ITEM
I: BUSINESS
Organization and Nature
of Business
Our
Corporate History
NanoViricides,
Inc. (the “Company”) was incorporated under the laws of the State of Colorado on July 25, 2000 as Edot-com.com, Inc.
and was organized for the purpose of conducting Internet retail sales. On April 1, 2005, Edot-com.com, Inc. was incorporated under
the laws of the State of Nevada for the purpose of re-domiciling the Company as a Nevada corporation, Edot-com.com (Nevada). On
April 15, 2005, Edot-com.com (Colorado) and Edot-com.com (Nevada) were merged and Edot-com.com, Inc., (ECMM) a Nevada corporation,
became the surviving entity. On April 15, 2005, the authorized shares of common stock was increased to 300,000,000 shares at $.001
par value and the Company effected a 3.2 to 1 forward stock split effective May 12, 2005.
On June
1, 2005, Edot-com.com, Inc. acquired NanoViricide, Inc., a privately owned Florida corporation (“NVI”), pursuant to
an Agreement and Plan of Share Exchange (the “Exchange”). NVI was incorporated under the laws of the State of Florida
on May 12, 2005 and its sole asset was comprised of a licensing agreement with TheraCour Pharma, Inc., (“TheraCour,”
an approximately 15.2% shareholder of NVI) for rights to develop and commercialize novel and specifically targeted drugs based
on TheraCour’s targeting technologies, against a number of human viral diseases. (For financial accounting purposes, the
acquisition was a reverse acquisition of the Company by NVI, under the purchase method of accounting, and was treated as a recapitalization
with NVI as the acquirer). Upon consummation of the Exchange, ECMM adopted the business plan of NVI.
Pursuant
to the terms of the Exchange, ECMM acquired NVI in exchange for an aggregate of 80,000,000 newly issued shares of ECMM common
stock, resulting in an aggregate of 100,000,000 shares of ECMM common stock issued and outstanding. As a result of the Exchange,
NVI became a wholly owned subsidiary of ECMM. The ECMM shares were issued to the NVI Shareholders on a pro rata basis, on the
basis of 4,000 shares of the Company’s Common Stock for each share of NVI common stock held by such NVI Shareholder at the
time of the Exchange.
On June
28, 2005, NVI was merged into its parent ECMM and the separate corporate existence of NVI ceased. Effective on the same date,
Edot-com.com, Inc., changed its name to NanoViricides, Inc. and its stock symbol on the Pink Sheets to “NNVC”, respectively.
The Company submitted a Form-10SB to the SEC to become a reporting company on November 14, 2006. The Company’s filing status
became effective in March 2007. On June 28, 2007, the company became quoted on the OTC Bulletin Board under the symbol NNVC.
On September
10, 2013, the Company adopted a uniform reverse split of its securities in a 3.5 to 1 ratio, reducing its authorized common stock
to 85,714,287 shares at $0.001 par value, in order to satisfy the share price listing requirements of US National exchanges. On
Wednesday, September 25, 2013, the Company’s common stock began trading on the New York Stock Exchange MKT (NYSE MKT) under
the same symbol, namely “NNVC”. NYSE MKT has changed its name to NYSE American in July 2017.
NanoViricides,
Inc. (the “Company”), is a nano-biopharmaceutical (nanomedicine) company whose business goals are to discover, develop
and commercialize therapeutics to advance the care of patients suffering from life-threatening viral infections. We are a development
stage company with several drugs in various stages of early development. The Company’s drugs are based on several patents,
patent applications, provisional patent applications, and other proprietary intellectual property held by TheraCour Pharma, Inc.
(“TheraCour®”), to which the Company has exclusive licenses in perpetuity for the treatment of the following human
viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Influenza including Asian Bird Flu Virus (INF), Herpes Simplex Virus
(HSV), Hepatitis C Virus (HCV), Hepatitis B Virus (HBV), and Rabies. On February 15, 2010, the Company entered into an Additional
License Agreement with TheraCour granting the Company the exclusive licenses in perpetuity for technologies developed by TheraCour
for the additional virus types for Dengue viruses (DENV), Japanese Encephalitis (JEV), West Nile Virus (WNV), viruses causing
viral Conjunctivitis (a disease of the eye) and Ocular Herpes keratitis, and Ebola/Marburg viruses.
The Company
focuses its research and clinical programs on specific anti-viral therapeutics and is seeking to add to its existing portfolio
of products through its internal discovery and clinical development programs and through an in-licensing strategy. To date, the
Company has not commercialized any product.
The Company
does not claim to be creating a cure for viral diseases. The Company’s objectives are to create the best possible anti-viral
nanoviricides and then subject these compounds to rigorous laboratory and animal testing towards US FDA and international regulatory
approvals. Our long-term research efforts are aimed at augmenting the nanoviricides that we currently have in development with
additional therapeutic agents to produce further improved anti-viral agents in the future. We believe that many viral infections
that are at present untreatable or incurable would be curable using such an advanced approach.
The Nanoviricide® Platform
Technology
NanoViricides,
Inc. is a global leading company in the application of nanomedicine technologies to the complex issues of viral diseases. The
nanoviricide® technology enables direct attacks at multiple points on a virus particle. It is believed that such attacks would
lead to the virus particle becoming ineffective at infecting cells. Antibodies in contrast attack a virus particle at only a maximum
of two attachment points per antibody. In addition, the nanoviricide technology also simultaneously enables attacking the rapid
intracellular reproduction of the virus by incorporating one or more active pharmaceutical ingredients (APIs) within the core
of the nanoviricide. The nanoviricide technology is the only technology in the world, to the best of our knowledge, that is capable
of both (a) attacking extracellular virus thereby breaking the reinfection cycle, and simultaneously (b) disrupting intracellular
production of the virus, thereby enabling complete control of a virus infection.
Our anti-viral
therapeutics, that we call “nanoviricides®” are designed to look to the virus like the native host cell surface
to which it binds. Since these binding sites for a given virus do not change despite mutations and other changes in the virus,
we believe that our drugs will be broad-spectrum, i.e. effective against most if not all strains, types, or subtypes, of a given
virus, provided the virus-binding portion of the nanoviricide is engineered appropriately.
This powerful
platform technology has enabled us to develop several drug candidates against a large number of different viruses that could be
further improved into clinical drug candidates, thus building a very broad drug pipeline that may lead to exponential growth of
the Company upon the approval of our first drug candidate.
It is important
to realize that the flexible nanoviricides nanomedicines show substantial advantages over hard sphere nanoparticles in this antiviral
drug application. Hard sphere nanomaterials such as dendritic materials (dendrimers), nanogold shells, silica, gold or titanium
nanospheres, polymeric particles, etc., were never designed to be capable of completely enveloping and neutralizing the virus
particle.
Nanoviricides
are designed to work by binding to and eliminating virus particles from the blood-stream, just as antibodies do, only potentially
much better. Treating a patient that has a viral infection with a nanoviricide against that virus is expected to result in reduction
in viremia. Reduction in viremia is an important goal in diseases caused by all viral infections. Nanoviricides are designed to
accomplish this using a “Bind-Encapsulate-Destroy” strategy to eliminate the free virus.
A nanoviricide
is constructed by chemically attaching a ligand designed to bind to a virus particle, to a polymeric material that forms a flexible
nanomicelle by self-assembly. If antibodies are known to affect a viral disease, it is possible to construct a nanoviricide against
it, and there can be a general expectation of some success, depending upon the ligand chosen. We can choose a ligand from any
of a number of chemical classes, including small chemicals, peptides, or antibody fragments or even whole antibodies.
A nanoviricide
is made by chemically covalently linking a “nanomicelle” - a globular polymeric micelle with pendant lipid chains
inside, to one or more different small chemical ligands designed to mimic the cellular receptor to which the virus binds. In addition,
the nanoviricide can carry additional active pharmaceutical ingredients (APIs), which may be chosen to affect the intracellular
virus life cycle. Thus the nanoviricide platforms enables construction of complete virus-killing nanomachines that block the virus
from entering the cell as well as that block further production of the virus inside the cell.
Attacking
the “Achilles Heel” of the Virus- Unchanging Ability of the Virus to Bind to Its Cognate Receptor on Cell
We strive
hard to develop virus-binding small chemical ligands that mimic the cognate cellular receptor of the virus, using rational design
and molecular modeling strategies and our internal, accumulated expertise. This is the receptor to which a virus binds to gain
entry into the human cell. Some viruses use more than one, different, receptors. The nanoviricide® platform technology allows
use of different ligands on the same nanoviricide drug to be able to attack such difficult viruses.
It would
be very difficult for a virus to become resistant to a nanoviricide that mimics the virus’ cellular receptor. This is because,
no matter how much a virus mutates or changes, its binding to the cellular receptor does not change. If the virus does not bind
to the nanoviricide efficiently, it would likely have lost its ability to bind to the cellular receptor efficiently as well, resulting
in an attenuated version with limited pathogenicity.
Beyond
Antibodies: A Nanoviricide in Its Design is a Nanomachine Built to Destroy Viruses
A nanoviricide
exposes a very high density of virus binding sites on its surface, in contrast to a human cell. Thus, a virus would be more likely
to be captured by the nanoviricide than to bind to a cell. Once bound to the virus, it is thought that the nanoviricide would
wrap itself around the virus, and the interior lipidic chains of the nanoviricide would merge into the lipid envelope of an enveloped
virus, thus destabilizing the virus. This would result in loss of the viral glycoproteins that it uses to bind to cell and to
fuse with the cell membrane, thus rendering the virus particle non-infectious. In contrast, for an antibody to be successful as
a drug, as many as ten to fifteen antibodies must bind to saturate the virus surface. The resulting antibody-virus complex then
may be subject to the complement protein system in the bloodstream, or it may bind to antibody-receptors on human immune cells.
Thus the human immune system needs to be functional for an antibody to be effective as a “drug”. In a sense, antibodies
only “flag” the virus particle as foreign.
Almost any
virus that causes pathology in humans is able to do so because it has developed intelligent and complicated pathways for disabling
the human immune system at one or more points. This may be one of the reasons why many antiviral antibodies fail in the field
use. Additionally, viruses readily escape antibodies by mutations. Such viral escape from antibodies has been witnessed in almost
every viral epidemic, be it HIV/AIDS, Influenza pandemic of 2009, or the Ebola epidemic of 2014-15. In contrast, a nanoviricide
would complete the job of making the virus particle non-infectious, without any help from the human immune system.
Broad-Spectrum
Nanoviricide Drug Candidates
A nanoviricide
is generally “broad-spectrum” in the sense that it would be effective against all viruses that use the same cellular
receptor.
Formulation
is Inherent in the Design Aspect of a Nanoviricide
We believe
that once we declare a clinical candidate for a given indication in our HerpeCide programs, further IND-enabling pre-clinical
development will be rapid. Formulation development for novel drugs in normal pharmaceutical paradigm often takes years. However,
in the nanoviricide approach, the nanomicelle polymeric backbone itself takes care of the formulation aspects. The nanomicelle
is designed to optimize the drug for its intended route of administration, be it injectable, skin cream, eye drops, or even oral.
Thus no specific or extensive formulation development is expected to be required after clinical candidate declaration. In addition,
we have already short-listed the ligands as well as the nanomicelle backbones for the final candidates in the HerpeCide program.
At present we are synthesizing these final candidate ligands and nanomicelle backbone candidates as required, for the studies
leading to clinical candidate declaration. At the same time, we are also continuing to develop the necessary CMC aspects of the
resulting candidates in parallel. We have already performed preliminary safety studies of our injectable FluCide™ drug candidate
with excellent safety indications in both mouse (at KARD Scientific) and rat (at BASi) models. The HerpeCide program drug candidates
are dermal or ocular topical treatments. Thus we believe that the safety/toxicology studies for these candidates will be relatively
straightforward.
Uniform
Polymer Nature Enables Nanomedicine Manufacturing Quality Assurance
A major
problem in the field of nanomedicines has been that most nanomedicines have been found to be notoriously difficult to manufacture
in a consistent manner from batch to batch. This is because of the complexity inherent in making large molecules, and the very
nature of polymer and particle making processes.
The nanoviricide
technology has been designed from the ground up to enable consistent manufacture and control. Thus, the nanoviricide backbone
is a homopolymer of a single repeating unit or monomer, and not a block copolymer. In addition, the nanoviricide polymer is designed
to dynamically and naturally self-assemble into micelles in a solution. Also, the virus-binding ligands are chemically attached
to the polymer. The extent of attachment can be assessed by analytical techniques that we have developed and continue to develop
as needed. Further we use specialized techniques in the polymer processing to minimize any contamination with endotoxins or other
foreign particles. The final nanoviricide solutions can be sterile filtered using standard membrane filtration processes. The
resulting solutions can be concentrated in a non-contaminating environment in our Process Scale-Up Lab or our cGMP Facility.
Thus the
nanoviricides platform has been designed from the ground up to enable simplifications in processes and analyses that need to be
implemented in order to develop robust, reproducible, and scalable processes.
State
of the Company – Drug Development Programs
During the
financial year ending June 30, 2017, we have focused our efforts primarily on the HerpeCide program.
We currently
have eight different drug development programs, attesting to the strength of our platform technology. We have now chosen to focus
strategically on our HerpeCide™ program indications and drug candidates that are expected to result in a robust franchise
with drug approvals against a number of different herpesvirus indications.
Pharmaceutical
drug development is an expensive and long duration proposition. Management’s plan is to develop each of our nanoviricides
to the necessary stage(s) and then engage into licensing or co-development relationships with other pharmaceutical companies.
Such licensing or co-development relationships usually may entail upfront payments, milestones payments, cost-sharing, and eventual
revenue-sharing, including royalty on sales. There is no guarantee that we will be able to negotiate agreements that are financially
beneficial to the Company at the present stage. As and when needed, management plans to continue to raise additional funds for
our continuing drug development efforts from public markets.
We believe
we are now one of the very few small pharmaceutical drug innovators that possess their own cGMP or cGMP-capable manufacturing
facility. With our Shelton, Connecticut campus and pilot-scale c-GMP-capable manufacturing facility, we are now in a position
to advance our drug candidates into clinical trials, produce the pre-clinical “tox package” batches, and the clinical
drug substance batches.
The Company’s
new cGMP-capable pilot-scale manufacturing facility in Connecticut may enable initial market entry for our products upon approval,
allowing the Company to grow into a stand-alone Pharma company, in addition to a potential licensing strategy for success. The
Company thus continues to minimize risk to investors by improving the potential for success.
While we
have continued to make significant progress in advancing our HerpeCide program drug pipeline, we have also had to curtail our
programs and slow down drug development towards the clinic due to fiscal constraints. In particular, R&D staffing at our affiliates
has been reduced significantly, by about 25%. This is expected to have the effect of lengthening our timeline to begin human clinical
trials.
The HerpeCide™
Program is Now Our Top Priority with At Least Four Indications to Follow
We are planning at least four different
indications in our HerpeCide™ program, namely (i) skin cream from the treatment of shingles caused by Varicella Zoster Virus
(VZV), (ii) skin cream for the treatment of orolabial herpes (“cold sores”) and recurrent herpes labialis (RHL) mostly
caused by HSV-1, (iii) ocular eye drops treatment for external eye herpes keratitis (HK), caused by HSV-1 or HSV-2, and (iv) skin
cream for the treatment of genital herpes caused by HSV2. Of these, the skin cream candidates against HSV-1 and VZV are the most
advanced.
We anticipate that our drug candidate against
VZV is most likely to be our earliest nanoviricide drug candidate to enter human clinical trials. This is primarily because of
the timelines for anticipated drug development studies required for these two drug candidates. The Company does not currently have
a license from TheraCour for the VZV area. The Company intends to enter into discussions with TheraCour after obtaining
independent asset valuations to serve as the basis for such additional licenses. However, there can be no assurance that the Company
will be able to enter into an agreement with TheraCour for such license or that the agreement will be on terms that are favorable
to the Company. Nevertheless, to date, TheraCour has granted all license requests made by the Company.
The Company is also exploring additional
indications of its anti-herpes drug candidates which will broaden the pipeline and require limited development work. In particular,
certain eye diseases of the retina have been causatively linked to herpesviruses. For example, most cases of viral Acute Retinal
Necrosis (ARN), a disease that leads to severe loss of vision and can lead to blindness, have been linked to VZV and HSV-2, with
some also associated with HSV-1 or CMV infection of the eye. It is believed that, HSV-2 ARN in children and adolescents may result
from undiagnosed and asymptomatic neonatal HSV-2 infection, which has reactivated several years later from latency in a cranial
nerve and entered the retina. Currently, intravenous followed by oral acyclovir derivatives daily for several months to years and
sometimes intravitreal (into the eye) foscarnet injections are therapeutically employed with limited effectiveness, establishing
the potential of effective antiviral therapy to avoid blindness as well as multiple surgeries related to retinal detachment. A
highly effective antiviral that can be injected into the eye infrequently and provides sustained antiviral therapeutic effect over
a long period of time for ARN is an unmet medical need.
Neonatally acquired herpesvirus infections,
even when asymptomatic, are thought to have led to ARN as late as age 22. There are approximately 2,500 cases per year of diagnosed
neonatal herpesvirus infections in the USA.
The potential broad-spectrum nature of
our anti-HSV drug candidates is expected to enable several anti-herpesviral indications. Thus, HSV-1 primarily affects skin and
mucous membranes causing “cold sores”. HSV-2 primarily affects skin and mucous membranes leading to genital herpes.
HSV-1 infection of the eye causes herpes keratitis that can lead to blindness in some cases. In addition, human herpesvirus-3 (HHV-3),
aka varicella-zoster virus (VZV) causes chickenpox in children and, when reactivated in adults, causes shingles. Shingles breakouts
are amenable to topical treatment, as are the HSV cold sores, genital lesions, and herpes keratitis of the eye. In fact, topical
treatment is expected to result in extremely high antiviral efficacy. This is because such treatment would provide higher concentrations
of the antiviral at the site where the virus is manifesting at its highest levels. Highly effective topical treatments in most
of these scenarios remain unmet medical needs. Most of these indications do not have satisfactory treatments at present, if any.
Further, the treatment of herpesvirus infections caused by acyclovir- and famciclovir- resistant mutants is currently an unmet
medical need.
With additional
indications in the diseases caused by viruses in the herpesvirus family, it is likely that our HerpeCide program could expand
into a much broader product pipeline than currently anticipated. We anticipate that many of these new drugs would be variations
on our current drug candidates. It is therefore expected that the incremental cost of drug development for such additional indications
could be substantially smaller than the cost of developing drugs against other viruses in our portfolio.
Progress
in Identifying Clinical Lead Drug Candidates against the Four HerpeCide Program Indications
Previously, in August 2015, we obtained
confirmatory animal studies data on our then current lead anti-herpesvirus drug candidate from TransPharm, LLC. The data confirmed
the results earlier obtained in Professor Ken Rosenthal’s Lab at the NorthEast Ohio Medical Center (NEOMED). In both studies,
dermal topical treatment with our anti-HSV drug candidate led to 85~100% survival in mice lethally infected with the zosteriform,
neurotropic, clinically-derived and relevant strain, namely HSV-1 H129. In contrast, all of the untreated mice had severe clinical
morbidity and none of the untreated mice survived. These studies established this drug candidate as a viable, effective potential
drug. (Professor Rosenthal has since retired from NEOMED and is now Professor of Biomedical Sciences at the College of Medicine,
Roseman University of Health Sciences, Summerlin, NV.)
We have
developed additional variations of the ligand used in this older herpecide drug candidate using molecular modeling and rational
design strategies. The new ligands appear to have substantially improved effectiveness and similar level of safety as the prior
tested ligand. We are now performing studies on chemical covalent conjugates of these ligands with different “nanomicelle”
polymer backbones. We have planned a brief set of studies to identify the lead clinical candidates for the different herpesvirus
indications based on these new nanoviricides.
These
nanoviricides drug candidates developed against herpes HSV-1 and HSV-2 have been found to be also effective against the shingles
virus, namely the Varicella Zoster Virus (VZV), also called HHV-3 (human herpesvirus-3). At present, there is no well-established
animal model of shingles infection, while animal models have been developed to test for shingles vaccines. There is a promising
human skin explant-based model for evaluation of drugs against VZV infection that we are employing, in lieu of animal studies.
This model is expected to be more relevant than an animal model. It is particularly suited for a topical drug such as ours. We
believe that, if successful, these data will be sufficient to establish the effectiveness of a nanoviricide drug candidate to
pursue further in human clinical studies. Additionally, dermal safety/toxicology studies will be needed. These studies will be
relatively short in time scope if the drug is not significantly systemically distributed when given topically. Thus these safety/tox
studies for the VZV skin cream are expected to be significantly shorter than the studies for ocular, injectable, or oral drugs.
Topical
treatment of herpesvirus infections is important because herpesviruses become latent in neuronal cells or in ganglia, and cause
periodic localized breakouts that appear as skin rashes and lesions. Systemic drug treatment results in side effects because of
the high systemic drug concentrations that need to be achieved and the large drug quantities that must be administered. Since
the virus remains mostly localized in the area of the rash and connected nerve apparatus, using high concentrations of drugs delivered
in small quantities topically would allow maximizing the effectiveness while minimizing side effects.
Since these
nanoviricides are designed to attack the virus directly, we believe that human clinical studies should reflect the success of
the preclinical studies.
We are also
continuing to work on developing relevant chemical identification and characterization assays, physicochemical and biochemical
characterization assays, and chemical process optimization studies, that will be part of the CMC (Chemistry, Manufacture and Controls)
section of the Investigational New Drug (IND) Application for the shingles drug. We believe this drug will be our first candidate
into human clinical trials.
Thus, we are performing studies relevant
to an Investigational New Drug (IND) application filing in the HerpeCide program at present.
HerpeCide Program Collaborations and
Program Update
We have engaged in several new collaborations
to help us finalize clinical candidates and develop IND-enabling pre-clinical data in our various programs this year. Notably,
we have signed collaborations with the CORL at the University of Wisconsin for HSV-1 and HSV-2, with focus on small animal models
for ocular disease; the Campbell Lab at the University of Pittsburgh for in vitro cell culture models of various ocular viruses
including many adenovirus and herpesvirus strains, as well as animal models for ocular herpes keratitis (HK) and adenoviral epidemic
kerato-conjunctivitis (EKC). TransPharm, LLC, a contract research organization (CRO), continues to provide animal studies support
in pre-clinical animal efficacy of our HSV-1 and HSV-2 skin cream drug candidates. In addition, we have a continuing relationship
with BioanalyticalSystems, Inc. (“BASi”), a CRO for GLP and non-GLP safety/toxicology studies. We have engaged Biologics
Consulting Group (BCG) for advice and help with regulatory affairs.
In addition, in October 2016, we announced
that we have entered into an agreement with SUNY Upstate Medical University for the testing of the Company’s nanoviricides®
drug candidates against varicella zoster virus, i.e. the shingles virus. This research is being performed in the laboratory of
Dr. Jennifer Moffat.
Initially,
Dr. Moffat conducted cell culture studies i.e.
in vitro
studies. Upon finding that the nanoviricides drug candidates were
effective against VZV in cell cultures, Dr. Moffat has advanced the studies to the
ex vivo
studies stage, wherein our drug
candidates are being evaluated against VZV infection of human skin patches.
Dr. Moffat
has extensive experience in varicella zoster virus (VZV) infection and antiviral agent discovery. The goal of these studies is
to help select a clinical drug development candidate for toxicology and safety evaluation intended for clinical trials for the
treatment of shingles in humans.
VZV is restricted
to human tissue and only infects and replicates in human tissue. The
ex vivo
studies are continuing to evaluate the efficacy
of the Company’s nanoviricides to inhibit VZV in human skin organ cultures. Dr. Moffat has developed the human skin organ
culture VZV infection model for the evaluation of therapeutics. This model is a good representative model of natural VZV infection
in humans as well as an important model for evaluating antiviral activity, because it demonstrates behavior similar to the skin
lesions caused by VZV in human patients.
Dr. Moffat
is an internationally recognized expert on varicella zoster virus, and her research has focused on the pathogenesis and treatment
of infection by this virus. The National Institute of Health has recognized this VZV model via a contract with Dr. Moffat’s
lab for evaluating antiviral compounds against VZV. Dr. Moffat is the director of two research core facilities at SUNY Upstate:
the Center for Humanized Mouse Models and
In vivo
Imaging.
The Company
has established a direct relationship with the Moffat lab, without NIH as an intermediary.
In addition,
Dr. Brian Friedrich, Senior Virologist of the Company has also performed and continues to perform extensive antiviral cell culture
studies against VZV in our BSL-2+ anti-viral cell culture laboratory in Shelton, CT.
Dr. Friedrich
presented a poster entitled “Novel Nanoviricides® Highly Effective Against Varicella Zoster Virus in Cell Culture”
at the 36th Annual Meeting of the American Society of Virology (ASV) on June 26th, 2017. The ASV Meeting was hosted and held at
the University of Wisconsin-Madison, from June 24th to 28th, 2017 (
https://extensionconferencecenters.uwex.edu/asv2017/
).
The two
active nanoviricide® candidates presented therein inhibited VZV up to 5x better than acyclovir-sodium (the current standard
of care), and completely inhibited VZV protein production/infection in cell culture studies. These results indicate a very high
level of anti-VZV effectiveness. The nanoviricide candidates were non-cytotoxic even at the highest doses in all cell lines tested.
Thus it should be possible to administer very high concentrations of the drug locally on the skin without any deleterious effects.
Importantly,
the data being presented demonstrate that the anti-viral activity of a nanoviricide is driven by the virus-specific ligand attached
to it. Thus two of the nanoviricide drug candidates were highly effective against VZV, whereas a third one was not as effective.
All three ligands were derived by in silico computer-aided drug design based on known structures of HSV glycoprotein binding
to the cellular receptor, namely the herpesvirus entry mediator (HVEM), and thus were expected to be active against herpes simplex
viruses, and only some of them were anticipated to be active against all alphaherpesviruses. VZV is an alphaherpesvirus. This
has once again demonstrated the validity of our scientific drug development approach.
Subsequent
to the reporting period, on July 10, 2017, the Company announced the results of initial testing of our anti-herpes drug candidates
in the
ex
vivo human skin patch model performed by Dr. Moffat.
The anti-shingles
nanoviricides® drug candidates achieved dramatic reduction in infection of human skin by the varicella-zoster virus (VZV),
the shingles virus in this study. These findings corroborate the previously reported findings of inhibition of VZV infection of
human cells in culture. The antiviral effect of certain nanoviricide drug candidates was substantially greater than the effect
of the standard positive control of cidofovir added into media. Even more remarkably, the effect of these nanoviricides drug candidates
was equivalent to a topical formulation of 1% cidofovir applied directly onto the skin patch. A topical skin cream containing
2% cidofovir is clinically used in very severe cases of shingles. However, the cytotoxicity of cidofovir is known to cause ulceration
of the skin to which it is applied, followed by natural wound healing.
Additional
studies towards selection of the final drug candidate(s) to be studied in safety/toxicology are continuing at present. Selection
of clinical candidate for an investigational new drug application (IND) and human clinical studies is anticipated as these studies
progress.
Shingles
and Associated Pain, Post-herpetic Neuralgia (PHN)
Shingles is caused by re-activation of
the chickenpox virus that most humans acquire in childhood. The chickenpox vaccine for children is a live, attenuated virus (LAV).
The LAV is not as pathogenic as the wild-type virus. However, this means the virus is present in the vaccinated individual, but
remains suppressed by the immune system. In both vaccinated and unvaccinated persons, re-activation occurs when the immune system
is suppressed which may be simply because of stress, advanced age, or some other immune modifying circumstances including immune-compromise
due to organ transplants or other diseases. Generally, humans in the age range of 50-60 are more prone to shingles, with next reactivation
occurring about 10~15 years later. There is a shingles vaccine approved for adults age 60 and above which is also available for
adults younger than that.
Acyclovir-based oral drugs, such as valacyclovir
(Valtrex®), are available as systemic therapy for shingles. Intravenous acyclovir is also employed for treatment of various
VZV indications. However, VZV is substantially less sensitive to (val)acyclovir than is HSV-1. Thus the oral drug generally does
not result in optimal level of the active drug at the site of VZV viral production, and does not result in significant control
of the pathology. The antiviral drugs may be given for a period of 14 days or longer, with as much as 5g of dose per day, due to
poor efficacy. In some indications, the treatment has been continued for a year or so. Thus, there is an unmet need for developing
anti-VZV antivirals with high efficacy and safety.
Most adults with shingles recover in about
15~30 days. While the rash is unsightly, its stinging pain is often debilitating. Further, 65~70% of patients develop post-herpetic
neuralgia, or PHN, a stinging, debilitating pain that lasts more than 30 days, and, in some patients, may last for years. At present,
an oral drug called FV-100 is in Phase 3 clinical trials for PHN. A Phase 2 clinical study comparing FV-100 to valacyclovir for
PHN and shingles was completed by Bristol-Myers-Squibb (BMS) in 2015. BMS is no longer developing this drug, although a small company
is continuing to develop it. FV-100 is a nucleoside analog with an extremely restricted activity range. It is highly specific to
VZV, and it did not have effectiveness against even the equivalent simian virus in pre-clinical studies.
It is generally
believed that PHN results from damage to the local nerve endings and nerve cells caused by the uncontrolled production of the
shingles virus. However, VZV has been found to be present in at least 75% of PHN cases in a study, indicating a role for antivirals
in controlling PHN. We believe that an effective therapy, such as our nanoviricide against VZV, which blocks progression of the
virus to infect new cells and thereby limits further production of virus, would minimize the damage to nerve endings and nerve
cells caused by the virus. We believe that this would minimize the occurrence, severity, and time period of PHN, in addition to
having significant effects on the severity of shingles rash, lesions, and healing time.
We believe
that a skin cream would be the best form of treatment to provide rapid control of the virus and shingles lesions patch expansion,
since the shingles outbreak remains highly localized. A skin cream would afford much greater local exposure of drug to virus compared
to a systemic oral or injectable treatment.
An effective
therapy for patients with severe shingles continues to be an unmet need.
HSV-1,
HSV-2, Ocular Herpes Keratitis
We believe
that a skin cream for the control of HSV-1 “cold sores” (herpes labialis, and recurrent herpes labialis or RHL), is
another drug candidate that will be close to entering human clinical trials. We have already achieved strong success in animal
studies against HSV-1, as discussed above.
We believe
that we will be able to successfully develop a drug for Ocular Herpes Keratitis (HK) as well. It is caused by HSV-1 or HSV-2 infection
of the external eye. We are developing this drug as topical eye drops or eye lotion, in order to achieve maximum local drug effect
while minimizing systemic exposure. We plan on testing these drug candidates against adenoviruses as well, to determine if the
same drug would also be effective against epidemic kerato-conjunctivitis (EKC, the severe “pink eye” disease). If
the same drug works against herpesvirus and adenovirus infections of the eye, this drug would cover almost 99% of all external
eye viral pathologies.
We also believe that we will be able to
develop a drug against HSV-2 genital herpes. We plan on developing a skin cream for this indication, to maximize local effectiveness.
The FluCide™ Program
We are continuing our development of the
FluCide™ anti-influenza drug program at the next lower priority level after the HerpeCide program. We have two drugs in development
in this program. The Injectable FluCide is designed to piggyback into IV infusions for severely ill, hospitalized influenza patients.
There are approximately 100,000 to 300,000 such cases annually in the USA alone. No current anti-influenza drugs are sufficiently
effective to be of help in this scenario. We believe that our injectable FluCide would be substantially superior to current anti-influenza
drugs and would be able to save lives in this scenario, based on the strong effectiveness in animal studies that has been observed.
Following this drug, we are working on an Oral FluCide drug candidate for out-patient influenza treatment.
We have recently announced collaboration
with the Webster Lab at the St. Jude Children’s Hospital, TN, for the pre-clinical development program for both injectable
and oral anti-influenza nanoviricide drug development. Given the several failures of anti-influenza drug developments that have
led to increased burden of pre-clinical studies, our FluCide pre-clinical development program is expected to take longer than our
HerpeCide™ program IND-enabling pre-clinical studies.
NanoViricides, Inc. is possibly the first
company in the world in the entire field of nanomedicines to have developed an orally available nanomedicine drug with high effective
bioavailability. We have previously estimated an effective bioavailability of about 30-35% for the oral form of an anti-influenza
drug candidate compared to the same drug given as injectable, based on animal studies. Our oral anti-influenza drug candidate has
shown extremely high broad-spectrum effectiveness against two different influenza A viruses in animal models.
In addition,
we are developing a highly effective injectable anti-influenza drug. The Company is developing this injectable drug for hospitalized
patients with severe influenza, including immuno-compromised patients. The Company believes that this drug may also be usable
as a single-dose injection in a medical office for less severe cases of influenza. Both of these anti-influenza therapeutic candidates
are “broad-spectrum”, i.e. they are expected to be effective against most if not all types of influenzas including
H7N9, Bird Flu H5N1, other Highly Pathogenic Influenzas (HPI/HPAI), Epidemic Influenzas such as the 2009 “swine flu”
H1N1/A/2009, and Seasonal Influenzas including the recent H3N2 influenza. The Company has already demonstrated that our anti-influenza
drugs have significantly superior activity when compared to oseltamivir (Tamiflu®) against two unrelated influenza A subtypes,
namely, H1N1 and H3N2 in a highly lethal animal model.
Our position
that an injectable drug against influenza is a viable option is now affirmed by the approval of the very first injectable drug
for influenza in December 2014, namely peramivir (Rapivab, by BioCryst). Interestingly, peramivir as an injection was approved
even though it did not appear to provide significant additional benefits over other drugs in its class. Overall, patients who
received 600 mg of peramivir had symptom relief 21 hours sooner, on average, than those who received the placebo, which is consistent
with other drugs in the same class. Additionally, peramivir injection was found to be not effective for hospitalized patients
with severe influenza.
Thus, an
effective therapy for patients hospitalized with severe influenza continues to be an unmet need.
In addition,
a single injection treatment of non-hospitalized patients would be a viable drug if it provides superior benefits to existing
therapies.
Both of
these anti-influenza drug candidates can be used as prophylactics to protect at-risk personnel such as health-care workers and
immediate family members and caretakers of a patient.
DengueCide™
We are
developing a broad-spectrum anti-dengue nanoviricide which is in pre-clinical development in the DengueCide™ program at
a lower priority than FluCide. The Company is developing a broad-spectrum drug against Dengue viruses that is expected to be
useful for the treatment of any of the four major serotypes of dengue viruses, including in severe cases of dengue (DSS) and
dengue hemorrhagic fever (DHF). It is thought that DSS and DHF caused by prior antibodies against dengue that a
patient’s body creates to fight a second unrelated dengue infection, and the second virus uses these antibodies
effectively to hitch a ride into human cells, thereby causing a more severe infection than in naive patients. The Company has
received an “Orphan Drug Designation” for our DengueCide
TM
drug from the USFDA as well as the European
Medicines Agency (EMA). This orphan drug designation carries significant economic benefits for the Company. We have
previously achieved significant survival of mice in a lethal infection animal model of dengue disease. This model simulates
antibody-dependent enhancement of dengue, which is believed to lead in humans to severe dengue, and dengue hemorrhagic fever.
These studies were performed by Professor Eva Harris at the University of Berkeley.
HIVCide™
Our HIVCide™
program is currently receiving the lowest development priority primarily due to the extremely expensive nature of this program.
The drug candidates in the HIVCide™ program were found to have effectiveness equal to that of a triple drug HAART cocktail
therapy in the standard humanized SCID-hu Thy/Liv mouse model. Moreover, the nanoviricides were long acting. Viral load suppression
continued to hold for more than four weeks after stopping HIVCide treatment. The Company believes that this strong effect and
sustained effect together indicate that HIVCide can be developed as a single agent that would provide “Functional Cure”
from HIV/AIDS. The Company believes that substantially all HIV virus can be cleared upon HIVCide treatment, except the integrated
viral genome in latent cells. This would enable discontinuation of treatment until HIV reemerges from the latent reservoir, which
may be several months without any drugs. Moreover, the Company believes that this therapy would also minimize the chances of HIV
transmission. The Company is currently optimizing the anti-HIV drug candidates. These drug candidates are effective against both
the R5 and X4 subtypes of HIV-1 in cell cultures. The Company believes that these drug candidates are “broad-spectrum”,
i.e. they are expected to be effective against most strains and mutants of HIV, and therefore escape of mutants from our drugs
is expected to be minimal. Certain anti-HIV nanoviricides have already been demonstrated that appear to provide extended viral
load suppression for as long as 30 days or more even after stopping the drug, in animal studies. Given the chronic nature of HIV/AIDS,
such a drug that has long sustained effect is expected to provide significant benefits to the patient. We believe once a week
dosing is possible. Anti-HIV drug development is both expensive and slow because of the nature of the animal studies that require
SCID mice whose immune system is destroyed and then replaced by surgically implanting and growing human immune system tissues
in the mouse body. Due to our limited resources, HIVCide development is further hampered.
EKC
In addition,
the Company is developing broad-spectrum eye drops that are expected to be effective against a majority of the viral infections
of the external eye. Most of these viral infections are from adenoviruses or from herpesviruses. The Company has shown excellent
efficacy of its drug candidates against EKC (adenoviral epidemic kerato-conjunctivitis) in an animal model. If feasible, we are
planning to merge the anti-EKC drug development program and the ocular Herpes Keratitis drug development program, to develop a
single drug that is effective against both diseases, i.e. effective against both adenoviruses and herpesviruses. This work is
in research stage.
Other
Drug Programs: Ebola, Rabies and others
In addition
to these eight drugs in development, the Company also has research programs against Rabies virus, Ebola and Marburg viruses, the
recently emerged Middle East Respiratory Syndrome coronavirus (MERS-CoV), and others. We will not be undertaking socially important
programs such as the development of an anti-Zika virus drug candidate, or continuation of our efforts in developing anti-Ebola
drug candidate, unless non-dilutive funding for such efforts becomes available.
To date,
the Company does not have any commercialized products. The Company continues to add to our existing portfolio of products through
our internal discovery and clinical development programs and also seeks to do so through an in-licensing strategy.
Thus, this
year, we have further focused our programs and prioritized them in order to advance our first drug candidate into the clinic in
the near future.
Safety
and Toxicology Studies
As part
of the IND–enabling development of our Injectable FluCide™ drug candidate, we previously performed initial safety-toxicology
screening of an optimized FluCide® drug candidate in a GLP-like toxicology study in rats. We reported that a good safety profile
was observed for this drug candidate in rats at the end of January 2015. These results are in agreement with the previously
reported results of a non-GLP toxicology study in mice. The current study results also support the Company’s positive findings
in animal models of infection with different influenza A virus strains in which no safety or toxicology concerns were observed.
The Company has previously reported that many of its FluCide candidates demonstrated extremely high anti-influenza activity in
those models. These results are extremely important since they indicate that FluCide continues to look very promising as one of
the most advanced candidates in the Company’s drug development pipeline.
We believe
that these safety/toxicology results are also applicable to other drug candidates as well in the sense that they have established
the safety of the polymer backbones that we have employed. The polymer is made up of PEG (polyethylene glycol) chains put together
into a single polymer chain with ligands and pendant lipids substantially uniformly attached at the connector points. This enables
the nanoviricide to be substantially non-immunogenic. PEG chain attachment or PEGylation is a widely used technique for rendering
antibodies and other drugs substantially non-immunogenic.
We have
performed cell culture studies to assess safety of the anti-VZV drug candidates in different types of cell lines. We have found
that they were extremely safe and are suitable for further drug development. We plan on performing small animal safety/toxicology
studies after a certain set of
ex vivo
studies are performed. This study will, to some extent, guide the requirements for
the GLP Safety/Toxicology study. We are already working on producing the nanoviricides materials needed for the rat toxicology
study. We are also working on completing the production scale-up necessary for producing a batch of materials for the GLP Safety/Tox
Package study.
Clinical
and Regulatory Strategy
We have
engaged Biologics Consulting Group, a well-known group of regulatory consultants, to advise us on the regulatory pathways, and
the studies required for the IND applications for the various disease indications.
We are developing
a global clinical strategy in order to get our first drug candidate into the clinic as soon as feasible. To this end, we are studying
the human clinical trials regulatory requirements in various countries, in particular, Australia, India, and the USA. It may be
possible to start Phase I safety human clinical trials in Australia several months ahead of start of similar trials in the USA,
provided that a cGMP-like or cGLP manufactured drug product can be entered into Phase I human clinical trials in Australia. [cGMP-like
may be loosely interpreted as a drug product manufactured in a process that is compliant with the current Good Manufacturing Practices
(cGMP) Guidelines, although the facility may not yet be registered as a cGMP facility. cGLP product is generally interpreted as
a drug product that is produced in compliance with current Good Laboratory Practices (cGLP), and therefore is a well characterized
research product, but has not yet gone through the rigorous manufacturing quality and reproducibility requirements that are part
of cGMP.
At present,
the anti-VZV drug candidate appears to be our most advanced drug candidate, with the other HerpeCide™ program drug candidates
following in its foot-steps, as the necessary additional safety and efficacy studies in cell culture and animal models are performed.
We depend upon external collaborators for animal safety and efficacy studies, limiting the speed of our drug development work.
While we seek collaborators and providers that have animal models that may be predictive of efficacy in human clinical trials,
pharmaceutical drug development relies on what is available and what is doable rather than this gold standard. Newly implemented
animal models require validation studies to establish how reproducibly they can discriminate between placebo and drugs that are
known to work in the clinic, when such drugs are available. In many cases, we have to rely upon research level animal models that
have not yet established such robustness. Nevertheless, we can continue to use such models to obtain preliminary indications for
drug candidate refinements.
We believe
that the preliminary efficacy we have observed of our anti-VZV drug candidates in the
ex vivo
human skin patch model in
the Moffat Lab is a strong indicator that these drug candidates are worthy of clinical development. There is no well-established
animal model for shingles at present. As such we assume that these datasets will be sufficient for filing an IND. Therefore, we
have planned further screening to determine final clinical candidate(s) and further plan on taking one or two candidates through
initial safety studies, followed by GLP Safety/Toxicology studies. We plan on obtaining a pre-IND meeting with the US FDA after
the initial safety studies in order to obtain further guidance on the datasets expected in the IND.
It is possible
that with the improved regulatory environment in the USA, it may be feasible for us to engage into human clinical studies under
US FDA with our existing manufacturing capabilities.
Large
Market Sizes – The Company Targets an Overall Anti-Viral Drug Market Size that Exceeds $40B
The current
market size for drugs for the treatment of different herpes simplex infections is about $2~4B. The current market size for the
treatment of shingles is estimated at about $500M to $1B. We believe that when an effective topical treatment is introduced, the
market size is likely to expand substantially.
The approximate market size for severe
cases of shingles may be in the billion-dollar range. Severe cases of shingles may lead to hospitalization in several thousand
cases in the USA. In addition, shingles appearing on the face may reach the eye and may cause significant vision issues. The outpatient
treatment market size for shingles at present is limited, because of the limited effectiveness of existing drugs. An effective
drug could expand this market into billions of dollars globally. Novel shingles vaccines with improved effectiveness are in development.
However, as shingles is not seen as a life-threatening or life-modifying disease, the use of vaccines is limited, and may continue
to be limited, especially if an effective drug is developed.
In addition, the estimated market size
for an effective anti-Influenza drug is expected to be in tens of billions of dollars. The current estimate of anti-influenza drug
market size is approximately $4B. Given the number of influenza cases annually, it is estimated that a successful oral anti-influenza
drug could be a $50B or greater market.
The current market size for anti-HIV treatments
is in excess of $40B.
Our focus at present is on the topical
treatments for different herpesvirus infections in the HerpeCide program, as listed elsewhere in this report. We plan on re-engaging
our Influenza and HIV programs when sufficient funding and skilled human resources are available.
Our Campus
in Shelton, CT
We are happy
to report that our new campus at Shelton, CT, is mostly operative. With the expanded R&D labs, Analytical Labs, the new Bio
labs, the new Process Scale-Up production facility, and the new cGMP-capable manufacturing facility established at our new Shelton
campus, we are in a much stronger position than ever to move our drug development programs into the clinic rapidly.
Process
Scale-Up Production Capability
The Process
Scale-up area is operational at scales of about 200g to 1kg per step for different chemical synthesis and processing steps.
It comprises reactors and process vessels on chassis or skids, ranging from 1L to 30L capacities, as needed. Many of the reactors
or vessels have been designed by us for specific tasks.
cGMP
Production Capability
Our versatile,
customizable cGMP-capable manufacturing facility is designed to support the production of kilogram-scale quantities of any of
our nanoviricides drugs. In addition, it is designed to support the production of the drug in any formulation such as injectable,
oral, skin cream, eye drops, lotions, etc. The production scale is designed so that clinical batches for Phase I, Phase II, and
Phase III can be made in this facility. The clean room suite contains areas suitable for the production of sterile injectable
drug formulations, which require special considerations.
We have planned certain minimal infrastructure
modifications to improve the capabilities of the cGMP-compliant facility, based on our experience in the Scale-up operations. Certain
of these improvements are expected to add a separate production suite for the manufacture of skin cream in an area that was designated
for such further expansion. These infrastructure improvements will be undertaken only after appropriate level of funding becomes
available, of which there can be no assurance.
After these infrastructure improvements,
we plan to produce at least three consecutive batches of a drug product and satisfy that said drug product is within our own defined
specifications. After we are satisfied with such strong reproducibility of our processes, we plan to register the facility as a
cGMP manufacturing facility with the US FDA.
At present, we plan on moving operations
to our cGMP-capable manufacturing facility as the operational steps are developed to the level needed for moving them into this
facility. This requires the development of draft-level Standard Operating Procedures, training, and drill-through of operations.
We will also need to establish a Quality Assurance and Quality Control Department. We have lost approximately 40% of our personnel
in the Chemistry and Engineering through attrition. The remaining staff is busy developing our pre-clinical HerpeCide programs.
Given the limited financing, we have not
been able to attract the necessary talent for replacing the lost staff and for building out the additional resources such as QA/QC.
We have been working with our extremely versatile and multi-talented team, in a task-serialized fashion, over the last several
years. While the versatility of the team has enabled us to develop and establish most of the required quality assays and methods,
we will be severely limited in our abilities in producing a cGMP product until the staffing is enhanced.
After we are able to attract and hire quality
candidates that we severely need, we anticipate that it will take at least six months to one year for each such person to be fully
productive as an integrated part of our team. In the past, we have been very fortunate that newly hired personnel were immediately
productive in tasks delineated to them, and they were productively integrated within a short time frame of several months into
independent but integrated parts of our team. However, this is not always the case.
We operate in a completely novel area of
medicines, which is broadly described as polymeric-micelle based drug conjugates and complex nanomedicines. Our technologies are
also completely novel, and unmatched in the industry. As such, we anticipate a longer training period for new employees than in
normal small chemical or biological drugs. We need talented personnel with specialized training. With the extreme difficulties
in hiring foreigners due to immigration requirements, there is only a severely limited talent pool that may be available or accessible
to us.
Thus limited
financing has a long-lasting effect on our ability to progress to the human clinical stage.
We employ
the same team that developed the small-scale synthesis chemistry for translation of those chemical syntheses into clinical-scale
processes, and also to perform the related chemical engineering, quality control, quality assurance, and regulatory tasks along
the way. Because of the small size of our scientific staff, this results in significant serialization of efforts. However, the
personnel cost, as well as the time and expense cost of transfer of knowledge and training of a separate dedicated team is avoided
because the same expert scientists who have developed the chemistries are also involved in scaling them up into process scale.
To enable such extensive multi-tasking, we have a continuous training program in place, with both formal and informal components.
We believe that this approach helps us keep drug development costs as low as possible.
Our BSL-2
Certified Virology Lab
Most importantly,
we have significantly enhanced our internal anti-viral cell culture testing capabilities at our Shelton campus. We have achieved
BSL-2 (Biological Safety Level 2) certification from the State of Connecticut for our Virology suite at the new campus. This suite
comprises three individual virology workrooms, enabling us to work on several different viruses and strains at the same time.
This facility is designed only for cell culture studies on viruses, and no animal studies can be conducted at any of our own facilities.
We have brought in Brian Friedrich, Ph.D., as the Company’s Virologist. Dr. Friedrich has previously performed drug screening
of hundreds of candidates against several viruses including alphaviruses, bunyaviruses, and filoviruses (namely, Ebola and Marburg,
which are BSL-4), to discover potential therapeutics, while he was at United States Army Medical Research Institute of Infectious
Diseases (USAMRIID). Brian has also worked extensively on Flaviviruses, specifically West Nile Virus, while at University of Texas
Medical Branch (UTMB). He has also worked on HIV as part of his PhD thesis. Dengue viruses as well as the Zika virus belong to
the Flavivirus family.
Dr. Friedrich
has already established several different types of assays for screening of candidates against VZV, HSV-1 and HSV-2 in our lab.
He is now in the process of establishing assays for Influenza viruses and HIV. We believe that having developed the internal capabilities
for cell culture testing of our ligands and nanoviricides against a variety of viruses has substantially strengthened our drug
development programs. We believe that this internal screening enables speedy evaluation of a much larger number of candidates
than external collaborations allow. This has significantly improved our ability of finding highly effective ligands and performing
structure-activity-relationship studies of the same in a short time period.
Manufacturing
Requirements of Some of Our Drug Candidates
The HerpeCide
program drug product batch requirements are estimated to be fairly modest because of the topical nature of treatment. In consultation
with BASi and BCG, we have currently estimated a batch size of approximately 500g will be sufficient for the “Tox Package”
(i.e. safety and toxicology) studies of our dermal topical shingles drug candidate. We are estimating that a ~500g batch will
be more than sufficient for initial Phase-I human clinical studies as well. Our current estimate for a Phase IIa human clinical
efficacy study is also in the range of a ~500g batch requirement. We already have the facilities for producing up to 1kg per
batch or more. Many of our synthesis steps have already been scaled up to 200g~500g scales. The “nanomicelle” polymer
manufacture is already scaled to ~500g scale. Some of the synthetic steps have also been tested successfully at kg scales. Thus
we believe that we have sufficient production capability for the amounts of the HerpeCide drugs that would be needed for tox package
as well as clinical studies.
As we move
our drug candidates into clinical studies, we plan to perform further scale-up studies to get to about 1kg per batch production
scale. In the current facility, we may be able to manufacture about 10kg to 20kg of cGMP product annually. Depending upon the
drug’s potency and indication, this production size may fetch modest revenues of around $50M to $500M, depending upon the
cost metrics, enabling profitable market entry. Such initial commercialization would allow the Company to turn itself into a stand-alone
pharmaceutical company, by enabling capital formation for larger scale manufacturing facilities and fueling further growth.
Patents,
Trademarks, Proprietary Rights: Intellectual Property
The Company
has an exclusive license in perpetuity for technologies developed by TheraCour for the following virus types: HIV, Hepatitis C
Virus, HSV, Asian (bird) flu, Influenza, and rabies. The Company has entered into an Additional License Agreement with TheraCour
granting the Company the exclusive licenses in perpetuity for technologies developed by TheraCour for the additional virus types
for Dengue viruses, Japanese Encephalitis virus, West Nile Virus, Viruses causing viral Conjunctivitis (a disease of the eye)
and Ocular Herpes, and Ebola/Marburg viruses. (Also please see under “Significant Alliances: Related Parties: TheraCour
Pharma”).
The Company has entered into a Memorandum
of Understanding with TheraCour, whereby TheraCour will initiate discovery and development for drug candidates for a new virus
or indication upon such request by the Company. If the resulting drug candidates are worthy of further drug development, NanoViricides
may determine that it should enter into a licensing agreement with TheraCour. In such a case, NanoViricides would obtain an independent
asset valuation for the asset(s) to be licensed from a party experienced in such valuations. NanoViricides and TheraCour would
thereafter negotiate the terms of compensation for the new license agreement. However, there can be no assurance that an agreement
for licenses for new viruses will be entered into on terms that are favorable to NanoViricides. We believe this process has been
extremely beneficial for NanoViricides, since this process saves NanoViricides from the cost of acquiring and paying for licenses
that it may not want to pursue further. At present, TheraCour has licensed the Company HSV-1 and HSV-2, but has not licensed the
VZV area, nor has it licensed any of the remaining herpesviruses. NanoViricides intends to commission an independent party asset
valuations to serve as the basis for such additional licenses that it may seek in accordance with our process. However, there can
be no assurance that the Company will be able to enter into an agreement with TheraCour for such license or that the agreement
will be on terms that are favorable to the Company. The licenses granted by TheraCour are for entire sets of pathologies that the
licensed virus is a causative agent for. The licenses are not for single drug entities, although that is the customary mode in
the Pharmaceutical industry. Thus these are very broad licenses and enable NanoViricides to pursue a number of indications as well
as develop drug candidates with different characteristics as is best suited for the indications, without having to license the
resulting drugs separately.
Patents
and other proprietary rights are essential for our operations. If we have a properly designed and enforceable patent, it can be
more difficult for our competitors to use our technology to create competitive products and more difficult for our competitors
to obtain a patent that prevents us from using technology we create. As part of our business strategy, we actively seek patent
protection both in the United States and internationally and intend to file additional patent applications, when appropriate,
to cover improvements in our compounds, products and technology. We also rely on trade secrets, internal know-how, technological
innovations and agreements with third parties to develop, maintain and protect our competitive position. Our ability to be competitive
will depend on the success of this strategy.
The Company
believes that the drugs by themselves, Injectable FluCide, Oral FluCide, DengueCide, HIVCide, Nanoviricide Eye Drops, HerpeCide,
RabiCide, and others, may be eligible for patent protection. The Company plans on filing patent applications for protecting these
drugs when we have definitive results from in-vitro or in-vivo studies that enable further drug development and IND application
filing.
The Company
has licensed key patents, patent applications and rights to proprietary and patent-pending technologies related to our compounds,
products and technologies (see Table 1), but we cannot be certain that issued patents will be enforceable or provide adequate
protection or that pending patent applications will result in issued patents.
Table
1: Intellectual Property, Patents, and Pending Patents Licensed by the Company
|
|
Patent
or Application
|
|
Date of
Issue/
Application
|
|
US Expiry
Date
|
|
International
|
|
Owners
|
1
|
|
US6,521,736
(Certain specific amphiphilic polymers).
|
|
Issued: Feb 18, 2003
|
|
Feb 18, 2020
|
|
N/A
|
|
TheraCour Pharma and Univ. of Massachusetts, Lowell. [Nonexclusive license from TheraCour
Pharma].
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
PCT/US06/01820
(SOLUBILIZATION AND TARGETED DELIVERY OF DRUGS WITH SELF-ASSEMBLING AMPHIPHILIC POLYMERS).
|
|
Applied: Jan 19, 2006 PCT U.S. Issuance: May 8, 2012.
|
|
October, 2028 (estimated)
|
|
Applications are in various prosecution stages. Fifty two of these have been issued or validated
|
|
TheraCour Pharma, Inc. [Exclusive License].
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
PCT/US2007/001607
SELF-ASSEMBLING AMPHIPHILIC POLYMERS AS ANTIVIRAL AGENTS
|
|
Applied: Jan 22, 2007
|
|
Ca. 2029(estimated)
|
|
Applications are in various prosecution stages. Nine of these have been issued or validated
|
|
TheraCour Pharma, Inc. [Exclusive License].
|
We have previously announced certain important
issuances of patents on the TheraCour® technology underlying our nanoviricides® drugs. A fundamental patent on the polymeric
micelles composition, structure and uses was issued in the USA with substantially broad claims. This validates the novelty of our
approach as well as our leadership position in the nanomedicines based on polymeric micelle technologies. This patent application
has so far been issued, granted, and/or validated, with substantially similar broad claims as 52 different patents in different
countries and multi-country intellectual property organizations. A fundamental patent on which the nanoviricides® technology
is based (US Patent No. 8,173,764) for “Solubilization and Targeted Delivery of Drugs with Self-Assembling Amphiphilic Polymers”
was issued on May 8, 2012. The patent term is expected to last through October 1, 2028, including anticipated extensions in compensation
for time spent in clinical trials. This US Patent has been allowed with a very broad range of claims to a large number of families
of chemical structure compositions, pharmaceutical compositions, methods of making the same, and uses of the same. The disclosed
structures enable self-assembling, biomimetic nanomedicines. NanoViricides, Inc. holds exclusive, perpetual, worldwide licenses
to these technologies for a broad range of antiviral applications and diseases. The other national and regional counterparts of
the international Patent Cooperation Treaty (“PCT”) application number PCT/US06/01820, which was filed in 2006, have
issued as a Singapore National Patent Publication, a South African patent, and also as an ARIPO regional patent, an OAPI regional
patent (covering Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Republic of Congo, Cote d’Ivoire, Equatorial
Guinea, Gabon, Guinea, Guinea Bissau, Mali, Mauritania, Niger, Senegal, and Togo). It has also issued as a granted patent in New
Zealand, China, Mexico, Japan, Australia, Canada, several countries in Europe, Hong Kong, Indonesia, Israel, Korea, Malaysia, Philippines,
Pakistan, and Vietnam among others. Estimated expiry dates range nominally from 2026 to 2027, prior to accounting for various extensions
available in different regions and countries. Additional issuances are continuing in Europe, and in several other countries around
the world.
Another fundamental patent application
on the antivirals developed using the polymeric micelles has so far been issued, granted, and/or validated, with substantially
broad claims as well, as 9 different patents. The counterparts of the international PCT application PCT/US2007/001607 have issued
as a granted patent in ARIPO, Australia, China, Japan, Mexico, New Zealand, OAPI, South Africa, and Korea to date. Additional issuances
are expected in Europe, USA, and in several other countries around the world. This patent application teaches antivirals based
on the TheraCour polymeric micelle technologies, their broad structures and compositions of matter, pharmaceutical compositions,
methods of making the same, and their uses. The nominal expiry dates are expected to range from 2027 to 2029. Further patent prosecution
in several other regions and countries is continuing.
A total of at least, 61 patents have been
issued globally, on the basis of the two international PCT patent families that cover the fundamental aspects of our platform technology.
Additional patent grants are expected to continue as the applications progress through prosecution processes. All of the resulting
patents have substantially broad claims.
These patents
have nominal expiry dates in 2026 to 2029. The dates can be further extended in several countries and regions for the additional
allowances due to the regulatory burden of drug development processes, or other local considerations, such as licensing to a local
majority held company. Many countries allow up to five years extension for regulatory delays.
No patent
applications have been filed for the actual drug candidates that we intend to develop as drugs as of now. We intend to file the
patent application for FluCide and HerpeCide before entering human clinical trials. The estimated expiry date for the FluCide
and HerpeCide patents, if and when issued, would be no earlier than 2037-2038.
Of the patents and technologies licensed,
the Company believes that it will not be using the intellectual property, compositions of matter, or other aspects described and
secured under the US Patent No. US 6,521,736. The Company believes that this patent describes an inferior technology compared to
the technology in the later patent filings of Dr. Diwan. This patent, the Company believes, discloses prototype materials that
served to establish the proof of principles developed by Dr. Anil Diwan, the Company’s President and co-founder, whether
such materials were possible to create and whether such materials would indeed be capable of encapsulation of pharmaceutically
relevant compounds. The Company believes that the new and novel compositions disclosed in the new patent applications, No. PCT/US06/01820,
and No. PCT/US2007/001607, and additional proprietary intellectual property provide the necessary features that enable the development
of nanoviricides. The Company believes that no other published literature materials or existing patents are capable of providing
all of the necessary features for this development, to the best of our knowledge. However, the Company has no knowledge of the
extensive active internal developments at a number of companies in the targeted therapeutics area.
We may obtain
patents for our compounds many years before we obtain marketing approval for them. Because patents have a limited life, which
may begin to run prior to the commercial sale of the related product, the commercial value of the patent may be limited. However,
we may be able to apply for patent term extensions, based on delays experienced in marketing products due to regulatory requirements.
There is no assurance we would be able to obtain such extensions. The Company controls the research and work TheraCour performs
on its behalf and no costs may be incurred without the prior authorization or approval of the Company.
Patents
relating to pharmaceutical, biopharmaceutical and biotechnology products, compounds and processes such as those that cover our
existing compounds, products and processes and those that we will likely file in the future, do not always provide complete or
adequate protection. Future litigation or reexamination proceedings regarding the enforcement or validity of our licensor, TheraCour
Pharma Inc.’s existing patents or any future patents, could invalidate TheraCour’s patents or substantially reduce
their protection. In addition, the pending patent applications and patent applications filed by TheraCour, may not result in the
issuance of any patents or may result in patents that do not provide adequate protection. As a result, we may not be able to prevent
third parties from developing the same compounds and products that we have developed or are developing. In addition, certain countries
do not permit enforcement of our patents, and manufacturers are able to sell generic versions of our products in those countries.
We also
rely on unpatented trade secrets and improvements, unpatented internal know-how and technological innovation. In particular, a
great deal of our material manufacturing expertise, which is a key component of our core material technology, is not covered by
patents but is instead protected as a trade secret. We protect these rights mainly through confidentiality agreements with our
corporate partners, employees, consultants and vendors. These agreements provide that all confidential information developed or
made known to an individual during the course of their relationship with us will be kept confidential and will not be used or
disclosed to third parties except in specified circumstances. In the case of employees, the agreements provide that all inventions
made by the individual while employed by us will be our exclusive property. We cannot be certain that these parties will comply
with these confidentiality agreements, that we have adequate remedies for any breach, or that our trade secrets will not otherwise
become known or be independently discovered by our competitors.
Trademarks
On April
20, 2010, the United States Patent and Trademark Office granted trademark registration number 3,777,001 to the Company for the
standard character mark “nanoviricides” (the “Mark”) for International Class 5, pharmaceutical preparation
for the treatment of viral diseases. The Mark was registered on the Principal Register and is protected in all its letter forms,
including corresponding plural and singular forms, various forms of capitalization, and fonts and designs.
Recognition
On August
24, 2016, the Honorable U.S. Senator Chris Murphy visited the Company’s campus in Shelton, CT. In addition the Honorable
U.S. Richard Blumenthal has previously visited our company. Further, the Honorable U.S. Representative Jim Himes visited our company
in the recent past
On July
25, 2016, our President, Dr. Anil Diwan, was invited to participate in the prestigious 31st Annual Chief Executive of the Year
Gala Reception & Dinner held at the New York Stock Exchange. In addition, he was also invited to participate in the CEO Roundtable
Discussion on Innovation.
Previously,
on April 18, 2016, the Company announced that it has been recognized as one of the “Most Innovative Business Leaders of
2016” by AI Global Media, publisher of Acquisition International Magazine and Website (“AI”) (
http://www.acquisition-intl.com
).
A focus article on NanoViricides was published in AI Magazine, February 2016 issue.
Presentations
and Conferences
The Company
continues its efforts at connecting with additional investors and presenting in investor-oriented business conferences. Some of
these are listed below.
Importantly,
the Company presented a poster entitled “Novel Nanoviricides® Highly Effective Against Varicella Zoster Virus in Cell
Culture” at the 36th Annual Meeting of the American Society of Virology (ASV) on June 26, 2017. The ASV Meeting was hosted
and held at the University of Wisconsin-Madison, from June 24th to 28th, 2017 (
https://extensionconferencecenters.uwex.edu/asv2017/
).
Dr. Brian Friedrich, Senior Virologist of the Company, presented the Company’s work on the evaluation of nanoviricides drug
candidates for effectiveness against the shingles virus (Varicella Zoster Virus, VZV, aka Human HerpesVirus-3 or HHV-3) in this
poster.
In addition,
Eugene Seymour, MD, MPH, CEO of the Company has been presenting at various investor meetings. He is also meeting with different
investment brokerage houses, as well as private family offices, angel investors and other sources of funds.
Further,
Anil R. Diwan, PhD, President and Chairman of the Company, is regarded as an expert in nanomedicines and has been invited to present
regarding critical issues in nanomedicines drug development including regulatory processes, with special emphasis on CMC (chemistry,
manufacture, and controls).
On September
12
th
, 2017, Dr. Seymour presented an overview of the Company at the 19
th
Annual Rodman & Renshaw Global
Investment Conference, sponsored by H.C. Wainwright & Co., LLC, held at Lotte New York Palace Hotel in New York City.
Eugene Seymour,
MD, MPH., CEO, described the Company's progress towards human clinical trials stage at the 2017 Marcum Investor Conference held
on June 15, 2017 at the Grand Hyatt Hotel in New York City.
On April
27, 2017, Eugene Seymour, MD, MPH, CEO, presented information about the Company and its progress towards human trials at the Planet
Microcap conference at the Planet Hollywood Hotel. The Planet MicroCap Showcase brings together the most promising companies and
the top dealmakers in MicroCap Finance for three days of company presentations, one-on-one meetings, and networking.
On September
21, 2016, Dr. Anil Diwan, President and Chairman of the Company, was invited as panel participant to discuss “Regulatory
Landscape: What’s Needed to Drive Innovation” in the “Anti-Infectives-Rx 2016” Conference organized by
Boston Biotech Conferences and held at the Harvard Medical School - Joseph B. Martin Conference Center, Boston, MA.
On September
19, 2016, Dr. Diwan was invited to present two talks at the “Public Health and Emerging Microbial Threats, 14th Annual International
Conference” (PHEMT), held at the Albany College of Pharmacy and Health Sciences, Albany, NY 12208, USA.
Dr. Diwan
presented a talk entitled “Beyond Antibodies: Chemical Nanomachines to Combat Emerging Virus Threats” about the Nanoviricides
technology and accomplishments in the first session at PHEMT.
Additionally,
Dr. Diwan was invited to and presented a talk on “Nanomedicine Drug Development Regulatory Processes: Critical Issues”
in the second session at PHEMT.
On September
13, 2016, Dr. Seymour presented the Company’s progress at the 18th Annual Rodman & Renshaw Global Investment Conference,
sponsored by H.C. Wainwright & Co., LLC, held at Lotte New York Palace Hotel in New York City.
Previously,
on February 22, 2016, the Company announced that information on its novel proprietary anti-virus platform technology has been
published in the book “
Handbook of Clinical Nanomedicine, Vol. 1. Nanoparticles, Imaging, Therapy, and Clinical
Applications
”, a CRC Press publication. The chapter entitled “Nanoviricides: Targeted Anti-Viral Nanomaterials”
provides an in-depth presentation of the NanoViricides platform technology, evidence for how nanoviricides® are believed to
act plus dramatic results of nanoviricides specifically targeting certain viral diseases, such as Influenza.
Glossary
of Terms
Nano
- When used as a prefix for something other than a unit of measure, as in “nanoscience,” nano means relating to
nanotechnology, or on a scale of nanometers (one billionth of a meter or greater).
Viricide
- An agent that reliably deactivates or destroys a virus.
Nanoviricide
® – An agent that is made by attaching ligands against a certain virus or family of viruses to a nanomicelle based
on the Company’s patent-pending and proprietary technologies.
Ligand
- A short peptide or chemical molecule fragment that has been designed to specifically recognize one particular type of virus.
Micelle
- an aggregate of molecules in a solution, such as those formed by detergents.
Nanomicelle
- A term coined to describe the micelles formed from the backbone polymer of a nanoviricide sans attached ligands.
Pendant
polymeric micelles
- A polymeric micelle forms from a polymer whose chemical constitution is such that even a single chain
of the polymer forms a micelle. A pendant polymer is a polymer that has certain units in its backbone that extend short chains
branched away from the backbone. Pendant Polymeric Micelles therefore are polymeric micelle materials that are a class of pendant
polymers, and naturally form exceptionally well-defined, self-assembling, globular micelles with a core-shell architecture.
Mutations
- The ability (of a virus) to change its genetic structure to avoid the body’s natural defenses. Mutant viruses are
created from a parent virus strain through a process of natural selection under pressure as it replicates in a host.
P-Value
- In statistical hypothesis testing, the p-value is the probability of obtaining a result at least as extreme as that obtained,
assuming that the null hypothesis is true; wherein the truth of the null hypothesis states that the finding was the result of
chance alone. The fact that p-values are based on this assumption is crucial to their correct interpretation. The smaller the
p-value, the greater is the probability that the observed study results and the comparison control are distinct, and therefore
that the study results are not a result of chance alone.
More technically,
the p-value of an observed value observed of some random variable T used as a test statistic is the probability that, given that
the null hypothesis is true, T will assume a value as or more unfavorable to the null hypothesis as the observed value observed.
“More unfavorable to the null hypothesis” can in some cases mean greater than, in some cases less than and in some
cases further away from a specified center value.
Investigational
New Drug Application (Investigational New Drug (“IND”)
- The process of licensure of a new drug in the US goes
through several steps. A simplified explanation of these steps is as follows. Initially a Company may file a pre-IND application
to seek meetings with the FDA for guidance on work needed for filing an IND application. The Company obtains data on the safety
and effectiveness of the drug substance in various laboratory studies including cell cultures and animal models. The Company also
obtains data on chemical manufacturing of the drug substance. These and certain additional data are used to create an IND which
the Company files with the FDA. After the FDA approves an IND application, the Company may conduct human clinical studies. A Phase
I human clinical trial is designed typically to evaluate safety of the drug and maximum permissible dosage level. A Phase II human
clinical trial that follows is designed to evaluate effectiveness of the drug against the disease in a small cohort of patients.
A Phase III human clinical trial thereafter is designed to evaluate effectiveness and safety in larger groups of patients, often
at multiple sites. The Company may then submit an NDA (New Drug Application) with the data collected in the clinical trials. The
FDA may approve the NDA. Once the NDA is approved, the Company can sell the drug in the USA. European countries have similar processes
under the European Medicines Agency (EMA). Other countries have similar processes.
SAR:
Structure-Activity-Relationship study. When an initial lead drug compound is found that has activity, further studies on drug
compounds obtained by suitably modifying it are performed with the goal of improving efficacy, safety, or both. Such studies are
called SAR studies.
A Note
on US FDA Priority Review Vouchers
The Food
and Drug Administration Amendments Act of September 2007 authorizes the FDA to award a priority review voucher to any company
that the FDA has determined is eligible for priority approval process for a treatment for a neglected tropical disease. The priority
review voucher can be traded to another company in a manner similar to carbon (emissions) credit vouchers. The recipient company
can save as much as six months on their drug review process, and it is anticipated that they would be willing to trade in vouchers
with cash benefits to the company developing drugs against neglected tropical diseases. The regulation became effective as of
September 30, 2008.
Economists
at Duke University, who proposed the voucher concept in 2006, have calculated that reduction of the FDA approval time from 18
to six months could be worth more than $300 million to a company with a top-selling drug with a net present value close to $3
billion. At this level, the voucher would be expected to offset the substantial investment and risk required for discovery and
development of a new treatment for a neglected tropical disease. (David B. Ridley, Henry G. Grabowski and Jeffrey L. Moe, “Developing
Drugs For Developing Countries”, Health Affairs, 25, no. 2 (2006): 313-324; doi: 10.1377/hlthaff.25.2.313; © 2006 by
Project Hope. and (
http://blogs.cgdev.org/globalhealth/2007/10/fda_priority_review.php
). Some of the PRVs have been “sold”
for as much as $250M or so recently.
While there
is no indication whether NanoViricides, Inc. can obtain priority review vouchers for its drugs against neglected tropical diseases,
the high efficacies of our drug candidates lead us to believe that this may be possible. FDA awards priority review status on
the basis of several criteria. NanoViricides, Inc. is currently working on several neglected tropical diseases, including Dengue
fever viruses, rabies, Ebola/Marburg viruses, among others. Of these, Dengue viruses are explicitly included in the list under
this Public Law, and the remaining viruses are eligible for similar treatment according to the language in the Public Law, at
the discretion of the Secretary of Health (Food and Drug Administration Amendments Act of 2007, P.L. 110–85, Sept. 27, 2007,
http://www.fda.gov/oc/initiatives/fdaaa/PL110-85.pdf
). The Zika virus was added to this list recently.
Products
NanoViricides,
Inc. currently has no products for sale. The Company currently has developed reasonably safe and effective drug candidates against
eight different indications as demonstrated in pre-clinical cell culture and animal studies. The Company believes that with the
funds on hand, it should be able to take at least one of these drug candidates into IND filing stage in the near future. The Company
will need to raise additional funds for commencing and executing human clinical trials.
Reports
to Security Holders
As a result
of its filing of Form 10-SB and listing on the FINRA OTC Bulletin Board, the Company became subject to the reporting obligations
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include filing an annual
report under cover of Form 10-K, with audited financial statements, unaudited quarterly reports on Form 10-Q and the requisite
proxy statements with regard to annual shareholder meetings. The public may read and copy any materials the Company files with
the Securities and Exchange Commission (the “Commission”) at the Commission’s Public Reference Room at 100 F
Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0030. The Commission maintains an Internet site (
http://www.sec.gov
) that contains reports, proxy
and information statements and other information regarding issuers that file electronically with the Commission. Information about
the Company is also available on its Web site at
www.nanoviricides.com
. Information included on the Web site is not part
of this Form 10-K.
The Company’s
common stock has been listed on the NYSE MKT (a US national exchange) since September 25, 2013. The NYSE MKT Exchange requires
additional corporate governance, financial and reporting requirements. NYSE MKT has changed its name to “NYSE American”
in July 2017.
Website
Our website
address is
www.nanoviricides.com
.
We intend
to make available through our website, all of our filings with the Commission and all amendments to these reports as soon as reasonably
practicable after filing, by providing a hyperlink to the EDGAR website containing our reports.
Our Contact
Information
Our principal
executive offices are currently located at 1 Controls Drive, Shelton, Connecticut 06484 and our telephone number is (203) 937-6137
(voice mail). We can be contacted by email at
info@nanoviricides.com
.
ITEM
1A. RISK FACTORS
Our business,
financial condition, operating results and prospects are subject to the following risks. Additional risks and uncertainties not
presently foreseeable to us may also impair our business operations. If any of the following risks or the risks described elsewhere
in this report actually occurs, our business, financial condition or operating results could be materially adversely affected.
In such case, the trading price of our common stock could decline, and our stockholders may lose all or part of their investment
in the shares of our common stock.
This Form
10-K contains forward-looking statements that involve risks and uncertainties. These statements can be identified by the use of
forward-looking terminology such as “believes,” “expects,” “intends,” “plans,”
“may,” “will,” “should,” “predict” or “anticipation” or the negative
thereof or other variations thereon or comparable terminology. Actual results could differ materially from those discussed in
the forward- looking statements as a result of certain factors, including those set forth below and elsewhere in this Form 10-K.
Risks
Specific to Our Business
Our
company is a development stage company that has no products approved for commercial sale, never generated any revenues and may
never achieve revenues or profitability.
Our company
is a development stage company that has no products approved for commercial sale, never generated any revenues and may never achieve
revenues or profitability. We are a development stage biopharmaceutical company. Currently, we have no products approved for commercial
sale and, to date, we have not generated any revenues. Our ability to generate revenue depends heavily on:
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demonstration
and proof of principle in pre-clinical trials that a nanoviricide is safe and effective;
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successful
development of our first product candidate in our pipeline;
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our
ability to seek and obtain regulatory approvals, including with respect to the indications
we are seeking;
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the
successful commercialization of our product candidates; and
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market
acceptance of our products.
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All of our
existing product candidates are in early stages of development. It will be several years, if ever, until we have a commercial
drug product available for resale. If we do not successfully develop and commercialize these products, we will not achieve revenues
or profitability in the foreseeable future, if at all. If we are unable to generate revenues or achieve profitability, we may
be unable to continue our operations.
We are a
development stage company with a limited operating history, making it difficult for you to evaluate our business and your investment.
We are in the development stage and our operations and the development of our proposed products are subject to all of the risks
inherent in the establishment of a new business enterprise, including but not limited to:
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the
absence of an operating history;
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the
lack of commercialized products;
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expected
substantial and continual losses for the foreseeable future;
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limited
experience in dealing with regulatory issues; the lack of manufacturing experience and
limited marketing experience;
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an
expected reliance on third parties for the development and commercialization of our proposed
products;
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a
competitive environment characterized by numerous, well-established and well capitalized
competitors; and
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reliance
on key personnel.
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Because we are subject
to these risks, you may have a difficult time evaluating our business and your investment in our company.
Our ability
to become profitable depends primarily on the following factors:
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our
ability to develop drugs, obtain approval for such drugs, and if approved, to successfully
commercialize our nanoviricide drug(s);
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our
R&D efforts, including the timing and cost of clinical trials; and
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our
ability to enter into favorable alliances with third-parties who can provide substantial
capabilities in clinical development, regulatory affairs, sales, marketing and distribution.
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Even
if we successfully develop and market our drug candidates, we may not generate sufficient or sustainable revenue to achieve or
sustain profitability.
We have
incurred significant operating losses and may not ever be profitable. As of June 30, 2017, we had a cash and cash equivalent balance
of $15,099,461. Also, the Company has incurred significant operating losses since its inception, resulting in an accumulated deficit
of $75,128,691 at June 30, 2017. Such losses are expected to continue for the foreseeable future. The Company estimates that it
has sufficient cash to support current operations through September 2018.
We
will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds
when needed and on acceptable terms.
While
we believe we currently have sufficient funding to be able to take at least one our drug candidates into initial human
clinical trials, we currently do not have sufficient resources to complete the development and commercialization of any of
our proposed products. As of June 30, 2017, we have a cash and cash equivalent balance of $15,099,461, which will be
sufficient to fund our planned operations for approximately the next twelve months at our budgeted rate of
expenditures.
In the event
that we cannot obtain acceptable financing, or that we are unable to secure additional financing on acceptable terms, we would
be unable to complete development of our various drug candidates. This would necessitate implementing staff reductions and operational
adjustments that would include reductions in the following business areas:
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research
and development programs;
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preclinical
studies and clinical trials; material characterization studies, regulatory processes;
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a
search for third party marketing partners to market our products for us.
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The amount
of capital we may need will depend on many factors, including the:
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progress,
timing and scope of our research and development programs;
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progress,
timing and scope of our preclinical studies and clinical trials;
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time
and cost necessary to obtain regulatory approvals;
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time
and cost necessary to establish our own marketing capabilities or to seek marketing partners;
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time
and cost necessary to respond to technological and market developments;
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changes
made or new developments in our existing collaborative, licensing and other commercial
relationships; and
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new
collaborative, licensing and other commercial relationships that we may establish.
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Our fixed
expenses, such as rent, license payments and other contractual commitments, may increase in the future, as we may:
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enter
into leases for new facilities and capital equipment;
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enter
into additional licenses and collaborative agreements; and
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incur
additional expenses associated with being a public company.
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We
have limited experience in drug development and may not be able to successfully develop any drugs.
Until the
formation of NanoViricide, Inc. (the Company’s predecessor prior to the reverse merger in 2005) our management and key personnel
had no experience in pharmaceutical drug development and, consequently, may not be able to successfully develop any drugs. Our
ability to achieve revenues and profitability in our business will depend, among other things, on our ability to:
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develop
products internally or obtain rights to them from others on favorable terms;
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complete
laboratory testing and human studies;
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obtain
and maintain necessary intellectual property rights to our products;
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successfully
complete regulatory review to obtain requisite governmental agency approvals;
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enter
into arrangements with third parties to manufacture our products on our behalf; and
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enter
into arrangements with third parties to provide sales and marketing functions.
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Development
of pharmaceutical products is a time-consuming process, subject to a number of factors, many of which are outside of our control.
Consequently, we can provide no assurance of the successful and timely development of new drugs.
Our drug
candidates are in their developmental stage. Further development and extensive testing will be required to determine their technical
feasibility and commercial viability. Our success will depend on our ability to achieve scientific and technological advances
and to translate such advances into reliable, commercially competitive drugs on a timely basis. Drugs that we may develop are
not likely to be commercially available for a few years. The proposed development schedules for our drug candidates may be affected
by a variety of factors, including technological difficulties, proprietary technology of others, and changes in government regulation,
many of which will not be within our control. Any delay in the development, introduction or marketing of our drug candidates could
result either in such drugs being marketed at a time when their cost and performance characteristics would not be competitive
in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of our projects, the unproven
technology involved and the other factors described elsewhere in “Risk Factors”, we may not be able to complete successfully
the development or marketing of any drugs.
We may fail
to successfully develop and commercialize our drug candidates if they:
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are
found to be unsafe or ineffective or fail to meet the appropriate endpoints in clinical
trials;
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do
not receive necessary approval from the FDA or foreign regulatory agencies;
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fail
to conform to a changing standard of care for the diseases they seek to treat; or
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are
less effective or more expensive than current or alternative treatment methods.
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Drug development
failure can occur at any stage of clinical trials and as a result of many factors and there can be no assurance that we or our
collaborators will reach our anticipated clinical targets. Even if we or our collaborators complete our clinical trials, we do
not know what the long-term effects of exposure to our drug candidates will be. Furthermore, our drug candidates may be used in
combination with other treatments and there can be no assurance that such use will not lead to unique safety issues. Failure to
complete clinical trials or to prove that our drug candidates are safe and effective would have a material adverse effect on our
ability to generate revenue and could require us to reduce the scope of or discontinue our operations.
We
must comply with significant and complex government regulations, compliance with which may delay or prevent the commercialization
of our drug candidates.
The R&D,
manufacture and marketing of drug candidates are subject to regulation, primarily by the FDA in the United States and by comparable
authorities in other countries. These national agencies and other federal, state, local and foreign entities regulate, among other
things, R&D activities (including testing in primates and in humans) and the testing, manufacturing, handling, labeling, storage,
record keeping, approval, advertising and promotion of the products that we are developing. Noncompliance with applicable requirements
can result in various adverse consequences, including approval delays or refusals to approve drug licenses or other applications,
suspension or termination of clinical investigations, revocation of approvals previously granted, fines, criminal prosecution,
recalls or seizures of products, injunctions against shipping drugs and total or partial suspension of production and/or refusal
to allow a company to enter into governmental supply contracts.
The process
of obtaining FDA approval has historically been costly and time consuming. Current FDA requirements for a new human drug or biological
product to be marketed in the United States include: (1) the successful conclusion of pre-clinical laboratory and animal tests,
if appropriate, to gain preliminary information on the product’s safety; (2) filing with the FDA of an IND application to
conduct human clinical trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human clinical
investigations to establish the safety and efficacy of the product for its recommended use; and (4) filing by a company and acceptance
and approval by the FDA of a New Drug Application, or NDA, for a drug product or a biological license application, or BLA, for
a biological product to allow commercial distribution of the drug or biologic. A delay in one or more of the procedural steps
outlined above could be harmful to us in terms of getting our drug candidates through clinical testing and to market.
The FDA
reviews the results of the clinical trials and may order the temporary or permanent discontinuation of clinical trials at any
time if it believes the drug candidate exposes clinical subjects to an unacceptable health risk. Investigational drugs used in
clinical studies must be produced in compliance with current good manufacturing practice, or GMP, rules pursuant to FDA regulations.
Sales outside
the United States of products that we develop will also be subject to regulatory requirements governing human clinical trials
and marketing for drugs and biological products and devices. The requirements vary widely from country to country, but typically
the registration and approval process takes several years and requires significant resources. In most cases, even if the FDA has
not approved a product for sale in the United States, the product may be exported to any country if it complies with the laws
of that country and has valid marketing authorization by the appropriate authority. There are specific FDA regulations that govern
this process.
We also
are subject to the following risks and obligations, related to the approval of our products:
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The
FDA or foreign regulators may interpret data from pre-clinical testing and clinical trials
in different ways than we interpret them.
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If
regulatory approval of a product is granted, the approval may be limited to specific
indications or limited with respect to its distribution.
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In
addition, many foreign countries control pricing and coverage under their respective
national social security systems.
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The
FDA or foreign regulators may not approve our manufacturing processes or manufacturing
facilities.
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The
FDA or foreign regulators may change their approval policies or adopt new regulations.
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Even
if regulatory approval for any product is obtained, the marketing license will be subject
to continual review, and newly discovered or developed safety or effectiveness data may
result in suspension or revocation of the marketing license.
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If
regulatory approval of the product candidate is granted, the marketing of that product
would be subject to adverse event reporting requirements and a general prohibition against
promoting products for unapproved or “off-label” uses.
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In
some foreign countries, we may be subject to official release requirements that require
each batch of the product we produce to be officially released by regulatory authorities
prior to its distribution by us.
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We
will be subject to continual regulatory review and periodic inspection and approval of
manufacturing modifications, including compliance with current GMP regulations.
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We
can provide no assurance that our drug candidates will obtain regulatory approval or that the results of clinical studies will
be favorable.
The Company
reports summary of its studies as the data become available to the Company, after analyzing and verifying same, in its press releases.
All of our
products in development are still in the pre-clinical stage, and not submitted to any regulatory agencies in any formal drug licensing
or approval processes. We have previously held a pre-IND meeting with the US FDA regarding our anti-influenza drug candidates,
in March 2012. However, since then, we have re-evaluated our priorities. We have now prioritized our HerpeCide™ program
drug candidates as our highest priority candidates. We believe that we have obtained valuable information at the pre-IND meeting
for our FluCide program that we believe we can apply to our HerpeCide program in a generalized manner.
Such strategic
changes are necessitated due to the limited resources available to us for drug development. We perform such strategic changes
in order to maximize our chances of entering into human clinical trials in the regulatory process in the earliest time frame possible,
and within the funding available to the Company, guided by input from a number of sources. Such changes are designed to accelerate
some programs and would lead to delays in some other programs that receive lower priority, due to our limited resources. We may
not be able to accurately assess the effect of such changes on our business plan.
The testing,
marketing and manufacturing of any product for use in the United States will require approval from the FDA. We cannot predict
with any certainty the amount of time necessary to obtain such FDA approval and whether any such approval will ultimately be granted.
Preclinical and clinical trials may reveal that one or more products are ineffective or unsafe, in which event further development
of such products could be seriously delayed or terminated. Moreover, obtaining approval for certain products may require testing
on human subjects of substances whose effects on humans are not fully understood or documented. Delays in obtaining FDA or any
other necessary regulatory approvals of any proposed drug and failure to receive such approvals would have an adverse effect on
the drug’s potential commercial success and on our business, prospects, financial condition and results of operations. In
addition, it is possible that a proposed drug may be found to be ineffective or unsafe due to conditions or facts that arise after
development has been completed and regulatory approvals have been obtained. In this event, we may be required to withdraw such
proposed drug from the market. To the extent that our success will depend on any regulatory approvals from government authorities
outside of the United States that perform roles similar to that of the FDA, uncertainties similar to those stated above will also
exist.
Even
if we obtain regulatory approvals, our marketed drug candidates will be subject to ongoing regulatory review. If we fail to comply
with continuing U.S. and foreign regulations, we could lose our approvals to market these drugs and our business would be seriously
harmed.
Following
any initial regulatory approval of any drugs we may develop, we will also be subject to continuing regulatory review, including
the review of adverse experiences and clinical results that are reported after our drug candidates are made commercially available.
This would include results from any post-marketing tests or vigilance required as a condition of approval. The manufacturer and
manufacturing facilities we use to make any of our drug candidates will also be subject to periodic review and inspection by the
FDA. The discovery of any previously unknown problems with the drug, manufacturer or facility may result in restrictions on the
drug or manufacturer or facility, including withdrawal of the drug from the market. If we are required to withdraw all or more
of our drugs from the market, we may be unable to continue revenue-generating operations. Reliance on third-party manufacturers
entails risks to which we would not be subject if we manufactured drugs ourselves, including reliance on the third-party manufacturer
for regulatory compliance. Our drug promotion and advertising is also subject to regulatory requirements and continuing FDA review.
Development
of our drug candidates requires a significant investment in R&D. Our R&D expenses in turn, are subject to variation based
on a number of factors, many of which are outside of our control. A sudden or significant increase in our R&D expenses could
materially and adversely impact our results of operations.
We currently
have sufficient funds on hand to take at least one drug candidate into IND application stage. We believe we will be pursuing a
candidate from our HerpeCide™ program (which at present has four separate disease indications underneath the program) for
an IND and initiating human clinical trials with the limited financial resources in hand.
The
Company will be unable to proceed with its business plan beyond approximately September 30, 2018, without obtaining additional
financing to support its budgeted Research and Development and other costs.
Because
we expect to expend substantial resources on R&D, our success depends in large part on the results as well as the costs of
our R&D. A failure in our R&D efforts or substantial increase in our R&D expenses would adversely affect our results
of operations. R&D expenditures are uncertain and subject to much fluctuation. Factors affecting our R&D expenses include,
but are not limited to:
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the
number and outcome of clinical studies we are planning to conduct; for example, our R&D
expenses may increase based on the number of late-stage clinical studies that we may
be required to conduct;
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the
number, extent, and outcome of pre-clinical studies we are planning to conduct; for example,
our R&D expenses may increase based on the number and extent of IND-enabling pre-clinical
studies including CMC studies and Quality programs that we may be required to conduct;
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the
number of drugs entering into pre-clinical development from research; for example, there
is no guarantee that internal research efforts will succeed in generating sufficient
data for us to make a positive development decision;
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licensing
activities, including the timing and amount of related development funding or milestone
payments; for example, we may enter into agreements requiring us to pay a significant
up-front fee for the purchase of in-process R&D that we may record as R&D expense.
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We
have no experience in conducting or supervising clinical trials and must outsource all clinical trials.
We have
no experience in conducting or supervising clinical trials that must be performed to obtain data to submit in concert with applications
for approval by the Food and Drug Administration (“FDA”). The regulatory process to obtain approval for drugs for
commercial sale involves numerous steps. Drugs are subjected to clinical trials that allow development of case studies to examine
safety, efficacy, and other issues to ensure that sale of drugs meets the requirements set forth by various governmental agencies,
including the FDA. In the event that our protocols do not meet standards set forth by the FDA, or that our data is not sufficient
to allow such trials to validate our drugs in the face of such examination, we might not be able to meet the requirements that
allow our drugs to be approved for sale.
Because
we have no experience in conducting or supervising clinical trials, we must outsource our clinical trials to third parties. We
have no control over their compliance with procedures and protocols used to complete clinical trials in accordance with standards
required by the agencies that approve drugs for sale. If these subcontractors fail to meet these standards, the validation of
our drugs would be adversely affected, causing a delay in our ability to meet revenue-generating operations.
We
are subject to risks inherent in conducting clinical trials. The risk of non-compliance with FDA-approved good clinical practices
by clinical investigators, clinical sites, or data management services could delay or prevent us from developing or ever commercializing
our drug candidates.
Agreements
with clinical investigators and medical institutions for clinical testing and with other third parties for data management services
place substantial responsibilities on these parties, which could result in delays in, or termination of, our clinical trials if
these parties fail to perform as expected. For example, if any of our clinical trial sites fail to comply with FDA-approved good
clinical practices, we may be unable to use the data gathered at those sites. If these clinical investigators, medical institutions
or other third parties do not carry out their contractual duties or obligations or fail to meet expected deadlines, or if the
quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or
for other reasons, our clinical trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approval
for or successfully commercialize our drug candidates.
We or regulators
may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate our clinical trials
if at any time we believe that they present an unacceptable risk to the patients enrolled in our clinical trials. In addition,
regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that
the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable
safety risk to the patients enrolled in our clinical trials.
Our clinical
trial operations will be subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our clinical
trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive reports
of observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If regulatory
agencies deem our responses to be inadequate, or are dissatisfied with the corrective actions that we or our clinical trial sites
have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators
may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our drug candidates or we may be criminally prosecuted. If we are unable to
complete clinical trials and have our products approved due to our failure to comply with regulatory requirements, we will be
unable to commence revenue-generating operations.
Efforts
of government and third-party payers to contain or reduce the costs of health care may adversely affect our revenues even if we
were to develop an FDA approved drug.
Our ability
to earn sufficient returns on our drug candidates may depend in part on the extent to which government health administration authorities,
private health coverage insurers and other organizations will provide reimbursement for the costs of such drugs and related treatments.
Significant uncertainty exists as to the reimbursement status of newly approved health care drugs, and we do not know whether
adequate third-party coverage will be available for our drug candidates. If our current and proposed drugs are not considered
cost-effective, reimbursement to the consumers may not be available or sufficient to allow us to sell drugs on a competitive basis.
The failure of the government and third-party payers to provide adequate coverage and reimbursement rates for our drug candidates
could adversely affect the market acceptance of our drug candidates, our competitive position and our financial performance.
If
we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of
regulatory approval, product recalls and seizures, operating restrictions and criminal prosecutions.
Confidentiality
agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
Disclosure of our trade secrets or proprietary information could compromise any competitive advantage that we have.
We depend
upon confidentiality agreements with our officers, employees, consultants, and subcontractors to maintain the proprietary nature
of the technology. These measures may not afford us sufficient or complete protection, and may not afford an adequate remedy in
the event of an unauthorized disclosure of confidential information. In addition, others may independently develop technology
similar to ours, otherwise avoiding the confidentiality agreements, or produce patents that would materially and adversely affect
our business, prospects, financial condition, and results of operations.
We
will rely upon licensed patents to protect our technology. We may be unable to obtain or protect such intellectual property rights,
and we may be liable for infringing upon the intellectual property rights of others.
Our ability
to compete effectively will depend on our ability to maintain the proprietary nature of our technologies and the proprietary technology
of others with which we have entered into licensing agreements. We have exclusively licensed patent applications from TheraCour
Pharma, Inc. and expect to file patents of our own in the coming years. There can be no assurance that any of these patent applications
will ultimately result in the issuance of a patent with respect to the technology owned by us or licensed to us. The patent position
of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations.
The standards that the United States Patent and Trademark Office use to grant patents are not always applied predictably or uniformly
and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable
in pharmaceutical or biotechnology patents. Accordingly, we do not know the degree of future protection for our proprietary rights
or the breadth of claims that will be allowed in any patents issued to us or to others. Further, we rely on a combination of trade
secrets, know-how, technology and nondisclosure, and other contractual agreements and technical measures to protect our rights
in the technology. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently
developed by a competitor, our business and financial condition could be materially adversely affected.
We do not
believe that any of the drug candidates we are currently developing infringe upon the rights of any third parties nor are they
infringed upon by third parties; however, there can be no assurance that our technology will not be found in the future to infringe
upon the rights of others or be infringed upon by others. In such a case, others may assert infringement claims against us, and
should we be found to infringe upon their patents, or otherwise impermissibly utilize their intellectual property, we might be
forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties’
patent rights. In addition to any damages we might have to pay, we may be required to obtain licenses from the holders of this
intellectual property, enter into royalty agreements, or redesign our drug candidates so as not to utilize this intellectual property,
each of which may prove to be uneconomical or otherwise impossible. Conversely, we may not always be able to successfully pursue
our claims against others that infringe upon our technology and the technology exclusively licensed from the TheraCour Pharma
Inc. Thus, the proprietary nature of our technology or technology licensed by us may not provide adequate protection against competitors.
Moreover,
the cost to us of any litigation or other proceeding relating to our patents and other intellectual property rights, even if resolved
in our favor, could be substantial, and the litigation would divert our management’s efforts. Uncertainties resulting from
the initiation and continuation of any litigation could limit our ability to continue our operations.
Other
companies or organizations may assert patent rights that prevent us from developing and commercializing our drug candidates.
We are in
a relatively new scientific field that has generated many different patent applications from organizations and individuals seeking
to obtain important patents in the field. Because the field is so new, very few of these patent applications have been fully processed
by government patent offices around the world, and there is a great deal of uncertainty about which patents will issue, when,
to whom, and with what claims. It is likely that there will be significant litigation and other proceedings, such as interference
proceedings in various patent offices, relating to patent rights in the field. Others may attempt to invalidate our patents or
other intellectual property rights. Even if our rights are not directly challenged, disputes among third parties could lead to
the weakening or invalidation of those intellectual property rights.
Thus, it
is possible that one or more organizations will hold patent rights to which we will need a license. Any license required under
any patent may not be made available on commercially acceptable terms, if at all. In addition, such licenses are likely to be
non-exclusive and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required
license and are unable to design around a patent, we may be unable to effectively market some of our technology and drug candidates,
which could limit our ability to generate revenues or achieve profitability and possibly prevent us from generating revenue sufficient
to sustain our operations.
We
are dependent upon TheraCour Pharma Inc. for the rights to develop the products we intend to sell.
Our ability
to develop, manufacture and sell the products the Company plans to develop is derived from our “Material Licensing Agreement”
with TheraCour Pharma Inc. (“TheraCour”). While we hold the license in perpetuity, the Agreement may be terminated
by TheraCour as a result of: the insolvency or bankruptcy proceedings by or against the Company, a general assignment by the Company
to is creditors, the dissolution of the Company, cessation by the Company of business operations for ninety (90) days or more
or the commencement by the Company or an affiliate to challenge or invalidate the issued patents.
The Company
does not hold the rights to any other patents nor does the Company conduct its own research and development to develop other products
to manufacture and sell. If the Company’s Agreement with TheraCour is terminated, it is unlikely we will be able to commence
revenue-generating operations or that the Company could continue operating at all.
We
lack suitable facilities for clinical testing; reliance on third parties.
The Company
does not have facilities that could be used to conduct clinical testing. We expect to contract with third parties to conduct all
clinical testing required to obtain approvals for any drugs that we might develop. We currently outsource all clinical testing
to a number of third parties in various collaborations and service contracts. Any of our collaborators or service providers may
discontinue the service contract or collaboration. We will then be required to modify our priorities and goals, obtain other collaborators
or service providers to replace the ones we lose, or we may even be forced to abandon certain drug development programs. In addition,
any failures by third parties to adequately perform their responsibilities may delay the submission of our proposed products for
regulatory approval, impair our ability to deliver our products on a timely basis or otherwise impair our competitive position.
We
have limited manufacturing experience.
The Company
has never manufactured products in the highly regulated environment of pharmaceutical manufacturing. There are numerous regulations
and requirements that must be maintained to obtain licensure and the permits required to commence manufacturing, as well as additional
requirements to continue manufacturing pharmaceutical products. We now own facilities that could be used to manufacture clinical
quantities of any products that might be developed by the Company. We believe that this cGMP-capable facility may allow us to
produce limited quantities of a drug after approval for initial market entry, and that such an effort may make commercial sense
if the treatment course requirements and afflicted patient populations are limited, and if the remuneration for the treatment
course is appropriate. However, we do not own, nor lease facilities suitable for cGMP manufacture of any of our drug candidates
in large commercial quantities, nor do we have the resources at this time to acquire or lease suitable facilities. At present,
we have not retained any contract manufacturing organizations (CMO) for commercial manufacture or for clinical product manufacture.
We
have no sales and marketing personnel.
We are
an early stage development company with limited resources. We do not currently have any products available for sale, so have
not secured sales and marketing staff at this early stage of operations. We cannot generate sales without a sales or
marketing staff and must rely on officers to provide any sales or marketing services until such staff are secured, if ever.
Even if we were to successfully develop approvable drugs, we will not be able to sell these drugs if we or our third party
manufacturers fail to comply with manufacturing regulations.
If we were
to successfully develop approvable drugs, before we can begin selling these drugs, we must obtain regulatory approval of our manufacturing
facility and process or the manufacturing facility and process of the third party or parties with whom we may outsource our manufacturing
activities. In addition, the manufacture of our products must comply with the FDA’s current Good Manufacturing Practices
regulations, commonly known as GMP regulations. The GMP regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities, if any in the future and the manufacturing facilities of our third party manufacturers will be continually
subject to inspection by the FDA and other state, local and foreign regulatory authorities, before and after product approval.
We cannot guarantee that we, or any potential third party manufacturer of our products, will be able to comply with the GMP regulations
or other applicable manufacturing regulations.
As of the
date of this filing, we have approximately thirty employees and several consultants and independent contractors. The only consultant/contractor
that we consider critical to the Company is TheraCour, discussed in the next risk factor. All other consultant/contractors would
be more readily replaceable. We have recently significantly expanded our operations and staff materially and our new employees
include a number of key managerial, technical, financial, R&D and operations personnel. The expansion of our business will
continue to place a significant strain on our limited managerial, operational and financial resources. We have no experience in
integrating multiple employees. Therefore, there is a substantial risk that we will not be able to integrate new employees into
our operations which would have a material adverse effect on our business, prospects, financial condition and results of operations.
We
license our core technology from TheraCour Pharma Inc. and we are dependent upon them as they have exclusive development rights.
If we lose the right to utilize any of the proprietary information that is the subject of this license agreement, we may incur
substantial delays and costs in development of our drug candidates
The Company
has entered into a Material License Agreement with TheraCourPharma, Inc. (“TheraCour”) (an approximately 15.2% shareholder
of the Company’s common stock) whereby TheraCour has exclusive rights to develop exclusively for us, the materials that
comprise the core drugs of our planned business. TheraCour is a development stage company with limited financial resources and
needs the Company’s progress payments to further the development of the nanoviricides. The Company controls the research
and work TheraCour performs on its behalf and no costs may be incurred without the prior authorization or approval of the Company.
No royalties are due to TheraCour from the Company’s inception through June 30, 2017.
We depend
on TheraCour and other third parties to perform manufacturing activities effectively and on a timely basis. If these third parties
fail to perform as required, this could impair our ability to deliver our products on a timely basis or cause delays in our clinical
trials and applications for regulatory approval, and these events could harm our competitive position and adversely affect our
ability to commence revenue-generating operations. The manufacturing process for pharmaceutical products is highly regulated,
and regulators may shut down manufacturing facilities that they believe do not comply with regulations. We and our manufacturers
are subject to the FDA’s current Good Manufacturing Practices, which are extensive regulations governing manufacturing processes,
stability testing, record-keeping and quality standards and similar regulations are in effect in other countries. In addition,
our manufacturing operations are subject to routine inspections by regulatory agencies.
Our
collaborative relationships with third parties could cause us to expend significant resources and incur substantial business risk
with no assurance of financial return.
We anticipate
substantial reliance upon strategic collaborations for marketing and the commercialization of our drug candidates and we may rely
even more on strategic collaborations for R&D of our other drug candidates. Our business depends on our ability to sell drugs
to both government agencies and to the general pharmaceutical market. Offering our drug candidates for non-medical applications
to government agencies does not require us to develop new sales, marketing or distribution capabilities beyond those already existing
in the company. Selling antiviral drugs, however, does require such development. We plan to sell antiviral drugs through strategic
partnerships with pharmaceutical companies. If we are unable to establish or manage such strategic collaborations on terms favorable
to us in the future, our revenue and drug development may be limited. To date, we have not entered into any strategic collaborations
with third parties capable of providing these services. In addition, we have not yet marketed or sold any of our drug candidates
or entered into successful collaborations for these services in order to ultimately commercialize our drug candidates.
If we determine
to enter into R&D collaborations during the early phases of drug development, our success will in part depend on the performance
of our research collaborators. We will not directly control the amount or timing of resources devoted by our research collaborators
to activities related to our drug candidates. Our research collaborators may not commit sufficient resources to our programs.
If any research collaborator fails to commit sufficient resources, our preclinical or clinical development programs related to
this collaboration could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products
or alternative technologies in preference to those being developed in collaboration with us. Finally, if we fail to make required
milestone or royalty payments to our collaborators or to observe other obligations in our agreements with them, our collaborators
may have the right to terminate those agreements.
Manufacturers
producing our drug candidates must follow current GMP regulations enforced by the FDA and foreign equivalents. If a manufacturer
of our drug candidates does not conform to the current GMP regulations and cannot be brought up to such a standard, we will be
required to find alternative manufacturers that do conform. This may be a long and difficult process, and may delay our ability
to receive FDA or foreign regulatory approval of our drug candidates and cause us to fall behind on our business objectives.
Establishing
strategic collaborations is difficult and time-consuming. Our discussion with potential collaborators may not lead to the establishment
of collaborations on favorable terms, if at all. Potential collaborators may reject collaborations based upon their assessment
of our financial, regulatory or intellectual property position. Even if we successfully establish new collaborations, these relationships
may never result in the successful development or commercialization of our drug candidates or the generation of sales revenue.
To the extent that we enter into collaborative arrangements, our drug revenues are likely to be lower than if we directly marketed
and sold any drugs that we may develop.
Management
of our relationships with our collaborators will require:
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significant
time and effort from our management team;
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coordination
of our marketing and R&D programs with the marketing and R&D priorities of our
collaborators; and
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effective
allocation of our resources to multiple projects.
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We
employ the use of certain chemical and biological agents and compounds that may be deemed hazardous and we are therefore subject
to various environmental laws and regulations. Compliance with these laws and regulations may result in significant costs, which
could materially reduce our ability to become profitable.
We use hazardous
materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment.
As appropriate, we safely store these materials and wastes resulting from their use at our laboratory facility pending their ultimate
use or disposal. We contract with a third party to properly dispose of these materials and wastes. We are subject to a variety
of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of
these materials and wastes. We may incur significant costs complying with environmental laws and regulations adopted in the future.
If
we use biological and hazardous materials in a manner that causes injury, we may be liable for damages.
Our R&D
and manufacturing activities will involve the use of biological and hazardous materials. Although we believe our safety procedures
for handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot entirely eliminate
the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials. We carry $8,000,000
casualty and general liability insurance policies. Accordingly, in the event of contamination or injury, we could be held liable
for damages or penalized with fines in an amount exceeding our resources and insurance coverage, and our clinical trials or regulatory
approvals could be suspended.
We
may not be able to attract and retain highly skilled personnel.
Our ability
to attract and retain highly skilled personnel is critical to our operations and expansion. We face competition for these types
of personnel from other pharmaceutical companies and more established organizations, many of which have significantly larger operations
and greater financial, technical, human and other resources than us. We may not be successful in attracting and retaining qualified
personnel on a timely basis, on competitive terms, or at all. If we are not successful in attracting and retaining these personnel,
our business, prospects, financial condition and results of operations will be materially and adversely affected.
We
depend upon our senior management and their loss or unavailability could put us at a competitive disadvantage.
We currently
depend upon the efforts and abilities of our management team. The loss or unavailability of the services of any of these individuals
for any significant period of time could have a material adverse effect on our business, prospects, financial condition and results
of operations. We have not obtained, do not own, nor are we the beneficiary of key-person life insurance for all of our key personnel.
The Company
believes that its two executive officers, Eugene Seymour, Chief Executive Officer, and Anil Diwan, President and Chairman of Board,
are critical to the success of the Company. The Company is a limited beneficiary of a certain amount of key man insurance for
these two executive officers that the Company maintains. However there can be no assurances that the amount of the key man insurance
coverage would be sufficient to provide replacement of these key officers for continuing the Company’s operations in a timely
manner, should such an event arise.
The Company
also maintains a limited amount of Directors and Officers Liability insurance coverage to protect all of its directors and executive
officers taken together. There can be no assurance that this D&O coverage will be sufficient to cover the costs of the events
that may lead to its invocation, in which case, there could be a substantial impact on the Company’s ability to continue
operations, should such an unforeseen event occur.
There
are conflicts of interest among our officers, directors and stockholders.
The Company
has a majority independent Board of Directors, a fully independent Compensation Committee, and a fully independent Audit Committee.
Certain of
our executive officers and directors and their affiliates are engaged in other activities and have interests in other
entities on their own behalf or on behalf of other persons. Neither we nor our stockholders will have any rights in these
ventures or their income or profits. Specifically, Anil Diwan owns approximately 70% of the capital stock of TheraCour
Pharma, Inc., which owns 15.2% of our Common Stock, and 2,000,000 shares of the Company’s Series A Preferred
stock, and provides the Company the nanomaterials with which it intends to develop its products and is the holder of the
intellectual property rights the Company uses to conduct its operations. While the Company is not aware of any conflict that
has arisen or any transaction that has not been conducted on an arm’s length basis to date, Dr. Diwan may have
conflicting fiduciary duties between the Company and TheraCour Pharma, Inc., for which he must recuse himself from certain
decision-making processes of the Company.
In addition,
one of our independent directors, Dr. Milton Boniuk has dispositive power over 3,768,233 shares of common stock, and 187,000 shares
of Series A preferred shares. In addition, Dr. Boniuk is the holder, or has dispositive power over $5,000,000 of the Company’s
Series C Convertible Debentures. The Company believes that as a significant investor himself, he represents the interests of the
shareholders at large.
The Company
does not allow a conflicted Shareholder, Director, or Executive Officer to vote on matters wherein a conflict may be perceived.
The conflicted entity is not allowed to nominate an alternate person to vote for them either. Other than this safeguard, the Company
currently does not have any policy in place, should such a conflict arise
In particular:
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Our executive officers or directors or their
affiliates may have an economic interest in, or other business relationship with, partner companies that invest in us.
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Our executive officers or directors or their
affiliates have interests in entities that provide products or services to us.
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In any of these
cases:
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Our executive officers or directors may have a conflict between
our current interests and their personal financial and other interests in another business venture.
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Our executive officers or directors may have conflicting fiduciary
duties to us and the other entity.
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The terms of transactions with the other entity may not be subject
to arm’s length negotiations and therefore may be on terms less favorable to us than those that could be procured through
arm’s length negotiations.
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We anticipate
entering into contracts with various U.S. government agencies. In contracting with government agencies, we will be subject to
various federal contract requirements. Future sales to U.S. government agencies will depend, in part, on our ability to meet these
requirements, certain of which we may not be able to satisfy.
We may enter
into contracts with various U.S. government agencies which have special contracting requirements that give the government agency
various rights or impose on the other party various obligations that can make the contracts less favorable to the non- government
party. Consequently, if a large portion of our revenue is attributable to these contracts, our business may be adversely affected
should the governmental parties exercise any of these additional rights or impose any of these additional obligations.
U.S. government
contracts typically contain unfavorable termination provisions and are subject to audit and modification by the government at
its sole discretion, which subjects us to additional risks. These risks include the ability of the U.S. government to unilaterally:
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suspend or prevent us for a set period of time from receiving
new contracts or extending existing contracts based on violations or suspected violations of laws or regulations;
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terminate our existing contracts;
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reduce the scope and value of our existing contracts;
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audit and object to our contract-related costs and fees, including
allocated indirect costs;
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control and potentially prohibit the export of our drug candidates;
and
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change certain terms and conditions in our contracts.
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The U.S. government
may terminate any of its contracts with us either for its convenience or if we default by failing to perform in accordance with
the contract schedule and terms. Termination for convenience provisions generally enable us to recover only our costs incurred
or committed, and settlement expenses and profit on the work completed prior to termination. Termination for default provisions
do not permit these recoveries and make us liable for excess costs incurred by the U.S. government in procuring undelivered items
from another source.
As a U.S. government
contractor, we may become subject to periodic audits and reviews. Based on the results of these audits, the U.S. government may
adjust our contract-related costs and fees, including allocated indirect costs. As part of any such audit or review, the U.S.
government may review the adequacy of, and our compliance with, our internal control systems and policies, including those relating
to our purchasing, property, compensation and/or management information systems. In addition, if an audit or review uncovers any
improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including termination
of our contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with
the U.S. government. We could also suffer serious harm to our reputation if allegations of impropriety were made against us. In
addition, under U.S. government purchasing regulations, some of our costs, including most financing costs, amortization of intangible
assets, portions of our R&D costs and some marketing expenses, may not be reimbursable or allowed under our contracts. Further,
as a U.S. government contractor, we may become subject to an increased risk of investigations, criminal prosecution, civil fraud,
whistleblower lawsuits and other legal actions and liabilities to which purely private sector companies are not.
We may
fail to obtain contracts to supply the U.S. government, and we may be unable to commercialize our drug candidates.
The U.S. government
has undertaken commitments to help secure improved countermeasures against bio-terrorism. The process of obtaining government
contracts is lengthy and uncertain, and we would compete for each contract. Moreover, the award of one government contract would
not necessarily secure the award of future contracts covering the same drug. If the U.S. government makes significant future contract
awards for the supply of its emergency stockpile to our competitors, our business will be harmed and it is unlikely that we will
be able to ultimately commercialize our competitive drug candidate.
In addition,
the determination of when and whether a drug is ready for large scale purchase and potential use will be made by the government
through consultation with a number of government agencies, including the FDA, the NIH, the CDC and the Department of Homeland
Security. Congress has approved measures to accelerate the development of bio-defense drugs through NIH funding, the review process
by the FDA and the final government procurement contracting authority. While this may help speed the approval of our drug candidates,
it may also encourage competitors to develop their own drug candidates.
The market for
government stockpiling of H5N1 medicines and other antiviral drugs in the Strategic National Stockpile is fairly new and uncertain.
At the present
many governments have already stockpiled influenza medicines for H5N1. We cannot predict with certainty the size of the market,
if any for all of the antiviral drugs that the governments may want to stockpile. Consequently, we cannot predict whether sales,
if any, to governments will be sufficient to fund our business plan and commence revenue-generating operations.
If the
U.S. government fails to continue funding bio-defense drug candidate development efforts or fails to purchase sufficient quantities
of any future bio-defense drug candidate, we may be unable to generate sufficient revenues to continue operations.
We hope to receive
funding from the U.S. government for the development of our bio-defense drug candidates. Changes in government budgets and agendas,
however, may result in future funding being decreased and de-prioritized, and government contracts typically contain provisions
that permit cancellation in the event that funds are unavailable to the government agency. Furthermore, we cannot be certain of
the timing of any future funding, and substantial delays or cancellations of funding could result from protests or challenges
from third parties. If the U.S. government fails to continue to adequately fund R&D programs, we may be unable to generate
sufficient revenues to continue operations. Similarly, if we develop a drug candidate that is approved by the FDA, but the U.S.
government does not place sufficient orders for this drug, our future business may be harmed.
Risks Related
to the Biotechnology/Biopharmaceutical Industry
The biotechnology
and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. We may
be unable to compete with enterprises equipped with more substantial resources than us.
The biotechnology
and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition based
primarily on scientific and technological factors. These factors include the availability of patent and other protection for technology
and products, the ability to commercialize technological developments and the ability to obtain government approval for testing,
manufacturing and marketing.
Our shingles
drug candidate would compete with Valtrex®, an approved drug (valacyclovir), and other acyclovir-related nucleoside analogs,
and new drugs in the pipeline such as FV-100. These approved drugs are known to have very limited benefit. FV-100, a VZV-specific
nucleoside analog is currently in Phase III clinical trials.
Our HSV-1 and
HSV-2 skin cream drug candidates would compete with branded and unbranded available skin creams, such as Abreva™, as well
as with branded and unbranded oral drug candidates against herpes, such as those based on acyclovir, valacyclovir, gancyclovir,
among others. All of these drugs are known to have limited benefits. It is not known until after human clinical trials whether
our drug candidates provide patient benefits beyond those of these drugs. Other drugs against herpes that are in the pipeline,
if approved prior to our drug approval, would also be competition. Their patient benefit profiles are not known at present.
Our anti-influenza
drug in development, Flucide, would compete with neuraminidase inhibitors Tamiflu and Relenza, anti-influenza drugs that are sold
by Roche and Glaxo SmithKline (GSK), respectively. Generic competitors include amantadine and rimantadine, both oral. BioCryst
Pharmaceuticals, Inc. has achieved US FDA approval for IV Infusions formulations of peramivir, an influenza neuraminidase inhibitor,
for the treatment of uncomplicated influenza. Peramivir is approved in Japan and had obtained emergency use authorization in the
US. Its effectiveness during multiple clinical trials was found to be severely limited. Several H5N1 bird flu, and influenza novelH1N1/2009
vaccines are also in development worldwide. Several companies are developing anti-influenza drugs and vaccines.
We have recently
completed preliminary animal studies against HIV that have resulted in the finding that certain of our drug candidates were superior
to the oral HAART cocktail in SCID-hu Thy/Liv humanized mice lethally infected with HIV-I. We thus believe that we have a very
strong lead drug identified against HIV. There are several companies with anti-HIV drugs in the market. A new drug, Maraviroc
from Pfizer has recently been approved, which falls in a new class called CCR5-blockers. Prior to this, two new drugs in a new
class called Integrase Inhibitors have been approved. A drug in the class called Entry & Fusion Inhibitors, enfuvirtide, (Fuzeon™,
Roche) has also been available. Additionally, the classical drugs, NRTI’s, NNRTI’s and PI’s (protease inhibitors)
are used in various combinations. A three-drug combo has been approved. A four-drug combo is expected to be approved soon. The
HIVCide-I nanoviricide is expected to act by a very different kind of mechanism, defining a new class of drugs, that is complementary
to the existing classes of anti-HIV drugs.
Our nanoviricide
eye drops for viral diseases of the eye are currently under development. We have shown significant clinical efficacy in an animal
model of EKC (adenoviral epidemic kerato-conjunctivitis). We have also shown very strong in vitro efficacy in HSV-1 reduction
in cell cultures. We believe that this drug has a very good efficacy and safety profile, based on current data. There are no approved
drugs against all viral diseases of the eye, or adenoviral EKC in particular. Several drugs are available for the treatment of
herpes keratitis. Idoxuridine, vidarabine, acyclovir and its derivatives, are among the leading ones. Aganocide is under development,
but did not meet its desired end points in a clinical trial recently. We believe that the nanoviricide eye drops should have a
significant advantage in terms of reduced frequency of application needed and simple application procedure.
We compete with
specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical
companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused their development
efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have developed or acquired internal
biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as well as
academic institutions, government agencies and private research organizations, also compete with us in recruiting and retaining
highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical
field will also depend to a considerable degree on the continuing availability of capital to us.
We are aware
of numerous products under development or manufactured by competitors that are used for the prevention or treatment of certain
diseases we have targeted for drug development. Various companies are developing biopharmaceutical products that potentially directly
compete with our drug candidates even though their approach to such treatment is different.
We expect that
our drug candidates under development and in clinical trials will address major markets within the anti-viral sector. Our competition
will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities.
Additionally, the timing of the market introduction of some of our potential drugs or of competitors’ products may be an
important competitive factor. Accordingly, the relative speed with which we can develop drugs, complete pre-clinical testing,
clinical trials, approval processes and supply commercial quantities to market are important competitive factors. We expect that
competition among drugs approved for sale will be based on various factors, including product efficacy, safety, reliability, availability,
price and patent protection.
The successful
development of biopharmaceuticals is highly uncertain. A variety of factors including, pre-clinical study results or regulatory
approvals, could cause us to abandon development of our drug candidates.
Successful development
of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Products
that appear promising in the early phases of development may fail to reach the market for several reasons including:
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pre-clinical study results that may show the product to be less
effective than desired (e.g., the study failed to meet its primary objectives) or to have harmful or problematic side effects;
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failure to receive the necessary regulatory approvals or a delay
in receiving such approvals. Among other things, such delays may be caused by slow enrollment in clinical studies, length
of time to achieve study endpoints, additional time requirements for data analysis or a IND and later NDA, preparation, discussions
with the FDA, an FDA request for additional pre-clinical or clinical data or unexpected safety or manufacturing issues;
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manufacturing costs, pricing or reimbursement issues, or other
factors that make the product not economical; and
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the proprietary rights of others and their competing products
and technologies that may prevent the product from being commercialized.
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Success in pre-clinical
and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently
susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to
complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory authority varies
significantly from one product to the next, and may be difficult to predict.
Risks Related
to the Securities Markets and Investments in Our Common Stock
If we do not meet the continued listing
standards of the NYSE American our common stock could be delisted from trading, which could limit investors’ ability to make
transactions in our common stock and subject us to additional trading restrictions.
As of September 25, 2013, our common stock
was listed on the NYSE MKT (now known as “NYSE American”), a national securities exchange, which imposes continued
listing requirements with respect to listed shares. If, however, we fail to satisfy the continued listing standards, such as, for
example, the requirement that our shares not trade “for a substantial period of time at a low price per share” or that
we not dispose of our principal operating assets or discontinue a substantial portion of our operations, among other requirements,
the NYSE American may issue anon-compliance letter or initiate delisting proceedings. If our securities are delisted from trading
on the NYSE American and we are not able to list our securities on another exchange or to have them quoted on NASDAQ, our securities
could be quoted on the OTC Bulletin Board or on the “pink sheets.” As a result, we could face significant adverse consequences
including:
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a limited availability of market quotations for our securities;
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a determination that our common stock is a “penny stock”
which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced
level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage for us; and
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a decreased ability to issue additional securities (including
pursuant to short-form registration statements on Form S-3 or obtain additional financing in the future).
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Our Company
is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), which
will require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs
will reduce or might eliminate our profitability.
Our Company
is required to file periodic reports with the Commission pursuant to the Exchange Act and the rules and regulations promulgated
thereunder. To comply with these requirements, our independent registered auditors will have to review our quarterly financial
statements and audit our annual financial statements. Moreover, our legal counsel will have to review and assist in the preparation
of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time, because
factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at
this time and will have a major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence
of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead
requirements and earn a profit. We may be exposed to potential risks resulting from new requirements under Section 404 of the
Sarbanes-Oxley Act of 2002. If we cannot provide reliable financial reports or prevent fraud, our business and operating results
could be harmed, investors could lose confidence in our reported financial information, the trading price of our Common Stock,
if a market ever develops, could drop significantly, or we could become subject to Commission enforcement proceedings.
Our Common
Stock may be considered a “penny stock” and may be difficult to sell.
The Commission
has adopted regulations which generally define “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. Historically, the price
of our Common Stock has fluctuated greatly. If, the market price of the Common Stock is less than $5.00 per share it therefore
may be designated as a “penny stock” according to Commission rules. The “penny stock” rules impose additional
sales practice requirements on 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).
For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities
and have received the purchaser’s written consent to the transaction before the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed
by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be
sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers
may restrict the ability or decrease the willingness of broker-dealers to sell our common shares, and may result in decreased
liquidity for our common shares and increased transaction costs for sales and purchases of our common shares as compared to other
securities.
Our stock
price may be volatile and your investment in our common stock could suffer a decline in value.
The price of
our common stock, as quoted on the NYSE MKT may fluctuate significantly in response to a number of factors, many of which are
beyond our control. These factors include but are not limited to:
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progress of our products through the regulatory process
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results of preclinical studies and clinical trials;
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announcements of technological innovations or new products by us or our competitors;
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government regulatory action affecting our products or our competitors’ products in both the United States and foreign countries;
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developments or disputes concerning patent or proprietary rights;
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general market conditions for emerging growth and pharmaceutical companies;
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economic conditions in the United States or abroad;
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actual or anticipated fluctuations in our operating results;
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broad market fluctuations; and
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changes in financial estimates by securities analysts.
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There is a risk of market fraud.
Shareholders should be aware that, according
to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns
include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler
room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse
of those prices and with consequent investor losses. We are aware of the abuses that have occurred historically in the penny stock
market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate
in the market, management will strive within the confines of practical limitations to prevent the described patterns from being
established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our
share price.
As of September 25, 2013, our common stock
was listed on the NYSE American national exchange. However, shareholders should be aware that the occurrence of the above-mentioned
patterns and practices cannot be entirely precluded and that the occurrence of these patterns or practices could increase the volatility
of our share price.
A registration of a significant amount
of our outstanding restricted stock may have a negative effect on the trading price of our stock.
At June 30, 2017, shareholders of the Company
had 21,179,432 shares (as adjusted) of restricted stock, or approximately 33.5% of the outstanding common stock. If we were
to file a registration statement including all of these shares, and the registration is allowed by the SEC, these shares would
be freely tradable upon the effectiveness of the planned registration statement. If investors holding a significant number of freely
tradable shares decide to sell them in a short period of time following the effectiveness of a registration statement, such sales
could contribute to significant downward pressure on the price of our stock.
We do not intend to pay any cash
dividends in the foreseeable future and, therefore, any return on your investment in our capital stock must come from increases
in the fair market value and trading price of the capital stock.
We have not paid any cash dividends on
our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future. We intend to retain future
earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements, which we may enter
into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be
at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital
requirements and any other factors that the board of directors decides is relevant. Therefore, any return on your investment in
our capital stock must come from increases in the fair market value and trading price of the capital stock.
We may
issue additional equity shares to fund the Company’s operational requirements, which would dilute share ownership.
The Company’s
continued viability depends on its ability to raise capital. Changes in economic, regulatory or competitive conditions may lead
to cost increases. Management may also determine that it is in the best interest of the Company to develop new services or products.
In any such case additional financing is required for the Company to meet its operational requirements. There can be no assurances
that the Company will be able to obtain such financing on terms acceptable to the Company and at times required by the Company,
if at all. In such event, the Company may be required to materially alter its business plan or curtail all or a part of its operational
plans as detailed further in Management’s Discussion and Analysis in this Form 10-K. While the Company currently has no
offers to sell its securities to obtain financing, sale or the proposed sale of substantial amounts of our common stock in the
public markets may adversely affect the market price of our common stock and our stock price may decline substantially. In the
event that the Company is unable to raise or borrow additional funds, the Company may be required to curtail significantly its
operational plans as further detailed in Requirements for Additional Capital in the Management Discussion and Analysis of this
Form 10-K.
The Company
is authorized to issue up to 150,000,000 shares of Common Stock on a post-split basis without additional approval by shareholders.
As of June 30, 2017, we had 63,306,774 shares of common stock outstanding, 6,673,860 warrants convertible to 6,673,860 shares
of common stock and 4,348,744 shares of Series A Preferred Stock convertible into 15,220,604 shares of Common Stock only in the
event of a change in control.
As of September
25, 2013, our common stock is listed on the NYSE American national exchange.
Large
amounts of our common stock will be eligible for resale under Rule 144.
As of June 30,
2017, 21,179,432 of 63,306,774 issued and outstanding shares (as adjusted) of the Company’s common stock were restricted
securities as defined under Rule 144 of the Securities Act of 1933, as amended (the “Act”) and under certain circumstances
may be resold without registration pursuant to Rule 144. In addition the 4,348,744 shares of Series A Preferred Stock are restricted
and convertible into 15,220,604 shares of Common Stock only in the event of a Change of Control of the Company.
Approximately
2,547,000 shares of our restricted shares of common stock (as adjusted) are held by non-affiliates who may avail themselves of
the public information requirements and sell their shares in accordance with Rule 144. As a result, some or all of these shares
may be sold in accordance with Rule 144 potentially causing the price of the Company’s shares to decline.
In general,
under Rule 144, a person (or persons whose shares are aggregated) who has satisfied a six month holding period may, under certain
circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding
shares of common stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate,
as such term is defined in Rule 144(a)(1), of the Company and who has satisfied a one-year holding period. Any substantial sale
of the Company’s common stock pursuant to Rule 144 may have an adverse effect on the market price of the Company’s
shares. This filing will satisfy certain public information requirements necessary for such shares to be sold under Rule 144.
The requirements
of complying with the Sarbanes-Oxley act may strain our resources and distract management.
We are subject
to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley
Act of 2002. The costs associated with these requirements may place a strain on our systems and resources. The Exchange Act requires
that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act
requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Historically,
as a private company we have maintained a small accounting staff, but in order to maintain and improve the effectiveness of our
disclosure controls and procedures and internal control over financial reporting, significant additional resources and management
oversight will be required. This includes, among other things, retaining independent public accountants. This effort may divert
management’s attention from other business concerns, which could have a material adverse effect on our business, financial
condition, results of operations and cash flows. In addition, we may need to hire additional accounting and financial persons
with appropriate public company experience and technical accounting knowledge, and we cannot assure you that we will be able to
do so in a timely fashion.
Sales
of additional equity securities may adversely affect the market price of our common stock and your rights in the Company may be
reduced.
We expect to
continue to incur drug development and selling, general and administrative costs, and in order to satisfy our funding requirements,
we may need to sell additional equity securities. Our stockholders may experience substantial dilution and a reduction in the
price that they are able to obtain upon sale of their shares. Also, any new securities issued may have greater rights, preferences
or privileges than our existing common stock that may adversely affect the market price of our common stock and our stock price
may decline substantially.