As filed with the Securities and Exchange
Commission on September 29, 2017
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
D.C. 20549
FORM S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES
ACT OF 1933
TONIX
PHARMACEUTICALS HOLDING CORP.
(Name of registrant in its charter)
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Nevada
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2834
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26-1434750
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(State or other Jurisdiction
of Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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509 Madison Avenue, Suite 306
New York, New York 10022
(212) 980-9155
(Address and telephone number of principal
executive offices and principal place of business)
Seth Lederman
Chief Executive Officer
Tonix Pharmaceuticals Holding Corp.
509 Madison Avenue, Suite 306
New York, New York 10022
(212) 980-9155
(Name, address and telephone
number of agent for service)
Copies to:
Marc J. Ross, Esq.
James M. Turner, Esq.
Sichenzia Ross Ference Kesner LLP
1185 Avenue of the Americas, 37
th
Floor
New York, New York 10036
(212) 930-9700
(212) 930-9725 (fax)
APPROXIMATE DATE OF PROPOSED SALE TO
THE PUBLIC:
From time to time after this Registration
Statement becomes effective.
If any securities
being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box:
☒
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ☐
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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☐
(Do not check if smaller reporting company)
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Smaller reporting company
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☒
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Emerging growth company
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If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
☐
CALCULATION OF REGISTRATION FEE
Title of Each Class Of
Securities To Be Registered
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Amount To Be
Registered (1) (2)
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Proposed Maximum
Offering Price
Per Security (3)
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Proposed Maximum
Aggregate
Offering Price (3)
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Amount Of
Registration Fee
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Common stock, $.001 par value
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2,100,000
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$
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4.11
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$
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8,631,000
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$
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1,000.33
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Total
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2,100,000
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$
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4.11
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$
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8,631,000
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$
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1,000.33
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(1)
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Pursuant to Rule 416 under the Securities Act of 1933, as amended, or the Securities Act, the shares of common stock offered hereby also include an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of anti-dilution provisions, stock splits, stock dividends, recapitalizations or other similar transactions.
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(2)
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Represents 73,039 shares of common stock previously issued to the selling stockholder named herein, and 2,026,961 shares of common stock that are issuable pursuant to a purchase agreement with the selling stockholder named herein.
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(3)
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Calculated pursuant to Rule 457(c), solely for the purpose of computing the amount of the registration fee, on the basis of the average of the high and low prices of the registrant’s common stock quoted on The NASDAQ Global Market on September 25, 2017.
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The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The information in this
Prospectus is not complete and may be changed. The selling stockholders may not sell these securities under this Prospectus
until the registration statement of which it is a part and filed with the Securities and Exchange Commission is effective. This
Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
SUBJECT TO COMPLETION,
DATED SEPTEMBER 29, 2017
PRELIMINARY PROSPECTUS
Up to 2,100,000 Shares of Common Stock
This
prospectus covers the offer and sale of up to 2,100,000 shares of common stock, $0.001 par value per share of Tonix Pharmaceuticals
Holding Corp., a Nevada corporation, by Lincoln Park Capital Fund, LLC, or Lincoln Park or the Selling Stockholder.
The
shares of common stock being offered by the Selling Stockholder have been or may be issued pursuant to the purchase agreement dated
September 28, 2017, or the Purchase Agreement, that we entered into with Lincoln Park. See “The Lincoln Park Transaction”
for a description of the Purchase Agreement and “Selling Stockholder” for additional information regarding Lincoln
Park. The prices at which Lincoln Park may sell the shares of common stock will be determined by the prevailing market price for
the shares of common stock or in negotiated transactions.
We
are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of the shares of common
stock by the Selling Stockholder.
The
Selling Stockholder may sell the shares of common stock described in this prospectus in a number of different ways and at varying
prices. See “Plan of Distribution” for more information about how the Selling Stockholder may sell the shares of common
stock being registered pursuant to this prospectus. The Selling Stockholder is an “underwriter” within the meaning
of Section 2(a)(11) of the Securities Act.
We
will pay the expenses incurred in registering the shares of common stock, including legal and accounting fees. See “Plan
of Distribution”.
Our
common stock is currently quoted on The NASDAQ Global Market under the symbol “TNXP”. On September 28, 2017, the last
reported sale price of our common stock on The NASDAQ Global Market was $4.38 per share.
Investing in our
common stock involves a high degree of risk. Before making any investment in our common stock, you should read and carefully
consider the risks described in this Prospectus under “Risk Factors“ beginning on page 10 of this Prospectus.
You should rely
only on the information contained in this Prospectus or any prospectus supplement or amendment thereto. We have not authorized
anyone to provide you with different information.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This Prospectus is dated
, 2017
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This
prospectus, including the documents that we incorporate by reference, contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements include those
that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements
of historical fact. These statements include, but are not limited to, statements regarding:
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our expectations regarding clinical studies, the timing of clinical results, development timelines and regulatory filings and submissions for our product candidates;
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our intention to have one unblinded interim analysis, or IA, by an independent data monitoring committee, or IDMC, when the Phase 3 clinical study, or the HONOR study, of Tonmya
®
(cyclobenzaprine HCl, or CBP, sublingual tablets), or Tonmya, in participants with military-related posttraumatic stress disorder, or PTSD, from approximately 50% efficacy-evaluable participants, or approximately 275 participants, to occur in the first half of 2018; and, if the IA results require continued enrollment, our expectation of topline results from the 550-participants available in the second half of 2018; and
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our liquidity and our expectations regarding our needs for and ability to raise additional capital.
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These
forward-looking statements are based on our current expectations and projections about future events and they are subject to risks
and uncertainties known and unknown to us that could cause actual results and developments to differ materially from those expressed
or implied in such statements, including the risks described under “Risk Factors” in this prospectus.
In
some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,”
“intends,” “estimates,” “plans,” “believes,” “seeks,” “may,”
“should”, “could” or the negative of such terms or other similar expressions. Accordingly, these statements
involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them.
Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus.
You
should read this prospectus and the documents that we reference herein and therein, completely and with the understanding that
our actual future results may be materially different from what we expect. You should assume that the information appearing in
this prospectus and the documents incorporated by reference is accurate as of their respective dates. Our business, financial condition,
results of operations and prospects may change. We may not update these forward-looking statements, even though our situation may
change in the future, unless required by law to update and disclose material developments related to previously disclosed information.
We qualify all of the information presented in this prospectus, and particularly our forward-looking statements, by these cautionary
statements.
ABOUT THIS PROSPECTUS
You should rely only
on the information contained in this Prospectus. We have not authorized anyone to provide you with information different from that
contained in this Prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock
only in jurisdictions where offers and sales are permitted. The information contained in this Prospectus is accurate only as of
the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of our common stock. The Prospectus
will be updated and updated prospectuses made available for delivery to the extent required by the federal securities laws.
No person is authorized
in connection with this Prospectus to give any information or to make any representations about us, the selling stockholders, the
securities or any matter discussed in this Prospectus, other than the information and representations contained in this Prospectus.
If any other information or representation is given or made, such information or representation may not be relied upon as having
been authorized by us or any selling stockholder. This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any distribution of securities in accordance with this Prospectus shall, under any circumstances, imply that there
has been no change in our affairs since the date of this Prospectus. The Prospectus will be updated and updated prospectuses made
available for delivery to the extent required by the federal securities laws.
PROSPECTUS SUMMARY
The
items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected
information and does not contain all of the information you should consider in making your investment decision. Therefore, you
should read the entire prospectus carefully before investing in our securities. Investors should carefully consider the information
set forth under “Risk Factors” beginning on page 10 of this prospectus.
Except where the context otherwise
requires, the terms, “we,” “us,” “our,” “Tonix” or “the Company,” refer
to the business of Tonix Pharmaceuticals Holding Corp., a Nevada corporation and its wholly-owned subsidiaries.
Overview
We are a late clinical-stage
pharmaceutical company dedicated to the development of innovative pharmaceutical products to address public health challenges.
Our most advanced drug development program is focused on delivering an efficacious and safe long-term treatment for PTSD. PTSD
is characterized by chronic disability, inadequate treatment options, high utilization of healthcare services, and significant
economic burden. We have assembled a management team with significant industry experience to lead the development of our product
candidates. We complement our management team with a network of scientific, clinical, and regulatory advisors that includes recognized
experts in the fields of PTSD and other central nervous system disorders.
In June 2017, the United
States Food and Drug Administration, or FDA, conditionally accepted the proposed trade name Tonmya for TNX-102 SL (CBP sublingual
tablets), or TNX-102 SL, for the treatment of PTSD. The FDA’s final approval of Tonmya as a name for TNX-102 SL for the treatment
of PTSD is subject to a new drug application, or NDA, approval. A request for review of Tonmya as the proposed name for TNX-102
SL for the management of fibromyalgia has been withdrawn at the FDA. The United States Patent and Trademark Office, or PTO, has
granted the federal registration of the Tonmya mark. TNX-102 SL is an investigational new drug and has not been approved for any
indication.
Our lead product candidate,
Tonmya or TNX-102 SL, a proprietary low-dose CBP sublingual tablet designed for bedtime administration, is in Phase 3 development
as a potential treatment for PTSD. We commenced the HONOR study, a randomized, double-blind, placebo-controlled study of Tonmya
in approximately 550 participants with military-related PTSD in the first quarter of 2017. This Phase 3 study is an adaptive design
study based on the results of the Phase 2 AtEase study. The study design is very similar to the Phase 2 AtEase study, except there
will be one planned IA and the involvement of the IDMC to review unblinded IA results. The IDMC will make a recommendation to continue
as planned, to continue but increase the number of recruited participants or to stop for success. Based on the Phase 2 AtEase study
results in military-related PTSD, Tonmya was granted Breakthrough Therapy designation by the FDA in December 2016, for the treatment
of PTSD.
Our development pipeline
includes: TNX-601 (tianeptine oxalate), a separate pre-IND, or Investigational New Drug, application candidate designed for daytime
administration as a potential treatment of PTSD and for cognitive dysfunction associated with steroid use; TNX-801, a potential
smallpox-preventing vaccine based on a live synthetic version of horsepox virus, or HPXV; TNX-301 an IND candidate for the treatment
of alcohol use disorders, or AUD; and TNX-701, a biodefense development program for protection from radiation injury. We hold worldwide
development and commercialization rights to all our product candidates.
Our Product Pipeline
Tonmya – Posttraumatic Stress
Disorder Program
Tonmya is a small,
rapidly disintegrating tablet containing CBP for sublingual administration and transmucosal absorption. Tonmya is a proprietary,
Protectic™ protective eutectic formulation of CBP that allows for rapid systemic exposure and increased bioavailability through
the transmucosal delivery. Tonmya is in Phase 3 for the treatment of PTSD.
An estimated 8.6 million
adults in the U.S. suffer from PTSD, a chronic disorder that is characterized by hyperarousal, avoidance, emotional numbing, and
sleep disturbances. People with PTSD suffer significant impairment in their functioning, including occupational activities and
social relations, and are at elevated risk for impulsive, violent behaviors toward others and themselves, including suicide. Many
patients fail to adequately respond to the medications approved for PTSD. Antidepressants, sedative-hypnotics and antipsychotics
not approved for PTSD are commonly prescribed despite generally weak evidence in support of their use. Antianxiety drugs, also
called anxiolytics, are not approved for PTSD, but are commonly prescribed despite the recommendations against their use by many
experts. Anxiolytics are comprised of benzodiazepine and non-benzodiazepine drugs, which carry risks of tolerance and addiction
and are also associated with potential serious side-effects, such as retrograde amnesia.
Phase 2 AtEase Study
In the first quarter
of 2015, we commenced a randomized, double-blind, placebo-controlled, 12-week Phase 2 study of Tonmya in participants with military-related
PTSD, which we refer to as the AtEase study. The primary objective of this study was to evaluate the potential clinical benefit
of using Tonmya to treat military-related PTSD at a dose of 2.8 mg or 5.6 mg (2 x 2.8 mg tablets). The primary efficacy endpoint
was the 12-week mean change from baseline in the severity of PTSD symptoms as measured by the Clinician-Administered PTSD Scale
for the Diagnostic and Statistical Manual of Mental Disorders-5
th
edition, or CAPS-5, between those treated with Tonmya
and those receiving placebo. The CAPS-5 scale is a standardized structured clinical interview and is considered the gold standard
in clinical research and regulatory approval for measuring the symptom severity of PTSD.
In the AtEase study,
participants experienced their index trauma during military service in 2001 or later and had a baseline CAPS-5 score of 29 or higher,
and were randomized in a 2:1:2 ratio to bedtime daily Tonmya 2.8 mg, Tonmya 5.6 mg, or placebo sublingual tablets for 12 weeks,
respectively. The AtEase study was conducted at 24 U.S. centers and enrolled 231 participants in the modified intent-to-treat population.
We reported topline results from the AtEase study in May 2016.
AtEase was adequately
designed to evaluate whether a 2.8 mg dose would be efficacious, which would have provided an opportunity for this study to be
used as one of the two pivotal efficacy studies required to support approval of Tonmya for the treatment of PTSD. Although the
2.8 mg dose trended in the direction of a therapeutic effect, it did not reach statistical significance on the primary endpoint.
The 5.6 mg dose had a therapeutic effect as assessed by the CAPS-5 scale, which was statistically significant by Mixed-effect Model
Repeated Measures, or MMRM, with Multiple Imputation, or MI, analysis (p-value = 0.031), even though this arm of the study, by
design, included only approximately half the number of participants of the 2.8 mg and placebo arms. Tonmya 5.6 mg demonstrated
a dose-effect on multiple efficacy and safety measurements in the AtEase study.
In the AtEase study,
Tonmya was well tolerated and the participant retention rate was 73% on placebo, 79% on Tonmya 2.8 mg and 84% on Tonmya 5.6 mg.
Four distinct serious adverse events, or SAEs, were reported in the study; three were in the placebo group, and one (proctitis/peri-rectal
abscess) in the Tonmya arm, which was determined to be unrelated to Tonmya. The most common non-dose related adverse events were
mild and transient local administration site conditions and of these oral hypoaesthesia, or numbness, was the most frequent and
occurred in 39% of participants treated with the 2.8 mg dose and 36% of the participants treated with the 5.6 mg dose, compared
to 2% of the participants receiving placebo. Oral paresthesia, or tingling, occurred in 16% of participants treated with the 2.8
mg dose and 4% of participants treated with the 5.6 mg dose, compared to 3% of the participants receiving placebo. Glossodynia,
or a burning or stinging sensation in the mouth, occurred in 3% of participants treated with the 2.8 mg dose and 6% of participants
treated with the 5.6 mg dose, compared to 1% of participants receiving placebo. Systemic adverse events that were potentially dose-related
and occurred in greater than or equal to 5% of participants treated with the 5.6 mg dose or placebo included: somnolence in 16%
versus 6% of the participants receiving placebo; dry mouth in 16% versus 11% of the participants receiving placebo; headache in
12% versus 4% of the participants receiving placebo; insomnia in 6% versus 9% of the participants receiving placebo; sedation in
12% versus 1% of the participants receiving placebo; upper respiratory tract infection in 4% versus 5% of the participants receiving
placebo; abnormal dreams in 2% versus 5% of the participants receiving placebo; and weight increase in 2% versus 5% of the participants
receiving placebo. For the participants treated with the 2.8 mg dose, the incidence of the most common systemic adverse events
reported above were less frequent than participants treated with the 5.6 mg dose with the exception of insomnia, which was 8%.
Retrospective analysis
of the AtEase study suggested that the subset of participants with CAPS-5 score of 33 or higher was equivalent to the population
of PTSD subjects studied in prior FDA registration studies of paroxetine and sertraline using older versions of the Clinician-Administered
PTSD Scale. To confirm this efficacy evidence, our ongoing Phase 3 program enrolls participants with baseline CAPS-5 score of 33
or higher. The beneficial effects of Tonmya 5.6 mg were preserved in the subgroup with PTSD from combat traumas (85% of AtEase
population). Also, sustained remission (i.e. satisfying remission criterion of CAPS-5 score less than 11 at both week 8 and week
12) was observed in 21% of participants receiving a 5.6 mg dose of Tonmya as compared to 5% of participants in the placebo group
(p = 0.02, logistic regression). The AtEase study supported the hypothesized mechanism of sleep quality improvement, since additional
retrospective analyses showed that in the CAPS-5 score of 33 or higher subset of participants, sleep improvement at week 4, measured
by the PROMIS Sleep Disturbance instrument, predicted treatment response (by improvement in total CAPS-5 score without the sleep
item) at week 12 in the Tonmya 5.6 mg group (p = 0.01, linear regression).
Open-label Extension Study for AtEase
Participants who completed
the AtEase study were eligible to enroll into a three-month open-label extension study with Tonmya 2.8 mg. We conducted this open-label
extension study to obtain additional safety information from participants in the AtEase Study. The clinical phase of this open-label
extension study is complete. Tonmya 2.8 mg was well tolerated for up to six months of treatment and no new safety signals were
revealed in this open-label extension study.
Ongoing Phase 3 Study
We have commenced a
randomized, double-blind placebo-controlled Phase 3 study of Tonmya in approximately 550 participants with military-related PTSD
in the first quarter of 2017. This first Phase 3 study, the “HONOR study,” is an adaptive design study based on the
results of the Phase 2 AtEase study. The study design is very similar to the Phase 2 AtEase study, except there will be one
planned IA and the involvement of the IDMC to review unblinded IA results. The IDMC will make a recommendation to continue as planned,
to continue but increase the number of recruited participants or to stop for success. In addition, there will be one active
dose (5.6 mg administered as 2 x 2.8 mg tablets) and the entrance criterion is CAPS-5 ≥ 33 in this Phase 3 study. The IA will
be conducted when approximately 50% (approximately 250 – 300 participants) of the initially planned participant enrollment
is evaluable for efficacy. We received FDA acceptance of the Phase 3 HONOR study design in January of 2017. The HONOR study is
being conducted at approximately 45 U.S. sites. As in the case of the AtEase study, the primary efficacy endpoint of the HONOR
study is the 12-week mean change from baseline in the severity of PTSD symptoms as measured by the CAPS-5 scale between those treated
with Tonmya and those receiving placebo.
Open-label Extension Study for HONOR
To obtain additional
safety information from participants in the HONOR study, participants who completed the HONOR study are eligible to enroll into
a 12-week open-label extension study with Tonmya 5.6 mg. This open-label extension study is ongoing.
Prospective Phase 3 Study
A second, randomized,
double-blind placebo-controlled Phase 3 study of Tonmya (5.6 mg administered as 2 x 2.8 mg tablets) in approximately 550 predominantly
civilian PTSD participants will follow. We expect this study to be conducted at approximately 45 U.S. sites. As in the case of
the HONOR and AtEase studies, the primary efficacy endpoint of this second Phase 3 study will be the 12-week mean change from baseline
in the severity of PTSD symptoms as measured by the CAPS-5 scale between those treated with Tonmya and those receiving placebo.
Long-Term Safety Exposure Study for
Tonmya
In addition to the
ongoing 12-week open-label extension study for HONOR, we plan to conduct the registration-required open-label extension studies
of Tonmya in participants who complete either the 12-week open-label extension study of HONOR study or the predominantly civilian
PTSD Phase 3 study. The goal of the open-label extension studies is to obtain adequate 6- and 12-month safety exposure data from
Tonmya 5.6 mg to support its registration for the treatment of PTSD, a chronic psychiatric condition.
Regulatory Update
We held an End-of-Phase
2 Chemistry, Manufacturing and Controls, or CMC, meeting with the FDA in February 2016 to discuss the quality data requirement
for an NDA submission for Tonmya. In general, our proposed NDA CMC plan for Tonmya was acceptable to the FDA and can be applied
to the PTSD NDA.
Subsequent to reporting
the Phase 2 AtEase study topline result, we held an End-of-Phase 2/Pre-Phase 3 meeting with the FDA in early August 2016 to discuss
the Phase 3 program required to support the registration of Tonmya for the treatment of PTSD and the remaining data package for
the NDA filing. Based on this meeting discussion and the official FDA meeting minutes, we expect that positive results from two
adequate, well-controlled Phase 3 efficacy and safety studies and long-term (six- and 12-month) safety exposure studies would provide
sufficient evidence of efficacy and safety to support the clinical approval of Tonmya for the treatment of PTSD. As described above,
the first Phase 3 study will be in participants with military-related PTSD and the second Phase 3 study will study predominately
civilian PTSD participants.
In December 2016, the
FDA granted Breakthrough Therapy designation to Tonmya for the treatment of PTSD. The Breakthrough Therapy designation request
was based on the preliminary clinical evidence of Tonmya on military-related PTSD in the AtEase study.
Breakthrough
Therapy designation is intended to expedite the development and review of drugs for serious or life-threatening conditions. The
benefits of Breakthrough Therapy designation include the eligibility for priority review of the NDA within six months instead of
10 months and rolling submission of completed portions of the NDA, in addition to an organizational commitment involving FDA’s
senior managers contributing significant guidance. The FDA is committing to provide us timely advice and interactive communications
related to the design and efficient execution of our Breakthrough Therapy development program.
In
March 2017, we held the Initial Cross-Disciplinary Breakthrough Therapy Type B meeting with the FDA to discuss the opportunity
to accelerate the development and submission of the Tonmya NDA for the treatment of PTSD. Based on our discussions with the FDA
and the FDA official meeting minutes, a single-study NDA approval could be possible based on topline data from the ongoing HONOR
study. Additionally, due to the lack of evidence of potential abuse in clinical studies of Tonmya, the FDA agreed that studies
in assessing abuse potential of Tonmya are not required to support the Tonmya NDA.
In May 2017, the PTO
issued us U.S. Patent No. 9,636,408. The patent, “Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline
Hydrochloride,” claims the composition and manufacture of a unique formulation that characterizes Tonmya. The patent is expected
to provide Tonmya with U.S. market exclusivity until 2034.
In June 2017, the FDA
conditionally accepted the proposed trade name Tonmya for TNX-102 SL (CBP sublingual tablets) for the treatment of PTSD.
On September 7, 2017,
we had a Breakthrough Therapy CMC Guidance Meeting with the FDA to discuss the CMC plan for the Tonmya NDA filing. Formal meeting
minutes from the FDA will be available by October 7, 2017.
On September 13, 2017,
we were issued European patent 2501234 “Methods and Compositions for Treating Symptoms Associated with PTSD Using Cyclobenzaprine”.
This patent protects the use of Tonmya for the treatment of PTSD as well as its active ingredient CBP for the treatment of PTSD.
The patent is expected to provide Tonmya with European market exclusivity until 2030 and may be extended based on the timing of
the European marketing authorization of Tonmya for PTSD.
Phase 1 Bioequivalence, Bridging
PK, Food-Effect and Dose-Proportionality Studies
Completed Bioequivalence Study
We completed a Phase
1 bioequivalence study that compared the pharmacokinetic profiles of single-dose of Tonmya 2.8 mg tablets manufactured at two facilities:
(i) the facility used to produce Tonmya 2.8 mg tablets for the Phase 2 AtEase study; and (ii) the facility used to produce Tonmya
2.8.mg tablets for our clinical studies required to support the PTSD NDA submission and the to-be-marketed product. This bioequivalence
study demonstrated that the Tonmya 2.8 mg tablets manufactured at these two facilities were bioequivalent, supporting the use of
the AtEase study to support the Phase 3 studies.
Planned Multi-dose Bridging PK Study
We intend to seek FDA
marketing approval for Tonmya pursuant to Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, using AMRIX
®
extended-release
capsules (30 mg) as our reference listed drug, or RLD. As agreed upon by the FDA, we plan to study Tonmya 5.6 mg (administered
as 2 x 2.8 mg tablets) in comparison to AMRIX 30 mg extended-release capsules in a randomized, open-label, parallel, multiple-dose
bridging PK study to provide a systemic exposure bridge. If the exposures of Tonmya (2 x 2.8 mg tablets) are less than or
comparable to the RLD maximum approved dose (30 mg) for the initial dose and at steady state, the results of this study will provide
the necessary systemic exposure bridge of Tonmya 5.6.mg to AMRIX 30 mg extended-release capsules, and the approval of Tonmya for
PTSD can thus rely on the safety findings (clinical and nonclinical) of the currently approved CBP drug products.
Food Effect and Dose-proportionality
Studies
To support the Tonmya
product registration, a randomized, open-label, 2-way crossover, food-effect, comparative bioavailability study of Tonmya following
a single dose in healthy subjects under fasting and fed conditions and a randomized, open-label, 2-way crossover, dose-proportionality,
comparative bioavailability study of a single dose Tonmya at 2.8 mg vs. 5.6 mg in healthy subjects under fasting conditions will
be completed for the Tonmya NDA submission.
Cyclobenzaprine Hydrochloride Nonclinical
Development
The FDA has accepted
our proposed nonclinical data package to support our PTSD NDA filing. In October 2016, we completed the six-month repeated-dose
toxicology study of the active ingredient, CBP in rats and a nine-month repeated-dose toxicology study in dogs required for the
NDA filing and to support Phase 3 clinical studies outside the U.S., if necessary. These chronic toxicity studies were requested
by the FDA to augment the nonclinical information in the AMRIX approved prescribing information, or labeling, which is necessary
to support the Tonmya labeling for long-term use. Based on the prescribing information of AMRIX and the post-marketing surveillance
information, there is no evidence of abuse for CBP. As a result, the FDA has advised that we will not have to assess the abuse
and dependency potential of Tonmya to support the Tonmya 505(b)(2) NDA submission for the treatment of PTSD.
Additional Product Candidates
We also have a pipeline
of other drug and biologic candidates, including two pre-IND candidates, TNX-601 for PTSD and TNX-801, a biologic vaccine product
for the prevention of smallpox, as well as an IND candidate, TNX-301, a potential treatment for AUD.
TNX-601
TNX-601 is a novel
oral formulation of tianeptine oxalate in the pre-IND stage of development for the treatment for PTSD. Currently there is no tianeptine-containing
product approved in the U.S., but tianeptine sodium (amorphous) has been marketed in Europe, Asia, and Latin America for the treatment
of depression since 1987. It is effective in various depressive states and also improves depression-associated anxiety and somatic
complaints. We have discovered a novel oxalate salt and polymorph, which we believe may provide improved stability, consistency,
and manufacturability relative to the known forms of tianeptine. Like CBP, tianeptine shares structural similarities with classic
tricyclic antidepressants, but it has unique pharmacological and neurochemical properties. Tianeptine modulates the glutamatergic
system indirectly and reverses the neuroplastic changes that are observed during periods of stress and corticosteroid use. It is
a weak mu-opioid receptor (MOR) agonist, but does not have significant affinity for other known neurotransmitter receptors. Due
to its use in Europe, Asia, and Latin America for several decades, tianeptine has an established safety profile. In addition to
being used to treat depression, several published studies support the potential of tianeptine as a potentially effective and safe
therapy for patients with PTSD. Leveraging our development expertise in PTSD, TNX-601 is being developed for daytime usage as a
first-line monotherapy for PTSD. Tianeptine’s reported pro-cognitive and anxiolytic effects as well as its ability to attenuate
the neuropathological effects of excessive stress responses suggest that it may be used to treat PTSD by a different mechanism
of action than Tonmya.
On April 19, 2016,
we were issued US patent 9,314,469 B2 “Method for treating neurocognitive dysfunction,” which includes using tianeptine
for cognitive dysfunction associated with corticosteroid use. We intend to develop TNX-601 under Section 505(b)(1) of the FDCA
as a potential treatment for PTSD and cognitive dysfunction associated with corticosteroid use. Pharmaceutical development work
on TNX-601 has been initiated.
TNX-801
TNX-801 is a novel
potential smallpox-preventing vaccine based on a live synthetic version of HPXV grown in cell culture. TNX-801 was synthesized
by Professor David Evans and Dr. Ryan Noyce at the University of Alberta, Canada in collaboration with us. HPXV has protective
vaccine activity in mice, using a model of lethal vaccinia infection. Vaccine manufacturing activities have been initiated to support
further nonclinical testing of TNX-801. We are developing TNX-801 as a potential smallpox-preventing vaccine for widespread immunization
and for the U.S. strategic national stockpile. Though it shares structural characteristics with vaccinia-based vaccines, TNX-801
has unique virulence properties that we believe may suggest lower toxicity and potential safety advantages over existing vaccinia-based
vaccines, which have been associated with adverse side effects such as myopericarditis.
We intend to develop
TNX-801 under 21 CFR 601 Subpart H, pursuant to which the FDA may grant marketing approval for a biological product for which safety
has been established in humans and for which the requirements for efficacy are met based on adequate and well-controlled animal
studies, where human studies are not ethical or feasible. This approval pathway has been described as the “Animal Rule”.
In the 1970s, vaccination against smallpox was discontinued in the U.S.; however, smallpox remains a material threat to national
security. We recently filed a patent on the novel virus vaccine. In addition, 12 years of non-patent based exclusivity is expected
under the Patient Protection and Affordable Care Act. Following the recent passage of the 21st Century Cures Act, we believe TNX-801
qualifies as a medical countermeasure, and therefore should be eligible for a Priority Review Voucher upon receiving FDA licensure.
We are currently working to develop a vaccine that meets current Good Manufacturing Practice, or cGMP, quality to support an IND
study.
TNX-301
TNX-301 is a fixed-dose
combination drug product, or CDP, containing two FDA-approved drugs, disulfiram and selegiline. We intend to develop TNX-301 CDP
under Section 505(b)(2) of the FDCA as a potential treatment for AUD, and we have commenced development work on TNX-301 formulations.
A pre-IND meeting was held in February 2016 to discuss the clinical development program of TNX-301 for AUD. At that meeting, the
FDA advised us of the nonclinical studies required for this CDP IND application to support the initiation of the first-in-man study
with TNX-301. IND planning activities are underway.
TNX-701
In addition, we own
rights to intellectual property on a biodefense technology relating to the development of protective agents against radiation exposure,
which we refer to as TNX-701. We have begun nonclinical research and development on TNX-701. Similar to the regulatory pathway
intended for TNX-801, we plan to develop TNX-701 under the Animal Rule. We expect significant reduction in development costs and
risks compared to the development of other new chemical entities, or NCEs, or new biologic candidates.
Corporate Information
We were incorporated
on November 16, 2007 under the laws of the State of Nevada as Tamandare Explorations Inc. On October 11, 2011, we changed our name
to Tonix Pharmaceuticals Holding Corp. Our principal executive offices are located at 509 Madison Avenue, Suite 306, New York,
New York 10022, and our telephone number is (212) 980-9155. Our website addresses are
www.tonixpharma.com, www.tonix.com,
and
www.krele.com
.
The information on our websites is not part of this prospectus. We have included our website addresses as a factual reference and
do not intend them to be active links to our websites.
The Offering
Common stock offered by the Selling Stockholder
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2,100,000 shares consisting of:
● 73,039 shares of our common stock issued to Lincoln Park as consideration for its commitment to
purchase shares of our common stock under the Purchase Agreement, or the Commitment Shares; and
●
2,026,961 shares we may sell to Lincoln Park under the Purchase Agreement from time to time after
the date of this prospectus.
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Common stock outstanding before the offering
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7,581,700 shares, as of September 28, 2017.
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Common stock outstanding after the offering
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9,608,661 shares.
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Use of proceeds
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We will receive no proceeds from the sale of shares of common stock by Lincoln Park in this offering. We may receive up to $15,000,000 in aggregate gross proceeds under the Purchase Agreement from any sales we make to Lincoln Park pursuant to the Purchase Agreement after the date of this prospectus. Any proceeds that we receive from sales to Lincoln Park under the Purchase Agreement will be used for working capital and general corporate purposes. See “Use of Proceeds.”
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Symbol on The NASDAQ Global Market
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“TNXP”
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Risk factors
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You should carefully consider the information set forth in this Prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 10 of this Prospectus before deciding whether or not to invest in our common stock.
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Purchase Agreement with Lincoln
Park
On
September 28, 2017, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has agreed to purchase
from us up to an aggregate of $15,000,000 of our common stock (subject to certain limitations) from time to time over the term
of the Purchase Agreement. Also on September 28, 2017, we entered into a registration rights agreement, or the Registration Rights
Agreement, with Lincoln Park pursuant to which we have filed with the SEC the registration statement that includes this prospectus
to register for resale under the Securities Act, the shares of common stock that have been or may be issued to Lincoln Park under
the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement and the Registration
Rights Agreement, we issued
73,039
Commitment Shares.
We
do not have the right to commence any sales of our common stock to Lincoln Park under the Purchase Agreement until certain conditions
set forth in the Purchase Agreement, all of which are outside of Lincoln Park’s control, have been satisfied, including that
the SEC has declared effective the registration statement that includes this prospectus. Thereafter, we may, from time to time
and at our sole discretion, direct Lincoln Park to purchase shares of our common stock in amounts up to 30,000 shares on any single
business day, subject to a maximum of $1,000,000 per purchase, plus an “initial amount”, other “accelerated amounts”
and/or “additional amounts” under certain circumstances. There are no trading volume requirements or restrictions under
the Purchase Agreement, and we will control the timing and amount of any sales of our common stock to Lincoln Park. The purchase
price of the shares that may be sold to Lincoln Park under the Purchase Agreement will be based on the market price of our common
stock preceding the time of sale as computed under the Purchase Agreement. The purchase price per share will be equitably adjusted
for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during
the business days used to compute such price. We may at any time in our sole discretion terminate the Purchase Agreement without
fee, penalty or cost upon one business days’ notice. There are no restrictions on future financings, rights of first refusal,
participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement, other than a
prohibition on entering into a “Variable Rate Transaction,” as defined in the Purchase Agreement. Lincoln Park may
not assign or transfer its rights and obligations under the Purchase Agreement.
As
of September 28, 2017, there were 7,581,700 shares of our common stock outstanding, of which 6,304,021 shares were held by non-affiliates, excluding
the
73,039
Commitment Shares that we have already issued to Lincoln Park under the
Purchase Agreement. Although the Purchase Agreement provides that we may sell up to $15,000,000 of our common stock to Lincoln
Park, only 2,100,000 shares of our common stock are being offered under this prospectus, which represents: (i)
73,039
shares that we already issued to Lincoln Park as a commitment fee for making the commitment under the Purchase Agreement,
and (ii) an additional
2,026,961
shares which may be issued to Lincoln Park in
the future under the Purchase Agreement, if and when we sell shares to Lincoln Park under the Purchase Agreement. Depending on
the market prices of our common stock at the time we elect to issue and sell shares to Lincoln Park under the Purchase Agreement,
we may need to register for resale under the Securities Act additional shares of our common stock in order to receive aggregate
gross proceeds equal to the $15,000,000 total commitment available to us under the Purchase Agreement. If all of the 2,100,000
shares offered by Lincoln Park under this prospectus were issued and outstanding as of the date hereof, such shares would represent
22% of the total number of shares of our common stock outstanding and 25% of the total number of outstanding shares held by non-affiliates, in
each case as of the date hereof. If we elect to issue and sell more than the 2,100,000 shares offered under this prospectus to
Lincoln Park, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act
any such additional shares, which could cause additional substantial dilution to our stockholders. The number of shares ultimately
offered for resale by Lincoln Park is dependent upon the number of shares we sell to Lincoln Park under the Purchase Agreement.
Under
applicable rules of The NASDAQ Global Market, in no event may we issue or sell to Lincoln Park under the Purchase Agreement more
than 19.99% of the shares of our common stock outstanding immediately prior to the execution of the Purchase Agreement (which is
1,500,981 shares based on 7,508,661 shares outstanding immediately prior to the execution of the Purchase Agreement), or the Exchange
Cap, unless (i) we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap or (ii) the
average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equals or exceeds $4.5178
per share (which represents the closing consolidated bid price of our common stock on September 27, 2017, plus an incremental amount
to account for our issuance of the Commitment Shares to Lincoln Park), such that the transactions contemplated by the Purchase
Agreement are exempt from the Exchange Cap limitation under applicable NASDAQ rules. In any event, the Purchase Agreement specifically
provides that we may not issue or sell any shares of our common stock under the Purchase Agreement if such issuance or sale would
breach any applicable rules or regulations of The NASDAQ Global Market.
The
Purchase Agreement also prohibits us from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated
with all other shares of our common stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park
and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares
of our common stock, or the Beneficial Ownership Cap, as calculated pursuant to Section 13(d) of the Securities Exchange Act
of 1934, as amended, or the Exchange Act, and Rule 13d-3 thereunder.
Issuances
of our common stock in this offering will not affect the rights or privileges of our existing stockholders, except that the economic
and voting interests of each of our existing stockholders will be diluted as a result of any such issuance. Although the number
of shares of common stock that our existing stockholders own will not decrease, the shares owned by our existing stockholders will
represent a smaller percentage of our total outstanding shares after any such issuance to Lincoln Park.
RISK
FACTORS
This
investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below
and the other information in this Prospectus. If any of the following risks actually occur, our business, operating results and
financial condition could be harmed and the value of our stock could go down. This means you could lose all or a part of your
investment.
RISKS
RELATED TO OUR BUSINESS
We
have a history of operating losses and expect to incur losses for the foreseeable future. We may never generate revenues or, if
we are able to generate revenues, achieve profitability.
We
are focused on product development, and we have not generated any revenues to date. We have incurred losses in each year of our
operations, and we expect to continue to incur operating losses for the foreseeable future. These operating losses have adversely
affected and are likely to continue to adversely affect our working capital, total assets and shareholders’ equity.
We
and our prospects should be examined in light of the risks and difficulties frequently encountered by new and early-stage companies
in new and rapidly evolving markets. These risks include, among other things, the speed at which we can scale up operations, our
complete dependence upon development of products that currently have no market acceptance, our ability to establish and expand
our brand name, our ability to expand our operations to meet the commercial demand of our clients, our development of and reliance
on strategic and customer relationships and our ability to minimize fraud and other security risks.
The
process of developing our products requires significant clinical, nonclinical and CMC development, laboratory testing and clinical
studies. In addition, commercialization of our product candidates will require that we obtain necessary regulatory approvals and
establish sales, marketing and manufacturing capabilities, either through internal hiring or through contractual relationships
with others. We expect to incur substantial losses for the foreseeable future as a result of anticipated increases in our research
and development costs, including costs associated with conducting preclinical and nonclinical testing and clinical studies, and
regulatory compliance activities.
Our
ability to generate revenues and achieve profitability will depend on numerous factors, including success in:
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developing and testing
product candidates;
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receiving regulatory
approvals;
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commercializing
our products; and
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establishing a favorable
competitive position.
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Many
of these factors will depend on circumstances beyond our control. We cannot assure you that we will ever have a product approved
by the FDA, that we will bring any product to market or, if we are successful in doing so, that we will ever become profitable.
We
expect to incur substantial additional operating expenses over the next several years as our research, development, preclinical
and nonclinical testing, and clinical study activities increase. The amount of future losses and when, if ever, we will achieve
profitability are uncertain. We have no products that have generated any commercial revenue, do not expect to generate revenues
from the commercial sale of products in the near future, and might never generate revenues from the sale of products. Our ability
to generate revenue and achieve profitability will depend on, among other things, successful completion of the development of
our product candidates; obtaining necessary regulatory approvals from the FDA; establishing manufacturing, sales, and marketing
arrangements with third parties; and raising sufficient funds to finance our activities. We might not succeed at any of these
undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations
may be materially adversely affected.
We
have a limited operating history and we expect a number of factors to cause our operating results to fluctuate on a quarterly
and annual basis, which may make it difficult to predict our future performance.
We
are a development-stage biopharmaceutical company with a limited operating history. Our operations to date have been primarily
limited to developing our technology and undertaking preclinical and nonclinical testing and clinical studies of our clinical-stage
product candidate, Tonmya for PTSD. We have not yet obtained regulatory approvals for Tonmya or any of our other product candidates.
Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer
operating history or commercialized products. Our financial condition has varied significantly in the past and will continue to
fluctuate from quarter-to-quarter or year-to-year due to a variety of factors, many of which are beyond our control. Factors relating
to our business that may contribute to these fluctuations include other factors described elsewhere in this annual report and
also include:
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our ability to obtain
additional funding to develop our product candidates;
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delays in the commencement,
enrollment and timing of clinical studies;
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the success of our
clinical studies through all phases of clinical development, including studies of our most advanced product candidate Tonmya
for PTSD;
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any delays in regulatory
review and approval of product candidates in clinical development;
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our ability to obtain
and maintain regulatory approval for our product candidate Tonmya for PTSD or any of our other product candidates in the United
States and foreign jurisdictions;
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potential nonclinical
toxicity and/or side effects of our product candidates that could delay or prevent commercialization, limit the indications
for any approved drug, require the establishment of REMS, or cause an approved drug to be taken off the market;
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our dependence on
third party contract manufacturing organizations, or CMOs, to supply or manufacture our products;
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our dependence on
third party contract research organizations, or CROs, to conduct our clinical studies and nonclinical research;
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our ability to establish
or maintain collaborations, licensing or other arrangements;
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market acceptance
of our product candidates;
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our ability to establish
and maintain an effective sales and marketing infrastructure, either through the creation of a commercial infrastructure or
through strategic collaborations;
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competition from
existing products or new products that may emerge;
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the ability of patients
or healthcare providers to obtain coverage of or sufficient reimbursement for our products;
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our ability to leverage
our proprietary technology platform to discover and develop additional product candidates;
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our ability and
our licensors’ abilities to successfully obtain, maintain, defend and enforce intellectual property rights important
to our business;
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our ability to attract
and retain key personnel to manage our business effectively;
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our ability to build
our finance infrastructure and improve our accounting systems and controls;
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potential product
liability claims;
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potential liabilities
associated with hazardous materials; and
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our ability to obtain
and maintain adequate insurance policies.
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Accordingly,
the results of any quarterly or annual periods should not be relied upon as indications of future operating performance.
We
have no approved products on the market and therefore do not expect to generate any revenues from product sales in the foreseeable
future, if at all.
To
date, we have no approved product on the market and have generated no product revenues. We have funded our operations primarily
from sales of our securities. We have not received, and do not expect to receive for at least the next couple of years, if at
all, any revenues from the commercialization of our product candidates. To obtain revenues from sales of our product candidates,
we must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing and marketing
drugs with commercial potential. We may never succeed in these activities, and we may not generate sufficient revenues to continue
our business operations or achieve profitability.
We
are largely dependent on the success of our clinical-stage product candidate, Tonmya for PTSD, and we cannot be certain that this
product candidate will receive regulatory approval or be successfully commercialized.
We
currently have no products for sale, and we cannot guarantee that we will ever have any drug products approved for sale. We and
our product candidates are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries
governing, among other things, research, testing, clinical studies, manufacturing, labeling, promotion, selling, adverse event
reporting and recordkeeping. We are not permitted to market any of our product candidates in the United States until we receive
approval of an NDA for a product candidate from the FDA or the equivalent approval from a foreign regulatory authority. Obtaining
FDA approval is a lengthy, expensive and uncertain process. We currently have one product candidate, Tonmya, in Phase 3 development
for the treatment of PTSD, and the success of our business currently depends on its successful development, approval and commercialization.
Any projected sales or future revenue predictions are predicated upon FDA approval and market acceptance of Tonmya. If projected
sales do not materialize for any reason, it would have a material adverse effect on our business and our ability to continue operations.
Tonmya
has not completed the clinical development process; therefore, we have not yet submitted an NDA or foreign equivalent or received
marketing approval for this product candidate anywhere in the world. The clinical development program for Tonmya for PTSD may
not lead to commercial products for a number of reasons, including if we fail to obtain necessary approvals from the FDA or foreign
regulatory authorities because our clinical studies fail to demonstrate to their satisfaction that this product candidate is safe
and effective or a clinical program may be put on hold due to unexpected safety issues. We may also fail to obtain the necessary
approvals if we have inadequate financial or other resources to advance our product candidates through the clinical study process.
Any failure or delay in completing clinical studies or obtaining regulatory approvals for Tonmya for PTSD in a timely manner would
have a material adverse impact on our business and our stock price.
We
may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize
on programs or product candidates that may be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and human resources, we are currently focusing on the regulatory approval of Tonmya for PTSD. As a result,
we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have
greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products
or profitable market opportunities. Our spending on existing and future product candidates for specific indications may not yield
any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular
product candidate, we may relinquish valuable rights to that product candidate through strategic alliance, licensing or other
royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization
rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which
it would have been more advantageous to enter into a partnering arrangement.
We
will need additional capital. If additional capital is not available or is available at unattractive terms, we may be forced to
delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or curtail
our operations.
In
order to develop and bring our product candidates to market, we must commit substantial resources to costly and time-consuming
research, preclinical and nonclinical testing, clinical studies and marketing activities. We anticipate that our existing cash
and cash equivalents will enable us to maintain our current operations for at least the next 12 months. We anticipate using our
cash and cash equivalents to fund further research and development with respect to our lead product candidate. We will, however,
need to raise additional funding sooner if our business or operations change in a manner that consumes available resources more
rapidly than we anticipate. Our requirements for additional capital will depend on many factors, including:
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successful commercialization
of our product candidates;
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the time and costs
involved in obtaining regulatory approval for our product candidates;
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costs associated
with protecting our intellectual property rights;
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development of marketing
and sales capabilities;
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payments received
under future collaborative agreements, if any; and
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market acceptance
of our products.
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To
the extent we raise additional capital through the sale of equity securities, the issuance of those securities could result in
dilution to our shareholders. In addition, if we obtain debt financing, a substantial portion of our operating cash flow may be
dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities.
If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development
programs, reduce our commercialization efforts or curtail our operations. In addition, we may be required to obtain funds through
arrangements with collaborative partners or others that may require us to relinquish rights to technologies, product candidates
or products that we would otherwise seek to develop or commercialize ourselves or license rights to technologies, product candidates
or products on terms that are less favorable to us than might otherwise be available.
We
will require substantial additional funds to support our research and development activities, and the anticipated costs of preclinical
and nonclinical testing and clinical studies, regulatory approvals and eventual commercialization. Such additional sources of
financing may not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms,
we may be unable to commence or complete clinical studies or obtain approval of any product candidates from the FDA and other
regulatory authorities. In addition, we could be forced to discontinue product development, forego sales and marketing efforts
and forego attractive business opportunities. Any additional sources of financing will likely involve the issuance of our equity
securities, which will have a dilutive effect on our shareholders.
There
is no assurance that we will be successful in raising the additional funds needed to fund our business plan. If we are not able
to raise sufficient capital in the near future, our continued operations will be in jeopardy and we may be forced to cease operations
and sell or otherwise transfer all or substantially all of our remaining assets.
We
face intense competition in the markets targeted by our product candidates. Many of our competitors have substantially greater
resources than we do, and we expect that all of our product candidates under development will face intense competition from existing
or future drugs.
We
expect that all of our product candidates under development, if approved, will face intense competition from existing and future
drugs marketed by large companies. These competitors may successfully market products that compete with our products, successfully
identify drug candidates or develop products earlier than we do, or develop products that are more effective, have fewer side
effects or cost less than our products.
Additionally,
if a competitor receives FDA approval before we do for a drug that is similar to one of our product candidates, FDA approval for
our product candidate may be precluded or delayed due to periods of non-patent exclusivity and/or the listing with the FDA by
the competitor of patents covering its newly-approved drug product. Periods of non-patent exclusivity for new versions of existing
drugs such as our current product candidates can extend up to three and one-half years.
These
competitive factors could require us to conduct substantial new research and development activities to establish new product targets,
which would be costly and time consuming. These activities would adversely affect our ability to commercialize products and achieve
revenue and profits.
Competition
and technological change may make our product candidates and technologies less attractive or obsolete.
We
compete with established pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications
we are pursuing and that have greater financial and other resources. Other companies may succeed in developing products earlier
than us, obtaining FDA approval for products more rapidly, or developing products that are more effective than our product candidates.
Research and development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments
or cures superior to any therapy we develop. We face competition from companies that internally develop competing technology or
acquire competing technology from universities and other research institutions. As these companies develop their technologies,
they may develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would
result in a decrease in the revenue we would be able to derive from the sale of any products.
There
can be no assurance that any of our product candidates will be accepted by the marketplace as readily as these or other competing
treatments. Furthermore, if our competitors’ products are approved before ours, it could be more difficult for us to obtain
approval from the FDA. Even if our products are successfully developed and approved for use by all governing regulatory bodies,
there can be no assurance that physicians and patients will accept our product(s) as a treatment of choice.
Furthermore,
the pharmaceutical research industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith
are numerous and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations
preclude us from forecasting revenues or income with certainty or even confidence.
If
we fail to protect our intellectual property rights, our ability to pursue the development of our technologies and products would
be negatively affected.
Our
success will depend in part on our ability to obtain patents and maintain adequate protection of our technologies and products.
If we do not adequately protect our intellectual property, competitors may be able to use our technologies to produce and market
drugs using our technologies and patents in direct competition with us and erode our competitive advantage. Some foreign countries
lack rules and methods for defending intellectual property rights and do not protect proprietary rights to the same extent as
the United States. Many companies have had difficulty protecting their proprietary rights in these foreign countries. We may not
be able to prevent misappropriation of our proprietary rights and intellectual property rights in these and other countries.
We
have received, and are currently seeking, patent protection for numerous compounds and methods of treating diseases. However,
the patent process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in
protecting our products by obtaining and defending patents related to them. These risks and uncertainties include the following:
patents that may be issued or licensed may be challenged, invalidated, or circumvented, or otherwise may not provide us any competitive
advantage; our competitors, many of which have substantially greater resources than we and many of which have made significant
investments in competing technologies, may seek, or may already have obtained, patents that will limit, interfere with, or eliminate
our ability to make, use, and sell our potential products either in the United States or in international markets; there may be
significant pressure on the United States government and other international governmental bodies to limit the scope of patent
protection both inside and outside the United States for treatments that prove successful as a matter of public policy regarding
worldwide health concerns; and countries other than the United States may have less robust patent laws than those upheld by United
States courts, allowing foreign competitors the ability to exploit these laws to create, develop, and market competing products
using our technologies and patents.
Moreover,
any patents issued to us may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents.
Third parties may also independently develop products similar to our products, duplicate our unpatented products or design around
any patents or propriety technologies on products we develop. Additionally, extensive time is required for development, testing
and regulatory review of a potential product. While extensions of patent term due to regulatory delays may be available, it is
possible that, before any of our product candidates can be commercialized, any related patent, even with an extension, may expire
or remain in force for only a short period following commercialization, thereby reducing any advantages to us of the patent.
In
addition, the PTO and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical
and/or biotechnology-related inventions be limited or narrowed substantially to cover only the innovations specifically exemplified
in the patent application, thereby limiting the scope of protection against competitive challenges. Thus, even if we or our licensors
are able to obtain patents, the patents may be substantially narrower than anticipated.
Our
success depends on our patents and patent applications that may be licensed exclusively to us and other patents and patent applications
to which we may obtain assignment or licenses. We may not be aware, however, of all patents, published applications or published
literature that may affect our business either by blocking our ability to commercialize our product candidates, by preventing
the patentability of our product candidates to us or our licensors, or by covering the same or similar technologies. These patents,
patent applications, and published literature may limit the scope of our future patent claims or adversely affect our ability
to market our product candidates.
In
addition to patents, we rely on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions,
and security measures to protect our confidential and proprietary information. These measures may not adequately protect our trade
secrets or other proprietary information. If they do not adequately protect our rights, third parties could use our technology,
and we could lose any competitive advantage we may have. In addition, others may independently develop similar proprietary information
or techniques or otherwise gain access to our trade secrets, which could impair any competitive advantage we may have.
Patent
protection and other intellectual property protection is crucial to the success of our business and prospects, and there is a
substantial risk that such protections will prove inadequate.
We
may be involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming.
The
pharmaceutical industry has been characterized by extensive litigation regarding patents and other intellectual property rights,
and companies have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement
claims or litigation arising out of present and future patents and other proceedings of our competitors. The defense and prosecution
of intellectual property suits are costly and time-consuming to pursue, and their outcome is uncertain. Litigation may be necessary
to determine the enforceability, scope, and validity of the proprietary rights of others. An adverse determination in litigation
to which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties,
or restrict or prevent us from selling our products in certain markets. Although patent and intellectual property disputes might
be settled through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could
include our paying large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory
terms or at all.
Competitors
may infringe our patents, and we may file infringement claims to counter infringement or unauthorized use. Third parties may assert
that our patents are invalid and/or unenforceable in these proceedings. Such litigation can be expensive, particularly for a company
of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid
or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents
do not cover its technology. An adverse determination of any litigation or defense proceedings could put one or more of our patents
at risk of being invalidated or interpreted narrowly.
Third
parties may also assert that our patents are invalid in patent office administrative proceedings. These proceedings include oppositions
in the European Patent Office and
inter partes
review and post-grant review proceedings in the PTO. The success rate of
these administrative challenges to patent validity in the United States is higher than it is for validity challenges in litigation.
Interference
or derivation proceedings brought before the PTO may be necessary to determine priority of invention with respect to innovations
disclosed in our patents or patent applications. During these proceedings, it may be determined that we do not have priority of
invention for one or more aspects in our patents or patent applications and could result in the invalidation in part or whole
of a patent or could put a patent application at risk of not issuing. Even if successful, an interference or derivation proceeding
may result in substantial costs and distraction to our management.
Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation or interference or
derivation proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors
perceive these results to be negative, the price of our common stock could be adversely affected.
There
are no unresolved communications, allegations, complaints or threats of litigation related to the possibility that our patents
are invalid or unenforceable. Any litigation or claims against us, whether or not merited, may result in substantial costs, place
a significant strain on our financial resources, divert the attention of management and harm our reputation. An adverse decision
in litigation or administrative proceedings could result in inadequate protection for our product candidates and/or reduce the
value of any license agreements we have with third parties.
If
we infringe the rights of third parties we could be prevented from selling products, forced to pay damages, and defend against
litigation.
If
our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial
costs and we may have to: obtain licenses, which may not be available on commercially reasonable terms, if at all; abandon an
infringing product candidate; redesign our products or processes to avoid infringement; stop using the subject matter claimed
in the patents held by others; pay damages; and/or defend litigation or administrative proceedings which may be costly whether
we win or lose, and which could result in a substantial diversion of our financial and management resources.
If
preclinical and nonclinical testing or clinical studies for our product candidates are unsuccessful or delayed, we will be unable
to meet our anticipated development and commercialization timelines.
We
rely and expect to continue to rely on third parties, including CROs and outside consultants, to conduct, supervise or monitor
some or all aspects of preclinical and nonclinical testing and clinical studies involving our product candidates. We have less
control over the timing and other aspects of these preclinical and nonclinical testing activities and clinical studies than if
we performed the monitoring and supervision entirely on our own. Third parties may not perform their responsibilities for our
preclinical and nonclinical testing and clinical studies on our anticipated schedule or, for clinical studies, consistent with
a clinical study protocol. Delays in preclinical and nonclinical testing, and clinical studies could significantly increase our
product development costs and delay product commercialization. In addition, many of the factors that may cause, or lead to, a
delay in the clinical studies may also ultimately lead to denial of regulatory approval of a product candidate.
The
commencement of clinical studies can be delayed for a variety of reasons, including delays in:
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demonstrating sufficient
safety and efficacy to obtain regulatory approval to commence a clinical study;
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reaching agreement
on acceptable terms with prospective CROs and study sites;
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developing a stable
formulation of a product candidate;
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manufacturing sufficient
quantities of a product candidate; and
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obtaining institutional
review board, or IRB, approval to conduct a clinical study at a prospective site.
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Once
a clinical study has begun, it may be delayed, suspended or terminated by us or the FDA or other regulatory authorities due to
a number of factors, including:
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ongoing discussions
with the FDA or other regulatory authorities regarding the scope or design of our clinical studies;
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failure to conduct
clinical studies in accordance with regulatory requirements;
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lower than anticipated
recruitment or retention rate of patients in clinical studies;
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inspection of the
clinical study operations or study sites by the FDA or other regulatory authorities resulting in the imposition of a clinical
hold;
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lack of adequate
funding to continue clinical studies;
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negative results
of clinical studies;
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investigational
drug product out-of-specification; or
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nonclinical or clinical
safety observations, including adverse events and SAEs.
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If
clinical studies are unsuccessful, and we are not able to obtain regulatory approvals for our product candidates under development,
we will not be able to commercialize these products, and therefore may not be able to generate sufficient revenues to support
our business.
We
rely on third parties to conduct, supervise and monitor our clinical studies, and if those third parties perform in an unsatisfactory
manner, it may harm our business.
We
rely on CROs and clinical study sites to ensure the proper and timely conduct of our clinical studies. While we have agreements
governing their activities, we will have limited influence over their actual performance. We will control only certain aspects
of our CROs’ activities. Nevertheless, we will be responsible for ensuring that our clinical studies are conducted in accordance
with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our
regulatory responsibilities.
We
and our CROs are required to comply with the FDA’s cGCP for conducting, recording and reporting the results of clinical
studies to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality
of clinical study participants are protected. The FDA enforces these cGCPs through periodic inspections of study sponsors, principal
investigators and clinical study sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in
our clinical studies may be deemed unreliable and the FDA may require us to perform additional clinical studies before approving
any marketing applications. Upon inspection, the FDA may determine that our clinical studies did not comply with cGCPs. In addition,
our clinical studies, including our ongoing Phase 3 HONOR study in military-related PTSD, will require a sufficiently large number
of test subjects to evaluate the effectiveness and safety of Tonmya. Accordingly, if our CROs fail to comply with these regulations
or fail to recruit a sufficient number of participants, our clinical studies may be delayed or we may be required to repeat such
clinical studies, which would delay the regulatory approval process.
Our
CROs are not our employees, and we are not able to control whether or not they devote sufficient time and resources to our clinical
studies. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also
be conducting clinical studies, or other drug development activities which could harm our competitive position. If our CROs do
not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy
of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements,
or for any other reasons, our clinical studies may be extended, delayed or terminated, and we may not be able to obtain regulatory
approval for, or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects
for such product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
We
also rely on other third parties to store and distribute drug products for our clinical studies. Any performance failure on the
part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization
of our products, if approved, producing additional losses and depriving us of potential product revenue.
We
have limited experience in completing a Phase 3 clinical study and have never submitted an NDA before, and may be unable to do
so for Tonmya or other product candidates we are developing.
We
initiated a Phase 3 study in military-related PTSD in the first quarter of 2017. As this study is intended to provide efficacy
and safety evidence to support marketing approval by the FDA, it is considered a pivotal, confirmatory or registration, study.
The conduct of pivotal clinical studies and the submission of a successful NDA is a complicated process. Although members of our
management team have extensive industry experience, including in the development, clinical testing and commercialization of drug
candidates, we have conducted only one pivotal clinical study before (the AFFIRM study in fibromyalgia participants), have limited
experience in preparing, submitting and prosecuting regulatory filings, and have not submitted an NDA before. Consequently, we
may be unable to successfully and efficiently execute and complete this planned clinical study in a way that leads to NDA submission
and approval of Tonmya and other product candidates we are developing. We may require more time and incur greater costs than our
competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or
complete, or delays in, our planned clinical studies would prevent or delay commercialization of Tonmya and other product candidates
we are developing.
Our
product candidates may cause SAEs or undesirable side effects which may delay or prevent marketing approval, or, if approval is
received, require them to be taken off the market, require them to include safety warnings or otherwise limit their sales.
SAEs
or undesirable side effects from Tonmya or any of our other product candidates could arise either during clinical development
or, if approved, after the approved product has been marketed. The results of future clinical studies, including Tonmya, may show
that our product candidates cause SAEs or undesirable side effects, which could interrupt, delay or halt clinical studies, resulting
in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities.
If
Tonmya or any of our other product candidates cause SAEs or undesirable side effects or suffer from quality control issues:
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regulatory authorities
may impose a clinical hold or risk evaluation and mitigation strategies, or REMS, which could result in substantial delays,
significantly increase the cost of development, and/or adversely impact our ability to continue development of the product;
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regulatory authorities
may require the addition of statements, specific warnings, or contraindications to the product label, or restrict the product’s
indication to a smaller potential treatment population;
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we may be required
to change the way the product is administered or conduct additional clinical studies;
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we may be required
to implement a risk minimization action plan, which could result in substantial cost increases and have a negative impact
on our ability to commercialize the product;
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we may be required
to limit the participants who can receive the product;
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we may be subject
to limitations on how we promote the product;
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we may, voluntarily
or involuntarily, initiate field alerts for product recall, which may result in shortages;
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sales of the product
may decrease significantly;
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regulatory authorities
may require us to take our approved product off the market;
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we may be subject
to litigation or product liability claims; and
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our reputation may
suffer.
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Any
of these events could prevent us from achieving or maintaining market acceptance of the affected product or could substantially
increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues from
the sale of our products.
If
a competing drug shows efficacy in military-related PTSD prior to the FDA approval of Tonmya or if Tonmya fails to confirm the
results of the AtEase Phase 2 study in showing activity in military-related PTSD in the Phase 3 HONOR study, then the FDA may
rescind the Breakthrough Therapy designation.
In
December 2016, the FDA granted Tonmya for PSTD Breakthrough Therapy designation based on several factors, including that Tonmya
has the potential to be an improvement over existing therapies for military-related PTSD. If another therapy is shown to be effective
in military-related PTSD before FDA approval of Tonmya, then the FDA may rescind the designation. In addition, if Tonmya fails
to confirm the activity from the AtEase study in treating military-related PTSD, then the FDA may rescind the Breakthrough Therapy
designation.
Breakthrough
Therapy designation for Tonmya may not lead to faster development or regulatory processes nor does it increase the likelihood
that Tonmya will receive marketing approval for PTSD.
There
is no guarantee that the receipt of Breakthrough Therapy designation will result in a faster development, review or approval process
for Tonmya for PTSD or increase the likelihood that Tonmya will be granted marketing approval for
PTSD. In some cases, the development program for the Breakthrough Therapy could be shorter than for other drugs intended to treat
the disease being studied. However, the FDA notes that a compressed drug development program still must generate adequate data
to demonstrate that the drug is safe, effective and meets the statutory standard for approval. Breakthrough Therapy designation
does not change the standards for approval. If a clinical development program granted Breakthrough Therapy designation does not
continue to meet the criteria, the FDA may rescind the designation.
Likewise,
any future Breakthrough Therapy designation for any other potential indication of TNX-102 SL neither guarantees a faster development
process, review or approval nor improves the likelihood of the granting of marketing approval by the FDA for any such potential
indication of TNX-102 SL compared to drugs considered for approval under conventional FDA procedures. We may seek a Breakthrough
Therapy designation for other of our product candidates, but the FDA may not grant this status to any of our proposed product
candidates.
If
we are unable to file for approval of Tonmya under Section 505(b)(2) of the FDCA or if we are required to generate additional
data related to safety and efficacy in order to obtain approval under Section 505(b)(2), we may be unable to meet our anticipated
development and commercialization timelines.
Our
current plans for filing NDAs for our product candidates include efforts to minimize the data we will be required to generate
in order to obtain marketing approval for our product candidates and therefore reduce the development time. We held a pre-IND
meeting with the FDA in October 2012 to discuss the development of Tonmya in PTSD. Following the results of the AtEase Study,
we held an End-of-Phase 2/Pre-Phase 3 meeting with the FDA in August 2016 to discuss our most advanced development program, in
which we are developing Tonmya for the treatment of PTSD. In March 2017, we had our initial Cross-disciplinary Breakthrough Therapy
meeting with the FDA to discuss ways to expedite the development and NDA submission of Tonmya. Although our interactions with
the FDA have encouraged our efforts to continue to develop Tonmya for PTSD, there is no assurance that we will satisfy the FDA’s
requirements for approval in this indication. The timeline for filing and review of our NDA for Tonmya for PTSD is based on our
plan to submit this NDA under Section 505(b)(2) of the FDCA, which would enable us to rely in part on data in the public domain
or elsewhere. We have not yet filed an NDA under Section 505(b)(2) for any of our product candidates. Depending on the data that
may be required by the FDA for approval, some of the data may be related to products already approved by the FDA. If the data
relied upon is related to products already approved by the FDA and covered by third-party patents we would be required to certify
that we do not infringe the listed patents or that such patents are invalid or unenforceable. As a result of the certification,
the third-party would have 45 days from notification of our certification to initiate an action against us. In the event that
an action is brought in response to such a certification, the approval of our NDA could be subject to a stay of up to 30 months
or more while we defend against such a suit. Approval of our product candidates under Section 505(b)(2) may therefore be delayed
until patent exclusivity expires or until we successfully challenge the applicability of those patents to our product candidates.
Alternatively, we may elect to generate sufficient additional clinical data so that we no longer rely on data which triggers a
potential stay of the approval of our product candidates. Even if no exclusivity periods apply to our applications under Section
505(b)(2), the FDA has broad discretion to require us to generate additional data on the safety and efficacy of our product candidates
to supplement third-party data on which we may be permitted to rely. In either event, we could be required, before obtaining marketing
approval for any of our product candidates, to conduct substantial new research and development activities beyond those we currently
plan to engage in order to obtain approval of our product candidates. Such additional new research and development activities
would be costly and time consuming.
We
may not be able to realize a shortened development timeline for Tonmya for PTSD, and the FDA may not approve our NDA based on
their review of the submitted data. If CBP-containing products are withdrawn from the market by the FDA for any safety reason,
we may not be able to reference such products to support a 505(b)(2) NDA for Tonmya, and we may need to fulfill the more extensive
requirements of Section 505(b)(1). If we are required to generate additional data to support approval, we may be unable to meet
our anticipated development and commercialization timelines, may be unable to generate the additional data at a reasonable cost,
or at all, and may be unable to obtain marketing approval of our lead product candidate.
We
will need to expand our operations and increase the size of our company, and we may experience difficulties in managing growth.
As
we advance our product candidates through preclinical and nonclinical testing and clinical studies, and develop new product candidates,
we will need to increase our product development, scientific, regulatory and compliance and administrative headcount to manage
these programs. In addition, to meet our obligations as a public company, we will need to increase our general and administrative
capabilities. Our management, personnel and systems currently in place may not be adequate to support this future growth. Our
need to effectively manage our operations, growth and various projects requires that we:
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successfully attract
and recruit new employees with the expertise and experience we will require;
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manage our clinical
programs effectively, which we anticipate being conducted at numerous clinical sites;
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develop a marketing,
distribution and sales infrastructure in addition to a post-marketing surveillance program if we seek to market our products
directly; and
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continue to improve
our operational, manufacturing, quality assurance, financial and management controls, reporting systems and procedures.
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If
we are unable to successfully manage this growth and increased complexity of operations, our business may be adversely affected.
Our
executive officers and other key personnel are critical to our business, and our future success depends on our ability to retain
them.
Our
success depends to a significant extent upon the continued services of Dr. Seth Lederman, our President and Chief Executive Officer
and Dr. Gregory M. Sullivan, our Chief Medical Officer. Dr. Lederman has overseen Tonix Pharmaceuticals, Inc., a wholly-owned
subsidiary, since inception and provides leadership for our growth and operations strategy as well as being an inventor on many
of our patents. Dr. Sullivan has served as our Chief Medical Officer since 2014 and directed the Phase 2 AtEase study and is directing
the Phase 3 HONOR study. Loss of the services of Drs. Lederman or Sullivan would have a material adverse effect on our growth,
revenues, and prospective business. The loss of any of our key personnel, or the inability to attract and retain qualified personnel,
may significantly delay or prevent the achievement of our research, development or business objectives and could materially adversely
affect our business, financial condition and results of operations.
Any
employment agreement we enter into will not ensure the retention of the employee who is a party to the agreement. In addition,
we have only limited ability to prevent former employees from competing with us. Furthermore, our future success will also depend
in part on the continued service of our key scientific and management personnel and our ability to identify, hire, and retain
additional personnel. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel
necessary for the development of our business. Moreover, competition for personnel with the scientific and technical skills that
we seek is extremely high and is likely to remain high. Because of this competition, our compensation costs may increase significantly.
If
we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.
Over
time we will need to hire additional qualified personnel with expertise in drug development, product registration, clinical, preclinical
and nonclinical research, quality compliance, government regulation, formulation and manufacturing, financial matters and sales
and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research
institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be
successful. Attracting and retaining qualified personnel will be critical to our success.
We
rely on third parties to manufacture the compounds used in our studies, and we intend to rely on them for the manufacture of any
approved products for commercial sale. If these third parties do not manufacture our product candidates in sufficient quantities
and at an acceptable cost, clinical development and commercialization of our product candidates could be delayed, prevented or
impaired.
We
have no manufacturing facilities, and we have no experience in the clinical or commercial-scale manufacture of drugs or in designing
drug manufacturing processes. We intend to rely on CMOs to manufacture some or all of our product candidates in clinical studies
and our products that reach commercialization. Completion of our clinical studies and commercialization of our product candidates
requires the manufacture of a sufficient supply of our product candidates. We have contracted with outside sources to manufacture
our development compounds, including Tonmya. If, for any reason, we become unable to rely on our current sources for the manufacture
of our product candidates, either for clinical studies or, at some future date, for commercial quantities, then we would need
to identify and contract with additional or replacement third-party manufacturers to manufacture compounds for nonclinical, preclinical,
clinical, and commercial purposes. Although we are in discussions with other manufacturers we have identified as potential alternative
CMOs of Tonmya, we may not be successful in negotiating acceptable terms with any of them.
We
believe that there are a variety of manufacturers that we may be able to retain to produce these products. However, once we retain
a manufacturing source, if our manufacturers do not perform in a satisfactory manner, we may not be able to develop or commercialize
potential products as planned. Certain specialized manufacturers are expected to provide us with modified and unmodified pharmaceutical
compounds, including finished products, for use in our preclinical and nonclinical testing and clinical studies. Some of these
materials are available from only one supplier or vendor. Any interruption in or termination of service by such sole source suppliers
could result in a delay or interruption in manufacturing until we locate an alternative source of supply. Any delay or interruption
in manufacturing operations (or failure to locate a suitable replacement for such suppliers) could materially adversely affect
our business, prospects, or results of operations. We do not have any short-term or long-term manufacturing agreements with many
of these manufacturers. If we fail to contract for manufacturing on acceptable terms or if third-party manufacturers do not perform
as we expect, our development programs could be materially adversely affected. This may result in delays in filing for and receiving
FDA approval for one or more of our products. Any such delays could cause our prospects to suffer significantly.
Failure
by our third-party manufacturers to comply with the regulatory guidelines set forth by the FDA with respect to our product candidates
could delay or prevent the completion of clinical studies, the approval of any product candidates or the commercialization of
our products.
Such
third-party manufacturers must be inspected by FDA for cGMP compliance before they can produce commercial product. We may be in
competition with other companies for access to these manufacturers’ facilities and may be subject to delays in manufacture
if the manufacturers give other clients higher priority than they give to us. If we are unable to secure and maintain third-party
manufacturing capacity, the development and sales of our products and our financial performance may be materially affected.
Manufacturers
are obligated to operate in accordance with FDA-mandated requirements. A failure of any of our third-party manufacturers to establish
and follow cGMP requirements and to document their adherence to such practices may lead to significant delays in the availability
of material for clinical studies, may delay or prevent filing or approval of marketing applications for our products, and may
cause delays or interruptions in the availability of our products for commercial distribution following FDA approval. This could
result in higher costs to us or deprive us of potential product revenues.
Complying
with cGMP and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping,
and quality control to assure that the product meets applicable specifications and other requirements. We, or our contracted manufacturing
facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly
delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action
and may be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition,
and results of operations may be materially harmed.
Drug
manufacturers are subject to ongoing periodic unannounced inspections by the FDA, the Drug Enforcement Administration, or DEA,
and corresponding state and foreign agencies to ensure strict compliance with cGMP requirements and other requirements under Federal
drug laws, other government regulations and corresponding foreign standards. If we or our third-party manufacturers fail to comply
with applicable regulations, sanctions could be imposed on us, including fines, injunctions, civil penalties, failure by the government
to grant marketing approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating
restrictions and criminal prosecutions.
Corporate
and academic collaborators may take actions to delay, prevent, or undermine the success of our products.
Our
operating and financial strategy for the development, clinical testing, manufacture, and commercialization of drug candidates
is heavily dependent on our entering into collaborations with corporations, academic institutions, licensors, licensees, and other
parties. Our current strategy assumes that we will successfully establish these collaborations, or similar relationships; however,
there can be no assurance that we will be successful establishing such collaborations. Some of our existing collaborations are,
and future collaborations may be, terminable at the sole discretion of the collaborator. Replacement collaborators might not be
available on attractive terms, or at all. The activities of any collaborator will not be within our control and may not be within
our power to influence. There can be no assurance that any collaborator will perform its obligations to our satisfaction or at
all, that we will derive any revenue or profits from such collaborations, or that any collaborator will not compete with us. If
any collaboration is not pursued, we may require substantially greater capital to undertake development and marketing of our proposed
products and may not be able to develop and market such products effectively,
if at all. In addition, a lack of development and marketing collaborations may lead to significant delays in introducing proposed
products into certain markets and/or reduced sales of proposed products in such markets.
Data
provided by collaborators and others upon which we rely that has not been independently verified could turn out to be false, misleading,
or incomplete.
We
rely on third-party vendors, scientists, and collaborators to provide us with significant data and other information related to
our projects, clinical studies, and our business. If such third parties provide inaccurate, misleading, or incomplete data, our
business, prospects, and results of operations could be materially adversely affected.
Our
product candidates are novel and still in development.
We
are a clinical-stage pharmaceutical company focused on the development of drug product candidates, all of which are still in development.
Our drug development methods may not lead to commercially viable drugs for any of several reasons. For example, we may fail to
identify appropriate targets or compounds, our drug candidates may fail to be safe and effective in clinical studies, or we may
have inadequate financial or other resources to pursue development efforts for our drug candidates. Our drug candidates will require
significant additional development, clinical studies, regulatory clearances and additional investment by us or our collaborators
before they can be commercialized.
Successful
development of our products is uncertain.
Our
development of current and future product candidates is subject to the risks of failure and delay inherent in the development
of new pharmaceutical products, including: delays in product development, clinical testing, or manufacturing; unplanned expenditures
in product development, clinical testing, or manufacturing; failure to receive regulatory approvals; emergence of superior or
equivalent products; inability to manufacture on its own, or through any others, product candidates on a commercial scale; and
failure to achieve market acceptance.
Because
of these risks, our research and development efforts may not result in any commercially viable products. If a significant portion
of these development efforts are not successfully completed, required regulatory approvals are not obtained or any approved products
are not commercially successfully, our business, financial condition, and results of operations may be materially harmed.
Clinical
studies required for our product candidates are expensive and time-consuming, and their outcome is uncertain.
In
order to obtain FDA approval to market a new drug product, we must demonstrate proof of safety and effectiveness in humans. To
meet these requirements, we must conduct “adequate and well controlled” clinical studies. Conducting clinical studies
is a lengthy, time-consuming, and expensive process. The length of time may vary substantially according to the type, complexity,
novelty, and intended use of the product candidate, and often can be several years or more per study. Delays associated with products
for which we are directly conducting clinical studies may cause us to incur additional operating expenses. The commencement and
rate of completion of clinical studies may be delayed by many factors, including, for example: inability to manufacture sufficient
quantities of stable and qualified materials under cGMP, for use in clinical studies; slower than expected rates of patient recruitment;
failure to recruit a sufficient number of patients; modification of clinical study protocols; changes in regulatory requirements
for clinical studies; the lack of effectiveness during clinical studies; the emergence of unforeseen safety issues; delays, suspension,
or termination of the clinical studies due to the ITB responsible for overseeing the study at a particular study site; and government
or regulatory delays or “clinical holds” requiring suspension or termination of the studies.
The
results from early clinical studies are not necessarily predictive of results obtained in later clinical studies. Accordingly,
even if we obtain positive results from early clinical studies, we may not be able to confirm the results in future clinical studies.
For example, in our Phase 3 AFFIRM trial in fibromyalgia, we were not able replicate the results we received from our Phase 2b
BESTFIT trial. Clinical studies may not demonstrate sufficient safety and effectiveness to obtain the requisite regulatory approvals
for product candidates.
Our
clinical studies may be conducted in patients with CNS conditions, and in some cases, our product candidates are expected to be
used in combination with approved therapies that themselves have significant adverse event profiles. During the course of treatment,
these patients could suffer adverse medical events or die for reasons that may or may not be related to our product candidates.
We cannot ensure that safety issues will not arise with respect to our product candidates in clinical development.
The
failure of clinical studies to demonstrate safety and effectiveness for the desired indications could harm the development of
that product candidate and other product candidates. This failure could cause us to abandon a product candidate and could delay
development of other product candidates. Any delay in, or termination of, our clinical studies would delay the filing of our NDAs
with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues. Any change in,
or termination of, our clinical studies could materially harm our business, financial condition, and results of operations.
We
are subject to extensive and costly government regulation.
Product
candidates employing our technology are subject to extensive and rigorous domestic government regulation including regulation
by the FDA, the Centers for Medicare and Medicaid Services, other divisions of the United States Department of Health and Human
Services, the United States Department of Justice, state and local governments, and their respective foreign equivalents. The
FDA regulates the research, development, preclinical and nonclinical testing and clinical studies, manufacture, safety, effectiveness,
record-keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import, and export of biopharmaceutical
products. The FDA regulates small molecule chemical entities as drugs, subject to an NDA under the FDCA. The FDA applies the same
standards for biologics, requiring an IND application, followed by a Biologic License Application, or BLA, prior to licensure.
Other products, such as vaccines, are also regulated under the Public Health Service Act. FDA has conflated the standards for
approval of NDAs and BLAs so that they require the same types of information on safety, effectiveness, and CMCs. If products employing
our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not
they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than
corresponding United States regulation.
Government
regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling our products. The
regulatory review and approval process, which includes preclinical and nonclinical testing and clinical studies of each product
candidate, is lengthy, expensive, and uncertain. We or our collaborators must obtain and maintain regulatory authorization to
conduct clinical studies. We or our collaborators must obtain regulatory approval for each product we intend to market, and the
manufacturing facilities used for the products must be inspected and meet legal requirements. Securing regulatory approval requires
the submission of extensive preclinical, nonclinical and clinical data and other supporting information for each proposed therapeutic
indication in order to establish the product’s safety and efficacy, and in the case of biologics also potency and purity,
for each intended use. The development and approval process takes many years, requires substantial resources, and may never lead
to the approval of a product.
Even
if we are able to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the
product, may otherwise limit our ability to promote, sell, and distribute the product, may require that we conduct costly post-marketing
surveillance, and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such
as, for example, manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained,
any approvals may be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the
product, such as a previously unknown safety issue.
If
we, our collaborators, or our CMOs fail to comply with applicable regulatory requirements at any stage during the regulatory process,
such noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications;
refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved
applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial
suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations
by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.
We
do not have, and may never obtain, the regulatory approvals we need to market our product candidates.
Following
completion of clinical studies, the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an
NDA or BLA in order to obtain FDA approval of the product and authorization to commence commercial marketing. In responding to
an NDA, the FDA may require additional testing or information, may require that the product labeling be modified, may impose post-approval
study and other commitments or reporting requirements or other restrictions on product distribution, or may deny the application.
The FDA has established performance goals for review of NDAs or BLAs: six months for priority applications and ten months for
standard applications. However, the FDA is not required to complete its review within these time periods. The timing of final
FDA review and action varies greatly, but can take years in some cases and may involve the input of an FDA advisory committee
of outside experts. Product sales in the United States may commence only when an NDA or BLA is approved.
To
date, we have not applied for or received the regulatory approvals required for the commercial sale of any of our products in
the United States or in any foreign jurisdiction. None of our product candidates have been determined to be safe and effective,
and we have not submitted an NDA or BLA to the FDA or an equivalent application to any foreign regulatory authorities for any
of our product candidates.
It
is possible that none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays
in obtaining regulatory approvals, may adversely affect the successful commercialization of any drugs or biologics that we or
our partners develop, may impose additional costs on us or our collaborators, may diminish any competitive advantages that we
or our partners may attain, and/or may adversely affect our receipt of revenues or royalties.
Our
product candidates may face competition sooner than expected.
We
intend to seek data exclusivity or market exclusivity for our product candidates provided under the FDCA and similar laws in other
countries. We believe that TNX-801 could qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation
Act of 2009, or BPCIA, which was enacted as part of the Patient Protection and Affordable Care Act. Under the BPCIA, an application
for a biosimilar product or BLA cannot be submitted to the FDA until four years, or if approved by the FDA, until 12 years, after
the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway
for the approval of biosimilar and interchangeable biological products. The new abbreviated regulatory pathway establishes legal
authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable”
based on its similarity to an existing brand product. The new law is complex and is only beginning to be interpreted and implemented
by the FDA. While it is uncertain when any such processes may be fully adopted by the FDA, any such processes could have a material
adverse effect on the future commercial prospects for any of our product candidates that are biologics. There is also a risk that
President Trump’s administration could repeal or amend the BPCIA to shorten this exclusivity period, potentially creating
the opportunity for biosimilar competition sooner than anticipated after the expiration of our patent protection. Although there
is no current discussion of repeal or modification of the BPCIA, the future remains uncertain. Moreover, the extent to which a
biosimilar, once approved, will be substituted for any reference product in a way that is similar to traditional generic substitution
for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still
developing.
Our
product candidates that are not, or are not considered, biologics that would qualify for exclusivity under the BPCIA may be eligible
for market exclusivity as drugs under the FDCA. The FDCA provides a five-year period of non-patent marketing exclusivity within
the U.S. to the first applicant to gain approval of an NDA for an NCE. A drug is an NCE if the FDA has not previously approved
any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.
During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2)
NDA, submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference
to all the data required for approval. However, an application may be submitted after four years if it contains a certification
of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA
or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored
by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages,
or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations
and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.
Even
if, as we expect, our product candidates are considered to be reference products eligible for 12 years of exclusivity under the
BPCIA or five years of exclusivity under the FDCA, another company could market competing products if the FDA approves a full
BLA or full NDA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled
clinical trials to demonstrate the safety, purity and potency of the products. Moreover, an amendment or repeal of the BPCIA could
result in a shorter exclusivity period for our product candidates, which could have a material adverse effect on our business.
Even if approved, our products will
be subject to extensive post-approval regulation.
Once a product is approved,
numerous post-approval requirements apply. Among other things, the holder of an approved NDA is subject to periodic and other FDA
monitoring and reporting obligations, including obligations to monitor and report adverse events and instances of the failure of
a product to meet the specifications in the NDA. Application holders must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also
submit advertising and other promotional material to the FDA and report on ongoing clinical studies.
Depending on the circumstances,
failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products,
total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter
into supply contracts, including government contracts. In addition, even if we comply with FDA and other requirements, new information
regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw product approval.
Even if we obtain regulatory approval
to market our product candidates, our product candidates may not be accepted by the market.
Even if the FDA approves
one or more of our product candidates, physicians and patients may not accept it or use it. Even if physicians and patients would
like to use our products, our products may not gain market acceptance among healthcare payors such as managed care formularies,
insurance companies or government programs such as Medicare or Medicaid. Acceptance and use of our products will depend upon a
number of factors including: perceptions by members of the health care community, including physicians, about the safety and effectiveness
of our drug or device product; cost-effectiveness of our product relative to competing products; availability of reimbursement
for our product from government or other healthcare payors; and effectiveness of marketing and distribution efforts by us and our
licensees and distributors, if any.
The degree of market
acceptance of any pharmaceutical product that we develop will depend on a number of factors, including:
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the safety and effectiveness of our products, including any significant potential side effects (including drowsiness and dry mouth), as compared to alternative products or treatment methods;
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the timing of market entry as compared to competitive products;
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the rate of adoption of our products by doctors and nurses;
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product labeling or product insert required by the FDA for each of our products;
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reimbursement policies of government and third-party payors;
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effectiveness of our sales, marketing and distribution capabilities and the effectiveness of such capabilities of our collaborative partners, if any; and
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unfavorable publicity concerning our products or any similar products.
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Our product candidates,
if successfully developed, will compete with a number of products manufactured and marketed by major pharmaceutical companies,
biotechnology companies and manufacturers of generic drugs. Our products may also compete with new products currently under development
by others. Physicians, patients, third-party payors and the medical community may not accept and utilize any of our product candidates.
If our products do not achieve market acceptance, we will not be able to generate significant revenues or become profitable.
Because we expect sales
of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future,
the failure of these products to find market acceptance would harm our business and could require us to seek additional financing.
If we fail to establish marketing,
sales and distribution capabilities, or fail to enter into arrangements with third parties, we will not be able to create a market
for our product candidates.
Our strategy with our
product candidates is to control, directly or through contracted third parties, all or most aspects of the product development
process, including marketing, sales and distribution. Currently, we do not have any sales, marketing or distribution capabilities.
In order to generate sales of any product candidates that receive regulatory approval, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third
parties to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require
substantial resources, which may divert the attention of our management and key personnel and defer our product development efforts.
To the extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts
of others. These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into
arrangements with third parties, we will experience delays in product sales and incur increased costs.
Sales of pharmaceutical
products largely depend on the reimbursement of patients’ medical expenses by government health care programs and private
health insurers. Without the financial support of the government or third-party payors, the market for our products will be limited.
These third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.
Recent proposals to change the health care system in the United States have included measures that would limit or eliminate payments
for medical products and services or subject the pricing of medical treatment products to government control. Significant uncertainty
exists as to the reimbursement status of newly approved health care products. Third-party payors may not reimburse sales of our
products or enable our collaborators to sell them at profitable prices.
Our business strategy
might involve out-licensing product candidates to or collaborating with larger firms with experience in marketing and selling pharmaceutical
products. There can be no assurance that we will be able to successfully establish marketing, sales, or distribution relationships;
that such relationships, if established, will be successful; or that we will be successful in gaining market acceptance for our
products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues
will be lower than if we marketed and sold our products directly, and any revenues we receive will depend upon the efforts of such
third-parties. If we are unable to establish such third-party sales and marketing relationships, or choose not to do so, we will
have to establish and rely on our own in-house capabilities.
We, as a company, have
no experience in marketing or selling pharmaceutical products and currently have no sales, marketing, or distribution infrastructure.
To market any of our products directly, we would need to develop a marketing, sales, and distribution force that both has technical
expertise and the ability to support a distribution capability. The establishment of a marketing, sales, and distribution capability
would significantly increase our costs, possibly requiring substantial additional capital. In addition, there is intense competition
for proficient sales and marketing personnel, and we may not be able to attract individuals who have the qualifications necessary
to market, sell, and distribute our products. There can be no assurance that we will be able to establish internal marketing, sales,
or distribution capabilities. If we are unable to, or choose not to establish these capabilities, or if the capabilities we establish
are not sufficient to meet our needs, we will be required to establish collaborative marketing, sales, or distribution relationships
with third parties.
In the event that we are successful
in bringing any products to market, our revenues may be adversely affected if we fail to obtain acceptable prices or adequate reimbursement
for our products from third-party payors.
Our ability to commercialize
pharmaceutical products successfully may depend in part on the availability of reimbursement for our products from:
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government and health administration authorities;
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private health insurers; and
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other third party payors, including Medicare and Medicaid.
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We cannot predict the
availability of reimbursement for health care products to be approved in the future. Third-party payors, including Medicare and
Medicaid, are challenging the prices charged for medical products and services. Government and other third-party payors increasingly
are limiting both coverage and the level of reimbursement for new drugs whether approved under Section 505(b)(1), 505(b)(2), or
505(j) of the FDCA, through direct payment mechanisms and through cost containment programs such as the Medicaid Drug Rebate Program.
Third-party insurance coverage may not be available to patients for any of our products.
The continuing efforts
of government and third-party payors to contain or reduce the costs of health care may limit our commercial opportunity. If government
and other third-party payors do not provide adequate coverage and reimbursement for any prescription product we bring to market,
doctors may not prescribe them or patients may ask to have their physicians prescribe competing drugs with more favorable reimbursement.
In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United
States, we expect that there will continue to be federal and state proposals for similar controls. In addition, we expect that
increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products.
Cost control initiatives could decrease the price that we receive for any products in the future. Further, cost control initiatives
could impair our ability to commercialize our products and our ability to earn revenues from this commercialization.
If we obtain approval to commercialize
any approved products outside of the United States, a variety of risks associated with international operations could materially
adversely affect our business.
If Tonmya or any of
our other product candidates are approved for commercialization outside of the United States, we intend to enter into agreements
with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we will be subject
to additional risks related to entering into international business relationships, including:
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different regulatory requirements for drug approvals;
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reduced protection for intellectual property rights, including trade secret and patent rights;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, hurricanes, floods and fires; and
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difficulty in importing and exporting clinical study materials and study samples.
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We face the risk of product liability
claims and may not be able to obtain insurance.
Our business exposes
us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our
collaborators’ drugs harms people, we may be subject to costly and damaging product liability claims brought against us by
clinical study participants, consumers, health care providers, pharmaceutical companies or others selling our products. Our inability
to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could
prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators. While we currently
carry clinical study insurance and product liability insurance, we cannot predict all of the possible harms or side effects that
may result and, therefore, the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities
we might incur. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval
for our drug candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for
any products approved for marketing. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential
product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business
and financial position. If we are sued for any injury allegedly caused by our or our collaborators’ products, our liability
could exceed our total assets and our ability to pay the liability. A product liability claim or series of claims brought against
us would decrease our cash and could cause our stock price to fall.
We use hazardous chemicals in our
business. Potential claims relating to improper handling, storage or disposal of these chemicals could affect us and be time consuming
and costly.
Our research and development
processes and/or those of our third party contractors may involve the controlled use of hazardous materials and chemicals. These
hazardous chemicals are reagents and solvents typically found in a chemistry laboratory. Our operations also produce hazardous
waste products. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous
materials. While we attempt to comply with all environmental laws and regulations, including those relating to the outsourcing
of the disposal of all hazardous chemicals and waste products, we cannot eliminate the risk of contamination from or discharge
of hazardous materials and any resultant injury. In the event of such an accident, we could be held liable for any resulting damages
and any liability could materially adversely affect our business, financial condition and results of operations.
Compliance with environmental
laws and regulations may be expensive. Current or future environmental regulations may impair our research, development or production
efforts. We might have to pay civil damages in the event of an improper or unauthorized release of, or exposure of individuals
to, hazardous materials. We are not insured against these environmental risks.
If we enter into collaborations
with third parties, they might also work with hazardous materials in connection with our collaborations. We may agree to indemnify
our collaborators in some circumstances against damages and other liabilities arising out of development activities or products
produced in connection with these collaborations.
In addition, the federal,
state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive
materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business,
financial condition and results of operations.
Our insurance policies are expensive
and protect us only from some business risks, which will leave us exposed to significant uninsured liabilities.
We carry insurance
for most categories of risk that our business may encounter, however, we may not have adequate levels of coverage. We currently
maintain general liability, clinical study, property, workers’ compensation, products liability and directors’ and
officers’ insurance, along with an umbrella policy, which collectively costs approximately $600,000 per annum. We cannot
provide any assurances that we will be able to maintain existing insurance at current or adequate levels of coverage. Any significant
uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.
If we retain collaborative partners
and our partners do not satisfy their obligations, we will be unable to develop our partnered product candidates.
In the event we enter
into any collaborative agreements, we may not have day-to-day control over the activities of our collaborative partners with respect
to any of these product candidates. Any collaborative partner may not fulfill its obligations under these agreements. If a collaborative
partner fails to fulfill its obligations under an agreement with us, we may be unable to assume the development of the products
covered by that agreement or enter into alternative arrangements with a third party. In addition, we may encounter delays in the
commercialization of the product candidate that is the subject of the agreement. Accordingly, our ability to receive any revenue
from the product candidates covered by these agreements will be dependent on the efforts of our collaborative partner. We could
also become involved in disputes with a collaborative partner, which could lead to delays in or termination of our development
and commercialization programs and time-consuming and expensive litigation or arbitration. In addition, any such dispute could
diminish our collaborators’ commitment to us and reduce the resources they devote to developing and commercializing our products.
Conflicts or disputes with our collaborators, and competition from them, could harm our relationships with our other collaborators,
restrict our ability to enter future collaboration agreements and delay the research, development or commercialization of our product
candidates. If any collaborative partner terminates or breaches its agreement, or otherwise fails to complete its obligations in
a timely manner, our chances of successfully developing or commercializing these product candidates would be materially and adversely
affected. We may not be able to enter into collaborative agreements with partners on terms favorable to us, or at all. Our inability
to enter into collaborative arrangements with collaborative partners, or our failure to maintain such arrangements, would limit
the number of product candidates that we could develop and ultimately, decrease our sources of any future revenues.
We may be unsuccessful in obtaining
a priority voucher for material threat medical countermeasures.
In 2016, the 21st Century
Cures Act, or the Act, was signed into law to support ongoing biomedical innovation. One part of the Act, Section 3086, is aimed
at “Encouraging Treatments for Agents that Present a National Security Threat.” The Act created a new priority review
voucher program for “material threat medical countermeasures.” The Act defines such countermeasures as drugs or vaccines
intended to treat biological, chemical, radiological, or nuclear agents that present a national security threat or to treat harm
from a condition that may be caused by administering a drug or biological product against such an agent. The Department of Homeland
Security has identified 13 such threats, including anthrax, smallpox, Ebola/Marburg, tularemia, and botulism. A priority review
voucher can be applied to any other product; it shortens the FDA review timeline for a new application from 10 months to 6 months.
The recipient of a priority review voucher may transfer it.
We intend to seek a
priority voucher for TNX-801 as a material threat medical countermeasure. However, the structure of voucher programs limits the
number of medical countermeasures eligible for a priority review voucher. Further, the medical countermeasure must qualify for
priority review in order to be eligible and may not include any commercially approved indication. As such, the market for the TNX-801
will be limited if we are successful in obtaining a priority voucher.
There may not be market interest
in TNX-801.
The government is the
only market for most medical countermeasures. This is because unlike other drugs and vaccines, these products are not sold to doctors,
hospitals, or pharmacies. The BioShield Special Reserve Fund, or SRF, has been the sole medical countermeasures market for the
last decade; a 10 year advance appropriation of $5.6 billion was available to procure successful candidate medical countermeasures.
The SRF expired in 2013 and all funds were used to add 12 new medical countermeasures to the national stockpile. Congress reauthorized
the SRF but adequate funding has not yet followed; the SRF is now appropriated annually and has not kept pace with the need for
purchasing products ready for stockpiling. Further, similar products are being developed by other companies, such as Bavarian Nordic,
which is developing Modified Virus Ankara, or MVA, which may compete with TNX-801. As such, even if TNX-801 were to receive FDA
approval, the commercial success of TNX-801 remains uncertain.
If technology developed for the purposes
of developing new medicines or vaccines can be applied to the creation or development of biological weapons, then our technology
may be considered “dual use” technology and be subject to limitations on public disclosure or export.
Together with the University
of Alberta, we are consulting with government authorities before publishing work that describes the synthesis of poxviruses, including
TNX-801. Our research collaboration is dedicated not only to creating tools that better protect public health but also to safeguarding
any information with broad, dual-use potential that could be inappropriately applied. “Dual use research” is research
conducted for legitimate purposes that generates knowledge, information, technologies, and/or products that can be reasonably anticipated
to provide knowledge, information, products, or technologies that could be directly misapplied to pose a significant threat to
public health, agricultural crops, or national security. Because variola, the agent that causes smallpox, is a pox virus, the technology
we created could be considered dual use and could be subject to export control, for example under the Wassenaar Arrangement. Further,
if federal authorities determine that our research is subject to institutional oversight, we will need to implement a risk-management
plan developed in collaboration with the institutional review entity. Failure to comply with the plan may result in suspension,
limitation, or termination of federal funding or loss of future federal funding opportunities for any of our or the University
of Alberta’s research.
We face risks in connection with
existing and future collaborations with respect to the development, manufacture, and commercialization of our product candidates.
We face a number of
risks in connection with our current collaborations, including the University of Alberta. Our collaboration agreements are subject
to termination under various circumstances. Our collaborators may change the focus of their development and commercialization efforts
or may have insufficient resources to effectively assist in the development of our products. Any future collaboration agreements
may have the effect of limiting the areas of research and development that we may pursue, either alone or in collaboration with
third parties. Further, disagreements with collaborators, including disagreements over proprietary rights, contract interpretation,
or the preferred course of development, might cause delays, might result in litigation or arbitration, or might result in termination
of the research, development or commercialization of our products. Any such disagreements would divert management attention and
resources and be time-consuming and costly.
We face risks in connection with
the production and storage of the TNX-801 vaccine.
The TNX-801 vaccine
candidate is a live form of HPXV. We have initiated vaccine-manufacturing activities to support further nonclinical testing of
TNX-801. While it is potentially safer and possibly better tolerated than existing smallpox-preventing vaccines, the production
and storage of the synthesized HPXV virus stock may carry risk of infection and harm to individuals. HPXV, an equine disease caused
by a virus and characterized by eruptions in the mouth and on the skin, is believed to be eradicated. No true HPXV outbreaks have
been reported since 1976, at which time the United States Department of Agriculture obtained the viral sample used for the sequence
published in 2006 that allowed the synthesis of TNX-801.
RISKS RELATED TO OUR STOCK
Sales of
additional shares of our common stock could cause the price of our common stock to decline.
Sales
of substantial amounts of our common stock in the public market, or the availability of such shares for sale, by us or others,
including the issuance of common stock upon exercise of outstanding options and warrants, could adversely affect the price of our
common stock. We and our directors and officers may sell shares into the market, which could adversely affect the market price
of shares of our common stock.
The market price for our common stock
may be volatile, and your investment in our common stock could decline in value.
The stock market in
general has experienced extreme price and volume fluctuations. The market prices of the securities of biotechnology and specialty
pharmaceutical companies, particularly companies like ours without product revenues and earnings, have been highly volatile and
may continue to be highly volatile in the future. This volatility has often been unrelated to the operating performance of particular
companies. The following factors, in addition to other risk factors described in this section, may have a significant impact on
the market price of our common stock:
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announcements of technological innovations or new products by us or our competitors;
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announcement of FDA approval or disapproval of our product candidates or other product-related actions;
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developments involving our discovery efforts and clinical studies;
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developments or disputes concerning patents or proprietary rights, including announcements of infringement, interference or other litigation against us or our potential licensees;
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developments involving our efforts to commercialize our products, including developments impacting the timing of commercialization;
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announcements concerning our competitors, or the biotechnology, pharmaceutical or drug delivery industry in general;
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public concerns as to the safety or efficacy of our product candidates or our competitors’ products;
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changes in government regulation of the pharmaceutical or medical industry;
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changes in the reimbursement policies of third party insurance companies or government agencies;
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actual or anticipated fluctuations in our operating results;
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changes in financial estimates or recommendations by securities analysts;
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developments involving corporate collaborators, if any;
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changes in accounting principles; and
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the loss of any of our key scientific or management personnel.
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In the past, securities
class action litigation has often been brought against companies that experience volatility in the market price of their securities.
Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management’s
attention and resources, which could adversely affect our business, operating results and financial condition.
We do not anticipate paying dividends
on our common stock and, accordingly, shareholders must rely on stock appreciation for any return on their investment.
We have never declared
or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is
subject to the discretion of our board of directors and will depend on various factors, including our operating results, financial
condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment
in our company if you require dividend income from your investment in our company. The success of your investment will likely depend
entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no
guarantee that our common stock will appreciate in value.
We expect that our quarterly results
of operations will fluctuate, and this fluctuation could cause our stock price to decline.
Our quarterly operating
results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business
involves variable factors, such as the timing of the research, development and regulatory pathways of our product candidates, which
could cause our operating results to fluctuate.
Due to the possibility
of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.
The rights of the holders of common stock may be impaired
by the potential issuance of preferred stock.
Our articles of incorporation
give our board of directors the right to create new series of preferred stock. As a result, the board of directors may, without
stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely
affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right
to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The
possible impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention
to issue any shares of preferred stock or to create a series of preferred stock, we may issue such shares in the future.
If we fail to comply with the rules
under the Sarbanes-Oxley Act of 2002 related to accounting controls and procedures, or if we discover material weaknesses and deficiencies
in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more
difficult.
If we fail to comply
with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover material
weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly
and raising capital could be more difficult. Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the
effectiveness of our internal control over financial reporting. If material weaknesses or significant deficiencies are discovered
or if we otherwise fail to achieve and maintain the adequacy of our internal control, we may not be able to ensure that we can
conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of
the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are
important to helping prevent financial fraud. 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, and the trading price
of our common stock could drop significantly.
Because certain of our stockholders
control a significant number of shares of our common stock, they may have effective control over actions requiring stockholder
approval.
As of September 28,
2017, our directors, executive officers and principal stockholders (those beneficially owning in excess of 5%), and their respective
affiliates, beneficially own approximately 17.7% of our outstanding shares of common stock. As a result, these stockholders, acting
together, would have the ability to control the outcome of matters submitted to our stockholders for approval, including the election
of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders,
acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of
ownership might harm the market price of our common stock by:
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delaying, deferring or preventing a change in corporate control;
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impeding a merger, consolidation, takeover or other business combination involving us; or
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discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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If securities or industry analysts
do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our
stock price and trading volume could decline.
The trading market
for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our
business. Our research coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases,
if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these
analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets,
which in turn could cause our stock price or trading volume to decline.
Risks Related
to This Offering
The sale
or issuance of our common stock to Lincoln Park may cause dilution and the sale of the shares of common stock acquired by Lincoln
Park, or the perception that such sales may occur, could cause the price of our common stock to fall.
On
September 28, 2017, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has committed to purchase
up to $15,000,000 of our common stock. Upon the execution of the Purchase Agreement, we issued
73,039
Commitment Shares to Lincoln Park as a fee for its commitment to purchase shares of our common stock under the Purchase
Agreement. The remaining shares of our common stock that may be issued under the Purchase Agreement may be sold by us to Lincoln
Park at our discretion from time to time over a 30-month period commencing after the satisfaction of certain conditions set forth
in the Purchase Agreement, including that the SEC has declared effective the registration statement that includes this prospectus.
The purchase price for the shares that we may sell to Lincoln Park under the Purchase Agreement will fluctuate based on the price
of our common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common
stock to fall.
We
generally have the right to control the timing and amount of any future sales of our shares to Lincoln Park. Additional sales of
our common stock, if any, to Lincoln Park will depend upon market conditions and other factors to be determined by us. We may ultimately
decide to sell to Lincoln Park all, some, or none of the additional shares of our common stock that may be available for us to
sell pursuant to the Purchase Agreement. If and when we do sell shares to Lincoln Park, after Lincoln Park has acquired the shares,
Lincoln Park may resell all, some or none of those shares at any time or from time to time in its discretion. Therefore, sales
to Lincoln Park by us could result in substantial dilution to the interests of other holders of our common stock. Additionally,
the sale of a substantial number of shares of our common stock to Lincoln Park, or the anticipation of such sales, could make it
more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise
wish to effect sales.
USE OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold from time to time by Lincoln Park. We will receive
no proceeds from the sale of shares of common stock by Lincoln Park in this offering. We may receive up to $15,000,000 in aggregate
gross proceeds under the Purchase Agreement from any sales we make to Lincoln Park pursuant to the Purchase Agreement after the
date of this prospectus. We estimate that the net proceeds to us from the sale of our common stock to Lincoln Park pursuant to
the Purchase Agreement will be up to $14,900,000 over an approximately 30-month period, assuming that we sell the full amount of
our common stock that we have the right, but not the obligation, to sell to Lincoln Park under the Purchase Agreement, and after
other estimated fees and expenses. See “Plan of Distribution” elsewhere in this prospectus for more information.
We
expect to use any proceeds that we receive under the Purchase Agreement for working capital and general corporate purposes.
LINCOLN PARK
TRANSACTION
General
On
September 28, 2017, we entered into the Purchase Agreement and the Registration Rights Agreement with Lincoln Park. Pursuant to
the terms of the Purchase Agreement, Lincoln Park has agreed to purchase from us up to $15,000,000 of our common stock (subject
to certain limitations) from time to time during the term of the Purchase Agreement. Pursuant to the terms of the Registration
Rights Agreement, we have filed with the SEC the registration statement that includes this prospectus to register for resale under
the Securities Act the shares that have been or may be issued to Lincoln Park under the Purchase Agreement.
Pursuant
to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement and the Registration Rights Agreement, we
issued
73,039
Commitment Shares to Lincoln Park as consideration for its commitment
to purchase shares of our common stock under the Purchase Agreement.
We
do not have the right to commence any sales to Lincoln Park under the Purchase Agreement until certain conditions set forth in
the Purchase Agreement, all of which are outside of Lincoln Park’s control, have been satisfied, including the registration
statement that includes this prospectus being declared effective by the SEC. Thereafter, we may, from time to time and at our sole
discretion, direct Lincoln Park to purchase shares of our common stock in amounts up to 30,000 shares on any single business day,
which amounts may be increased to up to 70,000 shares of our common stock depending on the market price of our common stock at
the time of sale but in no event greater than $1,000,000 per such purchase. The purchase price per share is based on the market
price of our common stock immediately preceding the time of sale as computed under the Purchase Agreement. Lincoln Park may not
assign or transfer its rights and obligations under the Purchase Agreement.
Under
applicable rules of The NASDAQ Global Market, in no event may we issue or sell to Lincoln Park under the Purchase Agreement shares
of our common stock in excess of the Exchange Cap (which is 1,500,981 shares, or 19.99% of the shares of our common stock outstanding
immediately prior to the execution of the Purchase Agreement), unless (i) we obtain stockholder approval to issue shares of common
stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of our common stock to Lincoln Park under
the Purchase Agreement equals or exceeds $4.5178 per share (which represents the closing consolidated bid price of our common stock
on September 27, 2017, plus an incremental amount to account for our issuance of the Commitment Shares to Lincoln Park), such that
the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable NASDAQ rules.
In any event, the Purchase Agreement specifically provides that we may not issue or sell any shares of our common stock under the
Purchase Agreement if such issuance or sale would breach any applicable rules or regulations of The NASDAQ Global Market.
The
Purchase Agreement also prohibits us from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated
with all other shares of our common stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park
and its affiliates exceeding the Beneficial Ownership Cap.
Purchase of
Shares Under the Purchase Agreement
Regular Purchases
Under
the Purchase Agreement, on any business day selected by us, we may direct Lincoln Park to purchase up to 30,000 shares of our common
stock on any such business day, or a Regular Purchase, provided, however, that (i) the Regular Purchase may be increased to up
to 40,000 shares, provided that the closing sale price is not below $5.00 on the purchase date, (ii) the Regular Purchase may be
increased to up to 50,000 shares, provided that the closing sale price is not below $6.00 on the purchase date, (iii) the Regular
Purchase may be increased to up to 60,000 shares, provided that the closing sale price is not below $7.50 on the purchase date,
(iv) the Regular Purchase may be increased to up to 70,000 shares, provided that the closing sale price is not below $10.00 on
the purchase date, and (v) we may direct Lincoln Park to purchase shares in a Regular Purchase only if at least one business day
has passed since the most recent Regular Purchase, as applicable, was completed. In each case, the maximum amount of any single
Regular Purchase may not exceed $1,000,000 per purchase. The purchase price per share for each such Regular Purchase will be equal
to the lower of:
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the lowest sale price for
our common stock on the purchase date of such shares; or
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●
|
the arithmetic average
of the three lowest closing sale prices for our common stock during the 10 consecutive business days ending on the business day
immediately preceding the purchase date of such shares.
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Accelerated
Purchases
In
addition to Regular Purchases described above, we may also direct Lincoln Park, on any business day on which we have properly submitted
a Regular Purchase notice and the closing sale price of our common stock is not below $3.00 (subject to adjustment for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase
Agreement), to purchase an additional amount of our common stock on the next business day, or an Accelerated Purchase, not to exceed
the lesser of:
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30% of the aggregate shares
of our common stock traded during normal trading hours on the purchase date; and
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Three (3) times the number
of purchase shares purchased pursuant to the corresponding Regular Purchase.
|
The
purchase price per share for each such Accelerated Purchase will be equal to the lower of:
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96% of the volume weighted
average price during (i) the entire trading day on the purchase date, if the volume of shares of our common stock traded on the
purchase date has not exceeded a volume maximum calculated in accordance with the Purchase Agreement, or (ii) the portion of the
trading day of the purchase date (calculated starting at the beginning of normal trading hours) until such time at which the volume
of shares of our common stock traded has exceeded such volume maximum; or
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the closing sale price
of our common stock on the accelerated purchase date.
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Initial Purchase
In
addition to the Regular Purchases described above, we have the option, on the first date that we are first able to begin selling
shares to Lincoln Park under the Purchase Agreement, we may direct Lincoln Park to purchase up to 300,000 shares, or the Initial
Purchase, provided, however, that Lincoln Park’s committed obligation under the Initial Purchase shall not exceed $1,000,000.
The
purchase price for such Initial Purchase shall be equal to the lower of:
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the closing sales price
for our common stock on the date immediately prior to the purchase date of such shares; or
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the arithmetic average
of the closing sale prices for our common stock during the 10 consecutive business days ending on the business day immediately
preceding the purchase date of such shares.
|
Additional
Purchases
In
addition to the Regular Purchases, Accelerated Purchases and the Initial Purchase described above, from time to time after the
date that we are first able to begin selling shares to Lincoln Park under the Purchase Agreement, we may also direct Lincoln Park,
on any business day that the closing price of our common stock is not below $3.00 (subject to adjustment for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction), to purchase additional amounts
of our common stock, or an Additional Purchase, provided, however, that (i) we may direct Lincoln Park to purchase shares in an
Additional Purchase only if at least 15 business days have passed since the most recent Additional Purchase, as applicable, was
completed, (ii) we may direct Lincoln Park to purchase shares in an Additional Purchase only if at least 30 business days have
passed since the Initial Purchase, if exercised, was completed, (iii) Lincoln Park’s committed obligation under any single
Additional Purchase shall not exceed $500,000, and (iv) Lincoln Park’s committed obligation under all Additional Purchases
shall not exceed $2,000,000 in the aggregate.
The
purchase price for each such Additional Purchase shall be equal to the lower of:
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96% of the purchase price
under a Regular Purchase on the date we give notice for the related Additional Purchase; or
|
In
the case of the Regular Purchases, Accelerated Purchases, Initial Purchase and Additional Purchases, the purchase price per share
will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction occurring during the business days used to compute the purchase price.
Other
than as described above, there are no trading volume requirements or restrictions under the Purchase Agreement, and we will control
the timing and amount of any sales of our common stock to Lincoln Park.
Events of Default
Events
of default under the Purchase Agreement include the following:
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the effectiveness of the
registration statement of which this prospectus forms a part lapses for any reason (including, without limitation, the issuance
of a stop order), or any required prospectus supplement and accompanying prospectus are unavailable for the resale by Lincoln
Park of our common stock offered hereby, and such lapse or unavailability continues for a period of 10 consecutive business days
or for more than an aggregate of 30 business days in any 365-day period;
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suspension by our principal
market of our common stock from trading for a period of one business day;
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the de-listing of our common
stock from The NASDAQ Global Market, our principal market, provided our common stock is not immediately thereafter trading on
the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Capital Market, the NYSE MK Market, the OTC Bulletin
Board or OTC Markets (or nationally recognized successor thereto);
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the failure of our transfer
agent to issue to Lincoln Park shares of our common stock within three business days after the applicable date on which Lincoln
Park is entitled to receive such shares;
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any breach of the representations
or warranties or covenants contained in the Purchase Agreement or Registration Rights Agreement that has or could have a material
adverse effect on us and, in the case of a breach of a covenant that is reasonably curable, that is not cured within five business
days;
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if at any time the Exchange
Cap is reached, to the extent applicable;
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any voluntary or involuntary
participation or threatened participation in insolvency or bankruptcy proceedings by or against us; or
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if at any time we are not
eligible to transfer our common stock electronically.
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Lincoln
Park does not have the right to terminate the Purchase Agreement upon any of the events of default set forth above. During an event
of default, all of which are outside of Lincoln Park’s control, we may not direct Lincoln Park to purchase any shares of
our common stock under the Purchase Agreement.
Our Termination
Rights
We
have the unconditional right, at any time, for any reason and without any payment or liability to us, to give notice to Lincoln
Park to terminate the Purchase Agreement. In the event of bankruptcy proceedings by or against us, the Purchase Agreement will
automatically terminate without action of any party.
No Short-Selling
or Hedging by Lincoln Park
Lincoln
Park has agreed that neither it nor any of its affiliates shall engage in any direct or indirect short-selling or hedging of our
common stock during any time prior to the termination of the Purchase Agreement.
Prohibitions
on Variable Rate Transactions
There
are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the
Purchase Agreement or Registration Rights Agreement other than a prohibition on entering into a “Variable Rate Transaction,”
as defined in the Purchase Agreement.
Effect of Performance
of the Purchase Agreement on Our Stockholders
All
2,100,000 shares registered in this offering which have been or may be issued or sold by us to Lincoln Park under the Purchase
Agreement are expected to be freely tradable. It is anticipated that shares registered in this offering will be sold over a period
of up to 30 months commencing on the date that the registration statement including this prospectus becomes effective. The sale
by Lincoln Park of a significant amount of shares registered in this offering at any given time could cause the market price of
our common stock to decline and to be highly volatile. Sales of our common stock to Lincoln Park, if any, will depend upon market
conditions and other factors to be determined by us. We may ultimately decide to sell to Lincoln Park all, some or none of the
additional shares of our common stock that may be available for us to sell pursuant to the Purchase Agreement. If and when we do
sell shares to Lincoln Park, after Lincoln Park has acquired the shares, Lincoln Park may resell all, some or none of those shares
at any time or from time to time in its discretion. Therefore, sales to Lincoln Park by us under the Purchase Agreement may result
in substantial dilution to the interests of other holders of our common stock. In addition, if we sell a substantial number of
shares to Lincoln Park under the Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the
mere existence of our arrangement with Lincoln Park may make it more difficult for us to sell equity or equity-related securities
in the future at a time and at a price that we might otherwise wish to effect such sales. However, we have the right to control
the timing and amount of any additional sales of our shares to Lincoln Park and the Purchase Agreement may be terminated by us
at any time at our discretion without any cost to us.
Pursuant
to the terms of the Purchase Agreement, we have the right, but not the obligation, to direct Lincoln Park to purchase up to $15,000,000
of our common stock, exclusive of the
73,039
shares issued to Lincoln Park on such
date as a commitment fee. Depending on the price per share at which we sell our common stock to Lincoln Park pursuant to the Purchase
Agreement, we may need to sell to Lincoln Park under the Purchase Agreement more shares of our common stock than are offered under
this prospectus in order to receive aggregate gross proceeds equal to the $15,000,000 total commitment available to us under the
Purchase Agreement. If we choose to do so, we must first register for resale under the Securities Act such additional shares of
our common stock, which could cause additional substantial dilution to our stockholders. The number of shares ultimately offered
for resale by Lincoln Park under this prospectus is dependent upon the number of shares we direct Lincoln Park to purchase under
the Purchase Agreement.
The
Purchase Agreement prohibits us from issuing or selling to Lincoln Park under the Purchase Agreement (i) shares of our common stock
in excess of the Exchange Cap, unless we obtain stockholder approval to issue shares in excess of the Exchange Cap or the average
price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equal or exceed $4.5178 per share,
such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable
NASDAQ rules, and (ii) any shares of our common stock if those shares, when aggregated with all other shares of our common stock
then beneficially owned by Lincoln Park and its affiliates, would exceed the Beneficial Ownership Cap.
The
following table sets forth the amount of gross proceeds we would receive from Lincoln Park from our sale of shares to Lincoln
Park under the Purchase Agreement at varying purchase prices:
|
|
|
|
|
|
|
Assumed Average
Purchase Price
Per Share
|
|
Number of Registered
Shares to be Issued if Full
Purchase (1)
|
|
Percentage of Outstanding
Shares After Giving Effect to
the Issuance to Lincoln Park (2)
|
|
Proceeds from the Sale of Shares
to Lincoln Park Under the $15M
Purchase Agreement
|
$2.00
|
|
|
|
2,026,961
|
|
|
|
21%
|
|
|
$
|
4,053,922
|
|
$4.31 (3)
|
|
|
|
2,026,961
|
|
|
|
21%
|
|
|
$
|
8,736,202
|
|
$6.00
|
|
|
|
2,026,961
|
|
|
|
21%
|
|
|
$
|
12,161,766
|
|
$8.00
|
|
|
|
1,875,000
|
|
|
|
20%
|
|
|
$
|
15,000,000
|
|
$10.00
|
|
|
|
1,500,000
|
|
|
|
17%
|
|
|
$
|
15,000,000
|
|
(1)
|
Although the Purchase Agreement provides that we may sell up to $15,000,000 of our common stock to Lincoln Park, we are only registering 2,100,000 shares under this prospectus which represents: (i)
73,039
shares that we already issued to Lincoln Park as a commitment fee for making the commitment under the Purchase Agreement, and (ii) an additional
2,026,961
shares which may be issued to Lincoln Park in the future under the Purchase Agreement, if and when we sell shares to Lincoln Park under the Purchase Agreement, and which may or may not cover all the shares we ultimately sell to Lincoln Park under the Purchase Agreement, depending on the purchase price per share. As a result, we have included in this column only those shares that we are registering in this offering. If we seek to issue shares of our common stock, including shares from other transactions that may be aggregated with the transactions contemplated by the Purchase Agreement under the applicable rules of The NASDAQ Global Market, in excess of 1,500,951 shares, or 19.99% of the total common stock outstanding immediately prior to the execution of the Purchase Agreement, we may be required to seek stockholder approval in order to be in compliance with the rules of The NASDAQ Global Market.
|
(2)
|
The denominator is based on 7,581,700 shares outstanding as of September 28, 2017, adjusted to include the issuance of (i)
73,039
commitment shares issued to Lincoln Park upon the execution of the Purchase Agreement, and (ii) the number of shares set forth in the adjacent column which we would have sold to Lincoln Park, assuming the purchase price in the adjacent column. The numerator is based on the number of shares issuable under the Purchase Agreement at the corresponding assumed purchase price set forth in the adjacent column.
|
|
|
(3)
|
The closing sale price of our common stock on September 27, 2017.
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is
listed on The NASDAQ Global Market under the symbol “TNXP”. The following table sets forth, for the periods indicated,
the high and low sales prices per share of our common stock as reported by The NASDAQ Stock Market, after giving effect to the
1-for-10 reverse stock split, which was effected on March 17, 2017.
|
|
Fiscal Year 2017
|
|
|
High
|
|
Low
|
First Quarter
|
|
$
|
9.40
|
|
$
|
3.30
|
Second Quarter
|
|
$
|
5.81
|
|
$
|
3.80
|
Third Quarter (through September 28, 2017)
|
|
$
|
4.49
|
|
$
|
2.85
|
|
|
Fiscal Year 2016
|
|
|
High
|
|
Low
|
First Quarter
|
|
$
|
79.54
|
|
$
|
22.00
|
Second Quarter
|
|
$
|
37.70
|
|
$
|
18.40
|
Third Quarter
|
|
$
|
28.00
|
|
$
|
6.90
|
Fourth Quarter
|
|
$
|
8.50
|
|
$
|
3.52
|
|
|
Fiscal Year 2015
|
|
|
High
|
|
Low
|
First Quarter
|
|
$
|
86.50
|
|
$
|
56.10
|
Second Quarter
|
|
$
|
107.20
|
|
$
|
58.80
|
Third Quarter
|
|
$
|
98.90
|
|
$
|
51.40
|
Fourth Quarter
|
|
$
|
78.40
|
|
$
|
50.50
|
Holders
On September 28, 2017,
there were approximately 108 holders of record of our common stock. Because many of our shares of common stock are held by brokers
and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these
record holders.
Dividend Policy
We have never paid
any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in the foreseeable
future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future
determination to pay cash dividends will be at the discretion of the Board and will be dependent upon our financial condition,
results of operations, capital requirements and such other factors as the Board deems relevant.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Some
of the information in this Form S-1 contains forward-looking statements that involve substantial risks and uncertainties. You
can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,”
“believe,” “estimate” and “continue,” or similar words. You should read statements that contain
these words carefully because they:
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discuss our future
expectations;
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contain projections
of our future results of operations or of our financial condition; and
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state other “forward-looking”
information.
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We
believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately
predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those
anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,”
“Business” and elsewhere in this Prospectus. See “Risk Factors.”
Business
Overview
We
are a late clinical-stage pharmaceutical company dedicated to the development of innovative pharmaceutical products to address
public health challenges. Our most advanced drug development program is focused on delivering an efficacious and safe long-term
treatment for PTSD. PTSD is characterized by chronic disability, inadequate treatment options, high utilization of healthcare
services, and significant economic burden. We have assembled a management team with significant industry experience to lead the
development of our product candidates. We complement our management team with a network of scientific, clinical, and regulatory
advisors that includes recognized experts in the fields of PTSD and other central nervous system disorders.
In
June 2017, the FDA conditionally accepted the proposed trade name Tonmya for TNX-102 SL for the treatment of PTSD. The FDA's final
approval of Tonmya as a name for TNX-102 SL for the treatment of PTSD is subject to an NDA approval. A request for review
of Tonmya as the proposed name for TNX-102 SL for the management of fibromyalgia has been withdrawn at the FDA. The U.S. Patent
and Trademark Office has granted the federal registration of the Tonmya mark.
Our
lead product candidate, Tonmya or TNX-102 SL, a proprietary low-dose CBP sublingual tablet designed for bedtime administration,
is in Phase 3 development as a potential treatment for PTSD. The FDA has designated Tonmya a Breakthrough Therapy for the treatment
of PTSD.
Our
therapeutic strategy in PTSD is supported by results from a randomized, double-blind, placebo-controlled, 12-week Phase 2 study
of Tonmya in participants with military-related PTSD, which we refer to as the AtEase study. We reported topline results from
the AtEase study in May 2016. In the AtEase study, participants experienced their index trauma during military service in 2001
or later and had a baseline CAPS-5 score of 29 or higher and were randomized in a 2:1:2 ratio to Tonmya 2.8 mg, Tonmya 5.6 mg
(2 x 2.8 mg tablets), or placebo sublingual tablets at bedtime daily for 12 weeks, respectively. This study was conducted at 24
U.S. centers and enrolled 231 participants in the modified intent-to-treat population. The primary objective of the AtEase study
was to evaluate the efficacy and safety of Tonmya in the treatment of military-related PTSD. The primary efficacy endpoint was
the 12-week mean change from baseline in the severity of PTSD symptoms as measured by CAPS-5 between those treated with Tonmya
and those receiving placebo. The CAPS-5 scale is a standardized structured clinician interview and is considered the gold standard
in clinical research and regulatory approval for measuring the symptom severity of PTSD.
AtEase
was adequately designed to evaluate whether a 2.8 mg dose would be efficacious, which would have provided an opportunity for this
study to be used as one of the two pivotal efficacy studies required to support approval of Tonmya for the treatment of PTSD.
Although the 2.8 mg dose trended in the direction of a therapeutic effect, it did not reach statistical significance on the primary
endpoint. The 5.6 mg dose had a therapeutic effect as assessed by the CAPS-5 scale, which was statistically significant by MMRM
with MI analysis (p-value = 0.031), even though this arm of the study, by design, included only approximately half the number
of participants of the 2.8 mg and placebo arms. Tonmya 5.6 mg demonstrated a dose-effect on multiple efficacy and safety measurements
in the AtEase study.
In
the AtEase study, Tonmya was well tolerated and the participant retention rate was 73% on placebo, 79% on Tonmya 2.8 mg and 84%
on Tonmya 5.6 mg. Four distinct SAEs were reported in the study; three were in the placebo group, and one (proctitis/peri-rectal
abscess,) in the Tonmya arm, which was determined to be unrelated to Tonmya. The most common non-dose related adverse events were
mild and transient local administration site conditions and of these oral hypoaesthesia, or numbness, was the most frequent and
occurred in 39% of participants treated with the 2.8 mg dose and 36% of the participants treated with the 5.6 mg dose, compared
to 2% of the participants receiving placebo. Oral paresthesia, or tingling, occurred in 16% of participants treated with the 2.8
mg dose and 4% of participants treated with the 5.6 mg dose, compared to 3% of the participants receiving placebo. Glossodynia,
or a burning or stinging sensation in the mouth, occurred in 3% of participants treated with the 2.8 mg dose and 6% of participants
treated with the 5.6 mg dose, compared to 1% of participants receiving placebo.
Systemic
adverse events that were potentially dose-related and occurred in greater than or equal to 5% of participants treated with the
5.6 mg dose or placebo included: somnolence in 16% versus 6% of the participants receiving placebo; dry mouth in 16% versus 11%
of the participants receiving placebo; headache in 12% versus 4% of the participants receiving placebo; insomnia in 6% versus
9% of the participants receiving placebo; sedation in 12% versus 1% of the participants receiving placebo; upper respiratory tract
infection in 4% versus 5% of the participants receiving placebo; abnormal dreams in 2% versus 5% of the participants receiving
placebo; and weight increase in 2% versus 5% of the participants receiving placebo. For the participants treated with the 2.8
mg dose, the incidence of the most common systemic adverse events reported above were less frequent than participants treated
with the 5.6 mg dose with the exception of insomnia, which was 8%.
Retrospective
analysis of the AtEase study suggested that the subset of participants with CAPS-5 score of 33 or higher was equivalent to the
population of PTSD subjects studied in prior FDA registration studies of paroxetine and sertraline using older versions of the
Clinician-Administered PTSD Scale. To confirm this efficacy evidence, our ongoing Phase 3 program is enrolling participants with
baseline CAPS-5 score of 33 or higher. The beneficial effects of Tonmya 5.6 mg were preserved in the subgroup with PTSD from combat
traumas (85% of AtEase population). Also, sustained remission (i.e. satisfying remission criterion of a CAPS-5 score less than
11 at both week 8 and week 12) was observed in 21% of participants in the Tonmya 5.6 mg group as compared to 5.2% of participants
in the placebo group (p = 0.02, logistic regression). The AtEase study supported the hypothesized mechanism of sleep quality improvement,
since additional retrospective analyses showed that in the subset of participants with CAPS-5 score of 33 or higher, sleep improvement
at week 4, measured by the PROMIS Sleep Disturbance instrument, predicted treatment response (by improvement in total CAPS-5 score
without the sleep item) at week 12 in the Tonmya 5.6 mg group (p = 0.01, linear regression).
On
December 16, 2016, the FDA designated Tonmya a Breakthrough Therapy for the treatment of PTSD based on data derived from a population
with military-related PTSD in the AtEase study.
We
received FDA clearance of the first Phase 3 study design in January 2017. We commenced the HONOR study, a randomized, double-blind
placebo-controlled Phase 3 study of Tonmya in approximately 550 participants with military-related PTSD in the first quarter of
2017. This study is an adaptive design study based on the results of the Phase 2 AtEase study. The study design is very similar
to the Phase 2 AtEase study, except there will be one planned IA and the involvement of the IDMC to review unblinded IA results.
The IDMC will make a recommendation to continue as planned, to continue but increase the number of recruited participants or to
stop for success. In addition, there will be one active dose (5.6 mg administered as 2 x 2.8 mg tablets) and the entrance criterion
is CAPS-5 ≥ 33 in this Phase 3 study. The IA will be conducted when approximately 50% of the initially planned participants
(approximately 275 participants) are randomized. The HONOR study is being conducted at approximately 45 U.S. sites. As in the
case of the AtEase study, the primary efficacy endpoint of the HONOR study is the 12-week mean change from baseline in the severity
of PTSD symptoms as measured by the CAPS-5 scale between those treated with Tonmya 5.6 mg and those receiving placebo.
At
the Initial Cross-disciplinary Breakthrough Therapy meeting on March 9, 2017, the FDA confirmed that a single-study NDA approval
is possible if the topline data of the Phase 3 HONOR study is statistically persuasive and no additional abuse and dependency
study is necessary to support the NDA filing.
On
May 2, 2017, we were issued U.S. patent 9,636,408 “Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline
Hydrochloride”, which includes compositions of cyclobenzaprine HCl and methods of manufacturing the eutectic. The Protectic™
protective eutectic and Angstro-Technology™ formulation claimed in the patent are important elements of our proprietary
Tonmya composition. The patent is expected to provide Tonmya with U.S. market exclusivity until 2034.
On
September 7, 2017, we had a Breakthrough Therapy CMC Guidance meeting with the FDA to discuss the NDA CMC plan and formal meeting
minutes will be available by October 7, 2017.
On
September 13, 2017, we were issued European patent 2501234 “Methods and Compositions for Treating Symptoms Associated with
PTSD Using Cyclobenzaprine”. This patent protects the use of Tonmya for the treatment of PTSD as well as its active ingredient
CBP for the treatment of PTSD. The patent is expected to provide Tonmya with European market exclusivity until 2030 and may be
extended based on the timing of the European marketing authorization of Tonmya for PTSD.
We
also have a pipeline of other drug and biologic candidates, including two pre-IND candidates, TNX-601 (tianeptine oxalate) for
PTSD and TNX-801, a potential smallpox-preventing vaccine, an IND candidate, TNX-301, a potential treatment for AUD, and TNX-701,
a biodefense development program for protection from radiation injury. We hold worldwide development and commercialization rights
to all of our product candidates.
TNX-601
is a novel oral formulation of tianeptine oxalate in the pre-IND stage of development for the treatment for PTSD. We have discovered
a novel salt and polymorph, which we believe may provide improved stability, consistency, and manufacturability relative to the
known forms of tianeptine. Leveraging our development expertise in PTSD, TNX-601 is being developed as a first-line monotherapy
for PTSD for daytime use. Tianeptine’s reported pro-cognitive and anxiolytic effects as well as its ability to attenuate
the neuropathological effects of excessive stress responses suggest that it may be used to treat PTSD by a different mechanism
of action than Tonmya. On April 19, 2016, we were issued U.S. patent 9,314,469 B2 “Method for treating neurocognitive dysfunction”
which includes using tianeptine for cognitive dysfunction associated with corticosteroid use. We intend to develop TNX-601 under
Section 505(b)(1) of the FDCA as a potential daytime treatment for PTSD and cognitive dysfunction associated with corticosteroid
use. Pharmaceutical development work on TNX-601 has been initiated.
TNX-801
is a novel potential smallpox-preventing vaccine based on a live synthetic version of HPXV grown in cell culture. Professor David
Evans and Dr. Ryan Noyce at the University of Alberta, Canada in collaboration with us, synthesized the HPVX, which demonstrated
protective vaccine activity in mice, using a model of lethal vaccinia infection. We are developing TNX-801 as a potential smallpox-preventing
vaccine for widespread immunization and for the U.S. strategic national stockpile. Though it shares structural characteristics
with vaccinia-based vaccines, TNX-801 has unique virulence properties that we believe may suggest lower toxicity and potential
safety advantages over existing vaccinia-based vaccines, which have been associated with adverse side effects such as myopericarditis.
We intend to develop TNX-801 under 21 CFR 601 Subpart H, pursuant to which the FDA may grant marketing approval for a biological
product for which safety has been established in humans and for which the requirements for efficacy are met based on adequate
and well-controlled animal studies, where human studies are not ethical or feasible. This approval pathway has been described
as the “Animal Rule”. In the 1970s, vaccination against smallpox was discontinued in the U.S.; however, smallpox remains
a material threat to national security. We recently filed a patent on the novel virus vaccine. In addition, 12 years of non-patent
based exclusivity is provided under the Patient Protection and Affordable Care Act. It is unknown if a replacement for the repeal
of the Affordable Care Act, if enacted, would contain the 12-year exclusivity provision. Following the recent passage of the 21st
Century Cures Act, we believe TNX-801 qualifies as a medical countermeasure, and therefore should be eligible for a Priority Review
Voucher upon FDA approval. We are currently working to develop a vaccine that meets cGMP quality to support an IND study.
TNX-301
is a fixed-dose CDP containing two FDA-approved drugs, disulfiram and selegiline. We intend to develop TNX-301 CDP under Section
505(b)(2) of the FDCA as a potential treatment for AUD, and we have commenced development work on TNX-301 formulations. A pre-IND
meeting was held in February 2016 to discuss the clinical development program of TNX-301 for AUD. At that meeting, the FDA advised
us the nonclinical studies required for this CDP IND application to support the initiation of the first-in-man study with TNX-301.
IND planning activities are underway.
In
addition, we own rights to intellectual property on a biodefense technology relating to the development of protective agents against
radiation exposure, which we refer to as TNX-701. We have begun nonclinical research and development on TNX-701. Similar to the
regulatory pathway intended for TNX-801, we plan to develop TNX-701 under the Animal Rule. We expect significant reduction in
development costs and risks compared to the development of other NCEs or new biologic candidates.
Current
Operating Trends
Our
current research and development efforts are focused on developing Tonmya for PTSD, but we also expend increasing effort on our
other pipeline programs, including TNX-601, TNX-801 and TNX-301. Our research and development expenses consist of manufacturing
work and the cost of drug ingredients used in such work, fees paid to consultants for work related to clinical trial design and
regulatory activities, fees paid to providers for conducting various clinical studies as well as for the analysis of the results
of such studies, and for other medical research addressing the potential efficacy and safety of our drugs. We believe that significant
investment in product development is a competitive necessity, and we plan to continue these investments in order to be in a position
to realize the potential of our product candidates and proprietary technologies.
We
expect that all of our research and development expenses in the near-term future will be incurred in support of our current and
future preclinical and clinical development programs rather than technology development. These expenditures are subject to numerous
uncertainties relating to timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology
and efficacy. At the appropriate time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical
trials for each drug candidate. We anticipate funding these trials ourselves, and possibly with the assistance of federal grants,
contracts or other agreements. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain
products in order to focus our resources on more promising products. Completion of clinical trials may take several years, and
the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate.
The
commencement and completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during
clinical trials, unforeseen safety issues, slower than expected participant recruitment, lack of funding or government delays.
In addition, we may encounter regulatory delays or rejections as a result of many factors, including results that do not support
the intended safety or efficacy of our product candidates, perceived defects in the design of clinical trials and changes in regulatory
policy during the period of product development. As a result of these risks and uncertainties, we are unable to accurately estimate
the specific timing and costs of our clinical development programs or the timing of material cash inflows, if any, from our product
candidates. Our business, financial condition and results of operations may be materially adversely affected by any delays in,
or termination of, our clinical trials or a determination by the FDA that the results of our trials are inadequate to justify
regulatory approval, insofar as cash in-flows from the relevant drug or program would be delayed or would not occur.
Results
of Operations
We
anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress
of our research and development efforts and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate
predictions of future operations are difficult or impossible to make.
Three
Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016
Research
and Development Expenses
.
Research and development expenses for the three months ended June 30, 2017 were $2.8 million,
a decrease of $4.7 million, or 63%, from $7.5 million for the three months ended June 30, 2016. This decrease is predominately
due to the discontinuation of development work related to the fibromyalgia program. During the three months ended June 30, 2017,
we incurred $1.7 million, $0.1 million and $0.4 million in clinical, non-clinical and manufacturing expenses, respectively, as
compared to $4.8 million, $0.3 million, and $0.9 million for the same period last year, respectively.
Compensation-related
expenses were $0.5 million for the three months ended June 30, 2017, compared to $1.0 million for the three months ended June
30, 2016, a decrease of $0.5 million, or 50%. Cash compensation-related expenses were $0.4 million for the three months ended
June 30, 2017, a decrease of $0.4 million, or 50%, from $0.8 million for the three months ended June 30, 2016. The decreases were
primarily a result of a reduction in personnel. We incurred $0.1 million in stock-based compensation in the three months ended
June 30, 2017 in connection with the vesting of stock options, which were previously issued to officers and consultants, as compared
to $0.2 million in stock-based compensation for the same period in 2016. Regulatory and legal costs for the three months ended
June 30, 2017 were $0.1 million, a decrease of $0.1 million, or 50%, from $0.2 million incurred in the three months ended June
30, 2016. The decrease in regulatory and legal costs was primarily due to the decrease in active trials.
Travel,
meals and entertainment costs for the three months ended June 30, 2017 and 2016 were each $0.1 million. Travel, meals and entertainment
costs include travel related to clinical development and medical-related conferences. Other research and development costs
totaled a credit of $0.1 million for the three months ended June 30, 2017, a decrease of $0.3 million, or 150%, from $0.2 million
incurred for the three months ended June 30, 2016. Included in 2017, is an insurance refund of $0.2 million. Other research and
development costs include rent, insurance and other office related expenses.
General
and Administrative Expenses
.
General and administrative expenses for the three months ended June 30, 2017 were $2.0
million, a decrease of $0.3 million, or 13%, from $2.3 million incurred in the three months ended June 30, 2016. This decrease
is primarily due to reduced compensation-related expenses.
Compensation-related
expenses decreased to $0.8 million for the three months ended June 30, 2017, from $1.1 million for the three months ended June
30, 2016, a decrease of $0.3 million, or 27%. Cash compensation-related expenses were $0.5 million for the three months ended
June 30, 2017, a decrease of $0.1 million, or 17%, from $0.6 million for the three months ended June 30, 2016. We incurred $0.3
million in stock-based compensation in connection with the 2014 employee stock purchase plan and the vesting of restricted stock
units and stock options in the three months ended June 30, 2017, which were previously issued to board members, officers and consultants,
as compared to $0.5 million in stock-based compensation for the same period last year. The decrease in cash compensation related
costs was primarily a result of a reduction in personnel.
Professional
services for the three months ended June 30, 2017 totaled $0.7 million for both reporting periods. Of professional services, legal
fees totaled $0.3 million for the three months ended June 30, 2017, an increase of $0.1 million, or 50%, from $0.2 million incurred
for the three months ended June 30, 2016. The increase is mainly due to an increase in legal fees related to patent activity.
Audit and accounting fees incurred for the three months ended June 30, 2017 and 2016 were both $0.1 million. Investor and public
relations fees incurred for the three months ended June 30, 2017 and 2016 were both $0.2 million. Other professional fees for
the three months ended June 30, 2017 totaled $0.1 million, a decrease of $0.1 million, or 50%, from $0.2 million incurred for
the three months ended June 30, 2016. Other professional fees include human resources and corporate consultants.
Travel,
meals and entertainment costs for the three months ended June 30, 2017 were $0.1 million for both reporting periods. Office
and other administrative expenses were $0.4 million for both reporting periods. Office and other administrative expenses include
rent, insurance and other office related expenses.
Net
Loss
. As a result of the foregoing, the net loss for the three months ended June 30, 2017 was $4.8 million, compared to
a net loss of $9.8 million for the three months ended June 30, 2016.
Six
Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Research
and Development Expenses
.
Research and development expenses for the six months ended June 30, 2017 were $5.8 million,
a decrease of $12.4 million, or 68%, from $18.2 million for the six months ended June 30, 2016. This decrease is predominately
due to the discontinuation of development work related to the episodic tension-type headache and fibromyalgia programs. During
the six months ended June 30, 2017, we incurred $3.1 million, $0.1 million and $0.7 million in clinical, non-clinical and manufacturing
expenses, respectively, as compared to $11.0 million, $1.2 million and $2.2 million for the same period last year, respectively.
Compensation-related
expenses were $1.1 million for the six months ended June 30, 2017, compared to $2.0 million for the six months ended June 30,
2016, a decrease of $0.9 million, or 45%. Cash compensation-related expenses were $0.9 million for the six months ended June 30,
2017, a decrease of $0.7 million, or 44%, from $1.6 million for the six months ended June 30, 2016. The decreases were primarily
a result of a reduction in personnel. We incurred $0.2 million in stock-based compensation in connection with the vesting of stock
options in the six months ended June 30, 2017 that were previously issued to officers and consultants as compared to $0.4 million
in stock-based compensation for the same period last year. Regulatory and legal costs for the six months ended June 30, 2017 were
$0.4 million, a decrease of $0.3 million, or 43%, from $0.7 million incurred in the six months ended June 30, 2016. The decrease
in regulatory and legal costs was primarily due to the decrease in active trials.
Travel,
meals and entertainment costs for the six months ended June 30, 2017 and 2016 were both $0.4 million. Travel, meals and entertainment
costs include travel related to clinical development and medical-related conferences. Other research and development costs
totaled $0 for the six months ended June 30, 2017 after offsetting an insurance refund received of $0.2 million, compared to $0.7
million for the six months ended June 30, 2016. Other research and development costs include rent, insurance and other office
related expenses.
General
and Administrative Expenses
.
General and administrative expenses for the six months ended June 30, 2017 were $4.1
million, a decrease of $1.6 million, or 28%, from $5.7 million incurred in the six months ended June 30, 2016. This decrease is
primarily due to reduced compensation-related expenses.
Compensation-related
expenses decreased to $1.8 million for the six months ended June 30, 2017 from $3.0 million for the six months ended June 30,
2016, a decrease of $1.2 million, or 40%. Cash compensation-related expenses were $1.0 million for the six months ended June 30,
2017, a decrease of $0.7 million, or 41%, from $1.7 million for the six months ended June 30, 2016. We incurred $0.8 million in
stock-based compensation in connection with the 2014 employee stock purchase plan and the vesting of restricted stock units and
stock options in the six months ended June 30, 2017 that were previously issued to board members, officers and consultants as
compared to $1.3 million in stock-based compensation for the same period last year. The decrease in cash compensation-related
costs was primarily a result of a reduction in personnel.
Professional
services for the six months ended June 30, 2017 totaled $1.5 million, a decrease of $0.1 million, or 6%, from the $1.6 million
incurred for the six months ended June 30, 2016. Of professional services, legal fees totaled $0.5 million for both reporting
periods. Audit and accounting fees incurred for the six months ended June 30, 2017 and 2016 were both $0.2 million. Investor and
public relations fees totaled $0.4 million for the six months ended June 30, 2017, a decrease of $0.1 million, or 20%, from $0.5
million incurred for the six months ended June 30, 2016. Other professional fees incurred for the six months ended June 30, 2017
and 2016 were both $0.4 million. Other professional fees include human resources and corporate consultants.
Travel,
meals and entertainment costs for the six months ended June 30, 2017 were $0.1 million, a decrease of $0.1 million, or 50%, from
$0.2 million incurred in the six months ended June 30, 2016. Travel, meals and entertainment costs include travel related to business
development and investor relations activities, which were reduced from 2016. Office and other administrative expenses totaled
$0.7 million, a decrease of $0.2 million, or 22%, from $0.9 million incurred in the six months ended June 30, 2016. Office and
other administrative expenses include rent, insurance and other office related expenses.
Net
Loss
. As a result of the foregoing, the net loss for the six months ended June 30, 2017 was $9.8 million, compared to
a net loss of $23.8 million for the six months ended June 30, 2016.
Fiscal
year Ended December 31, 2016 Compared to Fiscal year Ended December 31, 2015
Research
and Development Expenses
.
Research and development expenses for the fiscal year ended December 31, 2016 were $28.5
million, a decrease of $7.0 million, or 20%, from $35.5 million for the fiscal year ended December 31, 2015. This decrease is
primarily due to decreased development work related to TNX-201 (dexisometheptene mucate) for episodic tension-type headache, including
formulation development, manufacturing, human safety and efficacy trials as well as pharmacokinetic studies. This decrease is
also due to decreased development work on Tonmya for fibromyalgia. In 2016, we incurred $16.4 million, $1.4 million and $3.3 million
in clinical, non-clinical, and manufacturing, respectively, as compared to $16.8 million, $5.3 million and $4.4 million in 2015,
respectively. Costs related to product development decreased to $0.3 million for the fiscal year ended December 31, 2016 from
$0.9 million for the fiscal year ended December 31, 2015, a decrease of $0.6 million, or 67%. The decrease is primarily due to
the reduction in active trials.
Compensation-related
expenses increased to $4.5 million for the fiscal year ended December 31, 2016, from $4.1 million for the fiscal year ended December
31, 2015, an increase of $0.4 million, or 10%. Cash compensation-related expenses were $3.6 million for the fiscal year ended
December 31, 2016, an increase of $0.7 million, or 24%, from $2.9 million for the fiscal year ended December 31, 2015. The increase
was primarily a result of annual salary increases and increased personnel during parts of 2016. We incurred $0.9 million in stock-based
compensation in connection with the vesting of stock options in 2016, which were previously issued to officers and consultants,
as compared to $1.2 million in stock-based compensation in 2015. Regulatory and legal costs decreased to $1.3 million for the
fiscal year ended December 31, 2016, from $1.8 million for the fiscal year ended December 31, 2015, a decrease of $0.5 million,
or 28%. The decrease in regulatory and legal costs is primarily due to a shift in personnel related to then ongoing trials.
Travel,
meals and entertainment costs decreased to $0.5 million for the fiscal year ended December 31, 2016, from $1.4 million for the
fiscal year ended December 31, 2015, a decrease of $0.9 million, or 64%. Travel, meals and entertainment costs include travel
related to clinical development, including investigator meetings and medical-related conferences, whereas such activities decreased
from 2015. Other research and development costs were $0.8 million for both reporting periods. Other research and development
costs include rent, insurance and other office-related expenses.
General
and Administrative Expenses
.
General and administrative expenses for the fiscal year ended December 31, 2016 were
$10.4 million, a decrease of $2.3 million, or 18%, from $12.7 million incurred in the fiscal year ended December 31, 2015. This
decrease is primarily due to a reduction in activities related to compensation-related expenses and professional services.
Compensation-related
expenses decreased to $5.2 million for the fiscal year ended December 31, 2016, from $5.8 million for the fiscal year ended December
31, 2015, a decrease of $0.6 million, or 10%. We incurred $2.3 million in stock-based compensation in connection with the employee
stock purchase plan and the vesting of restricted stock units and stock options in 2016, which were previously issued to board
members, officers, employees and a consultant, as compared to $3.2 million in stock-based compensation in 2015. Cash compensation-related
expenses were $2.9 million for the fiscal year ended December 31, 2016, an increase of $0.3 million, or 12%, from $2.6 million
for the fiscal year ended December 31, 2015. The increase was primarily a result of annual salary increases and increased personnel
during parts of 2016.
Professional
services for the fiscal year ended December 31, 2016 totaled $3.2 million, a decrease of $1.1 million, or 26%, over the $4.3 million
incurred for the fiscal year ended December 31, 2015. Of professional services, legal fees totaled $1.0 million for the fiscal
year ended December 31, 2016, a decrease of $0.8 million, or 44%, from $1.8 million incurred for the fiscal year ended December
31, 2015. The decrease was mainly due to a reduction in international legal work and legal fees related to patent activity. Audit
and accounting fees incurred in the fiscal years ended December 31, 2016 and 2015 amounted to $0.6 million and $0.5 million, respectively,
an increase of $0.1 million, or 20%. Investor and public relations fees totaled $1.0 million for the fiscal year ended December
31, 2016, a decrease of $0.3 million, or 23%, from $1.3 million incurred in the fiscal year ended December 31, 2015. The decrease
is due to a reduction in non-deal roadshows and attending less investor-related conferences. Other consulting fees and other professional
fees totaled $0.6 million for the fiscal year ended December 31, 2016, a decrease of $0.1 million, or 14%, from $0.7 million incurred
in the fiscal year ended December 31, 2015. Other professional fees include human resources, finance and corporate consultants.
Travel,
meals and entertainment costs for the fiscal year ended December 31, 2016 were $0.3 million, a decrease of $0.6 million, or 67%,
from $0.9 million incurred in the fiscal year ended December 31, 2015. Travel, meals and entertainment costs include travel related
to business development and investor relations activities, which were significantly reduced from 2015. Office and other administrative
expenses totaled $1.7 million for both reporting periods. Office and other administrative expenses include rent, depreciation,
insurance, business taxes, dues and subscriptions and other office related expenses.
Net
Loss
. As a result of the foregoing, the net loss for the year ended December 31, 2016 was $38.8 million, compared to a
net loss of $48.1 million for the year ended December 31, 2015.
Liquidity
and Capital Resources
As
of June 30, 2017, we had working capital of $33.7 million, comprised primarily of cash and cash equivalents of $34.4 million and
prepaid expenses and other of $1.1 million, which was offset by $1.2 million of accounts payable and $0.6 million of accrued expenses.
A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our ongoing HONOR
study. For the six months ended June 30, 2017 and 2016, we used approximately $9.2 million and $23.5 million of cash in operating
activities, respectively, which represents cash outlays for research and development and general and administrative expenses in
such periods. Decreases in cash outlays principally resulted from reduced spending on manufacturing, non-clinical and clinical
cost and activities, regulatory cost, and payroll. For the six months ended June 30, 2017, net proceeds from financing activities
were from the sale of our common stock of approximately $17.4 million. In the comparable 2016 period, approximately $11.8 million
was raised through the sale of shares of common stock.
Cash
provided by investing activities for the six months ended June 30, 2017 was approximately $7.2 million, related to the maturity
of marketable securities. Investing activities for the six months ended June 30, 2016 related to the maturity of marketable securities
of $7.5 million offset by the purchase of equipment and leasehold improvements of $0.1 million.
April
2017 Financing
On
March 30, 2017, we entered into an underwriting agreement with Aegis Capital Corp., as representative of the several underwriters,
or collectively, the 2017 Underwriters, relating to the issuance and sale of 1,800,000 shares of our common stock, in an underwritten
public offering, or the April 2017 Financing. The public offering price for each share of common stock was $4.45. We granted the
2017 Underwriters an option to purchase up to an additional 270,000 shares of common stock to cover over-allotments, if any.
The
April 2017 Financing closed on April 4, 2017. The 2017 Underwriters purchased the shares at a seven percent discount to the public
offering price, for an aggregate discount of $0.6 million (or $0.31 per share). We incurred offering expenses of approximately
$0.2 million. We received net proceeds of approximately $7.2 million. On April 13, 2017, the 2017 Underwriters fully exercised
the over-allotment option and purchased 270,000 shares of common stock for net proceeds of approximately $1.1 million, net of
an aggregate discount of $0.1 million (or $0.31 per share).
At-the-Market
Offering
On
April 28, 2016, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, as sales agent,
pursuant to which we could have, from time to time, issued and sold common stock with an aggregate value of up to $15.0 million
in at-the-market, or ATM, sales. On the same day, we filed a prospectus supplement under our existing shelf registration
relating to the Sales Agreement. Cowen acted as sole sales agent for any sales made under the Sales Agreement for a 3% commission
on gross proceeds. Our common stock was sold at prevailing market prices at the time of the sale, and, as a result, prices varied.
During the six months ended June 30, 2017, we sold an aggregate of 1,486,474 shares of common stock using the ATM, resulting in
net proceeds of $9.1 million, net of expenses of approximately $0.3 million of Cowen’s commission. With these sales, we
sold all $15 million of shares under the Sales Agreement, and the Sales Agreement was terminated.
Lincoln
Park Equity Offering
On
September 28, 2017, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has agreed to purchase
from us up to an aggregate of $15,000,000 of our common stock (subject to certain limitations) from time to time over the term
of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement, we issued
73,039
Commitment Shares to Lincoln Park.
Future
Liquidity Requirements
We
expect to incur losses from operations for the near future. We expect to incur increasing research and development expenses, including
expenses related to additional clinical trials. We expect that our general and administrative expenses will decrease in the near
term, as we have taken certain measures to reduce costs in order to preserve cash to fund our activities through at least the
end of the ongoing Phase 3 HONOR study in military-related PTSD. Our existing cash and marketable securities are sufficient to
fund our operating expenses and planned clinical trial through at least 12 months from the date of this filing.
Our
future capital requirements will depend on a number of factors, including the progress of our research and development of product
candidates, the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability
of financing and our success in developing markets for our product candidates.
We
will need to obtain additional capital in order to fund future research and development activities. Future financing may include
the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to
raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts
owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue
additional equity or debt securities, shareholders may experience additional dilution or the new equity securities may have rights,
preferences or privileges senior to those of existing holders of our common stock.
If
additional financing is not available or is not available on acceptable terms, we may be required to delay, reduce the scope of
or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements
with collaborative partners or others that may require us to relinquish rights to certain product candidates that we might otherwise
seek to develop or commercialize independently.
Stock
Compensation
Stock
Options
We
have issued awards under our 2012 Incentive Stock Option Plan, 2014 Stock Incentive Plan and 2016 Stock Incentive Plan, or collectively,
the Prior Plans, and under the 2017 Stock Incentive Plan, or the 2017 Plan, and together with the Prior Plans, the Plans. No future
awards are issuable under the Prior Plans.
On
June 16, 2017, our stockholders approved the 2017 Plan. As a result of adoption of the 2017 Plan by the stockholders, no further
grants may be made under the Prior Plans. Under the terms of the 2017 Plan, we may issue (1) stock options (incentive and nonstatutory),
(2) restricted stock, (3) SARs, (4) RSUs, (5) other stock-based awards, and (6) cash-based awards. The 2017 Plan provides for
the issuance of up to 1,280,000 shares of common stock, which amount will be (a) reduced by awards granted under the Prior Plans
after March 31, 2017, and (b) increased to the extent that awards granted under the Plans are forfeited, expire or are settled
for cash (except as otherwise provided in the 2017 Plan).
In
terms of calculating how many shares are reduced or increased based on activity under the Prior Plans after March 31, 2017, the
calculation shall be based on one share for every one share that was subject to an option or SAR and 1.15 shares for every one
share that was subject to an award other than an option or SAR. With respect to awards intended to qualify as performance-based
compensation under Section 162(m) of the Code, the 2017 Plan provides that, subject to adjustment as provided in the plan, no
participant may, in any 12-month period (i) be granted options or SARs with respect to more than 750,000 shares of our common
stock, (ii) earn more than 500,000 shares of our common stock under restricted stock awards, restricted stock unit awards, performance
awards and/or other stock-based awards, or (iii) earn more than $5,000,000 under an award; provided, however, that each of these
limitations shall be multiplied by two (2) with respect to awards granted to a participant during the first calendar year in which
the participant commences employment with us or any of our subsidiaries. The Board of Directors determines the exercise price,
vesting and expiration period of the grants under the 2017 Plan. However, the exercise price of an incentive stock option may
not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more shareholder and 100% of fair
value for a grantee who is not a 10% shareholder. The fair value of the common stock is determined based on quoted market price
or in absence of such quoted market price, by the Board of Directors in good faith. Additionally, the vesting period of the grants
under the 2017 Plan may not be more than five years and expiration period not more than ten years. We reserved 1,280,000 shares
of our common stock for future issuance under the terms of the 2017 Plan. As of June 30, 2017, 1,153,968 shares were available
for future grants under the 2017 Plan.
We
measure the fair value of stock options on the date of grant, based on a Binomial option pricing model using certain assumptions
discussed in the following paragraph, and the closing market price of our common stock on the date of the grant. For employees
and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is
generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. Most stock
options granted pursuant to the Plans typically vest 1/3rd 12 months from the date of grant and 1/36th each month thereafter for
24 months and expire ten years from the date of grant. In addition, we also issue performance-based options to executive officers,
which options vest when the target parameters are met, subject to a one year minimum service period prior to vesting. Stock-based
compensation expense related to awards is amortized over the applicable vesting period using the straight-line method.
On
September 12, 2017, 20,000 options were granted to our new non-employee director for board services for the one year term of the
director’s board appointment, in lieu of cash, exercisable for ten years with a one year vesting from the grant date and
a fair value of $4.25 at the date of grant.
On
June 20, 2017, 150,000 options were granted to our non-employee directors for board services for the one year term of the director’s
board appointment, in lieu of cash, exercisable for ten years with a one year vesting from the grant date and a fair value of
$2.73 at the date of grant.
On
March 1, 2017, 61,750 options were granted to employees with an exercise price of $5.50, exercisable for a period of ten years
and a grant date fair value of $3.36. Additionally, we granted options to purchase 28,250 shares of our common stock to employees
with an exercise price of $5.50, exercisable for a period of ten years and vesting 50% upon our achieving enrollment of 250 participants
in the ongoing HONOR study by December 31, 2017, and the remaining 50% vesting 1% for each participant that is enrolled in the
HONOR study by December 31, 2017 in excess of 250, subject to a one year minimum service period prior to vesting.
On
May 27, 2016, 3,500 options were granted to employees with an exercise price of $24.20 and exercisable for a period of ten years.
Additionally, we granted options to purchase 6,000 shares of our common stock to an employee with an exercise price of $24.20,
exercisable for a period of ten years, and vesting 1/3 each upon our common stock having an average closing sale price equal to
or exceeding each of $60.00, $70.00 and $80.00 per share for 20 consecutive trading days, subject to a one year minimum service
period prior to vesting.
On
February 9, 2016, 40,300 options were granted to employees with an exercise price of $50.30 and exercisable for a period of ten
years. Additionally, we granted options to purchase 20,000 shares of our common stock to employees with an exercise price of $50.30,
exercisable for a period of ten years, and vesting 1/3 each upon our common stock having an average closing sale price equal to
or exceeding each of $60.00, $70.00 and $80.00 per share for 20 consecutive trading days, subject to a one year minimum service
period prior to vesting.
Stock-based
compensation expense relating to options granted of $0.5 million and $1.0 million was recognized for the three and six month periods
ended June 30, 2017, respectively, and $0.7 million and $1.5 million was recognized for the three and six month periods ended
June 30, 2016, respectively.
As
of June 30, 2017, we had approximately $1.5 million of total unrecognized compensation cost related to non-vested awards granted
under the Plans, which we expect to recognize over a weighted average period of 1.23 years.
Employee
Stock Purchase Plan
On
June 9, 2014, we approved the Tonix Pharmaceuticals Holdings Corp. 2014 Employee Stock Purchase Plan, or the 2014 ESPP. The 2014
ESPP allows eligible employees to purchase up to an aggregate of 30,000 shares of our common stock. Under the 2014 ESPP,
on the first day of each offering period, each eligible employee for that offering period has the option to enroll for that offering
period, which allows the eligible employees to purchase shares of our common stock at the end of the offering period. Each offering
period under the 2014 ESPP is for six months, which can be modified from time-to-time. Subject to limitations, each participant
will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions for
the offering period by the applicable purchase price, which is equal to 85 percent of the fair market value of our common
stock at the beginning or end of each offering period, whichever is less. A participant must designate in his or her enrollment
package the percentage (if any) of compensation to be deducted during that offering period for the purchase of stock under the
2014 ESPP, subject to the statutory limit under the Code. As of June 30, 2017, after giving effect to shares purchased, as described
below, there were 1,689 shares available for future issuance under the 2014 ESPP.
The
2014 ESPP is considered a compensatory plan with the related compensation cost written off over the six month offering period.
The compensation expense related to the 2014 ESPP for the six months ended June 30, 2017 and 2016 was $36,000 and $59,000, respectively.
As of June 30, 2017, approximately $76,000 of employee payroll deductions, which had been withheld since January 1, 2017, the
commencement of the offering period ending June 30, 2017, are included in accrued expenses in the accompanying balance sheet.
In July 2017, 17,760 shares that were purchased as of December 31, 2016, were issued under the 2014 ESPP, and approximately $64,000
of employee payroll deductions accumulated at June 30, 2017, related to acquiring such shares, was transferred from accrued expenses
to additional paid in capital. In January 2017, 2,496 shares that were purchased as of December 31, 2016, were issued under
the 2014 ESPP, and approximately $10,000 of employee payroll deductions accumulated at December 31, 2016, related to acquiring
such shares, was transferred from accrued expenses to additional paid in capital.
Restricted
Stock Units
In
February 2017, 5,625 RSUs that were granted to our non-employee directors for board services in 2016, in lieu of cash, with a
one year vesting from the grant date and a fair value of $38.10 at the date of grant vested, and 5,625 shares of our common stock
were issued during the six months ended June 30, 2017.
In
May 2017, 5,625 RSUs vested that were granted to our non-employee directors for board services in 2016, in lieu of cash, with
a one year vesting from the grant date and a fair value of $22.90 at the date of grant, and 4,125 shares of our common stock were
issued during the six months ended June 30, 2017.
Stock-based
compensation expense related to RSU grants was $21,000 and $72,000 for the three and six months ended June 30, 2017, respectively,
and $64,000 and $144,000 for the three and six months ended June 30, 2016, respectively.
Lease
Commitments
As
of September 28, 2017, future minimum lease payments under operating leases for office space were as follows (in thousands):
Year Ending December 31,
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|
|
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2017
|
|
$
|
136
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|
2018
|
|
|
458
|
|
2019
|
|
|
181
|
|
|
|
$
|
775
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Critical
Accounting Policies and Estimates
Our
discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of
these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities
and expenses. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and
on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates.
We
believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation
of our consolidated financial statements.
Research
and Development
. We outsource our research and development efforts and expense the related costs as incurred, including the
cost of manufacturing product for testing, licensing fees and costs associated with planning and conducting clinical trials. The
value ascribed to patents and other intellectual property acquired was expensed as research and development costs, as it related
to particular research and development projects and had no alternative future uses.
We
estimate our accrued expenses. Our clinical trial accrual process is designed to account for expenses resulting from our obligations
under contracts with vendors, consultants and clinical research organizations and clinical site agreements in connection with
conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract
and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts.
We account for trial expenses according to the progress of the trial as measured by participant progression and the timing of
various aspects of the trial. We determine accrual estimates that take into account discussions with applicable personnel and
outside service providers as to the progress or state of completion of trials, or the services completed. During the course
of a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates. We make estimates
of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us at that time. Our clinical
trial accruals and prepaid assets are dependent upon the timely and accurate reporting of CROs and other third-party vendors.
Stock-Based
Compensation
. All stock-based payments to employees and to nonemployee directors for their services as directors consisted
of grants of restricted stock and stock options, which are measured at fair value on the grant date and recognized in the condensed
consolidated statements of operations as compensation expense over the relevant vesting period. Restricted stock payments to nonemployees
are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date
a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are
nonforfeitable, the measurement date is the date the award is issued.
Income
Taxes
. Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating
loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial
reporting amounts measured at the current enacted tax rates. We record an estimated valuation allowance on its deferred income
tax assets if it is not more likely than not that these deferred income tax assets will be realized. We recognized a tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements
from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate
settlement.
Recent
Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-02, Leases
(Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of
short-term leases) at the commencement date: a lease liability, which is a lessee‘s obligation to make lease payments arising
from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right
to use, or control the use of, a specified asset for the lease term. Public business entities should apply the amendments in ASU
2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application
is permitted. Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing
at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified
retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period
presented. Lessees may not apply a full retrospective transition approach. We are currently evaluating the impact of adopting
this guidance.
In
November 2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to provide guidance on the presentation
of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing the diversity in presentation.
This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. This
update may have an effect on our future classification of certain transactions on our consolidated statement of cash flows and
related disclosures.
BUSINESS
Business
Overview
Tonix
is a clinical-stage pharmaceutical company dedicated to the development of innovative pharmaceutical products to address public
health challenges. Our most advanced drug development program is focused on delivering an efficacious and safe long-term treatment
for PTSD. PTSD is characterized by chronic disability, inadequate treatment options, high utilization of healthcare services,
and significant economic burden. We have assembled a management team with significant industry experience to lead the development
of our product candidates. We complement our management team with a network of scientific, clinical, and regulatory advisors that
includes recognized experts in the fields of PTSD and other central nervous system disorders. In September 2016, we discontinued
our fibromyalgia program in order to fully focus our resources on our PTSD program.
In
June 2017, the FDA conditionally accepted the proposed trade name Tonmya for TNX-102 SL, for the treatment of PTSD. The FDA's
final approval of Tonmya as a name for TNX-102 SL for the treatment of PTSD is subject to an NDA approval. A request for review
of Tonmya as the proposed name for TNX-102 SL for the management of fibromyalgia has been withdrawn at the FDA. The PTO has granted
the federal registration of the Tonmya mark.
Our
lead product candidate, Tonmya, a proprietary low-dose CBP sublingual tablet, designed for bedtime administration, is in Phase
3 development as a potential treatment for PTSD. Our development pipeline includes: TNX-601 (tianeptine oxalate), a separate pre-IND
candidate designed for daytime administration as a potential treatment of PTSD and for cognitive dysfunction associated with steroid
use; TNX-801, a potential smallpox-preventing vaccine based on a live synthetic version of HPXV; TNX-301 an IND candidate for
the treatment of AUD; and TNX-701, a biodefense development program for protection from radiation injury. We hold worldwide development
and commercialization rights to all of our product candidates.
Tonmya
– Posttraumatic Stress Disorder Program
Tonmya
is a small, rapidly disintegrating tablet containing CBP for sublingual administration and transmucosal absorption. Tonmya has
a proprietary, Protectic™ protective eutectic formulation of CBP that allows for rapid systemic exposure and increased bioavailability
through the transmucosal delivery. We are developing Tonmya for the management of PTSD under an IND cleared by the FDA, in June
2014.
An
estimated 8.6 million adults in the U.S. suffer from PTSD, a chronic disorder that is characterized by hyperarousal, avoidance,
emotional numbing, and sleep disturbances. People with PTSD suffer significant impairment in their functioning, including occupational
activities and social relations, and are at elevated risk for impulsive, violent behaviors toward others and themselves, including
suicide. Many patients fail to adequately respond to the medications approved for PTSD. Antidepressants, sedative-hypnotics and
antipsychotics not approved for PTSD are commonly prescribed despite generally weak evidence in support of their use. Antianxiety
drugs, also called anxiolytics, are not approved for PTSD, but are commonly prescribed despite the recommendations against their
use by many experts. Anxiolytics are comprised of benzodiazepine and non-benzodiazepine drugs, which carry risks of tolerance
and addiction and are also associated with potential serious side-effects, such as retrograde amnesia.
Our
Strategy
Our
objective is to develop and commercialize our product candidates. The principal components of our strategy are to:
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Develop Tonmya
for PTSD and TNX-102 SL for Other Indications
. We currently are focusing on the development of Tonmya for PTSD. Our
broader development strategy is to leverage the patentable formulation to explore the clinical potential of TNX-102 SL in
multiple other central nervous system disorders that are underserved by currently available medications and represent large
unmet medical needs;
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Maximize the
commercial potential of Tonmya
. We plan to commercialize Tonmya for PTSD, either on our own or through collaboration
with partners. We believe Tonmya can be marketed to U.S. physicians either by an internal sales force that we will build or
by a contract sales organization, which we would engage. An alternative strategy would be to enter into partnership agreements
with drug companies that already have significant marketing capabilities in the same, or similar, therapeutic areas. If we
determine that such a strategy would be more favorable than developing our own sales capabilities, we would seek to enter
into collaborations with pharmaceutical or biotechnology companies for the commercialization of Tonmya;
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Pursue a broad
intellectual property strategy to protect our product candidates
. We are pursuing a broad patent strategy for our
product candidates, and we endeavor to generate new patent applications as supported by our innovations and conceptions as
well as to advance their prosecution. In the cases of Tonmya and TNX-102 SL, we own patents and patent applications protecting
its composition-of-matter, certain methods of its use, its formulation, and its pharmacokinetic properties. We recently received
a Notice of Allowance from the PTO, for patent claims that will protect the pharmaceutical eutectic composition of Tonmya
or TNX-102 SL until 2034. We were issued U.S Patent No. 9,636,408 for patent claims that will protect the composition and
manufacture of a unique formulation that characterizes Tonmya and TNX-102 SL until 2034. We plan to opportunistically apply
for new patents to protect TNX-102 SL and our other product candidates;
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Provide value
propositions to merit market demand and reimbursement for our product candidates
. We are designing the development
programs for our product candidates to demonstrate their value propositions to patients, prescribers, and third-party payors.
In the case of Tonmya, we have been engaged in market research and commercial assessment activities, the results of which
we may use to inform future commercial strategy. We plan to continue these activities in tandem with our clinical development
of Tonmya and to conduct similar work in relation to our other product candidates as they advance in their development; and
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Pursue additional
indications and commercial opportunities for our product candidates
. We will seek to maximize the value of TNX-102
SL, and our other product candidates by pursuing other indications and commercial opportunities for such candidates. For example,
we own rights related to the development and commercialization of CBP for fibromyalgia, generalized anxiety disorder, depression,
and fatigue related to disordered sleep.
|
Disease
and Market Overview
Our
product candidates address disorders that are not well served by currently available therapies and represent large potential commercial
market opportunities. Background information on the disorders and related commercial markets that may be addressed by our clinical-stage
product candidates is set forth below.
Posttraumatic
Stress Disorder
PTSD
is a chronic syndrome that may develop after a person is exposed to one or more traumatic events, such as warfare, sexual assault,
serious injury, or threat of imminent death. The core symptom clusters of PTSD are avoidance, emotional numbing, hyperarousal,
and intrusion, where the triggering event is commonly re-experienced by the individual through intrusive, recurrent recollections,
flashbacks, and nightmares. People with PTSD suffer significant impairment in their daily functioning, including occupational
activities and social relations, and are at elevated risk for impulsive violent behaviors toward others and themselves, including
suicide. Of those who experience significant trauma, approximately 20% of women and 8% of men develop PTSD. According to the U.S.
Department of Veterans Affairs, the prevalence rate of PTSD in the military population is higher than that among civilians. As
of 2015, there were approximately 638,000 veterans receiving treatment for PTSD in the Veterans Health Administration, or VHA.
Based on March 2015 VHA data, more than 19% of military veterans involved in recent conflicts were seen at VHA facilities for
potential or provisional PTSD.
The
medications currently approved by the FDA for the treatment of PTSD show little evidence of a treatment effect in men, lack evidence
of efficacy in those for whom the traumatic event was combat-related, and carry suicidality warnings. Sleep disturbances are central
features of PTSD and are predictive of disease severity, depression, substance abuse, and suicidal ideation, yet are resistant
to the approved medications and present a difficult therapeutic challenge. Current PTSD treatments include off-label use of anxiolytics,
sedative-hypnotics, and antipsychotics, many of which lack reliable evidence of efficacy, and have significant safety liabilities
and dependence risk.
Tonmya
Overview
Tonmya
or TNX-102 SL is a proprietary sublingual tablet formulation of CBP that efficiently delivers CBP across the oral mucosal membrane
into the systemic circulation. We are developing Tonmya for PTSD. We own all rights to Tonmya in all geographies, and we bear
no obligations to third-parties for any future development or commercialization. Excipients used in Tonmya are approved for pharmaceutical
use. Some of the excipients were specially selected to promote a local oral environment that facilitates mucosal absorption of
CBP.
The
current Tonmya or TNX-102 SL sublingual tablets contain 2.8 mg of CBP. For the treatment of PTSD, 5.6 mg of Tonmya, comprised
of two Tonmya 2.8 mg tablets administered simultaneously at bedtime, is in Phase 3 development. We selected this dose with the
goal of providing a balance of efficacy, safety, and tolerability that would be acceptable as a first-line therapy and for long-term
use, and in patient populations characterized by burdensome symptoms and sensitivity to medications.
The
active ingredient in Tonmya or TNX-102 SL, CBP, is a serotonin 2A and alpha-1 adrenergic receptor antagonist as well as an inhibitor
of serotonin and norepinephrine reuptake. In PTSD, both paroxetine and sertraline are believed to exert their clinical benefit
primarily by blocking serotonin reuptake. As such, Tonmya acts upon cellular receptors that play important roles in the treatment
of PTSD, including the transporters that mediate serotonin and norepinephrine reuptake. In addition, Tonmya also acts upon other
receptors in the central nervous system not targeted by products approved for PTSD, including the serotonin 2A, alpha-1 adrenergic
and histamine H-1 receptors.
CBP
is the active ingredient of two products that are approved in the U.S. for the treatment of muscle spasm: FLEXERIL
®
(5 mg and 10 mg oral immediate-release, or IR, tablet) and AMRIX
®
(15 mg and 30 mg oral extended-release capsule).
The FLEXERIL brand of CBP IR tablet has been discontinued since May 2013. There are numerous generic versions of CBP IR tablets
on the market. CBP-containing products are not indicated for the treatment of PTSD. CBP-containing products are approved for short
term use (two to three weeks) only as an adjunct to rest and physical therapy for relief of muscle spasm associated with acute,
painful musculoskeletal conditions. IR CBP tablets are recommended for three times per day dosing, which results in relatively
stable blood levels of CBP after several days of treatment. Extended-release CBP capsules taken once a day mimic, and flatten,
the pharmacokinetic profile of three times per day IR CBP tablets.
We
designed Tonmya and TNX-102 SL to be administered once-daily at bedtime and intended for long-term dosing regimen. We believe
the selected dose of Tonmya and its pharmacokinetic profile will enable it to achieve a desirable balance of efficacy, safety,
and tolerability in PTSD. Our Phase 1 comparative trials showed that, on a dose-adjusted basis, Tonmya results in faster systemic
absorption and significantly higher plasma levels of CBP in the first hour following sublingual administration relative to oral
IR CBP tablets. In clinical studies, Tonmya 2.8 mg and Tonmya 5.6 mg were generally well-tolerated, with no SAEs reported in these
studies. Some subjects experienced transient numbness of the tongue after Tonmya administration.
We
expect that any applications we submit to the FDA for approval of Tonmya for the treatment of PTSD will be submitted under Section
505(b)(2) of the FDCA for product candidates containing an active ingredient that is similar or identical to an already approved
product. In general, the development timeline for a 505(b)(2) NDA is shorter and less expensive than an NDA developed under Section
505(b)(1), which is for NCEs that have never been approved in the United States. Currently, we are pursuing the development of
Tonmya for PTSD, for which Tonmya is in Phase 3 development. We believe that Tonmya and TNX-102 SL have the potential to provide
clinical benefit to this and possibly other CNS indications that are underserved by currently marketed products.
On
May 2, 2017, we were issued U.S. patent 9,636,408 “Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline
Hydrochloride”, which includes compositions of CBP and methods of manufacturing the eutectic. The Protectic™ protective
eutectic and Angstro-Technology™ formulation claimed in the patent are important elements of our proprietary Tonmya or TNX-102
SL composition. The patent is expected to provide Tonmya with U.S. market exclusivity until 2034. Eutectic tablets containing
CBP and mannitol eutectic have good pharmaceutical stability and manufacturability. A solid eutectic is a form of matter in which
two solid crystals co-penetrate each other, such that the inter-molecular space between the units of one crystal lattice are occupied
by the other crystal’s lattice. The distance between the molecular units is not changed. A Notice of Allowance signifies
that we will be entitled to receive patent protection until 2034 in the U.S. for the allowed claims when the patent is issued.
On
September 13, 2017, we were issued European patent 2501234 “Methods and Compositions for Treating Symptoms Associated with
PTSD Using Cyclobenzaprine”. This patent protects the use of Tonmya for the treatment of PTSD as well as its active ingredient
CBP for the treatment of PTSD. The patent is expected to provide Tonmya with European market exclusivity until 2030 and may be
extended based on the timing of the European marketing authorization of Tonmya for PTSD.
Tonmya
– PTSD Program
We
are developing Tonmya for the treatment of PTSD under an effective IND application.
Clinical
Development Plan
Phase
2 AtEase Study
In
the first quarter of 2015, we commenced a randomized, double-blind, placebo-controlled, 12-week Phase 2 study of Tonmya in participants
with military-related PTSD, which we refer to as the AtEase study. The primary objective of this study was to evaluate the potential
clinical benefit of using Tonmya to treat military-related PTSD at a dose of 2.8 mg or 5.6 mg (2 x 2.8 mg tablets). The primary
efficacy endpoint was the 12-week mean change from baseline in the severity of PTSD symptoms as measured by the CAPS-5 between
those treated with Tonmya and those receiving placebo. The CAPS-5 scale is a standardized structured clinician interview and is
considered the gold standard in clinical research and regulatory approval for measuring the symptom severity of PTSD.
In
the AtEase study, participants experienced their index trauma during military service in 2001 or later and had a baseline CAPS-5
score of 29 or higher, and were randomized in a 2:1:2 ratio to bedtime daily Tonmya 2.8 mg, Tonmya 5.6 mg, or placebo sublingual
tablets for 12 weeks, respectively. The AtEase study was conducted at 24 U.S. centers and enrolled 231 participants in the modified
intent-to-treat population. We reported topline results from the AtEase study in May 2016.
AtEase
was adequately designed to evaluate whether a 2.8 mg dose would be efficacious, which would have provided an opportunity for this
study to be used as one of the two pivotal efficacy studies required to support approval of Tonmya for the treatment of PTSD.
Although the 2.8 mg dose trended in the direction of a therapeutic effect, it did not reach statistical significance on the primary
endpoint. The 5.6 mg dose had a therapeutic effect as assessed by the CAPS-5 scale, which was statistically significant by MMRM
with MI analysis (p-value = 0.031), even though this arm of the study, by design, included only approximately half the number
of participants of the 2.8 mg and placebo arms. Tonmya 5.6 mg demonstrated a dose-effect on multiple efficacy and safety measurements
in the AtEase study.
In
the AtEase study, Tonmya was well tolerated and the participant retention rate was 73% on placebo, 79% on Tonmya 2.8 mg and 84%
on Tonmya 5.6 mg. Four distinct SAEs were reported in the study; three were in the placebo group, and one (proctitis/peri-rectal
abscess) in the Tonmya arm, which was determined to be unrelated to Tonmya. The most common non-dose related adverse events were
mild and transient local administration site conditions and of these oral hypoaesthesia, or numbness, was the most frequent and
occurred in 39% of participants treated with the 2.8 mg dose and 36% of the participants treated with the 5.6 mg dose, compared
to 2% of the participants receiving placebo. Oral paresthesia, or tingling, occurred in 16% of participants treated with the 2.8
mg dose and 4% of participants treated with the 5.6 mg dose, compared to 3% of the participants receiving placebo. Glossodynia,
or a burning or stinging sensation in the mouth, occurred in 3% of participants treated with the 2.8 mg dose and 6% of participants
treated with the 5.6 mg dose, compared to 1% of participants receiving placebo. Systemic adverse events that were potentially
dose-related and occurred in greater than or equal to 5% of participants treated with the 5.6 mg dose or placebo included: somnolence
in 16% versus 6% of the participants receiving placebo; dry mouth in 16% versus 11% of the participants receiving placebo; headache
in 12% versus 4% of the participants receiving placebo; insomnia in 6% versus 9% of the participants receiving placebo; sedation
in 12% versus 1% of the participants receiving placebo; upper respiratory tract infection in 4% versus 5% of the participants
receiving placebo; abnormal dreams in 2% versus 5% of the participants receiving placebo; and weight increase in 2% versus 5%
of the participants receiving placebo. For the participants treated with the 2.8 mg dose, the incidence of the most common systemic
adverse events reported above were less frequent than participants treated with the 5.6 mg dose with the exception of insomnia,
which was 8%.
Retrospective
analysis of the AtEase study suggested that the subset of participants with CAPS-5 score of 33 or higher was equivalent to the
population of PTSD subjects studied in prior FDA registration studies of paroxetine and sertraline using older versions of the
Clinician-Administered PTSD Scale. To confirm this efficacy evidence, our ongoing Phase 3 program enrolls participants with baseline
CAPS-5 score of 33 or higher. The beneficial effects of Tonmya 5.6 mg were preserved in the subgroup with PTSD from combat traumas
(85% of AtEase population). Also, sustained remission (i.e. satisfying remission criterion of CAPS-5 score less than 11 at both
week 8 and week 12) was observed in 21% of participants receiving a 5.6 mg dose of Tonmya as compared to 5% of participants in
the placebo group (p = 0.02, logistic regression). The AtEase study supported the hypothesized mechanism of sleep quality improvement,
since additional retrospective analyses showed that in the CAPS-5 score of 33 or higher subset of participants, sleep improvement
at week 4, measured by the PROMIS Sleep Disturbance instrument, predicted treatment response (by improvement in total CAPS-5 score
without the sleep item) at week 12 in the Tonmya 5.6 mg group (p = 0.01, linear regression).
Open-label
Extension Study for AtEase
Participants
who completed the AtEase study were eligible to enroll into a three-month open-label extension study with Tonmya 2.8 mg. We conducted
this open-label extension study to obtain additional safety information from participants in the AtEase Study. The clinical phase
of this open-label extension study is complete. Tonmya 2.8 mg was well tolerated for up to six months of treatment and no new
safety signals were revealed in this open-label extension study.
Ongoing
Phase 3 Study
We
have commenced the HONOR study, a randomized, double-blind, placebo-controlled Phase 3 study of Tonmya in approximately 550 participants
with military-related PTSD in the first quarter of 2017. This study is an adaptive design study based on the results of the Phase
2 AtEase study. The study design is very similar to the Phase 2 AtEase study, except there will be one planned IA and the
involvement of the IDMC to review unblinded IA results. The IDMC will make a recommendation to continue as planned, to continue
but increase the number of recruited participants or to stop for success. In addition, there will be one active dose (5.6
mg administered as 2 x 2.8 mg tablets) and the entrance criterion is CAPS-5 ≥ 33 in this Phase 3 study. The IA will be conducted
when approximately 50% (approximately 250 – 300 participants) of the initially planned participant enrollment is evaluable
for efficacy. We received FDA acceptance of the Phase 3 HONOR study design in January of 2017. The HONOR study is being conducted
at approximately 45 U.S. sites. As in the case of the AtEase study, the primary efficacy endpoint of the HONOR study is the 12-week
mean change from baseline in the severity of PTSD symptoms as measured by the CAPS-5 scale between those treated with Tonmya and
those receiving placebo.
Open-label
Extension Study for HONOR
To
obtain additional safety information from participants in the HONOR study, participants who completed the HONOR study are eligible
to enroll into a 12-week open-label extension study with Tonmya 5.6 mg. This open-label extension study is ongoing.
Prospective
Phase 3 Study
A
second, randomized, double-blind placebo-controlled Phase 3 study of Tonmya (5.6 mg administered as 2 x 2.8 mg tablets) in approximately
550 predominantly civilian PTSD participants will follow. We expect this study to be conducted at approximately 45 U.S. sites.
As in the case of the HONOR and AtEase studies, the primary efficacy endpoint of this second Phase 3 study will be the 12-week
mean change from baseline in the severity of PTSD symptoms as measured by the CAPS-5 scale between those treated with Tonmya and
those receiving placebo.
Long-Term
Safety Exposure Study for Tonmya
In
addition to the ongoing 12-week open-label extension study for HONOR, we plan to conduct the registration-required open-label
extension studies of Tonmya in participants who complete either the 12-week open-label extension study of HONOR study or the predominantly
civilian PTSD Phase 3 study. The goal of the open-label extension studies is to obtain adequate 6- and 12-month safety exposure
data from Tonmya 5.6 mg to support its registration for the treatment of PTSD, a chronic psychiatric condition.
Regulatory
Update
We
held an End-of-Phase 2 CMC meeting with the FDA in February 2016 to discuss the quality data requirement for an NDA submission
for Tonmya. In general, our proposed NDA CMC plan for Tonmya was acceptable to the FDA and can be applied to the PTSD NDA.
Subsequent
to reporting the Phase 2 AtEase study topline result, we held an End-of-Phase 2/Pre-Phase 3 meeting with the FDA in early August
2016 to discuss the Phase 3 program required to support the registration of Tonmya for the treatment of PTSD and the remaining
data package for the NDA filing. Based on this meeting discussion and the official FDA meeting minutes, we expect that positive
results from two adequate, well-controlled Phase 3 efficacy and safety studies and long-term (six- and 12-month) safety exposure
studies would provide sufficient evidence of efficacy and safety to support the clinical approval of Tonmya for the treatment
of PTSD. As described below, the first Phase 3 study will be in participants with military-related PTSD and the second Phase 3
study will study predominately civilian PTSD participants.
In
December 2016, the FDA granted Breakthrough Therapy designation to Tonmya for the treatment of PTSD. The Breakthrough Therapy
designation request was based on the preliminary clinical evidence of Tonmya on military-related PTSD in the AtEase study.
Breakthrough
Therapy designation is intended to expedite the development and review of drugs for serious or life-threatening conditions. The
benefits of Breakthrough Therapy designation include the eligibility for priority review of the NDA within six months instead
of 10 months and rolling submission of completed portions of the NDA, in addition to an organizational commitment involving FDA's
senior managers contributing significant guidance. The FDA is committing to provide us timely advice and interactive communications
related to the design and efficient execution of our Breakthrough Therapy development program.
In
March 2017, we held the Initial Cross-Disciplinary Breakthrough Therapy Type B meeting with the FDA to discuss the opportunity
to accelerate the development and submission of the Tonmya NDA for the treatment of PTSD. Based on our discussions with the FDA
and the FDA official meeting minutes, a single-study NDA approval could be possible based on statistically persuasive topline
data from the ongoing HONOR study. Additionally, due to the lack of evidence of potential abuse in clinical studies of Tonmya,
the FDA agreed that studies in assessing abuse and dependency potential of Tonmya are not required to support the Tonmya NDA filing.
In
May 2017, the PTO issued us U.S. Patent No. 9,636,408. The patent, “Eutectic Formulations of Cyclobenzaprine Hydrochloride
and Amitriptyline Hydrochloride,” claims the composition and manufacture of a unique formulation that characterizes Tonmya.
The patent is expected to provide Tonmya with U.S. market exclusivity until 2034 upon NDA approval.
In
June 2017, the FDA conditionally accepted the proposed trade name Tonmya for TNX-102 SL (cyclobenzaprine HCl sublingual tablets)
for the treatment of PTSD.
On
September 7, 2017, we had a Breakthrough Therapy CMC Guidance Meeting with the FDA to discuss the CMC plan for the Tonmya NDA
filing. Formal meeting minutes from the FDA will be available in October.
On
September 13, 2017, we were issued European patent 2501234 “Methods and Compositions for Treating Symptoms Associated with
PTSD Using Cyclobenzaprine”. This patent protects the use of Tonmya for the treatment of PTSD as well as its active ingredient
CBP for the treatment of PTSD. The patent is expected to provide Tonmya with European market exclusivity until 2030 and may be
extended based on the timing of the European marketing authorization of Tonmya for PTSD.
Other
NDA Requirements
An
Agreed Initial Pediatric Study Plan, or Agreed iPSP, is required for the initial NDA submission. We submitted a revised iPSP in
the first quarter of 2017, which incorporated the FDA comments received on our iPSP submitted in the third quarter of 2016. Additional
comments from the FDA were received in second quarter of 2017 on our revised iPSP. We plan to submit an Agreed iPSP in the first
quarter of 2018. A Final Pediatric Study Plan requirement will be determined at the time of the NDA approval.
Based
on our discussions with the FDA and the FDA official meeting minutes, we will not have to conduct special populations (geriatric
and renal/hepatic impaired), drug-drug interaction or cardiovascular safety studies to support the NDA filing. Due to the well-established
safety profile of CBP at much higher doses than we proposed for PTSD and the long-term safety data (up to 15 months) on Tonmya
2.8 mg in a prior fibromyalgia program, the FDA has not requested a risk management plan or medication guide for this product.
Similarly, no drug abuse and dependence study is required for this NDA.
Phase
1 Bioequivalence, Bridging PK, Food-Effect and Dose-Proportionality Studies
Completed
Bioequivalence Study
We
completed a Phase 1 bioequivalence study that compared the pharmacokinetic profiles of single-dose of Tonmya 2.8 mg tablets manufactured
at two facilities: (i) the facility used to produce Tonmya 2.8 mg tablets for the Phase 2 AtEase study; and (ii) the facility
used to produce Tonmya 2.8.mg tablets for our clinical studies required to support the PTSD NDA submission and the to-be-marketed
product. This bioequivalence study demonstrated that the Tonmya 2.8 mg tablets manufactured at these two facilities were bioequivalent,
supporting the use of the AtEase study to support the Phase 3 studies.
Planned
Multi-dose Bridging PK Study
We
intend to seek FDA marketing approval for Tonmya pursuant to Section 505(b)(2) of the FDCA using AMRIX
®
extended-release
capsules (30 mg) as our RLD. As agreed upon by the FDA, we plan to study Tonmya 5.6 mg (administered as 2 x 2.8 mg tablets) in
comparison to AMRIX 30 mg extended-release capsules in a randomized, open-label, parallel, multiple-dose bridging PK study to
provide a systemic exposure bridge. If the exposures of Tonmya 5.6 mg are less than or comparable to the RLD maximum approved
dose (30 mg) for the initial dose and at steady state, the results of this study will provide the necessary systemic exposure
bridge of Tonmya 5.6.mg to AMRIX 30 mg extended-release capsules and the approval of Tonmya for PTSD NDA can thus rely on the
safety findings (clinical and nonclinical) of the currently approved CBP drug products.
Food
Effect and Dose-proportionality Studies
To
support the Tonmya product registration, a randomized, open-label, 2-way crossover, food-effect, comparative bioavailability study
of Tonmya following a single dose in healthy subjects under fasting and fed conditions and a randomized, open-label, 2-way crossover,
dose-proportionality, comparative bioavailability study of a single dose Tonmya 2.8 mg vs 5.6 mg in healthy subjects under fasting
conditions will be completed for the Tonmya NDA submission.
Cyclobenzaprine
Hydrochloride Nonclinical Development
The
FDA has accepted our proposed nonclinical data package to support our PTSD NDA filing. In October 2016, we completed the six-month
repeated-dose toxicology study of the active ingredient, CBP in rats and a nine-month repeated-dose toxicology study in dogs required
for the NDA filing and to support Phase 3 clinical studies outside the U.S., if necessary. These chronic toxicity studies were
requested by the FDA to augment the nonclinical information in the AMRIX approved prescribing information, or labeling, which
is necessary to support the Tonmya labeling for long-term use. Based on the prescribing information of AMRIX and the post-marketing
surveillance information, there is no evidence of abuse for CBP. As a result, the FDA has advised that we will not have to assess
the abuse and dependency potential of Tonmya to support the Tonmya 505(b)(2) NDA submission for the treatment of PTSD.
Manufacturing
The
Tonmya and TNX-102 SL drug products were manufactured in a small-scale cGMP facility that is licensed to manufacture clinical
trial materials, but not equipped for large-scale commercial production. For the clinical trial materials for Phase 3 clinical
and NDA required Phase 1 studies, and for the commercial product, we have engaged a commercial cGMP facility that is capable of
manufacturing the registration batches to support the NDA. The product’s comparability is supported by the bioequivalence
results of the single-dose pharmacokinetic study.
Additional
Product Candidates
We
also have a pipeline of other drug and biologic candidates, including two pre-IND candidates, TNX-601 for PTSD and TNX-801, a
biologic vaccine product for the prevention of smallpox, as well as an IND candidate, TNX-301, a potential treatment for AUD.
TNX-601
TNX-601
is a novel oral formulation of tianeptine oxalate in the pre-IND stage of development for the treatment for PTSD. Currently there
is no tianeptine-containing product approved in the U.S., but tianeptine sodium (amorphous) has been marketed in Europe, Asia,
and Latin America for the treatment of depression since 1987. It is effective in various depressive states and also improves depression-associated
anxiety and somatic complaints. We have discovered a novel oxalate salt and polymorph, which we believe may provide improved stability,
consistency, and manufacturability relative to the known forms of tianeptine. Like CBP, tianeptine shares structural similarities
with classic tricyclic antidepressants, but it has unique pharmacological and neurochemical properties. Tianeptine modulates the
glutamatergic system indirectly and reverses the neuroplastic changes that are observed during periods of stress and corticosteroid
use. It is a weak mu-opioid receptor (MOR) agonist, but does not have significant affinity for other known neurotransmitter receptors.
Due to its use in Europe, Asia, and Latin America for several decades, tianeptine has an established safety profile. In addition
to being used to treat depression, several published studies support the potential of tianeptine as a potentially effective and
safe therapy for patients with PTSD. Leveraging our development expertise in PTSD, TNX-601 is being developed for daytime usage
as a first-line monotherapy for PTSD. Tianeptine’s reported pro-cognitive and anxiolytic effects as well as its ability
to attenuate the neuropathological effects of excessive stress responses suggest that it may be used to treat PTSD by a different
mechanism of action than Tonmya.
On
April 19, 2016, we were issued US patent 9,314,469 B2 “Method for treating neurocognitive dysfunction,” which includes
using tianeptine for cognitive dysfunction associated with corticosteroid use. We intend to develop TNX-601 under Section 505(b)(1)
of the FDCA as a potential treatment for PTSD and cognitive dysfunction associated with corticosteroid use. Pharmaceutical development
work on TNX-601 has been initiated.
TNX-801
TNX-801
is a novel potential smallpox-preventing vaccine based on a live synthetic version of HPXV grown in cell culture. TNX-801 was
synthesized by Professor David Evans and Dr. Ryan Noyce at the University of Alberta, Canada in collaboration with us. HPXV has
protective vaccine activity in mice, using a model of lethal vaccinia infection. Vaccine manufacturing activities have been initiated
to support further nonclinical testing of TNX-801. We are developing TNX-801 as a potential smallpox-preventing vaccine for widespread
immunization and for the U.S. strategic national stockpile. Though it shares structural characteristics with vaccinia-based vaccines,
TNX-801 has unique virulence properties that we believe may suggest lower toxicity and potential safety advantages over existing
vaccinia-based vaccines, which have been associated with adverse side effects such as myopericarditis.
We
intend to develop TNX-801 under the Animal Rule. In the 1970s, vaccination against smallpox was discontinued in the U.S.; however,
smallpox remains a material threat to national security. We recently filed a patent on the novel virus vaccine. In addition, 12
years of non-patent based exclusivity is expected under the Patient Protection and Affordable Care Act. Following the recent passage
of the 21st Century Cures Act, we believe TNX-801 qualifies as a medical countermeasure, and therefore should be eligible for
a Priority Review Voucher upon receiving FDA licensure. We are currently working to develop a vaccine that meets cGMP quality
to support an IND study.
TNX-301
TNX-301
is a fixed-dose CDP containing two FDA-approved drugs, disulfiram and selegiline. We intend to develop TNX-301 CDP under Section
505(b)(2) of the FDCA as a potential treatment for AUD, and we have commenced development work on TNX-301 formulations. A pre-IND
meeting was held in February 2016 to discuss the clinical development program of TNX-301 for AUD. At that meeting, the FDA advised
us of the nonclinical studies required for this CDP IND application to support the initiation of the first-in-man study with TNX-301.
IND planning activities are underway.
TNX-701
In
addition, we own rights to intellectual property on a biodefense technology relating to the development of protective agents against
radiation exposure, which we refer to as TNX-701. We have begun nonclinical research and development on TNX-701. Similar to the
regulatory pathway intended for TNX-801, we plan to develop TNX-701 under the Animal Rule. We expect significant reduction in
development costs and risks compared to the development of other NCEs or new biologic candidates.
Competition
Our
industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large
pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government
agencies and research institutions. We believe that key competitive factors that will affect the development and commercial success
of our product candidates are efficacy, safety, tolerability, reliability, price and reimbursement level. Many of our potential
competitors, including many of the organizations named below, have substantially greater financial, technical and human resources
than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other
regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful
than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may
be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates
obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates.
We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become
available. Further, the development of new treatment methods for the conditions we are targeting could render our drugs non-competitive
or obsolete.
The
markets for medicines to treat PTSD and other CNS conditions are well developed and populated with established drugs marketed
by large and small pharmaceutical, biotechnology and generic drug companies. GlaxoSmithKline (Paxil
®
) and Pfizer
(Zoloft
®
) market FDA-approved drugs for PTSD. Paxil and Zoloft lost their U.S. patent exclusivities in 2003 and
2006, respectively.
Certain
other companies and institutions are known to be developing prescription medications for PTSD, including Bionomics (BNC-201),
Otsuka/Lundbeck (Rexulti
®
[brexpiprazole]), Uniformed Services University of the Health Sciences (riluzole) and
the Multidisciplinary Association of Psychedelic Studies (methylenedioxymethamphetamine [MDMA]). BNC-201 is in Phase 2 for civilian
PTSD and is an allosteric modulator of the
alpha
7 nicotinic acetylcholine receptor.
Rexulti is in Phase 2 for PTSD and is an atypical antipsychotic. Riluzole is in a Phase 2 trial for active duty military members
and veterans with PTSD and is a blocker of certain sodium channels and a modulator of the glutamatergic system. MDMA is Phase
3 ready for PTSD and is a DEA schedule 1 hallucinogen that is being studied for drug-assisted psychotherapy. MDMA was awarded
Breakthrough Therapy designation by the FDA in August 2017. Brainsway Ltd., a medical device company, is currently recruiting
patients for a pivotal Phase 3 trial using a deep transcranial magnetic stimulation device. A number of other companies have or
may be developing prescription medications for PTSD, including Actavis, Johnson and Johnson, Marinus Pharmaceuticals, Merck, and
Pfizer. Medications that are used off-label for the treatment of PTSD include: anti-depressants, such as nefazodone and trazodone;
the antihistamine cyproheptadine; and certain atypical antipsychotics, such as olanzapine and risperidone. Additionally, a number
of companies are working on vaccines/treatments for smallpox, including Bavarian Nordic, SIGA and Chimerix. Bavarian Nordic is
developing MVA, which is a vaccine. SIGA is developing Arestvy
®
(tecovirimat), which is an antiviral. Chimerix
is developing brincidofovir (CMX001), which is an antiviral.
Intellectual
Property
We
believe that we have an extensive patent portfolio and substantial know-how relating to Tonmya or TNX-102 SL and our other product
candidates. Our patent portfolio, described more fully below, includes claims directed to Tonmya compositions and methods of use.
As of September 28, 2017, the patents we are either the owner of record of or own the contractual right to include five issued
U.S. patents and 26 issued non-U.S. patents. We are actively pursuing an additional 16 U.S. patent applications, of which five
are provisional and 11 are non-provisional, one international patent application, and 68 non-U.S./non-international patent applications.
We
strive to protect the proprietary technology that we believe is important to our business, including our proprietary technology
platform, our product candidates, and our processes. We seek patent protection in the United States and internationally for our
products, their methods of use and processes of manufacture, and any other technology to which we have rights, where available
and when appropriate. We also rely on trade secrets that may be important to the development of our business.
Our
success will depend on 1) the ability to obtain and maintain patent and other proprietary rights in commercially important technology,
inventions and know-how related to our business, 2) the validity and enforceability of our patents, 3) the continued confidentiality
of our trade secrets, and 4) our ability to operate without infringing the valid and enforceable patents and proprietary rights
of third parties. We also rely on continuing technological innovation and in-licensing opportunities to develop and maintain our
proprietary position.
We
cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent
applications we may own or license in the future, nor can we be certain that any of our existing patents or any patents we may
own or license in the future will be useful in protecting our technology. For this and more comprehensive risks related to our
intellectual property, please see “Risk Factors — Risks Relating to Our Intellectual Property.”
The
term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries
in which we file, the patent term is 20 years from the date of filing the first non-provisional priority application. In the United
States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays
by the PTO in granting a patent, or may be shortened if a patent is terminally disclaimed over another patent.
The
term of a U.S. patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term
restoration as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Amendments permit
a patent term extension of up to five years beyond the statutory 20-year term of the patent for the approved product if the active
ingredient has not been previously approved in the U.S. The length of the patent term extension is related to the length of time
the drug is under regulatory review. A patent term extension cannot extend the remaining term of a patent beyond a total of 14
years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions
are available in Europe and some other foreign jurisdictions to extend the term of a patent that covers an approved drug. When
possible, depending upon the length of clinical trials and other factors involved in the filing of an NDA, we expect to apply
for patent term extensions for patents covering our product candidates and their methods of use.
The
patent portfolios for our proprietary technology platform and our five most advanced product candidates as of September 28, 2017
are summarized below.
Tonmya
— CNS
Our
patent portfolio for Tonmya and TNX-102 SL includes patent applications directed to compositions of matter of CBP, formulations
containing CBP, and methods for treating CNS conditions, such as PTSD, utilizing these compositions and formulations.
Certain
eutectic compositions were discovered by development partners and are termed the “Eutectic Technology.” The patent
portfolio for Tonmya and TNX-102 SL relating to the Eutectic Technology includes patent applications directed to eutectic compositions
containing CBP, eutectic CBP formulations, methods for treating PTSD and other CNS conditions utilizing eutectic CBP compositions
and formulations, and methods of manufacturing eutectic CBP compositions. The Eutectic Technology patent portfolio includes U.S.
patent applications, such as U.S. Patent Application No. 14/214,433. If U.S. and non-U.S. patents claiming priority from those
applications issue, those patents would expire in 2034 or 2035, excluding any patent term adjustments or extensions.
On
March 10, 2017, we received a notice of allowance from the PTO for the US patent No. 14/214,433 “Eutectic Formulations of
Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride,” which includes compositions of CBP and methods of manufacturing
the eutectic. The U.S. eutectic patent was issued on May 2, 2017. The allowed claims will protect the pharmaceutical composition
since it is based on the eutectic. The allowed claims will also protect the method of manufacturing the eutectic. Eutectic tablets
containing CBP and mannitol eutectic have good pharmaceutical stability and manufacturability. A solid eutectic is a form of matter
in which two solid crystals co-penetrate each other, such that the inter-molecular space between the units of one crystal lattice
are occupied by the other crystal lattice. The distance between the molecular units is not changed.
The
unique pharmacokinetic profile of Tonmya and TNX-102 SL, or the PK Technology, was discovered by Tonix and its development partners.
The patent portfolio for Tonmya relating to the PK Technology includes patent applications directed to compositions of matter
of CBP, formulations containing CBP, and methods for treating PTSD and other CNS conditions utilizing these compositions and formulations.
The PK Technology patent portfolio includes U.S. Patent Application No. 13/918,692. If U.S. and non-U.S. patents claiming priority
from those applications issue, those patents would expire in 2033, excluding any patent term adjustments or extensions.
On
September 13, 2017, we were issued European patent 2501234 “Methods and Compositions for Treating Symptoms Associated with
PTSD Using Cyclobenzaprine”. This patent protects the use of Tonmya for the treatment of PTSD as well as its active ingredient
CBP for the treatment of PTSD. The patent is expected to provide Tonmya with European market exclusivity until 2030 and may be
extended based on the timing of the European marketing authorization of Tonmya for PTSD.
TNX-601
— PTSD
Our
patent portfolio for tianeptine oxalate includes U.S. provisional Patent Application No. 62/439,533. It includes claims directed
to composition, including pharmaceutical compositions, and methods of use.
TNX-801
— Live HPXV Vaccine for Prevention of Smallpox
We
own the rights to develop a potential biodefense technology, TNX-801, a live HPXV that is a new vaccine candidate against smallpox.
We have patent applications directed to synthetic chimeric poxviruses and methods of using these poxviruses to protect individuals
against smallpox. These applications include U.S. provisional Patent Application Nos. 62/416,577 and 62/434,794. We also own the
rights to develop some different vaccine candidates against smallpox. With respect to this smallpox vaccine candidate, we own
U.S. non-provisional Patent Application No. 14/207,727 and related intellectual property rights. The smallpox vaccine technologies
relate to proprietary forms of live HPXV and vaccinia vaccines which may be safer than ACAM2000, the only currently available
replication competent, live vaccinia vaccine to protect against smallpox disease. We believe that this technology, after further
development, may be of interest to biodefense agencies in the U.S. and other countries.
TNX-301 — Alcohol
Use Disorders
Our
patent portfolio for disulfiram and selegiline combinations includes patents and patent applications. It includes claims directed
to disulfiram and selegiline, pharmaceutical compositions containing disulfiram and selegiline, disulfiram and selegiline formulations,
methods of treating AUD, and methods of modulating alcohol abuse and dependence. It includes issued U.S. Patent Nos. 8,093,300
and 8,481,599. The patent expiring last is expected to expire in 2024, excluding any patent term extensions.
TNX-701
— Radioprotection Biodefense Technology
We
own the rights to develop a potential biodefense technology, which is a potential radioprotective therapy. For protection of intellectual
property, we have not disclosed the identity of the new development candidate.
Trade
Secrets
In
addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. For example, significant
aspects of our proprietary technology platform are based on unpatented trade secrets and know-how. Trade secrets and know-how
can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements
and invention assignment agreements with our employees, consultants, scientific advisors, contractors, and commercial partners.
These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements,
to grant us ownership of technologies that are developed through a relationship with a third party. We also seek to preserve the
integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and
electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems,
agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently discovered by competitors. To the extent that our contractors use intellectual
property owned by others in their work for us, disputes may arise as to rights in related or resulting inventions and know-how.
Issued
Patents
Our
current patents owned include:
Sublingual
Cyclobenzaprine/Amitriptyline
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
631144
|
|
Compositions and
Methods for Transmucosal Absorption
|
|
New Zealand
|
|
June 14,
2033
|
I590820
|
|
Compositions and
Methods for Transmucosal Absorption
|
|
Taiwan
|
|
June 14,
2033
|
PTSD
Treatment
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
2501234
|
|
Methods and Compositions
for Treating Symptoms Associated with Post-Traumatic Stress Disorder Using Cyclobenzaprine
|
|
Europe
|
|
November
16, 2030
|
Sleep
Disorder Treatment
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
9,474,728
|
|
Methods and Compositions
for Treating Fatigue Associated with Disordered Sleep Using Very Low Dose Cyclobenzaprine
|
|
U.S.A.
|
|
June 9, 2031
|
Depression
Treatment
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
2012225548
|
|
Methods and Compositions
for Treating Depression Using Cyclobenzaprine
|
|
Australia
|
|
March 6,
2032
|
614725
|
|
Methods and Compositions
for Treating Depression Using Cyclobenzaprine
|
|
New Zealand
|
|
March 6,
2032
|
Cyclobenzaprine/Amitriptyline
Eutectics
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
9,636,408
|
|
Eutectic Formulations
of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
U.S.A.
|
|
March 14,
2034
|
631152
|
|
Eutectic Formulations
of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
New Zealand
|
|
March 14,
2034
|
Neurocognitive
Dysfunction Treatment
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
9,314,469
|
|
Method for Treating
Neurocognitive Dysfunction
|
|
U.S.A.
|
|
September
24, 2030
|
2299822
|
|
Method for Treating
Neurocognitive Dysfunction
|
|
Europe
|
|
April 30,
2029
|
AUD
Treatment
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
8,093,300
|
|
Compositions and
Methods for Increasing Compliance with Therapies Using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism
|
|
U.S.A.
|
|
May 23, 2024
|
8,481,599
|
|
Compositions and
Methods for Increasing Compliance with Therapies Using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism
|
|
U.S.A.
|
|
Nov. 4, 2022
|
2002354017
|
|
Compositions and
Methods for Increasing Compliance with Therapies Using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism
|
|
Australia
|
|
Nov. 4, 2022
|
2463987
|
|
Compositions and
Methods for Increasing Compliance with Therapies Using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism
|
|
Canada
|
|
Nov. 4, 2022
|
1441708
|
|
Compositions and
Methods for Increasing Compliance with Therapies Using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism
|
|
Austria, Belgium,
Denmark, France, Germany, Luxembourg, Monaco, Portugal, Switzerland, U.K.
|
|
Nov. 4, 2022
|
532583
|
|
Compositions and
Methods for Increasing Compliance with Therapies Using Aldehyde Dehydrogenase Inhibitors and Treating Alcoholism
|
|
New Zealand
|
|
Nov. 4, 2022
|
Cocaine
Addiction Treatment
Patent
No.
|
|
Title
|
|
Country
/ Region
|
|
Expiration
Date
|
2011314358
|
|
Treatment for Cocaine
Addiction
|
|
Australia
|
|
Aug. 31,
2031
|
2611440
|
|
Treatment for Cocaine
Addiction
|
|
Austria, Belgium,
Portugal, Denmark, Switzerland
|
|
Aug. 31,
2031
|
Pending Patent Applications
Our current pending
patent applications are as follows:
Cyclobenzaprine/Amitriptyline Eutectics
Application No.
|
|
Title
|
|
Country / Region
|
14/214,433
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
U.S.A.
|
15/459,093
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
U.S.A.
|
14/776,624
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
U.S.A.
|
15/511,287
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
U.S.A.
|
2014233277
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Australia
|
2015317336
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Australia
|
BR112015022095-9
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Brazil
|
112017005231-8
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Brazil
|
2,904,812
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Canada
|
2,961,822
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Canada
|
201480024011.1
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
China
|
201580050140.2
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
China
|
14762323.5
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Europe
|
15841528.1
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Europe
|
16106690.2
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Hong Kong
|
P-00 2015 06570
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Indonesia
|
P00201702438
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Indonesia
|
241353
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Israel
|
251218
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Israel
|
3392/KOLNP/2015
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
India
|
201717013182
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
India
|
2016-503239
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Japan
|
2017-535609
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Japan
|
MX/a/2015/012622
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Mexico
|
MX/a/2017/003644
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Mexico
|
PI 2015703142
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Malaysia
|
PI 2017700889
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Malaysia
|
631152
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
New Zealand
|
730061
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
New Zealand
|
730379
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
New Zealand
|
517381123
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Saudi Arabia
|
515361124
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Saudi Arabia
|
11201507124X
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Singapore
|
11201701995P
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
Singapore
|
Not Yet Assigned
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Singapore
|
2015/07443
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
South Africa
|
2017/01637
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
South Africa
|
103109816
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Taiwan
|
2014-000391
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride and Amitriptyline Hydrochloride
|
|
Venezuela
|
PCT/US2015/051068
|
|
Eutectic Formulations of Cyclobenzaprine Hydrochloride
|
|
PCT
|
Sublingual Cyclobenzaprine/Amitriptyline
Application No.
|
|
Title
|
|
Country / Region
|
13/918,692
|
|
Compositions and Methods for Transmucosal Absorption
|
|
U.S.A.
|
P20130102101
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Argentina
|
2013274003
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Australia
|
BR112014031394-6
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Brazil
|
2,876,902
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Canada
|
201380039522.6
|
|
Compositions and Methods for Transmucosal Absorption
|
|
China
|
13804115.7
|
|
Compositions and Methods for Transmucosal Absorption
|
|
European Patent Office
|
2013/24661
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Gulf Cooperation Council
|
15110186.6
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Hong Kong
|
P-00 2015 00202
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Indonesia
|
236268
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Israel
|
139/KOLNP/2015
|
|
Compositions and Methods for Transmucosal Absorption
|
|
India
|
2015-517469
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Japan
|
MX/a/2014/015436
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Mexico
|
PI 2014703784
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Malaysia
|
726488
|
|
Compositions and Methods for Transmucosal Absorption
|
|
New Zealand
|
10201605407T
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Singapore
|
106117185
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Taiwan
|
2013-000737
|
|
Compositions and Methods for Transmucosal Absorption
|
|
Venezuela
|
2015/00288
|
|
Compositions and Methods for Transmucosal Absorption
|
|
South Africa
|
PTSD Treatment
Application No.
|
|
Title
|
|
Country / Region
|
12/948,828
|
|
Methods and Compositions for Treating Symptoms Associated with Post-Traumatic Stress Disorder Using Cyclobenzaprine
|
|
U.S.A.
|
|
|
|
|
|
13103530.6
|
|
Methods and Compositions for Treating Symptoms Associated with Post-Traumatic Stress Disorder Using Cyclobenzaprine
|
|
Hong Kong
|
|
|
|
|
|
62/532,353
|
|
Analogs of Cyclobenzaprine
|
|
U.S.A
|
Sleep Disorder Treatment
Application No.
|
|
Title
|
|
Country / Region
|
15/266,035
|
|
Methods and Compositions for Treating Fatigue Associated with Disordered Sleep Using Very Low Dose Cyclobenzaprine
|
|
U.S.A.
|
Esreboxetine for Fibromyalgia
Application No.
|
|
Title
|
|
Country / Region
|
62/430,864
|
|
Salts and Polymorphs of Esreboxetine for the treatment of Fibromyalgia
|
|
U.S.A.
|
Tianeptine for PTSD
Application No.
|
|
Title
|
|
Country / Region
|
62/439,533
|
|
Tianeptine Oxalate Salts and Polymorphs
|
|
U.S.A.
|
Novel Smallpox Vaccines
Application No.
|
|
Title
|
|
Country / Region
|
14/207,727
|
|
Novel Smallpox Vaccines
|
|
U.S.A.
|
Synthetic Chimeric Poxviruses
Application No.
|
|
Title
|
|
Country / Region
|
62/416,577
|
|
Synthetic Chimeric Poxviruses
|
|
U.S.A.
|
62/434,794
|
|
Synthetic Chimeric Poxviruses
|
|
U.S.A.
|
Depression Treatment
Application No.
|
|
Title
|
|
Country / Region
|
13/412,571
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
U.S.A.
|
2016222412
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
Australia
|
2,829,200
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
Canada
|
12755254.5
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
European Patent Office
|
2013-557811
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
Japan
|
2016-7041
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
Japan
|
714294
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
New Zealand
|
730065
|
|
Methods and Compositions for Treating Depression Using Cyclobenzaprine
|
|
New Zealand
|
Cocaine Addiction Treatment
Application No.
|
|
Title
|
|
Country / Region
|
13/820,338
|
|
Treatment for Cocaine Addiction
|
|
U.S.A.
|
2809966
|
|
Treatment for Cocaine Addiction
|
|
Canada
|
2013-527062
|
|
Treatment for Cocaine Addiction
|
|
Japan
|
10-2013-7008187
|
|
Treatment for Cocaine Addiction
|
|
Republic of Korea
|
13114135.2
|
|
Treatment for Cocaine Addiction
|
|
Hong Kong
|
Neurocognitive Dysfunction Treatment
Application No.
|
|
Title
|
|
Country / Region
|
15/064,196
|
|
Method for Treating Neurocognitive Dysfunction
|
|
U.S.A.
|
17176372.5
|
|
Method for Treating Neurodegenerative Dysfunction
|
|
Europe
|
2723688
|
|
Method for Treating Neurodegenerative Dysfunction
|
|
Canada
|
Trademarks and Service Marks
We seek trademark and
service mark protection in the United States and outside of the United States where available and when appropriate. We are the
owner of the following U.S. federally registered marks: TONIX PHARMACEUTICALS (Reg. No. 4656463, issued December 16, 2014) and
TONMYA (Reg. No. 4868328, issued December 8, 2015).
We are the owner of
the following marks for which applications for U.S. federal registration are currently pending: FYMRALIN (Serial No. 86/516046,
filed January 27, 2015), MODALTIN (Serial No. 86/631228, filed May 15, 2015), RAPONTIS (Serial No. 86/631236, filed May 15, 2015),
IMADAZIO (Serial No. 86/631242, filed May 15, 2015), PROTECTIC (Serial No. 86/636119, filed May 20, 2015), TONIX PHARMACEUTICALS
(Serial No. 86/400401, filed September 19, 2014) and ANGSTRO-TECHNOLOGY (Serial No. 86/713402, filed August 3, 2015).
Research and Development
We have approximately
eight employees dedicated to research and development. We anticipate that our research and development expenditures will decrease
as we focus our efforts on our late-stage clinical development of Tonmya for PTSD. We need to raise additional capital to fund
our development plans and there is no certainty that we will be successful in continuing to attract new investments. Our research
and development operations are located in New York, NY, San Diego, CA, Dublin, Ireland and Montreal, Canada. We have used, and
expect to continue to use, third parties to conduct our nonclinical and clinical studies.
Manufacturing
We have contracted
with third-party cGMP-compliant CMOs for the manufacture of Tonmya drug substances and drug products for investigational purposes,
including nonclinical and clinical testing. For Tonmya, we have engaged a cGMP facility for manufacturing of to-be-marketed product
for Phase 3 clinical and commercial. Our manufacturing operations are managed and controlled in Dublin, Ireland.
All of our small molecules
drug candidates are synthesized using industry standard processes, and our drug products are formulated using commercially available
pharmaceutical grade excipients.
Our smallpox-preventing
vaccine candidate is a biologic and uses live form of HPXV. Both the drug substance (HPVX and the cell bank) and the drug product
(vaccine) will be manufactured by contract cGMP-compliant facilities capable of manufacturing for nonclinical/clinical testing
and licensed product.
Government Regulations
The FDA and other federal,
state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling,
manufacture, marketing and distribution of drug products. These agencies regulate, among other things, research and development
activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising
and promotion of our product candidates. The regulatory approval process is generally lengthy and expensive, with no guarantee
of a positive result. Moreover, failure to comply with applicable FDA or other requirements may result in civil or criminal penalties,
recall or seizure of products, injunctive relief including partial or total suspension of production, or withdrawal of a product
from the market.
The FDA regulates,
among other things, the research, manufacture, promotion and distribution of drugs in the United States under the FDCA and other
statutes and implementing regulations. The process required by the FDA before prescription drug product candidates may be marketed
in the United States generally involves the following:
|
●
|
completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA’s Good Laboratory Practice regulations;
|
|
●
|
submission to the FDA of an IND, which must become effective before human clinical trials may begin;
|
|
●
|
performance of adequate and well-controlled human clinical trials in accordance with the FDA’s regulations, including Good Clinical Practices, to establish the safety and efficacy of the product candidate for each proposed indication;
|
|
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submission to the FDA of an NDA for drug products, or a BLA for biologic products;
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satisfactory completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced to assess compliance with cGMP regulations; and
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FDA review and approval of the NDA or BLA prior to any commercial marketing, sale or shipment of the drug.
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The testing and approval
process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product
candidates will be granted on a timely basis, if at all.
Nonclinical tests include
laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and
other animal studies. The results of nonclinical tests, together with manufacturing information and analytical data, are submitted
as part of an IND to the FDA. Some nonclinical testing may continue even after an IND is submitted. The IND also includes one or
more protocols for the initial clinical trial or trials and an investigator’s brochure. An IND automatically becomes effective
30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to the proposed
clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor and the
FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical trial holds also may be imposed
at any time before or during studies due to safety concerns or non-compliance with regulatory requirements. An independent IRB
at each of the clinical centers proposing to conduct the clinical trial must review and approve the plan for any clinical trial
before it commences at that center. An IRB considers, among other things, whether the risks to individuals participating in the
trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the consent form signed by the
trial participants and must monitor the study until completed.
Clinical Trials
Clinical trials involve
the administration of the product candidate to human subjects under the supervision of qualified medical investigators according
to approved protocols that detail the objectives of the study, dosing procedures, subject selection and exclusion criteria, and
the parameters to be used to monitor participant safety. Each protocol for a U.S. study is submitted to the FDA as part of the
IND.
Human clinical trials
are typically conducted in three sequential phases, but the phases may overlap, or be combined.
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Phase 1 clinical trials typically involve the initial introduction of the product candidate into healthy human volunteers. In Phase 1 clinical trials, the product candidate is typically tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
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Phase 2 clinical trials are generally conducted in a limited patient population to gather evidence about the efficacy of the product candidate for specific, targeted indications; to determine dosage tolerance and optimal dosage; and to identify possible adverse effects and safety risks. Phase 2 clinical trials, in particular Phase 2b trials, can be undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites.
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Phase 3 clinical trials are undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites. The size of Phase 3 clinical trials depends upon clinical and statistical considerations for the product candidate and disease. Phase 3 clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and provide an adequate basis for product labeling.
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Post-approval clinical
trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial approval. These clinical trials are used
to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term
safety follow-up.
Clinical testing must
satisfy extensive FDA regulations. Reports detailing the results of the clinical trials must be submitted at least annually to
the FDA and safety reports must be submitted for serious and unexpected adverse events. Success in early-stage clinical trials
does not assure success in later-stage clinical trials. The FDA, an IRB or we may suspend a clinical trial at any time on various
grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
New Drug Applications
Assuming successful
completion of the required clinical trials, the results of product development, nonclinical studies and clinical trials are submitted
to the FDA as part of an NDA. An NDA also must contain extensive manufacturing information, as well as proposed labeling for the
finished product. An NDA applicant must develop information about the chemistry and physical characteristics of the drug and finalize
a process for manufacturing the product in accordance with cGMP. The manufacturing process must be capable of consistently producing
quality product within specifications approved by the FDA. The manufacturer must develop methods for testing the quality, purity
and potency of the final product. In addition, appropriate packaging must be selected and tested and stability studies must be
conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life. Prior to approval, the
FDA will conduct an inspection of the manufacturing facilities to assess compliance with cGMP.
The FDA reviews all
NDAs submitted before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing.
In this event, the NDA must be resubmitted with the additional information and is subject to review before the FDA accepts it for
filing. After an application is filed, the FDA may refer the NDA to an advisory committee for review, evaluation and recommendation
as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory
committee, but it considers them carefully when making decisions. The FDA may deny approval of an NDA if the applicable regulatory
criteria are not satisfied. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently
than we interpret the same data. The FDA may issue a complete response letter, which may require additional clinical or other data
or impose other conditions that must be met in order to secure final approval of the NDA. If a product receives regulatory approval,
the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product. In addition, the FDA may require us to conduct Phase 4 testing which
involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA approval, and may require
surveillance programs to monitor the safety of approved products which have been commercialized. Once issued, the FDA may withdraw
product approval if ongoing regulatory requirements are not met or if safety or efficacy questions are raised after the product
reaches the market.
Section 505(b) NDAs
There are two types
of NDAs: the Section 505(b)(1) NDA, or full NDA, and the Section 505(b)(2) NDA. We intend to file Section 505(b)(2) NDAs for Tonmya
for PTSD, and for certain other products, that might, if accepted by the FDA, save time and expense in the development and testing
of our product candidates. We may need to file a Section 505(b)(1) NDA for certain other products in the future. A full NDA is
submitted under Section 505(b)(1) of the FDCA, and must contain full reports of investigations conducted by the applicant to demonstrate
the safety and effectiveness of the drug. A Section 505(b)(2) NDA may be submitted for a drug for which one or more of the investigations
relied upon by the applicant was not conducted by or for the applicant and for which the applicant has no right of reference from
the person by or for whom the investigations were conducted. A Section 505(b)(2) NDA may be submitted based in whole or in part
on published literature or on the FDA’s finding of safety and efficacy of one or more previously approved drugs, which are
known as reference drugs. Thus, the filing of a Section 505(b)(2) NDA may result in approval of a drug based on fewer clinical
or nonclinical studies than would be required under a full NDA. The number and size of studies that need to be conducted by the
sponsor depends on the amount and quality of data pertaining to the reference drug that are publicly available, and on the similarity
of and differences between the applicant’s drug and the reference drug. In some cases, extensive, time-consuming, and costly
clinical and nonclinical studies may still be required for approval of a Section 505(b)(2) NDA.
Our drug approval strategy
for our new formulations of approved chemical entities is to submit Section 505(b)(2) NDAs to the FDA. As such, we plan to submit
an NDA under Section 505(b)(2) for Tonmya for PTSD. The FDA may not agree that this product candidate is approvable for PTSD as
a Section 505(b)(2) NDA. If the FDA determines that a Section 505(b)(2) NDA is not appropriate and that a full NDA is required
for Tonmya, the time and financial resources required to obtain FDA approval for Tonmya could substantially and materially increase,
and Tonmya might be less likely to be approved. If the FDA requires a full NDA for Tonmya, or requires more extensive testing and
development for some other reason, our ability to compete with alternative products that arrive on the market more quickly than
our product candidates would be adversely impacted. If CBP-containing products are withdrawn from the market by the FDA for any
reason, we may not be able to reference such products to support our anticipated Tonmya 505(b)(2) NDA, and we may be required to
follow the requirements of Section 505(b)(1).
Patent Protections
An applicant submitting
a Section 505(b)(2) NDA must certify to the FDA with respect to the patent status of the reference drug upon which the applicant
relies in support of approval of its drug. With respect to every patent listed in the FDA’s Orange Book, which is the FDA’s
list of approved drug products, as claiming the reference drug or an approved method of use of the reference drug, the Section
505(b)(2) applicant must certify that: (1) there is no patent information listed in the orange book for the reference drug; (2)
the listed patent has expired; (3) the listed patent has not expired, but will expire on a particular date; (4) the listed patent
is invalid or will not be infringed by the manufacture, use, or sale of the product in the Section 505(b)(2) NDA; or (5) if the
patent is a use patent, that the applicant does not seek approval for a use claimed by the patent. If the applicant files a certification
to the effect of clause (1), (2) or (5), FDA approval of the Section 505(b)(2) NDA may be made effective immediately upon successful
FDA review of the application, in the absence of marketing exclusivity delays, which are discussed below. If the applicant files
a certification to the effect of clause (3), the Section 505(b)(2) NDA approval may not be made effective until the expiration
of the relevant patent and the expiration of any marketing exclusivity delays.
If the Section 505(b)(2)
NDA applicant provides a certification to the effect of clause (4), referred to as a paragraph IV certification, the applicant
also must send notice of the certification to the patent owner and the holder of the NDA for the reference drug. The filing of
a patent infringement lawsuit within 45 days of the receipt of the notification may prevent the FDA from approving the Section
505(b)(2) NDA for 30 months from the date of the receipt of the notification unless the court determines that a longer or shorter
period is appropriate because either party to the action failed to reasonably cooperate in expediting the action. However, the
FDA may approve the Section 505(b)(2) NDA before the 30 months have expired if a court decides that the patent is invalid or not
infringed, or if a court enters a settlement order or consent decree stating the patent is invalid or not infringed.
Notwithstanding the
approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years certain brand-name pharmaceutical companies
and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2)
is successfully challenged in court, the FDA may be required to change its interpretation of Section 505(b)(2) which could delay
or even prevent the FDA from approving any Section 505(b)(2) NDA that we submit. The pharmaceutical industry is highly competitive,
and it is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval
of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly
delay, or even prevent, the approval of the new product. Moreover, even if the FDA ultimately denies such a petition, the FDA may
substantially delay approval while it considers and responds to the petition.
Marketing Exclusivity
Market exclusivity
provisions under the FDCA can delay the submission or the approval of Section 505(b)(2) NDAs, thereby delaying a Section 505(b)(2)
product from entering the market. The FDCA provides five-year marketing exclusivity to the first applicant to gain approval of
an NDA for an NCE, meaning that the FDA has not previously approved any other drug containing the same active moiety. This exclusivity
prohibits the submission of a Section 505(b)(2) NDA for any drug product containing the active ingredient during the five-year
exclusivity period. However, submission of a Section 505(b)(2) NDA that certifies that a listed patent is invalid, unenforceable,
or will not be infringed, as discussed above, is permitted after four years, but if a patent infringement lawsuit is brought within
45 days after such certification, FDA approval of the Section 505(b)(2) NDA may automatically be stayed until 7½ years after
the NCE approval date. The FDCA also provides three years of marketing exclusivity for the approval of new and supplemental NDAs
for product changes, including, among other things, new indications, dosage forms, routes of administration or strengths of an
existing drug, or for a new use, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored
by the applicant are deemed by FDA to be essential to the approval of the application. Five-year and three-year exclusivity will
not delay the submission or approval of another full NDA; however, as discussed above, an applicant submitting a full NDA under
Section 505(b)(1) would be required to conduct or obtain a right of reference to all of the nonclinical and adequate and well-controlled
clinical trials necessary to demonstrate safety and effectiveness.
Other types of exclusivity
in the United States include orphan drug exclusivity and pediatric exclusivity. The FDA may grant orphan drug designation to a
drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals
in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that
the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered
from sales in the United States for that drug. Seven-year orphan drug exclusivity is available to a product that has orphan drug
designation and that receives the first FDA approval for the indication for which the drug has such designation. Orphan drug exclusivity
prevents approval of another application for the same drug for the same orphan indication, for a period of seven years, regardless
of whether the application is a full NDA or a Section 505(b)(2) NDA, except in limited circumstances, such as a showing of clinical
superiority to the product with orphan exclusivity. Pediatric exclusivity, if granted, provides an additional six months to an
existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which runs
from the end of other exclusivity protection or patent delay, may be granted based on the voluntary completion of a pediatric study
in accordance with an FDA-issued “Written Request” for such a study.
Section 505(b)(2) NDAs
are similar to full NDAs filed under Section 505(b)(1) in that they are entitled to any of these forms of exclusivity if they meet
the qualifying criteria. They also are entitled to the patent protections described above, based on patents that are listed in
the FDA’s Orange Book in the same manner as patents claiming drugs and uses approved for NDAs submitted as full NDAs.
Breakthrough Therapy Designation
On July 9, 2012, the
Food and Drug Administration Safety and Innovation Act, or FDASIA, was signed. FDASIA Section 902 provides for a new drug designation
–Breakthrough Therapy. A Breakthrough Therapy is a drug:
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intended alone or in combination with one or more other drugs to treat a serious or life threatening disease or condition; and
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preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
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In December 2016, the
FDA granted Breakthrough Therapy designation to Tonmya for the treatment of PTSD. The Breakthrough Therapy designation request
was submitted based on the preliminary clinical evidence of TNX 102-SL on military-related PTSD in the AtEase study.
Breakthrough
Therapy designation is intended to expedite the development and review of drugs for serious or life-threatening conditions. The
benefits of Breakthrough Therapy designation include the eligibility for priority review of the NDA within six months instead of
10 months and rolling submission of portions of the NDA, in addition to an organizational commitment involving FDA’s senior managers
contributing significant guidance. The FDA is committing to provide us timely advice and interactive communications related to
the design and efficient execution of our drug development program.
Material Threat Medical Countermeasures
In 2016, the Act was
signed into law to support ongoing biomedical innovation. One part of the Act, Section 3086, is aimed at “Encouraging Treatments
for Agents that Present a National Security Threat.” The Act created a new priority review voucher program for “material
threat medical countermeasures.” The Act defines such countermeasures as drugs or vaccines intended to treat biological,
chemical, radiological, or nuclear agents that present a national security threat or to treat harm from a condition that may be
caused by administering a drug or biological product against such an agent. The Department of Homeland Security has identified
13 such threats, including anthrax, smallpox, Ebola/Marburg, tularemia, and botulism. A priority review voucher can be applied
to any other product; it shortens the FDA review timeline for a new application from 10 months to 6 months. The recipient of a
priority review voucher may transfer it. We intend to seek a priority voucher for TNX-801 as a material threat medical countermeasure.
Other Regulatory Requirements
Maintaining substantial
compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and
financial resources. Drug manufacturers are required to register their establishments with the FDA and certain state agencies,
and after approval, the FDA and these state agencies conduct periodic unannounced inspections to ensure continued compliance with
ongoing regulatory requirements, including cGMPs. In addition, after approval, some types of changes to the approved product, such
as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.
The FDA may require post-approval testing and surveillance programs to monitor safety and the effectiveness of approved products
that have been commercialized. Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing
regulation by the FDA, including:
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record-keeping requirements;
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reporting of adverse experiences with the drug;
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providing the FDA with updated safety and efficacy information;
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reporting on advertisements and promotional labeling;
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drug sampling and distribution requirements; and
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complying with electronic record and signature requirements.
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In addition, the FDA
strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. There
are numerous regulations and policies that govern various means for disseminating information to health-care professionals as well
as consumers, including to industry sponsored scientific and educational activities, information provided to the media and information
provided over the Internet. Drugs may be promoted only for the approved indications and in accordance with the provisions of the
approved label.
The FDA has very broad
enforcement authority and the failure to comply with applicable regulatory requirements can result in administrative or judicial
sanctions being imposed on us or on the manufacturers and distributors of our approved products, including warning letters, refusals
of government contracts, clinical holds, civil penalties, injunctions, restitution and disgorgement of profits, recall or seizure
of products, total or partial suspension of production or distribution, withdrawal of approvals, refusal to approve pending applications,
and criminal prosecution resulting in fines and incarceration. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject
to significant liability. In addition, even after regulatory approval is obtained, later discovery of previously unknown problems
with a product may result in restrictions on the product or even complete withdrawal of the product from the market.
The Impact of New Legislation and Amendments to Existing
Laws
The FDCA is subject
to routine legislative amendments with a broad range of downstream effects. In addition to new legislation, such as the FDA Reauthorization
Act of 2017 or the FDASIA in 2012, Congress introduces amendments to reauthorize drug user fees and address emerging concerns every
five years. We cannot predict the impact of these new legislative acts and their implementing regulations on our business. The
programs established or to be established under the legislation may have adverse effects upon us, including increased regulation
of our industry. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.
In addition, the FDA’s regulations, policies and guidance are often revised or reinterpreted by the agency or the courts
in ways that may significantly affect our business and our products. Additionally, the current legislative authority for the Prescription
Drug User Fee Act expires in September 2017. The requirements and changes imposed by the legislation to reauthorize the act may
make it more difficult, and more costly, to obtain and maintain approval for new pharmaceutical products, or to produce, market
and distribute existing products. It is impossible to predict whether additional legislative changes will be enacted, or FDA regulations,
guidance or interpretations will change, or what the impact of such changes, if any, may be.
Employees
As of September 28,
2017, we had 13 full-time employees, of whom five hold M.D. or Ph.D. degrees. We have eight employees dedicated to research and
development. Our research and development operations are located in New York, NY, San Diego, CA, Dublin, Ireland and Montreal,
Canada. We have used, and expect to continue to use, third parties to conduct our nonclinical and clinical studies as well as part-time
employees. None of our employees are represented by a collective bargaining agreement, and we believe that our relations with our
employees are good.
DESCRIPTION OF PROPERTIES
We maintain our principal
office at 509 Madison Avenue, Suite 306, New York, New York 10022. Our telephone number at that office is (212) 980-9155 and our
fax number is (212) 923-5700. On February 11, 2014, we entered into a lease amendment and expansion agreement, whereby we agreed
to lease additional premises for office space, commencing May 1, 2014 and expiring on April 30, 2019. In connection therewith,
we executed a letter of credit, which has a remaining balance of $88,842 as of December 31, 2016, and we deposited such amount
into the restricted cash account maintained at the bank that issued the letter of credit. Including the additional premises, the
total square footage of our principal office space is approximately 4,800.
On April 28, 2014,
we entered into a lease for approximately 3,578 square feet of office space in San Jose, California, whereby we agreed to lease
premises, commencing August 1, 2014 and expiring on October 31, 2018. In connection therewith, we paid a security deposit of $44,546.
During December 2016, in an effort to reduce operating costs, we exited this facility and terminated this lease. The total costs
associated with exiting this facility were $0.1 million.
On June 19, 2015, we
entered into a lease for approximately 2,450 square feet of office space in Dublin, Ireland, whereby we agreed to lease premises,
commencing June 1, 2015 and expiring on May 31, 2018. During August 2017, in an effort to reduce operating costs, we terminated
this lease and will exit the premises in November 2017.
On July 27, 2015, we
entered into a lease for approximately 132 square feet of office space in Montreal, Canada, whereby we agreed to lease premises,
commencing August 1, 2015 and expiring on July 31 on an annual renewal basis. In connection therewith, we paid a security deposit
of $800.
On August 24, 2015,
we entered into a lease for approximately 2,762 square feet of office space in San Diego, California, whereby we agreed to lease
premises, commencing September 1, 2015 and expiring on August 31, 2019. In connection therewith, we paid a security deposit of
$11,272.
On August 22, 2017,
we entered into a lease for approximately 450 square feet of office space in Dublin, Ireland, whereby we agreed to lease premises,
commencing November 20, 2017 and expiring on November 30, 2018. In connection therewith, we paid a security deposit of $7,067.
Future minimum lease
payments are as follows (in thousands):
Year Ending December 31,
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2017
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$
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136
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2018
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458
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2019
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181
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$
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775
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We believe that our
existing facilities are suitable and adequate to meet our current business requirements.
LEGAL PROCEEDINGS
From time to time,
we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm
our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in
the aggregate, a material adverse effect on our business, financial condition, operating results or cash flows.
MANAGEMENT
The Board of Directors
elects our executive officers annually. A majority vote of the directors who are in office is required to fill vacancies. Each
director shall be elected for the term of one year and until his successor is elected and qualified or until his earlier resignation
or removal. Our directors and executive officers are as follows:
NAME
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AGE
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CURRENT POSITION
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Seth Lederman
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60
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President, CEO and Chairman of the Board of Directors
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Margaret Smith Bell
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57
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Director
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Stuart Davidson
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60
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Director
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Patrick Grace
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61
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Director
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Donald W. Landry
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63
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Director
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Ernest Mario
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79
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Director
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Charles E. Mather IV
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57
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Director
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John Rhodes
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61
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Lead Director
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Samuel Saks
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62
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Director
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Bradley Saenger
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44
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Chief Financial Officer and Treasurer
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Gregory Sullivan
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52
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Chief Medical Officer and Secretary
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The following information
with respect to the principal occupation or employment of each nominee for director, the principal business of the corporation
or other organization in which such occupation or employment is carried on, and such nominee’s business experience during
the past five years, as well as the specific experiences, qualifications, attributes and skills that have led the Board to determine
that such Board members should serve on our Board, has been furnished to the Company by the respective director nominees:
Seth Lederman,
MD
became our President, Chief Executive Officer, Chairman of the Board and a Director in October 2011. Dr. Lederman
founded Tonix Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company, or Tonix Sub, in June of 2007 and has acted as its
Chairman of the Board of Directors since its inception and as President since June 2010. Dr. Lederman is an inventor on key patents
and patent applications underlying our programs including: TNX-102 SL’s eutectic composition; Tonmya’s pharmacokinetic
profile and related therapeutic properties, and Tonmya for PTSD. Dr. Lederman has been the Chairman of Krele since its inception
in August 2010. Dr. Lederman has also been the President and a director of Tonix Pharmaceuticals (Canada), Inc. since its inception
in April 2013, a director of Tonix Pharmaceuticals (Barbados), Ltd. from December 2013 until it was dissolved in 2015. Lederman
served as a director of Tonix Pharma Limited between December 2014 and September 2015 and Tonix Pharma Holdings Limited between
December 2014 and November 2015. Since 1996, Dr. Lederman served as an Associate Professor at Columbia University, and retired
on April 13, 2017. As an Assistant Professor at Columbia, Dr. Lederman discovered and characterized the CD40-ligand and invented
therapeutic candidates to treat autoimmune diseases and transplant rejection. Dr. Lederman has been a Manager of L&L Technologies
LLC, or L&L, since 1996. In addition, Dr. Lederman has been the Managing Member of Seth Lederman Co, LLC since January 2007
and the Managing Member of Lederman & Co, LLC, or Lederman & Co, since 2002, both of which are biopharmaceutical consulting
and investing companies. Dr. Lederman has also been the Managing Member of Targent Pharmaceuticals, LLC, or Targent, since 2000,
and Managing Member of Plumbline LLC since 2002. Targent was a founder of Targent Pharmaceuticals Inc. on which Board of Directors
Dr. Lederman served from inception in 2001 until the sale of its assets to Spectrum Pharmaceuticals Inc. in 2006. Between January
2007 and November 2008, Dr. Lederman was a Managing Partner of Konanda Pharma Partners, LLC, a Director of Konanda Pharma Fund
I, LP, and a Managing Partner of Konanda General Partner, LLC, which were related private growth equity fund entities. As well,
between January 2007 and November 2008, Dr. Lederman was Chairman of Validus Pharmaceuticals, Inc. and Fontus Pharmaceuticals,
Inc., which were portfolio companies of the Konanda private growth equity funds. Since December 2011, Dr. Lederman has served as
CEO and Chairman of Leder Laboratories Inc., or Leder Labs, and Starling Pharmaceuticals Inc., or Starling, which are biopharmaceutical
development companies. Since March 2013, Dr. Lederman has been the chairman of Leder Laboratories, Ltd., a wholly-owned subsidiary
of Leder Labs. In 2015, Dr. Lederman served as a member of the US – Japan Business Council. Between 2006 and 2011, Dr. Lederman
was a director of Research Corporation, a New York-based non-profit organization. Dr. Lederman received his BA degree in Chemistry
from Princeton University in 1979 and his MD from Columbia University in 1983. Dr. Lederman has been a New York State licensed
physician since 1985. Dr. Lederman’s significant experience with our patent portfolio and his experience as an entrepreneur,
seed capital investor, fund manager, and director of start-up biopharmaceutical companies were instrumental in his selection as
a member of the Board.
Margaret Smith
Bell
became a Director in September 2017. For the last five years, Ms. Bell has been a homemaker. Previously, Ms.
Bell was a Vice President at Standard Life Investments where she was a portfolio manager and health care equity analyst. Ms. Bell
was also a Managing Director at Putnam Investments, and served as a senior health care analyst and a portfolio manager of the Putnam
Health Sciences Trust. Ms. Bell was an analyst and vice president at State Street Research and a research analyst at Alex. Brown
& Sons, Inc. Ms. Bell is a past member of the Board of Overseers at Beth Israel Deaconess Medical Center. Ms. Bell holds a
B.A. from Wesleyan University and an M.B.A. from the Wharton School at the University of Pennsylvania. Ms. Bell’s extensive
healthcare and investment banking experience was instrumental in her selection as a member of our Board.
Stuart Davidson
became
a Director in October 2011. Between July 2010 and October 2011, Mr. Davidson served as a director of Tonix Sub. Since 2011, Mr.
Davidson has been a Managing Director of Sonen Capital. Since 1994, Mr. Davidson has been a Managing Partner of Labrador Ventures.
Prior to Labrador, Mr. Davidson founded and served as CEO of Combion, Inc., which was acquired by Incyte. He also served as President
of Alkermes, Inc., a biotechnology company focused on drug delivery. Mr. Davidson received his Bachelor’s Degree from Harvard
College in 1978 and his MBA from Harvard Business School in 1984. Mr. Davidson’s prior experience as a venture capital investor,
entrepreneur, and biotechnology industry executive experience in the leadership of pharmaceutical companies was instrumental in
his selection as a member of our Board.
Patrick Grace
became
a Director in October 2011. Between June 2007 and October 2011, Mr. Grace served as a director of Tonix Sub. Since January 2017,
Mr. Grace has been the President and CEO of Grace Institute Foundation. From 1996 to September 2016, he served as Chairman of the
Grace Institute, New York, New York (workforce development for women). Mr. Grace was the co-founder of and served as the Managing
Partner of Apollo Philanthropy Partners, L.L.C. from October 2008 until October 2012. He was President of MLP Capital, Inc., an
investment holding company, from 1996 to 2016. Mr. Grace served in various senior management roles with W. R. Grace & Co. from
1977 to 1995, and was last President and CEO of Grace Logistics Services, Inc. From January 2000 to August 2002, Mr. Grace was
also President and Chief Executive Officer of Kingdom Group, LLC, or Kingdom, a provider of turnkey compressed natural gas fueling
systems, and he was Executive Vice President of Kingdom from August 1999 to December 2000. Since 1996, he has been a director of
Chemed Corporation. Mr. Grace was a liberal arts major at the University of Notre Dame and earned a MBA in finance from Columbia
University. Mr. Grace’s extensive executive experience, along with his membership on the board of directors of a public company,
was instrumental in his selection as a member of our Board.
Donald W. Landry,
MD, PhD
became a Director in October 2011. Between June 2007 and October 2011, Dr. Landry served as a director of
Tonix Sub. Dr. Landry has been a member of the faculty of Columbia University since 1985, and has served as the Samuel Bard Professor
of Medicine, Chair of the Department of Medicine and Physician-in-Chief at New York Presbyterian Hospital/Columbia University Medical
Center since 2008. Since November 2015, he has been a director of Sensient Technologies Corp. Dr. Landry was a co-founder and has
been a member of L&L since 1996. Dr. Landry received his BS degree in Chemistry from Lafayette College in 1975, his PhD in
Organic Chemistry from Harvard University in 1979 and his M.D. from Columbia University in 1983. Dr. Landry has been a New York
State licensed physician since 1985. In 2008, Dr. Landry was awarded the Presidential Citizens Medal, the second-highest award
that the President can confer upon a civilian. Dr. Landry’s significant medical and scientific background was instrumental
in his selection as a member of the Board.
Ernest Mario,
PhD
became a Director in October 2011. Between September 2010 and October 2011, Dr. Mario served as a director of
Tonix Sub. Dr. Mario is a former Deputy Chairman and Chief Executive of Glaxo Holdings plc and a former Chairman and Chief Executive
Officer of ALZA Corporation. Since April 2014, Dr. Mario has served as Chairman of Soleno Therapeutics, Inc. (formerly Capnia,
Inc.), a specialty pharmaceutical company in Palo Alto, CA. Between August 2007 and February 2014, Dr. Mario served as the Chief
Executive Officer and Chairman of Soleno Therapeutics, Inc. and between February 2014 and April 2014, Dr. Mario served as Executive
Chairman. From 2003 to 2007, he was Chairman and Chief Executive of Reliant Pharmaceuticals, Inc. Dr. Mario is currently a director
of Soleno Therapeutics, Inc. (since 2007), Celgene Corp. (since 2007) and Chimerix, Inc. (since February 2013). Dr. Mario is also
Chairman of Chimerix. Dr. Mario served as a director of Boston Scientific Corp. (2001 – 2016), Kindred Biosciences, Inc.
(2013 – 2016), VIVUS Inc. (2012 – 2013), XenoPort Inc. (2012 – 2015), and Maxygen Inc. (2001 – 2013). He
serves as an advisor to The Ernest Mario School of Pharmacy at Rutgers University. In 2007, Dr. Mario was awarded the Remington
Medal by the American Pharmacists’ Association, pharmacy’s highest honor. Dr. Mario received a PhD and an MS in physical
sciences from the University of Rhode Island and a BS in pharmacy from Rutgers University. Dr. Mario brings to his service as a
director his significant executive leadership experience, including his experience leading several pharmaceutical companies, as
well as his membership on public company boards and foundations. He also has extensive experience in financial and operations management,
risk oversight, and quality and business strategy.
Charles E. Mather
IV
became a Director in October 2011. Between April and October 2011, Mr. Mather served as a director of Tonix Sub.
Mr. Mather has been a Managing Director of Equity Capital Markets at BTIG since March 2015 and served as its co-head of Capital
Markets since March 2017. From December 2009 to February 2015 he was the Head of Private and Alternative Capital and Co-Head of
Equity Capital Markets at Janney Montgomery Scott. Between May 2007 and September 2008, Mr. Mather was the head of the Structured
Equity Group at Jefferies Group Inc. Prior to that, Mr. Mather held various senior investment banking positions at Cowen and Company,
including as Co-Head of the Private Equity Group. From July 2015 until August 2017, Mr. Mather served as a director of the Finance
Company of Pennsylvania. Mr. Mather received a BA in History from Brown University and an MBA in Finance from The Wharton School,
University of Pennsylvania. Mr. Mather’s extensive experience advising life science companies as an investment banker was
instrumental in his selection as a member of our Board.
John Rhodes
became
a Director in October 2011 and Lead Director in February 2014. Mr. Rhodes has served as Chair of the New York State Public Service
Commission and Chief Executive Officer of the Department of Public Services since June 2017. Mr. Rhodes served as President and
CEO of the New York State Energy Research and Development Authority between September 2013 and June 2017. Between October 2010
and October 2011, Mr. Rhodes served as a director of Tonix Sub. Between 2005 and 2013, Mr. Rhodes was a director of Dewey Electronics
Company, a manufacturer of electronic and electromechanical systems for the military and commercial markets. Between January 2013
and September 2013, he served as director of the Center for Market Innovation at Natural Resources Defense Council. Between April
2007 and June 2010, Mr. Rhodes was a Senior Advisor to Good Energies, Inc., a renewable energy company. Mr. Rhodes is a former
Vice President of Booz Allen Hamilton, Inc. Mr. Rhodes is a graduate of Princeton University and the Yale School of Management.
Mr. Rhodes’ extensive business and consulting experience, along with his membership on the board of directors of a public
company was instrumental in his selection as a member of our Board.
Samuel Saks,
MD
became a Director in May 2012. Between 2003 and April 2009, Dr. Saks was the chief executive officer and a director
of Jazz Pharmaceuticals, Inc., a publicly-held biopharmaceutical company, which he co-founded in 2003. From April 2011 until February
2012, Dr. Saks served as interim Chief Medical Officer of Threshold Pharmaceuticals, a publicly-held biopharmaceutical company.
Between November 2013 and May 2015, Dr. Saks served as the Chief Development Officer of Auspex Pharmaceuticals, Inc., a publicly-held
biopharmaceutical company. From 2001 until 2003, Dr. Saks was company group chairman of ALZA Corporation and a member of the Johnson
& Johnson Pharmaceuticals Operating Committee. From 1992 until 2001, Dr. Saks held various positions at ALZA, including Chief
Medical Officer and Group Vice President, where he was responsible for clinical, regulatory and commercial activities. Previously,
Dr. Saks held clinical research and development management positions with Schering-Plough, Xoma and Genentech. Dr. Saks formerly
served as a scientific advisor to ArQule Pharmaceuticals, CMEA Ventures and ProQuest Investments. Dr. Saks is currently a director
of Velocity Pharmaceutical Development LLC (since 2011), Bullet Biotechnology, Inc. (since 2012), NuMedii (since 2013) and PDL
BioPharma, Inc. (since September 2015). Dr. Saks served as a director of Depomed, Inc. (2012 – 2017), Auspex Pharmaceuticals,
Inc. (2009 – 2015), Trubion Pharmaceuticals, Inc. (2005 – 2010), Corixa Corporation, Cougar Biotechnology, Inc., Coulter
Pharmaceuticals, Inc., Ilypsa, Inc. and Sirna Therapeutics Inc. (formerly, Ribozyme Pharmaceuticals, Inc.). Dr. Saks is board certified
in oncology and received a B.S. and an M.D. from the University of Illinois. Mr. Saks’ extensive scientific and medical expertise
and experience in formulating partnering and business development strategies, including those involving larger pharmaceutical companies,
was instrumental in his selection as a member of our Board.
Bradley Saenger,
CPA
became our Chief Financial Officer in February 2016. Mr. Saenger has worked for Tonix since May 2014, as the Director
of Accounting (May 2014 – December 2015) and VP of Accounting (January 2016 – February 2016). Between June 2013 and
March 2014, Mr. Saenger worked for Shire Pharmaceuticals as a consultant in the financial analyst research and development group.
Since November 2015, Mr. Saenger has been a director of Tonix Pharma Holdings Limited. Between February 2013 and May 2013, Mr.
Saenger worked for Stewart Health Care System as a financial consultant. Between October 2011 and December 2012, Mr. Saenger was
an Associate Director of Accounting at Vertex Pharmaceuticals, Inc. Between January 2005 and September 2011, Mr. Saenger worked
for Alere Inc., as a Manager of Corporate Accounting and Consolidations (2007 – 2011) and Manager of Financial Reporting
(2005 – 2006). Mr. Saenger also worked for PricewaterhouseCoopers LLP, Shifren Hirsowitz, public accountants and auditors
in Johannesburg, South Africa, Investec Bank in Johannesburg, South Africa and Norman Sifris and Company, public accountants and
auditors in Johannesburg, South Africa. Mr. Saenger received his Bachelor’s and Honors’ degrees in Accounting Science
from the University of South Africa. Mr. Saenger is a Chartered Accountant in South Africa and a Certified Public Accountant in
the Commonwealth of Massachusetts.
Gregory Sullivan,
MD
became our Chief Medical Officer on June 3, 2014 and our Secretary in March 2017. Prior to becoming our Chief Medical
Officer, he served on our Scientific Advisory Board since October 2010, and had also provided
ad hoc
consulting
services. Previously, Dr. Sullivan had been a member of the faculty of Columbia University since July 1999, where he served as
an Assistant Professor of Psychiatry in the Department of Psychiatry at Columbia University Medical Center (CUMC) until June 2014.
Between June 1997 and August 2014, Dr. Sullivan maintained a part-time psychiatry practice. He served as a Research Scientist at
the New York State Psychiatric Institute (NYSPI) from December 2006 to June 2014. He also served as a member of the Institutional
Review Board of the NYSPI from January 2009 to June 2014. As Principal Investigator and Co-Investigator on several human studies
of PTSD, Dr. Sullivan has administered the recruitment, biological assessments, treatment, and safety of participants with PTSD
in clinical trials of the disorder. He has published more than 50 articles and chapters on research topics ranging from stress
and anxiety disorders to abnormal serotonin receptor expression in depression, PTSD and panic disorder. He is a recipient of grants
from the National Institute of Mental Health (NIMH), the Anxiety Disorders Association of America, NARSAD, the Dana Foundation,
and the American Foundation for Suicide Prevention. Dr. Sullivan received a BA in Biology from the University of California, Berkeley,
and received his MD from the College of Physicians & Surgeons at Columbia University. He completed his residency training in
psychiatry at CUMC, and then a two-year NIMH-sponsored research fellowship in anxiety and affective disorders before joining the
faculty at Columbia.
Directors serve until
the next annual meeting of shareholders or until their successors are elected and qualified. Officers serve at the discretion of
the Board.
Board Independence
The Board has determined
that (i) Seth Lederman has a relationship which, in the opinion of the Board, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director and is not an “independent director” as defined in the
Marketplace Rules of The NASDAQ Stock Market and (ii) Margaret Smith Bell, Stuart Davidson, Patrick Grace, Donald Landry, Ernest
Mario, Charles Mather, John Rhodes, and Samuel Saks are each an independent director as defined in the Marketplace Rules of The
NASDAQ Stock Market.
Board Leadership Structure
Our CEO also serves
as the chairman of the Board. An independent director serves as the Board’s lead director. This structure allows one
person to speak for and lead both the Company and the Board, while also providing for effective independent board oversight
through an independent lead director. Having Dr. Lederman, our CEO, serve as Chairman creates clear and unambiguous authority,
which is essential to effective management. Our Board and management can respond more effectively to a clearer line of authority.
By designating our CEO as its Chairman, our Board also sends as an important signal to our employees and shareholders about who
is accountable. Further, since Dr. Lederman is the founder of our Company and is an inventor on key patents and patent applications
underlying our programs, we believe that Dr. Lederman is best-positioned to set our Board’s agenda and provide leadership.
We have established
the position of lead director, which is filled by Mr. Rhodes. The lead director has the following responsibilities, as detailed
in the Lead Director charter, adopted by the Board (and also performs any other functions the Board may request):
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Board leadership
— provides leadership to the Board in any situation where the chairman’s role may be, or may be perceived to be, in conflict, and also chairs meetings when the chairman is absent;
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Leadership of independent director meetings
— leads independent director meetings, which take place without any management directors or Tonix employees present;
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Additional meetings
— calls additional independent director meetings as needed;
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Chairman-independent director liaison
— regularly meets with the chairman and serves as liaison between the chairman and the independent directors;
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Stockholder communications
— makes himself available for direct communication with our stockholders;
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Board agenda, schedule & information
— works with the chairman regarding meeting agendas, meeting schedules and information sent to directors for Board meetings, including the quality, quantity, appropriateness and timeliness of such information; and
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Advisors and consultants
— recommends to the Board the retention of outside advisors and consultants who report directly to the Board on Board-wide issues.
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Board Role in Risk Oversight
Risk is an integral
part of the Board and Board committee deliberations throughout the year. While the Board has the ultimate oversight responsibility
for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the
Audit Committee focuses on financial risk, including internal controls, and receives financial risk assessment reports from management.
Risks related to the compensation programs are reviewed by the Compensation Committee. The Board is advised by these committees
of significant risks and management’s response through periodic updates.
Stockholder Communications with the
Board
The Company’s
stockholders may communicate with the Board, including non-executive directors or officers, by sending written communications addressed
to such person or persons in care of Tonix Pharmaceuticals Holding Corp., Attention: Secretary, 509 Madison Avenue, Suite 306,
New York, New York 10022. All communications will be compiled by the Secretary and submitted to the addressee. If the Board modifies
this process, the revised process will be posted on the Company’s website.
Meetings and Committees of the Board
During the fiscal year
ended December 31, 2016, the Board held 13 meetings, the Audit Committee held six meetings, the Compensation Committee held four
meetings and the Nominating and Corporate Governance Committee held three meetings. The Board and Board committees also approved
certain actions by unanimous written consent.
Board Committees
The Board has standing
Audit, Compensation, and Nominating and Corporate Governance Committees. Information concerning the membership and function of
each committee is as follows:
Board Committee Membership
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Name
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Nominating and Corporate
Governance Committee
|
|
Seth Lederman
|
|
|
|
|
|
|
|
Margaret Smith Bell
|
|
|
|
|
|
|
|
Stuart Davidson
|
|
|
|
**
|
|
|
|
Patrick Grace
|
|
**
|
|
|
|
*
|
|
Donald W. Landry
|
|
|
|
|
|
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|
Ernest Mario
|
|
|
|
*
|
|
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|
Charles E. Mather IV
|
|
*
|
|
|
|
*
|
|
John Rhodes
|
|
*
|
|
|
|
**
|
|
Samuel Saks
|
|
|
|
*
|
|
|
|
* Member of Committee
** Chairman of Committee
Audit Committee
Our Audit Committee
consists of Patrick Grace, Charles Mather and John Rhodes, with Mr. Grace elected as Chairman of the Committee. Our Board has determined
that each of Messrs. Grace, Mather and Rhodes are “independent” as that term is defined under applicable SEC rules
and under the current listing standards of the NASDAQ Stock Market. Mr. Grace is our audit committee financial expert.
Our Audit Committee’s
responsibilities include: (i) reviewing the independence, qualifications, services, fees, and performance of the independent auditors,
(ii) appointing, replacing and discharging the independent auditor, (iii) pre-approving the professional services provided by the
independent auditor, (iv) reviewing the scope of the annual audit and reports and recommendations submitted by the independent
auditor, and (v) reviewing our financial reporting and accounting policies, including any significant changes, with management
and the independent auditor. The Audit Committee reviewed and discussed with management the Company’s audited financial statements
for the year ended December 31, 2016.
Compensation Committee
Our Compensation Committee
consists of Stuart Davidson, Ernest Mario and Samuel Saks, with Mr. Davidson elected as Chairman of the Committee. Our Board has
determined that all of the members are “independent” under the current listing standards of the NASDAQ Stock Market.
Our Board has adopted a written charter setting forth the authority and responsibilities of the Compensation Committee.
Our Compensation Committee
has responsibility for, among other things, evaluating and making decisions regarding the compensation of our executive officers,
assuring that the executive officers are compensated effectively in a manner consistent with our stated compensation strategy,
producing an annual report on executive compensation in accordance with the rules and regulations promulgated by the SEC and periodically
evaluating and administering the terms and administration of our incentive plans and benefit programs. In addition, our Compensation
Committee reviews and makes recommendations to the Board regarding incentive compensation plans that require shareholder approval,
director compensation, the Company’s compensation discussion and analysis and the related executive compensation information
for inclusion in the Company’s 10-K and proxy statement, and employment and severance agreements relating to the chief executive
officer.
Nominating and Corporate Governance
Committee
Our Nominating and
Corporate Governance Committee consists of Patrick Grace, Charles Mather and John Rhodes, with Mr. Rhodes elected as Chairman of
the Committee. The Board has determined that all of the members are “independent” under the current listing standards
of the NASDAQ Stock Market.
Our Nominating and
Corporate Governance Committee has responsibility for assisting the Board in, among other things, effecting the organization, membership
and function of the Board and its committees. The Nominating and Corporate Governance Committee shall identify and evaluate the
qualifications of all candidates for nomination for election as directors. In addition, the Nominating and Corporate Governance
Committee is responsible for developing, recommending and evaluating corporate governance standards and a code of business conduct
and ethics.
Nomination of Directors
As provided in its
charter and our Company’s corporate governance principles, the Nominating and Corporate Governance Committee is responsible
for identifying individuals qualified to become directors. The Nominating and Corporate Governance Committee seeks to identify
director candidates based on input provided by a number of sources, including (1) the Nominating and Corporate Governance Committee
members, (2) our other directors, (3) our shareholders, (4) our Chief Executive Officer or Chairman, and (5) third parties such
as professional search firms. In evaluating potential candidates for director, the Nominating and Corporate Governance Committee
considers the entirety of each candidate’s credentials.
Qualifications for
consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the
existing composition of the Board. However, at a minimum, candidates for director must possess:
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high personal and professional ethics and integrity;
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●
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the ability to exercise sound judgment;
|
|
●
|
the ability to make independent analytical inquiries;
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●
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a willingness and ability to devote adequate time and resources to diligently perform Board and committee duties; and
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●
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the appropriate and relevant business experience and acumen.
|
In addition to these
minimum qualifications, the Nominating and Corporate Governance Committee also takes into account when considering whether to nominate
a potential director candidate the following factors:
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●
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whether the person possesses specific industry expertise and familiarity with general issues affecting our business;
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|
●
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whether the person’s nomination and election would enable the Board to have a member that qualifies as an “audit committee financial expert” as such term is defined by the SEC in Item 401 of Regulation S-K;
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|
●
|
whether the person would qualify as an “independent” director under the listing standards of the Nasdaq Stock Market;
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|
●
|
the importance of continuity of the existing composition of the Board to provide long term stability and experienced oversight; and
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|
|
●
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the importance of diversified Board membership, in terms of both the individuals involved and their various experiences and areas of expertise.
|
The Nominating and
Corporate Governance Committee will consider director candidates recommended by shareholders provided such recommendations are
submitted in accordance with the procedures set forth below. In order to provide for an orderly and informed review and selection
process for director candidates, the Board has determined that shareholders who wish to recommend director candidates for consideration
by the Nominating and Corporate Governance Committee must comply with the following:
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The recommendation must be made in writing to the Corporate Secretary at Tonix Pharmaceuticals Holding Corp.;
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|
●
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The recommendation must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and the Company within the last three years and evidence of the recommending person’s ownership of the Company’s common stock;
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The recommendation shall also contain a statement from the recommending shareholder in support of the candidate; professional references, particularly within the context of those relevant to board membership, including issues of character, judgment, diversity, age, independence, expertise, corporate experience, length of service, other commitments and the like; and personal references; and
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●
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A statement from the shareholder nominee indicating that such nominee wants to serve on the Board and could be considered “independent” under the Rules and Regulations of the Nasdaq Stock Market and the SEC, as in effect at that time.
|
All candidates submitted
by shareholders will be evaluated by the Nominating and Corporate Governance Committee according to the criteria discussed above
and in the same manner as all other director candidates.
Code of Ethics
We have adopted a Code
of Business Conduct and Ethics that applies to all of our directors, officers and employees.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of
the Exchange Act requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC
reports regarding their ownership and changes in ownership of our securities. We believe that, during fiscal 2016, our directors,
executive officers and 10% stockholders complied with all Section 16(a) filing requirements.
Involvement in Certain Legal Proceedings
Our directors and executive
officers have not been involved in any of the following events during the past ten years:
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1.
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any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
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2.
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any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
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|
3.
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being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
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4.
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being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
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|
5.
|
being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
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6.
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being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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EXECUTIVE COMPENSATION
Compensation Philosophy and Practices
We believe that the
performance of our executive officers significantly impacts our ability to achieve our corporate goals. We, therefore, place considerable
importance on the design and administration of our executive officer compensation program. This program is intended to enhance
stockholder value by attracting, motivating and retaining qualified individuals to perform at the highest levels and to contribute
to our growth and success. Our executive officer compensation program is designed to provide compensation opportunities that are
tied to individual and corporate performance.
Our compensation packages
are also designed to be competitive in our industry. The Compensation Committee from time-to-time consults with compensation consultants,
legal counsel and other advisors in designing our compensation program, including in evaluating the competitiveness of individual
compensation packages and in relation to our corporate goals.
Our
overall compensation philosophy has been to pay our executive officers an annual base salary and to provide opportunities, through
cash and equity incentives, to provide higher compensation if certain key performance goals are satisfied. We believe that many
of our key practices and programs demonstrate good governance. The main principles of our fiscal year 2016 compensation strategy
included the following:
|
●
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An emphasis on pay for performance
. A significant portion of our executive officers’ total compensation is variable and at risk and tied directly to measurable performance, which aligns the interests of our executives with those of our stockholders;
|
|
●
|
Performance results are linked to Company and individual performance
. When looking at performance over the year, we equally weigh individual performance as well as that of the Company as a whole. Target annual compensation is positioned to allow for above-median compensation to be earned through an executive officer’s and the Company’s extraordinary performance;
|
|
●
|
Equity as a key component to align the interests of our executives with those of our stockholders.
Our Compensation Committee continues to believe that keeping executives interests aligned with those of our stockholders is critical to driving toward achievement of long-term goals of both our stockholders and the Company; and
|
|
●
|
Peer group positioning
. While the Compensation Committee considers the level of compensation paid by the companies in our peer group as a reference point that provides a framework for its compensation decisions, in order to maintain competiveness and flexibility, the Compensation Committee does not target compensation at a particular level relative to the peer group; nor does the Compensation Committee employ a formal benchmarking strategy or rely upon specific peer–derived targets.
|
In 2016, we also continued
practices that demonstrate good governance and careful stewardship of corporate assets, including:
|
●
|
Limited personal benefits
. Our executive officers are eligible for the same benefits as our non-executive salaried employees, and they do not receive any additional perquisites.
|
|
●
|
No retirement benefits
. We do not provide our executive officers with a traditional retirement plan, or with any supplemental deferred compensation or retirement benefits.
|
|
●
|
No tax gross-ups
. We do not provide our executive officers with any tax gross-ups.
|
|
●
|
No single-trigger cash change in control benefits
. We do not provide cash benefits to our executives upon a change in control, absent an actual termination of employment.
|
At our annual meeting
in May 2016, we conducted our tri-annual advisory vote on executive compensation, commonly referred to as a “say-on-pay”
vote. At that time, approximately 95% of the votes affirmatively cast on the advisory say-on-pay proposal were voted in favor of
the compensation of our named executive officers. The Compensation Committee understood this level of approval to indicate strong
stockholder support for our executive compensation policies and programs generally, and as a result, our Compensation Committee
made no fundamental changes to our executive compensation programs. We will hold our next say-on-pay vote at the 2019 annual meeting.
Our Compensation Committee and our Board will consider shareholder feedback through the say-on-pay vote and remains committed to
engaging with shareholders and are open to feedback from shareholders.
Summary Compensation Table
The following table
provides certain summary information concerning compensation awarded to, earned by or paid to our Chief Executive Officer and the
two highest paid executive officers and up to two other highest paid individuals whose total annual salary and bonus exceeded $100,000
for fiscal years 2016 and 2015.
Name & Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($) (1)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings ($)
|
|
All Other
Compensation
($)
|
|
|
Total ($)
|
|
Seth Lederman
|
|
2016
|
|
|
472,500
|
|
|
—
|
|
|
—
|
|
|
292,763
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
765,263
|
|
Chief Executive Officer
|
|
2015
|
|
|
450,000
|
|
|
225,000
|
|
|
—
|
|
|
887,098
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
1,562,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Sullivan
|
|
2016
|
|
|
335,000
|
|
|
—
|
|
|
—
|
|
|
79,844
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
414,844
|
|
Chief Medical Officer
|
|
2015
|
|
|
238,110
|
|
|
47,000
|
|
|
—
|
|
|
124,382
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
409,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley Saenger
|
|
2016
|
|
|
301,361
|
|
|
—
|
|
|
—
|
|
|
71,760
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
373,121
|
|
Chief Financial Officer
|
|
2015
|
|
|
215,000
|
|
|
64,500
|
|
|
—
|
|
|
61,017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
340,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leland Gershell (2)
|
|
2016
|
|
|
33,056
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
392,000
|
(3)
|
|
|
425,056
|
|
Former Chief Financial Officer
|
|
2015
|
|
|
350,000
|
|
|
|
|
|
—
|
|
|
234,682
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
584,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Daugherty (4)
|
|
2015
|
|
|
238,110
|
|
|
62,275
|
|
|
—
|
|
|
168,971
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
469,356
|
|
Former Chief Scientific Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the aggregate grant date fair value of options granted in accordance with FASB Accounting Standards Codification, or ASC, Topic 718, “Stock Compensation.” For the relevant assumptions used in determining these amounts, refer to Note 8 to our audited financial statements.
|
|
(2)
|
Dr. Gershell resigned effective January 8, 2016.
|
|
(3)
|
Represents severance payment and consulting fees.
|
|
(4)
|
Dr. Daugherty’s employment was terminated, effective December 31, 2016.
|
Grants of Plan-Based Awards in Fiscal 2016
The following table provides information
with regard to each grant of plan-based award made to a named executive officer under any plan during the fiscal year ended December 31,
2016.
Name
|
|
Grant Date
|
|
All Other Option Awards:
Number of Securities
Underlying Options (#)
|
|
Exercise or Base Price of
Option Awards ($/Share)
|
|
Grant Date Fair Value of
Stock and Option Awards
($) (1)
|
|
Seth Lederman
|
|
2/9/2016
|
|
11,000
|
|
$
|
50.30
|
|
$
|
$2.49
|
|
|
|
2/9/2016
|
|
11,000
|
|
$
|
50.30
|
|
$
|
$0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley Saenger
|
|
2/9/2016
|
|
1,500
|
|
$
|
50.30
|
|
$
|
$2.49
|
|
|
|
5/27/2016
|
|
6,000
|
|
$
|
24.20
|
|
$
|
$0.08
|
|
|
|
5/27/2016
|
|
2,000
|
|
$
|
24.20
|
|
$
|
$1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Sullivan
|
|
2/9/2016
|
|
3,000
|
|
$
|
50.30
|
|
$
|
$2.49
|
|
|
|
2/9/2016
|
|
3,000
|
|
$
|
50.30
|
|
$
|
$0.17
|
|
|
(1)
|
Represents the aggregate grant date fair value of options granted in accordance with FASB ASC Topic 718.
|
Outstanding Equity Awards at December 31, 2016
The following table
presents information regarding outstanding equity awards held by our named executive officers as of December 31, 2016.
Name
|
|
Number of
Securities
underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price ($/Sh)
|
|
Option Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Seth Lederman
|
|
3,500
|
|
—
|
|
$
|
300.00
|
|
5/9/2022
|
|
|
|
6,750
|
|
—
|
|
$
|
102.00
|
|
2/12/2023
|
|
|
|
6,708
|
|
392
|
(1)
|
$
|
158.80
|
|
2/11/2024
|
|
|
|
8,334
|
|
1,666
|
(2)
|
$
|
98.70
|
|
6/17/2024
|
|
|
|
7,223
|
|
2,777
|
(3)
|
$
|
66.80
|
|
10/29/2024
|
|
|
|
11,550
|
|
7,350
|
(4)
|
$
|
59.50
|
|
2/25/2025
|
|
|
|
715
|
|
—
|
|
$
|
59.50
|
|
2/25/2025
|
|
|
|
—
|
|
11,000
|
(5)
|
$
|
50.30
|
|
2/9/2026
|
|
|
|
—
|
|
11,000
|
(6)
|
$
|
50.30
|
|
2/9/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley Saenger
|
|
918
|
|
182
|
(2)
|
$
|
98.70
|
|
6/17/2024
|
|
|
|
796
|
|
304
|
(3)
|
$
|
66.80
|
|
10/29/2024
|
|
|
|
796
|
|
504
|
(4)
|
$
|
59.50
|
|
2/25/2025
|
|
|
|
—
|
|
1,500
|
(5)
|
$
|
50.30
|
|
2/9/2026
|
|
|
|
—
|
|
6,000
|
(6)
|
$
|
24.20
|
|
5/27/2026
|
|
|
|
—
|
|
2,000
|
(7)
|
$
|
24.20
|
|
5/27/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Sullivan
|
|
2,209
|
|
441
|
(2)
|
$
|
98.70
|
|
6/17/2024
|
|
|
|
1,916
|
|
734
|
(3)
|
$
|
66.80
|
|
10/29/2024
|
|
|
|
1,621
|
|
1,029
|
(4)
|
$
|
59.50
|
|
2/25/2025
|
|
|
|
—
|
|
3,000
|
(5)
|
$
|
50.30
|
|
2/9/2026
|
|
|
|
—
|
|
3,000
|
(6)
|
$
|
50.30
|
|
2/9/2026
|
|
(1)
|
The shares subject to this stock option vested as to 1/3 of the shares on February 11, 2015, with the remaining shares vesting on an equal monthly basis over the following 24 months.
|
(2)
|
The shares subject to this stock option vested as to 1/3 of the shares on June 17, 2015, with the remaining shares vesting on an equal monthly basis over the following 24 months.
|
(3)
|
The shares subject to this stock option vested as to 1/3 of the shares on October 29, 2015, with the remaining shares vesting on an equal monthly basis over the following 24 months.
|
(4)
|
The shares subject to this stock option vested as to 1/3 of the shares on February 25, 2016, with the remaining shares vesting on an equal monthly basis over the following 24 months.
|
(5)
|
The shares subject to this stock option vested as to 1/3 of the shares on February 9, 2017, with the remaining shares vesting on an equal monthly basis over the following 24 months.
|
(6)
|
The shares subject to this stock option vest 1/3rd upon the date(s) that certain stock price goals are achieved. The stock price goals are such date(s) when the Company’s common stock has an average closing sales price equal to or exceeding each of $60.00, $70.00 and $80.00 per share for 20 consecutive trading days, subject to a one year minimum service period prior to vesting.
|
(7)
|
The shares subject to this stock option vested as to 1/3 of the shares on May 27, 2017, with the remaining shares vesting on an equal monthly basis over the following 24 months.
|
Option Exercises and Stock Vested
No options were exercised
by any of the named executive officers and no named executive officers held restricted stock units during the fiscal year ended
December 31, 2016.
Equity Compensation Plan Information
The following table
provides certain information with respect to our equity compensation plans in effect as of December 31, 2016.
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options,
warrants and rights
(A)
|
|
|
Weighted-average exercise price of outstanding options,
warrants and rights
(B)
|
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column A)
(2)
(C)
|
Equity compensation plans approved by security holders
(1)
|
|
|
228,676
|
|
|
$
|
$88.34
|
|
|
|
232,045
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
Total
|
|
|
228,676
|
|
|
|
|
|
|
|
232,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of the Prior Plans and the 2014 ESPP.
|
(2)
|
Consists of shares available for future issuance under the 2016 Plan and the 2014 ESPP. As of December 31, 2016, 212,596 shares of common stock were available for issuance under the 2016 Plan and 19,449 shares of common stock were available for issuance under the 2014 ESPP.
|
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
Employment Agreement with Seth Lederman
On February 11, 2014,
the Company entered into an employment agreement, or the Lederman Agreement, with Dr. Seth Lederman, or Lederman, to continue to
serve as our President, Chief Executive Officer and Chairman of the Board.
The base salary for
Lederman under the Lederman Agreement was $425,000 per annum. The Lederman Agreement has an initial term of one year
and automatically renew for successive one year terms unless either party delivers written notice not to renew at least 60 days
prior to the end of the current term.
Pursuant to the Lederman
Agreement, if the Company terminates Lederman’s employment without Cause (as defined in the Lederman Agreement) or Lederman
resigns for Good Reason (as defined in the Lederman Agreement), Lederman is entitled to the following payments and benefits: (1) his
fully earned but unpaid base salary through the date of termination at the rate then in effect, plus all other benefits, if any,
under any group retirement plan, nonqualified deferred compensation plan, equity award plan or agreement, health benefits plan
or other group benefit plan to which Lederman may be entitled to under the terms of such plans or agreements; (2) a lump sum
cash payment in an amount equal to 12 months of his base salary as in effect immediately prior to the date of termination;
(3) continuation of health benefits for Lederman and his eligible dependents for a period of 12 months following the
date of termination; and (4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards
as to the number of stock awards that would have vested over the 12-month period following termination had Lederman remained continuously
employed by the Company during such period.
Pursuant to the Lederman
Agreement, if Lederman’s employment is terminated as a result of death or permanent disability, Lederman or his estate, as
applicable, is entitled to the following payments and benefits: (1) his fully earned but unpaid base salary through the date
of termination at the rate then in effect; (2) a lump sum cash payment in an amount equal to six months of his base salary
as in effect immediately prior to the date of termination; and (3) the automatic acceleration of the vesting and exercisability
of outstanding unvested stock awards.
If
Lederman is terminated without Cause or resigns for Good Reason during the period commencing 90 days prior to a Change in
Control (as defined below) or 12 months following a Change in Control, Lederman shall be entitled to receive, in lieu of the
severance benefits described above, the following payments and benefits: (1) a lump sum cash payment in an amount equal to
36 months of his base salary as in effect immediately prior to the date of termination, except that, if and while Lederman
is still entitled to the Sale Bonus (as defined below), it will only be 18 months; (2) continuation of health benefits for
Lederman and his eligible dependents for a period of 24 months following the date of termination, except that, if and while
Lederman is still entitled to the Sale Bonus it will only be 12 months; and (3) the automatic acceleration of the vesting
and exercisability of outstanding unvested stock awards.
If during the term
of the Lederman Agreement or within 120 days after Lederman is terminated without Cause or resigns for Good Reason, following a
Change in Control, the Company consummates a Change in Control transaction in which the Enterprise Value (as defined below) equals
or exceeds $50 million, Lederman shall be entitled to receive a lump sum payment equal to 4.4% of the Enterprise Value, or the
Sale Bonus. The Sale Bonus provision of the Lederman Agreement will terminate upon the Company granting Lederman long-term
incentive compensation mutually agreed to by the Board and Lederman.
For
purposes of the Lederman Agreement, “Cause” generally means (1) commission of an act of fraud, embezzlement
or dishonesty or some other illegal act that has a demonstrable material adverse impact on the Company or any successor or affiliate
of the Company, (2) conviction of, or entry into a plea of “guilty” or “no contest” to, a felony,
(3) unauthorized use or disclosure of the Company’s confidential information or trade secrets or any successor or affiliate
of the Company that has, or may reasonably be expected to have, a material adverse impact on any such entity; (4) gross negligence,
failure to follow a material, lawful and reasonable request of the Board or material violation of any duty of loyalty to the Company
or any successor or affiliate of the Company, or any other demonstrable material willful misconduct by Lederman, (5) ongoing
and repeated failure or refusal to perform or neglect of his duties as required by his employment agreement, which failure, refusal
or neglect continues for 30 days following Lederman’s receipt of written notice from the Board stating with specificity
the nature of such failure, refusal or neglect, provided that such failure to perform is not as a result of illness, injury or
medical incapacity, or (6) material breach of any Company policy or any material provision of the Lederman Agreement.
For
purposes of the Lederman Agreement, “Good Reason” generally means (1) a material diminution in Lederman’s
title, authority, duties or responsibilities, (2) a material diminution in Lederman’s base compensation, unless such
a reduction is imposed across-the-board to the Company’s senior management, and such reduction is not greater than 15%, (3) a
material change in the geographic location at which Lederman must perform his duties, (4) any other action or inaction that
constitutes a material breach by the Company or any successor or affiliate of the Company’s obligations to Lederman under
the Lederman Agreement, or (5) the Company elects not to renew the Lederman Agreement for another term.
For
purposes of the Lederman Agreement, “Change in Control” generally means:
|
●
|
A transaction or series of transactions (other than public offerings) that results in any person or entity or related group of persons or entities (other than the Company, its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a person or entity that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than 40% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition;
|
|
●
|
(1) a merger, consolidation, reorganization, or business combination or (2) the sale, exchange or transfer of all or substantially all of the Company’s assets in any single transaction or series of transactions or (3) the acquisition of assets or stock of another entity, in each case other than a transaction:
|
|
o
|
which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent, directly or indirectly, at least 60% of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction, and
|
|
o
|
after which no person or group beneficially owns voting securities representing 40% or more of the combined voting power of the Company or its successor; provided, however, that no person or group is treated as beneficially owning 40% or more of combined voting power of the Company or its successor solely as a result of the voting power held in the Company prior to the consummation of the transaction.
|
For
purposes of the Lederman Agreement, “Enterprise Value” generally means (1) in a Change in Control in which consideration
is received by the Company, the total cash and non-cash consideration, including debt assumed, received by the Company, net of
any fees and expenses in connection with the transaction and (2) in a Change in Control in which consideration is payable to the
stockholders of the Company, the total cash and non-cash consideration, including debt assumed, payable to the Company’s
stockholders net of any fees and expenses in connection with the transaction. Enterprise Value also includes any cash
or non-cash consideration payable to the Company or to the Company’s stockholders on a contingent, earnout or deferred basis.
Employment Agreement with Gregory Sullivan
On June 3, 2014, the
Company entered into an employment agreement, or the Sullivan Agreement, with Dr. Gregory Sullivan, or Sullivan, to serve as our
Chief Medical Officer. The base salary for Sullivan under the Sullivan Agreement was $225,000 per annum. The
Sullivan Agreement had an initial term of one year and automatically renews for successive one year terms unless either party delivers
written notice not to renew at least 60 days prior to the end of the current term.
Pursuant
to the Sullivan Agreement, if the Company terminates Sullivan’s employment without Cause (as defined below) or Executive
resigns for Good Reason (as defined below), Sullivan is entitled to the following payments and benefits: (1) his fully earned
but unpaid base salary through the date of termination at the rate then in effect, plus all other benefits, if any, under
any
group retirement plan, nonqualified deferred compensation plan, equity award plan or agreement, health benefits plan or other group
benefit plan to which Sullivan may be entitled to under the terms of such plans or agreements; (2) a lump sum cash payment
in an amount equal to 12 months of his base salary as in effect immediately prior to the date of termination; (3) continuation
of health benefits for Sullivan and his eligible dependents for a period of 12 months following the date of termination; and
(4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards as to the number of
stock awards that would have vested over the 12-month period following termination had Sullivan remained continuously employed
by the Company during such period.
Pursuant to the Sullivan
Agreement, if Sullivan’s employment is terminated as a result of death or permanent disability, Sullivan or his estate, as
applicable, is entitled to his fully earned but unpaid base salary through the end of the month in which termination occurs at
the rate then in effect.
For
purposes of the Sullivan Agreement, “Cause” generally means (1) commission of an act of fraud, embezzlement
or dishonesty or some other illegal act that has a demonstrable material adverse impact on the Company or any successor or affiliate
of the Company, (2) conviction of, or entry into a plea of “guilty” or “no contest” to, a felony,
(3) unauthorized use or disclosure of the Company’s confidential information or trade secrets or any successor or affiliate
of the Company that has, or may reasonably be expected to have, a material adverse impact on any such entity, (4) gross negligence,
failure to follow a material, lawful and reasonable request of the Company or material violation of any duty of loyalty to the
Company or any successor or affiliate of the Company, or any other demonstrable material misconduct by Sullivan, (5) ongoing
and repeated failure or refusal to perform or neglect of his duties as required by his employment agreement, which failure, refusal
or neglect continues for 30 days following Sullivan’s receipt of written notice from the Company stating with specificity
the nature of such failure, refusal or neglect, or (6) material breach of any Company policy or any material provision of
the Sullivan Agreement.
For
purposes of the Sullivan Agreement, “Good Reason” generally means (1) a material diminution in Executive’s
title, authority, duties or responsibilities, (2) a material diminution in the executive officer’s base compensation,
unless such a reduction is imposed across-the-board to the Company’s senior management and such reduction is not greater
than 15%, (3) a material change in the geographic location at which the executive officer must perform his duties, (4) any
other action or inaction that constitutes a material breach by the Company or any successor or affiliate of the Company’s
obligations to Sullivan under the Sullivan Agreement, or (5) the Company elects not to renew the Sullivan Agreement for
another term.
Directors Compensation Table
The following table
sets forth summary information concerning the total compensation paid to our non-employee directors in 2016 for services to our
Company.
Name
|
|
Stock
Awards ($)
(1)
|
|
Option
Awards ($)
|
|
Total ($)
|
|
Stuart Davidson
|
|
$
|
45,750
|
|
$
|
—
|
|
$
|
45,750
|
|
Patrick Grace
|
|
$
|
45,750
|
|
$
|
—
|
|
$
|
45,750
|
|
Donald Landry
|
|
$
|
45,750
|
|
$
|
—
|
|
$
|
45,750
|
|
Ernest Mario
|
|
$
|
45,750
|
|
$
|
—
|
|
$
|
45,750
|
|
Charles Mather IV
|
|
$
|
45,750
|
|
$
|
—
|
|
$
|
45,750
|
|
John Rhodes
(2)
|
|
$
|
68,625
|
|
$
|
—
|
|
$
|
68,625
|
|
Samuel Saks
|
|
$
|
45,750
|
|
$
|
—
|
|
$
|
45,750
|
|
Total:
|
|
$
|
343,125
|
|
$
|
—
|
|
$
|
343,125
|
|
(1)
|
Represents the aggregate grant date fair value of restricted stock units granted in accordance with FASB ASC Topic 718. For the relevant assumptions used in determining these amounts, refer to Note 8 to our audited financial statements included in our Annual Report on Form 10-K. These amounts do not necessarily correspond to the actual value that may be recognized from the restricted stock unit grant.
|
(2)
|
Mr. Rhodes received additional restricted stock units for serving as lead director.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have adopted a written
related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration
and oversight of “related-party transactions.” For purposes of our policy only, a “related-party transaction”
is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we
and any “related party” are participants involving an amount that exceeds $120,000.
Transactions involving
compensation for services provided to us as an employee, consultant or director are not considered related-person transactions
under this policy. A related party is any executive officer, director or a holder of more than five percent of our common stock,
including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, where
a transaction has been identified as a related-party transaction, our Chief Compliance Officer must present information regarding
the proposed related-party transaction to our Nominating and Corporate Governance Committee for review. The presentation must include
a description of, among other things, the material facts, the direct and indirect interests of the related parties, the benefits
of the transaction to us and whether any alternative transactions are available. To identify related-party transactions in advance,
we rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related-party
transactions, our Nominating and Corporate Governance Committee will take into account the relevant available facts and circumstances
including, but not limited to:
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●
|
whether the transaction was undertaken in the ordinary course of our business;
|
|
●
|
whether the related party transaction was initiated by us or the related party;
|
|
●
|
whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to us than
terms that could have been reached with an unrelated third party;
|
|
●
|
the purpose of, and the potential benefits to us from the related party transaction;
|
|
●
|
the approximate dollar value of the amount involved in the related party transaction, particularly as it relates to the related
party;
|
|
●
|
the related party’s interest in the related party transaction, and
|
|
●
|
any other information regarding the related party transaction or the related party that would be material to investors in light
of the circumstances of the particular transaction.
|
The
Nominating
and Corporate Governance Committee shall then make a recommendation to the
Board
,
who will determine whether or not to approve of the related party transaction, and if so, upon what terms and conditions. In the
event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations
and approval.
Other than as disclosed
below, during the last two fiscal years, there have been no related party transactions.
On February 3, 2015,
we entered into an underwriting agreement for an offering of common stock with a group of underwriters, including Janney Montgomery
Scott LLC. Charles Mather, one of our directors, was a Managing Director of Janney until February 2015.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth certain information regarding beneficial ownership of our common stock as of September 28, 2017:
|
●
|
by each person who is known by us to beneficially own more than 5% of our common stock;
|
|
●
|
by each of our officers and directors; and
|
|
●
|
by all of our officers and directors as a group.
|
Unless otherwise indicated
in the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s
address is c/o Tonix Pharmaceuticals Holding Corp., 509 Madison Avenue, Suite 306, New York New York 10022.
NAME OF OWNER
|
|
TITLE OF
CLASS
|
|
NUMBER OF
SHARES OWNED (1)
|
|
|
|
PERCENTAGE OF
COMMON STOCK (2)
|
|
Seth Lederman
|
|
Common Stock
|
|
|
182,871
|
|
(3)
|
|
|
2.39
|
%
|
Bradley Saenger
|
|
Common Stock
|
|
|
8,071
|
|
(4)
|
|
|
*
|
|
Gregory Sullivan
|
|
Common Stock
|
|
|
19,093
|
|
(5)
|
|
|
*
|
|
Margaret Smith Bell
|
|
Common Stock
|
|
|
0
|
|
|
|
|
*
|
|
Stuart Davidson
|
|
Common Stock
|
|
|
15,429
|
|
(6)
|
|
|
*
|
|
Patrick Grace
|
|
Common Stock
|
|
|
6,966
|
|
(7)
|
|
|
*
|
|
Donald Landry
|
|
Common Stock
|
|
|
14,663
|
|
(8)
|
|
|
*
|
|
Ernest Mario
|
|
Common Stock
|
|
|
79,863
|
|
(9)
|
|
|
1.05
|
%
|
Charles Mather IV
|
|
Common Stock
|
|
|
7,644
|
|
(10)
|
|
|
*
|
|
John Rhodes
|
|
Common Stock
|
|
|
24,763
|
|
(11)
|
|
|
*
|
|
Samuel Saks
|
|
Common Stock
|
|
|
12,088
|
|
(12)
|
|
|
*
|
|
Officers and Directors as a Group (11 persons)
|
|
Common Stock
|
|
|
316,938
|
|
(13)
|
|
|
4.11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Rosalind Advisors, Inc. (14)
|
|
Common Stock
|
|
|
594,077
|
|
(15)
|
|
|
7.79
|
%
|
Opaleye, L.P. (16)
|
|
Common Stock
|
|
|
413,593
|
|
|
|
|
5.46
|
%
|
* Denotes less than 1%
(1) Beneficial Ownership is determined
in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of
common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days
of September 28, 2017 are deemed outstanding for computing the percentage of the person holding such option or warrant but are
not deemed outstanding for computing the percentage of any other person.
(2) Percentage based upon 7,581,700 shares
of common stock issued and outstanding as of September 28, 2017.
(3) Includes 61,811 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days, days, 1,677 shares of common stock underlying
warrants, 18,463 shares of common stock and 5,450 shares of common stock underlying warrants owned by Lederman & Co, 3,246
shares of common stock and 1,267 shares of common stock underlying warrants owned by L&L, 5,898 shares of common stock and
825 shares of common stock underlying warrants owned by Targent, 2,917 shares of common stock and 417 shares of common stock underlying
warrants owned by Leder Labs, 2,917 shares of common stock and 417 shares of common stock underlying warrants owned by Starling,
13,300 shares owned through a 401(k) account, 50,000 shares owned through an IRA account and 3,100 shares owned by Dr. Lederman’s
spouse. Seth Lederman, as the Managing Member of Lederman & Co and Targent, the Manager of L&L and the Chairman of Leder
Labs and Starling, has investment and voting control over the shares held by these entities.
(4) Includes 5,292 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days.
(5) Includes 9,494 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days.
(6) Includes 4,136 shares of common stock
underlying options and restricted stock units which are currently exercisable or vested or become exercisable within 60 days, 7,454
shares of common stock and 1,084 shares of common stock underlying warrants owned by Lysander, LLC and 655 shares owned by Oystercatcher
Trust. Stuart Davidson, as the Member of Lysander, LLC and Trustee of Oystercatcher Trust, has investment and voting control over
the shares held by these entities.
(7) Includes 4,211 shares of common stock
underlying options and restricted stock units which are currently exercisable or vested or become exercisable within 60 days.
(8) Includes 4,061 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days, 125 shares of common stock underlying
warrants, 3,246 shares of common stock and 1,267 shares of common stock underlying warrants owned by L&L. Donald Landry, as
a Member of L&L, has investment and voting control over the shares held by this entity.
(9) Includes 4,061 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days, 6,084 shares of common stock underlying
warrants and 5,895 shares owned by Ernest and Mildred Mario Revocable Trust. Ernest Mario, as a Trustee of Ernest and Mildred Mario
Revocable Trust, has investment and voting control over the shares held by this entity.
(10) Includes 4,811 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days and 300 shares of common stock underlying
warrants.
(11) Includes 4,866 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days and 3,927 shares of common stock underlying
warrants.
(12) Includes 4,061 shares of common stock
underlying options which are currently exercisable or become exercisable within 60 days and 1,422 shares of common stock underlying
warrants.
(13) Includes 106,804 shares of common
stock underlying options and restricted stock units which are currently exercisable or vested or become exercisable within 60 days,
18,463 shares of common stock and 5,450 shares of common stock underlying warrants owned by Lederman & Co, 3,246 shares of
common stock and 1,267 shares of common stock underlying warrants owned by L&L, 5,898 shares of common stock and 825 shares
of common stock underlying warrants owned by Targent, 2,917 shares of common stock and 417 shares of common stock underlying warrants
owned by Leder Labs, 2,917 shares of common stock and 417 shares of common stock underlying warrants owned by Starling, 13,300
shares owned through a 401(k) account of Dr. Lederman, 50,000 shares owned through an IRA account of Dr. Lederman, 3,100 shares
owned by Dr. Lederman’s spouse, 7,454 shares of common stock and 1,084 shares of common stock underlying warrants owned by
Lysander, LLC, 655 shares owned by Oystercatcher Trust, 5,895 shares owned by Ernest and Mildred Mario Revocable Trust and 13,535
shares of common stock underlying warrants owned directly by the executive officers and directors.
(14) Based upon a Schedule 13G/A filed
with the SEC on April 7, 2017. The mailing address for this beneficial owner is
175
Bloor Street East, Suite 1316, North Tower, Toronto, Ontario, M4W 3R8 Canada
. Steven Salamon is the portfolio manager of
this entity and may be deemed to beneficially own the securities held by this entity.
(15) Includes 40,169 shares of common stock
underlying warrants.
(16) Based upon a Schedule 13G filed with
the SEC on April 17, 2017. The mailing address for this beneficial owner is
One Boston
Place, 26
th
Floor, Boston, Massachusetts 02108
. James Silverman is the president of Opaleye Management Inc.,
the investment manager of Opaleye, L.P., and may be deemed to beneficially own the securities held by this entity.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to
issue up to 150,000,000 shares of our common stock, par value $0.001 per share. As of September 28, 2017, there were
7,581,700
shares of our common stock issued and outstanding. The outstanding shares of our common stock are validly issued, fully
paid and nonassessable.
Holders of our common
stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of our common stock do not
have cumulative voting rights. Therefore, holders of a majority of the shares of our common stock voting for the election of directors
can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders.
A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such
as liquidation, merger or an amendment to our articles of incorporation.
Holders of our common
stock are entitled to share in all dividends that our Board of Directors, in its discretion, declares from legally available funds.
In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in
all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over
our common stock. Our common stock has no pre-emptive, subscription or conversion rights and there are no redemption provisions
applicable to our common stock.
Preferred Stock
We are authorized to
issue up to 5,000,000 shares of preferred stock, par value $.001 per share, none of which are currently outstanding. The shares
of preferred stock may be issued in series, and shall have such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for the issuance of such stock adopted from time to
time by the board of directors. The board of directors is expressly vested with the authority to determine and fix in the resolution
or resolutions providing for the issuances of preferred stock the voting powers, designations, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each such series to the full extent now or hereafter permitted by the laws
of the State of Nevada.
Convertible Securities
None.
Warrants
As
of September 28, 2017, we had outstanding warrants to purchase 731,194 shares of common stock at a weighted-average exercise price
of $18.76 per share, which expire between December 2017 and October 2021.
Anti-Takeover
Effects of Provisions of the Articles of Incorporation and Bylaws
Articles
of Incorporation and Bylaw Provisions.
Our articles of incorporation and bylaws include a number of provisions that may
have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate
with our board of directors rather than pursue non-negotiated takeover attempts. They are intended to enhance long-term
value to our stockholders by increasing the likelihood of continued stability in the composition of our board of directors and
its policies and discouraging certain types of transactions that may involve an actual or threatened acquisition of us. These provisions
are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may
be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our
shares and, as a consequence, they also may inhibit fluctuations in the market price of our stock that could result from actual
or rumored takeover attempts. These provisions include the items described below.
Filling
Vacancies.
Any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in
the size of our board of directors, may only be filled by the affirmative vote of a majority of our directors then in office even
if less than a quorum.
Meetings
of Stockholders.
Our bylaws provide that only our president or our board of directors may call special meetings of stockholders
and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders.
Our bylaws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before
the meeting.
Advance
Notice Requirements.
Our bylaws include advance notice procedures with regard to stockholder proposals relating to the
nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures
provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at
which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less than
90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The
notice must contain certain information specified in the amended and restated bylaws.
Amendment
to Bylaws and Articles of Incorporation.
As required by Nevada law, any amendment of our articles of incorporation must
first be approved by a majority of our board of directors and, if required by law or our articles of incorporation, thereafter
be approved by a majority of the outstanding shares entitled to vote on the amendment, and a majority of the outstanding shares
of each class entitled to vote thereon as a class. Our bylaws may be amended by the affirmative vote of a majority vote of the
directors then in office, subject to any limitations set forth in the bylaws, or by the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding voting power of our company, voting together as a single class.
Blank
Check Preferred Stock.
Our articles of incorporation provides for 5,000,000 authorized shares of preferred stock. The
existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to
discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or otherwise. For example, if
in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the
best interests of our company or our stockholders, our board of directors could cause shares of preferred stock to be issued without
stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the
proposed acquirer or insurgent stockholder or stockholder group. In this regard, our amended and restated certificate of incorporation
grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred
stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to
holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these
holders and may have the effect of delaying, deterring, or preventing a change of control of us.
Exchange Listing
Our
common stock is listed on The NASDAQ Global Market under the trading symbol “TNXP.”
Transfer Agent
and Registrar
The
transfer agent and registrar for our common stock is vStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Nevada
Revised Statutes, or NRS, Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers.
The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or
not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable
cause to believe his/her conduct was unlawful.
Under
NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes
he/she has met the standards and will personally repay the expenses if it is determined such officer or director did not meet the
standards.
We
are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out
of his actions, whether or not the NRS would permit indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Our
Articles of Incorporation, as amended, provides a limitation of liability such that no director or officer shall be personally
liable to us or any of our stockholders for damages for breach of fiduciary duty as a director or officer, involving any act or
omission of any such director or officer, provided there was no intentional misconduct, fraud or a knowing violation of the law,
or payment of dividends in violation of NRS Section 78.300.
PLAN OF DISTRIBUTION
The
common stock offered by this prospectus is being offered by the Selling Stockholder, Lincoln Park. The common stock may be sold
or distributed from time to time by the Selling Stockholder directly to one or more purchasers or through brokers, dealers, or
underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing
market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the common stock offered by this prospectus
could be effected in one or more of the following methods:
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●
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|
ordinary brokers’ transactions;
|
|
|
|
|
|
●
|
|
transactions involving cross or block trades;
|
|
|
|
|
|
●
|
|
through brokers, dealers, or underwriters who may act solely as agents;
|
|
|
|
|
|
●
|
|
“at the market” into an existing market for the common stock;
|
|
|
|
|
|
●
|
|
in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents;
|
|
|
|
|
|
●
|
|
in privately negotiated transactions; or
|
|
|
|
|
|
●
|
|
any combination of the foregoing.
|
In
order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for
sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.
Lincoln
Park is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.
Lincoln
Park has informed us that it intends to use an unaffiliated broker-dealer to effectuate all sales, if any, of the common stock
that it may purchase from us pursuant to the Purchase Agreement. Such sales will be made at prices and at terms then prevailing
or at prices related to the then current market price. Each such unaffiliated broker-dealer will be an underwriter within the meaning
of Section 2(a)(11) of the Securities Act. Lincoln Park has informed us that each such broker-dealer will receive commissions
from Lincoln Park that will not exceed customary brokerage commissions.
Brokers,
dealers, underwriters or agents participating in the distribution of the shares as agents may receive compensation in the form
of commissions, discounts, or concessions from the Selling Stockholder and/or purchasers of the common stock for whom the broker-dealers
may act as agent. The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions. Neither
we nor Lincoln Park can presently estimate the amount of compensation that any agent will receive.
We
know of no existing arrangements between Lincoln Park or any other stockholder, broker, dealer, underwriter or agent relating to
the sale or distribution of the shares offered by this prospectus. At the time a particular offer of shares is made, a prospectus
supplement, if required, will be distributed that will set forth the names of any agents, underwriters or dealers and any compensation
from the Selling Stockholder, and any other required information.
We
will pay the expenses incident to the registration, offering, and sale of the shares to Lincoln Park. We have agreed to indemnify
Lincoln Park and certain other persons against certain liabilities in connection with the offering of shares of common stock offered
hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required
to be paid in respect of such liabilities. Lincoln Park has agreed to indemnify us against liabilities under the Securities Act
that may arise from certain written information furnished to us by Lincoln Park specifically for use in this prospectus or, if
such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.
Lincoln
Park has represented to us that at no time prior to the Purchase Agreement has Lincoln Park or its agents, representatives or affiliates
engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of
Regulation SHO of the Exchange Act) of our common stock or any hedging transaction, which establishes a net short position with
respect to our common stock. Lincoln Park agreed that during the term of the Purchase Agreement, it, its agents, representatives
or affiliates will not enter into or effect, directly or indirectly, any of the foregoing transactions.
We
have advised Lincoln Park that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions,
Regulation M precludes the selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participates
in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which
is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases
made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may
affect the marketability of the securities offered by this prospectus.
This
offering will terminate on the date that all shares offered by this prospectus have been sold by Lincoln Park.
Our
common stock is quoted on The NASDAQ Global Market under the symbol “TNXP”.
SELLING STOCKHOLDERS
This
prospectus relates to the possible resale by the Selling Stockholder, Lincoln Park, of shares of our common stock that have been
or may be issued to Lincoln Park pursuant to the Purchase Agreement. We are filing the registration statement of which this prospectus
forms a part pursuant to the provisions of the Registration Rights Agreement, which we entered into with Lincoln Park on September
28, 2017 concurrently with our execution of the Purchase Agreement, in which we agreed to provide certain registration rights with
respect to sales by Lincoln Park of the shares of our common stock that have been or may be issued to Lincoln Park under the Purchase
Agreement.
Lincoln
Park, as the Selling Stockholder, may, from time to time, offer and sell pursuant to this prospectus any or all of the shares that
we have issued or may issue to Lincoln Park under the Purchase Agreement. The Selling Stockholder may sell some, all or none of
its shares. We do not know how long the Selling Stockholder will hold the shares before selling them, and we currently have no
agreements, arrangements or understandings with the Selling Stockholder regarding the sale of any of the shares.
The
following table presents information regarding the Selling Stockholder and the shares that it may offer and sell from time to
time under this prospectus. The table is prepared based on information supplied to us by the Selling Stockholder, and reflects
its holdings as of September 28, 2017. Neither Lincoln Park nor any of its affiliates has held a position or office, or had any
other material relationship, with us or any of our predecessors or affiliates. Beneficial ownership is determined in accordance
with Section 13(d) of the Exchange Act and Rule 13d-3 thereunder. The percentage of shares beneficially owned
prior to the offering is based on
7,581,700
shares of our common
stock actually outstanding as of September 28, 2017.
Selling Stockholder
|
|
Shares Beneficially
Owned Before this
Offering
|
|
|
Percentage of
Outstanding
Shares
Beneficially
Owned Before
this Offering
|
|
|
Shares to be Sold in
this Offering
|
|
|
Percentage of
Outstanding
Shares
Beneficially
Owned After
this Offering
|
|
Lincoln Park Capital Fund, LLC (1)
|
|
|
82,039
|
(2)
|
|
|
1.08%
|
(3)
|
|
|
2,100,000
|
(4)
|
|
|
*
|
(5)
|
* Represents less than 1%
(1)
|
Josh Scheinfeld and Jonathan Cope, the Managing Members of Lincoln Park Capital, LLC, are deemed to be beneficial owners of all of the shares of common stock owned by Lincoln Park Capital Fund, LLC. Messrs. Cope and Scheinfeld have shared voting and investment power over the shares being offered under the prospectus filed with the SEC in connection with the transactions contemplated under the Purchase Agreement. Lincoln Park Capital, LLC is not a licensed broker dealer or an affiliate of a licensed broker dealer.
|
|
|
(2)
|
Represents (i) 73,039 Commitment Shares of our common stock issued to Lincoln Park upon our execution of the Purchase Agreement as a fee for its commitment to purchase shares of our common stock under the Purchase Agreement, all of which shares are covered by the registration statement that includes this prospectus, and (ii) 9,000 shares of common stock issuable upon exercise of outstanding warrants. We have excluded from the number of shares beneficially owned by Lincoln Park prior to the offering all of the additional shares of common stock that Lincoln Park may be required to purchase pursuant to the Purchase Agreement, because the issuance of such shares is solely at our discretion and is subject to certain conditions, the satisfaction of all of which are outside of Lincoln Park’s control, including the registration statement of which this prospectus is a part becoming and remaining effective. Furthermore, under the terms of the Purchase Agreement, issuances and sales of shares of our common stock to Lincoln Park are subject to certain limitations on the amounts we may sell to Lincoln Park at any time, including the Exchange Cap and the Beneficial Ownership Cap. See the description under the heading “The Lincoln Park Transaction” for more information about the Purchase Agreement.
|
|
|
(3)
|
Based on
7,581,700
outstanding shares of our common stock as of September 28, 2017, which includes the
73,039
Commitment Shares we issued to Lincoln Park on September 28, 2017.
|
(4)
|
Although the Purchase Agreement provides that we may sell up to $15,000,000 of our common stock to Lincoln Park, only 2,100,000 shares of our common stock are being offered under this prospectus, which represents: (i)
73,039
Commitment Shares issued to Lincoln Park upon our execution of the Purchase Agreement as a fee for its commitment to purchase shares of our common stock under the Purchase Agreement; and (ii) an aggregate of
2,026,961
shares of our common stock that may be sold by us to Lincoln Park at our discretion from time to time over a 30-month period commencing after the satisfaction of certain conditions set forth in the Purchase Agreement, including that the SEC has declared effective the registration statement that includes this prospectus. Depending on the price per share at which we sell our common stock to Lincoln Park pursuant to the Purchase Agreement, we may need to sell to Lincoln Park under the Purchase Agreement more shares of our common stock than are offered under this prospectus in order to receive aggregate gross proceeds equal to the $15,000,000 total commitment available to us under the Purchase Agreement. If we choose to do so, we must first register for resale under the Securities Act such additional shares. The number of shares ultimately offered for resale by Lincoln Park is dependent upon the number of shares we sell to Lincoln Park under the Purchase Agreement.
|
|
|
(5)
|
Assumes the sale of all shares of common stock registered pursuant to this prospectus, although the selling stockholder is under no obligation to sell any shares of common stock at this time.
|
LEGAL MATTERS
Sichenzia Ross Ference
Kesner LLP, New York, New York will issue an opinion with respect to the validity of the shares of common stock being offered hereby.
EXPERTS
The consolidated balance
sheets of Tonix Pharmaceuticals Holding Corp. and subsidiaries as of December 31, 2016 and 2015 and the related consolidated statements
of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended have been audited
by EisnerAmper LLP, independent registered public accounting firm, as stated in their report which is incorporated herein
by reference. Such financial statements have been incorporated herein by reference in reliance on the report of such firm given
upon their authority as experts in accounting and auditing.
WHERE YOU CAN
FIND MORE INFORMATION
We
are required to file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and
copy any document filed by us at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our filings with the SEC
are also available to the public at the SEC’s Internet web site at
http://www.sec.gov
.
We
have filed a registration statement, of which this prospectus is a part, covering the securities offered hereby. As allowed by
SEC rules, this prospectus does not include all of the information contained in the Registration Statement and the included exhibits,
financial statements and schedules. You are referred to the Registration Statement, the included exhibits, financial statements
and schedules for further information. This prospectus is qualified in its entirety by such other information.
We
are subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, file periodic
reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are
available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website
at
www.tonixpharma.com
. The reference to our website address does not constitute incorporation by reference of the
information contained on our website, and you should not consider the contents of our website in making an investment decision
with respect to our common stock.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” the information we have filed with them, which means that we can disclose
important information to you by referring you to those documents. The information we incorporate by reference is an important part
of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. The
documents we are incorporating by reference are:
|
●
|
Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 13, 2017, as amended by our Annual Report on Form 10-K/A filed on September 1, 2017;
|
|
●
|
Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 12, 2017;
|
|
●
|
Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed on August 11, 2017;
|
|
●
|
Current Reports on Form 8-K, filed on January 10, 2017 (as to Item 8.01 only), January 31, 2017 (as to Item 8.01 only), March 2, 2017 (as to Item 8.01 only), March 14, 2017, March 16, 2017, March 28, 2017, March 30, 2017, April 3, 2017, April 4, 2017, April 11, 2017, April 13, 2017, May 22, 2017, May 30, 2017, June 15, 2017, June 16, 2017, July 6, 2017 (as to Item 8.01 only), August 1, 2017, August 29, 2017, September 14, 2017 (as to Items 5.02 and 8.01 only) and September 29, 2017; and
|
|
●
|
The description of our common stock contained in our Form 8-A, filed on July 23, 2013.
|
All documents we file
with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, except as to any portion of any report or documents
that is not deemed filed under such provisions, (1) on or after the date of filing of the Registration Statement containing
this prospectus and prior to the effectiveness of the Registration Statement and (2) on or after the date of this prospectus
until the earlier of the date on which all of the securities registered hereunder have been sold or the Registration Statement
of which this prospectus is a part has been withdrawn, shall be deemed incorporated by reference in this prospectus and to be a
part of this prospectus from the date of filing of those documents and will be automatically updated and, to the extent described
above, supersede information contained or incorporated by reference in this prospectus and previously filed documents that are
incorporated by reference in this prospectus.
Nothing in this
prospectus shall be deemed to incorporate information furnished but not filed with the SEC pursuant to Item 2.02, 7.01 or
9.01 of Form 8-K.
Upon
written or oral request, we will provide without charge to each person to whom a copy of the prospectus is delivered a copy of
the documents incorporated by reference herein (other than exhibits to such documents, unless such exhibits are specifically incorporated
by reference herein). You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:
Tonix Pharmaceuticals Holding Corp., 509 Madison Avenue, Suite 306, New York, NY 10022 Attention: Investor Relations, telephone: (212) 9809155. We
maintain a website at http://www.tonixpharma.com. You may access our definitive proxy statements on Schedule 14A, annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and periodic amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website
as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained
in, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus. We have
not authorized any one to provide you with any information that differs from that contained in this prospectus. Accordingly, you
should not rely on any information that is not contained in this prospectus. You should not assume that the information in this
prospectus is accurate as of any date other than the date of the front cover of this prospectus.
Tonix Pharmaceuticals Holding Corp.
PROSPECTUS
Up to 2,100,000 shares of
Common Stock, par value $0.001 per share
PROSPECTUS
__________________ , 2017
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth the estimated costs and expenses to be incurred in connection with the issuance and distribution of
the securities registered under this Registration Statement. All amounts are estimates except the SEC registration fee.
|
|
|
|
|
Item
|
|
Amount
to be paid
|
|
SEC registration fees
|
|
$
|
1,000.33
|
|
Printing and engraving expenses
|
|
|
2,500.00
|
|
Legal fees and expenses
|
|
|
40,000.00
|
|
Accounting fees and expenses
|
|
|
40,000.00
|
|
Transfer agent fees and expenses
|
|
|
2,500.00
|
|
Miscellaneous expenses
|
|
|
3,999.67
|
|
Total
|
|
$
|
90,000.00
|
|
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our bylaws provide
to the fullest extent permitted by Nevada law, our directors or officers shall not be personally liable to us or our shareholders
for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our bylaws is to eliminate
our right and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our
bylaws are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three
years, the registrant has sold the following securities which were not registered under the Securities Act of 1933, as amended.
On September 22, 2014,
we issued 1,050 shares of common stock to two investors upon the exercise of warrants for proceeds of $44,625.
On September 26, 2014,
we issued an aggregate of 145 shares of common stock to two investors upon the exercise of warrants for aggregate proceeds of $6,163.
On September 29, 2014,
we issued 3,000 shares of common stock to one investor upon the exercise of warrants for proceeds of $127,500.
On September 30, 2014,
we issued 1,000 shares of common stock to a director upon the exercise of warrants for proceeds of $42,500.
On September 30, 2014,
we issued an aggregate of 3,820 shares of common stock to eleven investors upon the exercise of warrants for aggregate proceeds
of $162,350.
On October 1, 2014,
we issued 3,765 shares of common stock to one investor upon the exercise of warrants for proceeds of $160,000.
On December 17, 2014,
we issued 353 shares of common stock to our Chief Financial Officer upon the exercise of warrants for proceeds of $15,003.
On December 18, 2014,
we issued 3,000 shares of common stock to one of our Directors upon the exercise of warrants for proceeds of $127,500.
On August 5, 2015,
we issued 200 shares of common stock to one investor upon the exercise of warrants for proceeds of $8,500.
On February 25, 2016,
we issued an aggregate of 1,800 shares of common stock to three non-employee directors in settlement for restricted stock units
that vested in February 2016.
On February 26, 2016,
we issued 600 shares of common stock to a non-employee director in settlement for restricted stock units that vested in February
2016.
On March 4, 2016, we
issued 600 shares of common stock to a non-employee director in settlement for restricted stock units that vested in February 2016.
On March 16, 2016,
we issued 600 shares of common stock to a non-employee director in settlement for restricted stock units that vested in February
2016.
On March 28, 2016,
we issued 600 shares of common stock to a non-employee director in settlement for restricted stock units that vested in February
2016.
On April 10, 2017,
we issued 2,250 shares of common stock to one investor upon the exercise of warrants issued October 26, 2016 for proceeds of $14,175.
On May 31, 2017, we issued 750 shares
of common stock to a non-employee director in settlement for restricted stock units that vested in May 2017.
On June 1, 2017, we issued 750 shares
of common stock to a non-employee director in settlement for restricted stock units that vested in May 2017.
On June 5, 2017, we issued 1,125
shares of common stock to a non-employee director in settlement for restricted stock units that vested in May 2017.
On June 6, 2017, we issued 750 shares
of common stock to a non-employee director in settlement for restricted stock units that vested in May 2017.
On June 20, 2017, we issued 750
shares of common stock to a non-employee director in settlement for restricted stock units that vested in May 2017.
On July 11, 2017, we issued 750
shares of common stock to a non-employee director in settlement for restricted stock units that vested in May 2017.
On
September 28, 2017, we issued 73,039 shares of common stock, at a price per share of $4.11, to Lincoln Park Capital Fund, LLC pursuant
to that certain Purchase Agreement dated September 28, 2017.
Unless
otherwise noted, all of the transactions described in Item 15 were exempt from registration under the Securities Act pursuant
to Section 4(a)(2) of the Securities Act in that such sales did not involve a public offering, under Rule 701 promulgated
under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written
contract relating to compensation, as provided by Rule 701, or under Rule 506 of Regulation D promulgated under the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See
the Exhibit Index set forth on page II-7 to this Registration Statement, which is incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);
(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement, and
(iii) To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided,
however,
that paragraphs (a)(i), (a)(ii) and (a)(iii) do not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13
or 15(d) of the Exchange Act that are incorporated by reference in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i)
Each
prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the Registration Statement as of the
date the filed prospectus was deemed part of and included in the Registration Statement; and
;
(ii)
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the Registration Statement
as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale
of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be deemed to be a new effective date of the Registration Statement
relating to the securities in the Registration Statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by
reference into the Registration Statement or prospectus that is part of the Registration Statement will, as to a purchaser with
a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the Registration Statement
or prospectus that was part of the Registration Statement or made in any such document immediately prior to such effective date.
(5)
That,
for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(6)
That,
for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide offering thereof.
(7)
To
deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial information.
(8)
That,
for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof..
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on September 29, 2017.
|
TONIX PHARMACEUTICALS HOLDING CORP.
|
|
|
|
Date: September 29, 2017
|
By:
|
/s/ SETH LEDERMAN
|
|
|
Seth Lederman
|
|
|
Chief Executive Officer (Principal Executive
Officer)
|
|
|
|
Date: September 29, 2017
|
By:
|
/s/ BRADLEY SAENGER
|
|
|
Bradley Saenger
|
|
|
Chief Financial Officer (Principal Accounting Officer)
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned
officers and directors of Tonix Pharmaceuticals Holding Corp., a Nevada corporation, do hereby constitute and appoint Seth Lederman
and Bradley Saenger and each of them his or her true and lawful attorney-in-fact and agent with full power and authority to do
any and all acts and things and to execute any and all instruments which said attorney and agent, determine may be necessary or
advisable or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulations
or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the
generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned
officers and directors in the capacities indicated below to this Registration Statement, and to any and all instruments or documents
filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, including post-effective
amendments, to this Registration Statement or any registration statement relating to this offering to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and each of the undersigned hereby ratifies and confirms that said
attorney and agent, shall do or cause to be done by virtue thereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF,
each of the undersigned has executed this Power of Attorney. In accordance with the requirements of the Securities Act of 1933,
as amended, this registration statement was signed by the following persons in the capacities and on the dates stated:
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
SETH LEDERMAN
|
|
Chief Executive Officer (Principal Executive
Officer) and Director
|
|
September 29, 2017
|
Seth Lederman
|
|
|
|
|
|
|
|
|
|
/s/
BRADLEY SAENGER
|
|
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
|
|
September 29, 2017
|
Bradley Saenger
|
|
|
|
|
|
|
|
|
|
/s/
MARGARET SMITH BELL
|
|
Director
|
|
September 29, 2017
|
Margaret Smith Bell
|
|
|
|
|
|
|
|
|
|
/s/
STUART DAVIDSON
|
|
Director
|
|
September 29, 2017
|
Stuart Davidson
|
|
|
|
|
|
|
|
|
|
/s/
PATRICK GRACE
|
|
Director
|
|
September 29, 2017
|
Patrick Grace
|
|
|
|
|
|
|
|
|
|
/s/
DONALD W. LANDRY
|
|
Director
|
|
September 29, 2017
|
Donald W. Landry
|
|
|
|
|
|
|
|
|
|
/s/
ERNEST MARIO
|
|
Director
|
|
September 29, 2017
|
Ernest Mario
|
|
|
|
|
|
|
|
|
|
/s/
CHARLES MATHER IV
|
|
Director
|
|
September 29, 2017
|
Charles Mather IV
|
|
|
|
|
|
|
|
|
|
/s/
JOHN RHODES
|
|
Director
|
|
September 29, 2017
|
John Rhodes
|
|
|
|
|
|
|
|
|
|
/s/
SAMUEL SAKS
|
|
Director
|
|
September 29, 2017
|
Samuel Saks
|
|
|
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EXHIBIT INDEX
Exhibit No.
|
|
Description
|
|
|
|
3.01
|
|
Articles of Incorporation, filed as an exhibit to the Registration Statement on Form S-1, filed with the Securities and Exchange Commission (the “Commission”) on April 9, 2008 and incorporated herein by reference.
|
|
|
|
3.02
|
|
Articles of Merger between Tamandare Explorations Inc. and Tonix Pharmaceuticals Holding Corp., effective October 11, 2011, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 17, 2011 and incorporated herein by reference.
|
|
|
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3.03
|
|
Third Amended and Restated Bylaws, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on June 3, 2016 and incorporated herein by reference.
|
|
|
|
3.03
|
|
Certificate of Change of Tonix Pharmaceuticals Holding Corp., dated March 13, 2017 and effective March 17, 2017, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on March 16, 2017 and incorporated herein by reference.
|
|
|
|
5.01
|
|
Opinion of Sichenzia Ross Ference Kesner LLP regarding the securities being registered.
|
|
|
|
10.01
|
|
Lease Agreement, dated as of September 28, 2010, by and between 509 Madison Avenue Associates, L.P. and Tonix Pharmaceuticals, Inc., filed as an exhibit to the amended Current Report on Form 8-K/A, filed with the Commission on February 3, 2012 and incorporated herein by reference.
|
|
|
|
10.02
|
|
Form of Class A Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on January 23, 2012 and incorporated herein by reference.
|
|
|
|
10.03
|
|
Form of Class A Warrant, dated December 4, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 5, 2012 and incorporated herein by reference.
|
|
|
|
10.04
|
|
Form of Class A Warrant, dated December 21, 2012, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on December 27, 2012 and incorporated herein by reference.
|
|
|
|
10.05
|
|
Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Seth Lederman, dated February 11, 2014, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on February 14, 2014 and incorporated herein by reference.*
|
|
|
|
10.06
|
|
Employment Agreement, between Tonix Pharmaceuticals Holding Corp. and Gregory Sullivan, dated June 3, 2014, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 3, 2014 and incorporated herein by reference.*
|
|
|
|
10.07
|
|
Lease Amendment and Expansion Agreement, dated February 11, 2014, by and between 509 Madison Avenue Associates, L.P. and Tonix Pharmaceuticals, Inc., filed as an exhibit to the Annual Report on Form 10-K filed with the Commission on February 27, 2015 and incorporated herein by reference.
|
|
|
|
10.08
|
|
Sales Agreement, dated April 28, 2016, by and between Tonix Pharmaceuticals Holding Corp. and Cowen and Company, LLC, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on April 28, 2016 and incorporated herein by reference.
|
|
|
|
10.09
|
|
Purchase Agreement, dated September 28, 2017, between Tonix Pharmaceuticals Holding Corp. and Lincoln Park Capital Fund, LLC,
filed as an exhibit to the Current Report on Form 8-K filed with the Commission on September 29, 2017 and incorporated herein by reference.
|
|
|
|
10.10
|
|
Registration Rights Agreement, dated September 28, 2017, between Tonix Pharmaceuticals Holding Corp. and Lincoln Park Capital Fund, LLC,
filed as an exhibit to the Current Report on Form 8-K filed with the Commission on September 29, 2017 and incorporated herein by reference.
|
|
|
|
14.01
|
|
Code of Business Conduct and Ethics for Employees, Executive Officers and Directors, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 16, 2016 and incorporated herein by reference.
|
|
|
|
21.01
|
|
List of Subsidiaries, filed as an exhibit to the Annual Report on Form 10-K, filed with the Commission on March 3, 2016 and incorporated herein by reference.
|
|
|
|
23.01
|
|
Consent of EisnerAmper LLP.
|
|
|
|
23.02
|
|
Consent of Sichenzia Ross Ference Kesner LLP (included in Exhibit 5.01).
|
|
|
|
24.01
|
|
Power of Attorney (contained on the signature pages to the registration statement).
|
|
|
|
101
|
|
The following financial information from the Annual Report on Form 10-K of Tonix Pharmaceuticals Holding Corp. for the year ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (1) Balance Sheets as of December 31, 2016 and 2015; (2) Statements of Operations for the years ended December 31, 2016 and 2015; (3) Statements of Convertible Preferred Stock and Statements of Stockholders’ Equity for the years ended December 31, 2016 and 2015; (4) Statements of Cash Flows for the years ended December 31, 2016 and 2015; and (4) Notes to Financial Statements,
filed as exhibits to the Annual Report on Form 10-K, filed with the Commission on April 13, 2017 and incorporated herein by reference.
|
|
|
|
102
|
|
The following financial information from the Quarterly Report on Form 10-Q of Tonix Pharmaceuticals Holding Corp. for the quarter ended June 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (1) Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016; (2) Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and 2016; (3) Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016; and (4) Notes to Condensed Consolidated Financial Statements (Unaudited),
filed as exhibits to the Quarterly Report on Form 10-Q, filed with the Commission on August 11, 2017 and incorporated herein by reference.
|
* Indicates
a management contract or compensatory plan or arrangement.
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