The information in this report contains
forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In
particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking
statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,”
“could,” “possibly,” “probably,” anticipates,” “projects,” “expects,”
“may,” “will,” or “should,” “designed to,” “designed for,” or other
variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements
will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our
actual results may differ significantly from management’s expectations.
Although these forward-looking statements
reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently known to
us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. As a result,
our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those set forth below under the caption “Risk Factors.” For these statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not
unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give our expectations
regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, unless required by law.
ITEM I: BUSINESS
Organization and Nature of Business
NanoViricides, Inc. (the “Company,” “we,” or “us” ) was incorporated
in Nevada
on April 1, 2005. Our corporate offices are located at 1 Controls Drive, Shelton, Connecticut 06484 and our telephone number is
(203) 937-6137. Our Website is located at
http://www.Nanoviricides.com
. We do not incorporate by reference into this Annual
Report the information on or accessible through our website, and you should not consider it part of this Annual Report.
On September 25, 2013, the Company’s
common stock began trading on the New York Stock Exchange American under the symbol, “NNVC”.
NanoViricides, Inc. is a global leader
in the development of nanomedicine drugs against viruses. We are a development stage company with several drugs in various stages
of pre-clinical development, including IND-enabling non-clinical studies. The Company is focused on bringing its topical treatment
for shingles into human clinical trials, which we believe is our most advanced drug indication. Shingles is caused by reactivation
of VZV (Varicella-Zoster Virus), which causes chickenpox in children. Several additional indications in the HerpeCide™ program
are expected to follow. In addition, the Company has drug candidates in development against severe influenzas (including bird
flu), HIV, Dengue, Ebola/Marburg and other viruses at different preclinical stages. The overall market size for our potential
drugs is in the range of $40~70 Billion. This broad pipeline is enabled by our unique post-immunotherapeutic “bind-encapsulate-destroy”
technology platform.
We are a development-stage company creating special-purpose nanomaterials for anti-viral drugs based on a novel, first-in-class mechanism.
The Company's novel nanoviricide® class of drug candidates are designed to specifically attack enveloped virus particles,
on the same sites that they use to bind to cells, and dismantle them. Our unique biomimetic approach promises that a virus cannot
escape our nanoviricide drugs due to mutations, if the virus-binding ligands perform as designed.
The Company’s drugs are based on
several patents, patent applications, provisional patent applications, and other proprietary intellectual property held by TheraCour
Pharma, Inc. (“TheraCour®”), to which the Company has exclusive licenses in perpetuity for the treatment of the
following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Influenza including Asian Bird Flu Virus (INF), Herpes
Simplex Virus HSV-1 and HSV-2, Hepatitis C Virus (HCV), Hepatitis B Virus (HBV), and Rabies. On February 15, 2010, the Company
entered into an Additional License Agreement with TheraCour granting the Company the exclusive licenses in perpetuity for technologies
developed by TheraCour for the additional virus types for Dengue viruses (DENV), Japanese Encephalitis (JEV), West Nile Virus
(WNV), viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes keratitis, and Ebola/Marburg viruses. In
addition, the Company is negotiating a license for the non-simplex herpes viruses, namely VZV (shingles, chicken pox virus), where
it has developed a lead indication, and the remaining human herpes viruses, namely EBV, HCMV, HHV-6A, HHV6B, and HHV7, and KSHV,
from TheraCour. For this purpose, the Company has conducted a valuation for the shingles and PHN (“postherpetic neuralgia”)
indications. The negotiation process has begun in earnest after the reporting period, with Dr. Irach Taraporewala being appointed
as the new Chief Executive Officer of the Company, effective September 1, 2018. To date, TheraCour has not withheld any licenses
for antiviral nanomedicines that NanoViricides has asked for, and we anticipate that the licenses to the remaining herpes viruses
including VZV will be executed once the due diligence process is completed.
The Company focuses its research and clinical
programs on specific anti-viral therapeutics and is seeking to add to its existing portfolio of products through its internal
discovery and clinical development programs and through an in-licensing strategy. To date, the Company has not commercialized
any product.
The Company’s objectives are to
create the best possible anti-viral nanoviricides and then subject these compounds to rigorous laboratory and animal testing towards
US FDA and international regulatory approvals. Our long-term research efforts are aimed at augmenting the nanoviricides that we
currently have in development with additional therapeutic agents to produce further improved anti-viral agents in the future.
We believe that many viral infections that are at present untreatable or incurable would be curable using such an advanced approach.
The Nanoviricide® Platform Technology
NanoViricides, Inc. is a global leading
company in the application of nanomedicine technologies to the complex issues of viral diseases. The nanoviricide® technology
enables direct attacks at multiple points on a virus particle. It is believed that such attacks would lead to the virus particle
becoming ineffective at infecting cells. Antibodies in contrast attack a virus particle at only a maximum of two attachment points
per antibody. In addition, the nanoviricide technology also simultaneously enables attacking the rapid intracellular reproduction
of the virus by incorporating one or more active pharmaceutical ingredients (APIs) within the core of the nanoviricide. The nanoviricide
technology is the only technology in the world, to the best of our knowledge, that is capable of both (a) attacking extracellular
virus thereby breaking the reinfection cycle, and simultaneously (b) disrupting intracellular production of the virus, thereby
enabling complete control of a virus infection.
Our anti-viral therapeutics, that we call
“nanoviricides®” are designed to look to the virus like the native host cell surface to which it binds. Since
these binding sites for a given virus do not change despite mutations and other changes in the virus, we believe that our drugs
will be broad-spectrum, i.e. effective against most if not all strains, types, or subtypes, of a given virus, provided the virus-binding
portion of the nanoviricide is engineered appropriately.
This powerful platform technology has
enabled us to develop several drug candidates against a large number of different viruses that could be further improved into
clinical drug candidates, thus building a very broad drug pipeline that may lead to exponential growth of the Company upon the
approval of our first drug candidate.
It is important to realize that the flexible
nanoviricides nanomedicines show substantial advantages over hard sphere nanoparticles in this antiviral drug application. Hard
sphere nanomaterials such as dendritic materials (dendrimers), nanogold shells, silica, gold or titanium nanospheres, polymeric
particles, etc., were never designed to be capable of completely enveloping and neutralizing the virus particle.
Nanoviricides are designed to work by
binding to and eliminating virus particles from the blood stream, just as antibodies do, only potentially much better. Treating
a patient that has a viral infection with a nanoviricide against that virus is expected to result in reduction in viremia. Reduction
in viremia is an important goal in diseases caused by all viral infections. Nanoviricides are designed to accomplish this using
a “Bind-Encapsulate-Destroy” strategy to eliminate the free virus.
A Nanoviricide is constructed by chemically
attaching a ligand designed to bind to a virus particle, to a polymeric material that forms a flexible nanomicelle by self-assembly.
If antibodies are known to affect a viral disease, it is possible to construct a nanoviricide against it, and there can be a general
expectation of some success, depending upon the ligand chosen. We can choose a ligand from any of a number of chemical classes,
including small chemicals, peptides, or antibody fragments or even whole antibodies.
A nanoviricide is made by chemically covalently
linking a “nanomicelle” - a globular polymeric micelle with pendant lipid chains inside, to one or more different
small chemical ligands designed to mimic the cellular receptor to which the virus binds. In addition, the nanoviricide can carry
additional active pharmaceutical ingredients (APIs), which may be chosen to affect the intracellular virus life cycle. Thus the
nanoviricide platforms enables construction of complete virus-killing nanomachines that block the virus from entering the cell
as well as that block further production of the virus inside the cell.
Attacking the “Achilles Heel”
of the Virus- Unchanging Ability of the Virus to Bind to Its Cognate Receptor on Cell
We strive hard to develop virus-binding
small chemical ligands that mimic the cognate cellular receptor of the virus, using rational design and molecular modeling strategies
and our internal, accumulated expertise. This is the receptor to which a virus binds to gain entry into the human cell. Some viruses
use more than one, different, receptors. The nanoviricide® platform technology allows use of different ligands on the same
nanoviricide drug to be able to attack such difficult viruses.
It would be very difficult for a virus
to become resistant to a nanoviricide that mimics the virus’ cellular receptor. This is because, no matter how much a virus
mutates or changes, its binding to the cellular receptor does not change. If the virus does not bind to the nanoviricide efficiently,
it would likely have lost its ability to bind to the cellular receptor efficiently as well, resulting in an attenuated version
with limited pathogenicity.
Beyond Antibodies or “Post-Immunotherapeutic”
Approach: A Nanoviricide in Its Design is a Nanomachine Built to Destroy Viruses
A nanoviricide exposes a very high density
of virus binding sites on its surface, in contrast to a human cell. Thus, a virus would be more likely to be captured by the nanoviricide
than to bind to a cell. Once bound to the virus, it is thought that the nanoviricide would wrap itself around the virus, and the
interior lipidic chains of the nanoviricide would merge into the lipid envelope of an enveloped virus, thus destabilizing the
virus. This would result in loss of the viral glycoproteins that it uses to bind to cell and to fuse with the cell membrane, thus
rendering the virus particle non-infectious. In contrast, for an antibody to be successful as a drug, as many as ten to fifteen
antibodies must bind to saturate the virus surface. The resulting antibody-virus complex then may be subject to the complement
protein system in the bloodstream, or it may bind to antibody-receptors on human immune cells. Thus the human immune system needs
to be functional for an antibody to be effective as a “drug”. In a sense, antibodies only “flag” the virus
particle as foreign.
Almost any virus that causes pathology
in humans is able to do so because it has developed intelligent and complicated pathways for disabling the human immune system
at one or more points. This may be one of the reasons why many antiviral antibodies fail in the field use. Additionally, viruses
readily escape antibodies by mutations. Such viral escape from antibodies has been witnessed in almost every viral epidemic, be
it HIV/AIDS, Influenza pandemic of 2009, or the Ebola epidemic of 2014-15. In contrast, a nanoviricide would complete the job
of making the virus particle non-infectious, without any help from the human immune system.
Broad-Spectrum Nanoviricide Drug Candidates
A nanoviricide is generally “broad-spectrum”
in the sense that it would be effective against all viruses that use the same cellular receptor, binding to the same site on that
cellular receptor.
Formulation is Inherent in the Design
Aspect of a Nanoviricide
We believe that once we declare a clinical
candidate for a given indication in our HerpeCide programs, further IND-enabling pre-clinical development will be rapid. Formulation
development for novel drugs in normal pharmaceutical paradigm often takes years. However, in the nanoviricide approach, the nanomicelle
polymeric backbone itself takes care of the formulation aspects. The nanomicelle is designed to optimize the drug for its intended
route of administration, be it injectable, skin cream, eye drops, or even oral. Thus no specific or extensive formulation development
is expected to be required after clinical candidate declaration. In addition, we have already short-listed the ligands as well
as the nanomicelle backbones for the final candidates in the HerpeCide program. At present we are synthesizing these final candidate
ligands and nanomicelle backbone candidates as required, for the studies leading to clinical candidate declaration. At the same
time, we are also continuing to develop the necessary CMC aspects of the resulting candidates in parallel. We have already performed
preliminary safety studies of our injectable FluCide™ drug candidate with excellent safety indications in both mouse (at
KARD Scientific) and rat (at BASi) models. The HerpeCide program drug candidates are dermal or ocular topical treatments. Thus
we believe that the safety/toxicology studies for these candidates will be relatively straightforward.
Uniform Polymer Nature Enables Nanomedicine
Manufacturing Quality Assurance
A major problem in the field of nanomedicines
has been that most nanomedicines have been found to be notoriously difficult to manufacture in a consistent manner from batch
to batch. This is because of the complexity inherent in making large molecules, and the very nature of polymer and particle making
processes.
The nanoviricide technology has been designed
from the ground up to enable consistent manufacture and control. Thus, the nanoviricide backbone is a homopolymer of a single
repeating unit or monomer, and not a block copolymer. In addition, the nanoviricide polymer is designed to dynamically and naturally
self-assemble into micelles in a solution. Also, the virus-binding ligands are chemically attached to the polymer. The extent
of attachment can be assessed by analytical techniques that we have developed and continue to develop as needed. Further we use
specialized techniques in the polymer processing to minimize any contamination with endotoxins or other foreign particles. The
final nanoviricide solutions can be sterile filtered using standard membrane filtration processes. The resulting solutions can
be concentrated in a non-contaminating environment in our Process Scale-Up Lab or our cGMP-capable Manufacturing Facility.
Thus the nanoviricides platform has been
designed from the ground up to enable simplifications in processes and analyses that need to be implemented in order to develop
robust, reproducible, and scalable processes.
State of the Company – Drug
Development Programs – Focus on HerpeCide™ Program
During the financial year ending June
30, 2018, we have focused our efforts primarily on the HerpeCide program. We are developing drugs against three indications in
this program in parallel at present, namely, HSV-1 “cold sores” (orolabial herpes and recurrent herpes labialis or
RHL), HSV-2 “genital ulcers”, and VZV shingles. We are developing topical treatments (skin creams or lotions) for
these three indications. All of the drug candidates in these three leading indications comprise common chemistry features, and
are based on the same family of ligands and polymers, enabling parallel development. Our parallel development of these indications
maximizes return on investment and shareholder value. Of these, the shingles indication program has advanced to the level of IND-enabling
Safety/Toxicology studies (i.e. “Tox Package” studies). We are currently advancing it towards an IND filing. We believe
that the other two indications will advance to an IND stage in the very near future.
Our HerpeCide™ program has matured
towards multiple drug indications. Besides the three indications listed above, modifications of the same drug candidates are anticipated
to be developed into (iv) Eye Drops to treat ocular (i.e. external eye) Herpes Keratitis (HK) caused by HSV-1 or HSV-2, and possibly
(v) Intra-Ocular injections to treat viral Acute Retinal Necrosis (vARN) caused by herpes viruses, primarily VZV, shingles (varicella
zoster virus) and HSV-2, a cause of blindness.
In addition, we believe that the shingles
drug candidate may be eligible for the PHN indication as well. PHN clinical studies are long and expensive, and we plan to advance
the candidate for this indication only after its shingles indication clinical trials are completed. Further, the same drug candidate
is expected to work against chickenpox in children. Chickenpox remains a sporadic epidemic disease despite vaccines.
Expansion to additional indications is
likely, as we perform further studies. It is likely that some of these drug candidates with variations may be able to address
diseases caused by the remaining human herpes viruses, namely EBV, HCMV, HHV-6A, HHV-6B, and HHV-7. Such expansions would enable
maximization of return on investment (ROI) and maximization of shareholder value.
Including the HerpeCide program explained
above, we currently have eight different drug development programs, attesting to the strength of our platform technology. We have
now chosen to focus strategically on our HerpeCide™ program indications and drug candidates that are expected to result
in a robust franchise with drug approvals against a number of different herpes virus indications.
Pharmaceutical drug development is an
expensive and long duration proposition. Management’s plan is to develop each of our nanoviricides to the necessary stage(s)
and then engage into licensing or codevelopment relationships with other pharmaceutical companies. Such licensing or codevelopment
relationships usually may entail upfront payments, milestones payments, cost sharing, and eventual revenue sharing, including
royalties on sales. There is no guarantee that we will be able to negotiate agreements that are financially beneficial to the
Company at the present stage. As and when needed, management plans to continue to raise additional funds for our continuing drug
development efforts from public markets.
We believe we are one of the very few
small pharmaceutical drug innovators that possess their own cGMP or cGMP-capable manufacturing facility. With our Shelton, Connecticut
campus and pilot-scale cGMP-capable manufacturing facility, we are in a position to advance our drug candidates into clinical
trials, produce the pre-clinical “tox package” batches, and the clinical drug substance batches.
The Company’s cGMP-capable pilot-scale
manufacturing facility in Connecticut may enable initial market entry for some of our products upon approval, allowing the Company
to grow into a stand-alone Pharma company, in addition to a potential licensing strategy for success. The Company thus continues
to minimize risk to investors by improving the potential for success.
While we have continued to make significant
progress in advancing our HerpeCide program drug pipeline, we have also had to curtail our programs and slow down drug development
towards the clinic due to fiscal constraints. In particular, R&D staffing at our affiliates has been reduced significantly,
by about 25% in the last few years. This is expected to have the effect of lengthening our timeline to begin human clinical trials.
The HerpeCide™ Program is Now
Our Top Priority – Shingles is Lead Indication moving into IND-enabling “Tox Package” Studies
We anticipate that our drug candidate
against VZV is most likely to be our earliest nanoviricide drug candidate to enter human clinical trials. This is primarily because
of the timelines for anticipated drug development studies required for the different indications of drug candidates in development.
The Company does not currently have a license from TheraCour for the VZV area. The Company is in discussions with TheraCour after
having obtained independent asset valuations to serve as the basis for such additional licenses. This process is advancing in
earnest after the reporting period, with our new CEO, Dr. Irach Taraporewala, joining on September 1, 2018. Since then, the Company
has extended Dr. Carolyn Myers’ consulting agreement to help with development of the license agreements. However there can
be no assurance that the Company will be able to enter into an agreement with TheraCour for such license or that the agreement
will be on terms that are favorable to the Company. Nevertheless, to date, TheraCour has granted all license requests made by
the Company.
Our most advanced drug candidate is
a nanoviricide against VZV (varicella-zoster virus), the virus that causes debilitating shingles rash in adults and
chickenpox in children. Its first indication is expected to be as topical treatment of shingles rash. About 500,000 to 1
million episodes of herpes zoster (shingles) occur annually in the United States alone. In spite of the new Shingrix™
vaccine, the market size for a therapeutic for shingles is estimated to be in the billions of dollars. There is currently no
approved drug against shingles, PHN or chickenpox, indicating an unmet medical need.
The Company is also exploring additional
indications of its anti-herpes drug candidates which will broaden the pipeline and require limited development work. In particular,
certain eye diseases of the retina have been causatively linked to herpes viruses. For example, most cases of viral Acute Retinal
Necrosis (ARN), a disease that leads to severe loss of vision and can lead to blindness, have been linked to VZV and HSV-2, with
some also associated with HSV-1 or CMV infection of the eye. It is believed that, HSV-2 ARN in children and adolescents may result
from undiagnosed and asymptomatic neonatal HSV-2 infection, which has reactivated several years later from latency in a cranial
nerve and entered the retina. Currently, intravenous followed by oral acyclovir derivatives daily for several months to years
and sometimes intravitreal (into the eye) foscarnet injections are therapeutically employed with limited effectiveness, establishing
the potential of effective antiviral therapy to avoid blindness as well as multiple surgeries related to retinal detachment. A
highly effective antiviral that can be injected into the eye infrequently and provides sustained antiviral therapeutic effect
over a long period of time for ARN is an unmet medical need.
Neonatally acquired herpes virus infections,
even when asymptomatic, are thought to have led to ARN as late as age 22. There are approximately 2,500 cases per year of diagnosed
neonatal herpes virus infections in the USA.
The potential broad-spectrum nature of
our anti-HSV drug candidates is expected to enable several anti-herpesviral indications. Thus, HSV-1 primarily affects skin and
mucous membranes causing “cold sores”. HSV-2 primarily affects skin and mucous membranes leading to genital herpes.
HSV-1 infection of the eye causes herpes keratitis that can lead to blindness in some cases. In addition, human herpesvirus-3
(HHV-3), aka varicella-zoster virus (VZV) causes chickenpox in children and, when reactivated in adults, causes shingles. Shingles
breakouts are amenable to topical treatment, as are the HSV cold sores, genital lesions, and herpes keratitis of the eye.
Topical treatment is expected to result
in extremely high antiviral efficacy. This is because such treatment would provide higher concentrations of the antiviral at the
site where the virus is manifesting at its highest levels. Highly effective topical treatments in most of these scenarios remain
unmet medical needs. Most of these indications do not have satisfactory treatments at present, if any. Further, the treatment
of herpes virus infections caused by acyclovir- and famciclovir- resistant mutants is currently an unmet medical need.
With additional indications in the diseases
caused by viruses in the herpes virus family, it is likely that our HerpeCide program could expand into a much broader product
pipeline than currently anticipated. We anticipate that many of these new drugs would be variations on our current drug candidates.
It is therefore expected that the incremental cost of drug development for such additional indications could be substantially
smaller than the cost of developing drugs against other viruses in our portfolio.
Progress in Identifying Clinical Lead
Drug Candidates against the Four HerpeCide Program Indications
Previously, in August 2015, we obtained
confirmatory animal studies data on our then current lead anti-herpes virus drug candidate from TransPharm, LLC. The data confirmed
the results earlier obtained in Professor Ken Rosenthal’s Lab at the NorthEast Ohio Medical Center (NEOMED). In both studies,
dermal topical treatment with our anti-HSV drug candidate led to 85~100% survival in mice lethally infected with the zosteriform,
neurotropic, clinically derived and relevant strain, namely HSV-1 H129. In contrast, all of the untreated mice had severe clinical
morbidity and none of the untreated mice survived. These studies established this drug candidate as a viable, effective potential
drug. Professor Rosenthal has since retired from NEOMED and is now Professor of Biomedical Sciences at the College of Medicine,
Roseman University of Health Sciences, Summerlin, NV.
We have developed additional variations
of the ligand used in this older herpecide drug candidate using molecular modeling and rational design strategies. The new ligands
appear to have substantially improved effectiveness and with a similar level of safety as did the prior tested ligand. We are
now performing studies on chemical covalent conjugates of these ligands with different “nanomicelle” polymer backbones.
We are performing a set of studies to identify the lead clinical candidates for the different herpes virus indications based on
these new nanoviricides.
We have found that the nanoviricides drug
candidates developed against herpes HSV-1 and HSV-2 are also effective against the shingles virus, namely the Varicella Zoster
Virus (VZV), also called HHV-3 (human herpesvirus-3) in cell culture studies in house. These data were presented at the American
Society of Virology 2017 annual meeting held in June 2017 at Madison, WI. Additional studies have continued to demonstrate strong
effectiveness as the development progresses.
We have also found that the shingles treatment
nanoviricides drug candidates were highly effective in VZV infection studies using human skin-patch organ culture (SOC) model.
We have repeatedly found strong effectiveness in the SOC studies using different variations of the drug candidates aimed at establishing
the final clinical drug candidate. These studies were performed in the Professor Jennifer Moffat Lab at the Upstate Medical Center
in SUNY, Syracuse, NY. The Moffat group presented some of these data at the 31st International Conference on Antiviral Research
held in Porto, Portugal, on June 10-15, 2018.
At present, there is no well-established
animal model of shingles infection, while animal models have been developed to test for shingles vaccines. We are employing the
human skin explant-based SOC model for evaluation of drugs against VZV infection, in lieu of animal studies. This model is expected
to be more relevant than an animal model. It is particularly suited for a topical drug such as ours. We believe that these human
skin-patch SOC model experimental data will be sufficient to establish the effectiveness of a nanoviricide drug candidate to pursue
further in human clinical studies.
Our drug candidates for shingles treatment
were also found to be extremely safe in a preliminary rat safety/toxicology study, as we reported in April 2018. No clinically
observable adverse safety and toxicology effects were seen in this study of the Company’s optimized topical dermal drug
candidates based on multiple parameters evaluated. There were no adverse effects on the skin at the treatment sites. Equally importantly,
the results of the non-GLP safety and toxicology study showed that there were no overall observable systemic effects either. There
were no observable direct effects on the primary organ function whether the drug was administered to the skin or administered
systemically. This includes liver and kidney function. This is important as the liver and kidneys are major organs involved in
drug toxicity. Dermal topical treatment of rats with formulated drug candidates was evaluated in this study as a primary objective,
since skin is the primary breakout site of HSV-1, HSV-2, and VZV infections. Additionally, the same drug candidates as formulated
for systemic delivery were employed to evaluate potential systemic safety/toxicological effects. We now also report herein that
there were no observable changes in the histo-pathological study (tissue structure) of a panel of organs including the brain,
heart, liver, lungs, spleen, kidney, intestines, uterus, testis, as well as skin upon treatment with the tested drug candidates.
The study was conducted by AR Biosystems of Beverly, MA.
Of note, the drug candidates tested in
this safety/toxicology study have previously shown broad-spectrum effectiveness against alphaherpesviruses, i.e. HSV-1, HSV-2,
and VZV.
These results are consistent with the
positive findings in a model of VZV (the shingles virus) infection of human skin in which no safety or toxicology concerns have
been observed, further demonstrating the safety of these drug candidates. The drug candidates have shown strong effectiveness
in these shingles virus studies as well, as previously reported. Further, these candidates have demonstrated strong anti-viral
activities against HSV-1, HSV-2, and VZV in cell culture studies using multiple cell lines.
The Company’s drug candidates in
HerpeCide™ program are being developed for direct topical application on the affected areas to control the infections. Direct
topical application enables delivery of the highest possible concentrations of the active substance directly at the site of infection.
This allows for maximal clinical effectiveness, while at the same time minimizing side effects that are seen with systemic therapy
(such as oral drugs or injectables).
The shingles drug candidates are thus
advancing towards the full battery of GLP safety and toxicology studies that are needed for filing an Investigational New Drug
(IND) application with the US FDA, prior to beginning human clinical trials.
Because of the strong safety observed
in preliminary studies, the IND-enabling Tox Package study would be performed at the Maximum feasible Dose (MFD) level. Subsequent
to the reporting period, in September 2018, the Company has started production in a GMP-like process at our cGMP-capable facility
in Shelton, CT to manufacture sufficient quantities of the drug candidate for the planned IND-enabling Tox Package study. The
Company expects to begin Tox Package studies once the drug is manufactured in the multi-kg quantities needed and is already in
negotiation with a CRO site for the study.
These dermal safety/tox studies for the
VZV skin cream are expected to be significantly shorter than the studies for ocular, injectable, or oral drugs. We anticipate
filing an IND once the report of these studies is available.
Topical treatment of herpes virus infections
is important because herpes viruses become latent in neuronal cells or in ganglia, and cause periodic localized breakouts that
appear as skin rashes and lesions. Systemic drug treatment results in side effects because of the high systemic drug concentrations
that need to be achieved and the large drug quantities that must be administered. Since the virus remains mostly localized in
the area of the rash and connected nerve apparatus, using high concentrations of drugs delivered in small quantities topically
would allow maximizing the effectiveness while minimizing side effects.
Since these nanoviricides are designed
to attack the virus directly, we believe that human clinical studies should reflect the success of the preclinical studies.
We are also continuing to work on developing
relevant chemical identification and characterization assays, physicochemical and biochemical characterization assays, and chemical
process optimization studies, that will be part of the CMC (Chemistry, Manufacture and Controls) section of the Investigational
New Drug (IND) Application for the shingles drug. We believe this drug will be our first candidate into human clinical trials.
HerpeCide Program Collaborations and
Program Update
We have engaged in several
collaborations to help us finalize clinical candidates and develop IND-enabling pre-clinical data in our various programs
this year. Notably, we have continued collaborations with the Collaborative Ophthalmic Research Laboratories (CORL), at
the University of Wisconsin for HSV-1 and HSV-2, with focus on small animal models for ocular disease.
In addition, we have a continuing relationship
with Bio-AnalyticalSystems, Inc. (“BASi”), Indiana, a CRO for GLP and non-GLP safety/toxicology (“Tox Package”)
studies. We have engaged Biologics Consulting Group (BCG), Virginia, for advice and help with regulatory affairs.
We also have a collaboration with the
Campbell Lab at the University of Pittsburgh for in vitro cell culture models of various ocular viruses including many adenovirus
and herpes virus strains, as well as animal models for ocular herpes keratitis (HK) and adenoviral epidemic keratoconjunctivitis
(EKC).
In addition, we have continued our agreement
with SUNY Upstate Medical University for the testing of the Company’s nanoviricides® drug candidates against varicella
zoster virus, i.e. the shingles virus. This research is being performed in the laboratory of Dr. Jennifer Moffat.
Initially, Dr. Moffat conducted cell culture
studies i.e.
in vitro
studies. Upon finding that the nanoviricides drug candidates were effective against VZV in cell cultures,
Dr. Moffat has advanced the studies to the
ex vivo
human skin-patch organ culture (SOC) model studies stage, wherein our
drug candidates are being evaluated against VZV infection of human skin patches.
Dr. Moffat has extensive experience in
varicella zoster virus (VZV) infection and antiviral agent discovery. The goal of these studies is to help select a clinical drug
development candidate for toxicology and safety evaluation intended for clinical trials for the treatment of shingles in humans.
VZV is restricted to human tissue and
only infects and replicates in human tissue. The
ex vivo
studies are continuing to evaluate the efficacy of the Company’s
nanoviricides to inhibit VZV in human skin organ cultures. Dr. Moffat has developed the human skin organ culture VZV infection
model for the evaluation of therapeutics. This model is a good representative model of natural VZV infection in humans as well
as an important model for evaluating antiviral activity, because it demonstrates behavior similar to the skin lesions caused by
VZV in human patients.
Dr. Moffat is an internationally recognized
expert on varicella zoster virus, and her research has focused on the pathogenesis and treatment of infection by this virus. The
National Institute of Health has recognized this VZV model via a contract with Dr. Moffat’s lab for evaluating antiviral
compounds against VZV. Dr. Moffat is the director of two research core facilities at SUNY Upstate: the Center for Humanized Mouse
Models and
In vivo
Imaging.
The Company has established a direct relationship
with the Moffat lab, without NIH as an intermediary.
In addition, Dr. Brian Friedrich, Senior
Virologist of the Company continues to perform extensive antiviral cell culture studies against VZV, HSV-1 and HSV-2 using multiple
cell lines and multiple strains of the viruses, in our BSL-2+ anti-viral cell culture laboratory in Shelton, CT.
Dr. Friedrich presented a poster entitled
“Novel Nanoviricides® Highly Effective Against Varicella Zoster Virus in Cell Culture” at the 36th Annual Meeting
of the American Society of Virology (ASV) on June 26th, 2017. The ASV Meeting was hosted and held at the University of Wisconsin-Madison,
from June 24th to 28th, 2017 (
https://extensionconferencecenters.uwex.edu/asv2017/
).
The two active nanoviricide® candidates
presented therein inhibited VZV up to 5x better than acyclovir-sodium (the current standard of care), and completely inhibited
VZV protein production/infection in cell culture studies. These results indicate a very high level of anti-VZV effectiveness.
The nanoviricide candidates were non-cytotoxic even at the highest doses in all cell lines tested. Thus it should be possible
to administer very high concentrations of the drug locally on the skin without any deleterious effects.
Importantly, the data presented demonstrated
that the anti-viral activity of a nanoviricide is driven by the virus-specific ligand attached to it. Thus, two of the nanoviricide
drug candidates were highly effective against VZV, whereas a third one was not as effective. All three ligands were derived by
in silico computer-aided drug design based on known structures of HSV glycoprotein binding to the cellular receptor, namely the
herpes virus entry mediator (HVEM), and thus were expected to be active against herpes simplex viruses, and only some of them
were anticipated to be active against all alphaherpesviruses. VZV is an alphaherpesvirus. This has once again demonstrated the
validity of our scientific drug development approach.
On July 10, 2017, the Company announced
the results of initial testing of our anti-herpes drug candidates in the
ex
vivo human skin patch “SOC” model
performed by Dr. Moffat.
The anti-shingles nanoviricides® drug
candidates achieved dramatic reduction in infection of human skin by the varicella-zoster virus (VZV), the shingles virus in this
study. These findings corroborate the previously reported findings of inhibition of VZV infection of human cells in culture. The
antiviral effect of certain nanoviricide drug candidates was substantially greater than the effect of the standard positive control
of cidofovir added into media. Even more remarkably, the effect of these nanoviricides drug candidates was equivalent to a topical
formulation of 1% cidofovir applied directly onto the skin patch. A topical skin cream containing 2% cidofovir is clinically used
in very severe cases of shingles. However, the cytotoxicity of cidofovir is known to cause ulceration of the skin to which it
is applied, followed by natural wound healing.
Additional studies have continued at Dr.
Moffat lab with small variations on the drug candidates in order to identify a clinical drug candidate. These studies have continued
to demonstrate excellent efficacy of our nanoviricide drug candidates against the VZV virus infection. Dr. Moffat presented some
of the data at the 31st International Conference on Antiviral Research held June 11 - June 15, 2018 in Porto, Portugal.
Additional studies towards selection of
the final drug candidate to be studied in safety/toxicology are continuing at present. Selection of clinical candidate for an
investigational new drug application (IND) and human clinical studies is anticipated as these studies progress. Subsequent to
this reporting period, since September 2018, we have engaged in cGMP-like manufacture of the drug substance to supply the requirements
for the impending Tox Package study. We are able to perform many of the production steps prior to declaring a clinical candidate
because of the common processes in the production of the short-listed drug candidates. We believe that we are close to declaring
a clinical candidate.
Shingles and Associated Pain, Postherpetic
Neuralgia (PHN)
Shingles is caused by re-activation of
the chickenpox virus that most humans acquire in childhood. The chickenpox vaccine for children is a live, attenuated virus (LAV).
The LAV is not as pathogenic as the wild-type virus. However, this means the virus is present in the vaccinated individual, but
remains suppressed by the immune system. In both vaccinated and unvaccinated persons, re-activation occurs when the immune system
is suppressed which may be simply because of stress, advanced age, or some other immune modifying circumstances including immune-compromise
due to organ transplants or other diseases. Generally, humans in the age range of 50-60 are more prone to shingles, with next
reactivation occurring about 10~15 years later. There is a shingles vaccine approved for adults age 60 and above which is also
available for adults younger than that.
Acyclovir-based oral drugs, such as valacyclovir
(Valtrex®), are available as systemic therapy for shingles. Intravenous acyclovir is also employed for treatment of various
VZV indications. However, VZV is substantially less sensitive to (val)acyclovir than is HSV-1. Thus the oral drug generally does
not result in optimal level of the active drug at the site of VZV viral production, and does not result in significant control
of the pathology. The antiviral drugs may be given for a period of 14 days or longer, with as much as 5g of dose per day, due
to poor efficacy. In some indications, the treatment has been continued for a year or so. Thus, there is an unmet need for developing
anti-VZV antivirals with high efficacy and safety.
A Phase 3 clinical study comparing FV-100
to valacyclovir for PHN and shingles was terminated by ContraVir Pharma. FV-100 is a nucleoside analog with an extremely restricted
activity range. A helicase/primase inhibitor, ASP2151, was found to be non-inferior to valacyclovir in a shingles clinical study.
Astellas has suspended its development due to serious side effects in some healthy volunteers. A drug with a novel mechanism of
action such as our nanoviricides should be promising.
Most adults with shingles recover in about
15~30 days from the shingles rash. While the rash is unsightly, its stinging pain is often the debilitating pathology that leads
to lost workdays and other effects. Further, 65~70% of patients develop postherpetic neuralgia, or PHN, a stinging, debilitating
pain that lasts more than 30 days, and, in some patients, may last for years.
It is generally believed that PHN results
from damage to the local nerve endings and nerve cells caused by the uncontrolled production of the shingles virus. However, VZV
has been found to be present in at least 75% of PHN cases in a study, indicating a role for antivirals in controlling PHN. We
believe that an effective therapy, such as our nanoviricide against VZV, which blocks progression of the virus to infect new cells
and thereby limits further production of virus, would minimize the damage to nerve endings and nerve cells caused by the virus.
We believe that this would minimize the occurrence, severity, and time period of PHN, in addition to having significant effects
on the severity of shingles rash, lesions, and healing time.
In light of this we have conducted an
animal study regarding the effect of our nanoviricide drug candidates against shingles on neuropathic pain in a classical animal
model of pain (without VZV infection). On August 7, 2018, subsequent to the reporting period, we reported that our anti-Shingles
drug candidates were effective in ameliorating pain sensations in an animal model of abnormal pain. In this animal study, topical
treatment with the nanoviricides® anti-VZV compounds significantly reduced the measures of abnormal pain sensations in a rat
model of neuropathic pain. The study was conducted at AR Biosystems in Tampa FL. A characteristic excruciating pain is a debilitating
pathology of shingles presentation. Thus a direct pain-reducing effect of the Company’s anti-shingles drug candidates would
be very important in ameliorating the pathology of shingles, in addition to the already demonstrated significant antiviral effect.
We believe that a skin cream would be
the best form of treatment to provide rapid control of the virus and shingles lesions patch expansion, since the shingles outbreak
remains highly localized. A skin cream would afford much greater local exposure of drug to virus compared to a systemic oral or
injectable treatment.
An effective therapy for patients with
severe shingles continues to be an unmet need.
HSV-1, HSV-2, Ocular Herpes Keratitis
We believe that a skin cream for the control
of HSV-1 “cold sores” (herpes labialis, and recurrent herpes labialis or RHL) is another drug candidate that will
be close to entering human clinical trials. We have already achieved strong success in animal studies against HSV-1, as discussed
above.
We believe that we will be able to successfully
develop a drug for Ocular Herpes Keratitis (HK) as well. It is caused by HSV-1 or HSV-2 infection of the external eye. We are
developing this drug as topical eye drops or eye lotion, in order to achieve maximum local drug effect while minimizing systemic
exposure. We plan on testing these drug candidates against adenoviruses as well, to determine if the same drug would also be effective
against epidemic keratoconjunctivitis (EKC, the severe “pink eye” disease). If the same drug works against herpes
virus and adenovirus infections of the eye, this drug would cover almost 99% of all external eye viral pathologies. However, there can be no assurance that we will successfully be able to develop drugs for any of
these viruses.
We also believe that we will be able to
develop a drug against HSV-2 genital herpes. We plan on developing a skin cream for this indication, to maximize local effectiveness.
The FluCide™ Program
We are continuing our development of the
FluCide™ anti-influenza drug program at the next lower priority level after the HerpeCide program. We have two drugs in
development in this program. The Injectable FluCide is designed to piggyback into IV infusions for severely ill, hospitalized
influenza patients. There are approximately 100,000 to 300,000 such cases annually in the USA alone. No current anti-influenza
drugs are sufficiently effective to be of help in this scenario. We believe that our injectable FluCide would be substantially
superior to current anti-influenza drugs and would be able to save lives in this scenario, based on the strong effectiveness in
animal studies that has been observed. Following this drug, we are working on an Oral FluCide drug candidate for outpatient influenza
treatment.
We have a continuing collaboration with
the Webster Lab at the St. Jude Children’s Hospital, TN, for the pre-clinical development program for both injectable and
oral anti-influenza nanoviricide drug development. Given the several failures of anti-influenza drug developments that have led
to increased burden of pre-clinical studies, our FluCide pre-clinical development program is expected to take longer than our
HerpeCide™ program IND-enabling pre-clinical studies.
NanoViricides, Inc. is possibly the first
company in the world in the entire field of nanomedicines to have developed an orally available nanomedicine drug with high effective
bioavailability. We have previously estimated an effective bioavailability of about 30-35% for the oral form of an anti-influenza
drug candidate compared to the same drug given as injectable, based on animal studies. Our oral anti-influenza drug candidate
has shown extremely high broad-spectrum effectiveness against two different influenza A viruses in animal models.
In addition, we are developing a highly
effective injectable anti-influenza drug. The Company is developing this injectable drug for hospitalized patients with severe
influenza, including immuno-compromised patients. The Company believes that this drug may also be usable as a single-dose injection
in a medical office for less severe cases of influenza. Both of these anti-influenza therapeutic candidates are “broad-spectrum”,
i.e. they are expected to be effective against most if not all types of influenzas including H7N9, Bird Flu H5N1, other Highly
Pathogenic Influenzas (HPI/HPAI), Epidemic Influenzas such as the 2009 “swine flu” H1N1/A/2009, and Seasonal Influenzas
including the recent H3N2 influenza. The Company has already demonstrated that our anti-influenza drugs have significantly superior
activity when compared to oseltamivir (Tamiflu®) against two unrelated influenza A subtypes, namely, H1N1 and H3N2 in a highly
lethal animal model.
Our position that an injectable drug against
influenza is a viable option is now affirmed by the approval of the very first injectable drug for influenza in December 2014,
namely peramivir (Rapivab, by BioCryst). Interestingly, peramivir as an injection was approved even though it did not appear to
provide significant additional benefits over other drugs in its class. Overall, patients who received 600 mg of peramivir had
symptom relief 21 hours sooner, on average, than those who received the placebo, which is consistent with other drugs in the same
class. Additionally, peramivir injection was found to be not effective for hospitalized patients with severe influenza.
Thus, an effective therapy for patients
hospitalized with severe influenza continues to be an unmet need.
In addition, a single injection treatment
of non-hospitalized patients would be a viable drug if it provides superior benefits to existing therapies.
Both of these anti-influenza drug candidates
can be used as prophylactics to protect at-risk personnel such as health-care workers and immediate family members and caretakers
of a patient.
DengueCide™
We are developing a broad-spectrum anti-dengue
nanoviricide which is in pre-clinical development in the DengueCide™ program at a lower priority than FluCide. The Company
is developing a broad-spectrum drug against Dengue viruses that is expected to be useful for the treatment of any of the four
major serotypes of dengue viruses, including in severe cases of dengue (DSS) and dengue hemorrhagic fever (DHF). It is thought
that DSS and DHF caused by prior antibodies against dengue that a patient’s body creates to fight a second unrelated dengue
infection, and the second virus uses these antibodies effectively to hitch a ride into human cells, thereby causing a more severe
infection than in naive patients. The Company has received an “Orphan Drug Designation” for our DengueCide
TM
drug from the USFDA as well as the European Medicines Agency (EMA). This orphan drug designation carries significant economic
benefits for the Company. We have previously achieved significant survival of mice in a lethal infection animal model of dengue
disease. This model simulates antibody-dependent enhancement of dengue, which is believed to lead in humans to severe dengue,
and dengue hemorrhagic fever. These studies were performed by Professor Eva Harris at the University of Berkeley.
HIVCide™
Our HIVCide™ program is currently
receiving the lowest development priority primarily due to the extremely expensive nature of this program. The drug candidates
in the HIVCide™ program were found to have effectiveness equal to that of a triple drug HAART cocktail therapy in the standard
humanized SCID-hu Thy/Liv mouse model. Moreover, the nanoviricides were long acting. Viral load suppression continued to hold
for more than four weeks after stopping HIVCide treatment. The Company believes that this strong effect and sustained effect together
indicate that HIVCide can be developed as a single agent that would provide “Functional Cure” from HIV/AIDS. The Company
believes that substantially all HIV virus can be cleared upon HIVCide treatment, except the integrated viral genome in latent
cells. This would enable discontinuation of treatment until HIV reemerges from the latent reservoir, which may be several months
without any drugs. Moreover, the Company believes that this therapy would also minimize the chances of HIV transmission. The Company
is currently optimizing the anti-HIV drug candidates. These drug candidates are effective against both the R5 and X4 subtypes
of HIV-1 in cell cultures. The Company believes that these drug candidates are “broad-spectrum”, i.e. they are expected
to be effective against most strains and mutants of HIV, and therefore escape of mutants from our drugs is expected to be minimal.
Certain anti-HIV nanoviricides have already been demonstrated that appear to provide extended viral load suppression for as long
as 30 days or more even after stopping the drug, in animal studies. Given the chronic nature of HIV/AIDS, such a drug that has
long sustained effect is expected to provide significant benefits to the patient. We believe once a week dosing is possible. Anti-HIV
drug development is both expensive and slow because of the nature of the animal studies that require SCID mice whose immune system
is destroyed and then replaced by surgically implanting and growing human immune system tissues in the mouse body. Due to our
limited resources, HIVCide development is further hampered.
EKC
In addition, the Company is developing
broad-spectrum eye drops that are expected to be effective against a majority of the viral infections of the external eye. Most
of these viral infections are from adenoviruses or from herpes viruses. The Company has shown excellent efficacy of its drug candidates
against EKC (adenoviral epidemic keratoconjunctivitis) in an animal model. If feasible, we are planning to merge the anti-EKC
drug development program and the ocular Herpes Keratitis drug development program, to develop a single drug that is effective
against both diseases, i.e. effective against both adenoviruses and herpes viruses. This work is in research stage.
Other Drug Programs: Ebola, Rabies
and others
In addition to these eight drugs in development,
the Company also has research programs against Rabies virus, Ebola and Marburg viruses, the recently emerged Middle East Respiratory
Syndrome coronavirus (MERS-CoV), and others. We will not be undertaking socially important programs such as the development of
an anti-Zika virus drug candidate, or continuation of our efforts in developing anti-Ebola drug candidate, unless non-dilutive
funding for such efforts becomes available.
To date, the Company does not have any
commercialized products. The Company continues to add to our existing portfolio of products through our internal discovery and
clinical development programs and also seeks to do so through an in-licensing strategy.
Thus, this year, we have further focused
our programs and prioritized them in order to advance our first drug candidate into the clinic in the near future.
Safety and Toxicology Studies
As part of the IND–enabling development
of our Injectable FluCide™ drug candidate, we previously performed initial safety-toxicology screening of an optimized FluCide®
drug candidate in a GLP-like toxicology study in rats. We reported that a good safety profile was observed for this drug candidate
in rats at the end of January 2015. These results are in agreement with the previously reported results of a non-GLP toxicology
study in mice. The current study results also support the Company’s positive findings in animal models of infection with
different influenza A virus strains in which no safety or toxicology concerns were observed. The Company has previously reported
that many of its FluCide candidates demonstrated extremely high anti-influenza activity in those models. These results are extremely
important since they indicate that FluCide continues to look very promising as one of the most advanced candidates in the Company’s
drug development pipeline.
We believe that these safety/toxicology
results are also applicable to other drug candidates as well in the sense that they have established the safety of the polymer
backbones that we have employed. The polymer is made up of PEG (polyethylene glycol) chains put together into a single polymer
chain with ligands and pendant lipids substantially uniformly attached at the connector points. This enables the nanoviricide
to be substantially non-immunogenic. PEG chain attachment or PEGylation is a widely used technique for rendering antibodies and
other drugs substantially non-immunogenic.
Successful preliminary safety study in
an animal model has cleared the way for us to begin IND-enabling safety/toxicology study for our shingles treatment drug candidate,
as described earlier.
Clinical and Regulatory Strategy
We have engaged Biologics Consulting Group,
a well-known group of regulatory consultants, to advise us on the regulatory pathways, and the studies required for the IND applications
for the various disease indications.
At present, the anti-VZV drug candidate
appears to be our most advanced drug candidate, with the other HerpeCide™ program drug candidates following in its footsteps,
as the necessary additional safety and efficacy studies in cell culture and animal models are performed. We depend upon external
collaborators for animal safety and efficacy studies, limiting the speed of our drug development work. While we seek collaborators
and providers that have animal models that may be predictive of efficacy in human clinical trials, pharmaceutical drug development
relies on what is available and what is doable rather than this gold standard. Newly implemented animal models require validation
studies to establish how reproducibly they can discriminate between placebo and drugs that are known to work in the clinic, when
such drugs are available. In many cases, we have to rely upon research level animal models that have not yet established such
robustness. Nevertheless, we can continue to use such models to obtain preliminary indications for drug candidate refinements.
We believe that the efficacy we have observed
of our anti-VZV drug candidates in the
ex vivo
human skin patch “SOC” model in the Moffat Lab is a strong indicator
that these drug candidates are worthy of clinical development. There is no well-established animal model for shingles at present.
As such we assume that these datasets will be sufficient for filing an IND. Therefore, we have planned further screening to determine
final clinical candidate(s) and further plan on taking one or two candidates through initial safety studies, followed by GLP Safety/Toxicology
studies. We plan on obtaining a pre-IND meeting with the US FDA after the initial safety studies in order to obtain further guidance
on the datasets expected in the IND.
We believe that our existing cGMP-capable
manufacturing facilities are sufficient for the production of drug products for human clinical studies.
Large Market Sizes – The Company
Targets an Overall Anti-Viral Drug Market Size that Exceeds $40B
The current market size for drugs for
the treatment of different herpes simplex infections is about $2~4B. The current market size for the treatment of shingles is
estimated at about $500M to $1B. We believe that when an effective topical treatment is introduced, the market size is likely
to expand substantially.
The approximate market size for severe
cases of shingles may be in the billion-dollar range. Severe cases of shingles may lead to hospitalization in several thousand
cases in the USA. In addition, shingles appearing on the face may reach the eye and may cause significant vision issues. The outpatient
treatment market size for shingles at present is limited, because of the limited effectiveness of existing drugs. An effective
drug could expand this market into billions of dollars globally. Novel shingles vaccines with improved effectiveness are in development.
However, as shingles is not seen as a life-threatening or life-modifying disease, the use of vaccines is limited, and may continue
to be limited, especially if an effective drug is developed.
In addition, the estimated market size
for an effective anti-Influenza drug is expected to be in tens of billions of dollars. The current estimate of anti-influenza
drug market size is approximately $4B.
The current market size for anti-HIV treatments
is in excess of $20B.
Our focus at present is on the topical
treatments for different herpes virus infections in the HerpeCide program, as listed elsewhere in this report. We plan on re-engaging
our Influenza and HIV programs when sufficient funding and skilled human resources are available.
Our Campus in Shelton, CT
With the expanded R&D labs, Analytical
labs, the Bio labs, the Process Scale-Up production facility, and the cGMP-capable manufacturing facility established at our Shelton
campus, we are in a much stronger position than ever to move our drug development programs into the clinic rapidly.
Process Scale-Up Production Capability
The Process Scale-up area is operational
at scales of about 200g to 1kg per step for different chemical synthesis and processing steps. It comprises reactors and process
vessels on chassis or skids, ranging from 1L to 30L capacities, as needed. Many of the reactors or vessels have been designed
by us for specific tasks.
cGMP Production Capability
Our versatile, customizable cGMP-capable
manufacturing facility is designed to support the production of kilogram-scale quantities of any of our nanoviricides drugs. In
addition, it is designed to support the production of the drug in any formulation such as injectable, oral, skin cream, eye drops,
lotions, etc. The production scale is designed so that clinical batches for Phase I, Phase II, and Phase III can be made in this
facility. The clean room suite contains areas suitable for the production of sterile injectable drug formulations, which require
special considerations.
This cGMP-capable facility can handle
multiple reactors on chassis of up to 75L capacities. Thus, we have sufficient cGMP manufacturing capability to produce multi-kg
batches of our nanoviricide drug candidates.
We have planned certain minimal infrastructure
modifications to improve the capabilities of the cGMP-compliant facility, based on our experience in the Scale-up operations.
Certain of these improvements are expected to add a separate production suite for the manufacture of skin cream in an area that
was designated for such further expansion. These infrastructure improvements will be undertaken only after appropriate level of
funding becomes available, of which there can be no assurance.
After these infrastructure improvements,
we plan to produce at least three consecutive batches of a drug product and satisfy that said drug product is within our own defined
specifications. After we are satisfied with such strong reproducibility of our processes, we plan to register the facility as
a cGMP manufacturing facility with the US FDA.
At present, we plan on moving operations
to our cGMP-capable manufacturing facility as the operational steps are developed to the level needed for moving them into this
facility. This requires the development of draft-level Standard Operating Procedures, training, and drill-through of operations.
We will also need to establish a Quality Assurance and Quality Control Department.
Given the limited financing, we have not
been able to attract the necessary talent for replacing the lost staff and for building out the additional resources such as QA/QC.
If we are able to attract and
hire quality candidates that we severely need, we anticipate that it will take at least six months to one year for each such
person to be fully productive as an integrated part of our team. In the past, we have been very fortunate that newly hired
personnel were immediately productive in tasks delineated to them, and they were productively integrated within a short time
frame of several months into independent but integrated parts of our team. However, this is not always the case.
We operate in a completely novel area
of medicines, which is broadly described as polymeric-micelle based drug conjugates and complex nanomedicines. Our technologies
are also completely novel, and unmatched in the industry. As such, we anticipate a longer training period for new employees than
in normal small chemical or biological drugs. We need talented personnel with specialized training. With the extreme difficulties
in hiring foreigners due to immigration requirements, there is only a severely limited talent pool that may be available or accessible
to us.
Thus limited financing has a long-lasting
effect on our ability to progress to the human clinical stage.
We employ the same team that developed
the small-scale synthesis chemistry for translation of those chemical syntheses into clinical-scale processes, and also to perform
the related chemical engineering, quality control, quality assurance, and regulatory tasks along the way. Because of the small
size of our scientific staff, this results in significant serialization of efforts. However, the personnel cost, as well as the
time and expense cost of transfer of knowledge and training of a separate dedicated team is avoided because the same expert scientists
who have developed the chemistries are also involved in scaling them up into process scale. To enable such extensive multi-tasking,
we have a continuous training program in place, with both formal and informal components. We believe that this approach helps
us keep drug development costs as low as possible.
Our BSL-2 Certified Virology Lab
Most importantly, we have significantly
enhanced our internal anti-viral cell culture testing capabilities at our Shelton campus. We have achieved BSL-2 (Biological Safety
Level 2) certification from the State of Connecticut for our Virology suite at the new campus. This suite comprises three individual
virology workrooms, enabling us to work on several different viruses and strains at the same time. This facility is designed only
for cell culture studies on viruses, and no animal studies can be conducted at any of our own facilities. We have brought in Brian
Friedrich, Ph.D., as the Company’s Virologist. Dr. Friedrich has previously performed drug screening of hundreds of candidates
against several viruses including alphaviruses, bunyaviruses, and filoviruses (namely, Ebola and Marburg, which are BSL-4), to
discover potential therapeutics, while he was at United States Army Medical Research Institute of Infectious Diseases (USAMRIID).
Brian has also worked extensively on Flaviviruses, specifically West Nile Virus, while at University of Texas Medical Branch (UTMB).
He has also worked on HIV as part of his PhD thesis. Dengue viruses as well as the Zika virus belong to the Flavivirus family.
Dr. Friedrich has already established
several different types of assays for screening of candidates against VZV, HSV-1 and HSV-2 in our lab. He is now in the process
of establishing assays for Influenza viruses and HIV. We believe that having developed the internal capabilities for cell culture
testing of our ligands and nanoviricides against a variety of viruses has substantially strengthened our drug development programs.
We believe that this internal screening enables speedy evaluation of a much larger number of candidates than external collaborations
allow. This has significantly improved our ability of finding highly effective ligands and performing structure-activity-relationship
studies of the same in a short time period.
Manufacturing Requirements of Some
of Our Drug Candidates
The HerpeCide program drug product batch
requirements are estimated to be fairly modest because of the topical nature of treatment. In consultation with BASi and BCG,
we have currently estimated a batch size of approximately 1kg will be sufficient for the “Tox Package” (i.e. safety
and toxicology) studies of our dermal topical shingles drug candidate. We are estimating that a ~500g batch will be more than
sufficient for initial Phase-I human clinical studies as well. Our current estimate for a Phase IIa human clinical efficacy study
is also in the range of a ~500g batch requirement. We already have the facilities for producing up to 1kg per batch or more. Many
of our synthesis steps have already been scaled up to 200g~500g scales. The “nanomicelle” polymer manufacture is already
scaled to ~500g scale, with some steps already scaled up to multi-kg scale. Thus we believe that we have sufficient production
capability for the amounts of the HerpeCide drugs that would be needed for tox package as well as clinical studies.
As we move our drug candidates into clinical
studies, we plan to perform further scale-up studies to get to about 1kg per batch production scale. In the current facility,
we may be able to manufacture about 20kg to 50kg of cGMP API (active pharmaceutical ingredient) annually. Depending upon the drug’s
potency and indication, this production size may fetch modest revenues of around $50M to $500M, depending upon the cost metrics,
enabling profitable market entry. Such initial commercialization would allow the Company to turn itself into a stand-alone pharmaceutical
company, by enabling capital formation for larger scale manufacturing facilities and fueling further growth.
Patents, Trademarks, Proprietary Rights:
Intellectual Property
The Company has an exclusive license in
perpetuity for technologies developed by TheraCour for the following virus types: HIV, Hepatitis C Virus, HSV-1 and HSV-2, Asian
(bird) flu, Influenza, and rabies. The Company has entered into an Additional License Agreement with TheraCour granting the Company
the exclusive licenses in perpetuity for technologies developed by TheraCour for the additional virus types for Dengue viruses,
Japanese Encephalitis virus, West Nile Virus, viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes, and
Ebola/Marburg viruses. A license for VZV and the remaining herpes viruses is currently being negotiated with TheraCour. (Also please see under “Significant
Alliances: Related Parties: TheraCour Pharma”).
The Company has entered into a Memorandum
of Understanding with TheraCour, whereby TheraCour will initiate discovery and development for drug candidates for a new virus
or indication upon such request by the Company. If the resulting drug candidates are worthy of further drug development, NanoViricides
may determine that it should enter into a licensing agreement with TheraCour. In such a case, NanoViricides would obtain an independent
asset valuation for the asset(s) to be licensed from a party experienced in such valuations. NanoViricides and TheraCour would
thereafter negotiate the terms of compensation for the new license agreement. However, there can be no assurance that an agreement
for licenses for new viruses will be entered into on terms that are favorable to NanoViricides. We believe this process has been
extremely beneficial for NanoViricides, since this process saves NanoViricides from the cost of acquiring and paying for licenses
that it may not want to pursue further. At present, TheraCour has licensed the Company HSV-1 and HSV-2, but has not licensed the
VZV area, nor has it licensed any of the remaining herpes viruses. NanoViricides has commissioned independent party asset valuations
to serve as the basis for such additional licenses that it may seek in accordance with our process. However, there can be no assurance
that the Company will be able to enter into an agreement with TheraCour for such license or that the agreement will be on terms
that are favorable to the Company. The licenses granted by TheraCour are for entire sets of pathologies that the licensed virus
is a causative agent for. The licenses are not for single drug entities, although that is the customary mode in the Pharmaceutical
industry. Thus these are very broad licenses and enable NanoViricides to pursue a number of indications as well as develop drug
candidates with different characteristics as is best suited for the indications, without having to license the resulting drugs
separately.
Patents and other proprietary rights are
essential for our operations. If we have a properly designed and enforceable patent, it can be more difficult for our competitors
to use our technology to create competitive products and more difficult for our competitors to obtain a patent that prevents us
from using technology we create. As part of our business strategy, we actively seek patent protection both in the United States
and internationally and intend to file additional patent applications, when appropriate, to cover improvements in our compounds,
products and technology. We also rely on trade secrets, internal know-how, technological innovations and agreements with third
parties to develop, maintain and protect our competitive position. Our ability to be competitive will depend on the success of
this strategy.
The Company believes that the drugs by
themselves, Injectable FluCide, Oral FluCide, DengueCide, HIVCide, Nanoviricide Eye Drops, HerpeCide, RabiCide, and others, may
be eligible for patent protection. The Company plans on filing patent applications for protecting these drugs when we have definitive
results from in vitro or in vivo studies that enable further drug development and IND application filing.
The Company has licensed key patents,
patent applications and rights to proprietary and patent-pending technologies related to our compounds, products and technologies
(see Table 1), but we cannot be certain that issued patents will be enforceable or provide adequate protection or that pending
patent applications will result in issued patents.
Table 1: Intellectual Property, Patents,
and Pending Patents Licensed by the Company
|
|
Patent
or Application
|
|
Date
of Issue/
Application
|
|
US
Expiry Date
|
|
International
|
|
Owners
|
1
|
|
US6,521,736
(Certain specific amphiphilic polymers).
|
|
Issued: Feb
18, 2003
|
|
Feb 18, 2020
|
|
N/A
|
|
TheraCour Pharma
and Univ. of Massachusetts, Lowell. [Nonexclusive license from TheraCour Pharma].
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
PCT/US06/01820
(SOLUBILIZATION AND TARGETED DELIVERY OF DRUGS WITH
SELF-ASSEMBLING AMPHIPHILIC POLYMERS).
|
|
Applied: Jan
19, 2006 PCT U.S. Issuance: May 8, 2012.
|
|
October 2028
(estimated)
|
|
Applications
are in various prosecution stages. Fifty two of these have been issued or validated
|
|
TheraCour Pharma,
Inc. [Exclusive License].
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
PCT/US2007/001607
SELF-ASSEMBLING AMPHIPHILIC POLYMERS AS ANTIVIRAL
AGENTS
|
|
Applied: Jan
22, 2007
|
|
Ca. 2029(estimated)
|
|
Applications
are in various prosecution stages. Nine of these have been issued or validated
|
|
TheraCour Pharma,
Inc. [Exclusive License].
|
We have previously announced certain important
issuances of patents on the TheraCour® technology underlying our Nanoviricides® drugs. A fundamental patent on the polymeric
micelles composition, structure and uses was issued in the USA with substantially broad claims. This validates the novelty of
our approach as well as our leadership position in the nanomedicines based on polymeric micelle technologies. This patent application
has so far been issued, granted, and/or validated, with substantially similar broad claims as 52 different patents in different
countries and multi-country intellectual property organizations. A fundamental patent on which the nanoviricides® technology
is based (US Patent No. 8,173,764) for “Solubilization and Targeted Delivery of Drugs with Self-Assembling Amphiphilic Polymers”
was issued on May 8, 2012. The patent term is expected to last through October 1, 2028, including anticipated extensions in compensation
for time spent in clinical trials. This US Patent has been allowed with a very broad range of claims to a large number of families
of chemical structure compositions, pharmaceutical compositions, methods of making the same, and uses of the same. The disclosed
structures enable self-assembling, biomimetic nanomedicines. NanoViricides, Inc. holds exclusive, perpetual, worldwide licenses
to these technologies for a broad range of antiviral applications and diseases. The other national and regional counterparts of
the international Patent Cooperation Treaty (“PCT”) application number PCT/US06/01820, which was filed in 2006, have
issued as a Singapore National Patent Publication, a South African patent, and also as an ARIPO regional patent, an OAPI regional
patent (covering Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Republic of Congo, Cote d’Ivoire, Equatorial
Guinea, Gabon, Guinea, Guinea Bissau, Mali, Mauritania, Niger, Senegal, and Togo). It has also issued as a granted patent in New
Zealand, China, Mexico, Japan, Australia, Canada, several countries in Europe, Hong Kong, Indonesia, Israel, Korea, Malaysia,
Philippines, Pakistan, and Vietnam among others. Estimated expiry dates range nominally from 2026 to 2027, prior to accounting
for various extensions available in different regions and countries. Additional issuances are continuing in Europe, and in several
other countries around the world.
Another fundamental patent application
on the antivirals developed using the polymeric micelles has so far been issued, granted, and/or validated, with substantially
broad claims as well, as 9 different patents. The counterparts of the international PCT application PCT/US2007/001607 have issued
as a granted patent in ARIPO, Australia, China, Japan, Mexico, New Zealand, OAPI, South Africa, and Korea to date. Additional
issuances are expected in Europe, USA, and in several other countries around the world. This patent application teaches antivirals
based on the TheraCour polymeric micelle technologies, their broad structures and compositions of matter, pharmaceutical compositions,
methods of making the same, and their uses. The nominal expiry dates are expected to range from 2027 to 2029. Further patent prosecution
in several other regions and countries is continuing.
A total of at least 61 patents have been
issued globally on the basis of the two international PCT patent families that cover the fundamental aspects of our platform
technology. Additional patent grants are expected to continue as the applications progress through prosecution processes. All
of the resulting patents have substantially broad claims.
These patents have nominal expiry dates
in 2026 to 2029. The dates can be further extended in several countries and regions for the additional allowances due to the regulatory
burden of drug development processes, or other local considerations, such as licensing to a local majority held company. Many
countries allow up to a five year extension for regulatory delays.
No patent applications have been
filed for the actual drug candidates that we currently intend to develop as drugs. We intend to file the patent
application for FluCide and HerpeCide before entering human clinical trials. The estimated expiry date for the FluCide and
HerpeCide patents, if and when issued, would be no earlier than 2037-2038.
Of the patents and technologies licensed,
the Company believes that it will not be using the intellectual property, compositions of matter, or other aspects described and
secured under the US Patent No. US 6,521,736. The Company believes that this patent describes an inferior technology compared
to the technology in the later patent filings of Dr. Diwan. This patent, the Company believes, discloses prototype materials that
served to establish the proof of principles developed by Dr. Anil Diwan, the Company’s President and co-founder, whether
such materials were possible to create and whether such materials would indeed be capable of encapsulation of pharmaceutically
relevant compounds. The Company believes that the new and novel compositions disclosed in the new patent applications, No. PCT/US06/01820,
and No. PCT/US2007/001607, and additional proprietary intellectual property provide the necessary features that enable the development
of nanoviricides. The Company believes that no other published literature materials or existing patents are capable of providing
all of the necessary features for this development, to the best of our knowledge. However, the Company has no knowledge of the
extensive active internal developments at a number of companies in the targeted therapeutics area.
We may obtain patents for our compounds
many years before we obtain marketing approval for them. Because patents have a limited life, which may begin to run prior to
the commercial sale of the related product, the commercial value of the patent may be limited. However, we may be able to apply
for patent term extensions, based on delays experienced in marketing products due to regulatory requirements. There is no assurance
we would be able to obtain such extensions. The Company controls the research and work TheraCour performs on its behalf and no
costs may be incurred without the prior authorization or approval of the Company.
Patents relating to pharmaceutical, biopharmaceutical and
biotechnology products, compounds and processes such as those that cover our existing compounds, products and processes and
those that we will likely file in the future, do not always provide complete or adequate protection. Future litigation or
reexamination proceedings regarding the enforcement or validity of the existing patents or any future patents, of our
licensor TheraCour Pharma, Inc., could invalidate TheraCour’s patents or substantially reduce their protection. In
addition, the pending patent applications and patent applications filed by TheraCour, may not result in the issuance of any
patents or may result in patents that do not provide adequate protection. As a result, we may not be able to prevent third
parties from developing the same compounds and products that we have developed or are developing. In addition, certain
countries do not permit enforcement of our patents, and manufacturers are able to sell generic versions of our products in
those countries.
We also rely on unpatented trade secrets
and improvements, unpatented internal know-how and technological innovation. In particular, a great deal of our material manufacturing
expertise, which is a key component of our core material technology, is not covered by patents but is instead protected as a trade
secret. We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants
and vendors. These agreements provide that all confidential information developed or made known to an individual during the course
of their relationship with us will be kept confidential and will not be used or disclosed to third parties except in specified
circumstances. In the case of employees, the agreements provide that all inventions made by the individual while employed by us
will be our exclusive property. We cannot be certain that these parties will comply with these confidentiality agreements, that
we have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered
by our competitors.
Trademarks
On April 20, 2010, the United States Patent
and Trademark Office granted trademark registration number 3,777,001 to the Company for the standard character mark “nanoviricides”
(the “Mark”) for International Class 5, pharmaceutical preparation for the treatment of viral diseases. The Mark was
registered on the Principal Register and is protected in all its letter forms, including corresponding plural and singular forms,
various forms of capitalization, and fonts and designs.
Recognition
On August 24, 2016, the Honorable U.S.
Senator Chris Murphy visited the Company’s campus in Shelton, CT. In addition the Honorable U.S. Richard Blumenthal has
previously visited our company. Further, the Honorable U.S. Representative Jim Himes visited our company in the recent past.
On July 25, 2016, our President, Dr. Anil
Diwan, was invited to participate in the prestigious 31st Annual Chief Executive of the Year Gala Reception & Dinner held
at the New York Stock Exchange. In addition, he was also invited to participate in the CEO Roundtable Discussion on Innovation.
Previously, on April 18, 2016, the Company
announced that it has been recognized as one of the “Most Innovative Business Leaders of 2016” by AI Global Media,
publisher of Acquisition International Magazine and Website (“AI”) (
http://www.acquisition-intl.com
). A focus
article on NanoViricides was published in AI Magazine, February 2016 issue.
Presentations and Conferences
The Company continues its efforts at connecting
with additional investors and presenting in investor-oriented business conferences. Some of these are listed below.
Our collaborator, the Moffat group at
Upstate Medical Center, SUNY, Syracuse, NY, presented a poster entitled describing the effectiveness on nanoviricide candidates
against VZV virus in a human skin patch organ culture (“SOC”) model of shingles, at the 31st International Conference
on Antiviral Research held June 11 - June 15, 2018 in Porto, Portugal.
The Company presented a poster entitled
“Novel Nanoviricides® Highly Effective Against Varicella Zoster Virus in Cell Culture” at the 36th Annual Meeting
of the American Society of Virology (ASV) on June 26, 2017. The ASV Meeting was hosted and held at the University of Wisconsin-Madison,
from June 24th to 28th, 2017 (
https://extensionconferencecenters.uwex.edu/asv2017/
). Dr. Brian Friedrich, Senior Virologist
of the Company, presented the Company’s work on the evaluation of nanoviricides drug candidates for effectiveness against
the shingles virus (Varicella Zoster Virus, VZV, aka Human HerpesVirus-3 or HHV-3) in this poster.
The Company gave an oral presentation
on the “Effect of NanoViricide Anti-viral Agents in a Mouse Model of Acute Retinal Necrosis”, at the 51
st
Annual Meeting of the Ocular Microbiology and Immunology Group (OMIG) held at the Astor Crowne Plaza Hotel in New Orleans, LA,
on November 10, 2017. Both tested nanoviricide candidates were effective in decreasing viral load by about 2 to 3 logs at day
3 and demonstrated significant positive clinical effects on controlling HSV-2 G infection in the mouse eye. The study was conducted
in Dr. Brandt Lab at the CORL, University of Wisconsin, Madison, WI.
Anil R. Diwan, PhD, President and Chairman
of the Company, is regarded as an expert in nanomedicines and has been invited to present regarding critical issues in nanomedicines
drug development including regulatory processes, with special emphasis on CMC (chemistry, manufacture, and controls).
Subsequent to the reporting period, on
October 1, 2018, Dr. Irach Taraporewala, the new CEO of the Company provided a corporate overview at the MicroCap Conference in
New York City.
Subsequent to the reporting period, on
September 25, 2018, Dr. Irach Taraporewala, the new CEO of the Company and Dr. Anil Diwan, President of the Company, provided
a corporate overview at the NYC-Inaugural LD Micro Conference in New York City.
Subsequent to the reporting period, on
September 17, 2018, Dr. Diwan presented a talk entitled “NanoViricides – On the Road to Clinical Trials – cGMP
Manufacturing of Antiviral Nanomedicines” at the 16
th
Annual International Conference in Nanomedicines, entitled
“The Road from Nanomedicine to Precision Medicine” held at the Albany College of Pharmacy and Health Sciences, Albany,
NY.
Subsequent to the reporting period, on
September 6
, 2018, Anil R. Diwan, PhD, President and Chairman of the Company presented an overview of the Company
at the 20
th
Annual Rodman & Renshaw Global Investment Conference, sponsored by H.C. Wainwright & Co., LLC,
held at the St. Regis Hotel in New York City.
On April 9, 2018, Dr. Diwan presented
the recent safety data from preliminary safety/toxicology study for the shingles drug candidates and provided a corporate update
at the MicroCap Conference held at the Essex House in New York City.
Previously, on February 22, 2016, the
Company announced that information on its novel proprietary anti-virus platform technology has been published in the book “
Handbook
of Clinical Nanomedicine, Vol. 1. Nanoparticles, Imaging, Therapy, and Clinical Applications
”, a CRC Press publication.
The chapter entitled “Nanoviricides: Targeted Anti-Viral Nanomaterials” provides an in-depth presentation of the NanoViricides
platform technology, evidence for how nanoviricides® are believed to act plus dramatic results of nanoviricides specifically
targeting certain viral diseases, such as Influenza.
Glossary of Terms
Nano
- When used as a prefix for
something other than a unit of measure, as in “nanoscience,” nano means relating to nanotechnology, or on a scale
of nanometers (one billionth of a meter or greater).
Viricide
- An agent that reliably
deactivates or destroys a virus.
Nanoviricide
® – An agent
that is made by attaching ligands against a certain virus or family of viruses to a nanomicelle based on the Company’s patent-pending
and proprietary technologies.
Ligand
- A short peptide or chemical
molecule fragment that has been designed to specifically recognize one particular type of virus.
Micelle
- an aggregate of molecules
in a solution, such as those formed by detergents.
Nanomicelle
- A term coined to
describe the micelles formed from the backbone polymer of a nanoviricide sans attached ligands.
Pendant polymeric micelles
- A
polymeric micelle forms from a polymer whose chemical constitution is such that even a single chain of the polymer forms a micelle.
A pendant polymer is a polymer that has certain units in its backbone that extend short chains branched away from the backbone.
Pendant Polymeric Micelles therefore are polymeric micelle materials that are a class of pendant polymers, and naturally form
exceptionally well-defined, self-assembling, globular micelles with a core-shell architecture.
Mutations
- The ability (of a virus)
to change its genetic structure to avoid the body’s natural defenses. Mutant viruses are created from a parent virus strain
through a process of natural selection under pressure as it replicates in a host.
P-Value
- In statistical hypothesis
testing, the p-value is the probability of obtaining a result at least as extreme as that obtained, assuming that the null hypothesis
is true; wherein the truth of the null hypothesis states that the finding was the result of chance alone. The fact that p-values
are based on this assumption is crucial to their correct interpretation. The smaller the p-value, the greater is the probability
that the observed study results and the comparison control are distinct, and therefore that the study results are not a result
of chance alone.
More technically, the p-value of an observed
value observed of some random variable T used as a test statistic is the probability that, given that the null hypothesis is true,
T will assume a value as or more unfavorable to the null hypothesis as the observed value observed. “More unfavorable to
the null hypothesis” can in some cases mean greater than, in some cases less than and in some cases further away from a
specified center value.
Investigational New Drug Application
(Investigational New Drug (“IND”)
- The process of licensure of a new drug in the US goes through several steps.
A simplified explanation of these steps is as follows. Initially a Company may file a pre-IND application to seek meetings with
the FDA for guidance on work needed for filing an IND application. The Company obtains data on the safety and effectiveness of
the drug substance in various laboratory studies including cell cultures and animal models. The Company also obtains data on chemical
manufacturing of the drug substance. These and certain additional data are used to create an IND that the Company files with the
FDA. After the FDA approves an IND application, the Company may conduct human clinical studies. A Phase I human clinical trial
is designed typically to evaluate safety of the drug and maximum permissible dosage level. A Phase II human clinical trial that
follows is designed to evaluate effectiveness of the drug against the disease in a small cohort of patients. A Phase III human
clinical trial thereafter is designed to evaluate effectiveness and safety in larger groups of patients, often at multiple sites.
The Company may then submit an NDA (New Drug Application) with the data collected in the clinical trials. The FDA may approve
the NDA. Once the NDA is approved, the Company can sell the drug in the USA. European countries have similar processes under the
European Medicines Agency (EMA). Other countries have similar processes.
SAR:
Structure-Activity-Relationship
study. When an initial lead drug compound is found that has activity, further studies on drug compounds obtained by suitably modifying
it are performed with the goal of improving efficacy, safety, or both. Such studies are called SAR studies.
A Note on US FDA Priority Review Vouchers
The Food and Drug Administration Amendments
Act of September 2007 authorizes the FDA to award a priority review voucher to any company that the FDA has determined is eligible
for priority approval process for a treatment for a neglected tropical disease. The priority review voucher can be traded to another
company in a manner similar to carbon (emissions) credit vouchers. The recipient company can save as much as six months on their
drug review process, and it is anticipated that they would be willing to trade in vouchers with cash benefits to the company developing
drugs against neglected tropical diseases. The regulation became effective as of September 30, 2008.
Economists at Duke University, who proposed
the voucher concept in 2006, have calculated that reduction of the FDA approval time from 18 to six months could be worth more
than $300 million to a company with a top-selling drug with a net present value close to $3 billion. At this level, the voucher
would be expected to offset the substantial investment and risk required for discovery and development of a new treatment for
a neglected tropical disease. (David B. Ridley, Henry G. Grabowski and Jeffrey L. Moe, “Developing Drugs For Developing
Countries”, Health Affairs, 25, no. 2 (2006): 313-324; doi: 10.1377/hlthaff.25.2.313; © 2006 by Project Hope. and (
http://blogs.cgdev.org/globalhealth/2007/10/fda_priority_review.php
). Some of the PRVs have been “sold” for
as much as $250M or so recently.
While there is no indication whether NanoViricides,
Inc. can obtain priority review vouchers for its drugs against neglected tropical diseases, the high efficacies of our drug candidates
lead us to believe that this may be possible. FDA awards priority review status on the basis of several criteria. NanoViricides,
Inc. is currently working on several neglected tropical diseases, including Dengue fever viruses, rabies, Ebola/Marburg viruses,
among others. Of these, Dengue viruses are explicitly included in the list under this Public Law, and the remaining viruses are
eligible for similar treatment according to the language in the Public Law, at the discretion of the Secretary of Health (Food
and Drug Administration Amendments Act of 2007, P.L. 110–85, Sept. 27, 2007,
http://www.fda.gov/oc/initiatives/fdaaa/PL110-85.pdf
). The Zika virus was added to this list recently.
Products
NanoViricides, Inc. currently has no products
for sale. The Company currently has developed reasonably safe and effective drug candidates against several different indications
as demonstrated in pre-clinical cell culture and animal studies. The Company believes that with the funds on hand, it should be
able to take at least one of these drug candidates into IND filing stage in the near future. The Company will need to raise additional
funds for commencing and executing human clinical trials.
Reports to Security Holders
As of November 2006, as a result of its
filing of Form 10-SB and listing on the FINRA OTC Bulletin Board, the Company became subject to the reporting obligations of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include filing an annual report
under cover of Form 10-K, with audited financial statements, unaudited quarterly reports on Form 10-Q and the requisite proxy
statements with regard to annual shareholder meetings. The public may read and copy any materials the Company files with the Securities
and Exchange Commission (the “Commission”) at the Commission’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0030.
The Commission maintains an Internet site (
http://www.sec.gov
) that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the Commission. Information about the Company is also available
on its Web site at
www.nanoviricides.com
. Information included on the Web site is not part of this Form 10-K.
Further, the Company’s common stock
has been listed on the NYSE MKT (a US national exchange) since September 25, 2013. The NYSE-American Exchange requires additional
corporate governance, financial and reporting requirements. NYSE MKT has changed its name to “NYSE American” in July
2017.
On July 3, 2018, NanoViricides, Inc. (the
“Company”) received a notice from the New York Stock Exchange (the “NYSE”) indicating that the Company
is not in compliance with the NYSE’s continued listing requirements set forth in Part 8 of the NYSE American Company Guide
(the “Company Guide”). The NYSE noted that the Company is not in compliance with Section 803(B)(2)(a) of the Company
Guide in that it no longer has at least three members on the audit committee, effective as of June 29, 2018 when an Independent
Director Dr. Mukund Kulkarni advised the Company that he resigned as a member of its audit committee.
On July 10, 2018, Dr. Kulkarni advised
the Company that he rescinded his resignation as a member of the audit committee and the Company accepted the same. Dr. Kulkarni
rescinded his resignation from the Audit Committee subsequent to Dr. Boniuk’s resignation as a Director and from all committees
of the Board of Directors, on the same date. Due to Dr. Boniuk’s resignation, the non-compliance item continues to persist
until the Company appoints additional independent directors to the Board. The Company is already interviewing pharmaceutical industry
expert candidates for the directorship and hopes to complete the selection process soon.
Under the NYSE's rules, the Company will
have until the earlier of its next annual meeting or one year from the occurrence of the event that caused the failure to comply
with the board of directors composition requirements, provided, however, that if the annual shareholders’ meeting occurs
no later than 180 days following the event that caused the failure to comply with these requirements, the Company shall instead
have 180 days from such event to regain compliance.
Website
Our website address is
www.nanoviricides.com
.
We intend to make available through our
website, all of our filings with the Commission and all amendments to these reports as soon as reasonably practicable after filing,
by providing a hyperlink to the EDGAR website containing our reports.
Our Contact Information
Our principal executive offices are currently
located at 1 Controls Drive, Shelton, Connecticut 06484 and our telephone number is (203) 937-6137 (voice mail). We can be contacted
by email at
info@nanoviricides.com
.
ITEM 1A. RISK
FACTORS
Our business, financial condition, operating
results and prospects are subject to the following risks. Additional risks and uncertainties not presently foreseeable to us may
also impair our business operations. If any of the following risks or the risks described elsewhere in this report actually occurs,
our business, financial condition or operating results could be materially adversely affected. In such case, the trading price
of our common stock could decline, and our stockholders may lose all or part of their investment in the shares of our common stock.
This Form 10-K contains forward-looking
statements that involve risks and uncertainties. These statements can be identified by the use of forward-looking terminology
such as “believes,” “expects,” “intends,” “plans,” “may,” “will,”
“should,” “predict” or “anticipation” or the negative thereof or other variations thereon
or comparable terminology. Actual results could differ materially from those discussed in the forward- looking statements as a
result of certain factors, including those set forth below and elsewhere in this Form 10-K.
Risks Specific to Our Business
Our company is a development stage
company that has no products approved for commercial sale, never generated any revenues and may never achieve revenues or profitability.
Our company is a development stage company
that has no products approved for commercial sale, never generated any revenues and may never achieve revenues or profitability.
We are a development stage biopharmaceutical company. Currently, we have no products approved for commercial sale and, to date,
we have not generated any revenues. Our ability to generate revenue depends heavily on:
|
•
|
demonstration
and proof of principle in pre-clinical trials that a nanoviricide is safe and effective;
|
|
•
|
successful
development of our first product candidate in our pipeline;
|
|
•
|
our
ability to seek and obtain regulatory approvals, including with respect to the indications
we are seeking;
|
|
•
|
the
successful commercialization of our product candidates; and
|
|
•
|
market
acceptance of our products.
|
All of our existing product candidates
are in early stages of development. It will be several years, if ever, until we have a commercial drug product available for resale.
If we do not successfully develop and commercialize these products, we will not achieve revenues or profitability in the foreseeable
future, if at all. If we are unable to generate revenues or achieve profitability, we may be unable to continue our operations.
We are a development stage company with
a limited operating history, making it difficult for you to evaluate our business and your investment. We are in the development
stage and our operations and the development of our proposed products are subject to all of the risks inherent in the establishment
of a new business enterprise, including but not limited to:
|
•
|
the
absence of an operating history;
|
|
•
|
the
lack of commercialized products;
|
|
•
|
expected
substantial and continual losses for the foreseeable future;
|
|
•
|
limited
experience in dealing with regulatory issues; the lack of manufacturing experience and
limited marketing experience;
|
|
•
|
an
expected reliance on third parties for the development and commercialization of our proposed
products;
|
|
•
|
a
competitive environment characterized by numerous, well-established and well capitalized
competitors; and
|
|
•
|
reliance
on key personnel.
|
Because we are subject to these risks, you may have a
difficult time evaluating our business and your investment in our company.
Our ability to become profitable depends
primarily on the following factors:
|
•
|
our
ability to develop drugs, obtain approval for such drugs, and if approved, to successfully
commercialize our nanoviricide drug(s);
|
|
•
|
our
R&D efforts, including the timing and cost of clinical trials; and
|
|
•
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our
ability to enter into favorable alliances with third parties who can provide substantial
capabilities in clinical development, regulatory affairs, sales, marketing and distribution.
|
Even if we successfully develop
and market our drug candidates, we may not generate sufficient or sustainable revenue to achieve or sustain profitability.
We have incurred significant operating
losses and may not ever be profitable. As of June 30, 2018, we had a cash and cash equivalent balance of $7,081,771. Also, the
Company has incurred significant operating losses since its inception, resulting in an accumulated deficit of $83,692,146 at June
30, 2018. Such losses are expected to continue for the foreseeable future.
We will need to raise substantial
additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable
terms.
While we believe we will be able to raise
sufficient cash in the capital markets, to be able to take at least one of our drug candidates into initial human clinical trials,
we currently do not have sufficient resources to complete the development and commercialization of any of our proposed products.
In the event that we cannot obtain acceptable
financing, or that we are unable to secure additional financing on acceptable terms, we would be unable to complete development
of our various drug candidates. This would necessitate implementing staff reductions and operational adjustments that would include
reductions in the following business areas:
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research
and development programs;
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preclinical
studies and clinical trials; material characterization studies, regulatory processes;
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a
search for third party marketing partners to market our products for us.
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The amount of capital we may need will
depend on many factors, including the:
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progress,
timing and scope of our research and development programs;
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progress,
timing and scope of our preclinical studies and clinical trials;
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time
and cost necessary to obtain regulatory approvals;
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time
and cost necessary to establish our own marketing capabilities or to seek marketing partners;
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time
and cost necessary to respond to technological and market developments;
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changes
made or new developments in our existing collaborative, licensing and other commercial
relationships; and
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new
collaborative, licensing and other commercial relationships that we may establish.
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Our fixed expenses, such as real estate
taxes and facility and equipment maintenance, rent, and other contractual commitments, may increase in the future, as we may:
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enter
into leases for new facilities and capital equipment;
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enter
into additional licenses and collaborative agreements; and
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incur
additional expenses associated with being a public company.
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We have limited experience in drug
development and may not be able to successfully develop any drugs.
Until the formation of NanoViricide, Inc.
(the Company’s predecessor prior to the reverse merger in 2005) our management and key personnel had no experience in pharmaceutical
drug development and, consequently, may not be able to successfully develop any drugs. Our ability to achieve revenues and profitability
in our business will depend, among other things, on our ability to:
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develop
products internally or obtain rights to them from others on favorable terms;
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complete
laboratory testing and human studies;
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obtain
and maintain necessary intellectual property rights to our products;
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successfully
complete regulatory review to obtain requisite governmental agency approvals;
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enter
into arrangements with third parties to manufacture our products on our behalf; and
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enter
into arrangements with third parties to provide sales and marketing functions.
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Development of pharmaceutical products
is a time-consuming process, subject to a number of factors, many of which are outside of our control. Consequently, we can provide
no assurance of the successful and timely development of new drugs.
Our drug candidates are in their developmental
stage. Further development and extensive testing will be required to determine their technical feasibility and commercial viability.
Our success will depend on our ability to achieve scientific and technological advances and to translate such advances into reliable,
commercially competitive drugs on a timely basis. Drugs that we may develop are not likely to be commercially available for a
few years. The proposed development schedules for our drug candidates may be affected by a variety of factors, including technological
difficulties, proprietary technology of others, and changes in government regulation, many of which will not be within our control.
Any delay in the development, introduction or marketing of our drug candidates could result either in such drugs being marketed
at a time when their cost and performance characteristics would not be competitive in the marketplace or in the shortening of
their commercial lives. In light of the long-term nature of our projects, the unproven technology involved and the other factors
described elsewhere in “Risk Factors”, we may not be able to complete successfully the development or marketing of
any drugs.
We may fail to successfully develop and
commercialize our drug candidates if they:
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are
found to be unsafe or ineffective or fail to meet the appropriate endpoints in clinical
trials;
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do
not receive necessary approval from the FDA or foreign regulatory agencies;
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fail
to conform to a changing standard of care for the diseases they seek to treat; or
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are
less effective or more expensive than current or alternative treatment methods.
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Drug development failure can occur at
any stage of clinical trials and as a result of many factors and there can be no assurance that we or our collaborators will reach
our anticipated clinical targets. Even if we or our collaborators complete our clinical trials, we do not know what the long-term
effects of exposure to our drug candidates will be. Furthermore, our drug candidates may be used in combination with other treatments
and there can be no assurance that such use will not lead to unique safety issues. Failure to complete clinical trials or to prove
that our drug candidates are safe and effective would have a material adverse effect on our ability to generate revenue and could
require us to reduce the scope of or discontinue our operations.
We must comply with significant
and complex government regulations, compliance with which may delay or prevent the commercialization of our drug candidates.
The R&D, manufacture and marketing
of drug candidates are subject to regulation, primarily by the FDA in the United States and by comparable authorities in other
countries. These national agencies and other federal, state, local and foreign entities regulate, among other things, R&D
activities (including testing in primates and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping,
approval, advertising and promotion of the products that we are developing. Noncompliance with applicable requirements can result
in various adverse consequences, including approval delays or refusals to approve drug licenses or other applications, suspension
or termination of clinical investigations, revocation of approvals previously granted, fines, criminal prosecution, recalls or
seizures of products, injunctions against shipping drugs and total or partial suspension of production and/or refusal to allow
a company to enter into governmental supply contracts.
The process of obtaining FDA approval
has historically been costly and time consuming. Current FDA requirements for a new human drug or biological product to be marketed
in the United States include: (1) the successful conclusion of pre-clinical laboratory and animal tests, if appropriate, to gain
preliminary information on the product’s safety; (2) filing with the FDA of an IND application to conduct human clinical
trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human clinical investigations to
establish the safety and efficacy of the product for its recommended use; and (4) filing by a company and acceptance and approval
by the FDA of a New Drug Application, or NDA, for a drug product or a biological license application, or BLA, for a biological
product to allow commercial distribution of the drug or biologic. A delay in one or more of the procedural steps outlined above
could be harmful to us in terms of getting our drug candidates through clinical testing and to market.
The FDA reviews the results of the clinical
trials and may order the temporary or permanent discontinuation of clinical trials at any time if it believes the drug candidate
exposes clinical subjects to an unacceptable health risk. Investigational drugs used in clinical studies must be produced in compliance
with current good manufacturing practice, or GMP, rules pursuant to FDA regulations.
Sales outside the United States of products
that we develop will also be subject to regulatory requirements governing human clinical trials and marketing for drugs and biological
products and devices. The requirements vary widely from country to country, but typically the registration and approval process
takes several years and requires significant resources. In most cases, even if the FDA has not approved a product for sale in
the United States, the product may be exported to any country if it complies with the laws of that country and has valid marketing
authorization by the appropriate authority. There are specific FDA regulations that govern this process.
We also are subject to the following risks
and obligations, related to the approval of our products:
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The
FDA or foreign regulators may interpret data from pre-clinical testing and clinical trials
in different ways than we interpret them.
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If
regulatory approval of a product is granted, the approval may be limited to specific
indications or limited with respect to its distribution.
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In
addition, many foreign countries control pricing and coverage under their respective
national social security systems.
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The
FDA or foreign regulators may not approve our manufacturing processes or manufacturing
facilities.
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The
FDA or foreign regulators may change their approval policies or adopt new regulations.
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Even
if regulatory approval for any product is obtained, the marketing license will be subject
to continual review, and newly discovered or developed safety or effectiveness data may
result in suspension or revocation of the marketing license.
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If
regulatory approval of the product candidate is granted, the marketing of that product
would be subject to adverse event reporting requirements and a general prohibition against
promoting products for unapproved or “off-label” uses.
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In
some foreign countries, we may be subject to official release requirements that require
each batch of the product we produce to be officially released by regulatory authorities
prior to its distribution by us.
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We
will be subject to continual regulatory review and periodic inspection and approval of
manufacturing modifications, including compliance with current GMP regulations.
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We can provide no assurance that
our drug candidates will obtain regulatory approval or that the results of clinical studies will be favorable.
The Company reports summary of its studies
as the data become available to the Company, after analyzing and verifying same, in its press releases.
All of our products in development are
still in the pre-clinical stage, and not submitted to any regulatory agencies in any formal drug licensing or approval processes.
We have previously held a pre-IND meeting with the US FDA regarding our anti-influenza drug candidates, in March 2012. However,
since then, we have re-evaluated our priorities. We have now prioritized our HerpeCide™ program drug candidates as our highest
priority candidates. We believe that we have obtained valuable information at the pre-IND meeting for our FluCide program that
we believe we can apply to our HerpeCide program in a generalized manner.
Such strategic changes are necessitated
due to the limited resources available to us for drug development. We perform such strategic changes in order to maximize our
chances of entering into human clinical trials in the regulatory process in the earliest time frame possible, and within the funding
available to the Company, guided by input from a number of sources. Such changes are designed to accelerate some programs and
would lead to delays in some other programs that receive lower priority, due to our limited resources. We may not be able to accurately
assess the effect of such changes on our business plan.
The testing, marketing and manufacturing
of any product for use in the United States will require approval from the FDA. We cannot predict with any certainty the amount
of time necessary to obtain such FDA approval and whether any such approval will ultimately be granted. Preclinical and clinical
trials may reveal that one or more products are ineffective or unsafe, in which event further development of such products could
be seriously delayed or terminated. Moreover, obtaining approval for certain products may require testing on human subjects of
substances whose effects on humans are not fully understood or documented. Delays in obtaining FDA or any other necessary regulatory
approvals of any proposed drug and failure to receive such approvals would have an adverse effect on the drug’s potential
commercial success and on our business, prospects, financial condition and results of operations. In addition, it is possible
that a proposed drug may be found to be ineffective or unsafe due to conditions or facts that arise after development has been
completed and regulatory approvals have been obtained. In this event, we may be required to withdraw such proposed drug from the
market. To the extent that our success will depend on any regulatory approvals from government authorities outside of the United
States that perform roles similar to that of the FDA, uncertainties similar to those stated above will also exist.
Even if we obtain regulatory approvals,
our marketed drug candidates will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and foreign
regulations, we could lose our approvals to market these drugs and our business would be seriously harmed.
Following any initial regulatory approval
of any drugs we may develop, we will also be subject to continuing regulatory review, including the review of adverse experiences
and clinical results that are reported after our drug candidates are made commercially available. This would include results from
any post-marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use
to make any of our drug candidates will also be subject to periodic review and inspection by the FDA. The discovery of any previously
unknown problems with the drug, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including
withdrawal of the drug from the market. If we are required to withdraw all or more of our drugs from the market, we may be unable
to continue revenue-generating operations. Reliance on third-party manufacturers entails risks to which we would not be subject
if we manufactured drugs ourselves, including reliance on the third-party manufacturer for regulatory compliance. Our drug promotion
and advertising is also subject to regulatory requirements and continuing FDA review.
Development of our drug candidates
requires a significant investment in R&D. Our R&D expenses in turn, are subject to variation based on a number of factors,
many of which are outside of our control. A sudden or significant increase in our R&D expenses could materially and adversely
impact our results of operations.
We currently have sufficient funds on
hand to take at least one drug candidate into IND application stage. We believe we will be pursuing a candidate from our HerpeCide™
program for an IND and initiating human clinical trials with the limited financial resources in hand.
The Company will be unable to proceed
with its business plan beyond approximately September 30, 2019, without obtaining additional financing to support its budgeted
Research and Development and other costs.
Because we expect to expend substantial
resources on R&D, our success depends in large part on the results as well as the costs of our R&D. A failure in our R&D
efforts or substantial increase in our R&D expenses would adversely affect our results of operations. R&D expenditures
are uncertain and subject to much fluctuation. Factors affecting our R&D expenses include, but are not limited to:
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the
number and outcome of clinical studies we are planning to conduct; for example, our R&D
expenses may increase based on the number of late-stage clinical studies that we may
be required to conduct;
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the number, extent,
and outcome of pre-clinical studies we are planning to conduct; for example, our R&D expenses may increase based on the
number and extent of IND-enabling pre-clinical studies including CMC Studies, Tox Package Studies, and Quality Programs that
we may be required to conduct;
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the
number of drugs entering into pre-clinical development from research; for example, there
is no guarantee that internal research efforts will succeed in generating sufficient
data for us to make a positive development decision;
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licensing
activities, including the timing and amount of related development funding or milestone
payments; for example, we may enter into agreements requiring us to pay a significant
up-front fee for the purchase of in-process R&D that we may record as R&D expense.
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We have limited experience in conducting
or supervising clinical trials and must outsource all clinical trials.
We have limited experience in conducting
or supervising clinical trials that must be performed to obtain data to submit in concert with applications for approval by the
Food and Drug Administration (“FDA”). The regulatory process to obtain approval for drugs for commercial sale involves
numerous steps. Drugs are subjected to clinical trials that allow development of case studies to examine safety, efficacy, and
other issues to ensure that sale of drugs meets the requirements set forth by various governmental agencies, including the FDA.
In the event that our protocols do not meet standards set forth by the FDA, or that our data is not sufficient to allow such trials
to validate our drugs in the face of such examination, we might not be able to meet the requirements that allow our drugs to be
approved for sale.
Because we have limited experience in
conducting or supervising clinical trials, we must outsource our clinical trials to third parties. We have no control over their
compliance with procedures and protocols used to complete clinical trials in accordance with standards required by the agencies
that approve drugs for sale. If these subcontractors fail to meet these standards, the validation of our drugs would be adversely
affected, causing a delay in our ability to meet revenue-generating operations.
We are subject to risks inherent
in conducting clinical trials. The risk of non-compliance with FDA-approved good clinical practices by clinical investigators,
clinical sites, or data management services could delay or prevent us from developing or ever commercializing our drug candidates.
Agreements with clinical investigators
and medical institutions for clinical testing and with other third parties for data management services place substantial responsibilities
on these parties, which could result in delays in, or termination of, our clinical trials if these parties fail to perform as
expected. For example, if any of our clinical trial sites fail to comply with FDA-approved good clinical practices, we may be
unable to use the data gathered at those sites. If these clinical investigators, medical institutions or other third parties do
not carry out their contractual duties or obligations or fail to meet expected deadlines, or if the quality or accuracy of the
clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or for other reasons, our clinical
trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approval for or successfully commercialize
our drug candidates.
We or regulators may suspend or terminate
our clinical trials for a number of reasons. We may voluntarily suspend or terminate our clinical trials if at any time we believe
that they present an unacceptable risk to the patients enrolled in our clinical trials. In addition, regulatory agencies may order
the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not
being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the
patients enrolled in our clinical trials.
Our clinical trial operations will be
subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our clinical trial sites are not in
compliance with applicable regulatory requirements for conducting clinical trials, we may receive reports of observations or warning
letters detailing deficiencies, and we will be required to implement corrective actions. If regulatory agencies deem our responses
to be inadequate, or are dissatisfied with the corrective actions that we or our clinical trial sites have implemented, our clinical
trials may be temporarily or permanently discontinued, we may be fined, we or our investigators may be precluded from conducting
any ongoing or any future clinical trials, the government may refuse to approve our marketing applications or allow us to manufacture
or market our drug candidates or we may be criminally prosecuted. If we are unable to complete clinical trials and have our products
approved due to our failure to comply with regulatory requirements, we will be unable to commence revenue-generating operations.
Efforts of government and third-party
payers to contain or reduce the costs of health care may adversely affect our revenues even if we were to develop an FDA approved
drug.
Our ability to earn sufficient returns
on our drug candidates may depend in part on the extent to which government health administration authorities, private health
coverage insurers and other organizations will provide reimbursement for the costs of such drugs and related treatments. Significant
uncertainty exists as to the reimbursement status of newly approved health care drugs, and we do not know whether adequate third-party
coverage will be available for our drug candidates. If our current and proposed drugs are not considered cost-effective, reimbursement
to the consumers may not be available or sufficient to allow us to sell drugs on a competitive basis. The failure of the government
and third-party payers to provide adequate coverage and reimbursement rates for our drug candidates could adversely affect the
market acceptance of our drug candidates, our competitive position and our financial performance.
If we fail to comply with applicable
continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, product recalls
and seizures, operating restrictions and criminal prosecutions.
Confidentiality agreements with employees
and others may not adequately prevent disclosure of trade secrets and other proprietary information. Disclosure of our trade secrets
or proprietary information could compromise any competitive advantage that we have.
We depend upon confidentiality agreements
with our officers, employees, consultants, and subcontractors to maintain the proprietary nature of the technology. These measures
may not afford us sufficient or complete protection, and may not afford an adequate remedy in the event of an unauthorized disclosure
of confidential information. In addition, others may independently develop technology similar to ours, otherwise avoiding the
confidentiality agreements, or produce patents that would materially and adversely affect our business, prospects, financial condition,
and results of operations.
We will rely upon licensed patents
to protect our technology. We may be unable to obtain or protect such intellectual property rights, and we may be liable for infringing
upon the intellectual property rights of others.
Our ability to compete effectively will
depend on our ability to maintain the proprietary nature of our technologies and the proprietary technology of others with which
we have entered into licensing agreements. We have exclusive licenses from TheraCour Pharma, Inc. to novel technologies, proprietary
technologies, and knowhow, some of which has been filed in patent applications, and we expect to file patents of our own in the
coming years. There can be no assurance that any of these patent applications will ultimately result in the issuance of a patent
with respect to the technology owned by us or licensed to us. The patent position of pharmaceutical or biotechnology companies,
including ours, is generally uncertain and involves complex legal and factual considerations. The standards that the United States
Patent and Trademark Office use to grant patents are not always applied predictably or uniformly and can change. There is also
no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology
patents. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims that
will be allowed in any patents issued to us or to others. Further, we rely on a combination of trade secrets, know-how, technology
and nondisclosure, and other contractual agreements and technical measures to protect our rights in the technology. If any trade
secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor,
our business and financial condition could be materially adversely affected.
We do not believe that any of the drug
candidates we are currently developing infringe upon the rights of any third parties nor are they infringed upon by third parties;
however, there can be no assurance that our technology will not be found in the future to infringe upon the rights of others or
be infringed upon by others. In such a case, others may assert infringement claims against us, and should we be found to infringe
upon their patents, or otherwise impermissibly utilize their intellectual property, we might be forced to pay damages, potentially
including treble damages, if we are found to have willfully infringed on such parties’ patent rights. In addition to any
damages we might have to pay, we may be required to obtain licenses from the holders of this intellectual property, enter into
royalty agreements, or redesign our drug candidates so as not to utilize this intellectual property, each of which may prove to
be uneconomical or otherwise impossible. Conversely, we may not always be able to successfully pursue our claims against others
that infringe upon our technology and the technology exclusively licensed from the TheraCour Pharma Inc. Thus, the proprietary
nature of our technology or technology licensed by us may not provide adequate protection against competitors.
Moreover, the cost to us of any litigation
or other proceeding relating to our patents and other intellectual property rights, even if resolved in our favor, could be substantial,
and the litigation would divert our management’s efforts. Uncertainties resulting from the initiation and continuation of
any litigation could limit our ability to continue our operations.
Other companies or organizations
may assert patent rights that prevent us from developing and commercializing our drug candidates.
We are in a relatively new scientific
field that has generated many different patent applications from organizations and individuals seeking to obtain important patents
in the field. Because the field is so new, very few of these patent applications have been fully processed by government patent
offices around the world, and there is a great deal of uncertainty about which patents will issue, when, to whom, and with what
claims. It is likely that there will be significant litigation and other proceedings, such as interference proceedings in various
patent offices, relating to patent rights in the field. Others may attempt to invalidate our patents or other intellectual property
rights. Even if our rights are not directly challenged, disputes among third parties could lead to the weakening or invalidation
of those intellectual property rights.
Thus, it is possible that one or more
organizations will hold patent rights to which we will need a license. Any license required under any patent may not be made available
on commercially acceptable terms, if at all. In addition, such licenses are likely to be non-exclusive and, therefore, our competitors
may have access to the same technology licensed to us. If we fail to obtain a required license and are unable to design around
a patent, we may be unable to effectively market some of our technology and drug candidates, which could limit our ability to
generate revenues or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations.
We are dependent upon TheraCour
Pharma Inc. for the rights to develop the products we intend to sell.
Our ability to develop, manufacture and
sell the products the Company plans to develop is derived from our Licensing Agreements with TheraCour Pharma Inc. (“TheraCour”).
While we hold the licenses in perpetuity, the Agreements may be terminated by TheraCour as a result of: the insolvency or bankruptcy
proceedings by or against the Company, a general assignment by the Company to its creditors, the dissolution of the Company, cessation
by the Company of business operations for ninety (90) days or more or the commencement by the Company or an affiliate to challenge
or invalidate the issued patents.
The Company does not hold the rights to
any other patents nor does the Company conduct its own research and development to develop other products to manufacture and sell.
If the Company’s Agreement with TheraCour is terminated, it is unlikely we will be able to commence revenue-generating operations
or that the Company could continue operating at all.
We lack suitable facilities for
clinical testing; reliance on third parties.
The Company does not have facilities that
could be used to conduct clinical testing. We expect to contract with third parties to conduct all clinical testing required to
obtain approvals for any drugs that we might develop. We currently outsource all clinical testing to a number of third parties
in various collaborations and service contracts. Any of our collaborators or service providers may discontinue the service contract
or collaboration. We will then be required to modify our priorities and goals, obtain other collaborators or service providers
to replace the ones we lose, or we may even be forced to abandon certain drug development programs. In addition, any failures
by third parties to adequately perform their responsibilities may delay the submission of our proposed products for regulatory
approval, impair our ability to deliver our products on a timely basis or otherwise impair our competitive position.
We have limited manufacturing experience.
The Company has never manufactured products
in the highly regulated environment of pharmaceutical manufacturing. There are numerous regulations and requirements that must
be maintained to obtain licensure and the permits required to commence manufacturing, as well as additional requirements to continue
manufacturing pharmaceutical products. We now own facilities that could be used to manufacture clinical quantities of any products
that might be developed by the Company. We believe that this cGMP-capable facility may allow us to produce limited quantities
of a drug after approval for initial market entry, and that such an effort may make commercial sense if the treatment course requirements
and afflicted patient populations are limited, and if the remuneration for the treatment course is appropriate. However, we do
not own, nor lease facilities suitable for cGMP manufacture of any of our drug candidates in large commercial quantities, nor
do we have the resources at this time to acquire or lease suitable facilities. At present, we have not retained any contract manufacturing
organizations (CMO) for commercial manufacture or for clinical product manufacture.
We have no sales and marketing personnel.
We are an early stage development company
with limited resources. We do not currently have any products available for sale, so have not secured sales and marketing staff
at this early stage of operations. We cannot generate sales without a sales or marketing staff and must rely on officers to provide
any sales or marketing services until such staff are secured, if ever. Even if we were to successfully develop approvable drugs,
we will not be able to sell these drugs if we or our third-party manufacturers fail to comply with manufacturing regulations.
If we were to successfully develop approvable
drugs, before we can begin selling these drugs, we must obtain regulatory approval of our manufacturing facility and process or
the manufacturing facility and process of the third party or parties with whom we may outsource our manufacturing activities.
In addition, the manufacture of our products must comply with the FDA’s current Good Manufacturing Practices regulations,
commonly known as GMP regulations. The GMP regulations govern quality control and documentation policies and procedures. Our manufacturing
facilities, if any in the future and the manufacturing facilities of our third party manufacturers will be continually subject
to inspection by the FDA and other state, local and foreign regulatory authorities, before and after product approval. We cannot
guarantee that we, or any potential third party manufacturer of our products, will be able to comply with the GMP regulations
or other applicable manufacturing regulations.
As of the date of this filing, we have
approximately thirty employees including the employees of affiliates, and several consultants and independent contractors. The
only consultant/contractor that we consider critical to the Company is TheraCour, discussed in the next risk factor. All other
consultant/contractors would be more readily replaceable. We have recently significantly expanded our operations and staff materially
and our new employees include a number of key managerial, technical, financial, R&D and operations personnel. The expansion
of our business will continue to place a significant strain on our limited managerial, operational and financial resources. We
have no experience in integrating multiple employees. Therefore, there is a substantial risk that we will not be able to integrate
new employees into our operations which would have a material adverse effect on our business, prospects, financial condition and
results of operations.
We license our core technology from
TheraCour Pharma Inc. and we are dependent upon them as they have exclusive development rights. If we lose the right to utilize
any of the proprietary information that is the subject of this license agreement, we may incur substantial delays and costs in
development of our drug candidates
The Company has entered into Material
License Agreements with TheraCourPharma, Inc. (“TheraCour”) (an approximately 13.6% shareholder of the Company’s
common stock) as of June 30, 2018, whereby TheraCour has exclusive rights to develop exclusively for us, the materials that comprise
the core drugs of our planned business. TheraCour is a development stage company with limited financial resources and needs the
Company’s progress payments to further the development of the nanoviricides. The Company controls the research and work
TheraCour performs on its behalf and no costs may be incurred without the prior authorization or approval of the Company. No royalties
are due to TheraCour from the Company’s inception through June 30, 2018.
We depend on TheraCour and other third
parties to perform manufacturing activities effectively and on a timely basis. If these third parties fail to perform as required,
this could impair our ability to deliver our products on a timely basis or cause delays in our clinical trials and applications
for regulatory approval, and these events could harm our competitive position and adversely affect our ability to commence revenue-generating
operations. The manufacturing process for pharmaceutical products is highly regulated, and regulators may shut down manufacturing
facilities that they believe do not comply with regulations. We, and our manufacturers are subject to the FDA’s current
Good Manufacturing Practices, which are extensive regulations governing manufacturing processes, stability testing, record keeping
and quality standards and similar regulations are in effect in other countries. In addition, our manufacturing operations are
subject to routine inspections by regulatory agencies.
Our collaborative relationships
with third parties could cause us to expend significant resources and incur substantial business risk with no assurance of financial
return.
We anticipate substantial reliance upon
strategic collaborations for marketing and the commercialization of our drug candidates and we may rely even more on strategic
collaborations for R&D of our other drug candidates. Our business depends on our ability to sell drugs to both government
agencies and to the general pharmaceutical market. Offering our drug candidates for non-medical applications to government agencies
does not require us to develop new sales, marketing or distribution capabilities beyond those already existing in the company.
Selling antiviral drugs, however, does require such development. We plan to sell antiviral drugs through strategic partnerships
with pharmaceutical companies. If we are unable to establish or manage such strategic collaborations on terms favorable to us
in the future, our revenue and drug development may be limited. To date, we have not entered into any strategic collaboration
with third parties capable of providing these services. In addition, we have not yet marketed or sold any of our drug candidates
or entered into successful collaborations for these services in order to ultimately commercialize our drug candidates.
If we determine to enter into R&D
collaborations during the early phases of drug development, our success will in part depend on the performance of our research
collaborators. We will not directly control the amount or timing of resources devoted by our research collaborators to activities
related to our drug candidates. Our research collaborators may not commit sufficient resources to our programs. If any research
collaborator fails to commit sufficient resources, our preclinical or clinical development programs related to this collaboration
could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products or alternative
technologies in preference to those being developed in collaboration with us. Finally, if we fail to make required milestone or
royalty payments to our collaborators or to observe other obligations in our agreements with them, our collaborators may have
the right to terminate those agreements.
Manufacturers producing our drug candidates
must follow current GMP regulations enforced by the FDA and foreign equivalents. If a manufacturer of our drug candidates does
not conform to the current GMP regulations and cannot be brought up to such a standard, we will be required to find alternative
manufacturers that do conform. This may be a long and difficult process, and may delay our ability to receive FDA or foreign regulatory
approval of our drug candidates and cause us to fall behind on our business objectives.
Establishing strategic collaborations
is difficult and time-consuming. Our discussion with potential collaborators may not lead to the establishment of collaborations
on favorable terms, if at all. Potential collaborators may reject collaborations based upon their assessment of our financial,
regulatory or intellectual property position. Even if we successfully establish new collaborations, these relationships may never
result in the successful development or commercialization of our drug candidates or the generation of sales revenue. To the extent
that we enter into collaborative arrangements, our drug revenues are likely to be lower than if we directly marketed and sold
any drugs that we may develop.
Management of our relationships with our
collaborators will require:
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significant
time and effort from our management team;
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coordination
of our marketing and R&D programs with the marketing and R&D priorities of our
collaborators; and
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effective
allocation of our resources to multiple projects.
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We employ the use of certain chemical
and biological agents and compounds that may be deemed hazardous and we are therefore subject to various environmental laws and
regulations. Compliance with these laws and regulations may result in significant costs, which could materially reduce our ability
to become profitable.
We use hazardous materials, including
chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. As appropriate,
we safely store these materials and wastes resulting from their use at our laboratory facility pending their ultimate use or disposal.
We contract with a third party to properly dispose of these materials and wastes. We are subject to a variety of federal, state
and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials and
wastes. We may incur significant costs complying with environmental laws and regulations adopted in the future.
If we use biological and hazardous
materials in a manner that causes injury, we may be liable for damages.
Our
R&D and manufacturing activities will involve the use of biological and hazardous materials. Although we believe our safety
procedures for handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot
entirely eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials.
We carry $8,000,000
casualty and general liability insurance
policies. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in
an amount exceeding our resources and insurance coverage, and our clinical trials or regulatory approvals could be suspended.
We may not be able to attract and
retain highly skilled personnel.
Our ability to attract and retain highly
skilled personnel is critical to our operations and expansion. We face competition for these types of personnel from other pharmaceutical
companies and more established organizations, many of which have significantly larger operations and greater financial, technical,
human and other resources than us. We may not be successful in attracting and retaining qualified personnel on a timely basis,
on competitive terms, or at all. If we are not successful in attracting and retaining these personnel, our business, prospects,
financial condition and results of operations will be materially and adversely affected.
We depend upon our senior management
and their loss or unavailability could put us at a competitive disadvantage.
We currently depend upon the efforts and
abilities of our management team. The loss or unavailability of the services of any of these individuals for any significant period
of time could have a material adverse effect on our business, prospects, financial condition and results of operations. We have
not obtained, do not own, nor are we the beneficiary of key-person life insurance for all of our key personnel.
The Company believes that its two current
executive officers, Irach Taraporewala, Chief Executive Officer, and Anil Diwan, President, are critical to the success of the
Company. The Company is a limited beneficiary of a certain amount of key man insurance for Anil Diwan that the Company maintains.
However there can be no assurances that the amount of the key man insurance coverage would be sufficient to provide replacement
of these key officers for continuing the Company’s operations in a timely manner, should such an event arise.
The Company also maintains a limited amount
of Directors and Officers Liability insurance coverage to protect all of its directors and executive officers taken together.
There can be no assurance that this D&O coverage will be sufficient to cover the costs of the events that may lead to its
invocation, in which case, there could be a substantial impact on the Company’s ability to continue operations, should such
an unforeseen event occur.
There are conflicts of interest
among our officers, directors and stockholders.
The Company has a majority independent
Board of Directors, a fully independent Compensation Committee, and a fully independent Audit Committee.
Certain
of our executive officers and directors and their affiliates are engaged in other activities and have interests in other entities
on their own behalf or on behalf of other persons. Neither we, nor our stockholders will have any rights in these ventures or
their income or profits. Specifically, Anil Diwan owns approximately 90% of the capital stock of TheraCour Pharma, Inc., which
as of June 30, 2018 owned 13.6% of
our Common
Stock, and 2,000,000 shares of the Company’s Series A Preferred stock, and provides the nanomaterials to the Company with
which it intends to develop its products and is the holder of the intellectual property rights the Company uses to conduct its
operations. While the Company is not aware of any conflict that has arisen or any transaction that has not been conducted on an
arm’s length basis to date, Dr. Diwan may have conflicting fiduciary duties between the Company and TheraCour Pharma, Inc.,
for which he must recuse himself from certain decision-making processes of the Company.
In addition, a former independent director,
Dr. Milton Boniuk has dispositive power over 10,601,258 shares of common stock, and 337,000 shares of Series A preferred stock
as of June 30, 2018.
The Company does not allow a conflicted
Shareholder, Director, or Executive Officer to vote on matters wherein a conflict may be perceived. The conflicted entity is not
allowed to nominate an alternate person to vote for them either. Other than this safeguard, the Company currently does not have
any policy in place, should such a conflict arise.
In particular:
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Our executive officers
or directors or their affiliates may have an economic interest in, or other business relationship with, partner companies
that invest in us.
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Our executive officers
or directors or their affiliates have interests in entities that provide products or services to us.
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In any of these cases:
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Our executive officers
or directors may have a conflict between our current interests and their personal financial and other interests in another
business venture.
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Our executive officers
or directors may have conflicting fiduciary duties to us and the other entity.
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The terms of transactions
with the other entity may not be subject to arm’s length negotiations and therefore may be on terms less favorable to
us than those that could be procured through arm’s length negotiations.
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We anticipate entering into contracts
with various U.S. government agencies. In contracting with government agencies, we will be subject to various federal contract
requirements. Future sales to U.S. government agencies will depend, in part, on our ability to meet these requirements, certain
of which we may not be able to satisfy.
We may enter into contracts with various
U.S. government agencies which have special contracting requirements that give the government agency various rights or impose
on the other party various obligations that can make the contracts less favorable to the non- government party. Consequently,
if a large portion of our revenue is attributable to these contracts, our business may be adversely affected should the governmental
parties exercise any of these additional rights or impose any of these additional obligations.
U.S. government contracts typically contain
unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which subjects
us to additional risks. These risks include the ability of the U.S. government to unilaterally:
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suspend or prevent
us for a set period of time from receiving new contracts or extending existing contracts based on violations or suspected
violations of laws or regulations;
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terminate our existing
contracts;
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reduce the scope
and value of our existing contracts;
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audit and object
to our contract-related costs and fees, including allocated indirect costs;
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control and potentially
prohibit the export of our drug candidates; and
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change certain terms
and conditions in our contracts.
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The U.S. government may terminate any
of its contracts with us either for its convenience or if we default by failing to perform in accordance with the contract schedule
and terms. Termination for convenience provisions generally enable us to recover only our costs incurred or committed, and settlement
expenses and profit on the work completed prior to termination. Termination for default provisions do not permit these recoveries
and make us liable for excess costs incurred by the U.S. government in procuring undelivered items from another source.
As a U.S. government contractor, we may
become subject to periodic audits and reviews. Based on the results of these audits, the U.S. government may adjust our contract-related
costs and fees, including allocated indirect costs. As part of any such audit or review, the U.S. government may review the adequacy
of, and our compliance with, our internal control systems and policies, including those relating to our purchasing, property,
compensation and/or management information systems. In addition, if an audit or review uncovers any improper or illegal activity,
we may be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture
of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. We could
also suffer serious harm to our reputation if allegations of impropriety were made against us. In addition, under U.S. government
purchasing regulations, some of our costs, including most financing costs, amortization of intangible assets, portions of our
R&D costs and some marketing expenses, may not be reimbursable or allowed under our contracts. Further, as a U.S. government
contractor, we may become subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits
and other legal actions and liabilities to which purely private sector companies are not.
We may fail to obtain contracts
to supply the U.S. government, and we may be unable to commercialize our drug candidates.
The U.S. government has undertaken commitments
to help secure improved countermeasures against bio-terrorism. The process of obtaining government contracts is lengthy and uncertain,
and we would compete for each contract. Moreover, the award of one government contract would not necessarily secure the award
of future contracts covering the same drug. If the U.S. government makes significant future contract awards for the supply of
its emergency stockpile to our competitors, our business will be harmed and it is unlikely that we will be able to ultimately
commercialize our competitive drug candidate.
In addition, the determination of when
and whether a drug is ready for large scale purchase and potential use will be made by the government through consultation with
a number of government agencies, including the FDA, the NIH, the CDC and the Department of Homeland Security. Congress has approved
measures to accelerate the development of bio-defense drugs through NIH funding, the review process by the FDA and the final government
procurement contracting authority. While this may help speed the approval of our drug candidates, it may also encourage competitors
to develop their own drug candidates.
The market for government stockpiling
of H5N1 medicines and other antiviral drugs in the Strategic National Stockpile is fairly new and uncertain.
At the present many governments have already
stockpiled influenza medicines for H5N1. We cannot predict with certainty the size of the market, if any for all of the antiviral
drugs that the governments may want to stockpile. Consequently, we cannot predict whether sales, if any, to governments will be
sufficient to fund our business plan and commence revenue-generating operations.
If the U.S. government fails to
continue funding bio-defense drug candidate development efforts or fails to purchase sufficient quantities of any future bio-defense
drug candidate, we may be unable to generate sufficient revenues to continue operations.
We hope to receive funding from the U.S.
government for the development of our bio-defense drug candidates. Changes in government budgets and agendas, however, may result
in future funding being decreased and de-prioritized, and government contracts typically contain provisions that permit cancellation
in the event that funds are unavailable to the government agency. Furthermore, we cannot be certain of the timing of any future
funding, and substantial delays or cancellations of funding could result from protests or challenges from third parties. If the
U.S. government fails to continue to adequately fund R&D programs, we may be unable to generate sufficient revenues to continue
operations. Similarly, if we develop a drug candidate that is approved by the FDA, but the U.S. government does not place sufficient
orders for this drug, our future business may be harmed.
Risks Related to the Biotechnology/Biopharmaceutical
Industry
The biotechnology and biopharmaceutical
industries are characterized by rapid technological developments and a high degree of competition. We may be unable to compete
with enterprises equipped with more substantial resources than us.
The biotechnology and biopharmaceutical
industries are characterized by rapid technological developments and a high degree of competition based primarily on scientific
and technological factors. These factors include the availability of patent and other protection for technology and products,
the ability to commercialize technological developments and the ability to obtain government approval for testing, manufacturing
and marketing.
Our shingles drug candidate would compete
with Valtrex®, an approved drug (valacyclovir), and other acyclovir-related nucleoside analogs, and new drugs in the pipeline.
The approved drugs are known to have very limited benefit. FV-100, a VZV-specific nucleoside analog was in Phase III clinical
trials that were terminated. Development of ASP2151, a helicase/primase inhibitor, was terminated due to adverse events in healthy
persons in clinical trials. We are not aware of any further drugs in clinical trials for the treatment of shingles. Painkillers
such as lidocaine formulations and oxycodone formulations were in clinical trials for symptomatic relief of PHN.
Our HSV-1 and HSV-2 skin cream drug candidates
would compete with branded and unbranded available skin creams, such as Abreva™, as well as with branded and unbranded oral
drug candidates against herpes, such as those based on acyclovir, valacyclovir, gancyclovir, among others. All of these drugs
are known to have limited benefits. It is not known until after human clinical trials whether our drug candidates provide patient
benefits beyond those of these drugs. Other drugs against herpes that are in the pipeline, if approved prior to our drug approval,
would also be competition. Several drugs are in clinical trials for HSV-1 and/or HSV-2 treatment. These include brincidofovir,
cyclopropavir, valamocyclovir, pritelivir, letermovir, as well as antibodies. Their patient benefit profiles are not known at
present.
Our anti-influenza drug in development,
Flucide, would compete with neuraminidase inhibitors Tamiflu and Relenza, anti-influenza drugs that are sold by Roche and Glaxo
SmithKline (GSK), respectively. Generic competitors include amantadine and rimantadine, both oral. BioCryst Pharmaceuticals, Inc.
has achieved US FDA approval for IV Infusions formulations of peramivir, an influenza neuraminidase inhibitor, for the treatment
of uncomplicated influenza. Peramivir is approved in Japan and had obtained emergency use authorization in the US. Its effectiveness
during multiple clinical trials was found to be severely limited. Recently, a new drug, Xofluza (Baloxavir marboxil), developed
by Shionogi, Inc., has been approved in Japan, and licensed in the US and the rest of the world by Genetech/Roche. It is in fast
track Phase 3 clinical trials under the US FDA. It is an influenza viral endonuclease PA inhibitor. Other drugs in this class
are in clinical trials. So are drugs targeting the m7G cap-snatching activity (PB2) of influenza virus such as VX787, and antibodies.
Several H5N1 bird flu, and influenza novelH1N1/2009 vaccines are also in development worldwide. Several companies are developing
anti-influenza drugs and vaccines.
We have recently completed preliminary
animal studies against HIV that have resulted in the finding that certain of our drug candidates were superior to the oral HAART
cocktail in SCID-hu Thy/Liv humanized mice lethally infected with HIV-I. We thus believe that we have a very strong lead drug
identified against HIV. There are several companies with anti-HIV drugs in the market. A new drug, Maraviroc from Pfizer has recently
been approved, which falls in a new class called CCR5-blockers. Prior to this, two new drugs in a new class called Integrase Inhibitors
have been approved. A drug in the class called Entry & Fusion Inhibitors, enfuvirtide, (Fuzeon™, Roche) has also been
available. Additionally, the classical drugs, NRTI’s, NNRTI’s and PI’s (protease inhibitors) are used in various
combinations. A three-drug combo has been approved. A four-drug combo is expected to be approved soon. The HIVCide-I nanoviricide
is expected to act by a very different kind of mechanism, defining a new class of drugs, that is complementary to the existing
classes of anti-HIV drugs.
Our nanoviricide eye drops for viral diseases
of the eye are currently under development. We have shown significant clinical efficacy in an animal model of EKC (adenoviral
epidemic keratoconjunctivitis). We have also shown very strong in vitro efficacy in HSV-1 reduction in cell cultures. We believe
that this drug has a very good efficacy and safety profile, based on current data. There are no approved drugs against all viral
diseases of the eye, or adenoviral EKC in particular. Several drugs are available for the treatment of herpes keratitis. Idoxuridine,
vidarabine, acyclovir and its derivatives, are among the leading ones. Aganocide is under development, but did not meet its desired
end points in a clinical trial recently. We believe that the nanoviricide eye drops should have a significant advantage in terms
of reduced frequency of application needed and simple application procedure.
We compete with specialized biopharmaceutical
firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying
biotechnology to their operations. Many biopharmaceutical companies have focused their development efforts in the human therapeutics
area, including cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or
made commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions, government
agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel
and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will also depend to a considerable
degree on the continuing availability of capital to us.
We are aware of numerous products under
development or manufactured by competitors that are used for the prevention or treatment of certain diseases we have targeted
for drug development. Various companies are developing biopharmaceutical products that potentially directly compete with our drug
candidates even though their approach to such treatment is different.
We expect that our drug candidates under
development and in clinical trials will address major markets within the anti-viral sector. Our competition will be determined
in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities. Additionally,
the timing of the market introduction of some of our potential drugs or of competitors’ products may be an important competitive
factor. Accordingly, the relative speed with which we can develop drugs, complete pre-clinical testing, clinical trials, approval
processes and supply commercial quantities to market are important competitive factors. We expect that competition among drugs
approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price and patent
protection.
The successful development of biopharmaceuticals
is highly uncertain. A variety of factors including, pre-clinical study results or regulatory approvals, could cause us to abandon
development of our drug candidates.
Successful development of biopharmaceuticals
is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Products that appear promising
in the early phases of development may fail to reach the market for several reasons including:
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pre-clinical study
results that may show the product to be less effective than desired (e.g., the study failed to meet its primary objectives)
or to have harmful or problematic side effects;
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failure to receive
the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may be caused by
slow enrollment in clinical studies, length of time to achieve study endpoints, additional time requirements for data analysis
or a IND and later NDA, preparation, discussions with the FDA, an FDA request for additional pre-clinical or clinical data
or unexpected safety or manufacturing issues;
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manufacturing costs,
pricing or reimbursement issues, or other factors that make the product not economical; and
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the proprietary
rights of others and their competing products and technologies that may prevent the product from being commercialized.
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Success in pre-clinical and early clinical
studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible to varying
interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies
and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one
product to the next, and may be difficult to predict.
Risks Related to the Securities Markets
and Investments in Our Common Stock
If we do not meet the continued
listing standards of the NYSE American our common stock could be delisted from trading, which could limit investors’ ability
to make transactions in our common stock and subject us to additional trading restrictions.
As of September 25, 2013, our common stock
became listed on the NYSE MKT (now known as “NYSE American”), a national securities exchange, which imposes continued
listing requirements with respect to listed shares. If, however, we fail to satisfy the continued listing standards, such as,
for example, the requirement that our shares not trade “for a substantial period of time at a low price per share”
or that we not dispose of our principal operating assets or discontinue a substantial portion of our operations, among other requirements,
the NYSE American may issue anon-compliance letter or initiate delisting proceedings. If our securities are delisted from trading
on the NYSE American and we are not able to list our securities on another exchange or to have them quoted on NASDAQ, our securities
could be quoted on the OTC Bulletin Board or on the “pink sheets.” As a result, we could face significant adverse
consequences including:
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a limited availability
of market quotations for our securities;
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a determination
that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more
stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount
of news and analyst coverage for us; and
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a decreased ability
to issue additional securities (including pursuant to short-form registration statements on Form S-3 or obtain additional
financing in the future).
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On July 3, 2018, NanoViricides, Inc. (the
“Company”) received a notice from the New York Stock Exchange (the “NYSE”) indicating that the Company
is not in compliance with the NYSE’s continued listing requirements set forth in Part 8 of the NYSE American Company Guide
(the “Company Guide”). The NYSE noted that the Company is not in compliance with Section 803(B)(2)(a) of the Company
Guide in that it no longer has at least three members on the audit committee, effective as of June 29, 2018 when an Independent
Director Dr. Mukund Kulkarni advised the Company that he resigned as a member of its audit committee.
On July 10, 2018, Dr. Kulkarni advised
the Company that he rescinded his resignation as a member of the audit committee and the Company accepted the same. Dr. Kulkarni
rescinded his resignation from the Audit Committee subsequent to Dr. Boniuk’s resignation as a Director and from all committees
of the Board of Directors, on the same date. Due to Dr. Boniuk’s resignation, the non-compliance item continues to persist
until the Company appoints additional independent directors to the Board. The Company is already interviewing pharmaceutical industry
expert candidates for the directorship and hopes to complete the selection process soon.
Under the NYSE's rules, the Company will
have until the earlier of its next annual meeting or one year from the occurrence of the event that caused the failure to comply
with the board of directors composition requirements, provided, however, that if the annual shareholders’ meeting occurs
no later than 180 days following the event that caused the failure to comply with these requirements, the Company shall instead
have 180 days from such event to regain compliance.
Our Company is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), which will require us to incur
audit fees and legal fees in connection with the preparation of such reports. These additional costs will reduce or might eliminate
our profitability.
Our Company is required to file periodic
reports with the Commission pursuant to the Exchange Act and the rules and regulations promulgated thereunder. To comply with
these requirements, our independent registered auditors will have to review our quarterly financial statements and audit our annual
financial statements. Moreover, our legal counsel will have to review and assist in the preparation of such reports. The costs
charged by these professionals for such services cannot be accurately predicted at this time, because factors such as the number
and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a
major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously
be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit.
We may be exposed to potential risks resulting from new requirements under Section 404 of the Sarbanes-Oxley Act of 2002. If we
cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could
lose confidence in our reported financial information, the trading price of our Common Stock, if a market ever develops, could
drop significantly, or we could become subject to Commission enforcement proceedings.
Our Common Stock may be considered
a “penny stock” and may be difficult to sell.
The Commission has adopted regulations
which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share
or an exercise price of less than $5.00 per share, subject to specific exemptions. Historically, the price of our Common Stock
has fluctuated greatly. If, the market price of the Common Stock is less than $5.00 per share it therefore may be designated as
a “penny stock” according to Commission rules. The “penny stock” rules impose additional sales practice
requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally
those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have
received the purchaser’s written consent to the transaction before the purchase. Additionally, for any transaction involving
a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the
Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer
and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing
recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict
the ability or decrease the willingness of broker-dealers to sell our common shares, and may result in decreased liquidity for
our common shares and increased transaction costs for sales and purchases of our common shares as compared to other securities.
Our stock price may be volatile
and your investment in our common stock could suffer a decline in value.
The price of our common stock, as quoted
on the NYSE American, may fluctuate significantly in response to a number of factors, many of which are beyond our control. These factors
include but are not limited to:
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progress of our
products through the regulatory process
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results of preclinical
studies and clinical trials;
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announcements of
technological innovations or new products by us or our competitors;
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government regulatory
action affecting our products or our competitors’ products in both the United States and foreign countries;
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developments or
disputes concerning patent or proprietary rights;
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general market conditions
for emerging growth and pharmaceutical companies;
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economic conditions
in the United States or abroad;
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actual or anticipated
fluctuations in our operating results;
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broad market fluctuations;
and
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changes in financial
estimates by securities analysts.
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There is a risk of market fraud.
Shareholders should be aware that, according
to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns
include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler
room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse
of those prices and with consequent investor losses. We are aware of the abuses that have occurred historically in the penny stock
market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate
in the market, management will strive within the confines of practical limitations to prevent the described patterns from being
established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our
share price.
As of September 25, 2013, our common stock
was listed on the NYSE American national exchange. However, shareholders should be aware that the occurrence of the above-mentioned
patterns and practices cannot be entirely precluded and that the occurrence of these patterns or practices could increase the
volatility of our share price.
A registration of a significant
amount of our outstanding restricted stock may have a negative effect on the trading price of our stock.
At June 30, 2018, shareholders of
the Company held 21,000,399 shares (as adjusted) of restricted stock, or approximately 30.4% of the outstanding common
stock. If we were to file a registration statement including all of these shares, and the registration is allowed by the SEC,
these shares would be freely tradable upon the effectiveness of the planned registration statement. If investors holding a
significant number of freely tradable shares decide to sell them in a short period of time following the effectiveness of a
registration statement, such sales could contribute to significant downward pressure on the price of our stock.
We do not intend to pay any cash
dividends in the foreseeable future and, therefore, any return on your investment in our capital stock must come from increases
in the fair market value and trading price of the capital stock.
We have not paid any cash dividends on
our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future. We intend to retain future
earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements, which we may enter
into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be
at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital
requirements and any other factors that the board of directors decides is relevant. Therefore, any return on your investment in
our capital stock must come from increases in the fair market value and trading price of the capital stock.
We may issue additional equity shares
to fund the Company’s operational requirements, which would dilute share ownership.
The Company’s continued viability
depends on its ability to raise capital. Changes in economic, regulatory or competitive conditions may lead to cost increases.
Management may also determine that it is in the best interest of the Company to develop new services or products. In any such
case additional financing is required for the Company to meet its operational requirements. There can be no assurances that the
Company will be able to obtain such financing on terms acceptable to the Company and at times required by the Company, if at all.
In such event, the Company may be required to materially alter its business plan or curtail all or a part of its operational plans
as detailed further in Management’s Discussion and Analysis in this Form 10-K. While the Company currently has no offers
to sell its securities to obtain financing, sale or the proposed sale of substantial amounts of our common stock in the public
markets may adversely affect the market price of our common stock and our stock price may decline substantially. In the event
that the Company is unable to raise or borrow additional funds, the Company may be required to curtail significantly its operational
plans as further detailed in Requirements for Additional Capital in the Management Discussion and Analysis of this Form 10-K.
The
Company is authorized to issue up to 150,000,000 shares of Common Stock without additional approval by shareholders. As of June
30, 2018, we had 69,171,740 shares of common stock outstanding, 6,969,588 warrants convertible to 6,969,588 shares of common stock
and 4,531,394 shares of Series A Preferred Stock convertible into 15,859,879 shares of Common Stock only in the event of a change
in control. Subsequent to the reporting period, 2,868,891 warrants have expired on September 9, 2018.
As of September 25, 2013, our common stock
has been listed on the NYSE American national exchange.
Large amounts of our common stock
will be eligible for resale under Rule 144.
As of June 30, 2018, 20,997,362 of 69,171,740
issued and outstanding shares of the Company’s common stock were restricted securities as defined under Rule 144 of the
Securities Act of 1933, as amended (the “Act”) and under certain circumstances may be resold without registration
pursuant to Rule 144. In addition the 4,531,394 shares of Series A Preferred Stock are restricted and convertible into 15,859,879
shares of Common Stock only in the event of a Change of Control of the Company.
Approximately 2,854,614 shares of our
restricted shares of common stock (as adjusted) are held by non-affiliates who may avail themselves of the public information
requirements and sell their shares in accordance with Rule 144. As a result, some or all of these shares may be sold in accordance
with Rule 144 potentially causing the price of the Company’s shares to decline.
In general, under Rule 144, a person (or
persons whose shares are aggregated) who has satisfied a six month holding period may, under certain circumstances, sell within
any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common
stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate, as such term
is defined in Rule 144(a)(1), of the Company and who has satisfied a one-year holding period. Any substantial sale of the Company’s
common stock pursuant to Rule 144 may have an adverse effect on the market price of the Company’s shares. This filing will
satisfy certain public information requirements necessary for such shares to be sold under Rule 144.
The requirements of complying with
the Sarbanes-Oxley act may strain our resources and distract management.
We are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002. The costs
associated with these requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual,
quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain
effective disclosure controls and procedures and internal controls over financial reporting. Historically, we have maintained
a small accounting staff, but in order to maintain and improve the effectiveness of our disclosure controls and procedures and
internal control over financial reporting, significant additional resources and management oversight will be required. This includes,
among other things, activities necessary for supporting our independent public auditors. This effort may divert management’s
attention from other business concerns, which could have a material adverse effect on our business, financial condition, results
of operations and cash flows. In addition, we may need to hire additional accounting and financial persons with appropriate public
company experience and technical accounting knowledge, and we cannot assure you that we will be able to do so in a timely fashion.
Sales of additional equity securities
may adversely affect the market price of our common stock and your rights in the Company may be reduced.
We expect to continue to incur drug development
and selling, general and administrative costs, and in order to satisfy our funding requirements, we may need to sell additional
equity securities. Our stockholders may experience substantial dilution and a reduction in the price that they are able to obtain
upon sale of their shares. Also, any new securities issued may have greater rights, preferences or privileges than our existing
common stock that may adversely affect the market price of our common stock and our stock price may decline substantially.