Certain statements included or incorporated by reference in
this report constitute forward-looking statements within the meaning of
applicable securities laws. All statements contained in this report that are not
clearly historical in nature are forward-looking, and the words anticipate,
believe, continue, expect, estimate, intend, may, plan, will,
shall and other similar expressions are generally intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All
forward-looking statements are based on our beliefs and assumptions based on
information available at the time the assumption was made. These forward-looking
statements are not based on historical facts but on managements expectations
regarding future growth, results of operations, performance, future capital and
other expenditures (including the amount, nature and sources of funding
thereof), competitive advantages, business prospects and opportunities.
Forward-looking statements involve significant known and unknown risks,
uncertainties, assumptions and other factors that may cause our actual results,
levels of activity, performance or achievements to differ materially from those
implied by forward-looking statements. These factors should be considered
carefully and prospective investors should not place undue reliance on the
forward-looking statements. Although the forward-looking statements contained in
this report or incorporated by reference herein are based upon what management
believes to be reasonable assumptions, there is no assurance that actual results
will be consistent with these forward-looking statements. These forward-looking
statements are made as of the date of this report or as of the date specified in
the documents incorporated by reference herein, as the case may be.
We
undertake no obligation to update any forward-looking statements to reflect
events or circumstances after the date on which such statements were made or to
reflect the occurrence of unanticipated events, except as may be required by
applicable securities laws.
The factors set forth in Item 1A., "Risk
Factors", as well as any cautionary language in this report, provide examples of
risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in the common stock, you should be aware that the occurrence
of the events described as risk factors and elsewhere in this report could have
a material adverse effect on our business, operating results and financial
condition.
ITEM 1. BUSINESS.
Corporate History
Our predecessor company, Big Flash Corp., was incorporated in
Delaware on July 27, 1999. On April 28, 2006, Big Flash, through its Canadian
holding corporation, completed the acquisition of IntelGenx Corp., a Canadian
company incorporated on June 15, 2003. The Company did not have any operations
prior to the acquisition of IntelGenx Corp. In connection with the acquisition,
we changed our name from Big Flash Corp. to IntelGenx Technologies Corp.
IntelGenx Corp. has continued operations as our operating subsidiary.
Overview
We are a drug delivery company established in 2003 and
headquartered in Montreal, Quebec, Canada. Our focus is on the development of
novel oral immediate-release and controlled-release products for the
pharmaceutical market. More recently, we have made the strategic decision to
enter the oral film market and are in the process of implementing commercial
oral film manufacturing capability. This enables us to offer our partners a
comprehensive portfolio of pharmaceutical services, including pharmaceutical
R&D, clinical monitoring, regulatory support, tech transfer and
manufacturing scale-up, and commercial manufacturing.
Our business strategy is to develop pharmaceutical products
based on our proprietary drug delivery technologies and, once the viability of a
product has been demonstrated, to license the commercial rights to partners in
the pharmaceutical industry. In certain cases, we rely upon partners in the
pharmaceutical industry to fund development of the licensed products, complete
the regulatory approval process with the U.S. Food and Drug Administration
(FDA) or other regulatory agencies relating to the licensed products, and
assume responsibility for marketing and distributing such products.
In addition, we may choose to pursue the development of certain
products until the project reaches the marketing and distribution stage. We will
assess the potential for successful development of a product and associated
costs, and then determine at which stage it is most prudent to seek a partner,
balancing such costs against the potential for additional returns earned by
partnering later in the development process.
Managing our project pipeline is a key success factor for the
Company. We have undertaken a strategy under which we will work with
pharmaceutical companies in order to apply our oral film technology to
pharmaceutical products for which patent protection is nearing expiration, a
strategy which is often referred to as lifecycle management. Under
§(505)(b)(2) of the Food, Drug, and Cosmetics Act,the FDA may grant market exclusivity for a term of up to three
years of exclusivity following approval of a listed drug that contains
previously approved active ingredients but is approved in a new dosage, dosage
form, route of administration or combination.
4
The 505(b)(2) pathway is also the regulatory approach to be
followed if an applicant intends to file an application for a product containing
a drug that is already approved by the FDA for a certain indication and for
which the applicant is seeking approval for a new indication or for a new use,
the approval of which is required to be supported by new clinical trials, other
than bioavailability studies. We have implemented a strategy under which we
actively look for such so-called repurposing opportunities and determine
whether our proprietary VersaFilm technology adds value to the product. We
currently have two such drug repurposing projects in our development
pipeline.
We continue to develop the existing products in our pipeline
and may also perform research and development on other potential products as
opportunities arise.
We have established a state-of-the-art manufacturing facility
with the intent to manufacture all our VersaFilm products in-house as we
believe that this:
|
1)
|
represents a profitable business opportunity,
|
|
2)
|
will reduce our dependency upon third-party contract
manufacturers, thereby protecting our manufacturing process know- how and
intellectual property, and
|
|
3)
|
allows us to offer our clients and development partners a
full service from product conception through to supply of the finished
product.
|
Technology Platforms
Our product development efforts are based upon three delivery
platform technologies: (1) VersaFilm, an Oral Film technology, (2) VersaTab, a
Multilayer Tablet technology, and (3) AdVersa®, a Mucoadhesive Tablet
technology.
VersaFilm is a drug delivery platform technology that enables
the development of oral thin films, improving product performance:
|
|
Rapid disintegration without the need for water;
|
|
|
Quicker buccal or sublingual absorption;
|
|
|
Potential for faster onset of action and increased
bioavailability;
|
|
|
Potential for reduced adverse effects by bypassing
first-pass metabolism;
|
|
|
Easy administration for patients who have problems in
swallowing: pediatric, geriatric, fear choking and/or suffering from
nausea (e.g., nausea resulting from chemotherapy, radiotherapy or any
surgical treatment);
|
|
|
Pleasant taste;
|
|
|
Small and thin size, making it convenient for consumers.
|
Our VersaFilm technology consists of a thin (25-35 micron)
polymeric film comprised of United States Pharmacopeia (USP) components that are
approved by the FDA for use in food, pharmaceutical, and cosmetic products.
Derived from the edible film technology used for breath strips and initially
developed for the instant delivery of savory flavors to food substrates, the
VersaFilm technology is designed to provide a rapid response compared to
existing conventional tablets. Our VersaFilm technology is intended for
indications requiring rapid onset of action, such as migraine, opioid
dependence, chronic pain, motion sickness, erectile dysfunction, and nausea.
Our VersaTab platform technology allows for the development of
oral controlled-release products. It is designed to be versatile and to reduce
manufacturing costs as compared to competing oral extended-release delivery
technologies. Our VersaFilm technology allows for the instant delivery of
pharmaceuticals to the oral cavity, while our AdVersa® allows for the controlled
release of active substances to the oral mucosa.
Our VersaTab technology represents a new generation of
controlled release layered tablets designed to modulate the release of active
compounds. The technology is based on a multilayer tablet with an active core
layer and erodible cover layers. The release of the active drug from the core
matrix initially occurs in a first-order fashion. As the cover layers start to
erode, their permeability for the active ingredient through the cover layers
increases. Thus, the Multilayer Tablet can produce quasi-linear (zero-order)
kinetics for releasing a chemical compound over a desired period of time. The
erosion rate of the cover layers can be customized according to the
physico-chemical properties of the active drug. In addition, our multilayer
technology offers the opportunity to develop combination products in a
regulatory-compliant format. Combination products are made up of two or more
active ingredients that are combined into a single dosage form.
5
Our Mucoadhesive Tablet is a drug delivery system capable of
adhering to the oral mucosa and releasing the drug onto the site of application
at a controlled rate. The Mucoadhesive Tablet is designed to provide the
following advantages relative to competing technologies: (i) it avoids the first
pass effect, whereby the liver metabolizes the active ingredient and greatly
reduces the level of drug reaching the systemic circulation, (ii) it leads to a
higher absorption rate in the oral cavity as compared to the conventional oral
route, and (iii) it achieves a rapid onset of action for the drug. Our AdVersa®
technology is designed to be versatile in order to permit the site of
application, residence time, and rate of release of the drug to be modulated to
achieve the desired results.
Product Portfolio
Our product portfolio includes a blend of generic and branded
products based on our proprietary delivery technology (generic products are
essentially copies of products that have already received FDA approval). Of the
fourteen projects currently in our product portfolio, three utilize our
VersaTab technology, ten utilize our VersaFilm technology, and one utilizes
our AdVersa® technology.
INT0001/2004
: This is the most advanced generic product
involving our multilayer tablet technology. Equivalency with the reference
product Toprol XL
®
and its European equivalent Beloc-ZOK
®
has been demonstrated
in-vitro
. The product has been tested in phase I
studies. In November 2016 we entered into a License and Development Agreement
with Chemo Group to advance the commercialization of our Versa Tab product. The
manufacturing technology transfer to Chemo is currently ongoing.
INT0004/2006
: We developed a new, higher strength of the
antidepressant Bupropion HCl, the active ingredient in Wellbutrin
XL
®
, and, in November 2011, the FDA approved the drug for patients
with Major Depressive Disorder. In February 2012, we entered into an agreement
with Edgemont Pharmaceuticals LLC (Edgemont) for commercialization of the
product in the United States. Under the terms of the agreement, Edgemont
obtained certain exclusive rights to market and sell the product in the U.S. In
exchange we received a $1.0 million upfront payment, received launch related
milestones totaling up to $4.0 million, and are eligible for additional
milestones of up to a further $23.5 million upon achieving certain sales and
exclusivity targets. We also receive tiered double-digit royalties on the net
sales of the product. The agreement has no expiry date but may be terminated in
the event of, without limitation (i) failure by either us or Edgemont to perform
our respective obligations under the agreement; (ii) if either party files a
petition for bankruptcy or insolvency or otherwise winds up, liquidates or
dissolves its business, or (iii) otherwise by mutual consent of the parties. The
agreement also contains customary confidentiality, indemnification and
intellectual property protection provisions.
The product was launched in the U.S. in October 2012 under the
brand name Forfivo XL
®
. As of December 31, 2015 we had received an
upfront payment of $1 million and a $1 million milestone payment related to the
launch. The commercialization of Forfivo XL
®
triggered a
launch-related milestone payment of $3 million from IntelGenx licensing partner
Edgemont due to Edgemont reaching in July 2015, $7 million of cumulative net
trade sales of Forfivo XL
®
over the preceding 12 months. From that $3
million milestone payment, $1 million was received in Q3 2015. Of the remaining
balance of $2 million, $1 million was received in Q4 2015 and $1 million was
received in Q1 2016. We commenced receiving royalty payments in the first
quarter of 2013. We recorded $433 thousand for the cost of royalty and license
revenue in the twelve-month period ended December 31, 2015 compared with $61 in
the same period of 2014.
In August 2013, we announced receipt of a Paragraph IV
Certification Letter from Wockhardt Bio AG, advising of the submission of an
Abbreviated New Drug Application ("ANDA") to the FDA requesting authorization to
manufacture and market generic versions of Forfivo XL
®
450 mg tablets
in the U.S. In November 2014 we announced that the Paragraph IV litigation with
Wockhardt had been settled and that, under the terms of the settlement,
Wockhardt has been granted the right, with effect from January 15, 2018, to be
the exclusive marketer and distributor of an authorized generic of Forfivo
XL
®
in the U.S.
In December 2014 we announced that Edgemont had exercised its
right to extend the license for the exclusive marketing of Forfivo
XL
®
450 mg tablets. In exchange, we received milestone payments of
$650 thousand in December 2014 and $600 thousand in February 2015. All other
financial obligations contained in the license agreement entered into by
Edgemont and IntelGenx in February 2012, specifically launch-related and sales
milestones, together with the contractual royalty rates on net sales of the
product, remained in effect.
On August 5
th
, 2016, we announced that we had sold
our U.S. royalty on future sales of Forfivo XL
®
to SWK Holdings
Corporation (SWK) for $6 million (CAD$8 million). Forfivo XL
®
(Bupropion extended-release) is the first 450 mg bupropion HCl tablet indicated
for Major Depressive Disorder, approved by the FDA. As per terms of the
agreement, we received $6 million from SKW at closing. In return for, (i) 100%
of any and all royalties (as defined in the Edgemont Pharmaceuticals, LLC
License Agreement) or similar royalty amounts received on or after April 1,
2016, (ii) 100% of the $2 million milestone payment upon Edgemont reaching
annual net sales of $15 million, and (iii) 35% of all potential future milestone
payments. Patent protection for Forfivo XL
®
in the United States
expires in 2027 with an authorized generic entering the market in January
2018.
6
SWK is a specialized finance company with a focus on the global
healthcare sector. SWK partners with ethical product marketers and royalty
holders to provide flexible financing solutions at an attractive cost of capital
to create long-term value for both SWK's business partners and its
investors.
INT0007/2006
: We are developing an oral film product
based on our VersaFilm technology containing the active ingredient Tadalafil.
The product is intended for the treatment of erectile dysfunction (ED). The
results of a phase I pilot study that was conducted in the second quarter of
2015 confirmed that the product is bioequivalent with the brand product,
Cialis
®
. We are currently manufacturing submission batches that are
intended to support a 505(b)(2) NDA filing with the FDA with a target submission
date of about mid-2017 and a PDUFA date expected to be approximately mid-2018.
On November 21, 2016, we announced the signing of a binding
term sheet for a license to Eli Lilly and Company's tadalafil dosing patent,
United States Patent No. 6,943,166 (the '166 dosing patent). Any exclusivity
associated with the tadalafil compound patent is not affected by this
agreement.
Subject to FDA approval, this license allows us to
commercialize a Tadalafil ED VersaFilm product in the U.S. prior to the
expiration of the '166 dosing patent. This license terminates all our current
tadalafil-related litigation activities.
We are currently actively seeking a partner for the
commercialization of our Tadalafil ED VersaFilm product.
INT0008/2007:
We developed this oral film product based
on our VersaFilm technology. In March 2013 we submitted a 505(b)(2) new drug
application (NDA) to the FDA for our novel oral thin-film formulation of
Rizatriptan, the active drug in Maxalt-MLT
®
orally disintegrating
tablets. Maxalt-MLT
®
is a leading branded anti-migraine product
marketed by Merck & Co. The thin-film formulation of Rizatriptan was
developed in accordance with a co-development and commercialization agreement
with RedHill Biopharma Ltd. (RedHill). The product uses our proprietary
immediate release VersaFilm oral drug delivery technology. In December 2011, we
received approval by Health Canada to conduct a pivotal bioequivalence study to
determine if our product is safe and bioequivalent with the FDA approved
reference product, Maxalt-MLT
®
. The trial was conducted in the second
quarter of 2012 and was a randomized, two-period, two-way crossover study in
healthy male and female subjects. The study results indicate that the product is
safe, and that the 90% confidence intervals of the three relevant parameters
Cmax, AUC(0-t) and AUC(0-infinity) are well within the 80 125 acceptance range
for bioequivalency.
In June 2013 the FDA assigned a Prescription Drug User Fee Act
(PDUFA) action date of February 3, 2014 for the review of the NDA for
marketing approval and in February 2014 we received a Complete Response Letter
(CRL) from the FDA informing us that certain questions and deficiencies remain
that preclude the approval of the application in its present form. The questions
raised by the FDA in the CRL regarding the NDA for our anti-migraine VersaFilm
product primarily relate to third party Chemistry, Manufacturing and Controls
(CMC) and to the packaging and labeling of the product. No questions or
deficiencies were raised relating to the product's safety and the FDA's CRL does
not require additional clinical studies.
In March 2014 we submitted our response to the FDA's CRL and in
April, 2014 the FDA requested additional CMC data. We also reported that the
supplier of the active pharmaceutical ingredient (API) of the product has been
issued with an Import Alert by the FDA. The Import Alert bans the import into
the USA of all raw materials from the suppliers manufacturing facility, which
therefore prohibits the import of any products using these raw materials, and
effectively prevents our VersaFilm product from being approved by the FDA. We
have identified a new source of API which is currently used to manufacture new
submission lots to support the re-submission of the NDA filing in mid 2017 with
PDUFA date expected by early 2018.
In October 2014 we announced the submission of a Marketing
Authorization Application (MAA) to the German Federal Institute for Drugs and
Medical Devices (BfArM) seeking European marketing approval of our oral thin
film formulation of Rizatriptan for acute migraines, under the brand name
RIZAPORT
®
. The brand name RIZAPORT
®
was also conditionally
approved by the FDA as part of the NDA review process in the U.S. The MAA was
submitted under the European Decentralized Procedure (DCP) with Germany as the
reference member state. The submission is supported by several studies,
including a comparative bioavailability study which successfully established the
bioequivalence between RIZAPORT
®
and the European reference drug.
BfArM validated the MAA and initiated the formal review process of the
application on November 25, 2014. BfArM granted national marketing approval on
November 9, 2015 for RIZAPORT
®
under the DCP.
On September 10, 2015 we announced the positive outcome of the
DCP confirming that RIZAPORT is approvable in Europe. The announcement followed
the issuance of the Final Assessment Report from the Reference Member State
(RMS), the Federal Institute for Drugs and Medical Devices of Germany (BfArM),
and the agreement of all the Concerned Member States (CMS) in DCP that
RIZAPORT
®
is approvable. With the decision, the regulatory process
entered its final phase known as the national licensing phase during which the
National Agencies in the individual countries will issue the marketing licenses
that allow RIZAPORT® to be marketed in each country.
7
On November 9, 2015 we announced that the Federal Institute for
Drugs and Medical Devices of Germany (BfArM) has granted marketing authorization
of RIZAPORT® 5mg and 10mg, an oral thin film formulation of rizatriptan benzoate
for the treatment of acute migraines. The national approval of RIZAPORT® in
Germany was granted under the European Decentralized Procedure (DCP), in which
Germany served as the Reference Member State. This authorization was the first
national marketing approval of RIZAPORT®. Marketing authorization in Luxemburg,
the Concerned Member State, is expected to follow. IntelGenx and RedHill intend
to continue to work together to obtain national phase approvals in other
European DCP territories.
On February 18, 2016, we announced that the USPTO had granted a
patent protecting Rizaport®, an oral thin film formulation of rizatriptan
benzoate for the treatment of acute migraines. This patent protects the
composition of Rizaport® and will be listed in the Orange Book upon approval of
the product by the FDA. The patent application, entitled "Instantly Wettable
Oral Film Dosage Form Without Surfactant or Polyalcohol" covers rapidly
disintegrating film oral dosage forms and is valid until 2034.
On July 5, 2016, we announced the signing of the definitive
agreement with Grupo Juste S.A.Q.F. (now Exeltis Healthcare, S.L. (Exeltis))
for the commercialization of RIZAPORT®, our proprietary oral thin film for the
treatment of acute migraines, in the country of Spain. All commercial
manufacturing of RIZAPORT® will take place at our new state-of-the-art
manufacturing facility in Canada. Grupo Juste (Exeltis) is a prominent private
Spanish company with over 90 years of experience in the research, development
and commercialization of proprietary pharmaceutical products, including migraine
and other central nervous system drugs, in Europe, Latin America and other
territories.
According to the definitive agreement, Grupo Juste (Exeltis)
has obtained exclusive rights to register, promote and distribute RIZAPORT® in
Spain. In exchange, we and Redhill Biopharma will receive upfront and milestone
payments, together with a share of the net sales of RIZAPORT®. Commercial launch
in Spain is estimated to take place in the second half of 2017. The initial term
of the definitive agreement shall be for ten years from the date of first
commercial sale of the product and shall automatically renew for one additional
two-year term.
Through our partner Grupo Juste (Exeltis), the product was
submitted in Spain in September 2016 for approval using a decentralized
procedure. Approval in Spain is currently expected for Q4 2017.
On December 14, 2016, we, together with our partner RedHill,
announced the signing of an exclusive license agreement with Pharmatronic Co.
for the commercialization of RIZAPORT® in the Republic of Korea (South Korea).
Under the terms of the agreement, RedHill granted Pharmatronic Co. the exclusive
rights to register and commercialize RIZAPORT® in South Korea. IntelGenx and
RedHill have received an upfront payment and will be eligible to receive
additional milestone payments upon achievement of certain predefined regulatory
and commercial targets, as well as tiered royalties. The initial term of the
definitive agreement with Pharmatronic Co. is for ten years from the date of
first commercial sale and shall automatically renew for an additional two-year
term. Commercial launch in South Korea is estimated to take place in the first
quarter of 2019.
INT0010/2006
: We initially entered into an agreement
with Cynapsus Therapeutics Inc. (formerly Cannasat Therapeutics Inc.,
Cynapsus) for the development of a buccal muco-adhesive tablet product
containing a cannabinoid-based drug for the treatment of neuropathic pain and
nausea in cancer patients undergoing chemotherapy. In 2009, we completed a
clinical biostudy on the muco-adhesive tablet we developed which is based on our
proprietary AdVersa technology. The study results indicated improved
bioavailability and reduced first-pass metabolization of the drug. In the fourth
quarter of 2010, we acquired from Cynapsus full control of, and interest in,
this project going forward. We also obtained worldwide rights to U.S. Patent
7,592,328 and all corresponding foreign patents and patent applications to
exclusively develop and further provide intellectual property protection for
this project. Subsequent to the 2016 fiscal year end, on February 9, 2017, we
announced the signing of a binding term sheet with Tetra Bio-Pharma Inc.
(Tetra) for the development and commercialization of a drug product containing
dronabinol. Under the binding term sheet, Tetra will have exclusive rights to
sell the product in North America with a right of first negotiation for outside
the U.S. and Canada.
As per the Binding Term Sheet, we received a non-refundable
exclusive negotiation payment from Tetra. We will also be entitled to receive an
upfront payment along with set milestone payments based on the completion of an
efficacy study, approvals from FDA and Health Canada and launching of the
product.
We will be responsible for the research and development of the
product, including optimization of the prototype, scale-up activities and
preparation of a phase II proof of concept clinical study and will develop the
product as an oral mucoadhesive tablet based on our proprietary
AdVersa
®
controlled-release technology. Tetra will be responsible for
funding the product development, and will own and control all regulatory
approvals, including the application and any other marketing authorizations.
Tetra will also be responsible for all aspects of commercializing the drug
product.
INT0027/2011:
We developed this oral film product based
on our VersaFilm technology. In accordance with a co-development and
commercialization agreement with Par Pharmaceutical Companies, Inc. (Par), we
developed an oral film product based on our proprietary VersaFilm technology.
The product is a generic formulation of buprenorphine and naloxone Sublingual
Film, indicated for the treatment of opioid dependence. A bioequivalent film
formulation was developed, scaled-up, and pivotal batches manufactured and
tested during a subsequent pivotal clinical study. An ANDA was filed with the
FDA by Par in July 2013.
8
In August 2013 we were notified that, in response to filing of
the ANDA, we were named as a codefendant in a lawsuit pursuant to Paragraph IV
litigation filed by Reckitt Benckiser Pharmaceuticals and Monosol RX in the U.S.
District Court for the District of Delaware alleging infringement of U.S. Patent
Nos. 8,475,832, 8,603,514 and 8,017,150, each of which relate to
Suboxone
®
. We believe the ANDA product does not infringe those or any
other patents, and will vigorously defend ourselves in this matter. In
accordance with the terms of the co-development and commercialization agreement,
Par is financially responsible for the costs of this defense. Since Paragraph IV
litigation is a regular part of the ANDA process, we do not expect any
unanticipated impact on our already planned development schedule. In June 2016,
an opinion from the district court was obtained on the validity and infringement
of the 3 orange book patents. The court ruled that the product is not infringing
on two out of the three patents. Subsequently, appeals were filed by both
parties.
In December 2014, Reckitt Benckiser Pharmaceuticals and Monosol
RX filed a lawsuit for patent infringement in the U.S. District Court for the
District of Delaware relating to the Suboxone
®
ANDA product. We were
named as a codefendant in this action alleging patent infringement United States
Patent Nos. 8,900,497 (the 497 patent) and 8,906,277 (the 277 patent),
each of which relate to a process for making a uniform oral film (the process
patents). The trial for the process patents was held in November 2016. We
believe the ANDA product relating to Suboxone
®
does not infringe
those process patents or any other patents, and will vigorously defend ourselves
in this matter. In accordance with the terms of the co-development and
commercialization agreement, Par is financially responsible for the costs of
this defense.
On July 11, 2016, the Company announced the receipt of the
notice of appeal for the buprenorphine/naloxone sublingual film product for the
treatment of opiate addiction by Par and the Company to the United States Court
of Appeals for the Federal Circuit from the final judgment issued by the U.S.
District Court for the District of Delaware on June 28, 2016.
The ruling in the U.S. District Court of Delaware in the ANDA
litigation of Par and the Company against Indivior PLC and Monosol Rx, LLC
resulted in Par and the Company prevailing on the non-infringement of the U.S.
Patent No. 8,017,150, which is set to expire in 2023, and on the invalidity (all
claims) and non-infringement (certain claims) of the U.S. Patent No. 8,475,832,
which is set to expire in 2030. The Court also ruled that Par's ANDA product
would infringe the asserted claims of U.S. Patent No. 8,603,514, one of the
Orange Book listed patents for Suboxone Film, and that the asserted claims of
U.S. Patent No. 8,603,514 were not shown to be invalid.
Subsequent to year end, in late January 2017 we received a CRL
from the FDA requesting more information on the APIs and the finished product.
INT0036/2013
: Loxapine is for the treatment of anxiety
and aggression in patients suffering from schizophrenia or bipolar 1 disorder.
Loxapine oral film will utilize the company's proprietary VersaFilm technology,
allowing for an improved product to offer patients significant therapeutic
benefits compared to existing medications. A fast acting loxapine oral film
dosage form that can be used to effectively treat acute agitation associated
with schizophrenia or bipolar 1 disorder in non-institutionalized patients while
reducing the risk of pulmonary problems is needed as it could substantially
reduce the potential risks of violence and injury to patients and others by
preventing or reducing the duration and severity of an episode of acute
agitation. Our first clinical study on this product, completed in Q4 2014,
suggested improved bioavailability compared to the currently approved tablet. In
late 2015 we completed a second pilot clinical study which demonstrated that
buccal absorption of the drug from the loxapine oral film results in a
significantly higher bioavailability of the drug compared to oral tablets. We
are currently optimizing the film to further improve time to reach peak plasma
concentrations.
On February 10, 2016, we announced the submission of the patent
application with the U.S. patent office for an oral film dosage form containing
Loxapine for the treatment of anxiety and aggression in patients suffering from
schizophrenia or bipolar 1 disorder.
INT0037/2013
: A product based on one of our proprietary
technologies has been developed and we are currently preparing submission
batches in support of a marketing application to the FDA. The product was being
developed in accordance with another development and commercialization agreement
with Par Pharmaceutical, Inc. On September 18, 2015, Par was acquired by Endo
International plc. As a result of this acquisition, there was a conflict for Par
to remain as the partner for these products. As such, the product was returned
to the Company with full rights and no requirement for any compensation for work
paid by Par. We continue to work closely with Par on the opioid dependence
product and are pleased the relationship is on excellent terms.
On September 12, 2016, we announced that we had entered into a
licensing, development and supply agreement with Chemo Group (Chemo) granting
Chemo the exclusive license to commercialize two generic products for the USA
market and one product on a worldwide basis. Under the terms of the agreement, Chemo has
obtained certain exclusive rights to market and sell our products in exchange
for upfront and milestone payments, together with a share of the profits of
commercialization. Chemo also has a right of first negotiation to obtain the
exclusive commercialization rights for two of the products to include any
country outside the USA. Preparation of Scale-up activities for the product are
currently ongoing.
9
INT0039/2013
: A product based on one of our proprietary
technologies has complete development and phase I clinical trial with positive
data. The product was being developed in accordance with another development and
commercialization agreement with Par Pharmaceutical, Inc. On September 18, 2015,
Par was acquired by Endo International plc. As a result of this acquisition,
there was a conflict for Par to remain as the partner for this product. As such,
the product was returned to the Company with full rights and no requirement for
any compensation for work paid by Par. We continue to work closely with Par on
the opioid dependence product and are pleased the relationship is on excellent
terms.
On September 12, 2016, we announced that we had entered into a
licensing, development and supply agreement with Chemo granting Chemo the
exclusive license to commercialize two generic products for the U.S. market and
one product on a worldwide basis. Under the terms of the agreement, Chemo has
obtained certain exclusive rights to market and sell our products in exchange
for upfront and milestone payments, together with a share of the profits of
commercialization. Chemo also has a right of first negotiation to obtain the
exclusive commercialization rights for two of the products to include any
country outside the U.S. Preparation scale-up and submission activities are
currently ongoing.
INT0040/2014
: An oral film product based on our
proprietary edible film technology is currently in the optimization development
stage. In order to protect our competitive advantage, no further details of the
product can be disclosed at this stage.
On December 27, 2016, we announced that we have entered into a
co-development and commercialization agreement with Endo Ventures Ltd. for this
product utilizing our proprietary VersaFilm for the U.S. market. Under the
agreement, Endo has obtained certain exclusive rights to market and sell our
product in the U.S. We received an upfront payment and will receive future
milestone payments. Endo and IntelGenx will share the profits of
commercialization.
INT0041/2015:
An oral film product based on our
proprietary edible film technology is currently in the development stage. In
order to protect our competitive advantage, no further details of the product
can be disclosed at this stage.
INT0042/2015:
An oral film product based on our
proprietary edible film technology is currently in the early development stage.
In order to protect our competitive advantage, no further details of the product
can be disclosed at this stage.
INT0043/2015
: We are currently developing an oral film
containing montelukast as an active ingredient based on our proprietary edible
film technology VersaFilm .In pre-clinical studies, it was discovered that
montelukast has the potential to rejuvenate the brain in aged rats.
We are collaborating with Dr. Ludwig Aigner, a neuroscientist
who is a member of our Scientific Advisory Board and head of the Institute of
Molecular Regenerative Medicine at the Paracelsus Medical University in
Salzburg, Austria. Dr. Aigner has made major contributions in the field of brain
and spinal cord regeneration over the last 25 years. He was the first to develop
tools to visualize neurogenesis in living animals and identified signaling
mechanisms that are crucially involved in limiting brain regeneration. One of
these mechanisms, leukotriene signaling, is related to asthma. In consequence,
Dr. Aigner and his team recently demonstrated that the anti-asthmatic drug
montelukast structurally and functionally rejuvenates the aged brain. His main
aim is to develop molecular and cellular therapies for patients with
neurodegenerative diseases and for the aged population.
On July 13, 2016, we announced the initiation of a phase 1
clinical trial of montelukast, a unique drug repurposing opportunity for the
treatment of degenerative diseases of the brain, such as: mild cognitive
impairment and Alzheimers disease, the most prominent form of dementia. The
objectives of the trial were to demonstrate that our oral film product will
provide therapeutically effective blood levels of montelukast, and that
montelukast when delivered using our oral film crosses the blood brain
barrier.
On August 22, 2016, we announced the successful completion of
the pilot clinical study for our Montelukast VersaFilm that demonstrated a
significantly improved pharmacokinetic profile against the reference product.
The study data confirmed that buccal absorption of the drug from the Montelukast
film product resulted in a significantly improved bioavailability of the drug
compared to the commercial tablet. In addition, the study data confirmed that
Montelukast crosses the blood brain barrier when administered using our
Versafilm delivery technology.
We commenced preparation for a phase II-a proof-of-concept
(POC) study. The Company expects the results from the study to be available in
Q4/2017. We are also actively working on securing the IP of our product by
filing numerous patent applications. Based on the outcome of this first efficacy trial in humans, we will be
actively seeking a partnership or alliance opportunity to further advance
developmental work and commercialization of this product.
10
INT0044/2016
: A product based on one of our
VersaTab
TM
proprietary technologies currently in the early
development stage. In order to protect our competitive advantage, no further
details of the product can be disclosed at this stage.
On December 1
st
, 2016, we announced that we had
strengthened our relationship with Chemo by signing a term sheet for the
co-development and commercialization of a generic tablet in the area of CNS
(central nervous system) on a worldwide basis. According to Global Data,
worldwide sales in 2015 of the CNS related product exceeded $4 billion.
As per the agreement we received an upfront payment and will be
entitled to receive development costs of the product and future milestone
payments. Chemo and IntelGenx will also share the profits of commercialization.
The definitive agreement was signed on December 30, 2016.
The current status of each of our products as of the date of
this report is summarized in the following table:
Product
|
Indication
|
Status of Development
|
INT0001/2004
|
Anti-hypertension
|
Technology transfer ongoing
|
INT0004/2006
|
Antidepressant
|
FDA-approved November 2011. Commercially launched in USA
as Forfivo XL
®
in October 2012. In 2016 we sold the royalty
revenue to SWK.
|
INT0007/2006
|
Erectile dysfunction
|
Submission preparation ongoing
|
INT0008/2008
|
Migraine
|
Submission preparation ongoing at IntelGenx. Submission
currently under review by Spanish authorities.
|
INT0010/2006
|
Pain
|
Formulation optimization, scale-up preparation and
clinical study evaluation
|
INT0027/2011
|
Opioid dependence
|
ANDA submitted to FDA in July 2013. CRL received and
under review.
|
INT0036/2012
|
Schizophrenia
|
Formulation development ongoing
|
INT0037/2013
|
Undisclosed
|
Product developed. Preparing manufacture of submission
batches.
|
INT0039/2013
|
Undisclosed
|
Product developed. Preparing manufacture of submission
batches
|
INT0040/2013
|
Undisclosed
|
Formulation development ongoing
|
INT0041/2015
|
Undisclosed
|
Formulation development ongoing
|
INT0042/2015
|
Undisclosed
|
Formulation development ongoing
|
INT0043/2015
|
Alzheimer
|
Formulation development completed in preparation for
clinical phase II proof of concept
|
INT0044/2016
|
Undisclosed
|
Formulation development ongoing
|
Growth Strategy
Our primary growth strategies include: (1) identifying
lifecycle management opportunities for existing market leading pharmaceutical
products, (2) develop oral film products that provide tangible patient benefits,
(3) development of new drug delivery technologies, (4) repurposing existing
drugs for new indications, (5) developing generic drugs where high technology
barriers to entry exist in reproducing branded films, and (6) manufacturing our
VersaFilm products for commercial sale. In addition, our service portfolio also
includes contract manufacturing services as contract manufacturing presents an
attractive short term revenue opportunity and increases the utilization of the
manufacturing factory, thus further absorbing overhead costs.
11
Lifecycle Management Opportunities
We are seeking to position our delivery technologies as an
opportunity for lifecycle management of products for which patent protection of
the active ingredient is nearing expiration. While the patent for the underlying
substance cannot be extended, patent protection can be obtained for a new and
improved formulation by filing an application with the FDA under Section
505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Such applications,
known as a 505(b)(2) NDA, are permitted for new drug products that incorporate
previously approved active ingredients, even if the proposed new drug
incorporates an approved active ingredient in a novel formulation or for a new
indication. A 505(b)(2) NDA may include information regarding safety and
efficacy of a proposed drug that comes from studies not conducted by or for the
applicant. The first formulation for a respective active ingredient filed with
the FDA under a 505(b)(2) application may qualify for up to three years of
market exclusivity upon approval. Based upon a review of past partnerships
between third party drug delivery companies and pharmaceutical companies,
management believes that drug delivery companies which possess innovative
technologies to develop these special dosage formulations present an attractive
opportunity to pharmaceutical companies. Accordingly, we believe 505(b)(2)
products represent a viable business opportunity for us.
Product Opportunities that provide Tangible Patient
Benefits
Our focus will be on developing oral film products leveraging
our VersaFilm technology that provide tangible patient benefits versus existing
drug delivery forms. Patients with difficulties swallowing medication,
pediatrics or geriatrics may benefit from oral films due to the ease of use.
Similarly, we are working on oral films to improve bio-availability and/or
response time versus existing drugs and thereby reducing side effects.
Development of New Drug Delivery Technologies
The rapidly disintegrating film technology contained in our
VersaFilm, and our AdVersa® mucosal adhesive tablet, are two examples of our
efforts to develop alternate technology platforms. As we work with various
partners on different products, we seek opportunities to develop new proprietary
technologies.
Repurposing Existing Drugs
We are working on the repurposing of already approved drugs for
new indications using our VersaFilm film technology. This program represents a
viable growth strategy for us as it will allow for reduced development costs,
improved success rates and shorter approval times. We believe that through our
repurposing program we will be able minimize the risk of developmental failure
and create value for us and potential partners.
Generic Drugs with High Barriers to Entry
We plan to pursue the development of generic drugs that have
certain barriers to entry, e.g., where product development and manufacturing is
complex and can limit the number of potential entrants into the generic market.
We plan to pursue such projects only if the number of potential competitors is
deemed relatively insignificant.
VersaFilm Manufacturing
We are in the process of establishing a state-of-the-art
manufacturing facility for the future manufacture of our VersaFilm products.
Construction of the manufacturing and laboratories are now completed and
equipment is being prepared to begin manufacturing in 2017. We believe that this
(1) represents a profitable business opportunity, (2) will reduce our dependency
upon third-party contract manufacturers, thereby protecting our manufacturing
process know-how and intellectual property, and (3) allows us to offer our
development partners a full service from product conception through to supply of
the finished product.
With our current manufacturing equipment, we are only able to
manufacture products that do not contain flammable organic solvents. Since
several of our film products are solvent-based, we are in the process of
acquiring manufacturing equipment that is capable of handling organic solvents,
and we are expanding our manufacturing facility in order to create the space
required for this new manufacturing equipment.
Competition
The pharmaceutical industry is highly competitive and is
subject to the rapid emergence of new technologies, governmental regulations,
healthcare legislation, availability of financing, patent litigation and other
factors. Many of our competitors, including Monosol Rx, Tesa-Labtec GmbH,
BioDelivery Sciences International, Inc. and LTS Lohmann Therapy Systems Corp.,
have longer operating histories and greater financial, technical, marketing,
legal and other resources than we have. In addition, many of our competitors have significantly greater experience than we have
in conducting clinical trials of pharmaceutical products, obtaining FDA and
other regulatory approvals of products, and marketing and selling products that
have been approved. We expect that we will be subject to competition from
numerous other companies that currently operate or are planning to enter the
markets in which we compete.
12
The key factors affecting the development and commercialization
of our drug delivery products are likely to include, among other factors:
|
|
The regulatory requirements;
|
|
|
|
|
|
The safety and efficacy of our products;
|
|
|
|
|
|
The relative speed with which we can develop products;
|
|
|
|
|
|
Generic competition for any product that we develop;
|
|
|
|
|
|
Our ability to defend our existing intellectual property
and to broaden our intellectual property and technology base;
|
|
|
|
|
|
Our ability to differentiate our products;
|
|
|
|
|
|
Our ability to develop products that can be manufactured
on a cost effective basis;
|
|
|
|
|
|
Our ability to manufacture our products in compliance
with current Good Manufacturing Practices (cGMP) and any other
regulatory requirements; and
|
|
|
|
|
|
Our ability to obtain financing.
|
In order to establish ourselves as a viable industry partner,
we plan to continue to invest in our research and development activities and in
our manufacturing technology expertise, in order to further strengthen our
technology base and to develop the ability to manufacture our VersaFilm
products ourselves, and our VersaTab and AdVersa® products through our
manufacturing partners, at competitive costs.
Our Competitive Strengths
We believe that our key competitive strengths include:
|
|
Our comprehensive full services;
|
|
|
|
|
|
Our diversified pipeline;
|
|
|
|
|
|
Our ability to swiftly develop products through
to regulatory approval; and
|
|
|
|
|
|
The versatility of our drug delivery
technologies.
|
Manufacturing Partnership
While we previously manufactured products only for testing
purposes in our own laboratories, we have now started to manufacture products
for pivotal clinical trials, and we are undertaking steps to manufacture
products for commercial use. In order to establish ourselves as a full-service
partner for our thin film products, we have completed the construction of a new,
state-of-the-art oral film manufacturing facility and are in the process of
preparing the equipment and finalizing plans to commercially manufacture our
products using our VersaFilm drug delivery technology. VersaFilm is our
proprietary immediate release polymeric film technology. It is comprised of a
thin polymeric film using United States Pharmacopeia (USP) components that are
safe and approved by the FDA for use in food, pharmaceutical and cosmetic
products. We completed construction of our manufacturing facility and expect it
to be fully operational in 2017.
We are currently not a commercial manufacturer and we do not
usually purchase large quantities of raw materials. Our manufacturing partners,
however, may purchase significant quantities of raw materials, some of which may
have long lead times. If raw materials cannot be supplied to our manufacturing
partners in a timely and cost effective manner, our manufacturing partners may
experience delays in production that may lead to reduced supplies of
commercial products being available for sale or distribution. Such shortages
could have a detrimental effect on sales of the products and a corresponding
reduction on our royalty revenues earned.
13
Dependence on Major Customers
We currently rely on a few major customers for our end
products. We also currently depend upon a limited number of partners to develop
our products, to provide funding for the development of our products, to assist
in obtaining regulatory approvals that are required in order to commercialize
these products, and to market and sell our products.
Intellectual Property and Patent Protection
We protect our intellectual property and technology by using
the following methods: (i) applying for patent protection in the United States
and in the appropriate foreign markets, (ii) non-disclosure agreements, license
agreements and appropriate contractual restrictions and controls on the
distribution of information, and (iii) trade secrets, common law trademark
rights and trademark registrations. We plan to file core technology patents
covering the use of our platform technologies in any pharmaceutical products.
We have obtained 8 patents and have an additional 18 pending
patent applications, as described below. The patents expire 20 years after
submission of the initial application. In the U.S. the term of the patent
sometimes extends over the 20 year period. The initial term of 20 years is
extended by a period (the patent term adjustment) determined by the USPTO
according to the delays in the prosecution of the patent application that are
not applicant delays.
|
|
|
|
|
Date submitted / issued /
|
Patent No.
|
Title
|
|
Subject
|
|
expiration
|
|
|
|
|
|
|
6,231,957
|
Rapidly disintegrating flavor wafer for flavor enrichment
|
|
The
composition, manufacturing, and use of rapidly disintegrating flavored
films for releasing flavors to certain substrates
|
|
Issued
May 15, 2001
Expires May 6, 2019
|
|
|
|
|
|
|
US 6,660,292
|
Rapidly disintegrating film for precooked foods
|
|
Composition and manufacturing of flavored films for releasing
flavors to precooked food substrates
|
|
Issued
December 9, 2003
Expires June 19, 2021
|
|
|
|
|
|
|
US 7,132,113
|
Flavored film
|
|
Composition and manufacturing method of multi-layered films
|
|
Issued
November 7, 2006
Expires April 16, 2022
|
|
|
|
|
|
|
US 8,691,272
|
Multilayer tablet
|
|
Formulation of multilayered tablets
|
|
Issued
April 8, 2014
Expires January 28, 2033
|
|
|
|
|
|
|
US 8,703,191
|
Controlled release pharmaceutical tablets
|
|
Formulation of tablets containing bupropion and mecamylamine
|
|
Issued
April 22, 2014
Expires January 10, 2032
|
|
|
|
|
|
|
US 7,674,479
|
Sustained-release bupropion and bupropion / mecamylamine
tablets
|
|
Formulation and method of making tablets containing bupropion
and mecamylamine
|
|
Issued
March 9, 2010
Expires July 25, 2027
|
|
|
|
|
|
|
US 8,735,374
|
Oral mucoadhesive
dosage form
|
|
Direct
compression formulation for buccal and sublingual dosage forms
|
|
Issued May 27,
2014
Expires April 15, 2032
|
|
|
|
|
|
|
US 9,301,948
|
Instantly wettable oral film dosage form without surfactant or
polyalcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Issued
April 05, 2016
Expires July 30, 2033
|
14
US Appl.
13/079,348
|
Solid
oral dosage forms comprising tadalafil
|
|
Formulation of oral films containing tadalafil
|
|
Filed
April 4, 2011
|
|
|
|
|
|
|
US Appl.
12/963,132
|
Oral
film dosage forms and methods for making same
|
|
Optimization of film strip technology
|
|
Filed
December 8, 2010
|
|
|
|
|
|
|
US Appl.
14/630,699
|
Film
dosage forms containing amorphous active agents
|
|
Film
containing amorphous agent
|
|
Filed
February 25, 2015
|
|
|
|
|
|
|
US Appl.
14/554,332
|
Film
dosage forms with extended release mucoadhesive particles
|
|
Film
containing mucoadhesive particle
|
|
Filed
November 26, 2014
|
|
|
|
|
|
|
US Appl.
13/748,241
|
Oral
film dosage forms and methods for making same
|
|
Optimization of film strip technology
|
|
Filed
January 23, 2013
|
|
|
|
|
|
|
US Appl.
15/216,903
|
Film
dosage forms containing amorphous active agents
|
|
Film
containing amorphous agent
|
|
Filed
July 22, 2016
|
|
|
|
|
|
|
PCT Appl.
WO2016134454
|
Film
dosage forms containing amorphous active agents
|
|
Film
containing amorphous agent
|
|
Filed
January 29, 2016
|
|
|
|
|
|
|
PCT
Appl.
WO2016123696
|
Oral
dosage film exhibiting enhanced mucosal penetration
|
|
Formulation of oral films without conventional penetration
enhancer
|
|
Filed
January 22, 2016
|
|
|
|
|
|
|
US Appl.
14/612,433
|
Oral
dosage film exhibiting enhanced mucosal penetration
|
|
Formulation of oral films without conventional penetration
enhancer
|
|
Filed
February 3, 2015
|
|
|
|
|
|
|
Japanese
Appl.
JP2016527262
|
Immediately wet oral films dosage forms have no surfactant and
a polyhydric alcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Filed
July 30, 2014
|
|
|
|
|
|
|
Korean Appl.
KR2016008935
|
Immediately wet oral films dosage forms have no surfactant and
a polyhydric alcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Filed
July 30, 2014
|
|
|
|
|
|
|
EU Appl.
EP3,027,179
|
Immediately wet oral films dosage forms have no surfactant and
a polyhydric alcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Filed
July 30, 2014
|
|
|
|
|
|
|
Chinese Appl.
CN105530921
|
Immediately wet oral films dosage forms have no
surfactant and a polyhydric alcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Filed
July 30, 2014
|
15
Singapore Appl.
SG11201600455X
|
Immediately wet oral films dosage forms have no surfactant and
a polyhydric alcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Filed
July 30, 2014
|
|
|
|
|
|
|
Australian Appl.
AU2014298130
|
Immediately wet oral films dosage forms have no surfactant and
a polyhydric alcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Filed
July 30, 2014
|
|
|
|
|
|
|
Canadian Appl.
CA2,919,422
|
Immediately wet oral films dosage forms have no surfactant and
a polyhydric alcohol
|
|
Formulation of oral films containing active pharmaceutical
ingredients
|
|
Filed
July 30, 2014
|
|
|
|
|
|
|
Canadian Appl.
CA2797444
|
Solid
oral dosage forms comprising tadalafil
|
|
Formulation of oral films containing tadalafil
|
|
Filed
November 3, 2011
|
|
|
|
|
|
|
EU Appl.
EP1,968,562
|
Multilayer tablet
|
|
Formulation of multilayered tablets
|
|
Filed
November 22, 2007
|
Government Regulation
The pharmaceutical industry is highly regulated. The products
we participate in developing require certain regulatory approvals. In the United
States, drugs are subject to rigorous regulation by the FDA. The U.S. Federal
Food, Drug, and Cosmetic Act, and other federal and state statutes and
regulations, govern, among other things, the research, development, testing,
manufacture, storage, record keeping, packaging, labeling, adverse event
reporting, advertising, promotion, marketing, distribution, and import and
export of pharmaceutical products. Failure to comply with applicable regulatory
requirements may subject a company to a variety of administrative or
judicially-imposed sanctions and/or the inability to obtain or maintain required
approvals or to market drugs. The steps ordinarily required before a new
pharmaceutical product may be marketed in the United States include:
|
|
Preclinical laboratory tests, animal studies and
formulation studies under FDAs good laboratory practices regulations, or
GLPs;
|
|
|
|
|
|
The submission to the FDA of an investigational new drug
application, or IND, which must become effective before human clinical
trials may begin;
|
|
|
|
|
|
The completion of adequate and well-controlled clinical
trials according to good clinical practice regulations, or GCPs, to
establish the safety and efficacy of the product for each indication for
which approval is sought;
|
|
|
|
|
|
After successful completion of the required clinical
testing, submission to the FDA of a NDA, or an ANDA, for generic drugs. In
certain cases, an application for marketing approval may include
information regarding safety and efficacy of a proposed drug that comes
from studies not conducted by or for the applicant. Such applications,
known as a 505(b)(2) NDA, are permitted for new drug products that
incorporate previously approved active ingredients, even if the proposed
new drug incorporates an approved active ingredient in a novel formulation
or for a new indication;
|
|
|
|
|
|
Satisfactory completion of an FDA pre-approval inspection
of the manufacturing facility or facilities at which the product is to be
produced, to assess compliance with cGMPs to assure that the facilities,
methods and controls are adequate to preserve the drugs identity,
strength, quality and purity; and
|
|
|
|
|
|
FDA review and approval of the NDA or ANDA.
|
The cost of complying with the foregoing requirements,
including preparing and submitting an NDA or ANDA, may be substantial.
Accordingly, we typically rely upon our partners in the pharmaceutical industry
to spearhead and bear the costs of the FDA approval process. We also seek to
mitigate regulatory costs by focusing on 505(b)(2) NDA opportunities. By
applying our drug delivery technology to existing drugs, we seek to develop products with
lower research & development (R&D) expenses and shorter time-to-market
timelines as compared to regular NDA products.
16
Research and Development Expense
Our R&D expenses, net of R&D tax credits, for the year
ended December 31, 2016 increased by $733 thousand to $1,766 thousand, compared
with $1,033 thousand for the year ended December 31, 2015. The increase in
R&D expenditure is explained in the section of this report entitled
Managements Discussion and Analysis of Financial Condition and Results of
Operations.
Environmental Regulatory Compliance
We believe that we are in compliance with environmental
regulations applicable to our research and development and manufacturing
facility located in Ville Saint Laurent, Quebec.
Employees
As of the date of this filing, we have 25 full-time and four
part-time employees. None of our employees are covered by collective bargaining
agreements. We believe that our relations with our employees are very good.
ITEM 1A. RISK FACTORS.
Our business faces many risks. Any of the risks discussed
below, or elsewhere in this report or in our other filings with the Securities
and Exchange Commission (SEC), could have a material impact on our business,
financial condition, or results of operations.
Risks Related to Our Business
We have a history of losses and our revenues may not be
sufficient to sustain our operations.
Even though we ceased being a development stage company in
April 2006, we are still subject to all of the risks associated with having a
limited operating history and pursuing the development of new products. Our cash
flows may be insufficient to meet expenses relating to our operations and the
development of our business, and may be insufficient to allow us to develop new
products. We currently conduct research and development using our proprietary
platform technologies to develop oral controlled release and other delivery
products. We do not know whether we will be successful in the development of
such products. We have an accumulated deficit of approximately $17,737 thousand
since our inception in 2003 through December 31, 2016. To date, these losses
have been financed principally through sales of equity securities. Our revenues
for the past five years ended December 31, 2016, December 31, 2015, December 31,
2014, December 31, 2013 and December 31, 2012 were $5.2 million, $5.1 million,
$1.7 million, $948 thousand and $1,198 thousand respectively. Revenue generated
to date has not been sufficient to sustain our operations. In order to achieve
profitability, our revenue streams will have to increase and there is no
assurance that revenues will increase to such a level.
We may incur losses associated with foreign currency
fluctuations.
The majority of our expenses are paid in Canadian dollars,
while a significant portion of our revenues are in U.S. dollars. Our financial
results are subject to the impact of currency exchange rate fluctuations.
Adverse movements in exchange rates could have a material adverse effect on our
financial condition and results of operations.
We may need additional capital to fulfill our business
strategies. We may also incur unforeseen costs. Failure to obtain such capital
would adversely affect our business.
We will need to expend significant capital in order to continue
with our research and development by hiring additional research staff and
acquiring additional equipment. If our cash flows from operations are
insufficient to fund our expected capital needs, or our needs are greater than
anticipated, we may be required to raise additional funds in the future through
private or public sales of equity securities or the incurrence of indebtedness.
Additional funding may not be available on favorable terms, or at all. If we
borrow additional funds, we likely will be obligated to make periodic interest
or other debt service payments and may be subject to additional restrictive
covenants. If we fail to obtain sufficient additional capital in the future, we
could be forced to curtail our growth strategy by reducing or delaying capital
expenditures, selling assets or downsizing or restructuring our operations. If
we raise additional funds through public or private sales of equity securities,
the sales may be at prices below the market price of our stock and our
shareholders may suffer significant dilution.
17
The loss of the services of key personnel would adversely
affect our business.
Our future success depends to a significant degree on the
skills, experience and efforts of our executive officers and senior management
staff. The loss of the services of existing personnel would be detrimental to
our research and development programs and to our overall business.
We are dependent on business partners to conduct clinical
trials of, obtain regulatory approvals for, and manufacture, market, and sell
our products.
We depend heavily on our pharmaceutical partners to pay for
part or all of the research and development expenses associated with developing
a new product and to obtain approval from regulatory bodies such as the FDA to
commercialize these products. We also depend on our partners to distribute these
products after receiving regulatory approval. Our revenues from research and
development fees, milestone payments and royalty fees are derived from our
partners. Our inability to find pharmaceutical partners who are willing to pay
us these fees in order to develop new products would negatively impact our
business and our cash flows.
We have limited experience in manufacturing, marketing and
selling pharmaceutical products. Accordingly, if we cannot maintain our existing
partnerships or establish new partnerships with respect to our other products in
development, we will have to establish our own capabilities or discontinue the
commercialization of the affected product. Developing our own capabilities would
be expensive and time consuming and could delay the commercialization of the
affected product. There can be no assurance that we would be able to develop
these capabilities.
Our existing agreements with pharmaceutical industry partners
are generally subject to termination by the counterparty on short notice upon
the occurrence of certain circumstances, including, but not limited to, the
following: a determination that the product in development is not likely to be
successfully developed or not likely to receive regulatory approval; our failure
to satisfy our obligations under the agreement, or the occurrence of a
bankruptcy event. If any of our partnerships are terminated, we may be required
to devote additional resources to the product, seek a new partner on short
notice, or abandon the product development efforts. The terms of any additional
partnerships or other arrangements that we establish may not be favorable to us.
We are also at risk that these partnerships or other
arrangements may not be successful. Factors that may affect the success of our
partnerships include the following:
|
|
Our partners may incur financial and cash-flow
difficulties that force them to limit or reduce their participation in our
joint projects;
|
|
|
|
|
|
Our partners may be pursuing alternative technologies or
developing alternative products that are competitive to our product,
either on their own or in partnership with others;
|
|
|
|
|
|
Our partners may reduce marketing or sales efforts, or
discontinue marketing or sales of our products, which may reduce our
revenues received on the products;
|
|
|
|
|
|
Our partners may have difficulty obtaining the raw
materials to manufacture our products in a timely and cost effective
manner or experience delays in production, which could affect the sales of
our products and our royalty revenues earned;
|
|
|
|
|
|
Our partners may terminate their partnerships with us.
This could make it difficult for us to attract new partners, and it could
adversely affect how the business and financial communities perceive us;
|
|
|
|
|
|
Our partners may pursue higher priority programs or
change the focus of their development programs, which could affect the
partners commitment to us. Pharmaceutical and biotechnology companies
historically have re-evaluated their priorities from time to time,
including following mergers and consolidations, a common occurrence in
recent years; and
|
|
|
|
|
|
Our partners may become the target of litigation for
purported patent or intellectual property infringement, which could delay
or prohibit commercialization of our products and which would reduce our
revenue from such products.
|
We face competition in our industry, and several of our
competitors have substantially greater experience and resources than we
do.
We compete with other companies within the drug delivery
industry, many of which have more capital, more extensive research and
development capabilities and greater human resources than we do. Some of these
drug delivery competitors include Monosol Rx, Tesa-Labtec GmbH, BioDelivery
Sciences International, Inc. and LTS Lohmann Therapy Systems Corp. Our
competitors may develop new or enhanced products or processes that may be more
effective, less expensive, safer or more readily available than any products or processes that we develop, or they may develop
proprietary positions that prevent us from being able to successfully
commercialize new products or processes that we develop. As a result, our
products or processes may not compete successfully, and research and development
by others may render our products or processes obsolete or uneconomical.
Competition may increase as technological advances are made and commercial
applications broaden.
18
We rely upon third-party manufacturers, which puts us at
risk for supplier business interruptions.
In certain instances, we may have to enter into agreements with
third party manufacturers to manufacture certain of our products once we
complete development and after we receive regulatory approval. If our
third-party manufacturers fail to perform, our ability to market products and to
generate revenue would be adversely affected. Our failure to deliver products in
a timely manner could lead to the dissatisfaction of our distribution partners
and damage our reputation, causing our distribution partners to cancel existing
agreements with us and to stop doing business with us.
Any third-party manufacturers that we depend on to manufacture
our products are required to adhere to FDA regulations regarding current Good
Manufacturing Practices (cGMP), which include testing, control and documentation
requirements. Ongoing compliance with cGMP and other regulatory requirements is
monitored by periodic inspection by the FDA and comparable agencies in other
countries. Failure by our third-party manufacturers to comply with cGMP and
other regulatory requirements could result in actions against them by regulatory
agencies and jeopardize our ability to obtain products on a timely basis.
We are in the process of establishing our own manufacturing
facility for the future manufacture of VersaFilm products, which requires
considerable financial investment and, if we are unsuccessful, could have a
material adverse effect on our business, financial condition or results of
operations.
We currently manufacture products only for clinical and testing
purposes in our own facility and we do not manufacture products for commercial
use. In order to establish ourselves as a full-service partner for our thin film
products, we invested approximately $6.5 million to establish a state-of-the-art
manufacturing facility for the commercial manufacture of products developed
using our VersaFilm drug delivery technology. We anticipate the manufacturing
facility to be qualified and ready for regulatory approval in the second half of
2017.
With our current manufacturing equipment, we are only able to
manufacture products that do not contain flammable organic solvents. Since
several of our film products are solvent-based, we are in the process of
acquiring manufacturing equipment that is capable of handling organic solvents,
and we are expanding our manufacturing facility in order to create the space
required for this new manufacturing equipment.
We have limited expertise in establishing and operating a
manufacturing facility and although we have contracted with architects,
engineers and construction contractors specialized in the planning and
construction of pharmaceutical facilities, there can be no guarantee that the
project can be completed within the time or budget allocated. In addition, we
may be unable to attract suitably qualified personnel for our manufacturing
facility at acceptable terms and conditions of employment.
In addition, before we can begin commercial manufacture of our
VersaFilm products for sale in the United States, we must obtain FDA regulatory
approval for the product, which requires a successful inspection of our
manufacturing facilities, processes and quality systems by various health
authorities in addition to other product-related approvals. Further,
pharmaceutical manufacturing facilities are continuously subject to inspection
by the FDA and other health authorities before and after product approval. Due
to the complexity of the processes used to manufacture our VersaFilm products,
we may be unable initially or at any future time to pass federal, state or
international regulatory inspections in a cost effective manner. If we are
unable to comply with manufacturing regulations, we may be subject to fines,
unanticipated compliance expenses, recall or seizure of any approved products,
total or partial suspension of production and/or enforcement actions, including
injunctions, and criminal or civil prosecution.
The manufacture of our products is heavily regulated by
governmental health authorities, including the FDA. We must ensure that all
manufacturing processes comply with current Good Manufacturing Practices
(cGMP) and other applicable regulations. If we fail to comply fully with these
requirements and the health authorities' expectations, then we could be required
to shut down our production facilities or production lines, or could be
prevented from importing our products from one country to another. This could
lead to product shortages, or to our being entirely unable to supply products to
patients for an extended period of time. Such shortages or shut downs could lead
to significant losses of sales revenue and to potential third-party litigation.
In addition, health authorities have in some cases imposed significant penalties
for such failures to comply with cGMP. A failure to comply fully with cGMP could
also lead to a delay in the approval of new products to be manufactured at our
manufacturing facility.
Any disruption in the supply of our future products could have
a material adverse effect on our business, financial condition or results of
operations.
19
We have no timely ability to replace our future VersaFilm
manufacturing capabilities.
If our manufacturing facility suffers any type of prolonged
interruption, whether caused by regulator action, equipment failure, critical
facility services, fire, natural disaster or any other event that causes the
cessation of manufacturing activities, we would be exposed to long-term loss of
sales and profits. There are no facilities capable of contract manufacturing our
VersaFilm products at short notice. If we suffer an interruption to our
manufacturing of VersaFilm products, we may have to find a contract
manufacturer capable of supplying our needs, although this would require
completing a Manufacturing Site Change process, which takes considerable time
and is costly. Replacement of our manufacturing capabilities will have a
material adverse effect on our business and financial condition or results of
operations.
We depend on a limited number of suppliers for API.
Generally, only a single source of API is qualified for use in each product due
to the costs and time required to validate a second source of supply. Changes in
API suppliers must usually be approved through a Prior Approval Supplement by
the FDA.
Our ability to manufacture products is dependent, in part, upon
ingredients and components supplied by others, including international
suppliers. Any disruption in the supply of these ingredients or components or
any problems in their quality could materially affect our ability to manufacture
our products and could result in legal liabilities that could materially affect
our ability to realize profits or otherwise harm our business, financial, and
operating results. As the API typically comprises the majority of a product's
manufactured cost, and qualifying an alternative is costly and time-consuming,
API suppliers must be selected carefully based on quality, reliability of supply
and long-term financial stability.
We are subject to extensive government regulation including
the requirement of approval before our products may be marketed. Even if we
obtain marketing approval, our products will be subject to ongoing regulatory
review.
We, our partners, our products, and our product candidates are
subject to extensive regulation by governmental authorities in the United States
and other countries. Failure to comply with applicable requirements could result
in warning letters, fines and other civil penalties, delays in approving or
refusal to approve a product candidate, product recall or seizure, withdrawal of
product approvals, interruption of manufacturing or clinical trials, operating
restrictions, injunctions, and criminal prosecution.
Our products cannot be marketed in the United States without
FDA approval. Obtaining FDA approval requires substantial time, effort, and
financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all. With most of our products, we rely on our
partners for the preparation of applications and for obtaining regulatory
approvals. If the FDA does not approve our product candidates in a timely
fashion, or does not approve them at all, our business and financial condition
may be adversely affected. Further, the terms of approval of any marketing
application, including the labeling content, may be more restrictive than we
desire and could affect the marketability of our or our partner`s products.
Subsequent discovery of problems with an approved product may result in
restrictions on the product or its withdrawal from the market. In addition, both
before and after regulatory approval, we, our partners, our products, and our
product candidates are subject to numerous FDA requirements regarding testing,
manufacturing, quality control, cGMP, adverse event reporting, labeling,
advertising, promotion, distribution, and export. Our partners and we are
subject to surveillance and periodic inspections to ascertain compliance with
these regulations. Further, the relevant law and regulations may change in ways
that could affect us, our partners, our products, and our product candidates.
Failure to comply with regulatory requirements could have a material adverse
impact on our business.
Regulations regarding the manufacture and sale of our future
products are subject to change. We cannot predict what impact, if any, such
changes may have on our business, financial condition or results of operations.
Failure to comply with applicable regulatory requirements could have a material
adverse effect on our business, financial condition and results of operations.
Additionally, the time required for obtaining regulatory
approval is uncertain. We may encounter delays or product rejections based upon
changes in FDA policies, including cGMP, during periods of product development.
We may encounter similar delays in countries outside of the United States. We
may not be able to obtain these regulatory acceptances on a timely basis, or at
all.
The failure to obtain timely regulatory acceptance of our
products, any product marketing limitations, or any product withdrawals would
have a material adverse effect on our business, financial condition and results
of operations. In addition, before it grants approvals, the FDA or any foreign
regulatory authority may impose numerous other requirements with which we must
comply. Regulatory acceptance, if granted, may include significant limitations
on the indicated uses for which the product may be marketed. FDA enforcement
policy strictly prohibits the marketing of accepted products for unapproved
uses. Product acceptance could be withdrawn or civil and/or criminal sanctions
could be imposed for our failure to comply with regulatory standards or the
occurrence of unforeseen problems following initial marketing.
20
We may not be able to expand or enhance our existing product
lines with new products limiting our ability to grow.
If we are not successful in the development and introduction of
new products, our ability to grow will be impeded. We may not be able to
identify products to enhance or expand our product lines. Even if we can
identify potential products, our investment in research and development might be
significant before we can bring the products to market. Moreover, even if we
identify a potential product and expend significant dollars on development, we
may never be able to bring the product to market or achieve market acceptance
for such product. As a result, we may never recover our expenses.
The market may not be receptive to products incorporating
our drug delivery technologies.
The commercial success of any of our products that are approved
for marketing by the FDA and other regulatory authorities will depend upon their
acceptance by the medical community and third party payers as clinically useful,
cost-effective and safe. To date, only two products based upon our technologies
have been marketed in the United States, which limits our ability to provide
guidance or assurance as to market acceptance.
Factors that we believe could materially affect market
acceptance of these products include:
|
|
The timing of the receipt of marketing
approvals and the countries in which such approvals are obtained;
|
|
|
|
|
|
The safety and efficacy of the product as
compared to competitive products;
|
|
|
|
|
|
The relative convenience and ease of
administration as compared to competitive products;
|
|
|
|
|
|
The strength of marketing distribution support;
and
|
|
|
|
|
|
The cost-effectiveness of the product and the
ability to receive third party reimbursement.
|
We are subject to environmental regulations, and any failure
to comply may result in substantial fines and sanctions.
Our operations are subject to Canadian and international
environmental laws and regulations governing, among other things, emissions to
air, discharges to waters and the generation, handling, storage, transportation,
treatment and disposal of raw materials, waste and other materials. Many of
these laws and regulations provide for substantial fines and criminal sanctions
for violations. We believe that we are and have been operating our business and
facility in a manner that complies in all material respects with environmental,
health and safety laws and regulations; however, we may incur material costs or
liabilities if we fail to operate in full compliance. We do not maintain
environmental damage insurance coverage with respect to the products which we
manufacture.
The decision to establish commercial film manufacturing
capability may require us to make significant expenditures in the future to
comply with evolving environmental, health and safety requirements, including
new requirements that may be adopted or imposed in the future. To meet changing
licensing and regulatory standards, we may have to make significant additional
site or operational modifications that could involve substantial expenditures or
reduction or suspension of some of our operations. We cannot be certain that we
have identified all environmental and health and safety matters affecting our
activities and in the future our environmental, health and safety problems, and
the costs to remediate them, may be materially greater than we expect.
Risks Related to Our Intellectual Property
If we are not able to adequately protect our intellectual
property, we may not be able to compete effectively.
Our success depends, to a significant degree, upon the
protection of our proprietary technologies. While we currently own 8 patents and
have an additional 18 pending patent applications in several jurisdictions, we
will need to pursue additional protection for our intellectual property as we
develop new products and enhance existing products. We may not be able to obtain
appropriate protection for our intellectual property in a timely manner, or at
all. Our inability to obtain appropriate protections for our intellectual
property may allow competitors to enter our markets and produce or sell the same
or similar products.
If we are forced to resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and expensive.
In addition, our proprietary rights could be at risk if we are unsuccessful in,
or cannot afford to pursue, those proceedings.
We also rely on trade secrets and contract law to protect some
of our proprietary technology. We have entered into confidentiality and
invention agreements with our employees and consultants. Nevertheless, these
agreements may not be honored and they may not effectively protect our right to our un-patented trade secrets
and know-how. Moreover, others may independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
our trade secrets and know-how.
21
We may need to obtain licenses to patents or other proprietary
rights from third parties. We may not be able to obtain the licenses required
under any patents or proprietary rights or they may not be available on
acceptable terms. If we do not obtain required licenses, we may encounter delays
in product development or find that the development, manufacture or sale of
products requiring licenses could be foreclosed. We may, from time to time,
support and collaborate in research conducted by universities and governmental
research organizations. We may not be able to acquire exclusive rights to the
inventions or technical information derived from these collaborations, and
disputes may arise over rights in derivative or related research programs
conducted by us or our partners.
If we infringe on the rights of third parties, we may not be
able to sell our products, and we may have to defend against litigation and pay
damages.
If a competitor were to assert that our products infringe on
its patent or other intellectual property rights, we could incur substantial
litigation costs and be forced to pay substantial damages. Such litigation costs
could be as a result of direct litigation against us, or as a result of
litigation against one or more of our partners to whom we have contractually
agreed to indemnify in the event that our intellectual property is the cause of
a successful litigious action against our partner. Third-party infringement
claims, regardless of their outcome, would not only consume significant
financial resources, but would also divert our managements time and attention.
Such claims could also cause our customers or potential customers to purchase
competitors products or defer or limit their purchase or use of our affected
products until resolution of the claim. If any of our products are found to
violate third-party intellectual property rights, we may have to re-engineer one
or more of our products, or we may have to obtain licenses from third parties to
continue offering our products without substantial re-engineering. Our efforts
to re-engineer or obtain licenses could require significant expenditures and may
not be successful.
Our controlled release products that are generic versions of
branded controlled release products that are covered by one or more patents may
be subject to litigation, which could delay FDA approval and commercial launch
of our products.
We expect to file or have our partners file NDAs or ANDAs for
our controlled release products under development that are covered by one or
more patents of the branded product. It is likely that the owners of the patents
covering the brand name product or the sponsors of the NDA with respect to the
branded product will sue or undertake regulatory initiatives to preserve
marketing exclusivity. Any significant delay in obtaining FDA approval to market
our products as a result of litigation, as well as the expense of such
litigation, whether or not we or our partners are successful, could have a
materially adverse effect on our business, financial condition and results of
operations.
Risks Related to Our Securities:
The price of our common stock could be subject to
significant fluctuations.
Any of the following factors could affect the market price of
our common stock:
|
|
Our failure to achieve and maintain profitability;
|
|
|
|
|
|
Changes in earnings estimates and recommendations by
financial analysts;
|
|
|
|
|
|
Actual or anticipated variations in our quarterly results
of operations;
|
|
|
|
|
|
Changes in market valuations of similar companies;
|
|
|
|
|
|
Announcements by us or our competitors of significant
contracts, new products, acquisitions, commercial relationships, joint
ventures or capital commitments;
|
|
|
|
|
|
The loss of major customers or product or component
suppliers;
|
|
|
|
|
|
The loss of significant partnering relationships; and
|
|
|
|
|
|
General market, political and economic conditions.
|
22
We have a significant number of convertible securities
outstanding that could be exercised in the future. Subsequent resale of these
and other shares could cause our stock price to decline. This could also make it
more difficult to raise funds at acceptable levels pursuant to future securities
offerings.
Our common stock is a high risk investment.
Our common stock was quoted on the OTC Bulletin Board under the
symbol IGXT from January 2007 until June 2012 and, subsequent to our upgrade
in June 2012, has been quoted on the OTCQX. Our common stock has also been
listed on the TSX Venture Exchange under the symbol IGX since May 2008.
There is a limited trading market for our common stock, which
may affect the ability of shareholders to sell our common stock and the prices
at which they may be able to sell our common stock.
The market price of our common stock has been volatile and
fluctuates widely in response to various factors which are beyond our control.
The price of our common stock is not necessarily indicative of our operating
performance or long term business prospects. In addition, the securities markets
have from time to time experienced significant price and volume fluctuations
that are unrelated to the operating performance of particular companies. These
market fluctuations may also materially and adversely affect the market price of
our common stock.
In the United States, our common stock is considered a penny
stock. The SEC has adopted regulations which generally define a penny stock
to be an equity security that has a market price of less than $5.00 per share or
an exercise price of less than $5.00 per share, subject to specific exemptions.
This designation requires any broker or dealer selling these securities to
disclose certain information concerning the transaction, obtain a written
agreement from the purchaser and determine that the purchaser is reasonably
suitable to purchase the securities. These rules may restrict the ability of
brokers or dealers to sell our common stock and may affect the ability of
investors to sell their shares.
As a result of the foregoing, our common stock should be
considered a high risk investment.
The application of the penny stock rules to our common
stock could limit the trading and liquidity of our common stock, adversely
affect the market price of our common stock and increase stockholder transaction
costs to sell those shares.
As long as the trading price of our common stock is below $5.00
per share, the open market trading of our common stock will be subject to the
penny stock rules, unless we otherwise qualify for an exemption from the
penny stock definition. The penny stock rules impose additional sales
practice requirements on certain broker-dealers who sell securities to persons
other than established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouse). These regulations, if they apply, require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the associated risks. Under these
regulations, certain brokers who recommend such securities to persons other than
established customers or certain accredited investors must make a special
written suitability determination regarding such a purchaser and receive such
purchasers written agreement to a transaction prior to sale. These regulations
may have the effect of limiting the trading activity of our common stock,
reducing the liquidity of an investment in our common stock and increasing the
transaction costs for sales and purchases of our common stock as compared to
other securities.
We became public by means of a reverse merger, and as a
result we are subject to the risks associated with the prior activities of the
public company with which we merged.
Additional risks may exist because we became public through a
reverse merger with a shell corporation. Although the shell did not have any
operations or assets and we performed a due diligence review of the public
company, there can be no assurance that we will not be exposed to undisclosed
liabilities resulting from the prior operations of our company.
Our limited cash resources restrict our ability to pay cash
dividends.
Since our inception, we have not paid any cash dividends on our
common stock. We currently intend to retain future earnings, if any, to support
operations and to finance the growth and development of our business. Therefore,
we do not expect to pay cash dividends in the foreseeable future. Any future
determination relating to our dividend policy will be made at the discretion of
our Board of Directors and will depend on a number of factors, including future
earnings, capital requirements, financial conditions and future prospect and
other factors that the Board of Directors may deem relevant. If we do not pay
any dividends on our common stock, our shareholders will be able to profit from
an investment only if the price of the stock appreciates before the shareholder
sells it. Investors seeking cash dividends should not purchase our common
stock.
23
If we are the subject of securities analyst reports or if
any securities analyst downgrades our common stock or our sector, the price of
our common stock could be negatively affected.
Securities analysts may publish reports about us or our
industry containing information about us that may affect the trading price of
our common stock. In addition, if a securities or industry analyst downgrades
the outlook for our stock or one of our competitors stocks, the trading price
of our common stock may also be negatively affected.