Overview
We are a clinical pharmaceutical company
organized as a Nevada corporation in July 2017 to focus on the development of anti-cancer drug candidates for the treatment of
brain and central nervous system tumors, based on intellectual property that we license under license agreements with Houston Pharmaceuticals,
Inc. (“HPI”) and The University of Texas M.D. Anderson Cancer Center (“UTMDACC”) and own pursuant to a
collaboration and asset purchase agreement with Reata Pharmaceuticals, Inc. (“Reata”).
We believe our lead drug candidate, Berubicin,
if approved by the FDA, may be a significant discovery in the treatment of glioblastoma. Glioblastoma are tumors that arise from
astrocytes, which are star-shaped cells making up the supportive tissue of the brain. These tumors are usually highly malignant
(cancerous) because the cells reproduce quickly, and they are supported by a large network of blood vessels. Berubicin is an anthracycline,
which is a class of drugs that are among the most powerful chemotherapy drugs known. Based on limited clinical data, we believe
Berubicin is the first anthracycline that appears to have crossed the blood brain barrier and target brain cancer cells. While
our current focus is solely on the development of Berubicin, we are also in the process of attempting to secure intellectual property
rights in additional compounds that may be developed into drugs to treat cancers.
Berubicin was discovered at MD Anderson
by Dr. Waldemar Priebe, the founder of the Company. Through a series of transactions, Berubicin was initially licensed to Reata.
Reata conducted a Phase I clinical trial on Berubicin but subsequently allowed their IND with the FDA to lapse for strategic reasons.
This required us to obtain a new IND for Berubicin before beginning further clinical trials. On December 17, 2020, we announced
that our IND application with the FDA for Berubicin for the treatment of Glioblastoma Multiforme was in effect. We intend to initiate
our trial during the first quarter of 2021 to investigate the efficacy of Berubicin in adults with Glioblastoma Multiforme who
have failed first-line therapy. Recent correspondence between us and the FDA resulted in modifications to our previously disclosed
trial design, including designating overall survival (OS) as the primary endpoint of the study. OS is a rigorous endpoint that
the FDA has recognized as a basis for approval of oncology drugs when a statistically significant improvement can be shown relative
to a randomized control arm.
The planned Phase 2 trial will evaluate
the efficacy of Berubicin in patients with Glioblastoma Multiforme who have failed primary treatment for their disease, and results
will be compared to the current standard of care, with 2 to 1 randomization of the 243 patients to Berubicin or Lomustine. Subjects
receiving Berubicin will be administered a 2-hour IV infusion of 7.5 mg/m2 berubicin hydrochloride daily for three consecutive
days followed by 18 days off (21-day cycle). Lomustine is administered orally. The trial will include an interim analysis that
will evaluate the comparative effectiveness of these treatments. The trial's adaptive design is intended to allow this interim
analysis of the data to demonstrate meaningful differences in efficacy between treatments and then to allow an adjustment to the
size of the patient population in the trial for maximum efficiency in terms of time in development. Even if Berubicin is approved,
there is no assurance that patients will choose an infusion treatment, as compared to the current standard of care, which requires
oral administration.
We do not have manufacturing facilities
and all manufacturing activities are contracted out to third parties. Additionally, we do not have a sales organization.
On November 21, 2017, we entered into a
Collaboration and Asset Purchase Agreement with Reata (the “Reata Agreement”). Pursuant to the Reata Agreement we purchased
all of Reata’s intellectual property and development data regarding Berubicin, including all trade secrets, knowhow, confidential
information and other intellectual property rights, which we refer to as the Reata Data.
On December 28, 2017, we obtained the rights
to a worldwide, exclusive royalty-bearing, license to the chemical compound commonly known as Berubicin from HPI in an agreement
we refer to as the HPI License. HPI is affiliated with Dr. Priebe, who controls a majority of our shares. Under the HPI License
we obtained the exclusive right to develop certain chemical compounds for use in the treatment of cancer anywhere in the world.
In the HPI License we agreed to pay HPI: (i) development fees of $750,000 over a three-year period beginning November 2019; (ii)
a 2% royalty on net sales; (iii) a $50,000 per year license fee; (iv) milestone payments of $100,000 upon the commencement of a
Phase II trial and $1.0 million upon the approval of an New Drug Application (“NDA”) for Berubicin; and (v) 200,000
shares of our common stock. The patents we licensed from HPI expired in March 2020.
On June 10, 2020, the FDA granted Orphan
Drug Designation (“ODD”) for Berubicin for the treatment of malignant gliomas. ODD from the FDA is available for drugs
targeting diseases with less than 200,000 cases per year. ODD may enable market exclusivity of 7 years from the date of approval
of a NDA in the United States. During that period the FDA generally could not approve another product containing the same drug
for the same designated indication. Orphan drug exclusivity will not bar approval of another product under certain circumstances,
including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior to
the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company
with orphan drug exclusivity is not able to meet market demand. The ODD now constitutes our primary intellectual property protections
although the Company is exploring if there are other patents that could be filed related to Berubicin to extend additional protections.
With the Reata Agreement and the HPI License,
we believe we have obtained all rights and intellectual property necessary to develop Berubicin. As stated earlier, it is our plan
to obtain additional intellectual property covering other compounds which, subject to the receipt of additional financing, may
be developed into drugs for brain and other cancers.
On January 10, 2020, we entered into a Patent
and Technology License Agreement (the “1244 Agreement”) with The Board of Regents of The University of Texas System,
an agency of the State of Texas, on behalf of the UTMDACC. Pursuant to the 1244 Agreement, we obtained a royalty-bearing, worldwide,
exclusive license to certain intellectual property rights, including patent rights, related to our WP1244 drug technology. In consideration,
we must make payments to UTMDACC including an up-front license fee, annual maintenance fee, milestone payments and royalty payments
(including minimum annual royalties) for sales of licensed products developed under the 1244 Agreement. The term of the 1244 Agreement
expires on the last to occur of: (a) the expiration of all patents subject to the 1244 Agreement, or (b) fifteen years after execution;
provided that UTMDACC has the right to terminate the 1244 Agreement in the event that we fail to meet certain commercial diligence
milestones.
On May 7, 2020, pursuant to the WP1244 Portfolio
license agreement described above, the Company entered into a Sponsored Research Agreement with UTMDACC to perform research relating
to novel anticancer agents targeting CNS malignancies. The Company agreed to fund approximately $1,134,000 over a two-year period.
The Company paid and recorded $334,000 in 2020 related to this agreement in research and development expenses
in the Company’s Statements of Operations. The remaining $720,000 will be paid in 2021, of which $400,000 was accrued at
December 31, 2020. The principal investigator for this agreement is Dr. Priebe.
Market for Cancer Drugs and Berubicin
Cancer is the second leading cause of death
in the United States behind heart disease. In 2016, there were an estimated 15.5 million cancer survivors in the United States.
In 2018, the American Cancer Society estimated that nearly 1.7 million new cases would be diagnosed and over 600,000 Americans
would die from cancer.
Digestive, reproductive, breast and respiratory
cancers comprise 65% of expected cancer diagnoses in 2018, while cancers like leukemia and brain tumors are considered “rare
diseases.”
The worldwide cancer drug business has been
estimated to represent nearly $100 billion in annual sales. Our lead drug candidate, Berubicin, is in a class of drugs referred
to as anthracyclines, which are chemotherapy drugs designed to destroy the DNA of targeted cancer cells. The most common approved
anthracyclines are daunorubicin and doxorubicin and, prior to the expansion of their generic equivalents, annual revenues generated
from anthracyclines have been estimated in the range of $600 million. Many cancers are currently treated with anthracyclines; however,
primary and metastatic brain cancers have not been among them because heretofore no anthracyclines have been able to penetrate
the BBB. We believe that based on limited pre-clinical and clinical data, Berubicin appears to show that it can cross the BBB.
However, there is no assurance that Berubicin will be able to demonstrate such traits in more fulsome clinical trials.
Brain cancer in general is considered a
rare disease for which there are few available treatments. The leading brain tumor drug is temozolomide (“TMZ”), a
drug introduced under the brand name Temodar®. In 2012, one industry source reported annual revenues of approximately $882
million for Temodar before the expiration of its patent protection, at which point generic versions of the drug began to enter
the market and reduce prices. Temozolomide may extend progression free survival (“PFS”) but has never been shown to
be curative of any brain cancers.
The Orphan Drug Act and other legislative
initiatives provide incentives, including market exclusivity and accelerated approval pathways, for companies that pursue the development
of treatments for rare diseases and serious diseases for which there are few or no acceptable available treatment alternatives.
Orphan Drug exclusivity prevents for seven years the approval of another product with the same active moiety for the same rare
disease. If a product is a new chemical entity (i.e., generally that the moiety has not previously been approved), it may receive
five years of exclusivity, during which period FDA may not accept for review certain NDAs for another product with the same moiety.
If approval of a product required new clinical data, it may convey three years of exclusivity against approval of certain NDAs
for similar products. Over the last 10 years, an increasing number of companies have begun using these designations to obtain new
drug approvals for drugs where patent coverage has expired and/or where accelerated approval appears possible. An IMS Health report
estimated that, in 2013, the sale of drugs with full or partial Orphan Drug exclusivity represented approximately $29 billion in
revenue. We consider the receipt of Orphan Drug exclusivity and expedited pathways to approval or further development to be an
important part of our development strategy for our drug candidates.
The Berubicin Clinical Therapeutic Opportunity
The Company was created to specialize in
the discovery and development of novel treatments for brain tumors. Our main focus is currently the development and testing of
Berubicin. Based on limited clinical data, we believe Berubicin is the first anthracycline that appears in animal models and limited
clinical data derived from a Phase 1 human clinical trial to cross the BBB and target cancer cells. In 2009, Reata, the prior developer
of Berubicin, completed its Phase 1 clinical trial in patients diagnosed with brain cancers, including glioblastoma, the most aggressive
form of brain cancer.
Currently, there are no effective therapies
for glioblastoma. In the clinical trial completed in February 2009, Berubicin demonstrated one durable complete response (considered
clinically to be a cure) lasting over 11 years in a glioblastoma patient. This patient remains disease free and clinically stable
as of November 6, 2020.
In the trial, 25 of the 35 patients enrolled
were evaluable for response. In a prior clinical trial, Berubicin has also shown promising data in a patient population that currently
has a dismal median survival rate of only 14.6 months from glioblastoma diagnosis and few effective therapeutic options. If the
early results are proven to be reproducible and if we secure regulatory approval to market Berubicin, its apparent ability to
cross the BBB combined with its mechanism of action, more thoroughly discussed below, has the potential to become an effective
treatment for this deadly cancer.
In the United States, 22,850 new glioblastoma
patients are diagnosed, and 15,300 patients die of this deadly disease annually (National Cancer Institute 2015). Due to the lack
of effective therapies, the five-year survival rate of glioblastoma ranges from 13% for younger aged patients (20 to 44 years)
to 1% for older populations (over 44 years). The current standard for treatment is surgery, radiation, and chemotherapy with TMZ.
TMZ, the current chemotherapeutic component of the standard of care for glioblastoma, has limited efficacy. In the TMZ final clinical
trial performed before submitting for FDA approval (573 patients), overall survival was only improved by 2.5 months versus radiation
alone. At least 50% of TMZ treated patients do not respond to TMZ, primarily due to the over-expression of O6-methylguanine methyltransferase
(“MGMT”) and/or lack of a DNA repair pathway in glioblastoma cells. Given the different mechanism of action of Berubicin,
these patients may show a better outcome and our planned phased 2 clinical trial could be used to support an application for approval
of Berubicin as a frontline therapy. However, we believe that the most prudent initial investigational objective is a phase 2 stratified
trial that can either serve as a registration trial or provide sufficient data to power a phase 3 registration trial.
Based on data relating to the mechanism
of action of Berubicin, as well as clinical results from the Phase 1 study in brain tumors performed by Reata, the prior developer
of Berubicin, we are conducting a randomized, controlled multicenter study that will evaluate the efficacy of Berubicin versus
Lomustine (CCNU, CeeNU®, or Gleostine®) in patients with recurrent glioblastoma. Randomization to the two therapies (Berubicin
or Lomustine) will be on a 2:1 basis with 2 patients receiving Berubicin for every patient randomized to Lomustine. Lomustine is
a drug considered effective in patients with glioblastoma that has recurred or progressed following first line therapy. From the
data available from the Reata Phase 1 clinical trial (RTA 744-C-0401), the FDA has agreed that the dosage for Berubicin will be
at the maximum tolerated dose (“MTD”) determined in that trial. Thus, patients randomized to the Berubicin arm will
receive a 2-hour IV infusion of 7.5 mg/m2 berubicin hydrochloride daily for three consecutive days followed by 18 days off (21-day
cycle). Patients randomized to Lomustine will receive a single oral dose of 130 mg/m2 (rounded to the nearest 5 mg) every 6 weeks,
or per the full prescribing information for Lomustine incorporating institutional standards at each study site.
Efficacy will be measured by the benefit
of Berubicin vs. Lomustine in terms of overall survival (OS), considered the preferred standard as an endpoint for clinical trials
in Neuro-Oncology. Secondary endpoints using accepted radiologic methodology (magnetic resonance imaging (“MRI”)),
including both pre- and post-gadolinium T1-weighted scans and T2/fluid attenuated inversion recovery (“FLAIR”) images
will evaluate objective response rates (ORR), which include complete responses (CR) and partial responses (PR) as per RANO (Response
Assessment for Neuro-Oncology), and progression free survival at 6 months (PFS6). Additional information to be collected include
event free survival (EFS), corticosteroid usage, neurologic status, quality of life, and safety, and for Berubicin, the pharmacokinetics
(PK) at the dose and schedule employed. The trial will include an interim analysis to estimate the likelihood of achieving statistical
significance for the primary endpoint, OS, after approximately 50% of enrolled patients have reached 6 months on study.
Assuming data from the above described Phase
2 study is positive (and depending on the strength and quality of such data) at its completion we may seek approval to market Berubicin
from relevant regulatory authorities, we may look for a partner with which to conduct a Phase 3 study, or we may attempt to raise
sufficient capital to conduct such a study on our own. The goal of these potential Phase 3 studies, should they be necessary, is
to develop a body of evidence to support a successful application with the FDA and/or other similar regulatory agencies around
the world. Should we obtain approval from the FDA or other international regulatory agencies to market Berubicin, we will either
partner with third parties to sell and distribute it to physicians and patients, or we will develop our own sales force to do so.
Berubicin
Our first product under development is Berubicin,
a development stage anthracycline intended to treat glioblastoma. Berubicin is an anthracycline, a class of drugs that are among
the most powerful chemotherapy drugs known. Berubicin intercalates into DNA and interrupts topoisomerase II activity, resulting
in the inhibition of DNA replication and repair, and RNA and protein synthesis. Based on evidence developed from animal models
and limited clinical data derived from a Phase 1 human clinical trial, Berubicin appears to cross the blood brain barrier and target
cancer cells, specifically glioblastoma, unlike any other known anthracyclines.
Berubicin hydrochloride (HCl) is a novel
synthetic anthracycline with a chemical structure similar to doxorubicin HCl, a cytotoxic anthracycline topoisomerase II inhibitor
isolated from cultures of Streptomyces peucetius var. caesius. Doxorubicin HCl Injection and Doxorubicin HCl for Injection, drugs
related in chemical structure and mechanism of action to Berubicin, are approved by FDA for the treatment of various cancers, including
acute lymphoblastic leukemia, acute myeloblastic leukemia, Hodgkin lymphoma, Non-Hodgkin lymphoma, metastatic breast cancer, metastatic
Wilms’ tumor, metastatic neuroblastoma, metastatic soft tissue sarcoma, metastatic bone sarcomas, metastatic ovarian carcinoma,
metastatic transitional cell bladder carcinoma, metastatic thyroid carcinoma, metastatic gastric carcinoma, and metastatic bronchogenic
carcinoma, as well as part of a multiagent adjuvant chemotherapy for the treatment of women with axillary lymph node involvement
after resection of primary breast cancer. A liposomal formulation of doxorubicin HCl is also approved for the treatment of ovarian
cancer, AIDS-related Kaposi’s sarcoma, and multiple myeloma.
Doxorubicin HCl is not indicated for
cancers of the brain, where it has limited efficacy due to its poor penetration through the blood-brain barrier. Further, even
for those cancers that doxorubicin HCl is indicated, development of drug resistance remains a problem. In an effort to develop
a second generation anthracycline topoisomerase II inhibitor that can circumvent the BBB and the development of drug resistance,
Dr. Priebe created a library of high-affinity and sequence-selective deoxyribonucleic acid (“DNA”)-binding agents and
screened against a panel of P-glycoprotein 1 (Pgp) and multidrug resistance-associated protein 1 (MRP1)-overexpressing cells. This
led to the identification of berubicin HCl, which preclinical studies appear to show to be less affected by multidrug transporters
than doxorubicin, to be potentially more potent as an inhibitor of cell growth and inducer of apoptosis than doxorubicin, to sequester
preferentially in tumor tissue versus brain tissue, and to improve overall survival in an intracranial orthotopic glioma model.
There is no assurance that Berubicin will be able to demonstrate such traits in future clinical trials.
Glioblastoma has an unfavorable prognosis
mainly due to its high propensity for tumor recurrence, which is inevitable after a median survival time of 32–36 weeks.
A plethora of monotherapy and combination chemotherapy strategies have been evaluated in patients with recurrent glioblastoma.
Although these can result in some minor improvements in progression-free survival, with an estimation of approximately 30% after
six months, no obvious increase in survival has been associated with any particular regimen.
Despite aggressive initial treatment, most
patients develop recurrent diseases which can be treated with reresection, systemic treatment with targeted agents or cytotoxic
chemotherapy, reirradiation, or radiosurgery. Research into novel therapies is investigating alternative temozolomide regimens,
convection-enhanced delivery, immunotherapy, gene therapy, antiangiogenic agents, poly ADP ribose polymerase inhibitors, or cancer
stem cell signaling pathways. Overall, the 5-year survival rate is <10%, with a final mortality rate of close to 100%. Therefore,
the development of novel therapeutic options for patients with recurrent glioblastoma remains a priority. Given the short-term
efficacy and low survival rate of glioblastoma and other CNS patient groups, we believe there is a significant unmet need, and
financial opportunity.
Less than 40% of glioblastoma patients have
a genetic variation which makes their tumors initially more responsive to TMZ. However, because nearly all these patients will
quickly become resistant, Berubicin could be prescribed after failure with TMZ. The remaining 60% of patients initially fail to
respond to TMZ, primarily due to the over-expression of O6-methylguanine methyltransferase (MGMT) and/or lack of a DNA repair pathway
in glioblastoma cells. If Berubicin shows efficacy in clinical trials, of which there is no assurance, it could become the primary
drug treatment because TMZ is ineffective in this patient population.
Reata licensed in berubicin HCl with the
intent of developing it for commercialization. On December 28, 2004, Reata filed an initial IND (IND 68,279; Serial No. 000) for
an injection formulation of berubicin HCl (RTA 744 Injection) for the treatment of anaplastic astrocytoma, anaplastic oligodendroglioma,
anaplastic mixed oligo-astrocytoma, glioblastoma, and gliosarcoma. Three clinical trials were initiated under IND 68,279, two phase
1 trials and one phase 2 trial. The initial phase 1 trial (Study RTA 744-C-0401) was completed and the maximum tolerated dose determined.
A 44% disease control response rate was observed. The disease control rate was based on patients with stable disease plus responses.
In the trial, out of 25 patients, one patient achieved a complete response and 10 patients achieved a stable response. The 44%
disease control response rate is based on these 11 patients (out of 25 patients). Regardless, in 2008, Reata decided to curtail
development of RTA 744 Injection for strategic reasons. Further enrollment in the two ongoing berubicin clinical trials was halted.
Reata submitted a request to inactive the IND on March 17, 2011 (Serial No. 054) and requested that the IND be withdrawn on June
10, 2016 (Serial No. 0055). IND 68,279 was not withdrawn due to safety or efficacy concerns, but rather due to the above noted
corporate reprioritization.
CNS was formed in 2017, with Dr. Priebe
as the Scientific Founder. Reata sold CNS all rights to the berubicin investigational drug data, including the data submitted under
IND 68,279, and CNS has assumed sole authority, discretion and responsibility with respect to the development of the drug. As a
result of the Reata Agreement, we are the direct beneficiaries of the 4 years of active clinical development work performed by
Reata, including the execution of multiple Phase 1 human clinical trials. Furthermore, should our human trials demonstrate a significant
improvement in glioblastoma patient outcomes, the FDA may grant us an accelerated review schedule under its Breakthrough Therapy
Designation.
On May 24, 2019, our sublicensee, WPD, signed
the Granting Agreement with the Polish National Center for Research and Development for co-funding of research and development
work in the amount of 22,033,066 PLN (approximately US $5,798,875) for a new drug development as a part of the project “New
approach to glioblastoma treatment addressing the critical unmet medical need”, undertaken pursuant to the WPD Sublicense.
The grant will be co-funded by the European Union, under the Smart Growth Operational Program 2014-2020, Sectoral Programme InnoNeuroPharm,
Priority Axis I: Support R&D carried out by enterprises, Measure 1.2 Sectorial programs R&D. The main goal of the WPD Project
is to implement the first in the world multicenter pediatric phase I clinical trial to determine maximum tolerated dose (MTD) and
phase IB and II clinical trials in adults, in order to attempt to determine safety and efficacy of Berubicin. The WPD Project will
also include preclinical tests to determine the prospective use of Berubicin with temozolomide and with other compounds being developed
by WPD as candidates for anticancer drugs.
The WPD Project includes the implementation
of the following stages of R&D:
1. Scientific
Advice Procedure implementation; Regulatory documentation for “First in Children” and phase Ib and II clinical trial
in adults preparation;
2. IP
Manufacturing according to GMP;
3. Possible
In vitro studies on anticancer activity of Berubicin in combination with TMZ and other WPD molecules;
4. “First
in children” and Phase Ib in adults clinical trials conducting;
5. Phase
II in adults clinical trial conducting.
Berubicin Clinical Trial
In the first clinical trial for Berubicin,
which was referred to as Study RTA 744-C-0401, 25 of the 35 patients enrolled were evaluable for response. One patient achieved
a complete response, remained on study through seven cycles of therapy and was withdrawn for adverse events unrelated to Berubicin.
The patient was disease free as of November 6, 2020.
Study design
Study RTA 744-C-0401 was a Phase 1 dose-finding,
safety and pharmacokinetic (PK) study of intravenous Berubicin injection in patients with recurrent or refractory anaplastic astrocytoma,
anaplastic oligodendroglioma, anaplastic mixed oligo-astrocytoma, glioblastoma multiforme or gliosarcoma.
The study was an open-label, accelerated
dose-escalation study to determine the maximum tolerated dose starting with patients who were not taking concurrent enzyme-inducing
anti-epileptic drugs (EIAEDs) that could interfere with Berubicin drug metabolism. Intra-patient dose-escalation was allowed after
a patient had received a minimum of 4 cycles. Berubicin injection was administered either daily for three consecutive days repeated
every three weeks (Group A), or once-weekly for four-consecutive weeks repeated every five weeks (Group C). Enrollment for a planned
dose escalation in Group B (patients on EIAEDs) was not initiated after it was determined that the standard of care had changed
and an insufficient number of patients being treated with these anti-epileptic drugs would make it difficult to accrue the requisite
number of patients. The MTD for the remaining groups was determined in a stepwise fashion such that once the MTD for Group A (three
days in a row every 3 weeks) was determined, Group C was initiated at the MTD from Group A, given on a weekly basis for 4 of every
5 weeks to evaluate the tolerability and MTD of Berubicin on this alternative schedule.
Study Results
The first patient was enrolled into the
study in November 2005 and as of February 2009, the study was closed to accrual with no active patients remaining on study. Berubicin
was administered to a total of 54 patients (35 male and 19 female) with ages ranging from 25 to 70 years. Thirty-seven of the patients
(69%) entered the study with a diagnosis of glioblastoma multiforme, seven of which were secondary to transformation from anaplastic
astrocytoma. The time from the initial brain tumor diagnosis to enrollment on the study ranged from four months to 301 months (this
last timing for a patient diagnosed with childhood anaplastic astrocytoma).
Efficacy: Twenty-five of the 35 patients
enrolled in Group A were evaluable for response (under the Macdonald criteria described below). One patient receiving Berubicin
at 2.4 mg/m2/day achieved a complete response. The patient remained on study through 7 cycles of therapy before being withdrawn
for elevated liver function tests unrelated to study drug, and in follow-up remains disease free and clinically stable as of November
6, 2020.
One additional patient receiving Berubicin
at 7.5 mg/m2/day achieved an unconfirmed partial response as their best recorded response, unconfirmed since the scan showing the
partial response required a second scan corroborating the response. Although the patient had an 80% reduction in tumor volume after
two cycles of therapy, at the end of four cycles of therapy when an additional scan was obtained, despite the fact that the initial
lesion remained reduced, the patient developed a new lesion and was assessed as having disease progression, thus the PR could not
be confirmed. Ten additional patients in Group A had stable disease of 2-to-8 cycles in duration, with a median progression free
survival of four cycles (12 weeks). In Group C, seven patients were evaluable for response and all had progressive disease. Twelve
patients were discontinued from the study prior to the end of cycle 2 due to clinical deterioration and/or disease progression.
Macdonald criteria: The Macdonald
criteria, similarly to other systems, divides response into four types of response based on imaging (MRI) and clinical features:
Assessment
|
Imaging Features
|
Clinical Features
|
Complete Response (CR)
|
§
Disappearance of all enhancing disease (measurable and non-measurable)
§
Sustained for at least four weeks
§
No new lesions
|
§
No corticosteroids
§
Clinically stable or improved
|
Partial Response (PR)
|
§
50% or more decrease of measurable enhancing lesions
§
Sustained for at least four weeks
§
No new lesions
|
§
Stable or reduced corticosteroids
§
Clinically stable or improved
|
Stable Disease (SD)
|
§ Does not qualify for CR, PR or progression
|
§ Clinically stable
|
Progression
|
§
25% or more increase in enhancing lesions
§
Any new lesions
|
§ Clinical deterioration
|
Measurements of lesions are obtained from
axial post contrast T1 images. The maximal diameter is obtained, and then the second diameter is obtained at right angles to the
first. The product of these measurements is then used as the size of the lesion for the purpose of comparison.
Summary of Adverse Events: The adverse
events documented during Study RTA 744-C-0401 for all CTC grades of severity and regardless of relationship to study medication
are identified below.
Serious Adverse Event
|
|
Number of Patients Experiencing Adverse Event
|
Pulmonary embolism
|
|
5
|
Convulsion
|
|
5
|
Urinary tract infection
|
|
1
|
Peripheral motor neuropathy
|
|
1
|
Peripheral sensory neuropathy
|
|
1
|
Urinary retention
|
|
1
|
Nausea
|
|
4
|
Vomiting
|
|
5
|
Constipation
|
|
1
|
Leukopenia
|
|
1
|
Neutropenia
|
|
1
|
Headache
|
|
3
|
Speech disorder
|
|
1
|
Pyramidal tract syndrome
|
|
3
|
Somnolence
|
|
1
|
Dehydration
|
|
3
|
Brain oedema
|
|
1
|
Papilloedema
|
|
1
|
Eyelid ptosis
|
|
1
|
Macular oedema
|
|
1
|
Syncope
|
|
2
|
Deep vein thrombosis
|
|
1
|
Loss of consciousness
|
|
1
|
Embolism
|
|
1
|
Hemiparesis
|
|
1
|
Hydrocephalus
|
|
1
|
Muscle atrophy
|
|
1
|
Thrombocytopenia
|
|
1
|
Disease progression
|
|
3
|
Mental status changes
|
|
4
|
Thrombosis
|
|
1
|
Sepsis
|
|
1
|
Depressed level of consciousness
|
|
1
|
Dyspnoea
|
|
2
|
The larger number of events related to the
central nervous system is consistent with the impact of the underlying malignant disease in the brain of these patients. Myelosupression,
i.e., a decrease in the number of bone-marrow derived cells, is expected and consistent with the known toxicities of anthracyclines,
which can be managed by the use of effective supportive care.
Based on data relating to the mechanism
of action of Berubicin, as well as clinical results from the Phase 1 study in brain tumors performed by Reata, the prior developer
of Berubicin, we are conducting a randomized, controlled multicenter study that will evaluate the efficacy of Berubicin versus
Lomustine (CCNU, CeeNU®, or Gleostine®) in patients with recurrent glioblastoma. Randomization to the two therapies (Berubicin
or Lomustine) will be on a 2:1 basis with 2 patients receiving Berubicin for every patient randomized to Lomustine. Lomustine is
a drug considered effective in patients with glioblastoma that has recurred or progressed following first line therapy. From the
data available from the Reata Phase 1 clinical trial (RTA 744-C-0401), the FDA has agreed that the dosage for Berubicin will be
at the maximum tolerated dose (“MTD”) determined in that trial. Thus, patients randomized to the Berubicin arm will
receive a 2-hour IV infusion of 7.5 mg/m2 berubicin hydrochloride daily for three consecutive days followed by 18 days off (21-day
cycle). Patients randomized to Lomustine will receive a single oral dose of 130 mg/m2 (rounded to the nearest 5 mg) every 6 weeks,
or per the full prescribing information for Lomustine incorporating institutional standards at each study site.
Efficacy will be measured by the benefit
of Berubicin vs. Lomustine in terms of overall survival (OS), considered the preferred standard as an endpoint for clinical trials
in Neuro-Oncology. Secondary endpoints using accepted radiologic methodology (magnetic resonance imaging [“MRI”]),
including both pre- and post-gadolinium T1-weighted scans and T2/fluid attenuated inversion recovery (“FLAIR”) images
will evaluate objective response rates (ORR), which include complete responses (CR) and partial responses (PR) as per RANO (Response
Assessment for Neuro-Oncology), and progression free survival at 6 months (PFS6). Additional information to be collected include
event free survival (EFS), corticosteroid usage, neurologic status, quality of life, and safety, and for Berubicin, the pharmacokinetics
(PK) at the dose and schedule employed. The trial will include an interim analysis to estimate the likelihood of achieving statistical
significance for the primary endpoint, OS, after approximately 50% of enrolled patients have reached 6 months on study.
Assuming data from the above described Phase
2 study is positive (and depending on the strength and quality of such data) at its completion we may seek an expedited pathway
to approval to market Berubicin from relevant regulatory authorities, we may look for a partner with which to conduct a Phase 3
study, or we may attempt to raise sufficient capital to conduct such a study on our own. The goal of these potential Phase 3 studies,
should they be necessary, is to develop a body of evidence to support a successful application with the FDA and/or other similar
regulatory agencies around the world. Should we obtain approval from the FDA or other international regulatory agencies to market
Berubicin, we will either partner with third parties to sell and distribute it to physicians and patients, or we will develop our
own sales force to do so.
Competition
We operate in a highly competitive segment
of the pharmaceutical market, which market is highly competitive as a whole. We face competition from numerous sources including
commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies, and private and public research
institutions. Many of our competitors may have significantly greater financial, product development, manufacturing and marketing
resources. Additionally, many universities and private and public research institutes are active in cancer research, and some may
be in direct competition with us. We may also compete with these organizations to recruit scientists and clinical development personnel.
Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large and established companies.
The unmet medical need for more effective
cancer therapies is such that oncology drugs are one of the leading class of drugs in development. These include a wide array of
products against cancer targeting many of the same indications as our drug candidates. While the introduction of newer targeted
agents may result in extended overall survival, induction therapy regimens are likely to remain a cornerstone of cancer treatment
in the foreseeable future.
The current standard for the initial treatment
of glioblastoma is surgery, followed by radiation in combination with TMZ, followed by maintenance TMZ. While the percentage of
patients who survive two years from the diagnosis of glioblastoma has more than tripled from 8% to 25% in the last five years,
largely because of the use of TMZ, the overall survival remains dismal. There are currently at least 77 different experimental
therapies under clinical development in the United States for recurrent GBM based on the clinicaltrials.gov website. Thus, we
are operating in a highly competitive clinical trial environment, moving towards the pharmaceutical market, which is also extremely
competitive for patients with GBM. We also face competition from numerous sources including commercial pharmaceutical and biotechnology
enterprises, academic institutions, government agencies, and private and public research institutions. Many of our competitors
may have significantly greater cancer research capabilities, as well as financial, product development, manufacturing and marketing
resources. Additionally, many universities and private and public research institutes are active in cancer research, and some
may be in direct competition with us. In addition, we also compete with these organizations to recruit scientists and clinical
development personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies.
Intellectual Property
Under the HPI License we obtained the exclusive
right to develop certain patented chemical compounds for use in the treatment of cancer anywhere in the world. We have licensed
the right to certain intellectual property covering products comprised of anthracycline antibiotic compound, methods for manufacture
and use for the treatment of cancer. The licensed intellectual property originally included certain material patents in the United
States and their foreign counterparts throughout the world. The U.S. patents have expired, and as such, we may be subject to increased
competition.
On June 10, 2020, the FDA granted Orphan
Drug Designation (“ODD”) for Berubicin for the treatment of malignant gliomas. ODD from the FDA is available for drugs
targeting diseases with less than 200,000 cases per year. ODD may enable market exclusivity of 7 years from the date of approval
of a NDA in the United States. During that period the FDA generally could not approve another product containing the same drug
for the same designated indication. Orphan drug exclusivity will not bar approval of another product under certain circumstances,
including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior to
the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company
with orphan drug exclusivity is not able to meet market demand. The ODD now constitutes our primary intellectual property protections
although the Company is exploring if there are other patents that could be filed related to Berubicin to extend additional protections.
We plan to file additional patent applications
that potentially might allow for further increase of the exclusive market protection for use of Berubicin. However, we can provide
no assurance that we will be able to file or receive additional patent protection. The failure to receive such additional patent
protection will reduce the barrier to entry for competition for Berubicin, which may adversely affect our operations.
Governmental Regulation
Government authorities in the United States,
at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development,
testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution,
post-approval monitoring and reporting, marketing and export and import of products such as those we are developing. The pharmaceutical
drug product candidates that we develop must be approved by the FDA before they may be marketed and distributed.
In the United States, the FDA regulates
pharmaceutical products under the Federal Food, Drug, and Cosmetic Act, and implementing regulations. Pharmaceutical products are
also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial
time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development
process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA and related
enforcement activity could include refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning
letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals
of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could
have a material adverse effect on us. The process required by the FDA before a pharmaceutical product may be marketed in the United
States generally involves the following:
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Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices or other applicable regulations;
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Submission to the FDA of an Investigational New Drug application, or IND, which must become effective before human clinical studies may begin;
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Performance of adequate and well-controlled human clinical studies according to the FDA’s current good clinical practices (“GCP”), to establish the safety and efficacy of the proposed pharmaceutical product for its intended use;
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Submission to the FDA of an NDA for a new pharmaceutical product;
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Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the pharmaceutical product is produced, to assess compliance with current good manufacturing practices (“cGMP”), to assure that the facilities, methods and controls are adequate to preserve the pharmaceutical product’s identity, strength, quality and purity;
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Potential FDA audit of the preclinical and clinical study sites that generated the data in support of the NDA; and
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FDA review and approval of the NDA.
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The lengthy process of seeking required
approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial
resources and approvals, and continued compliance is inherently uncertain.
Before testing any compounds with potential
therapeutic value in humans, the pharmaceutical product candidate enters the preclinical testing stage. Preclinical tests include
laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety
and activity of the pharmaceutical product candidate. These early proof-of-principle studies are done using sound scientific procedures
and thorough documentation. The conduct of the single and repeat dose toxicology and toxicokinetic studies in animals must comply
with federal regulations and requirements including good laboratory practices. The sponsor must submit the results of the preclinical
tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical
protocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA
has concerns and notifies the sponsor. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before
the clinical study can begin. If resolution cannot be reached within the 30-day review period, either the FDA places the IND on
clinical hold or the sponsor withdraws the application. The FDA may also impose clinical holds on a pharmaceutical product candidate
at any time before or during clinical studies for various reasons. Accordingly, we cannot be sure that submission of an IND will
result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such
clinical study.
Clinical studies involve the administration
of the pharmaceutical product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally
physicians not employed by or under the clinical study sponsor’s control. Clinical studies are conducted under protocols
detailing, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria,
how the results will be analyzed and presented and the parameters to be used to monitor subject safety. Each protocol must be submitted
to the FDA as part of the IND. Clinical studies must be conducted in accordance with GCP. Further, each clinical study must be
reviewed and approved by an independent institutional review board (“IRB”) at, or servicing, each institution at which
the clinical study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers
such items as whether the risks to individuals participating in the clinical studies are minimized and are reasonable in relation
to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical study subject or
his or her legal representative and must monitor the clinical study until completed.
Human clinical studies are typically conducted
in three sequential phases that may overlap or be combined:
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Phase 1: The pharmaceutical product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases such as cancer, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients, with a goal of characterizing the safety profile of the drug and establishing a maximum tolerable dose.
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Phase 2: With the maximum tolerable dose established in a Phase 1 trial, the pharmaceutical product is evaluated in a limited patient population at the MTD to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases, to determine dosage tolerance, optimal dosage and dosing schedule and to identify patient populations with specific characteristics where the pharmaceutical product may be more effective.
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Phase 3: Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. The studies must be well controlled and usually include a control arm for comparison. One or two Phase 3 studies are usually required by the FDA for an NDA approval, depending on the disease severity and other available treatment options. In some instances, an NDA approval may be obtained based on Phase 2 clinical data with the understanding that the approved drug can be sold subject to a confirmatory trial to be conducted post-approval.
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Post-approval studies, or Phase 4 clinical
studies, may be conducted after initial marketing approval. These studies are often used to gain additional experience from the
treatment of patients in the intended therapeutic indication. The FDA also may require Phase 4 studies, Risk Evaluation and Mitigation
Strategies (“REMS”) and post-marketing surveillance, among other things, to monitor the effects of an approved product
or place conditions on an approval that could restrict the distribution or use of the product.
Progress reports detailing the results of
the clinical studies must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA
and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a
significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any
specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any time
on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted
in accordance with the IRB’s requirements or if the pharmaceutical product has been associated with unexpected serious harm
to patients.
Concurrent with clinical studies, companies
may complete additional animal studies and must also develop additional information about the chemistry and physical characteristics
of the pharmaceutical product as well as finalize a process for manufacturing the product in commercial quantities in accordance
with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the pharmaceutical
product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final
pharmaceutical product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted
to demonstrate that the pharmaceutical product candidate does not undergo unacceptable deterioration over its shelf life.
The results of product development, preclinical
studies and clinical studies, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry
of the pharmaceutical product, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting
approval to market the product. The submission of an NDA is subject to the payment of substantial user fees. A waiver of such fees
may be obtained under certain limited circumstances.
The FDA reviews all NDAs submitted before
it accepts them for filing and may request additional information rather than accepting an NDA for filing. Once the submission
is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under the
Prescription Drug User Fee Act (“PDUFA”), the FDA has 10 months after the 60-day filing date in which to complete its
initial review of a standard review NDA and respond to the applicant, and six months after the 60-day filing date for a priority
review NDA. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs.
After the NDA submission is accepted for
filing, the FDA reviews the NDA application to determine, among other things, whether the proposed product is safe and effective
for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s
identity, strength, quality and purity. The FDA may refer applications for novel pharmaceutical products or pharmaceutical products
which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and
other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making
decisions. During the pharmaceutical product approval process, the FDA also will determine whether a REMS is necessary to assure
the safe use of the pharmaceutical product. If the FDA concludes that a REMS is needed, the sponsor of the NDA must submit a proposed
REMS; the FDA will not approve the NDA without a REMS, if required.
Before approving an NDA, the FDA will inspect
the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing
processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites as well
as the site where the pharmaceutical product is manufactured to assure compliance with GCP and cGMP. If the FDA determines the
application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission
and often will request additional testing or information. In addition, the FDA will require the review and approval of product
labeling.
The NDA review and approval process
is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may
require additional clinical data or other data and information. Even if such data and information is submitted, the FDA may ultimately
decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and
the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency
decides not to approve the NDA. The complete response letter usually describes all of the specific deficiencies in the NDA identified
by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring
additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might
take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit
the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval,
the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings
or precautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical studies
designed to further assess pharmaceutical product safety and effectiveness and may require testing and surveillance programs to
monitor the safety of approved products that have been commercialized.
Expedited Development and Review Programs
The FDA has a Fast Track program that is
intended to expedite or facilitate the process for reviewing new pharmaceutical products that meet certain criteria. Specifically,
new pharmaceutical products are eligible for Fast Track designation if they are intended to treat a serious condition and demonstrate
the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product
and the specific indication for which it is being studied. Unique to a Fast Track product, the FDA may consider for review sections
of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission
of the sections of the NDA, if the FDA determines that the schedule is acceptable and if the sponsor pays any required user fees
upon submission of the first section of the NDA.
Any product submitted to the FDA for market,
including a Fast Track program, may also be eligible for other FDA programs intended to expedite development and review, such as
priority review and accelerated approval. Any product is eligible for priority review if it is intended to treat a serious condition
and it offers a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The
FDA will attempt to direct additional resources to the evaluation of an application for a new pharmaceutical product designated
for priority review in an effort to facilitate the review. Additionally, accelerated approval may be available for a product intended
to treat a serious condition that provides meaningful therapeutic benefit over existing treatments, which means the product may
be approved on the basis of adequate and well-controlled clinical studies establishing that the product has an effect on a surrogate
endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on an intermediate clinical endpoint.
As a condition of accelerated approval, the FDA may require the sponsor to perform adequate and well-controlled post-marketing
clinical studies. In addition, the FDA currently requires pre-approval of promotional materials for products receiving accelerated
approval, which could impact the timing of the commercial launch of the product. Fast Track designation, priority review and accelerated
approval do not change the standards for approval but may expedite the development or approval process.
Post-Approval Requirements
Any pharmaceutical products for which the
Company receives FDA approvals are subject to continuing regulation by the FDA, including, among other things, cGMP compliance,
record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy
information, product sampling and distribution requirements, complying with certain electronic records and signature requirements
and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising,
prohibitions on promoting pharmaceutical products for uses or in patient populations that are not described in the pharmaceutical
product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities
and promotional activities involving the internet. Failure to comply with FDA requirements can have negative consequences, including
adverse publicity, enforcement letters from the FDA, actions by the U.S. Department of Justice and/or U.S. Department of Health
and Human Services’ Office of Inspector General, mandated corrective advertising or communications with doctors, and civil
or criminal penalties. Although physicians may prescribe legally available pharmaceutical products for off-label uses, manufacturers
may not directly or indirectly market or promote such off-label uses.
We expect to rely on third parties
for the production of clinical and commercial quantities of our products. Manufacturers of our products are required to comply
with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. cGMP regulations require, among other
things, quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Pharmaceutical
product manufacturers and other entities involved in the manufacture and distribution of approved pharmaceutical products are required
to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by
the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend
time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a
product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal
of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being
implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims,
are also subject to further FDA review and approval.
Pharmaceutical Coverage, Pricing and
Reimbursement
Significant uncertainty exists as to the
coverage and reimbursement status of any pharmaceutical product candidates for which we may obtain regulatory approval. In the
United States and in markets in other countries, sales of any products for which we receive regulatory approval for commercial
sale will depend in part upon the availability of reimbursement from third-party payers. Third-party payers include government
payers such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. The process for
determining whether a payer will provide coverage for a pharmaceutical product may be separate from the process for setting the
price or reimbursement rate that the payer will pay for the pharmaceutical product. Third-party payers may limit coverage to specific
pharmaceutical products on an approved list, or formulary, which might not, and frequently does not, include all of the FDA-approved
pharmaceutical products for a particular indication. Third-party payers are increasingly challenging the price and examining the
medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. A payer’s
decision to provide coverage for a pharmaceutical product does not imply that an adequate reimbursement rate will be approved.
Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate
return on our investment in product development. In addition, in the United States there is a growing emphasis on comparative effectiveness
research, both by private payers and by government agencies. We may need to conduct expensive pharmacoeconomic studies in order
to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA
approvals. Our pharmaceutical product candidates may not be considered medically necessary or cost-effective. To the extent other
drugs or therapies are found to be more effective than our products, payers may elect to cover such therapies in lieu of our products
and/or reimburse our products at a lower rate.
Orphan Drug exclusivity prevents for seven
years the approval of another product with the same active moiety for the same rare disease. If a product is a new chemical entity
(i.e., generally that the moiety has not previously been approved), it may receive five years of exclusivity, during which period
FDA may not accept for review certain NDAs for another product with the same moiety. If approval of a product required new clinical
data, it may convey three years of exclusivity against approval of certain NDAs for similar products.
The marketability of any pharmaceutical
product candidates for which we may receive regulatory approval for commercial sale may suffer if the government and third-party
payers fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased
and we expect this will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement
rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which
we may receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
International Regulation
In addition to regulations in the United
States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution
of our future drugs. Whether or not we obtain FDA approval for a drug, we must obtain approval of a drug by the comparable regulatory
authorities of foreign countries before we can commence clinical trials or marketing of the drug in those countries. The approval
process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements
governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
Under European Union regulatory systems,
marketing authorizations may be submitted either under a centralized or mutual recognition procedure. The centralized procedure
provides for the grant of a single marketing authorization that is valid for all European Union member states. The mutual recognition
procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing
authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment
report, each member state must decide whether to recognize approval.
In addition to regulations in Europe and
the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial distribution
of our future drugs.
License Agreements
On November 21, 2017, we entered into a
Collaboration and Asset Purchase Agreement with Reata. Pursuant to the Reata Agreement we purchased all of Reata’s intellectual
property and development data regarding Berubicin, including all trade secrets, knowhow, confidential information and other intellectual
property rights. In exchange for these rights, we agreed to pay Reata an amount equal to 2.25% of the net sales of Berubicin for
a period of 10 years from our first commercial sale of Berubicin plus $10,000. Reata also agreed to use commercially reasonable
efforts, at the Company’s expense, to provide development assistance related to the product and/or product intellectual property.
The Reata Agreement will terminate ten years after the date of the first commercial sale of product, provided the agreement may
be earlier terminated due to a material breach of the agreement by either party, or if either party undergoes a bankruptcy event.
On December 28, 2017, we obtained the rights
to a worldwide, exclusive royalty-bearing, license to the chemical compound commonly known as Berubicin from HPI in an agreement
we refer to as the HPI License. Under the HPI License we obtained the exclusive right to develop certain patented chemical compounds
for use in the treatment of cancer anywhere in the world. In the HPI License we agreed to pay HPI: (i) development fees of $750,000
over a three-year period beginning November 2019; (ii) a 2% royalty on net sales; (iii) a $50,000 per year license fee; (iv) milestone
payments of $100,000 upon the commencement of a Phase II trial and $1.0 million upon the approval of a NDA for Berubicin; and (v)
200,000 shares of our common stock. We had the right, although we chose not to exercise such right, exercisable before December
28, 2020, to terminate the HPI License in full upon payment to HPI in the amount of $2,000,000 (the “Buy-Out Fee”).
Upon payment of the Buy-Out Fee, (i) our obligation to pay any additional development payments, license fee and the
milestone payments would have ceased; (ii) HPI would have transferred ownership of all development data in its possession to us
promptly; and (iii) HPI would have transferred to us any regulatory submissions including any IND, NDA or ANDA related to the patent
rights. The payment of the Buy-Out Fee would not have relieved us of our obligation to use commercially reasonable development
efforts to develop a licensed product by the development deadline as provided in the HPI License.
On August 30, 2018, we entered into a sublicense
agreement with WPD Pharmaceuticals, Inc., or WPD, pursuant to which we granted WPD an exclusive sublicense, even as to us, for
the patent rights we licensed pursuant to the HPI License within the following countries: Poland, Estonia, Latvia, Lithuania, Belarus,
Ukraine, Moldova, Romania, Bulgaria, Serbia, Macedonia, Albania, Armenia, Azerbaijan, Georgia, Montenegro, Bosnia, Croatia, Slovenia,
Slovakia, Czech Republic, Hungary, Chechnya, Uzbekistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Greece, Austria, and
Russia. The sublicense agreement provides that WPD must use commercially reasonable development efforts to attempt to develop and
commercialize licensed products in the above mentioned territories, which means the expenditure of at least $2.0 million on the
development, testing, regulatory approval or commercialization of the licensed products during the three year period immediately
following the date of the sublicense agreement. In the event that WPD fails to use commercially reasonable development efforts
to by the foregoing three-year deadline, we have the right to terminate this sublicense agreement. In consideration for the rights
granted under the sublicense agreement, to the extent we are required to make any payments to HPI pursuant to the HPI License as
a result of this sublicense agreement, WPD agreed to advance us such payments, and to pay us a royalty equal to 1% of such payments.
WPD is a Polish corporation that is majority-owned by an entity controlled by Dr. Priebe, our founder and largest shareholder.
On August 31, 2018, we entered into a sublicense
agreement with Animal Life Sciences, LLC, or ALI, pursuant to which we granted ALI an exclusive sublicense, even as to us, for
the patent rights we licensed pursuant to the HPI License solely for the treatment of cancer in non-human animals through any type
of administration. In consideration for the rights granted under the sublicense agreement, ALI agreed to issue us membership interests
in ALI equal to 1.52% of the outstanding ALI membership interests. As additional consideration for the rights granted, to the extent
we are required to make any payments to HPI pursuant to the HPI License as a result of this sublicense agreement, ALI agreed to
advance us such payments, and to pay us a royalty equal to 1% of such payments. Dr. Priebe holds 38% of the membership interests
of ALI.
On January 10, 2020, we entered into a Patent
and Technology License Agreement (the “1244 Agreement”) with The Board of Regents of The University of Texas System,
an agency of the State of Texas, on behalf of The University of Texas M. D. Anderson Cancer Center (“UTMDACC”). Pursuant
to the 1244 Agreement, we obtained a royalty-bearing, worldwide, exclusive license to certain intellectual property rights, including
patent rights, related to our WP1244 drug technology. In consideration, we must make payments to UTMDACC including an up-front
license fee, annual maintenance fee, milestone payments and royalty payments (including minimum annual royalties) for sales of
licensed products developed under the 1244 Agreement. The term of the 1244 Agreement expires on the last to occur of: (a) the expiration
of all patents subject to the 1244 Agreement, or (b) fifteen years after execution; provided that UTMDACC has the right to terminate
the 1244 Agreement in the event that we fail to meet certain commercial diligence milestones.
On May 7, 2020, pursuant to the WP1244 Portfolio
license agreement described above, the Company entered into a Sponsored Research Agreement with UTMDACC to perform research relating
to novel anticancer agents targeting CNS malignancies. The Company agreed to fund approximately $1,134,000 over a two-year period.
The Company paid and recorded $334,000 in 2020 related to this agreement in research and development expenses
in the Company’s Statements of Operations. The remaining $720,000 will be paid in 2021, of which $400,000 was accrued at
December 31, 2020. The principal investigator for this agreement is Dr. Priebe.
On March 20, 2020, we entered into a Development
Agreement with WPD Pharmaceuticals (“WPD”) (the “Development Agreement”), a company founded by Dr. Priebe.
Pursuant to the Development Agreement, WPD agreed to use its commercially reasonable efforts in good faith to develop and commercialize
certain products that WPD had previously sublicensed, solely in the field of pharmaceutical drug products for the treatment of
any viral infection in humans, with a goal of eventual approval of in certain territories consisting of: Poland, Estonia, Latvia,
Lithuania, Belarus, Ukraine, Romania, Armenia, Azerbaijan, Georgia, Slovakia, Czech Republic, Hungary, Uzbekistan, Kazakhstan,
Greece, Austria, Russia, Netherlands, Turkey, Belgium, Switzerland, Sweden, Portugal, Norway, Denmark, Ireland, Finland, Luxembourg,
Iceland. Pursuant to the Development Agreement, we agreed to pay WPD the following payments: (i) an upfront payment of $225,000
to WPD (paid in April 2020); and (ii) within thirty days of the verified achievement of the Phase II Milestone, (such verification
shall be conducted by an independent third party mutually acceptable to the parties hereto), we will make a payment of $775,000
to WPD. WPD agreed to pay us a development fee of 50% of the net sales for any products in the above territories; provided that
Poland shall not be included as a territory after WPD receives marketing approval for a product in one-half of the countries included
in the agreed upon territories or upon the payment by WPD to us of development fees of $1.0 million. The term of the Development
Agreement will expire on the expiration of the sublicense pursuant to which WPD has originally sublicensed the products, which
will occur upon the expiration of the patents subject to the sublicense agreement, the earliest of which expires in 2024.
Employees
As of February 11, 2021, we had three full
time employees. We also have two part-time employees serving as our chief medical and scientific officers, and accordingly, a high
percentage of the work performed for our development projects is conducted by qualified part-time staff and independent contractors.
An investment in our securities involves
a high degree of risk. You should consider carefully all of the material risks described below, together with the other information
contained in this Form 10-K. If any of the following events occur, our business, financial condition, results of operations and
cash flows may be materially adversely affected.
Risks Related to the Company’s Business and Industry
We will require substantial funding, which may not be available
to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our operations.
We are using the proceeds from our IPO and
subsequent funding to, among other uses, advance Berubicin through clinical development. Developing pharmaceutical products, including
conducting preclinical studies and clinical trials, is expensive. We will require substantial additional future capital in order
to complete clinical development and commercialize Berubicin. If the FDA requires that we perform additional nonclinical studies
or clinical trials, our expenses would further increase beyond what we currently expect and the anticipated timing of any potential
approval of Berubicin would likely be delayed. Further, there can be no assurance that the costs we will need to incur to obtain
regulatory approval of Berubicin will not increase.
We will continue to require substantial
additional capital to continue our clinical development and commercialization activities. Because successful development of our
product candidates is uncertain, we are unable to estimate the actual amount of funding we will require to complete research and
development and commercialize our products under development.
We estimate that we will require
additional financing of approximately $16.0 to $20.0 million to complete the Phase 2 trial for Berubicin, approximately $2.0
million to support near-term WP1244 preclinical work, plus such additional working capital to fund our operations during the
pendency of the trial. The timing and costs of clinical trials are difficult to predict and as such the foregoing estimates
may prove to be inaccurate. We have no commitments for such additional needed financing and will likely be required to raise
such financing through the sale of additional equity securities.
The amount and timing of our future funding
requirements will depend on many factors, including but not limited to:
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whether our plan for clinical trials will be completed on a timely basis;
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whether we are successful in obtaining an accelerated approval pathway with the FDA related to Berubicin;
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the progress, costs, results of and timing of our clinical trials for Berubicin;
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the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;
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the costs associated with securing and establishing commercialization and manufacturing capabilities;
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market acceptance of our product candidates;
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the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;
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our ability to maintain, expand and enforce the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
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our need and ability to hire additional management and scientific and medical personnel;
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the effect of competing drug candidates and new product approvals;
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our need to implement additional internal systems and infrastructure, including financial and reporting systems; and
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the economic and other terms, timing of and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future.
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Some of these factors are outside of our
control. We may seek additional funding through a combination of equity offerings, debt financings, government or other third-party
funding, commercialization, marketing and distribution arrangements and other collaborations, strategic alliances and licensing
arrangements. Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing
may adversely affect the holdings or the rights of our stockholders.
If we are unable to obtain funding on a
timely basis, we may be required to significantly curtail one or more of our research or development programs. We also could be
required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to
some of our technologies or product candidates or otherwise agree to terms unfavorable to us.
The report of our independent registered public accounting
firm expresses substantial doubt about our ability to continue as a going concern. Such “going concern” opinion could
impair our ability to obtain financing.
Our auditors have indicated in their report
on our financial statements for the fiscal year ended December 31, 2020 that conditions exist that raise substantial doubt about
our ability to continue as a going concern due to our recurring losses from operations. A “going concern” opinion could
impair our ability to finance our operations through the sale of equity, incurring debt, or other financing alternatives. Our ability
to continue as a going concern will depend upon the availability and terms of future funding. If we are unable to achieve this
goal, our business would be jeopardized and we may not be able to continue. If we ceased operations, it is likely that all of our
investors would lose their investment.
We have in the past completed related party transactions,
some of which that were not conducted on an arm’s length basis.
We have entered into transactions with entities
affiliated with our largest shareholder, Dr. Waldemar Priebe, including:
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We acquired the patent rights to Berubicin pursuant to a license agreement with Houston Pharmaceuticals, Inc.
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We entered into a sublicense agreement with WPD Pharmaceuticals,
Inc., an entity with which Dr. Priebe is affiliated, which granted a WPD a license to Berubicin in a specified territory (primarily
in eastern Europe and western Asia).
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We entered into a sublicense agreement with Animal Life Sciences, LLC, which granted an exclusive sublicense to Berubicin for the treatment of cancer in non-human animals.
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We entered into a development agreement with WPD Pharmaceuticals, Inc., which granted us an economic interest in WPD’s development of an anti-viral portfolio.
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We entered into the above agreements related
to Berubicin with HPI and WPD prior to our IPO, at a time during which we did not have an independent board of directors. As such,
due to the related party relationship between our Company and these entities, the negotiation of these agreements was not conducted
on an arm’s length basis. As such, it is possible that the terms were less favorable to us than in a transaction negotiated
in an arm’s length transaction.
We have never been profitable, we have no products approved
for commercial sale, and we have not generated any revenue from product sales. As a result, our ability to reduce our losses and
reach profitability is unproven, and we may never achieve or sustain profitability. Therefore, we may not be able to continue as
a going concern.
We have never been profitable and do not
expect to be profitable in the foreseeable future. We have not yet submitted any drug candidates for approval by regulatory authorities
in the United States or elsewhere. Our ability to continue as a going concern is dependent upon our generating cash flow from sales
that are sufficient to fund operations or finding adequate financing to support our operations. To date, we have had no revenues
and have relied on equity-based financing from the sale of securities in private placements and the issuance of convertible notes.
The continuation of the Company as a going concern is dependent upon our ability to obtain continued financial support from its
stockholders, necessary equity financing to continue operations and the attainment of profitable operations. As of December 31,
2020 the Company has incurred an accumulated deficit of $20,946,343 since inception and had not yet generated any revenue from
operations. Additionally, management anticipates that its cash on hand as of December 31, 2020 is sufficient to fund its planned
operations through but not beyond calendar year 2021.
To date, we have devoted most of our financial
resources to corporate overhead, clinical trial preparation and marketing of our securities. We have not generated any revenues
from product sales. We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as
we continue our development of, and seek regulatory approvals for Berubicin, prepare for and begin the commercialization of any
approved products, and add infrastructure and personnel to support our continuing product development efforts. We anticipate that
any such losses could be significant for the next several years. If Berubicin or any of our other drug candidates fail in clinical
trials or do not gain regulatory approval, or if our drug candidates do not achieve market acceptance, we may never become profitable.
As a result of the foregoing, we expect to continue to experience net losses and negative cash flows for the foreseeable future.
These net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity
and working capital.
Because of the numerous risks and uncertainties
associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses
or when, or if, we will be able to achieve profitability. In addition, our expenses could increase if we are required by the FDA
to perform studies or trials in addition to those currently expected, or if there are any delays in completing our clinical trials
or the development of any of our drug candidates. The amount of future net losses will depend, in part, on the rate of future growth
of our expenses and our ability to generate revenues.
We have no operating history and we expect a number of factors
to cause our operating results to fluctuate on an annual basis, which may make it difficult to predict our future performance.
We are a preclinical pharmaceutical company
with no operating history. Our operations to date have been limited to acquiring our technology portfolio. We have not yet commenced
any clinical trials or obtained any regulatory approvals for any of our drug candidates. Consequently, any predictions made about
our future success or viability may not be as accurate as they could be if we had a longer operating history or approved products
on the market. Our operating results are expected to significantly fluctuate from quarter to quarter or year to year due to a variety
of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include:
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any delays in regulatory review and approval of our product candidates in clinical development, including our ability to receive approval from the FDA for Berubicin;
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delays in the commencement, enrollment and timing of clinical trials;
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difficulties in identifying patients suffering from our target indications;
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the success of our clinical trials through all phases of clinical development;
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potential side effects of our product candidate that could delay or prevent approval or cause an approved drug to be taken off the market;
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our ability to obtain additional funding to develop drug candidates;
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our ability to identify and develop additional drug candidates beyond Berubicin;
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competition from existing products or new products that continue to emerge;
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our ability to adhere to clinical trial requirements directly or with third parties such as contract research organizations (CROs);
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our ability to establish or maintain collaborations, licensing or other arrangements;
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our ability to defend against any challenges to our intellectual property including, claims of patent infringement;
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our ability to enforce our intellectual property rights against potential competitors;
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our ability to secure additional intellectual property protection for our developing drug candidates and associated technologies;
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our ability to attract and retain key personnel to manage our business effectively; and
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potential product liability claims.
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These factors are our best estimates of
possible factors, but cannot be considered a complete recitation of possible factors that could affect the Company. Accordingly,
the results of any historical quarterly or annual periods should not be relied upon as indications of future operating performance.
We cannot be certain that Berubicin will receive regulatory
approval, and without regulatory approval we will not be able to market Berubicin.
Our business currently depends largely on
the successful development and commercialization of Berubicin. Our ability to generate revenue related to product sales, if ever,
will depend on the successful development and regulatory approval of Berubicin for the treatment of glioblastoma.
We currently have no products approved for
sale and we cannot guarantee that we will ever have marketable products. The development of a product candidate and issues relating
to its approval and marketing are subject to extensive regulation by the FDA in the United States and regulatory authorities in
other countries, with regulations differing from country to country. We are not permitted to market our product candidates in the
United States until we receive approval of an NDA from the FDA. We have not submitted any marketing applications for any of our
product candidates.
NDAs must include extensive preclinical
and clinical data and supporting information to establish the product candidate’s safety and effectiveness for each desired
indication. NDAs must also include significant information regarding the chemistry, manufacturing and controls for the product.
Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and we may not be successful in obtaining approval.
The FDA review processes can take years to complete and approval is never guaranteed. If we submit an NDA to the FDA, the FDA must
decide whether to accept or reject the submission for filing. We cannot be certain that any submissions will be accepted for filing
and review by the FDA. Regulators in other jurisdictions have their own procedures for approval of product candidates. Even if
a product is approved, the FDA may limit the indications for which the product may be marketed, require extensive warnings on the
product labeling or require expensive and time-consuming clinical trials or reporting as conditions of approval. Regulatory authorities
in countries outside of the United States and Europe also have requirements for approval of drug candidates with which we must
comply with prior to marketing in those countries. Obtaining regulatory approval for marketing of a product candidate in one country
does not ensure that we will be able to obtain regulatory approval in any other country. In addition, delays in approvals or rejections
of marketing applications in the United States, Europe or other countries may be based upon many factors, including regulatory
requests for additional analyses, reports, data, preclinical studies and clinical trials, regulatory questions regarding different
interpretations of data and results, changes in regulatory policy during the period of product development and the emergence of
new information regarding our product candidates or other products. Also, regulatory approval for any of our product candidates
may be withdrawn.
If we are unable to obtain approval from
the FDA, or other regulatory agencies, for Berubicin and our other product candidates, or if, subsequent to approval, we are unable
to successfully commercialize Berubicin or our other product candidates, we will not be able to generate sufficient revenue to
become profitable or to continue our operations, likely resulting in the total loss of principal for our investors.
Any statements in this filing indicating
that Berubicin has demonstrated preliminary evidence of efficacy are our own and are not based on the FDA’s or any other
comparable governmental agency’s assessment of Berubicin and do not indicate that Berubicin will achieve favorable efficacy
results in any later stage trials or that the FDA or any comparable agency will ultimately determine that Berubicin is effective
for purposes of granting marketing approval.
Delays in the commencement, enrollment and completion of
clinical trials could result in increased costs to us and delay or limit our ability to obtain regulatory approval for Berubicin
and our other product candidates.
Delays in the commencement, enrollment and
completion of clinical trials could increase our product development costs or limit the regulatory approval of our product candidates.
We do not know whether any future trials or studies of our other product candidates will begin on time or will be completed on
schedule, if at all. The start or end of a clinical study is often delayed or halted due to changing regulatory requirements, manufacturing
challenges, including delays or shortages in available drug product, required clinical trial administrative actions, slower than
anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative drug or required
prior therapy, clinical outcomes or financial constraints. For instance, delays or difficulties in patient enrollment or difficulties
in retaining trial participants can result in increased costs, longer development times or termination of a clinical trial. Clinical
trials of a new product candidate require the enrollment of a sufficient number of patients, including patients who are suffering
from the disease the product candidate is intended to treat and who meet other eligibility criteria. The rates of patient enrollment
are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, that
include the age and condition of the patients and the stage and severity of disease, the nature of the protocol, the proximity
of patients to clinical sites and the availability of effective treatments and/or availability of investigational treatment options
for the relevant disease.
A product candidate can unexpectedly fail
at any stage of preclinical and clinical development. The historical failure rate for product candidates is high due to scientific
feasibility, safety, efficacy, changing standards of medical care and other variables. The results from preclinical testing or
early clinical trials of a product candidate may not predict the results that will be obtained in later phase clinical trials of
the product candidate. We, the FDA or other applicable regulatory authorities may suspend clinical trials of a product candidate
at any time for various reasons, including, but not limited to, a belief that subjects participating in such trials are being exposed
to unacceptable health risks or adverse side effects, or other adverse initial experiences or findings. We may not have the financial
resources to continue development of, or to enter into collaborations for, a product candidate if we experience any problems or
other unforeseen events that delay or prevent regulatory approval of, or our ability to commercialize, product candidates, including,
but not limited to:
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inability to obtain sufficient funds required for a clinical trial;
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inability to reach agreements on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
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negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;
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serious and unexpected drug-related side effects experienced by subjects in our clinical trials or by individuals using drugs similar to our product candidates;
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conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
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difficulty in enrolling research subjects in clinical trials including the inability to enroll any subjects at all;
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high dropout rates and high fail rates of research subjects;
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inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical trials;
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greater than anticipated clinical trial costs;
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poor effectiveness of our product candidates during clinical trials; or
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unfavorable FDA or other regulatory agency inspection and review of a clinical trial site or vendor.
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We have never conducted a clinical trial or submitted an
NDA before, and any product candidate we advance through clinical trials may not have favorable results in later clinical trials
or receive regulatory approval.
Clinical failure can occur at any stage
of our clinical development. Clinical trials may produce negative or inconclusive results, and our collaborators or we may decide,
or regulators may require us, to conduct additional clinical trials or nonclinical studies. In addition, data obtained from trials
and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which
may delay, limit or prevent regulatory approval. Success in preclinical studies and early clinical trials does not ensure that
subsequent clinical trials will generate the same or similar results or otherwise provide adequate data to demonstrate the efficacy
and safety of a product candidate. A number of companies in the pharmaceutical industry, including those with greater resources
and experience than us, have suffered significant setbacks in clinical trials, even after seeing promising results in earlier clinical
trials.
In addition, the design of a clinical trial
can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become
apparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support regulatory
approval. Further, clinical trials of potential products often reveal that it is not practical or feasible to continue development
efforts.
If Berubicin is found to be unsafe or lack efficacy, we will
not be able to obtain regulatory approval for it and our business would be materially and possibly irreparably harmed.
In some instances, there can be significant
variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including
changes in trial protocols, differences in composition of the patient populations, adherence to the dosing regimen and other trial
protocols and the rate of dropout among clinical trial participants. We do not know whether any clinical trials we or any of our
potential future collaborators may conduct will demonstrate the consistent or adequate efficacy and safety that would be required
to obtain regulatory approval and market any products. If we are unable to bring Berubicin to market, or to acquire other products
that are on the market or can be developed, our ability to create long-term stockholder value will be limited.
Interim or preliminary data from our clinical trials that
we announce or publish from time to time may change as more patient data become available and are subject to audit and verification
procedures that could result in material changes in the final data.
We may publicly disclose preliminary data
from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings
and conclusions are subject to change following a full analyses of all data related to the particular trial. We also make assumptions,
estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity
to fully and carefully evaluate all data. As a result, the preliminary results that we report may differ from future results of
the same trials, or different conclusions or considerations may qualify such results once additional data have been received and
fully evaluated. Preliminary data also remain subject to audit and verification procedures that may result in the final data being
materially different from the preliminary data we previously published. As a result, preliminary data should be viewed with caution
until the final data are available. We may also disclose interim data from our clinical trials. Interim data from clinical trials
that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. Adverse differences between preliminary or interim data and final data could
significantly harm our business prospects. Further, disclosure of preliminary or interim data by us could result in volatility
in the price of shares of our common stock.
In addition, others, including regulatory
agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh
the importance of data differently, which could impact the approvability of the particular drug candidate and our business in general.
In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is
typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate
information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant
with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug candidate or our business.
If the interim data that we report differ from actual results, or if others, including regulatory authorities, disagree with the
conclusions reached, our ability to obtain approval for and commercialize our current or any our future drug candidate, our business,
operating results, prospects or financial condition may be materially harmed.
The COVID-19 outbreak may delay recruitment in our clinical
trials and may continue or worsen, may affect the business of the FDA, EMA or other health authorities, which could result in delays
in meetings related to our planned clinical trials and ultimately of reviews and approvals of our product candidates.
The COVID-19 outbreak has delayed recruitment
in clinical trials and may continue or worsen. Additionally, it may delay the approvals of our product candidates due to its effect
on the business of the FDA, EMA or other health authorities, which could result in delays in meetings related to planned clinical
trials. The spread of COVID-19 may also slow potential enrollment of clinical trials and reduce the number of eligible patients
for our clinical trials. The COVID-19 outbreak and mitigation measures also have had and may continue to have an adverse impact
on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our
ability to raise capital when needed. The extent to which the COVID-19 outbreak impacts our business and operations will depend
on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning
the severity of the virus and the actions to contain its impact.
Our product candidates may have undesirable side effects
that may delay or prevent marketing approval, or, if approval is received, require them to be taken off the market, require them
to include safety warnings or otherwise limit their sales.
Unforeseen side effects from any of our
product candidates could arise either during clinical development or, if Berubicin is approved, after the approved product has
been marketed. The range and potential severity of possible side effects from therapies such as Berubicin are significant. If Berubicin
causes undesirable or unacceptable side effects in the future, this could interrupt, delay or halt clinical trials and result in
the failure to obtain or suspension or termination of marketing approval from the FDA and other regulatory authorities, or result
in marketing approval from the FDA and other regulatory authorities only with restrictive label warnings.
If any of our product candidates receives
marketing approval and we or others later identify undesirable or unacceptable side effects caused by such products:
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regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;
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we may be required to change instructions regarding the way the product is administered, conduct additional clinical trials or change the labeling of the product;
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we may be subject to limitations on how we may promote the product;
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sales of the product may decrease significantly;
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regulatory authorities may require us to take our approved product off the market;
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we may be subject to litigation or product liability claims; and
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our reputation may suffer.
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Any of these events could prevent us or
our potential future collaborators from achieving or maintaining market acceptance of the affected product or could substantially
increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues from
the sale of our products.
If the FDA does not find the manufacturing facilities of
our future contract manufacturers acceptable for commercial production, we may not be able to commercialize any of our product
candidates.
We do not have any manufacturing capabilities
and we do not intend to manufacture the pharmaceutical products that we plan to sell. We utilize contract manufacturers for the
production of the active pharmaceutical ingredients and the formulation of drug product for our trials of Berubicin that we will
need to conduct prior to seeking regulatory approval. However, we do not have agreements for supplies of Berubicin or any of our
other product candidates and we may not be able to reach agreements with these or other contract manufacturers for sufficient
supplies to commercialize Berubicin if it is approved. Additionally, the facilities used by any contract manufacturer to manufacture
Berubicin or any of our other product candidates must be the subject of a satisfactory inspection before the FDA approves the
product candidate manufactured at that facility. We will be completely dependent on these third-party manufacturers for compliance
with the requirements of U.S. and non-U.S. regulators for the manufacture of our finished products. If our manufacturers cannot
successfully manufacture material that conform to our specifications and the FDA’s current good manufacturing practice standards,
or cGMP, and other requirements of any governmental agency whose jurisdiction to which we are subject, our product candidates
will not be approved or, if already approved, may be subject to recalls. Reliance on third-party manufacturers entails risks to
which we would not be subject if we manufactured our product candidates, including:
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the possibility that we are unable to enter into a manufacturing agreement with a third party to manufacture our product candidates;
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the possible breach of the manufacturing agreements by the third parties because of factors beyond our control; and
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the possibility of termination or nonrenewal of the agreements by the third parties before we are able to arrange for a qualified replacement third-party manufacturer.
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Any of these factors could cause the delay
of approval or commercialization of our product candidates, cause us to incur higher costs or prevent us from commercializing our
product candidates successfully. Furthermore, if any of our product candidates are approved and contract manufacturers fail to
deliver the required commercial quantities of finished product on a timely basis at commercially reasonable prices and we are unable
to find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent
volumes and quality and on a timely basis, we would likely be unable to meet demand for our products and could lose potential revenue.
It may take several years to establish an alternative source of supply for our product candidates and to have any such new source
approved by the government agencies that regulate our products.
We have no sales, marketing or distribution experience and
we will have to invest significant resources to develop those capabilities or enter into third-party sales and marketing arrangements,
the problems with which could materially harm our business at any time.
We have no sales, marketing or distribution
experience. To develop sales, distribution and marketing capabilities, we will have to invest significant amounts of financial
and management resources, some of which will need to be committed prior to any confirmation that Berubicin or any of our other
product candidates will be approved by the FDA. For product candidates where we decide to perform sales, marketing and distribution
functions ourselves or through third parties, we could face a number of additional risks, including that we or our third-party
sales collaborators may not be able to build and maintain an effective marketing or sales force. If we use third parties to market
and sell our products, we may have limited or no control over their sales, marketing and distribution activities on which our future
revenues may depend.
We may not be successful in establishing and maintaining
development and commercialization collaborations, which could adversely affect our ability to develop certain of our product candidates
and our financial condition and operating results.
Because developing pharmaceutical products,
conducting clinical trials, obtaining regulatory approval, establishing manufacturing capabilities and marketing approved products
are expensive, we may seek to enter into collaborations with companies that have more experience. Additionally, if any of our product
candidates receives marketing approval, we may enter into sales and marketing arrangements with third parties with respect to our
unlicensed territories. If we are unable to enter into arrangements on acceptable terms, if at all, we may be unable to effectively
market and sell our products in our target markets. We expect to face competition in seeking appropriate collaborators. Moreover,
collaboration arrangements are complex and time consuming to negotiate, document and implement and they may require substantial
resources to maintain. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements
for the development of our product candidates.
One or more of our collaboration partners
may not devote sufficient resources to the commercialization of our product candidates or may otherwise fail in their commercialization.
The terms of any collaboration or other arrangement that we establish may contain provisions that are not favorable to us, or the
favorability of which is dependent on conditions that are out of our control or unknowable at the time of execution. In addition,
any collaboration that we enter into may be unsuccessful in the development and commercialization of our product candidates. In
some cases, we may be responsible for continuing preclinical and initial clinical development of a product candidate or research
program under a collaboration arrangement, and the payment we receive from our collaboration partner may be insufficient to cover
the cost of this development. If we are unable to reach agreements with suitable collaborators for our product candidates, we would
face increased costs, we may be forced to limit the number of our product candidates we can commercially develop or the territories
in which we commercialize them. As a result, we might fail to commercialize products or programs for which a suitable collaborator
cannot be found. If we fail to achieve successful collaborations, our operating results and financial condition could be materially
and adversely affected.
Our success depends greatly on the success of Berubicin’s
development for the treatment of glioblastoma, and our pipeline of product candidates beyond this lead indication is extremely
early stage and limited.
Other than Berubicin, we do not have any
other clinical-stage drug candidates in our portfolio. As such, we are dependent on the success of Berubicin in the near term.
We cannot provide you any assurance that we will be able to successfully advance Berubicin through the development process.
We face competition from other biotechnology and pharmaceutical
companies and our operating results will suffer if we fail to compete effectively.
The biotechnology and pharmaceutical industries
are intensely competitive and subject to rapid and significant technological change. We have competitors in the United States,
Europe and other jurisdictions, including major multinational pharmaceutical companies, established biotechnology companies, specialty
pharmaceutical and generic drug companies and universities and other research institutions. Many of our competitors have greater
financial and other resources, such as larger research and development staff and more experienced marketing and manufacturing organizations
than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory
approvals, recruiting patients and manufacturing pharmaceutical products. These companies also have significantly greater research,
sales and marketing capabilities and collaborative arrangements in our target markets with leading companies and research institutions.
Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license
novel compounds that could make the product candidates that we develop obsolete. As a result of all of these factors, our competitors
may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing drugs for the diseases
that we are targeting before we do or may develop drugs that are deemed to be more effective or gain greater market acceptance
than ours. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large, established companies. In addition, many universities and private and public research institutes may become active
in our target disease areas. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, technologies
and drug products that are more effective or less costly than any of our product candidates that we are currently developing or
that we may develop, which could render our products obsolete or noncompetitive.
If our competitors market products that
are more effective, safer or less expensive or that reach the market sooner than our future products, if any, we may not achieve
commercial success. In addition, because of our limited resources, it may be difficult for us to stay abreast of the rapid changes
in each technology. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological
advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive
or not economical.
Our licensed U.S. patents expired in March 2020, the expiration
of our patents may subject us to increased competition, and the Orphan Drug Designation we received for Berubicin will not bar
approval of other similar products under certain circumstances.
The U.S. patents for Berubicin that we licensed
from HPI expired in March 2020, and such expiration may subject us to increased competition. On June 10, 2020, the FDA granted
Orphan Drug Designation (“ODD”) for Berubicin for the treatment of malignant gliomas. ODD from the FDA is available
for drugs targeting diseases with less than 200,000 cases per year. ODD may enable market exclusivity of 7 years from the date
of approval of a NDA in the United States. During that period the FDA generally could not approve another product containing the
same drug for the same designated indication. Orphan drug exclusivity will not bar approval of another product under certain circumstances,
including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior to
the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company
with orphan drug exclusivity is not able to meet market demand. The ODD now constitutes our primary intellectual property protections
although we are exploring if there are other patents that could be filed related to Berubicin to extend additional protections.
However, we can provide no assurance that we will be able to file or receive additional patent protection. The failure to obtain
additional patent protection will reduce the barrier to entry for competition for Berubicin, which may adversely affect our operations.
We may incur substantial costs as a result of litigation
or other proceedings relating to patent and other intellectual property rights.
We may from time to time seek to enforce
our intellectual property rights against infringers when we determine that a successful outcome is probable and may lead to an
increase in the value of the intellectual property. If we choose to enforce our patent rights against a party, then that individual
or company has the right to ask the court to rule that such patents are invalid or should not be enforced. Additionally, the validity
of our patents and the patents we have licensed may be challenged if a petition for post grant proceedings such as interpartes
review and post grant review is filed within the statutorily applicable time with the U.S. Patent and Trademark Office (USPTO).
These lawsuits and proceedings are expensive and would consume time and resources and divert the attention of managerial and scientific
personnel even if we were successful in stopping the infringement of such patents. In addition, there is a risk that the court
will decide that such patents are not valid and that we do not have the right to stop the other party from using the inventions.
There is also the risk that, even if the validity of such patents is upheld, the court will refuse to stop the other party on the
ground that such other party’s activities do not infringe our intellectual property rights. In addition, in recent years
the U.S. Supreme Court modified some tests used by the USPTO in granting patents over the past 20 years, which may decrease the
likelihood that we will be able to obtain patents and increase the likelihood of a challenge of any patents we obtain or license.
We may be subject to claims that our employees and contractors
have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and pharmaceutical
industries, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our
competitors or potential competitors. We may be subject to claims that these employees, or we, have used or disclosed trade secrets
or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if
we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
If we are not able to adequately prevent disclosure of trade
secrets and other proprietary information, the value of our technology and products could be significantly diminished.
We rely on trade secrets to protect our
proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets
are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators,
and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent
disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential
information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade
secret protection could adversely affect our competitive business position.
We will need to expand our operations and increase the size
of our Company, and we may experience difficulties in managing growth.
As of February 11, 2021, we have 3 full-time
employees. We also have 2 officers serving as part-time employees. As we advance our product candidates through preclinical studies
and clinical trials, we will need to increase our product development, scientific and administrative headcount to manage these
programs. In addition, to meet our obligations as a public company, we may need to increase our general and administrative capabilities.
Our management, personnel and systems currently in place may not be adequate to support this future growth. If we are unable to
successfully manage this growth and increased complexity of operations, our business may be adversely affected.
We may not be able to manage our business effectively if
we are unable to attract and retain key personnel and consultants.
We may not be able to attract or retain
qualified management, finance, scientific and clinical personnel and consultants due to the intense competition for qualified personnel
and consultants among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel
and consultants to accomplish our business objectives, we may experience constraints that will significantly impede the achievement
of our development objectives, our ability to raise additional capital.
We are highly dependent on the development,
regulatory, commercialization and business development expertise of our management team, key employees and consultants. If we lose
one or more of our executive officers or key employees or consultants, our ability to implement our business strategy successfully
could be seriously harmed. Any of our executive officers or key employees or consultants may terminate their employment at any
time. Replacing executive officers, key employees and consultants may be difficult and may take an extended period of time because
of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory
approval of and commercialize products successfully. Competition to hire and retain employees and consultants from this limited
pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel and consultants. Our failure
to retain key personnel or consultants could materially harm our business.
In addition, we have scientific and clinical
advisors and consultants who assist us in formulating our research, development and clinical strategies. These advisors are not
our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability
to us and typically they will not enter into noncompete agreements with us. If a conflict of interest arises between their work
for us and their work for another entity, we may lose their services. In addition, our advisors may have arrangements with other
companies to assist those companies in developing products or technologies that may compete with ours.
Our chief medical officer and chief science officer are currently
working for us on a part-time basis. Our chief executive officer, chief medical officer and chief science officer, also provide
services for other companies in our industry and such other positions may create conflicts of interest for such officers in the
future.
Certain of our key employees are currently
part-time and/or provide services for other biotechnology development efforts, including companies, with respect to our chief executive
officer and chief medical officer, which are developing anti-cancer drug candidates. Specifically, John M. Climaco, our chairman
and chief executive officer, is also serving as a director for Moleculin Biotech, Inc ., a company also actively developing
anticancer drugs. Sandra Silberman, our chief medical officer, is also the chief medical officer for New Products at Moleculin.
Donald Picker, our chief science officer, is the chief scientific officer at Moleculin.
In addition to our officers’ part-time
status, since Mr. Climaco, Dr. Silberman and Dr. Picker are associated with other companies that are developing anti-cancer drug
candidates, they may encounter conflicts of interest in the future. Although we do not believe that the drug candidates we are
currently pursuing compete with the types of drug candidates being pursued by the other companies Mr. Climaco, Dr. Silberman and
Dr. Picker are associated with, there is no assurance that such conflicts will not arise in the future.
We do not expect that our insurance policies will cover all
of our business exposures thus leaving us exposed to significant uninsured liabilities.
We do not carry insurance for all categories
of risk that our business may encounter. There can be no assurance that we will secure adequate insurance coverage or that any
such insurance coverage will be sufficient to protect our operations to significant potential liability in the future. Any significant
uninsured liability may require us to pay substantial amounts, which would adversely affect our financial position and results
of operations.
Although dependent on certain key personnel, we do not have
any key man life insurance policies on any such people.
We are dependent on John M. Climaco, Christopher
Downs, Sandra Silberman, and Donald Picker in order to conduct our operations and execute our business plan, however, we have not
purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, if any
of John M. Climaco, Christopher Downs, Sandra Silberman, or Donald Picker die or become disabled, we will not receive any compensation
to assist with such person’s absence. The loss of such person could negatively affect us and our operations.
There are limited suppliers for active pharmaceutical ingredients
(“API”) used in our drug candidates. Problems with the third parties that manufacture the API used in our drug candidates
may delay our clinical trials or subject us to liability.
We do not currently own or operate manufacturing
facilities for clinical or commercial production of the API used in any of our drug candidates. We have no experience in API manufacturing,
and we lack the resources and the capability to manufacture any of the APIs used in our drug candidates, on either a clinical or
commercial scale. As a result, we rely on third parties to supply the API used in each of our drug candidates. We expect to continue
to depend on third parties to supply the API for our current and future product candidates and to supply the API in commercial
quantities. We are ultimately responsible for confirming that the APIs used in our product candidates are manufactured in accordance
with applicable regulations.
Our third-party suppliers may not carry
out their contractual obligations or meet our deadlines. In addition, the API they supply to us may not meet our specifications
and quality policies and procedures or they may not be able to supply the API in commercial quantities. If we need to find alternative
suppliers for the API used in any of our product candidates, we may not bel able to contract for such supplies on acceptable terms,
if at all. Any such failure to supply or delay caused by such contract manufacturers would have an adverse effect on our ability
to continue clinical development of our product candidates or commercialization of our product candidates.
If our third-party drug suppliers fail to
achieve and maintain high manufacturing standards in compliance with cGMP regulations, we could be subject to certain product liability
claims in the event such failure to comply resulted in defective product that caused injury or harm.
We may not be able to recover from any catastrophic event
affecting our suppliers.
Our suppliers may not have adequate measures
in place to minimize and recover from catastrophic events that may substantially destroy their capability to meet customer needs
and any measures they may have in place may not be adequate to recover production processes quickly enough to support critical
timelines or market demands. These catastrophic events may include weather and geologic events such as tornadoes, earthquakes,
floods, tidal waves, volcanic eruptions, and fires as well as infectious disease epidemics, acts of war, acts of terrorism and
nationalization of private industry. In addition, these catastrophic events may render some or all of the products at the affect
facilities unusable.
We may be materially adversely affected in the event of cyber-based
attacks, network security breaches, service interruptions, or data corruption.
We rely on information technology to process
and transmit sensitive electronic information and to manage or support variety of business processes and activities. We use technology
systems to record, process, and summarize financial information and results of operations for internal reporting purposes and to
comply with regulatory financial reporting, legal, and tax requirements. Our information technology systems, some of which are
managed by third parties, may be susceptible to damage, disruptions or shut down student computer viruses, attacks by computer
hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware
failures, technology for communication failures, user errors or catastrophic events. Although we have developed systems and processes
that are designed to protect proprietary or confidential information and prevent data loss and other security breaches, such measures
cannot provide absolute security. If our systems are breached or suffer severe damage, disruption or shutdown and we are unable
to effectively resolve the issues in a timely manner, our business and operating results may significantly suffer and we may be
subject to litigation, government enforcement actions or potential liability. Security breaches could also cause us to incur significant
remediation costs, result in product development delays, disrupt key business operations, including development of our product
candidates, and divert attention of management and key information technology resources.
Risks Related to Our Common Stock
Failure to maintain effective internal control over our financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act could cause our financial reports to be inaccurate.
We are required pursuant to Section 404
of the Sarbanes-Oxley Act of 2002, or Section 404, to maintain internal control over financial reporting and to assess and report
on the effectiveness of those controls. This assessment includes disclosure of any material weaknesses identified by our management
in our internal control over financial reporting. Our management concluded that our internal controls over financial reporting
were, and continue to be ineffective, and as of the year ended December 31, 2020, identified a material weakness in our internal
controls due to the lack of sufficient personnel to allow for segregation of duties. While management is working to remediate the
material weakness, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified
material weaknesses or that the controls will prevent or detect future material weaknesses. If we are not able to maintain effective
internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could
have a material adverse effect on our business.
Failure to continue improving our accounting systems and
controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded
companies.
As a public company, we operate in an increasingly
demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002, and the related rules and regulations
of the SEC. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal
control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce
reliable financial reports and are important to help prevent financial fraud.
Management performed an annual assessment
as of December 31, 2020 of the effectiveness of our internal control over financial reporting for its annual report. Our management
concluded that our internal control over financial reporting was, and continues to be, ineffective and as of the year ended December
31, 2020, due to a material weakness in our internal controls due to the lack of segregation of duties. For as long as we remain
an “emerging growth company” as defined in the JOBS Act, we have and intend to consider to take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth
companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section
404(b) of the Sarbanes-Oxley Act. We may continue to take advantage of these reporting exemptions until we are no longer an “emerging
growth company.” To remediate this material weakness, we engaged an outside firm to assist management with such accounting
and will continue to use outside firms as a resource to deal with other non-recurring or unusual transactions. However, notwithstanding
our remediation efforts, there is no assurance we will not encounter accounting errors in the future. If we cannot provide reliable
financial reports or prevent fraud, our business and results of operations could be harmed, and investors could lose confidence
in our reported financial information.
Our executive officers, directors, major stockholder and
their respective affiliates exercise significant control over us, which will limit our stockholders ability to influence corporate
matters and could delay or prevent a change in corporate control.
The holdings of our executive officers,
directors, founder and their affiliates, are, in the aggregate, approximately 42.2% of our outstanding common stock. As a result,
these stockholders will be able to influence our management and affairs and control the outcome of matters submitted to our stockholders
for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our
assets.
These stockholders acquired their shares
of common stock for substantially less than the price of the shares of common stock at the time of this report, and these stockholders
may have interests, with respect to their common stock, that are different from those of our other stockholders and the concentration
of voting power among one or more of these stockholders may have an adverse effect on the price of our common stock.
In addition, this concentration of ownership
might adversely affect the market price of our common stock by: (1) delaying, deferring or preventing a change of control of our
Company; (2) impeding a merger, consolidation, takeover or other business combination involving our Company; or (3) discouraging
a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company.
Our current stockholders’ ownership may be diluted
if additional capital stock is issued to raise capital, to finance acquisitions or in connection with strategic transactions.
We intend to seek to raise additional funds,
finance acquisitions or develop strategic relationships by issuing equity or convertible debt securities, which would reduce the
percentage ownership of our existing stockholders. Our board of directors has the authority, without action or vote of the stockholders,
to issue all or any part of our authorized but unissued shares of common or preferred stock. Our articles of incorporation authorize
us to issue up to 75,000,000 shares of common stock and 5,000,000 shares of preferred stock. Future issuances of common or preferred
stock would reduce your influence over matters on which stockholders vote and would be dilutive to earnings per share. In addition,
any newly issued preferred stock could have rights, preferences and privileges senior to those of the common stock. Those rights,
preferences and privileges could include, among other things, the establishment of dividends that must be paid prior to declaring
or paying dividends or other distributions to holders of our common stock or providing for preferential liquidation rights. These
rights, preferences and privileges could negatively affect the rights of holders of our common stock, and the right to convert
such preferred stock into shares of our common stock at a rate or price that would have a dilutive effect on the outstanding shares
of our common stock.
In May 2020, the SEC issued an order suspending the trading
of our common stock and Nasdaq issued a trading halt in our common stock.
On May 1, 2020, the SEC, pursuant to Section
12(k) of the Exchange Act, ordered the temporary suspension of trading in our securities because of questions regarding the accuracy
and adequacy of information in the marketplace about us and our securities. Pursuant to the suspension order, the suspension commenced
at 9:30 a.m. EDT on May 4, 2020 and terminated at 11:59 p.m. EDT on May 15, 2020. On May 15, 2020, Nasdaq issued a trading halt
in our common stock pending the receipt of requested information, which halt was released on May 28, 2020. We believe in the accuracy
and adequacy of our public disclosures, but can provide no assurances that we will not encounter future similar actions, which
may adversely affect the holders of our common stock.
General Risk Factors
As a biotechnology company, we may be at an increased risk
of securities class action litigation.
Historically, securities class action litigation
has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant
for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years.
If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which
could harm our business.
If securities or industry analysts do not publish research
or reports about us, or if they adversely change their recommendations regarding our common stock, then our stock price and trading
volume could decline.
The trading market for our common stock
will be influenced by the research and reports that industry or securities analysts publish about us, our industry and our market.
If no analyst elects to cover us and publish research or reports about us, the market for our common stock could be severely limited
and our stock price could be adversely affected. As a small-cap company, we are more likely than our larger competitors to lack
coverage from securities analysts. In addition, even if we receive analyst coverage, if one or more analysts ceases coverage of
us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our
stock price or trading volume to decline. If one or more analysts who elect to cover us issue negative reports or adversely change
their recommendations regarding our common stock, our stock price could decline.
As an “emerging growth company” under the Jumpstart
Our Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
As an “emerging growth company”
under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerging
growth company until the earliest of:
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the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
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the last day of the fiscal year following the fifth anniversary of our IPO, which occurred in November 2019;
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the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or
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the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws.
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For so long as we remain an emerging growth
company, we will not be required to:
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have an auditor report on our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);
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submit certain executive compensation matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010;
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include detailed compensation discussion and analysis in our filings under the Securities Exchange Act of 1934, as amended, and instead may provide a reduced level of disclosure concerning executive compensation;
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may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and
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are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act.
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We intend to take advantage of all of these
reduced reporting requirements and exemptions, other than the longer phase-in periods for the adoption of new or revised financial
accounting standards under §107 of the JOBS Act.
Certain of these reduced reporting requirements
and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under
SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s
assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are
not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial
statements and related MD&A disclosure.
We cannot predict if investors will find
our securities less attractive due to our reliance on these exemptions. If investors were to find our common stock less attractive
as a result of our election, we may have difficulty raising financing in the future.