from stroke, kidney disease,
Alzheimer’s, and other vascular disorders brought on by high blood sugar.
IPOXYN and OXYFEX
IPOXYN (research investigative
material) is a carbohydrate-based, intravenous injectable intravenous solution that can potentially prevent hypoxic condition and
cell death, and treat these hypoxic conditions related to wound healing such as diabetic foot ulcers and other vascular complications
of diabetes. IPOXYN, an oxygen carrier blood substitute, has a very broad range of potential applications, including but not limited
to, tissue death prevention, wound healing, traumatic blood loss, traumatic brain injury, stroke, cancer, surgery, transplant and
anemia. In addition, since donated human blood needs refrigeration and has a shelf life of less than one month, IPOXYN can serve
as an adjunct to or replacement for donated blood in trauma and surgery cases when there are human blood supply deficiencies.
Hypoxia is a condition in which
cells lack sufficient oxygen delivery to support metabolic function. As evidenced by the well-established record of data relating
to similar products, the IPOXYN carbohydrate molecule contains oxygen rechargeable iron which picks up oxygen in the lungs, is
5,000 times smaller than a red blood cell (or RBC), and can reach hypoxic tissue more effectively than RBCs. IPOXYN is stable at
room temperature, has a three year shelf life and requires no blood type matching. We plan to introduce this product in clinical
trials for hypoxic medical conditions.
Our pharmaceutical agents are
intended for intravenous administration into the circulatory system to target acute and late stage diseases that, we believe, have
a great unmet medical need. Acute hypoxic conditions, which we intend to treat with IPOXYN, result from a lack of oxygen supply
to living cells. Hypoxia will lead to ischemia, inflammation and the death of living cells. Ischemia is a restriction in blood
supply, generally due to factors in the blood vessels, with resultant damage or dysfunction of tissue. Diabetic foot ulcer, which
occurs in 15% of patients with diabetes and precedes more than 80% of all lower leg amputations, is one of the major complications
of diabetes mellitus. Two major risk factors that cause diabetic foot ulcer are diabetic neuropathy and micro/macro ischemia. Increases
in mortality among diabetic patients observed over the past 20 years are considered to be due to the development of macro and micro
vascular complications including the failure of the wound healing process. A failure of effective treatment of wounds in this population
can often lead to infection, tissue death and amputation of the lower leg and foot as the only treatment option. We believe that
IPOXYN represents a potentially effective treatment for lower limb complications of diabetes.
Upon raising the required
capital, we intend to develop OXYFEX, a veterinary analog to IPOXYN. We are unaware of any drug currently on the market for
animals that can deliver oxygen, and there is only limited “blood banking” for animals despite a constant need.
OXYFEX™ can serve as the only available oxygen delivery mechanism for animals suffering ischemia or traumatic and
surgical blood loss events.
IPOXYN and OXYFEX consist of
a stabilized glycoprotein composition containing oxygen-rechargeable iron, targeting both human and animal tissues and
organ systems deprived of oxygen and in need of metabolic support. We have not conducted any clinical trials to confirm
the efficacy of, or filed any applications with the FDA with respect to, IPOXYN. We are in the process of developing IPOXYN
for pre-clinical studies, in order to conduct clinical trials and to file applications with the FDA as applicable. Our goal
is to file an IND application with the FDA, provided we obtain adequate funding. We expect to have access to
the pilot-scale manufacturing facility of a third party with adequate capacity to produce IPOXYN for clinical trials and
market introduction.
We have access, subject to adequate
funding, to both sufficient raw materials at commodity pricing and processing facilities to produce sufficient quantities of IPOXYN
to complete pre- clinical pharmacokinetic, safety and efficacy studies in support of an investigative new drug (IND) filing in
the United States in 2017. The primary raw material for IPOXYN is extracted from controlled sourced bovine blood which can be obtained
from multiple sources at commodity prices under Good Manufacturing Practice (GMP). There are numerous facilities capable of processing
source verified red blood cell extract. We expect to put in place agreements for obtaining and processing these materials upon
funding.
Drug Development Status
BTI-320 is our lead product
candidate and is currently in Phase II clinical development. We plan to initiate trials in the first half of 2017 subject to
raising adequate capital. Following Phase II clinical trial results reported in 2013 and the Phase IIb clinical trial concluded in
October 2014, the FDA accepted the first Investigational New Drug Application (or IND) We proposed for BTI-320 to treat Type
2 diabetes and weight management. Joslin Diabetes Center in Boston will serve as the lead clinic for the multi-center,
multi-country trial that may commence in 2017 subject to use receiving adequate funding. The trial may enroll up to 360
patients in the 24 week study which is being designed as a randomized, placebo-controlled, double blind international
multi-center study with two treatment arms. One of the primary endpoints of efficacy of the trial is the mean change in HbA1c
levels from baseline at 24 weeks. This is anticipated to be conducted at a number of international centers located in the
U.S., Europe, Asia and Australia. Development of IPOXYN is in the pre-clinical planning stage and further development is on
hold pending the securing of adequate funding.
BTI-320
In March 2014, following the
successful results of the Dartmouth study, we received and additional Institutional Review Board (IRB) approval to initiate a clinical
study of BTI-320 in the United States. In October 2014, we completed a Phase II trial in the United States and we are currently
delaying any additional Phase II trial efforts in France due to enrollment performance issues and lack of resources to support
the effort. These trials were designed to add CGM (continuous glucose monitoring) and better define PPG effects that support the
results from our Dartmouth study for BTI-320. In the Dartmouth study, BTI-320 was well tolerated in patients taking various anti-diabetic
agents, including Metformin. The recent additional clinical trial in the U.S. showed BTI-320 was safe and well tolerated with no
serious adverse events reported. The FDA has accepted an IND which was filed for BTI-320 to treat Type 2 Diabetes and weight management.
Subject to adequate funding, we tentatively are planning to commence additional clinical trials in 2017 for BTI-320.
IPOXYN
We believe IPOXYN is a safe
and effective intervention for reversing acute hypoxia, fulfilling an unmet clinical need; and that IPOXYN can alleviate acute
deficiency of oxygen and avert further life threatening complications and muscle and tissue death which can result from a sustained
deficiency of oxygen. Our belief about the safety and efficacy of IPOXYN is based on preliminary good laboratory practices (GLP)
testing of a material that is proposed to be bio-similar to IPOXYN, where it was found that such bio-similar formulation had no
material toxicity on a small group of animals. We understand that this testing of GLP intent investigative materials produced bio-similar
materials or, for that matter, pre-clinical testing, will not necessarily predict levels of toxicity and efficacy in humans. However,
if clinical trials ultimately support this belief, in many clinical situations IPOXYN could become a significant new management
tool to moderate the inconsistencies and logistics of RBC transfusion in all parts of the world.
In addition to the expansive
and broad application field development of human medical management, we envision a sizable and very accepting market in the veterinary
field. We could expect to make a registration filing for this market as soon as we can complete pre-clinical safety and efficacy
studies. Clinical safety and efficacy studies under Good Manufacturing Practices have not yet been initiated.
Preliminary data from animal
testing conducted by third parties as well as similarity testing suggests successful use of OXYFEX in hypoxia and critical anemic
situations, where hypoxic conditions were critical to animal survival. Other early experiments with similarly experimental materials
with dogs suggest intervention with OXYFEX will significantly improve survival in induced canine anemia models. This veterinary
treatment of signs and symptom of canine anemia will be our first target for seeking early regulatory approval in the European
Union. As there is substantial commonality between the metabolic functions of humans and other mammals, animal testing becomes
a starting point for many clinical development programs that can directly translate into clinical development programs for humans.
The third party testing described here was conducted by a company that developed a bio-similar product to OXYFEX. Testing included
repeated intravenous infusions of the product in dogs that was reported in documented literature and private regulatory filings,
and the testing did not result in reported mortality/morbidity of the subject animals. Reports concerning anemic dogs infused with
the bio-similar materials showed increased plasma hemoglobin levels resulting in an increase of the oxygen carrying capacity of
the treated animals. We have no agreements with the third party that conducted these toxicity tests, or its successors. No further
development work has been conducted on IPOXYN pending securing adequate funding and finalizing strategy as to the best development
plan. We also will move forward with new designations at to these investigative biosimilar materials as the funding or alliance
partnering is secured. We recently were issued composition of matter patents in this line of material development.
Market Opportunity
Diabetes and Metabolic Disease
Related Illness
According to the International
Diabetes Federation, in 2013, 382 million people worldwide are living with diabetes and that number is projected to increase to
592 million by 2035. In the United States alone, the Center for Disease Control estimated that there were 26 million people living
with diabetes and an estimated 79 million people who were pre-diabetic in 2011. Standard therapies for diabetes include physician
recommended diet and exercise, oral hypoglycemic drugs such as Metformin for Type 2 diabetes and insulin injection regimens for
people with Type 1 diabetes. The objective of each is to manage a daily blood glucose level range recommended by a physician. Each
of the current therapies alone has its limitations including numerous side effects and all treat the lack of control the system
has to reduce the excesses of immediate sugar exposure absorbed in the gut.
According to Standard &
Poor’s, the diabetes drug market is estimated to be $35 billion and is on pace to grow to more than $58 billion by 2018.
Pharmaceutical companies have been investigating new approaches to treating diabetes and market value has been maintained in the
industry due to the introduction of these new products. We believe that BTI-320 represents a near-term commercial opportunity in
a large and growing diabetes market worldwide. BTI-320 is pharmacologically differentiated from commercially available PPG drugs
via its apparent efficacy without severe side effect.
We believe that many patients
with diabetes have suboptimal relief from the route coaus and with the use of the above therapies alone or in combination with
each other drugs. In addition, other types of PPGs are only effective by themselves in the early stages of impaired glucose tolerance.
The present BTI-320 oral formulation is a new class of drug for the treatment of Type 2 diabetes. Human testing to date has shown
that it is safe and non-systemic with a benign side effect profile that will be used fin the treatment of diabetes. We believe
BTI-320 has the potential to be an adjunctive therapy when combined with Metformin, the most prescribed diabetes drug in the U.S.
with 50 million prescriptions annually.
Hypoxia
Development of IPOXYN (investigational
material) is in the pre-clinical stage and no work has been done in the past 2 years due to the lack of funding. Our injectable
drug candidate, IPOXYN, will potentially compete with existing therapies for the treatment of hypoxia or anti-necrosis that according
to Global Industry Analysts, Inc. has a global market opportunity of $1 billion. Hypoxia is a condition in which cells lack sufficient
oxygen supply to support metabolic function. The standard therapy for acute anemia resulting from blood loss is infusion of RBCs
mainly from supplies of donated blood. For prophylactic or long-term treatment of anticipated or chronic anemia, medications that
stimulate the creation of new RBCs are frequently used.
Presently, there is no substitute
for human red blood cells to deliver oxygen to the body; and transfusions involve many risks and limitations. The standard
therapy for reversing hypoxia is blood infusion, RBCs or hyperbaric oxygen. Hyperbaric medicine or hyperbaric oxygen therapy (HBOT)
is a medical term for using oxygen at a level higher than atmospheric pressure. The HBOT treatment can only be done at a medical
facility and each session can cost from $200 to more than $1,000 for the 90 minute chamber exposure. For decades, oxygen carriers
have been developed for perfusion and oxygenation of ischemic tissue; none have yet succeeded in becoming an artificial blood
component or an immediate blood or oxygen carrier substitute for the RBC’s. These past products were either expired blood-derived
elements, synthetic perfluorocarbons, or red blood cell modifiers. According to a Brown University study, there is a global shortage
of safe transfusion suitable blood of 110 million units, and the need for blood is rising 6-7% annually. IPOXYN, a blood substitute,
has a broad range of potential applications, including but not limited to, tissue death prevention, wound healing, traumatic blood
loss, traumatic brain injury, stroke, cancer, surgery, transplant and anemia.
Veterinary Market
Development of OXYFEX™
is in the pre-clinical stage and no work has been done to date due to the lack of funding. We plan to commence marketing OXYFEX™
for veterinary applications, which we view as a potentially lucrative market, once we receive the necessary approvals in the U.S.
and globally. As of now, no development work has been conducted on OXYFEX pending securing adequate funding and finalizing strategy
as to the development plan. We estimate that there are at least 15,000 small animal veterinary practices in the United States,
another 4,000 mixed animal practices treating small and large animals in the United States and approximately 22,000 small animal
practices in Europe. We believe that the average veterinary practice treats only a small percentage of canine anemia cases with
red blood cell transfusion. The remaining animals receive either cage rest or treatment such as fluid administration, iron supplements,
dietary supplements or inspired oxygen.
Our Product Candidates
Our primary business is the
development, manufacture and commercialization of therapeutic drugs with a focus on complex carbohydrate chemistry to address diabetes
and inflammatory diseases. We are currently focusing on drug candidates. BTI-320, a non-systemic, non-toxic, drug candidate taken
before carbohydrate meals, is designed to improve post-meal blood sugar control in patients with Type 2 diabetes.
We intend to develop IPOXYN pending
securing adequate financing and finalizing strategy as to the best development plan. We may also develop IPOXYN, an
injectable drug candidate for prevention of necrosis and treatment of hypoxia. IPOXYN is a polysaccharide based therapeutic
agent using proprietary processes and patented technology. Our IPOXYN drug consists of a stabilized polysaccharide
composition containing oxygen-rechargeable iron, targeting both human and animal tissues and organ systems deprived of oxygen
and in need of metabolic support.
According to Global Industry
Analysts, Inc., the global market opportunity for anti-hypoxia or anti-necrosis technology is $1 billion. Early entry global markets
include the following:
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Asia (replace Hepatitis C contaminated blood products)
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Africa (AIDS contaminated blood)
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Lower Limb Ischemia and other vascular complications of diabetes
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BTI-320
Overview
BTI-320 is our lead product
candidate and is currently in Phase II clinical development. Subject to us obtaining adequate funding, we expect to begin additional
clinical trials in 2017.
BTI-320 is a Carbohydrate Hydrolyzing
Enzyme Inhibitors (CHEI) for treatment of patients with Type 2 diabetes. BTI-320 initially targets improved management of post-meal
blood sugar in patients currently taking Metformin and potentially other anti-diabetic agents.
BTI-320, a non-systemic, non-toxic,
drug candidate taken before carbohydrate meals, is designed to improve post-meal blood glucose control in patients with Type 2
diabetes. BTI-320 acts non-systemically in the gastrointestinal tract to inhibit the enzymes that cleave complex carbohydrates
from foods into simple sugars, reducing available glucose during the period following a meal. BTI-320 initially targets improved
management of post-meal blood sugar in patients currently taking Metformin and potentially other anti-diabetic agents.
According to the International
Diabetes Federations 2011 report, Guideline for Management of Post-meal Glucose in Diabetes, addressing both post-meal plasma glucose
and fasting plasma glucose is an important strategy for achieving optimal glucose control, and that evidence points to a relationship
between an acute increase in blood sugar, particularly after a meal, and cardiovascular disease. We completed a BTI-320 Phase II
clinical trial in patients with Type 2 diabetes.
Status of Development of
BTI-320
BTI-320 is fully developed as
a drug candidate. In October 2011, we announced the initiation of our clinical trial at Dartmouth-Hitchcock Medical Center in New
Hampshire to evaluate the safety and efficacy of BTI-320 when added to oral agents or insulin regimen in patients with Type 2 Diabetes
Mellitus. In July 2012, we announced the completion of patient enrollment. In February 2013, we announced that BTI-320 reduced
the elevation of post-meal blood sugar by forty percent with no serious adverse events. The study evaluated BTI-320 in 24 patients
with Type 2 diabetes between the ages of 18 and 75 with a body mass index (BMI) of 25-40 kg/m2 and with HbA1c of less than or equal
to nine percent. HbA1c is a lab test that indicates the average level of blood sugar (glucose) over the previous three months.
Forty-five percent of patients
responded with an average forty percent reduction of post-meal glucose in the blood compared to baseline in a dose-dependent manner.
Additionally, results showed the effect of BTI-320 does not correlate with duration of diabetes and works regardless of concurrent
diabetes medications. There was no severe hypoglycemia and gastrointestinal side effects were mild. Satiety was also observed.
There were no serious adverse events from the data analysis of the open-label dose escalation crossover trial on Type 2 diabetic
patients.
The full article for the clinical
study was published in the July/August 2013 issue of
Endocrine Practice
, a peer-reviewed journal.
In October 2014, we reported
results from a Phase IIb study of BTI-320 in patients with Type 2 diabetes conducted in the U.S. by Accumed Research Associates.
The trial enrolled 23 patients with Type 2 diabetes diagnosed for at least one year and who were on a stable daily dose of Metformin
for at least three months. The patients were administered BTI-320 and Metformin using a randomized, double-blind, placebo-controlled,
dose-ranging, three-way cross-over study design. Of the 23 patients that completed the trial, 15 patients did not yield measurement
differences from normal to the rice test meal. The remaining eight patients responded to BTI-320 with up to a 34% reduction in
post meal blood glucose levels. Patients were given one to two BTI-320 tablets, half of the dose of the Dartmouth study and one
third the dose of the University of Sydney trial. The results of the trial showed BTI-320 as safe and well tolerated, with no serious
adverse events reported and provided information on different patient populations to be used to design the proper protocols for
future clinical trials.
Products Competitive with
BTI-320
Anti-diabetic drugs.
Anti-diabetic
drugs treat diabetes mellitus by lowering glucose levels in the blood. With the exceptions of insulin, insulin analogues and
Glucagon-like Peptide-1 Agonists, all are administered orally and are thus also called oral hypoglycemic agents or oral
anti-hyperglycemic agents. There are different classes of anti-diabetic drugs, and their selection depends on the nature of
the diabetes, age and situation of the person, as well as other factors. BTI-320 is the first compound in a new class of
therapies called Carbohydrate- Hydrolyzing Enzyme Inhibitor (CHEI) for treatment of patients with Type 2 diabetes. BTI-320
acts non-systematically in the gastrointestinal tract to inhibit the enzymes that cleave complex carbohydrates from foods
into simple sugars, reducing postprandial glucose excursion (post-meal blood sugar elevation).
Secretagogues.
Secretagogues,
which include Sulfonylureas and Meglitinides, help enhance insulin secretion. Sulfonylureas were the first widely used oral hypoglycemic
medications. They are
insulin secretagogues
, triggering insulin release by direct action on the KATP channel of the pancreatic
beta cells. Glipizide (Glucotrol®) falls into this category with side effects including GI discomfort, diarrhea and hypoglycemia.
Sensitizers.
Insulin
sensitizers address the core problem in Type 2 diabetes—insulin resistance—and include Biguanides and Thiazolidinediones.
Among oral hypoglycemic agents, insulin sensitizers are the largest category. Biguanides reduce hepatic glucose output and increase
uptake of glucose by the periphery, including skeletal muscle. Although it must be used with caution in patients with impaired
liver or kidney function, metformin, a biguanide, has become the most commonly used agent for Type 2 diabetes in children and teenagers.
Amongst common diabetic drugs, Metformin is the only widely used oral drug that does not cause weight gain. Metformin is the most
prescribed drug in this category whose side effects may be hypoglycemia and lactic acidosis.
Thiazolidinediones (TZDs), also
known as “glitazones,” bind to PPARγ, a type of nuclear regulatory protein involved in transcription of genes
regulating glucose and fat metabolism. Rosiglitazone (Avandia®) and Pioglitazone (Actos®) fall into this category of anti-diabetic
agent.
Alpha-glucosidase inhibitors.
Alpha-glucosidase inhibitors are “diabetes pills” but not technically hypoglycemic agents because they do not have
a direct effect on insulin secretion or sensitivity. These agents slow the digestion of starch in the small intestine, so that
glucose from the starch of a meal enters the bloodstream more slowly, and can be matched more effectively by an impaired insulin
response or sensitivity. These agents are effective by themselves only in the earliest stages of impaired glucose tolerance, but
can be helpful in combination with other agents in Type 2 diabetes. Acarbose, marketed as Prandase® and Glucobay® is an
Alpha-glucosidase Inhibitor.
IPOXYN and OXYFEX™
Development of IPOXYN is in
the pre-clinical stage and no work has progressed due to financial constraints. IPOXYN is designed for delivery as an intravenous
solution, with the expectation that it can support an inadequate supply of RBC oxygen needed to maintain metabolic functions in
the body. It may function without the limitations of compatibility, availability, short shelf life, volume and logistical challenges
commonly associated with transfusions of whole blood and packed red blood cells. Other intravenous fluids commonly used in emergency
trauma to restore blood volume, such as Ringer’s lactate or saline, are not designed to and do not carry oxygen. At present
we have not conducted any clinical trials to confirm the efficacy of, or filed any applications with the FDA with respect to, IPOXYN.
IPOXYN will not be ready for commercialization until these steps are completed. Preclinical animal study results for IPOXYN were
presented at the XIII International Symposium on Blood Substitutes and Oxygen Therapeutics in July 2011.
Upon securing adequate funding,
we plan to introduce this investigational product into clinical trials for hypoxic medical conditions. Hypoxia promotes resistance
to conventional treatments, as well as treatments for other diseases. IPOXYN has the potential to greatly improve survival of patients
in multiple indications in which hypoxia is a factor. Hypoxia is a condition in which cells lack sufficient oxygen supply to support
normal metabolic functions. It is widely known through research that lack of oxygen will result in a cascade of biochemical reactions
which promote resistance to many helpful therapeutic substances and which interfere with the body’s own repair mechanisms.
Antibiotics for the treatment of infection are less effective when hypoxic conditions are involved. Similarly, hypoxic cancer cells
are resistant to chemotherapy treatments; most chemotherapy drugs rely on rapid cell division which requires normal oxygenation
of cells, but in a hypoxic condition, cells proliferate by other pathways and therefore resist many chemotherapy treatments.
Another unmet clinical need
is in various acute ischemic conditions, where hypoxia can develop from a local restriction of constrained blood vessels, or poor
and compromised flow which leads to insufficient supply of oxygen by otherwise well-oxygenated and distributed RBCs, e.g. cerebral
ischemia, ischemic heart disease and intrauterine hypoxia which is an unchallenged cause of perinatal death. In these cases IPOXYN,
as a rechargeable soluble oxygen delivery agent, may not be restrained whereas well-oxygenated RBCs may be prevented due to size
from free flow and distribution and thus the delivery of oxygen. RBCs are large biological structures compared to the size of IPOXYN,
which is a modified single-protein function oxygen carrier. In ischemic and hypoxic conditions, RBCs may not be able to perfuse
the small vessels which have lost their ability to permit RBC distribution and thus oxygen delivery. Due to its small molecular
size, IPOXYN can carry and distribute oxygen widely without risk of clot formation and flow stoppage.
In veterinary medicine applications,
OXYFEX™ will be used as an oxygen delivery agent similar to an RBC replacement for ischemia and trauma, as well as for blood
loss during surgery.
Status of development of
IPOXYN
We are in the process of developing
IPOXYN for pre-clinical studies, in order to conduct clinical trials and to file applications with the FDA as applicable.
Products Competitive with
IPOXYN
Many biotechnology and pharmaceutical
companies are developing new technologies for the treatment of hypoxia and other diseases. The standard therapy for reversing hypoxia
due to acute blood loss may be blood infusion, RBCs or hyperbaric oxygen. Hyperbaric medicine, also known as hyperbaric oxygen
therapy (HBOT), is the medical terminology for using oxygen at a level higher than atmospheric pressure. There are many conditions
being treated using this approach including acute blood loss (Hart GB, Lennon PA, Strauss MB. (1987) “Hyperbaric oxygen in
exceptional acute blood-loss anemia,” J. Hyperbaric Med 2 (4): 205–210). In the United States, HBOT is recognized as
a reimbursable treatment for 14 “approved” conditions and an HBOT session can cost anywhere from $200 in private clinics,
to over $1,000 in hospitals. The most common intervention in hypoxic patients is RBC transfusion. The need for intervention to
reduce hypoxia can also be affected by medical conditions such as ischemia or cardiopulmonary failure, claudication (cramping caused
by blocked arteries in the leg), poor perfusion and other indications, where a combination of below optimal flow and capacity are
compromising oxygen delivery.
When compared to RBC transfusion,
we believe IPOXYN will have the following advantages:
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Availability:
readily available, with at least three year shelf-life (much longer than the five week plus shelf life
for RBCs) and easier to perfuse.
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Stability:
stored at room temperature for years while maintaining its full capacity for oxygen delivery and release
and logistical convenience.
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Sterile:
when manufactured and processed consistently through good manufacturing practices, free of infectious agents
and unnecessary elements.
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Compatibility:
safe for all blood types in a wide range of conditions and does not require pre-infusion typing or testing
for compatibility.
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Critical care
: IPOXYN can be safely applied outside the hospital to treat or prevent ischemic conditions in cases like
shock and trauma, heart attack or stroke where low flow or suspended local flow are disrupted. A readily available infusion package
makes it a straightforward tool for emergency medical teams to use on site in order to save a patient’s life, when time is
of the essence for survival.
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Molecular structure
: Chemically, IPOXYN features a small molecular size compared to RBCs, so it possesses better flow
characteristics and circumvents constricted and partially occluded vessels that restrict flow of RBCs and thus the supply of oxygen
to tissues and organs.
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Oxygenation
: Due to its high solubility, it has high capacity and faster exchange of oxygen in tissues, as well as facilitating
the release of oxygen from RBCs for overall unparalled efficiency.
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For chronic anemia situations,
erythropoietin-based formulations are available from two suppliers. Erythropoietin stimulates the erythropoietic system in the
bone marrow to produce its own RBCs. These products are slow acting, and only administered in anticipation of blood loss during
surgery, and are not effective for temporary use or in emergency situations when acute blood loss requires RBC infusion to deliver
oxygen.
The fields of treatment of oxygen-deprived
states have been approached in many ways. These include such techniques as high oxygen concentration, hyperbaric chambers, as well
as the more mechanical approaches of vessel dilation and blood thinning. All have met with minor measures of improvement. In the
early 1980’s a number of companies focused on creating specific oxygen carriers that were either (a) blood derived elements,
(b) synthetics consisting of Perfluoro chemicals or (c) elements created using recombinant and molecular engineering approaches
(red cell modifiers). Companies including Baxter, Abbot, and Biopure and OPK Biotech, for example, used the blood derived approach;
Green Cross, Alliance Pharmaceuticals and Synthetic blood focused on synthetics, and Somatogen and Allos Therapeutics tried recombinant
and molecular engineering. All of these approaches were early attempts to meet a need whose main focus has been on a “blood
substitute”. Our approach is fundamentally different. Instead of a blood substitute, we are offering a new chemical entity
that will deliver oxygen to hypoxic cells.
We are aware of other companies
researching the use of hemoglobin as a therapeutic, including programs in China and Japan. We expect IPOXYN to compete with traditional
therapies and with other oxygen delivery pharmaceuticals. Some of our competitors and potential competitors may have greater financial
and other resources to develop, manufacture and market their products. We believe the most immediate competition comes from companies
currently conducting clinical trials of investigational hemoglobin solutions.
We believe that these programs
are still in the preclinical stage of development. We believe that our use of controlled source bovine materials for the production
of IPOXYN is an advantage over products made from donated expired human red blood cells stored for a long period of time and other
competitive approaches because of the availability, abundance, ability to control source, cost and relative safety of bovine red
blood cells.
SUGARDOWN®
We have developed and currently
produce and test market sell SUGARDOWN®, a non-systemic complex carbohydrate-based dietary food supplement to support healthy
post-meal blood glucose using proprietary processes and technology. We will have unrestricted access to both sufficient raw materials
at commodity pricing and processing facilities to produce sufficient supply of SUGARDOWN® to support product distribution across
multiple sales channels regulated as a dietary supplement. Our SUGARDOWN® designated dietary supplement consists of a complex
carbohydrate composition.
Status of Development of
SUGARDOWN®
We completed development of
SUGARDOWN
®
as an over the counter (OTC) dietary supplement. We filed a structure and function claim application with
the United States Food and Drug Administration (FDA) with respect to SUGARDOWN
®,
which describes the proposed mechanism
of action of SUGARDOWN
®
in reducing post-meal elevation of glucose in the blood. We have submitted thirty structural
and functional claims with the FDA. We currently have strategically filed national stage patent applications pending that are directed
to the Composition of purified mannans, which are utilized in the formulation of SUGARDOWN
®.
We have also received a
registered mark for SUGARDOWN
®
. General Product Liability Insurance for SUGARDOWN
®
has been in effect since
April 2010. On January 24, 2012, we announced the clinical test results in healthy volunteers performed at the Sydney University
Glycemic Institute for Research with SUGARDOWN
®
. On January 28, 2013, we announced the final results of the study conducted
at the University of Sydney that showed the post- meal incremental area under the curve (iAUC) for glucose and insulin were significantly
lower following consumption of SUGARDOWN
®
tablets prior to a high carbohydrate meal of rice in a dose-dependent manner.
This resulted in a reduction of up to 61% in post-meal elevation of blood glucose compared with the rice consumed alone. On average,
there was a 25.5% reduction in the post-meal iAUC for glucose and a 20% reduction in post-meal insulin response for the 10 volunteers
in the study. No severe adverse effects were reported or observed during the study.
Licensing Agreement with
Advance Pharmaceutical Company
On June 24, 2011, we entered
into a definitive Licensing and Manufacturing Agreement (the “Agreement”) with Advance Pharmaceutical Company (“Advance
Pharmaceutical”), a Hong Kong-based, privately-held company and a significant stockholder of ours.
Under terms of the Agreement,
we will manufacture and supply product in bulk for Advance Pharmaceutical. Advance Pharmaceutical may be responsible for the packaging,
marketing and distribution of SUGARDOWN™ in Hong Kong, China and Macau. In November 2014, we agreed to expand their marketing
agreement to include 12 additional countries: Korea, Taiwan, Singapore, Thailand, Malaysia, Vietnam, Philippines, Myanmar, Indonesia,
Laos, Brunei and Cambodia. In March 2015, we agreed to expand their marketing agreement to include Japan. Advance Pharmaceutical
will also have rights to develop and manufacture SUGARDOWN™ for commercial sale in these countries, subject to establishment
of quality assurance and quality control standards set forth by us. The Agreement provides that Advance Pharmaceutical will pay
royalties to us for SUGARDOWN™ and related products developed by us and a reduced royalty rate for products based on our
intellectual property and developed by Advance Pharmaceutical. Revenue generated through this agreement for the years ended December
31, 2016 and 2015 were approximately $52,000 and $70,000, respectively.
Marketing SUGARDOWN®
We believe SUGARDOWN® is a safe and
effective designated dietary supplement that can help support healthy after-meal blood sugar excursions out of normal ranges and
support a weight management plan by helping to curb appetite if taken before meals. The product is ready for limited market release
and is currently available for distribution in some Asian markets and is available for sale in the U.S. through our product website,
www.sugardown.com
.
To date, our marketing plan
for SUGARDOWN® has been test marketing and to out-license marketing rights to strategic partners in their jurisdictions of
expertise. In June 2011, we entered into an agreement with Advance Pharmaceutical Co. Ltd., our Hong Kong-based strategic partner
that is also a significant stockholder of ours, to develop markets for SUGARDOWN® in Hong Kong, China and Macau. (See licensing
partnership above)
Overview of Diabetes
Diabetes Mellitus
Diabetes mellitus, known simply
as diabetes, is a chronic metabolic disorder in which a person has abnormally high levels of glucose in the circulating blood.
This condition is caused by a failure of the pancreas to produce insulin and/or an inability of the body to respond adequately
to circulating insulin. When glucose builds up in the blood instead of going into cells, it can lead to diabetes complications,
which include limb Ischemia and neuropathy, retinopathy, kidney, cardiovascular and cerebrovascular diseases. According to the
Centers for Disease Control and Prevention (CDC), diabetes affected approximately 26 million people in the United States in 2011.
The estimated cost of diabetes in the United States alone is $245 billion, according to a study commissioned by the American Diabetes
Association entitled,
Economic Costs of Diabetes in the U.S. in 2012.
Pre-Diabetes
Pre-diabetes is the state in
which a person has higher than normal blood glucose level, but not high enough to be diagnosed with diabetes. While in this range
between normal and diabetic, patients are at risk for not only developing Type 2 diabetes, but also for cardiovascular complications.
According to the CDC, pre-diabetes affected an estimated 79 million Americans in 2010.
Diabetes Mellitus is categorized
into three general areas:
Type 1 diabetes:
results
from the body’s failure to produce insulin, and presently requires the person to inject insulin. Only 5-10% of people with
diabetes have this form of the disease. It is considered an auto-immune disease, since the body’s immune system attacks and
destroys insulin producing beta cells in the pancreas.
Type 2 diabetes:
results
from insulin resistance by the body’s cells, deficient insulin production by the Pancreas or a combination of both. Insulin
resistance is a condition in which the cells in the body ignore or have become desensitized to insulin.
Gestational diabetes:
is
determined when pregnant women, who have never had diabetes before, have a high blood glucose level during pregnancy. It may precede
development of Type 2 diabetes and affects approximately 4% of all pregnant women.
People with Type 2 and Type
1 diabetes generally manage their blood glucose level on a meal-to-meal basis. High levels of glucose in the bloodstream for prolonged
periods can lead to complications of diabetes caused by reduced oxygen supply and nerve tissue damage to eyes, kidney, brain, heart
and limbs.
Standard therapies for diabetes
include physician-recommended exercise and diet, oral hypoglycemic drugs such as Metformin for Type 2 diabetics, and insulin injection
regimens for Type 1 diabetics. The objective of each is to maintain a daily blood glucose level range recommended by a physician.
Overview of Hypoxia
Hypoxic conditions are detrimental
to maintaining normal functionality in all living tissues. In mammals, red blood cells (RBCs) deliver oxygen throughout the body
using red blood cell contained (RBC) hemoglobin, a protein responsible for carrying and releasing oxygen to the body’s tissues.
Under normal conditions, approximately 98% of oxygen is delivered by hemoglobin in the RBCs, while less than two percent is dissolved
in the plasma, the fluid part of the blood.
As the heart pumps blood, RBCs
take up oxygen in the lungs and carry it to various parts of the body. Blood travels through progressively smaller blood vessels
to the capillaries, some of which are so narrow that RBCs can only pass through them in single file. Most of the oxygen release
occurs in the capillaries. Oxygen depleted RBCs return to the lungs to be reloaded. Adequate blood flow, pressure and RBC counts
are crucial to this process. Hypoxia, or oxygen deprivation, even for several minutes, can result in cell damage, organ dysfunction
and, if prolonged, death.
The causes of inadequate tissue
oxygenation generally can be classified into three major categories:
Ischemia
: inadequate
RBC flow for tissue oxygenation. Ischemia may be caused by obstructed or constricted blood vessels and can lead to stroke, heart
attack or other organ or tissue dysfunction.
Cardiopulmonary failure
:
impaired function of the heart or lungs. Cardiopulmonary failure may be caused by the inability of the heart to pump sufficient
quantities of blood to meet the needs of the tissues or the failure of the lungs to oxygenate blood adequately.
Anemia:
insufficient
RBCs in circulation. This condition can be caused by chronic disorders affecting RBCs functionality or production like chemotherapy
and radiation for treatment of cancer, or blood borne diseases like bone marrow diseases. Anemia may be also caused by acute blood
loss from accidental injury or surgery.
The standard therapy for acute
anemia resulting from blood loss is infusion of RBCs mainly from supplies of donated blood. For prophylactic or long-term treatment
of anticipated or chronic anemia, medications that stimulate the creation of new RBCs are frequently used.
Presently, there is no substitute
for human blood to deliver oxygen to the body; and transfusions involve certain risks and limitations. Despite the effort
by blood banks around the world to screen the blood supply for HIV, hepatitis and other blood borne diseases, there is a continuing
risk of an unsafe blood supply in many parts of the world; donated blood continues to carry the risk of disease transmission.
Blood compatibility and handling
and storage requirements and limitations limit the use of RBCs transfusions to hospital environment only. Shortages of certain
types of blood thus occur due to seasonal factors or disasters. Since RBCs’ oxygen-delivering capacity breaks down with storage
(approximately 75% capacity remains after eight days of storage) their shelf-life is less than 42 days, limiting the ability for
significant stockpiles of RBCs. In addition, for ischemic conditions due to constricted blood vessels where normal passage of RBCs
is restricted or due to impaired heart or lung function, RBC transfusions are generally not effective.
Business Strategy
Our business strategy primarily
consists of the following:
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to advance our leading clinical stage drug candidates, BTI-320 and IPOXYN/OXYFEX, through staged regulatory approvals in the
United States and the European Union and, if successful, to commercialize BTI-320 and IPOXYN either on our own or with one or more
strategic partners in the U.S. and/or outside of the U.S.; and
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to drive brand awareness and increase sales of SUGARDOWN® in North America and globally in 2017 and beyond and to further
study the potential beneficial characteristics of SUGARDOWN®.
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We intend to continue to establish
and implement clinical development programs that add value to our business in the shortest period of time possible and to seek
strategic partners when a program becomes advanced and requires additional resources. We intend to continue focusing our expertise
and resources to develop novel formulations, and to leverage development partnerships to apply our complex carbohydrate chemistry
design in other medical indications. We may seek to enter into licensing, co-marketing, or co-development agreements across different
geographic regions, in order to avail ourselves of the marketing expertise of one or more seasoned marketing and/or pharmaceutical
companies. Our strategy is to leverage considerable industry experience, expertise in complex carbohydrate chemistry and clinical
development experience to continue to identify, develop and commercialize product candidates with strong market potential that
can fulfill unmet medical needs in the treatment of diabetes and inflammatory diseases. We plan to further develop new and proprietary
drug candidates to provide improved efficacy and safety by using novel development pathways specific to each candidate.
A core part of our strategy
relies upon creating safe and efficacious drug formulations that can be administered as standalone therapies or in combination
with existing medications. We believe we utilize a novel approach that is expected to create safe and efficacious drug formulations
that can be combined with existing therapies and potentially deliver valuable products in areas of high unmet medical needs. In
2014, we assembled a scientific advisory board consisting of scientists with both academic and corporate research and development
experience that will provide leadership and counsel in the scientific, technological and regulatory aspects of our current and
future projects. In addition, we have assembled a medical advisory board consisting of leading physicians and key opinion leaders
who have participated in relevant clinical studies and who will guide us through ongoing clinical trial programs. Our scientific
and medical advisory boards consist of some of the leading scientists, medical doctors and professionals in the carbohydrate and
diabetes fields.
We believe that our highly experienced
drug development leadership provides us with a significant competitive advantage in designing highly efficient clinical programs
to deliver valuable products in areas of high unmet medical needs.
Key Strengths
We believe that our key differentiating
elements include:
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Focus on novel therapeutic opportunities provided by carbohydrates:
We are focused on development of carbohydrate-based
compounds to better manage blood glucose and anti-necrosis or hypoxia therapeutics. As a result of its structural complexity, carbohydrates
have not received as much scientific attention as nucleic acids and proteins. Carbohydrate-based therapeutics have proven to be
efficacious and safe, while elimination many common side effects from other types of drugs.
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Experienced management:
Carl Rausch is a leader in the field of oxygen therapeutics products and through the years was
responsible for the only manufactured and tested, and approved materials in this field as supported through publications and product
approvals in Russia and South Africa for the human version and for the Veterinary world in the European Union and for the US FDA.
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Products are differentiated from other investigative materials and address significant unmet needs:
Both of our lead
product candidates, BTI-320 and IPOXYN, are well-differentiated diabetes-related formulations that address important unmet medical
needs. Diabetes prevention and management, including excessive sugar exposure management and treatment of inflammatory diseases,
remains a critical area of unmet need. Increasingly, patients, physicians and the media are highlighting the deficiencies of current
diabetes-related therapies and the growing population of affected individuals.
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A multiple product portfolio with a balanced risk reward profile:
We have two lead product candidates and a dietary
supplement product currently generating a small revenue with what we believe can uncover significant growth prospects. We have
also begun to develop a pipeline of additional carbohydrate-based therapeutics. Accordingly, we believe that the revenues we generate
from our advanced products and drug candidates will offset costs related to developing our existing and future pipeline.
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Efficient development strategy:
We believe that the FDA’s 505(b)(2) regulatory pathway for IPOXYN and its veterinary
analog, OXYFEX, lowers the risk of drug development of these drug candidates. Our strategy of combining these drugs, once approved,
with novel delivery methods and pharmaceutical compositions is expected to significantly reduce clinical development time and costs
and lowers regulatory risks, while delivering valuable products in areas of high unmet need to the market place.
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Subsidiaries
We currently have no subsidiaries.
Employees
The Company does not have any full
time employees. Carl Rausch is our Chief Executive Officer and Chief Financial Officer. Mr. Rausch works under an employment
agreement with the Company. The Company employs other consultants to assist with the operation of the business as needed.
Facilities
We currently lease office space
at 354 Merrimack Street, Lawrence, MA 01843 on a month to month basis. Prior to this location, we leased office space at 233 Needham
Street, Newton MA 02464. This lease expired July 31, 2016 and no further obligation exists. During 2015, we leased an office located
at 1750 Elm Street, Suite 103, Manchester, NH 03104. The Company abandoned the Manchester NH lease in October of 2015. In March
2016, the Company and the landlord agreed to settle the remaining lease obligation for a one-time payment of $152,000. The Company
has no future obligation under the lease.
Manufacturing
We currently contract with a
third-party to manufacture BTI-320 and SUGARDOWN® in the United States at a Good Manufacturing Practices (GMP) compliant facility.
We are evaluating whether to gain access to a pilot-scale manufacturing facility with adequate capacity to produce IPOXYN for clinical
trials and market introduction following FDA/European Medicines Evaluation Agency (EMEA) approval, but no agreement for such access
is currently in place. We intend to only utilize manufacturing facilities that we believe are fully compliant with GMP as required
by the regulatory authorities in Europe or the United States.
Environmental Regulation
Pharmaceutical research and
development involves the controlled use of hazardous materials. Biotechnology and pharmaceutical companies must comply with laws
and regulations governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of
certain materials, biological specimens and wastes. We do not anticipate building in-house research, development or manufacturing
facilities, and, accordingly, do not expect to have to comply directly with environmental regulation. However, our contractors
and others conducting research, development or manufacturing activities for us may be required to incur significant compliance
cost, and this could in turn could increase our expense or delay our completion of research or manufacturing programs.
Lack of Major Customers
To date we have had limited
sales of our products and have one significant customer, Advance Pharmaceutical Co. Ltd., a Hong Kong-based pharmaceutical company,
a significant stockholder of ours, for distribution of SUGARDOWN
®
in Hong Kong, China and Macau. These authorized territories
were recently expanded to include Korea, Taiwan, Singapore, Thailand, Malaysia, Vietnam, Philippines, Myanmar, Indonesia, Laos,
Brunei, Cambodia and Japan. One of our directors, Conroy Chi-Heng Cheng, is also a director of Advance Pharmaceutical Co. Ltd.
Intellectual
Property
Patents,
trademarks, trade secrets, technological know-how and other proprietary rights are important to our business. Our patent portfolio
is directed to three main areas, mannans, hemoglobin composition and methods of use, and taste masking in chewable tablets. The
active ingredient in BTI-320 is a mannan, and BTI-320 is a proprietary fractionated mannan. Mannans are a group of plant-derived
complex carbohydrates, or polysaccharides, which consist mainly of polymers of the sugar mannose. Some of the plants from which
mannans are derived are guar, locust bean, fenugreek, barley and konjac. Published studies on mannans have shown that they possess
significant biological activity ranging from inhibition of cholesterol absorption to promoting wound healing and inhibiting tumor
growth. Studies have also shown that consuming mannans before a meal may lessen the rise in blood glucose after the meal. Therefore,
supplementation with mannans may be beneficial in the management of diabetes by supporting healthy blood sugar levels. We seek
to strengthen our patent portfolio and increase market exclusivity as we progress in our clinical development process. During
the clinical development and commercial scale up of our products, we anticipate additional intellectual property may be realized
from the creation of novel therapeutic formulations, methods of manufacture, methods of use and novel quality control assays for
each of our products. Our intellectual property estate directed to our technology and products consists of four international
patent applications and their related national stage applications entitled: Composition of Purified Soluble Mannans for Dietary
Supplements and Methods of Use Thereof (W02012/061675); Hemoglobin Compositions and Methods of Use (WO2012/78850); Encapsulation
of Pharmaceuticals for Taste Masking in Chewable Tablets (PCT/US14/27243); and Compositions for Inhibiting Amylase Mediated Hydrolysis
of Alpha (1-4) Linked Glucose Polymers (WO PCT/US16/31120). The international patent application entitled Hemoglobin Compositions
and Methods of Use and its related national stage filings, which were assigned to us by Dr. Platt, are directed to our IPOXYN
and OXYFEX technologies. National patent applications related to Hemoglobin Compositions have been recently allowed in the jurisdictions
of Europe and China. Additional Hemoglobin Composition applications are pending in the United States and Hong Kong. The international
patent application entitled Composition of Purified Soluble Mannans for Dietary Supplements and Methods of Use Thereof and its
related national stage filings, which were assigned to us by Dr. Platt, are directed to our BTI-320 and SUGARDOWN
®
technologies.
National patent applications related to the Purified Soluble Mannans have been recently allowed in China and Hong Kong. Additional
Purified Soluble Mannans applications are pending in the United States, Korea and Europe. The international application entitled:
Compositions for Inhibiting Amylase Mediated Hydrolysis of Alpha (1-4) Linked Glucose Polymers will enter its national phase in
November of 2017. Dr. Platt also has assigned the trademarks IPOXYN (U.S. Trademark Application No. 77754473) and Avanyx Therapeutics™
(U.S. Trademark Application No. 77806120) to us. Dr. Platt and our former President Mr. Tassey have assigned the trademark SUGARDOWN®
(U.S. Trademark Reg. No. 3,955,414, registered May 3, 2011) to us.
It
is not economically practicable to determine in advance whether our products, product components, manufacturing processes or the
intended uses for our products infringe the patent rights of others. It is likely that, from time to time, we will receive notices
from others of claims or potential claims of intellectual property infringement or we may be called upon to defend a customer,
vendee or licensee against such third party claims. Responding to these kinds of claims, regardless of merit, could consume valuable
time, result in costly litigation or cause delays, all of which could harm our business.
Responding
to these claims could also require us to enter into royalty or licensing agreements with third parties claiming infringement.
Such royalty or licensing agreements, if available, may not be available on terms acceptable to us.
Government
Regulation
New drug
approval for clinical use requires extensive research, manufacturing, pre-clinical and clinical studies, packaging, labeling,
advertising, promotion, export and marketing, among other things. Both BTI-320 and IPOXYN will be subject to extensive regulation
by governmental authorities in the United States and other countries. As a therapeutic product administered by intravenous infusion
IPOXYN will be regulated as a drug and will require extensive safety and efficacy studies for regulatory approval before it may
be commercialized.
Drug
Approval Process
In the United
States, IPOXYN is a new chemical entity and will require FDA approval. BTI-320, as a drug candidate, will also require FDA approval.
Before final approval for marketing for either IPOXYN or BTI-320 could occur, the following steps must be completed: preclinical
safety animal studies, GMP manufacturing, submission of Investigational New Drug, or IND application for extensive clinical trials
to show proof of concept to significant health benefit.
After approval
and during clinical studies the FDA can put the drug on "clinical hold." In such case, the IND sponsor and the FDA must
resolve any outstanding concerns before the use of the drug can proceed. The FDA may stop marketing, or clinical trials, or particular
types of trials, by imposing a clinical hold because of safety concerns and potential risk to patients.
Clinical
trials involve the administration of the investigational products to healthy volunteers or patients under the supervision of a
qualified principal investigator consistent with an informed consent. Each clinical protocol is submitted, reviewed and approved
by an independent Institutional Review Board, or IRB, or Ethical Committee (EC) at a participating hospital or clinical site,
at which the study will be conducted. The IRB/EC will consider, among other things; ethical factors, safety to human subjects
and the possible liability of the institution.
Clinical
trials required for FDA approval typically are conducted in three sequential phases, but the phases may overlap. In Phase I, the
initial introduction of the drug into human subjects, the drug is usually tested for safety or adverse effects, dosage tolerance,
absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase II
clinical trials usually involve studies in a limited patient population to evaluate the efficacy of the drug for specific, targeted
indications, determine dosage tolerance and optimal dosage and identify possible adverse effects and safety risks.
Phase III
clinical trials generally further evaluate clinical efficacy and test further for safety within an expanded patient population
and at multiple clinical sites.
After FDA
approval, Phase IV clinical trials may be conducted to gain additional experience from the treatment of patients in the intended
therapeutic indication. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for
approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase IV clinical trial
requirement. These clinical trials are often referred to as Phase III/IV post-approval clinical trials.
The results
of the pre-clinical studies and clinical trials, together with detailed information on the manufacture and composition of the
product, are submitted to the FDA in the application requesting approval to market the product. The FDA may delay approval of
any product submitted by the Company. The FDA may limit the indicated uses for which an approval is given.
New Drug
Approval for Veterinary Use
The use
of new drugs for companion animals requires the filing of a New Animal Drug Application, or NADA, with and approval by the FDA.
The requirements for approval are similar to those for new human drugs, exclusive of human trials. Obtaining NADA approval often
requires safety and efficacy clinical field trials in the applicable species and disease, after submission of an Investigational
New Animal Drug Application, or INADA, which for non-food animals becomes effective upon acceptance for filing.
Dietary
Supplements
We currently
offer SUGARDOWN
®
as a dietary supplement. We are not required to obtain FDA approval in order to offer SUGARDOWN
®
in this manner. We are required to either comply with certain FDA guidelines with respect to certain marketing claims for
SUGARDOWN
®
, or to file those claims with the FDA. We believe that we comply with those guidelines and have voluntarily
filed structural and functional claims with the FDA.
Pervasive
and Continuing Regulation
Any FDA
approvals that may be granted will be subject to continual review, and newly discovered or developed safety or efficacy data may
result in withdrawal of products from marketing. Moreover, if and when such approval is obtained, the manufacture and marketing
of our products remain subject to extensive regulatory requirements administered by the regulatory bodies, including compliance
with current Good Manufacturing Practices, serious adverse event reporting requirements and the FDA's general prohibitions against
promoting products for unapproved or "off-label" uses.
We are subject
to inspection and market surveillance by the FDA for compliance with these regulatory requirements. Failure to comply with the
requirements can, among other things, result in warning letters, product seizures, recalls, fines, injunctions, suspensions or
withdrawals of regulatory approvals and termination of marketing. Any such enforcement action could have a material adverse effect
on us. Unanticipated changes in existing regulatory requirements, state and local work and environmental laws or the adoption
of new requirements could also have a material adverse effect on us.
Foreign
Regulation
We will
be subject to a variety of regulations governing clinical trials and sales of our products in the United States and outside the
United States. Whether or not FDA approval has been obtained, approval of a product by the comparable non-U.S. regulatory authorities
must be obtained prior to the commencement of marketing of the product in any country.
The approval
process varies from country to country and can be complicated and time consuming; the time needed to secure approval may
be longer or shorter than that required for FDA approval. For example, the European Union requires approval of a Marketing Authorization
Application by the European Medicines Evaluation Agency. These applications require the completion of extensive preclinical studies,
clinical studies and manufacturing and controls information.
Reimbursement
Our ability
to successfully commercialize our human products also may depend on the extent to which reimbursement of the cost of such products
and related treatment will be approved by the government health administration authorities, private health insurers and other
health providers’ organizations. Significant uncertainty exists as to the reimbursement status of newly approved health
care products. As third-party payors are increasingly challenging the price of medical products, there can be no assurance that
adequate reimbursement of the cost will be available to enable us to maintain price levels sufficient for realization of an appropriate
return on its investment.
Recently
the public and the federal government have focused significant attention on reforming the health care system in the United States.
A number of health care reform measures have been suggested, including price controls on therapeutics. Public discussion of such
measures is likely to continue, and concerns about the potential effects of different possible proposals have been reflected in
the volatility of the stock prices of companies in the health care and related industries.
Item
1A. Risk Factors.
The following
important factors, and the important factors described elsewhere in this report or in our other filings with the SEC, could affect
(and in some cases have affected) our results and could cause our results to be materially different from estimates or expectations.
The following and these other risks could materially and adversely affect our business, operations, results or financial condition.
RISKS
RELATED TO OUR BUSINESS
We
have incurred significant losses since our inception and expect to incur losses for the foreseeable future and may never achieve
or maintain profitability.
We have
incurred losses totaling $18.2 million from August 24, 2009 (inception) through December 31, 2016
.
As of December 31, 2016,
we had approximately $687,000 of cash on hand. The report of our independent registered public accountants as of and for the year
ended December 31, 2016, contained an explanatory paragraph regarding substantial doubt about our ability to continue as a going
concern. Our ability to continue as a going concern is dependent upon our ability to generate revenue and raise capital from financing
transactions. The Company completed a private place during the third quarter of 2016 raising gross proceeds of $1.6 million. Management
anticipates that our cash resources will be sufficient to fund our planned operations into the second quarter of 2017 as a result
of this funding and proper cash management. The future of the Company is dependent upon its ability to obtain financing and upon
future profitable operations from the development of its new business opportunities. There can be no assurance that we will be
successful in accomplishing its objectives. Without such additional capital, we may be required to curtail or cease operations.
To stay
in business, we will need to raise substantial additional capital through public or private sales of our securities, debt financing
or short-term bank loans, or a combination of the foregoing. We anticipate that our expenses will increase substantially as we:
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conduct
additional Phase II and Phase III clinical trials of, and further advance, our lead drug
candidate BTI-320 and potentially initiate pre-clinical and clinical trials for IPOXYN;
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continue
the research and development of our other drug candidates, including potentially in-licensing
other technologies and therapeutics;
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seek
to discover and develop additional drug candidates;
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seek
regulatory approvals for any drug candidates that successfully complete clinical trials;
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potentially
establish a sales, marketing and distribution infrastructure and scale up external manufacturing
capabilities to commercialize any products for which we may obtain regulatory approval;
and
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maintain,
expand and protect our intellectual property portfolio.
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We believe
we have developed a viable plan to continue as a going concern. However, the plan relies upon our ability to obtain additional
sources of capital and financing. If the amount of capital we are able to raise from financing activities, together with our revenues
from operations, is not sufficient to satisfy our capital needs, we may be required to cease operations.
To become
and remain profitable, we must succeed in developing and commercializing products that generate significant income. This will
require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials
of our drug candidates, discovering additional drug candidates, obtaining regulatory approval for these drug candidates manufacturing,
marketing and selling any products for which we may obtain regulatory approval, and establishing and managing our collaborations
at various stages of each candidate’s development. We are only in the preliminary stages of many of these activities. We
may never succeed in these activities and, even if we do, may never generate income that is significant enough to achieve profitability.
Because
of the numerous risks and uncertainties associated with pharmaceutical and dietary supplement product development, we are unable
to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If
we are required by the U.S. Food and Drug Administration, or FDA, or the European Medicines Agency, or EMA, to perform studies
in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any
of our drug candidates, our expenses could increase and revenue could be further delayed.
Even if
we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure
to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our
business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline
in the value of our company could also cause you to lose all or part of your investment.
We
have a limited operating history, which makes it difficult to evaluate our current business and future prospects.
We are a
company with limited operating history, and our operations are subject to all of the risks inherent in establishing a new business
enterprise. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in connection with the formation of a new business, the development of new technologies or those
subject to clinical testing, and the competitive and regulatory environment in which we will operate. Although we have made initial
sales of our SUGARDOWN® product as a dietary supplement and, while we expect to continue selling or licensing that product,
we have no other products currently available for sale, and none are expected to be commercially available before 2018, if at
all. We may never obtain FDA or EMA approval of our products in development and, even if we do so and are also able to commercialize
our products, we may never generate revenue sufficient to become profitable. Our failure to generate revenue and profit would
likely cause our securities to decrease in value or become worthless.
We
will require additional financing to implement our business plan, which may not be available on favorable terms or at all, and
we may have to accept financing terms that would place restrictions on us.
We presently
have an immediate need for capital, and if we do not raise capital, we may be forced to curtail operations and our business might
fail. We anticipate that our cash resources will be sufficient to fund our planned operations into the second quarter of 2017.
Even if we are able to raise near term capital, we will need to continue to conduct significant research, development, testing
and regulatory compliance activities for IPOXYN and BTI-320 that, together with projected general and administrative expenses,
we expect will result in operating losses for the foreseeable future. We may not generate sales or other revenue from SUGARDOWN®
to fund operations and will remain dependent on outside sources of financing until that time and we will need to raise funds from
additional financing. We may not be able to obtain equity or debt financing on acceptable terms or at all to implement our growth
strategy. As a result, adequate capital may not be available to finance our current growth plans, take advantage of business opportunities
or respond to competitive pressures. If we are unable to raise additional funds, we may be forced to curtail or even abandon our
business plan.
Until such
time, if ever, as we can generate substantial product income, we expect to finance our cash needs through a combination of equity
offerings, debt financings and license and collaboration agreements. To the extent that we raise additional capital through the
sale of equity or convertible debt securities, the ownership interest of existing stockholders will be diluted, and the terms
of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. In addition,
the terms of any future financings may impose restrictions on our right to declare dividends or on the manner in which we conduct
our business. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting
or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring
dividends, or making acquisitions or significant asset sales.
If we raise
additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties,
we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or
grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock.
Our
products are based on novel, unproven technologies.
Our drug
candidates in development are based on novel, unproven technologies using proprietary carbohydrate compounds in combination with
FDA approved drugs currently used in the treatment of diabetes, ischemia, anemia and trauma and other diseases. Carbohydrates
are difficult to synthesize, and we may not be able to synthesize carbohydrates that would be usable as delivery vehicles for
the anti-hypoxia drugs we are working with or other therapeutics we intend to develop. Although we have completed certain animal
and human studies that we believe were successful, pre-clinical results in animal studies are not necessarily predictive of outcomes
in subsequent human clinical trials. Clinical trials are expensive, time- consuming and may not be successful. They involve the
testing of potential therapeutic agents, or effective treatments, in humans, typically in three phases, to determine the safety
and efficacy of the products necessary for an approved drug. Many products in human clinical trials fail to demonstrate the desired
safety and efficacy characteristics. Even if our products progress successfully through initial or subsequent human testing, they
may fail in later stages of development. We may engage others to conduct our clinical trials, including clinical research organizations
and, possibly, government-sponsored agencies. These trials may not start or be completed as we forecast, or may not achieve desired
results.
Clinical
drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience
delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.
All our
drug candidates are unproven and their risk of failure is high. It is impossible to predict when or if our drug candidates will
receive regulatory approval or, in the case of IPOXYN, prove effective and safe in humans. Before obtaining marketing approval
from regulatory authorities for the sale of any drug candidate, we must conduct extensive clinical trials and, in the case of
IPOXYN, first complete preclinical development, to demonstrate the safety and efficacy of our drug candidates in humans. Clinical
testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failed
clinical trial can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive
of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover,
preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed
their drug candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing
approval of their products.
We may experience
numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing
approval or commercialize our drug candidates, including:
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regulators
or institutional review boards may not authorize us or our investigators to commence
a clinical trial or conduct a clinical trial at a prospective trial site;
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we
may experience delays in reaching, or fail to reach, agreement on acceptable clinical
trial contracts or clinical trial protocols with prospective trial sites;
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clinical
trials of our drug candidates may produce negative or inconclusive results, and we may
decide, or regulators may require us, to conduct additional clinical trials or abandon
product development programs;
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the
number of patients required for clinical trials of our drug candidates may be larger
than we anticipate, enrollment in these clinical trials may be slower than we anticipate
or participants may drop out of these clinical trials at a higher rate than we anticipate;
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our
third-party contractors may fail to comply with regulatory requirements or meet their
contractual obligations to us in a timely manner, or at all;
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we
may have to suspend or terminate clinical trials of our drug candidates for various reasons,
including a finding that the participants are being exposed to unacceptable health risks;
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regulators
or institutional review boards may require that we or our investigators suspend or terminate
clinical research for various reasons, including noncompliance with regulatory requirements
or a finding that the participants are being exposed to unacceptable health risks;
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the
cost of clinical trials of our drug candidates may be greater than we anticipate;
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the
supply or quality of our drug candidates or other materials necessary to conduct clinical
trials of our drug candidates may be insufficient or inadequate;
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our
drug candidates may have undesirable side effects or other unexpected characteristics,
causing us or our investigators, regulators or institutional review boards to suspend
or terminate the trials; and
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regulators
may revise the requirements for approving our drug candidates, or such requirements may
not be as we anticipate.
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If we are
required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate,
if we are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials
or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be
delayed in obtaining marketing approval for our drug candidates;
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not
obtain marketing approval at all, which would seriously impair our viability;
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obtain
marketing approval in some countries and not in others;
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obtain
approval for indications or patient populations that are not as broad as we intend or
desire;
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obtain
approval with labeling that includes significant use or distribution restrictions or
safety warnings;
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be
subject to additional post-marketing testing requirements; or
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have
the product removed from the market after obtaining marketing approval.
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We are planning
to continue Phase II clinical trials and initiate Phase III clinical trials for BTI-320. In addition, subject to securing adequate
funding, we could potentially initiate pre- clinical studies of IPOXYN. However, we cannot provide any assurance that we will
successfully initiate or complete those planned trials and be able to initiate any other clinical trials for any of our drug candidates.
The results of our clinical trials could yield negative or ambiguous results. Since BTI-320 and IPOXYN are our most advanced drug
candidates, such results could adversely affect future development plans, collaborations and our stock price.
Our product
development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any
of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule,
or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive
right to commercialize our drug candidates or allow our competitors to bring products to market before we do, potentially impairing
our ability to successfully commercialize our drug candidates and harming our business and results of operations.
A
fast track, breakthrough therapy or other designation by the FDA may not actually lead to a faster development or regulatory review
or approval process.
We may seek
fast track, breakthrough therapy or similar designation for some of our drug candidates. If a drug is intended for the treatment
of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition,
the drug sponsor may apply for FDA fast track designation. The FDA has broad discretion whether or not to grant this designation,
and even if we believe a particular drug candidate is eligible for this designation, we cannot assure you that the FDA would decide
to grant it. Even if we do receive fast track designation, we may not experience a faster development process, review or approval
compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no
longer supported by data from our clinical development program.
Additionally,
we may in the future seek a breakthrough therapy designation for some of our product candidates that reach the regulatory review
process. A breakthrough therapy is a drug candidate that is intended, alone or in combination with one or more other drugs, to
treat a serious or life-threatening disease or condition, and that, as indicated by preliminary clinical evidence, may demonstrate
substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment
effects observed early in clinical development. Drugs designated as breakthrough therapies by the FDA are eligible for accelerated
approval and increased interaction and communication with the FDA designed to expedite the development and review process.
As with
fast track designation, designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe
one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and may determine
not to grant such a designation. Even if we receive a breakthrough therapy designation for any of our product candidates, the
designation may not result in a materially faster development process, review or approval compared to conventional FDA procedures.
Further, obtaining a breakthrough therapy designation does not assure or increase the likelihood of the FDA’s approval of
the applicable product candidate. In addition, even if one or more of our product candidates qualifies as a breakthrough therapy,
the FDA could later determine that those products no longer meet the conditions for the designation or determine not to shorten
the time period for FDA review or approval.
In addition,
we may seek to avail ourselves of the FDA’s 505(b)(2) approval procedure where it is appropriate to do so. Section 505(b)(2)
of the Federal Food, Drug, and Cosmetic Act permits an applicant to file a new drug application (or NDA) with the FDA where at
least some of the information required for approval comes from studies not conducted by or for the applicant and for which the
applicant has not obtained a right of reference. The applicant may rely upon published literature and the FDA’s findings
of safety and effectiveness based on certain preclinical testing or clinical studies conducted for an approved product. The FDA
may also require companies to perform additional studies or measurements to support the change from the approved product. If this
approval pathway is not available to us with respect to a particular formulation or product, or at all, the time and cost associated
with developing and commercializing such formulations or products may be prohibitive and our business strategy would be materially
and adversely affected.
We
rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing
to meet deadlines for the completion of such trials.
We currently
use third-party clinical research organizations, or CROs, to conduct our planned clinical trials and do not plan to independently
conduct clinical trials of our other drug candidates. We rely on third parties, such as CROs, clinical data management organizations,
medical institutions and clinical investigators, to conduct and manage our clinical trials. These agreements might terminate for
a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements,
that would delay our product development activities.
Our reliance
on these third parties for research and development activities reduces our control over these activities but does not relieve
us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance
with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with regulatory standards,
commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical trials
to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial
participants are protected. Other countries’ regulatory agencies also have requirements for clinical trials with which we
must comply. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored
database,
ClinicalTrials.gov
, within specified timeframes. Failure to do so can result in fines, adverse publicity and
civil and criminal sanctions.
Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties
do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with
regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals
for our drug candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our drug candidates.
We also
expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on
the part of our distributors could delay clinical development or marketing approval of our drug candidates or commercialization
of our products, producing additional losses and depriving us of potential product revenue.
If
we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals
could be delayed or prevented.
We may not
be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number
of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United
States, such as the EMA. In addition, some of our competitors have ongoing clinical trials for drug candidates that treat the
same indications as our drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll
in clinical trials of our competitors’ drug candidates.
Patient
enrollment is affected by other factors including:
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the
severity of the disease under investigation;
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the
patient eligibility criteria for the study in question;
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the
perceived risks and benefits of the drug candidate under study;
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the
efforts to facilitate timely enrollment in clinical trials;
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our
payments for conducting clinical trials;
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the
patient referral practices of physicians;
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the
ability to monitor patients adequately during and after treatment; and
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the
proximity and availability of clinical trial sites for prospective patients.
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We are unable
to forecast with precision our ability to enroll patients. Our inability to enroll a sufficient number of patients for our clinical
trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays
in our clinical trials may result in increased development costs for our drug candidates, which would cause the value of our company
to decline and limit our ability to obtain additional financing.
If
serious adverse or unacceptable side effects are identified during the development of our drug candidates or we observe limited
efficacy, we may need to abandon or limit our development of some of our drug candidates.
If our drug
candidates are associated with undesirable side effects in clinical trials, have limited efficacy or have characteristics that
are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the
undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
We believe our results to date suggest an acceptable safety profile at this stage of development. However, many compounds that
initially showed promise in early stage testing for treating diabetes and inflammatory diseases have later been found to cause
side effects that prevented further development of the compound.
Even
if any of our drug candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians,
patients, third-party payors and others in the medical community necessary for commercial success.
Even if
any of our drug candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians,
patients, third-party payors and others in the medical community. For example, current diabetes are well established in the medical
community, and physicians may continue to rely on these treatments. In addition, many new drugs have been recently approved and
many more are in the pipeline for the same diseases for which we are developing our drug candidates. If our drug candidates do
not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable.
The degree of market acceptance of our drug candidates, if approved for commercial sale, will depend on a number of factors, including:
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their
efficacy, safety and other potential advantages compared to alternative treatments;
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our
ability to offer them for sale at competitive prices;
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their
convenience and ease of administration compared to alternative treatments;
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the
willingness of the target patient population to try new therapies and of physicians to
prescribe these therapies;
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the
strength of marketing and distribution support;
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the
availability of third-party coverage and adequate reimbursement for our drug candidates;
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the
prevalence and severity of their side effects;
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any
restrictions on the use of our products together with other medications;
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interactions
of our products with other medicines patients are taking; and
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inability
of certain types of patients to take our products.
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If we are
unable to address and overcome these and similar concerns, our business and results of operations could be substantially harmed.
If
we are unable to establish effective sales, marketing and distribution capabilities or enter into agreements with third parties
with such capabilities, we may not be successful in commercializing our drug candidates if and when they are approved.
We do not
have a sales or marketing infrastructure and have limited experience in the sale, marketing or distribution of our products. To
achieve commercial success for any product for which we obtain marketing approval, we will need to successfully establish and
maintain relationships with third parties to perform sales and marketing functions, such as Advance Pharmaceutical.
In the future,
we may build a focused sales and marketing infrastructure to market or co-promote some of our drug candidates in the United States
and potentially elsewhere. There are risks involved with establishing our own sales, marketing and distribution capabilities.
For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the
commercial launch of a drug candidate or dietary supplement for which we recruit a sales force and establish marketing capabilities
is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses.
This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit
our efforts to commercialize our products on our own include:
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our
inability to recruit, train and retain adequate numbers of effective sales and marketing
personnel;
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the
inability of sales personnel to obtain access to or educate physicians on the benefits
of our products;
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the
lack of complementary products to be offered by sales personnel, which may put us at
a competitive disadvantage relative to companies with more extensive product lines;
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unforeseen
costs and expenses associated with creating an independent sales and marketing organization;
and
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inability
to obtain sufficient coverage and reimbursement from third-party payors and governmental
agencies.
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Currently,
we rely on third parties to sell, market and distribute our drug candidates. We may not be successful in entering into, or maintaining,
arrangements with such third parties or may be unable to do so on terms that are favorable to us. In addition, our product revenues
and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and
distribute any products that we develop ourselves. We likely will have little control over such third parties, and any of them
may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales,
marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be
successful in commercializing our drug candidates.
If
we are unable to convince physicians as to the benefits of our proposed products, we may incur delays or additional expense in
our attempt to establish market acceptance.
Broad use
of our proposed products may require physicians to be informed regarding our proposed products and the intended benefits. Inability
to carry out this physician education process may adversely affect market acceptance of our proposed products. We may be unable
to timely educate physicians regarding our proposed products in sufficient numbers to achieve our marketing plans or to achieve
product acceptance. Any delay in physician education may materially delay or reduce demand for our products. In addition, we may
expend significant funds toward physician education before any acceptance or demand for our proposed products is created, if at
all.
We
face substantial competition, which may result in others discovering, developing or commercializing competing products before
or more successfully than we do.
The development
and commercialization of new drug products, particularly in the diabetes sector, is highly competitive. We face competition with
respect to our current drug candidates, and will face competition with respect to any drug candidates that we may seek to develop
or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies
worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are
pursuing the development of products for the control of blood sugar and the treatment of diabetes generally. Potential competitors
also include academic institutions, government agencies and other public and private research organizations that conduct research,
seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.
A substantial
number of the companies against which we are competing or against which we may compete in the future have significantly greater
financial resources, established presence in the market and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions
in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number
of our competitors.
Smaller
and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, sales
and marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies complementary to, or necessary for, our programs.
Our commercial
opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have
fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors
also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could
result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability
to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
We may be
unable to compete in our target marketplaces, which could impair our ability to generate revenues, thus causing a material adverse
impact on our results of operations.
Our
reliance on one product and a limited number of customers for a significant portion of our revenues could materially and adversely
affect our results of operations and liquidity.
During the
years ended December 31, 2016 and 2015, all of our revenue was generated by sales of our SUGARDOWN® product. Advance Pharmaceutical
Company, Ltd., a related party, accounted for 53% and 71%, respectively for the years ended December 31, 2016 and 2015. If we
are unable to expand our customer base through our new marketing efforts, and we are not able to secure additional business from
our existing customer or our sales to this customer decline, our reliance on a limited number of customers may have a material
adverse effect on our business, result of operations, financial condition or liquidity. Furthermore, if we are unable to commercialize
any of our pharmaceutical drug candidates, our reliance on a single product may have a material adverse effect on our business,
result of operations, financial condition or liquidity.
Our success depends upon
our ability to retain key executives and to attract, retain, and motivate qualified personnel, and the loss of these persons could
adversely affect our operations and results.
We are highly
dependent on the principal members of our management, scientific and clinical team, including Carl Rausch, our Chief Executive
Officer and Director. We have an employment agreement with Mr. Rausch. We have no employees in our Company, we are entirely staffed
by consultants, each of whom may terminate their employment with us at any time.
The loss
of the services of our executive officers or other key employees or key members of our scientific or medical advisory boards,
could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully
implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an
extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience
required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited
pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition
among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring
of scientific and clinical personnel from universities and research institutions. In addition, we rely and expect to continue
to rely to a significant degree on consultants and advisors, including scientific and clinical advisors, to assist us in formulating
our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than
us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
Our
lack of operating experience may cause us difficulty in managing our growth which could lead to our inability to implement our
business plan.
We have
limited experience in marketing and the selling of pharmaceutical products. Any growth will require us to expand our management
and our operational and financial systems and controls. If we are unable to do so, our business and financial condition would
be materially harmed. If rapid growth occurs, it may strain our operational, managerial and financial resources.
We
will depend on third parties to manufacture and market our products and to design trial protocols, arrange for and monitor the
clinical trials, and collect and analyze data.
We do not
have, and do not now intend to develop, facilities for the manufacture of any of our products for clinical or commercial production.
In addition, we are not a party to any long- term agreement with any of our suppliers, and accordingly, we have our products manufactured
on a purchase-order basis from one of two primary suppliers. We will need to develop relationships with manufacturers and enter
into collaborative arrangements with licensees or have others manufacture our products on a contract basis. We expect to depend
on such collaborators to supply us with products manufactured in compliance with standards imposed by the FDA and foreign regulators.
In addition,
we have limited experience in marketing, sales or distribution. We currently have an agreement with Advance Pharmaceutical Co.
Ltd. to develop markets in Hong Kong, China and Macau for SUGARDOWN®. In November 2014, we agreed to expand this marketing
agreement to include 12 additional countries: Korea, Taiwan, Singapore, Thailand, Malaysia, Vietnam, Philippines, Myanmar, Indonesia,
Laos, Brunei and Cambodia. In March 2015, we agreed to expand their marketing agreement to include Japan. In May 2014, we entered
into a strategic marketing agreement a leading branding and marketing agency, aimed at driving brand awareness and growing sales
of SUGARDOWN® among the large pre-diabetic population in North America. This agreement was terminated in July 2015. If we
develop additional commercial products, we will need to rely on licensees, collaborators, joint venture partners or independent
distributors to market and sell those products and we may need to rely on additional third parties to market our products.
Moreover,
as we develop products eligible for clinical trials, we contract with independent parties to design the trial protocols, arrange
for and monitor the clinical trials, collect data and analyze data. In addition, certain clinical trials for our products may
be conducted by government-sponsored agencies and will be dependent on governmental participation and funding. Our dependence
on independent parties and clinical sites involves risks including reduced control over the timing and other aspects of our clinical
trials.
We
are exposed to product liability, pre-clinical and clinical liability risks which could place a substantial financial burden upon
us, should we be sued.
Our business
exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing
of pharmaceutical formulations and products. Such claims may be asserted against us. In addition, the use in our clinical trials
of pharmaceutical formulations and products that our potential collaborators may develop and the subsequent sale of these formulations
or products by us or our potential collaborators may cause us to bear a portion of or all product liability risks. A successful
liability claim or series of claims brought against us could have a material adverse effect on our business, financial condition
and results of operations.
We currently
maintain product liability insurance for SUGARDOWN®. There is no guarantee that such insurance will provide adequate coverage
against our potential liabilities. Since we do not currently have any FDA-approved products or other formulations, we do not currently
have any other product liability insurance covering commercialized products. We may not be able to obtain or maintain adequate
product liability insurance, when needed, on acceptable terms, if at all, or such insurance may not provide adequate coverage
against our potential liabilities. Furthermore, our current and potential partners with whom we have collaborative agreements
or our future licensees may not be willing to indemnify us against these types of liabilities and may not themselves be sufficiently
insured or have sufficient liquidity to satisfy any product liability claims. Claims or losses in excess of any product liability
insurance coverage that may be obtained by us could have a material adverse effect on our business, financial condition and results
of operations.
In addition,
we may be unable to obtain or to maintain clinical trial liability insurance on acceptable terms, if at all. Any inability to
obtain and/or maintain insurance coverage on acceptable terms could prevent or limit the commercialization of any products we
develop.
If
users of our proposed products are unable to obtain adequate reimbursement from third-party payers or if new restrictive legislation
is adopted, market acceptance of our proposed products may be limited and we may not achieve revenues.
The continuing
efforts of government and insurance companies, health maintenance organizations and other payers of healthcare costs to contain
or reduce costs of health care may affect our future revenues and profitability, and the future revenues and profitability of
our potential customers, suppliers and collaborative partners and the availability of capital. For example, in certain international
markets, pricing or profitability of prescription pharmaceuticals is subject to government control. In the U.S., given recent
federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures
will likely continue to focus on health care reform, the cost of prescription pharmaceuticals and on the reform of the Medicare
and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement
or adoption of such proposals could materially harm our business, financial condition and results of operations.
Our ability
to commercialize our proposed products will depend in part on the extent to which appropriate reimbursement levels for the cost
of our proposed formulations and products and related treatments are obtained by governmental authorities, private health insurers
and other organizations, such as HMOs. Third-party payers are increasingly challenging the prices charged for medical drugs and
services. Also, the trend toward managed health care in the U.S. and the concurrent growth of organizations such as HMOs, which
could control or significantly influence the purchase of health care services and drugs, as well as legislative proposals to reform
health care or reduce government insurance programs, may all result in lower prices for or rejection of our products.
There
are risks associated with our reliance on third parties for marketing, sales and distribution infrastructure and channels.
We have
entered into agreements with commercial partners to engage in sales, marketing and distribution efforts around our products in
development. We may be unable to maintain these third-party relationships, or establish new relationships, on a commercially reasonable
basis, if at all. In addition, these third parties may have similar or more established relationships with our competitors. If
we do not enter into or maintain relationships with third parties for the sales and marketing of our proposed products, we will
need to develop our own sales and marketing capabilities. Furthermore, even if engaged, these distributors may:
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to satisfy financial or contractual obligations to us;
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to adequately market our products;
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cease
operations with little or no notice to us; or
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offer,
design, manufacture or promote competing formulations or products.
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If we fail
to develop sales, marketing and distribution channels, we could experience delays in generating sales and incur increased costs,
which would harm our financial results.
We
will be subject to risks if we seek to develop our own sales force.
If we choose
at some point to develop our own sales and marketing capability, our experience in developing a fully integrated commercial organization
is limited. If we choose to establish a fully integrated commercial organization, we will likely incur substantial expenses in
developing, training and managing such an organization. We may be unable to build a fully integrated commercial organization on
a cost effective basis, or at all. Any such direct marketing and sales efforts may prove to be unsuccessful. In addition, we will
compete with many other companies that currently have extensive and well-funded marketing and sales operations. Our marketing
and sales efforts may be unable to compete against these other companies. We may be unable to establish a sufficient sales and
marketing organization on a timely basis, if at all.
RISKS
RELATED TO OUR INDUSTRY
We
will need regulatory approvals to commercialize our products as drugs.
If we choose
to offer BTI-320, IPOXYN, or any other product as a drug, we are required to obtain approval from the FDA to sell our products
in the U.S. and from foreign regulatory authorities to sell our products in other countries. The FDA’s review and approval
process is lengthy, expensive and uncertain. Extensive pre-clinical and clinical data and supporting information must be submitted
to the FDA for each indication for each product candidate to secure FDA approval. Before receiving FDA clearance to market our
proposed products, we will have to demonstrate that our products are safe and effective on the patient population and for the
diseases that are to be treated. Clinical trials, manufacturing and marketing of drugs are subject to the rigorous testing and
approval process of the FDA and equivalent foreign regulatory authorities. The Federal Food, Drug and Cosmetic Act and other federal,
state and foreign statutes and regulations govern and influence the testing, manufacture, labeling, advertising, distribution
and promotion of drugs and medical devices. As a result, regulatory approvals can take a number of years or longer to accomplish
and require the expenditure of substantial financial, managerial and other resources. The FDA could reject an application or require
us to conduct additional clinical or other studies as part of the regulatory review process. Delays in obtaining or failure to
obtain FDA approvals would prevent or delay the commercialization of our product candidates, which would prevent, defer or decrease
our receipt of revenues. In addition, if we receive initial regulatory approval, our product candidates will be subject to extensive
and rigorous ongoing domestic and foreign government regulation.
Data
obtained from clinical trials are susceptible to varying interpretations, which could delay, limit or prevent regulatory clearances.
Data already
obtained, or in the future obtained, from pre-clinical studies and clinical trials do not necessarily predict the results that
will be obtained from later pre-clinical studies and clinical trials. Moreover, pre-clinical and clinical data is susceptible
to varying interpretations, which could delay, limit or prevent regulatory approval. A number of companies in the pharmaceutical
industry have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. The failure
to adequately demonstrate the safety and effectiveness of a proposed formulation or product under development could delay or prevent
regulatory clearance of the potential drug, resulting in delays to commercialization, and could materially harm our business.
Our clinical trials may not demonstrate sufficient levels of safety and efficacy necessary to obtain the requisite regulatory
approvals for our drugs, and thus our proposed drugs may not be approved for marketing.
Our
competitive position depends on protection of our intellectual property.
Development
and protection of our intellectual property are critical to our business. All of our intellectual property has been invented and/or
developed or co-developed by our former CEO, Dr. David Platt. If we do not adequately protect our intellectual property, competitors
may be able to practice our technologies. Our success depends in part on our ability to obtain patent protection for our products
or processes in the U.S. and other countries, protect trade secrets, and prevent others from infringing on our proprietary rights.
Since patent
applications in the U.S. are maintained in secrecy for at least portions of their pendency periods (published on U.S. patent issuance
or, if earlier, 18 months from earliest filing date for most applications) and since other publication of discoveries in the scientific
or patent literature often lags behind actual discoveries, we cannot be certain that we are the first to make the inventions to
be covered by our patent applications. The patent position of biopharmaceutical firms generally is highly uncertain and involves
complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the
breadth of claims that it will allow in biotechnology patents.
Some or
all of our patent applications may not issue as patents or the claims of any issued patents may not afford meaningful protection
for our technologies or products. In addition, patents issued to us or our licensors may be challenged and subsequently narrowed,
invalidated or circumvented. Patent litigation is widespread in the biotechnology industry and could harm our business. Litigation
might be necessary to protect our patent position or to determine the scope and validity of third-party proprietary rights, and
we may not have the required resources to pursue such litigation or to protect our patent rights.
Although
we will require our scientific and technical employees and consultants to enter into broad assignment of inventions agreements,
and all of our employees, consultants and corporate partners with access to proprietary information to enter into confidentiality
agreements, these agreements may not be honored. Currently, we do not have any scientific or technical employees. We have consultants
and a network of uniquely experienced researchers, clinicians and drug developers, some of whom have signed or been asked to sign
agreements.
Products
we develop could be subject to infringement claims asserted by others.
We cannot
assure that products based on our patents or intellectual property that we license from others will not be challenged by a third
party claiming infringement of its proprietary rights. If we were not able to successfully defend patents that may be issued to
us, that we may acquire, or that we may license in the future, we may have to pay substantial damages, possibly including treble
damages, for past infringement.
We
face intense competition in the biotechnology and pharmaceutical industries.
The biotechnology
and pharmaceutical industries are intensely competitive. We face direct competition from U.S. and foreign companies focusing on
pharmaceutical products, which are rapidly evolving. Our competitors include major multinational pharmaceutical and chemical companies,
specialized biotechnology firms and universities and other research institutions. Many of these competitors have greater financial
and other resources, larger research and development staffs and more effective marketing and manufacturing organizations, than
we do. In addition, academic and government institutions are increasingly likely to enter into exclusive licensing agreements
with commercial enterprises, including our competitors, to market commercial products based on technology developed at such institutions.
Our competitors may succeed in developing or licensing technologies and products that are more effective or less costly than ours,
or succeed in obtaining FDA or other regulatory approvals for product candidates before we do. Acquisitions of, or investments
in, competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’ financial,
marketing, manufacturing and other resources.
The
market for our proposed products is rapidly changing and competitive, and new drugs and new treatments which may be developed
by others could impair our ability to maintain and grow our business and remain competitive.
The pharmaceutical
and biotechnology industries are subject to rapid and substantial technological change. Developments by others may render our
proposed products noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market
factors. Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others
diversifying into the field is intense and is expected to increase.
As a company
with nominal revenues engaged in the development of drug technologies, our resources are limited and we may experience technical
challenges inherent in such technologies. Competitors have developed or are in the process of developing technologies that are,
or in the future may be, the basis for competition. Some of these technologies may have an entirely different approach or means
of accomplishing similar therapeutic effects compared to our proposed products. Our competitors may develop drugs that are safer,
more effective or less costly than our proposed products and, therefore, present a serious competitive threat to us.
The potential
widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our proposed products, even if
commercialized. Many of our targeted diseases and conditions can also be treated by other medication. These treatments may be
widely accepted in medical communities and have a longer history of use. The established use of these competitive drugs may limit
the potential for our technologies, formulations and products to receive widespread acceptance if commercialized.
Health
care cost containment initiatives and the growth of managed care may limit our returns.
Our ability
to commercialize our products successfully may be affected by the ongoing efforts of governmental and third-party payers to contain
the cost of health care. These entities are challenging prices of health care products and services, denying or limiting coverage
and reimbursement amounts for new therapeutic products, and for FDA-approved products considered experimental or investigational,
or which are used for disease indications without FDA marketing approval.
Even if
we succeed in bringing any products to the market, they may not be considered cost-effective and third-party reimbursement might
not be available or sufficient. If adequate third-party coverage is not available, we may not be able to maintain price levels
sufficient to realize an appropriate return on our investment in research and product development. In addition, legislation and
regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after any of our proposed products
are approved for marketing.
RISKS
RELATED TO OUR INTELLECTUAL PROPERTY
If
we are unable to obtain and maintain patent protection for our products, or if the scope of the patent protection obtained is
not sufficiently broad, competitors could develop and commercialize products similar or identical to ours, and our ability to
successfully commercialize our products may be impaired.
Our success
depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States
and other countries with respect to our proprietary products. We seek to protect our proprietary position by filing patent applications
in the United States and abroad related to our drug candidates.
The patent
prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent
applications at a reasonable cost, in a timely manner, or in all jurisdictions. It is also possible that we will fail to identify
patentable aspects of our research and development output before it is too late to obtain patent protection.
The patent
position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions
and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights
to the same extent as the laws of the United States and we may fail to seek or obtain patent protection in all major markets.
For example, European patent law restricts the patentability of methods of treatment of the human body more than United States
law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications
in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at
all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned patents or
pending patent applications, or that we were the first to file for patent protection of such inventions, nor can we know whether
those from whom we license patents were the first to make the inventions claimed or were the first to file. As a result, the issuance,
scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent
applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively
prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation
of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent
protection.
Recent patent
reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed
into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that
affect the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent and Trademark Office,
or U.S. PTO, recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the
substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became
effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation
of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the
prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material
adverse effect on our business and financial condition.
Moreover,
we may be subject to a third-party preissuance submission of prior art to the U.S. PTO, or become involved in opposition, derivation,
reexamination,
inter partes
review, post- grant review or interference proceedings challenging our patent rights or the
patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of,
or invalidate our patent rights, allow third parties to commercialize our technology or products and compete directly with us,
without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent
rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it
could dissuade companies from collaborating with us to license, develop or commercialize current or future drug candidates.
Even if
our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent
competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent
our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.
The issuance
of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in
the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to
operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability
to stop others from using or commercializing similar or identical products, or limit the duration of the patent protection of
our products. Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio
may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We
may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming
and ultimately unsuccessful.
Competitors
may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required
to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could
provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property. In addition, in
a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe
the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents
at risk of being invalidated or interpreted narrowly, which could adversely affect us.
Third
parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the success of our business.
Our commercial
success depends upon our ability to develop, manufacture, market and sell our drug candidates without infringing the proprietary
rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries.
While no such litigation has been brought against us and we have not been held by any court to have infringed a third party’s
intellectual property rights, we cannot guarantee that our products or use of our products do not infringe third-party patents.
It is also possible that we have failed to identify relevant third-party patents or applications. For example, applications filed
before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain
confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months
after the earliest filing, which is referred to as the priority date. Therefore, patent applications covering our products or
technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published
can, subject to certain limitations, be later amended in a manner that could cover our technologies, our products or the use of
our products.
We may become
party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect
to our products and technology, including inter parties review, interference, or derivation proceedings before the U.S. PTO and
similar bodies in other countries. Third parties may assert infringement claims against us based on existing intellectual property
rights and intellectual property rights that may be granted in the future.
If we are
found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third
party to continue developing and marketing our products. However, we may not be able to obtain any required license on commercially
reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors
access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing
technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’
fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our
drug candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we
have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our
business.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance
with these requirements.
Periodic
maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over the
lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in
many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in
which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss
of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent
application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment
of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter
the market, which would have a material adverse effect on our business.
We
may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property,
or claiming ownership of what we regard as our own intellectual property.
Many of
our employees or contractors were previously employed at universities or other biotechnology or pharmaceutical companies, including
our competitors or potential competitors. Although we try to ensure that our employees and contractors do not use the proprietary
information or know-how of others in their work for us, we may be subject to claims that these employees or we have used or disclosed
intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer.
Litigation may be necessary to defend against these claims.
In addition,
while it is our policy to require our employees and contractors who may be involved in the development of intellectual property
to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each
party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing
or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to
determine the ownership of what we regard as our intellectual property.
If we fail
in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial
costs and be a distraction to management.
Intellectual
property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if
resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant
expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could
be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts
or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development
activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources
to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation
or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation
and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
If
we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition
to seeking patents for some of our technology and drug candidates, we also rely on trade secrets, including unpatented know-how,
technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in
part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees,
corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties.
We also seek to enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite
these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties
by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed
or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some
courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets
were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom
they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed
to or independently developed by a competitor, our competitive position would be harmed.
RISKS
RELATING TO OUR COMMON STOCK
The
market price of our common stock may be highly volatile, and you could lose all or part of your investment.
The trading price of our common
stock is likely to be volatile. This volatility may prevent you from being able to sell your shares at or above the price you
paid for your shares. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:
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any
adverse results or delays in commencement or completion of our planned clinical trials
for BTI-320 or IPOXYN;
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changes
in laws or regulations applicable to SUGARDOWN®, BTI-320 or IPOXYN or any future
product candidates, including but not limited to clinical trial requirements for approvals;
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unanticipated
serious safety concerns related to the use of SUGARDOWN®, BTI-320 or IPOXYN or any
future product candidates;
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a
decision to initiate a clinical trial, not to initiate a clinical trial or to terminate
an existing clinical trial;
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our
inability to obtain adequate product supply for SUGARDOWN®, BTI-320 or IPOXYN or
any future product candidate, or the inability to do so at acceptable prices;
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adverse
regulatory decisions;
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the
introduction of new products or technologies offered by us or our competitors;
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the
effectiveness of our or our potential partners' commercialization efforts;
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the
inability to effectively manage our growth;
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actual
or anticipated variations in quarterly operating results;
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our
failure to meet or exceed the estimates and projections of the investment community;
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the
perception of the pharmaceutical industry by the public, legislatures, regulators and
the investment community;
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the
overall performance of the U.S. equity markets and general political and economic conditions;
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developments
concerning our sources of manufacturing supply and any commercialization partners;
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announcements
of significant acquisitions, strategic partnerships, joint ventures or capital commitments
by us or our competitors;
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disputes
or other developments relating to proprietary rights, including patents, litigation matters
and our ability to obtain patent protection for our technologies;
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additions
or departures of key scientific or other consultants or management personnel;
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adverse
market reaction to any indebtedness we may incur or securities we may issue in the future;
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sales
of our common stock by our stockholders in the future;
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significant
lawsuits, including patent or stockholder litigation;
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changes
in the market valuations of similar companies;
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the
trading volume of our common stock;
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effects
of natural or man-made catastrophic events or other business interruptions; and
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other
events or factors, many of which are beyond our control.
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In addition,
the stock market in general, and the stock of biotechnology companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market
and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
We
have a limited market for our common stock, which makes our securities very speculative.
Trading
activity in our common stock is and has been limited. As a result, an investor may find it difficult to dispose of, or to obtain
accurate quotations of the price of our common stock. There can be no assurance that a more active market for our common stock
will develop, or if one should develop, there is no assurance that it will be sustained. This could severely limit the liquidity
of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability
to raise additional capital.
The
financial and operational projections that we may make from time to time are subject to inherent risks.
The projections
that we provide herein or our management may provide from time to time (including, but not limited to, those relating to potential
peak sales amounts, clinical and regulatory timelines, production and supply matters, commercial launch dates, and other financial
or operational matters) reflect numerous assumptions made by management, including assumptions with respect to our specific as
well as general business, regulatory, economic, market and financial conditions and other matters, all of which are difficult
to predict and many of which are beyond our control. Accordingly, there is a risk that the assumptions made in preparing the projections,
or the projections themselves, will prove inaccurate. There may be differences between actual and projected results, and actual
results may be materially different from than those contained in the projections. The inclusion of the projections in this prospectus
should not be regarded as an indication that we, our management, or their representatives considered or consider the projections
to be a guaranteed prediction of future events, and the projections should not be relied upon as such.
Our
ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.
Under Section
382 of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code, if a corporation undergoes an
"ownership change" (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year
period), the corporation's ability to use its pre-change net operating loss carry-forwards and other pre- change tax attributes
(such as research tax credits) to offset its post-change income may be limited. We believe that our private placements within
a three-year period and other transactions that have occurred over the past three years, we may have triggered an "ownership
change" limitation. We may also experience ownership changes in the future. As a result, if we earn net taxable income, our
ability to use our pre-change net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations,
which potentially could result in increased future tax liability to us.
Investors
may face significant restrictions on the resale of our common stock due to federal regulation of penny stocks.
Our common
stock is currently quoted on the OTCQB under the symbol BTHE. Our common stock is subject to the requirements of Rule 15(g)-9
promulgated under the Securities Exchange Act, so long as the price of our common stock is below $5.00 per share and our common
stock is not listed on a U.S. national securities exchange. Under such rule, broker- dealers who recommend low-priced securities
to persons other than established customers and accredited investors must satisfy special sales practice requirements, including
a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser’s
consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional
disclosure in connection with any trades involving a stock defined as a penny stock. The required penny stock disclosures include
the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with
it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their
securities in the secondary market.
We
have not paid any cash dividends in the past and have no plans to issue cash dividends in the future, which could cause the value
of our common stock to have a lower value than other similar companies which do pay cash dividends.
We have
not paid any cash dividends on our common stock to date and do not anticipate any cash dividends being paid to holders of our
common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of
the business, it is anticipated that any earnings will be retained to finance our future expansion. As we have no plans to issue
cash dividends in the future, our common stock could be less desirable to other investors and as a result, the value of our common
stock may decline, or fail to reach the valuations of other similarly situated companies who have historically paid cash dividends
in the past.
Future
sales of our securities, or the perception in the markets that these sales may occur, could depress our stock price.
As of December
31, 2016, we had issued and outstanding (i) 46,702,836 shares of common stock, (ii) warrants issued to the investors in our 2013
private placement collectively exercisable for 8,829,484 shares of common stock (the “Investor Warrants”), (iii) warrants
issued to the placement agent for our 2013 private placement exercisable for 1,716,849 shares of common stock (the "Placement
Agent Warrants"), (iv) other warrants exercisable for 1,878,336 shares of common stock, (v) warrants issued to the investors
in our 2016 private placement collectively exercisable for 16,000,000 shares of common stock, (vi) outstanding stock options exercisable
for 12,289,000 shares of common stock and (vii) shares issuable in exchange for our related party convertible debt of 35,040,000.
These securities will be eligible for public sale only if registered under the Securities Act or if the stockholder qualifies
for an exemption from registration under Rule 144 or other applicable exemption. We believe that our stockholders are currently
entitled to sell our shares pursuant to Rule 144 to the extent they satisfy the conditions thereunder. An aggregate of 17,659,007
shares of outstanding common stock and 8,829,484 shares of common stock issuable upon exercise of outstanding Investor Warrants
are registered for resale. The market price of our capital stock could drop significantly if the holders of the shares being registered
hereunder sell them or are perceived by the market as intending to sell them. Moreover, to the extent that additional shares of
our outstanding stock are registered, or otherwise become eligible for resale, and are sold, or the holders of such shares are
perceived as intended to sell them, this could further depress the market price of our common stock. These factors could also
make it more difficult for us to raise capital or make acquisitions through the issuance of additional shares of our common stock
or other equity securities.
The
right of the investors in our recent convertible debt financings to potentially receive additional shares of our common stock
could have a negative impact on our common stock price and could impair our ability to raise capital.
Pursuant
to the terms of our fixed price convertible note financings with a related party and significant stockholder, we may potentially
be required to issue additional shares of common stock to such investor causing dilution to existing shareholders. Moreover, the
existence of these rights could materially impair our ability to obtain financing, which would have a material adverse effect
on our business and viability.
The
right of the investors in certain of our recent convertible debt financings to participate in future financings of ours could
impair our ability to raise capital.
Under the
note purchase agreements with certain of the investors in our recent convertible debt financings, in the event that we seek to
raise money through the offer and sale of debt or equity securities under specified circumstances, we must first offer such investors
a right to participate in at least a portion of the securities we propose to offer in such funding. The existence of such right
of participation, or the exercise of such rights, may in the deter potential investors from providing us needed financing, or
may deter investment banks from working with, which would have a material adverse effect on our ability to finance our company.
Our
Certificate of Incorporation permits “blank check” preferred stock, which can be designated by our Board of Directors
without stockholder approval.
We have
5,000,000 authorized shares of preferred stock. The shares of our preferred stock may be issued from time to time in one or more
series, each of which shall have a distinctive designation or title as is determined by our Board of Directors prior to the issuance
of any shares thereof. The preferred stock may have such voting powers, full or limited, or no voting powers, and such preferences
and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as
adopted by the Board of Directors. Because the Board of Directors is able to designate the powers and preferences of the preferred
stock without the vote of a majority of our stockholders, stockholders will have no control over what designations and preferences
our preferred stock will have. If preferred stock is designated and issued, then depending upon the designation and preferences,
the holders of the preferred stock may exercise voting control over us. As a result, our stockholders will have no control over
the designations and preferences of the preferred stock and as a result the operations of our company.
Our
management and five significant stockholders collectively own a substantial majority of our common stock.
Collectively,
our officers, our directors and five significant stockholders own or exercise voting and investment control of approximately 71.1%
of our outstanding common stock on a fully diluted basis. As a result, investors may be prevented from affecting matters involving
our company, including:
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the
composition of our Board of Directors and, through it, any determination with respect
to our business direction and policies, including the appointment and removal of officers;
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any
determinations with respect to mergers or other business combinations;
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our
acquisition or disposition of assets; and
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our
corporate financing activities.
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Furthermore,
this concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business
combination that might otherwise be beneficial to our stockholders. This significant concentration of share ownership may also
adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company
that is controlled by a small number of stockholders.
Certain
provisions of Delaware law make it more difficult for a third party to acquire us and make a takeover more difficult to complete,
even if such a transaction were in the stockholders’ interest.
The Delaware
General Corporation Law contain provisions that may have the effect of making it more difficult or delaying attempts by others
to obtain control of us, even when these attempts may be in the best interests of our stockholders. We also are subject to the
anti-takeover provisions of the Delaware General Corporation Law, which prohibit us from engaging in a “business combination”
with an “interested stockholder” unless the business combination is approved in a prescribed manner and prohibit the
voting of shares held by persons acquiring certain numbers of shares without obtaining requisite approval. The statutes have the
effect of making it more difficult to effect a change in control of a Delaware company.
If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or
if they change their recommendations regarding our common stock adversely, the price of our common stock and trading volume could
decline.
The trading
market for our common stock may be influenced by the research and reports that securities or industry analysts may publish about
us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding
our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common
stock would likely decline. If any analyst who may cover us was to cease coverage of our company or fail to regularly publish
reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or trading
volume to decline.