Item
1. Business
Our
Strategy
Our
objective is to develop and commercialize our product candidates to treat diseases where the innate immune system is not functioning
normally and contributing to the patient’s disease. This can be in cancer where Natural Killer (“NK”) cells
are inactive and contribute to a tumor’s evasion of the immune system and/or disease progression while expression of MUC4
and cells of the tumor microenvironment such as Myeloid Derived Suppressor Cells (“MDSC”) proliferate to protect the
tumor from attack by the patient’s immune system or this can be other diseases such as neurologic and metabolic diseases
where chronic inflammation results in innate immune system dysfunction and disease progression or infectious disease where cytokine
storm causes a hypermetabolic state that causes the need to seek medical attention. Our initial focus will be the treatment of
cancer, treatment of Alzheimer’s Disease (“AD”), treatment of Treatment Resistant Depression (“TRD”),
treatment of immune mediated complications due to COVID-19 and non-alcoholic steatohepatitis (“NASH”). In cancer,
we plan to pursue two parallel development programs: (1) with INKmune we will initially focus on treating resistant disease women
with relapse refractory ovarian carcinoma and patients with high-risk myelodysplastic syndrome (high risk MDS); (2) with INB03,
we will treat patients with advanced cancers with elevated biomarkers of inflammation in their blood and evidence of disease that
is resistant to immunotherapy including women with MUC4 expressing HER2+ breast cancer. Our third drug candidate XPro1595, targets
Alzheimer’s Disease and TRD. XPro1595 for AD is progressing through Phase I trials and is being prepared for Phase II trials.
XPro1595 for TRD is being prepared for Phase II trials. Our fourth drug candidate, LIVNate, will be used to treat patients with
NASH. Our final drug, Quellor is in Phase II trials for the treatment of pulmonary complications due to COVID-19 infection. The
principal components of our strategy to achieve this objective are to:
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pursue
development strategies and regulatory approval pathways that allow the treatment of oncology patients with our lead product
candidates, INKmune and INB03;
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pursue development
strategies and regulatory approval pathways that allow the treatment of neurodegenerative diseases in patients with our lead
product candidates, XPro1595;
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pursue development
strategies and regulatory approval pathways that allow the treatment of pulmonary complications from COVID-19 infection patients
with our lead product candidate, Quellor;
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pursue
development strategies and regulatory approval pathways that allow the treatment of NASH in patients with our lead product candidates,
LIVNate;
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adopt
a product development strategy that solidifies our existing intellectual property (“IP”) to prevent competition
and expand our IP suite into related immunotherapeutic areas;
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provide
clear value propositions to third-party payers, such as managed care companies or government programs like Medicare, to merit
reimbursement for our product candidates; and
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Collaborate
with other pharmaceutical companies with respect to, among other things, our INKmune and the DN-TNF platform that includes
INB03, XPro1595, Quellor and LIVNate product candidates and other products that will benefit from development or marketing
beyond our current resources.
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Pursue
development and regulatory approval pathways. We believe Quellor, INKmune, INB03 and XPro1595 may be approvable under pathways
that are potentially shorter than those typically available for drug products based on novel active ingredients, including as
an orphan drug under the Orphan Drug Act and approval under the Food and Drug Administration (the “FDA”) Accelerated
Approval Program (see “Government Regulation”). We have not yet had a discussion with the Medicines and Healthcare
Products Regulatory Agency (“MHRA”) and/or FDA regarding such designation, but plan to do so in the future. We believe
both our INB03 HER2+ metastatic breast cancer program, high risk MDS and ovarian carcinoma treatment programs and our program
Quellor to treat respiratory complications due to COVID19 infection fit the criteria used by the FDA to grant these regulatory
designations. We believe that it would take a minimum of six months to receive Orphan Drug status once we submit an application
and a minimum of 12 months to receive a designation once we submit an application. We might never have these discussions, submit
applications under the Orphan Drug Act as the FDA Accelerated Approval Program or have these applications approved if we do.
Adopt
a two-pronged patent strategy. We are pursuing a two-pronged product development strategy that will seek to solidify our existing
IP to prevent competition and expand our IP suite into related therapeutic areas. We are confident that our core in-licensed IP
(see “Intellectual Property”) will allow us both freedom-to-operate and provide robust protection from outside competition.
We will continue to invest in expanding our patent suite. We will also seek to further to strengthen our IP position by looking
to in-license IP related to our focus on the innate immune system.
Provide
clear value propositions to third-party payors to merit reimbursement for our product candidates. We are designing our clinical
development programs to demonstrate compelling, competitive advantages to patients and prescribers, and to demonstrate value propositions
to third-party payors. We believe the use of INKmune and/or INB03 in patients with a high risk of tumor progression and death
from tumor should prolong survival, improve the patient’s quality of life and decrease the total cost of care for patients
with these lethal malignancies. For example, ovarian cancer patients relapse frequently. Each relapse requires an expensive, hospital-based
treatment regimen that has decreasing benefits. Treatment with INKmune as an out-patient may provide a more durable remission
and limit the need for treatment-associated hospitalizations. At the patient level, we believe INKmune and INB03 therapy, once
approved, should improve survival and quality of life. At the payor level, we believe INKmune, once approved, should provide more
predictable costs and outcomes. Therapies for Alzheimer’s disease are needed for medical, social and economic reasons. The
cost of Alzheimer’s disease to the government is large and growing. The cost to families and care givers is real and burdensome.
We believe treatment of patients with dementia, including Alzheimer’s disease, may provide a strategy to alter the costly
dynamic of this disease in society today. NASH, a silent epidemic in the US due to the high incidence of obesity, is expected
to be the most common cause of liver transplant 2030. There are no approved therapies for the NASH at this time. We believe treatment
of patients requiring hospitalization due to medical complications of COVID-19 infection may alter the arc of the pandemic. If
effective, Quellor should allow patients to be discharged from the hospital more quickly and decrease the risk of respiratory
failure requiring mechanical ventilation.
Collaborate
to maximize the value of our technology. We believe there are two reasons for us to enter collaborations with other companies.
The first is the further development of INKmune, INB03, Quellor, LIVNate and XPro1595 by either providing additional innovations
to the product, including combination therapy strategies, and/or providing resources to improve the speed and breadth of the development
process. The second is to optimize the commercialization of our products either globally or regionally. The ideal partner will
benefit us in both ways.
We
continue to look for ways to utilize our unique capabilities to optimize clinical application of cell therapies. We believe that
we have identified a way to manufacture human mesenchymal stem cells for the medical research and biotech community that offers
large volumes of high-quality, low passage human umbilical cord mesenchymal stem cells with minimal batch-to-batch variability.
We believe this may solve the problem associated with supplying an adequate supply of human mesenchymal stem cells for clinical
applications. The process to produce pooled, human umbilical cord mesenchymal stem cells was developed at University College London.
We have established a reliable supply of human umbilical cords based on our agreement with the Anthony Nolan Cord Blood Bank in
the United Kingdom. We have developed a validated manufacturing process that reliably produces contract manufacturer of the clinical
grade (“cGMP”) quality mesenchymal stem cells. The manufacturing process can be performed at a contract manufacturing
site under the direction of Mark Lowdell, the Company’s CSO. We have negotiated an exclusive 10-year license to the manufacturing
process from University College London Business, the licensing organization of University College London. We will seek academic
laboratories and biopharma companies who need a reliable source of high quality pooled human umbilical cord mesenchymal stem cells
for research of and development of clinical products. Once identified, we plan to act as a cGMP for the development of therapeutic
products by utilizing contract manufacturers. Because the production of the product is not continuous, we do not expect to engage
a contract manufacturer until we have a customer identified. We have identified several contract manufacturers in the UK that
have the capability to produce cGMP stem cells. We expect the commercial arrangement with academic laboratories or biopharma companies
to be a combination of fee-for-service and licensing that does not require additional investment by us. We will be opportunistic
in pursuing therapeutic opportunities for our own portfolio with this platform in the future if resources become available. The
regulatory path for therapeutic applications of the mesenchymal stem cell products is well established and similar to the regulatory
approval process for other cell therapies. We will only be responsible for regulatory compliance related to manufacturing of the
mesenchymal stem cells when the product is being developed by a third party. When developing a therapeutic product for the Company’s
commercial portfolio, the Company will be responsible for all aspects of the regulatory process.
Overview
of Immunotherapy for Cancer
The
immune system has two parts, innate and adaptive. The innate immune system is the body’s first line of defense against an
infection, providing immediate, non-specific responses to eliminate harmful cells in the body. Components of the innate immune
system include cytokines, chemokines, macrophages, neutrophils and NK cells, among others.
The
adaptive immune system is often initially triggered by the innate immune system, mounts a delayed response against diseased cells
and plays a role protecting against re-infection. An adaptive immune response is highly specific to a pathogen or antigen and
is developed or learned from prior exposure. Key components of the adaptive immune system include antibodies which bind to antigens
and mark them for destruction by other immune cells, B-cells which produce these antibodies upon exposure to antigens, and T-cells
which attack and eliminate the diseased cells.
The
biopharmaceutical industry has made significant advances in harnessing specific components of innate and adaptive immune systems
for therapeutic use. Some of these approaches are summarized below.
Cytokines.
One of the early applications of immunotherapy is the use of cytokines, including interferons and interleukin-2 (“IL-2”).
Interferons are molecules that inhibit the growth and replication of diseased cells and stimulate innate immune cells to attack
them. They have been used as standard of care for hepatitis B and C and multiple sclerosis, and to a lesser extent, as treatment
for certain cancers, including chronic myeloid leukemia, cutaneous T-cell lymphoma, myeloma and non-Hodgkin’s lymphoma.
However, the use of interferons has generally decreased over the years due to serious adverse events (e.g., flu-like symptoms
and dramatic weight loss) and introduction of new therapies with higher efficacy, better safety profiles and more convenient administration
although Alpha-interferon remains the treatment of choice for some hematological conditions such as polycythemia. IL-2 activates
T-cells and NK cells to attack diseased cells. IL-2 has been used to treat select cancers, but due to its relatively poor safety
profile, physicians often only resort to this therapy for the most advanced settings. Tumor Necrosis Factor alpha (“TNF”)
is the focus of INB03. TNF biology has four elements that include two cytokines, soluble TNF and trans-membrane TNF (“sTNF”
and “tmTNF,” respectively), and two receptors, TNF Receptor 1 and 2 (“TNFR1” and “TNFR2”).
The biology of TNF ligation of TNFR varies dramatically based on what elements of the TNF system that are used. sTNF binding to
TNFR1 is responsible for inflammation and cell death while sTNF binding to TNFR2 promotes proliferation of regulatory T cells
(“Treg”). In patients with advanced cancers, increased sTNF is not favorable to long-term survival because it promotes
epithelial-mesenchymal transformation and metastasis while making the tumor microenvironment more immunosuppressive promoting
resistance to therapy. In the CNS, sTNF promotes neuronal cell death, demyelination and synaptic pruning while tmTNF promotes
nerve cell survival, improves synaptic function and stimulates remyelination. In brief, sTNF is the “bad” TNF and
tmTNF is the “good” TNF. In patients with cancer, infection or neurologic disease, blockade of tmTNF function has
negative consequences such as immunosuppression, increased infection, synaptic dysfunction and demyelination.
Antibody
therapy. Antibodies exist in three formats: monoclonals (“mAbs”), oligo/polyclonal and antibody-drug conjugates.
mAbs represent an effective therapeutic modality and are important to the treatment paradigm of various diseases. Drug manufacturers
have leveraged mAbs’ ability to induce an antibody-dependent cell-mediated cytotoxicity, or ADCC effect to develop better
treatments that prolong survival and quality of life of patients. In addition, mAbs designed to inhibit specific checkpoints in
the immune system have overcome in vivo immune suppression and the resulting immune responses have led to profound therapeutic
benefit in some patients. However, the degree of efficacy of these therapies is heavily reliant on the immune system of patients,
many of whom are severely immuno-compromised. For example, despite over $1.0 billion of sales generated by recently launched PD-1
and PDL1 checkpoint inhibitors, they are reported to be generally only effective in approximately 10% to 25% of the addressable
patient population. In addition, mAbs are manufactured through a complex process that requires purification of cell products created
from a cell line. Polyspecific antibodies, for example bi-specific antibodies, are able to target more than one antigen. These
are often used to bring and effector T cell in contact with a target cell. Antibody drug conjugates are mAbs attached to a toxin,
chemotherapy or radio therapy that delivers the cancer killing payload directly to the cancer.
Dendritic
Cell Therapies. This approach is designed to indirectly stimulate a patient’s T-cells by leveraging the role of
dendritic cells in presenting antigens to T-cells. Cancer vaccines are the most common application of dendritic cells. The only
FDA-approved dendritic cell therapy is PROVENGE, which entails collecting monocytes from the patient, maturing them into dendritic
cells, “loading” ex vivo with the patient’s cancer antigens, and then re-infusing in the patient. Currently,
this process is cumbersome and expensive, and again, relies on an intact and effective immune system of the patient. There are
additional ongoing preclinical studies and clinical trials being conducted by our competitors aimed at addressing certain of the
limitations associated with this approach. To date, current clinical results of dendritic cell therapies have been mixed.
CAR-T
and TCR Therapies. T-cells recognize diseased cells by receptors engaging with antigens that are present on or inside
the diseased cells. CAR-T therapy entails genetically engineering T-cells to express synthetic CARs that direct T-cells to antigens
on the surface of cancer cells. TCR therapy modifies T-cells to express high-affinity tumor specific TCRs that recognize intra-cellular
antigens that must be presented on the surface of target cells. In early clinical trials, CAR-T and TCR therapies have demonstrated
impressive anti-tumor activity in a narrow spectrum of hematologic cancers and garnered significant attention by research institutions
and biopharmaceutical companies. We believe a key limitation of adaptive autologous immunotherapy is the need to retrieve non-compromised
immune cells from a cancer patient which requires a complex and costly manufacturing process to develop the therapy. The complexity
of this personalized process is reflected in the price of the two approved therapies. CAR-T therapies - tisagenlecleucel and axicabtagene
ciloleucel for advanced leukemia and lymphoma respectively. The cost of a single therapy is many hundreds of thousands of dollars.
As a consequence of this need to harvest active T-cells, current Phase I clinical trials for autologous CAR-T cell therapy in
large part enroll patients from highly selected, often relatively early-stage disease in a narrow spectrum of cancers, including
bulky hematological cancers. In addition, Phase I clinical trials of CAR-T cell immunotherapy have reported severe adverse toxicities
of cytokine release syndrome and neurotoxicity, requiring hospitalization, pre-conditioning and, in some instances, intensive
care unit admission following side effects associated with cytokine release syndrome. As a result, though our competitors continue
to develop their CAR-T and TCR product candidates with the goal of addressing certain of the limitations associated with these
approaches, we believe these serious challenges may limit their potential and use in a variety of indications, including solid
tumors.
Checkpoint
Inhibitors. Immune cells express proteins that are immune checkpoints that control and down-regulate the immune response.
These are best defined in T lymphocytes and include PD-1, CTLA-4, TIM-3 and LAG3. Tumor cells express the ligands to these receptors.
When T cells bind the ligand to these proteins on the tumor cells, the T cell is turned off and does not attempt to attack the
tumor cell. Thus, checkpoint inhibitors (“CPI”) are part of the complex strategy used by the tumor to evade the patient’s
immune system and are responsible for resistance to immunotherapy. Biopharmaceutical companies have successfully developed CPI
that block the receptor/ligand interaction to promote the adaptive immune response to the tumor. Six CPI are currently approved,
pembrolizumab, nivolumab, atezolizumab, avelumab, durvalumab, and ipilimumab for a wide variety of solid tumors including melanoma,
lung, bladder, gastric cancers and others. More CPI are in development and more tumor types will be added to the list of sensitive
tumors over the next years. CPI have become the backbone of cancer therapy and are expected to be the best -selling class of drugs
by 2027.
NK
Cells. NK cells typically represent approximately 2% to 13% of circulating lymphocytes and are a critical component of
the immune system responsible for innate immunity. Unlike adaptive immune cells, they are ever present and ready to attack, having
the inherent ability to detect and eliminate diseased cells without the need for antigen presentation, which is why they are called
“natural killers.”
NK
cells bind to stress ligands expressed by the diseased cells and directly eliminate them. This binding induces NK cells to release
cytokines, including, interferons and GM-CSF, which are integral in recruiting additional innate and adaptive immune responses
by the host. NK cells also represent a critical effector cell for ADCC, whereby target cells bound with human antibodies, whether
made by the patient’s body or administered, are selectively destroyed by the NK cells.
MDSC
Cells: MDSC are present in very low quantities in healthy patients. MDSC develop and proliferate in patients with chronic
infection and with cancer. In cancer, MDSC are a unique and well-defined cell population that home to the cancer and secrete immunosuppressive
cytokines that provide a protective, immunosuppressive shield to the tumor. This protective immunosuppressive shield prevents
the patient’s immune system from attacking the tumor. The presence of MDSC in the tumor microenvironment and/or circulating
in the patient’s blood predict for more advanced disease, resistance to immunotherapy and a worse patient survival.
Our
Innate Immune Dominant-Negative TNF product candidate
We
renamed XPro1595, which we license from Xencor, to INB03 when it is used for cancer related indications. We will continue
to call the drug XPro1595 when used for treatment of neuropsychiatric diseases, including Alzheimer’s disease and TRD discussed
below. We call the drug Quellor and LIVNate respectively for treatment of pulmonary complications of COVID-19 and NASH respectively.
Quellor, LIVNate, INB03 and XPro1595 are the same drug with different names for marketing purposes. INB03 is a novel innate immune
system check-point inhibitor that we believe decreases expression of MUC4 by the tumor, an important resistance mechanism to immunotherapy,
decreases proliferation of MDSC and decreases the secretion of immunosuppressive cytokines that protect the tumor from the patient’s
immunologic attack and help make the tumor resistant to immunotherapy. INB03, by inhibiting soluble TNF without inhibiting trans-membrane
TNF or TNF receptors (“tmTNF” and “TNFR” respectively), decreases expression of MUC4, alters the immunoregulatory
cell and cytokine profile of the tumor microenvironment to decrease the population of MDSC, decrease immunosuppressive cytokines
and increase immunoregulatory cytokines that changes the patient’s immune response to their tumor with improved NK/DC crosstalk
that causes expansion of the immune response including recruitment of the adaptive immune system with an increase in effector
and cytotoxic T cells that attack the cancer allowing for decreased resistance to immunotherapy including immune checkpoint inhibitors
(CPR), anti-HER2 immunotherapy such as Herceptin and kinase inhibitors such as lapatinib. By using INB03 as part of combination
therapy for cancer, we believe the patient’s dysregulated immune response, a hallmark of cancer progression and resistance
to therapy, to be converted to a coordinated immune response that can overcome resistance mechanisms to immunotherapy. These immune
responses have been studied in two animal models. In a murine model of an inflammatory cancer, where 3-methylcholanthrese is given
to mice in a subcutaneous injection that causes the development of multiple cutaneous fibrosarcoma. This model was developed by
Y Akamatsu in 1967 while working at the National Cancer Institute of the NIH. In research published by Professor Nikola Vujanovic
in Cancer Immunology Research in 2016, treatment with INB03 resulted in smaller and fewer cancers with increased
survival. INB03 is an engineered PEGylated protein that neutralizes human soluble TNF, a human inflammatory cytokine that is increased
in patients with advanced cancer. By specifically neutralizing the cytokine, there is decreased phosphorylation of STAT3, an essential
step required for the proliferation of the MDSC population, and secretion of the immunosuppressive cytokines. The combination
of decreased MDSC proliferation and decreased immunosuppressive cytokines allows the immune system to respond to the tumor. This
data was published in an article entitled Inhibition of Soluble Tumor Necrosis Factor Prevents Chemically Induced Carcinogenesis
in Mice in Cancer Immunology Research in Cancer Immunology Research 2016. In summary, INB03 functions as an innate
immune system checkpoint inhibitor by eliminating the population of MDSC that provides an immunosuppressive shield protecting
the tumor, the patient’s immune system is able to function normally to the benefit of the patient – it can attack
the tumor. TNF plays an important role in breast cancer (Schillaci R, Front. Oncol., 22 April 2020 | https://doi.org/10.3389/fonc.2020.00584).
In a murine model of trastuzumab resistant breast cancer using JMIT-1 cells, a human cell line of HER2 positive breast cancer
resistant to trastuzumab placed into immunocompromised mice, INB03 downregulates MUC4 from the surface of the JMIT-1 HER2+ breast
cancer cells to allow the trastuzumab resistant cells to become trastuzumab sensitive (Figure A from Bruni, NYAS 2020) to decrease
tumor growth (from Schillaci SABCS 2018, Figure B). JMIT-1 cells are also resistant to lapatinib, a TKI inhibitor used as a second
line therapy in women with trastuzumab resistant HER2+ breast cancer. The addition of INB03 to lapatinib in the animal model reverses
lapatinib resistance in part by decreasing expression of MUC4 (from Bruni NYAS 2020, Figure C). In addition to decreasing resistance
to trastuzumab by decreasing MUC4 expression, INB03 decreases the immunosuppressive tumor microenvironment (Schillaci SABCS 2018,
Bruni NYAS 2020). These data are relevant to all tumors that express HER2 and MUC4 including upper gastrointestinal malignancies
such as gastric and pancreatic cancer.
Because
INB03 targets the patient’s immune system and not the tumor, we believe INB03 is an immunotherapy that can be used to treat
many types of hematologic malignancies and solid tumors as part of combination therapy. The decision to use INB03 in a patient
will be based on biomarkers that should predict that a patient will benefit from treatment with the drug. MDSC rarely exist in
patients without cancer or chronic inflammation. Because MDSC can be measured in the tumor and/or blood of patients with immune
dysregulation and chronic inflammation caused by their cancer, MDSC blood levels i) have prognostic value predicting cancer stage
and risk of dying from cancer; ii) may be used as a biomarker to target patients who will benefit from INB03 therapy and iii)
should be biomarkers demonstrating a pharmacodynamic effect of INB03. Other biomarkers of inflammation may be useful in predicting
if a patient will benefit from therapy with INB03 such as Our Phase I clinical trial focused on using INB03 as monotherapy. This
is a typical Phase I clinical trial design for first-in-man trials in cancer. We expect to use INB03 as part of combination therapy
with approved cancer therapies as part of Phase II development. We do not expect to need to modify INB03 therapy to treat each
different type of cancer, because INB03 therapy targets the immune system, not the cancer. We do expect to develop the INB03 beyond
Phase II to target a specific type of cancer to meet the current system of regulatory approval. For instance, INB03 may be approved
to treat patients with elevated MDSC who have lung cancer. To get subsequent approval for the treatment of patients with renal
cell cancer who have increased MDSC, we will need to perform a pivotal trial in patients with renal cancer. Likewise, if we want
to get approval of treatment of women with HER2 positive breast cancer who express MUC4, we will need to perform a trial in those
patients and the results of that trial may be independent of MDSC levels. After the first regulatory approval, if and when achieved,
we believe the difficulty and cost of achieving these labels extensions will decline with each successive approval. At this time,
we cannot predict if patients without biomarkers of inflammation, elevated MDSC or cytokines, or increased expression of MUC4
will benefit from treatment with INB03. Those studies may be performed in the future, but they are not a priority.
XPro1595
neutralizes soluble TNF in the brain in exactly the same way INB03 neutralizes soluble TNF in the tumor microenvironment but the
effects of soluble TNF neutralization in the brain are different. The cause of the destructive neuroinflammation in the brain
are microglial and astroglial cells. The glial cell are two of four cells in the neural unit that also includes oligodentrocytes
and nerve cells. Activated microglial cells are considered the resident macrophages of the brain. The primary role of microglial
cells is to protect the neural unit from infection. When innate immune dysfunction causes chronic inflammation, activated microglial
cells produce soluble TNF that activates astrocytes. Activated glial cells cause nerve cell and oligodrocyte dysfunction that
results in synaptic pruning, nerve cell death and demyelination of neurons. These pathologies contribute, in part, to neurodegenerative
diseases such as AD, Parkinson’s disease, ALS, MS, Huntington’s disease, glaucoma and TBI (traumatic brain injury)
may contribute to neuropsychiatric diseases such as depression, bi-polar disease, sleep disorders, autism, schizophrenia and PTSD.
In the setting of AD, microglial activation causes dendritic pruning, synaptic dysfunction and nerve cell death that contributes
to cognitive decline and the behavioral manifestations of AD including depression, aggressiveness, sleep disorders, hallucinations
and anhedonia. Elimination of microglial activation should reverse these symptoms. Because soluble TNF is the apex cytokine in
the inflammatory cytokine cascade, neutralization of soluble TNF with XPro1595 should prevent glial activation and normalizes
function of the neural unit.
The
Company has an on-going Phase I trial using XPro1595 to reverse neuroinflammation in patients with Alzheimer’s disease.
The trial is being performed in Australia and is partially funded by a $1M USD Part-the-Cloud Award from the Alzheimer’s
Association. The clinical trial is the first in the Company’s development program for the treatment of dementia. The open
label, dose escalation trial in patients with Alzheimer’s disease with biomarkers of peripheral inflammation (one of CRP>1.5mg/L,
HgbA1c>6.0, ESR>10sec or have ApoE4) treats the patients with XPro1595 as a once-a-week subcutaneous injection for 3 months.
Patients have multiple biomarkers of neuroinflammation tested before and during therapy including soluble biomarkers in blood
and cerebral spinal fluid, volatile biomarkers in breath, behavioral biomarkers (neuropsychiatric symptoms of AD) and neuroimaging
biomarkers using MRI. The primary goal of this short, open label study is to demonstrate that treatment with XPro1595 decreases
neuroinflammation safely and to define the dose of XPro1595 to use in the Phase II trial. Studies of cognitive function are performed
on the patients but are not expected to show significant change because of the short duration of the trial and the wide range
of disability in patients enrolled in the clinical trial (MMSE range: 24-12). The goal of the planned Phase II trial will be to
demonstrate the prolonged control of neuroinflammation in patients with dementia will help control cognitive decline. Although
the trial has not been designed, we expect the trial be of a longer duration than the Phase I trial.
The
trial continues to enroll patients. More than half of the expected 18 patients have been enrolled. Preliminary data was presented
in a webinar on 13 July 2020. Neuroimaging data from six patients were presented in the figure below. In summary, treatment with
XPro1595 at either 0.3 or 1.0mg/kg once-a-week as a subcutaneous injection (low and high dose respectively) decreased white matter
free water (WMFW) as measured by MRI. WMFW is a validated biomarker of neuroinflammation. Although the number of patients is low,
there was a dose response with a greater decrease in WMFW in the high dose compared to the low dose group. An analysis of inflammation
in white matter tracts demonstrated a significant decrease in WMFW (40%; range 20-52%) in the arcute fasciculus, a white matter
tract important in the control of language and short-term memory (Figure D). These data suggest XPro1595 is decreasing neuroinflammation
in patients with Alzheimer’s disease who have biomarkers of peripheral inflammation.
Additional
data was presented on January 21, 2021. The goal of the January 21 data release was to show a correlation between the white matter
free water, a novel biomarker of inflammation with cerebral spinal fluid (“CSF”) cytokines and chemokine levels, a
traditional measure neuroinflammation. CSF cytokine/chemokines were measure in 9 patients before and after 12 weeks of weekly
therapy with XPro1595 using a panel from OLINK Target 48 Cytokine (https://www.olink.com/products/olink-target-48-cytokine/),
that measures 45 (Figure AD1).
In
the 6 patients in the 1mg/kg per week dose, only one cytokine and chemokine, interferon gamma (INFg) did not change in the CSF
of patients, the remainder all decreased on average of 15%. Using data from all patients treated for 12 weeks (3 low dose, 6 high
dose), a high correlation (R2=.7561) between the white matter free water safe mase and the inflammation composite score
is shown in figure AD2. The data analyzed provides evidence that XPro1595 decreases neuroinflammation in patients with Alzheimer’s
disease.
We believe these data
support the use of XPro1595 to treat other diseases where neuroinflammation is a part of the pathophysiology of the disease. The
company studied the consequences of decreasing neuroinflammation in the 6 patients from high dose group (XPro1595 1mg/kg for 12
weeks) be looking at the CSF proteome using technology for Proteome Sciences using their TMT Calibrator™ platform (https://www.proteomics.com/services/tmtcalibrator-workflow).
A large data set of proteins were identified. Early analysis of the data focusing on 26 AD related proteins demonstrated changes
in inflammation, neuronal and synaptic proteins caused by decreasing neuroinflammation after treatment with XPro1595 (Figure AD3).
The proteome also demonstrated a clear dose response with a greater number of proteins being affected by the high dose compared
to low dose XPro1595 therapy (0.3 vs 1.0 mg/kg/week for 12 weeks) (Figure AD4). The CSF proteome data is only partially analyzed.
Additional data may result from these ongoing analytics. In summary, these data allow the Company to commit to initiating a blinded
randomized Phase II trial in Alzheimer’s disease patients with peripheral biomarkers of inflammation in the second half of
2021. The design of the trial has not been finalized nor has the Company had discussions with the FDA. Hence the precise start
date depends on gaining regulatory approval for trial initiation by the FDA and resolution of the COVID19 pandemic.
COVID-19
infection causes a cytokine storm in many patients. The cytokine storm includes elevated levels of TNF, IL6, IL1 and other pro-inflammatory
cytokines in the patient’s blood. The cytokine storm correlates with symptoms of COVID19 of one or more organ systems -
neurologic, gastrointestinal, pulmonary, cardiovascular and renal. In 20% of patients, the cytokine storm causes severe enough
symptoms to require hospitalization. Targeting soluble TNF may have benefit in hospitalized patients with cytokine storm for two
reasons. TNF may be the “master cytokine”. Up-regulation of TNF is required for expression of IL6 and IL1, the two
other prominent cytokines of the cytokine storm. TNF activates endothelial cells to upregulate Tissue Factor that cause the formation
of blood clots. Aberant blood clots contribute to the pathology in patients with COVID-19 infection.
The
Company initiated a blinded randomized trial using Quellor to treat hospitalized patients with respiratory symptoms due to a COVID-19
infection. The 366-patient trial is being perform under an FDA IND#151,834 in multiple centers in the US. The trial includes a
Go/NoGo decision by the Data Safety Monitoring Board (“DSMB”) after the first 100 patients. No data will be released
by the DSMB other than the trial should continue or be closed. The trial enrolls patients admitted to the hospital who are considered
high risk for developing the need for mechanical respiratory support. Patients are randomized to receive a single dose of Quellor,
1mg/kg as a subcutaneous injection or placebo. If patients remain in the hospital for one week, they may get a second dose of
the investigational product. The primary end-point is the need for mechanical ventilation or death by 28 days. The final safety
visit is at or about day 40. Quellor is identical to XPro1595, INB03 and LIVNate. The trial is listed on www.clinicaltrials.gov.
Effective
therapy for TRD is a large unmet need. Twenty percent of patients with a Major Depressive Disorder have TRD. Once third of TRD
patients have peripheral biomarkers to inflammation (elevated CRP). This is a large patient population. The role of TNF and anti-TNF
therapeutics was explored in a small open label clinical trial by Prof. Andrew Miller, MD of Emory University demonstrated the
patients have elevated TNF levels and treatment with infliximab treated their depression (Miller, 2011).
The Company received
a $2.9M USD award from the National Institute of Mental Health (“NIMH”) to treat TRD with XPro1595. The blinded, randomized
Phase II trial will use a biomarkers of peripheral inflammation to select patients with TRD for enrollment. Patients will be treated
for 6 weeks. Primary end-points include both clinical and neuroimaging measures. The final trial design is ongoing and discussions
with the FDA are not complete. The Company anticipates receiving authorization to initiate the clinical trial in the second half
of 2021.
LIVNate
neutralizes soluble TNF in the treatment of NASH the same way that INB03 and XPro1595 neutralize soluble TNF for the treatment
of cancer and neurodegenerative diseases respectively. NASH is a complex disease with inflammatory, metabolic and fibrotic components
that contribute to disease progression. The effects of LIVNate on NASH are diverse. Based on murine data, we believe there are
3 major pathologic cycles that contribute to NASH. The peripheral pathologic cycle is metabolic with obesity and insulin resistance
contributing to the inflammatory and metabolic process that drives NASH. The regional pathologic cycle includes intestinal inflammation
with resulting leaky gut that drives the development mesenteric fat. All three elements contribute to a highly inflammatory mileau
delivered directly to the liver via the portal vein. The local pathologic loop includes lipotoxicity and innate immune dysfunction
caused by activated hepatic stellate cell, natural killer cells and hepatocytes. These pathologic cycles cause hepatocyte death,
inflammation and fibrosis – the pathologic hallmarks of NASH. In murine models of NASH, LIVNate has effects on each pathologic
cycle decreasing insulin resistance, intestinal inflammation and leak, hepatic inflammation, hepatocyte death and fibrosis. These
results must be confirmed in humans.
INB03,
XPro1595, Quellor and LIVNate, are delivered as a subcutaneous injection, similar to an insulin treatment, given one to three
times per week. Because this is a simple subcutaneous injection similar to an insulin injection (the therapy patients give themselves
for treatment of Type 1 diabetes mellitus), we expect patients to administer the therapy to themselves and not require expensive
or logistically challenging clinic visits to receive the therapy.
Three
step process to preparation for INB03, XPro1595, Quellor and LIVNate for human clinical trials:
Release
of INB03, XPro1595, Quellor and LIVNate drug supply
GMP
DN-TNF product (INB03, XPro1595, Quellor and LIVNate) are available for clinical development after completion of release testing.
The annual process for release testing was completed in February 2018, January 2019, December 2019 and November 2020. The supply
of DN-TNF product is limited, but enough to complete the planned Phase I study in Alzheimer’s disease and Phase II studies
in hospitalized patients with COVID-19. The re-release dossier has been submitted to the regulatory authorities in Australia and
the US (the FDA). We received notification on May 2018 that the INB03 can be used for oncology clinical trials and in May 2019
that XPro1595 can be used in Alzheimer’s disease clinical trials in AUS and in August 2020 that Quellor can be used for
the COVID-19 clinical trial in the US. For future trials, new batches of INB03, XPro1595, Quellor and LIVNate will need to be
produced. We plan to use a two-step approach to production of the new drug supply. We hope to improve the yield of the drug product
using the existing E.coli based system. Once the new process is validated and functional, we will perform a manufacturing
campaign drug for future clinical trials. This process has started at our manufacturing vendor KBI. The company expects the first
batches of new drug to be available 4Q21 assuming that manufacturing materials remain available and are not consumed by COVID-19
vaccine manufacturers. We expect the existing drug supply to support clinical development program until mid-2021. New drug supply
may not be available before the existing drug supply has been exhausted.
Interaction
with Regulatory Authorities Regarding INB03, XPro1595 and LIVNate Development
We have completed a
Phase I trial with INB03 in oncology. We are enrolling patients in a Phase I trial with XPro1595 in patients with Alzheimer’s
disease and a Phase II trial with Quellor to treat hospitalized patients with respiratory complications from COVID-19. The Phase
II program with Alzheimer’s disease will start after completion of the on-going Phase I program. The Phase I trial with XPro1595
in patients with Alzheimer’s disease is performed in Australia under the regulatory authority of the TGA using the Clinical
Trials Exemption (“CTX”) scheme. Our first interaction with the regulatory body occurred in March 2018. The Company
received approval to initiate the Phase I trial with INB03 in patients with advanced solid tumors on May 21, 2018. The second
interaction with the regulatory body occurred in March 2019. The Company received approval to initiate the Phase I trial with
XPro1595 in patients with Alzheimer’s disease in May 2019. Our first interaction with the FDA occurred in July 2020.
We received authorization to begin enrolling patients in the COVID19 trial late August 2020. We plan to discuss the Phase II Alzheimer’s
disease and Phase II TRD clinical trials with the FDA during the first half of 2021.
INB03
Product Development Path: Proposed Phase II Studies in patients with cancer
Phase
I open label study in patients with advance solid tumors has been completed. All future studies cancer will use INB03 as part
of combination therapy. Based on the results of the Phase I study and work performed and reported by Prof. Roxana Schillaci, we
are planning a study of INB03 in combination with currently approved second line therapy for treatment of tumors that express
MUC4. This may include a study in women with trastuzumab resistant HER2+ metastatic breast cancer where primary or secondary resistance
to trastuzumab is common and may include women with brain metastasis. Alternatively, a combination therapy trial in MUC4 expressing
tumors of the upper gastrointestinal tract such as gastric or pancreatic cancer may be performed. These trials will not be initiated
until the COVID-19 pandemic has run its course. We do not expect to treat patients in a Phase II trial with INB03 before 2022.
INB03
Registration Studies and/or Partnering
We
plan to pursue an efficient registration strategy using INB03 to improve the lives of patients with cancer and biomarkers of inflammation.
We believe that this strategy has use across many types of solid tumors including patients who have failed CPI, tyrosine kinase
inhibitors (“TKI”) and anti-cancer antibody therapy We have an active partnering position as it relates to INB03 development
in cancer, although no partnering discussion are underway at this time. We do not expect partnering discussions to begin until
Phase II data demonstrating efficacy of INB03 as part of combination therapy for cancer are available.
Our
INB03 platform can be used in cancer patients in many ways. The Phase I trial suggests the drug should not be used alone to treat
cancer but used in combination with, but not limited to, other cancer therapies including cytotoxic chemotherapy, immunotherapy,
radiation and surgery. We believe that INB03 can also be used to treat many types of hematologic and epithelial cancers.
INB03,
XPro1595, Quellor and LIVNate Regulatory Strategy
Drugs
from the DN-TNF platform will be developed using adequately powered, well designed studies with the goal to demonstrate a meaningful
clinical benefit to patients. In general, these will be blinded, randomized clinical trials using validated end-points that have
been authorized by a regulatory authority – the FDA, TGA, MHRA, EMA, etc. Currently, all planned studies will be performed
in North America, AUS and/or the UK. Studies will be expanded to Europe and beyond as resources permit and development needs expand.
Because there are no therapies similar to INB03, XPro1595, Quellor or LIVNate approved in any market and no therapies approved
for the treatment of the diseases we are pursuing, we plan to take advantage of the regulatory opportunities afforded to therapies
that treat markets with a high unmet need. In the U.S., this includes Orphan Drug Designation and expedited programs for approval
including Accelerated Approval, Breakthrough Therapy Designation, Fast Track Designation, and priority review (see “Government
Regulation”), and in the setting of COVID-19, Emergency Use Authorization. We cannot predict which, if any, of these programs
we will benefit from without further discussions with the FDA. Similar programs exist in the EU with the EMA. We will engage the
EMA once we have initiated Phase II trials in the United States and Australia.
Immunotherapy
for Treatment of Alzheimer’s Disease
XPro1595
is being developed for the treatment of Alzheimer’s disease. XPro1595 is identical to INB03, Quellor and LIVNate in every
way but name. The name XPro1595 will be used as the drug name in the Alzheimer’s disease development program. Microglial
activation and neuroinflammation are important causes of the synaptic dysfunction and nerve cell death that causes cognitive decline
in patient with dementia and Alzheimer’s disease. The relationship between β amyloid plaques and tau neurofibrillary
tangles, the traditional targets in AD drug development and neuroinflammation is complex. We believe targeting plaques and tangles
is not an effective treatment strategy, but that targeting neuroinflammation, the final common pathway of synaptic dysfunction
and nerve cell death is. Substantial direct pre-clinical data supports the use of XPro1595 in murine models of AD. Substantial
indirect data supports use of XPro1595 in humans including a decreased risk of AD in patients treated with non-selective TNF inhibitors
for rheumatoid arthritis and treatment using direct injection into paraspinous venous plexus. Because of different mechanism of
action of XPro1595 compared to the non-selective TNF inhibitors, we expect a lower risk of immunosuppression and demyelinating
diseases such as MS. The Company reported preliminary data on July 13, 2020 and January 21, 2021 supporting the use of XPro1595
to decrease neuroinflammation in patients with Alzheimer’s disease and biomarkers of peripheral inflammation (see above)
We
continue to enroll patients into an open label, biomarker directed, Phase I clinical trial in AUS that approaches AD as an immunologic
disease. Patients with dementia who have the diagnosis of AD with biomarkers of chronic inflammation that includes at least one
of a hs-CRP>1.5 mg/L, a ESR>10 mm/h, a HbgA1C>6.0% or are ApoE4 positive will be treated with XPro1595 for 12 weeks.
Three dosing cohorts were planned – 0.3, 1.0 and 3 mg per week as a subcutaneous injection. Patients will have 5 groups
of inflammatory biomarkers test before therapy, at 6 weeks and at 12 weeks. Biomarkers will be tested in blood and cerebral spinal
fluid, white matter free water will be determined by MRI and a “breath test” measuring exhaled volatile organ compounds
will be used to determine a signature of inflammation in AD patients. Finally, behavioral biomarkers of fatigue, depression aggression,
anhedonia and sleep disorders, behaviors that are very sensitive to neuroinflammation, will be cataloged using validated scales
to determine if these behaviors improve as neuroinflammation is brought under control. The first patient was enrolled in the low
dose 0.3mg/kg/week cohort in the last week of November 2019. The Safety Review Committee met by teleconference on January 7, 2020
to review the course of the patients in the first cohort and voted to open the second cohort, 1.0mg/kg/week, to enrollment. The
first patients were enrolled in the cohort the second week of February 2020. Based on preliminary data released on July 13, 2020
and January 21, 2021, we are confident that the clinical trial will be closed after completion of a 0.6mg/kg treatment group.
We have canceled plans to treat patients with 3.0mg/kg. If safety is confirmed, the data from the Phase I trial will allow the
Company to choose a dose to bring forward into the Phase II trial and select biomarkers for that trial. We plan to meet with the
FDA to present our plans for the Phase II study in patients with AD in the first half of 2021. If those meetings and subsequent
regulatory filings are successful, we plan to start treating patients in the Phase II trial in the second half of 2021.
XPro1595
Registration Studies and/or Partnering
We
plan to aggressively pursue an efficient registration strategy using XPro1595 to improve the lives of patients with AD with biomarkers
of inflammation. We believe AD is not the only indication for XPro1595 in neurodegenerative and neuropsychiatric diseases. We
plan to pursue other indications in neurodegenerative diseases as resources become available. We have received NIMH funding to
support a Phase II TRD program that hopes to start patient enrollment in the second half of 2021. We have an active partnering
position as it relates to XPro1595 development in neurodegenerative and neuropshyciatric diseases, although no partnering discussion
are underway at this time. There are two partnering opportunities with this novel immunotherapy for the treatment of neurologic
and psychiatric diseases. The first is a traditional partnership focused on the developing the drug for all neurodegenerative
and neuropsychiatric applications. The second is a more focused partnership developing XPro1595 as part of a combination therapy
for a company’s existing therapy. After completion of proof-of-concept Phase II studies, we will decide what the most efficient
registration strategy is available to the company with XPro1595. We may to have biopharma partners participate in this decision
making. We may also seek to be acquired at this stage.
Immunotherapy
for the treatment of NASH
LIVNate
is being developed for the treatment of NASH. LIVNate is identical to INB03, Quellor and XPro1595 in every way but name. The name
LIVNate will be used as the drug name in the NASH development program. NASH is a pleiotropic disease with elements of metabolic,
immunologic and fibrotic pathophysiology contributing to disease development and progression. The Company believes targeting the
metabolic and immunologic pathology is the best way to treat NASH. Furthermore, we believe there are three pathologic drivers
of NASH, two which originate beyond the liver (refer to Figure 7 below). The peripheral pathologic loop includes obesity and insulin
resistance. The regional pathologic loop includes intestinal inflammation, intestinal leak and mesenteric fat, a source of inflammatory
factors that are concentrated in portal blood. Finally, the local pathologic loop is caused by lipotoxicity and innate immune
activation in the liver that results in hepatocyte death, hepatitis and fibrosis, the hallmarks of NASH. In murine studies of
NASH, LIVNate reverses insulin resistance, intestinal inflammation and decreases the NAS (“NAFLD Activity Score”)
and Fibrosis score suggesting that LIVNate may be an effective therapy for the treatment of NASH.
We
are planning an open label Phase II study of patients with NASH. The study is planned as a proof-of-concept study in patients
with F3/F3 disease defined by non-invasive laboratory and imaging studies. Patients will be treated with LIVNate for 6 months
by once a week subcutaneous injection. We do not plan to perform liver biopsies as any part of the study. If the study is positive,
further development of LIVNate in NASH will be considered. Further development may include additional clinical trials alone or
with a partner or divesting the program. This clinical trial has been delayed due to the COVID-19 pandemic. We do not expect to
enroll patients into a NASH Phase II clinical trial until 2022 at the earliest.
LIVNate
Registration Studies and/or Partnering Programs
Because
NASH is an exceptionally dynamic area of drug development, the Company will decide on a development and/or partnering program
after the completion of the Phase II study. At this time, it is impossible to predict the development and commercial landscape
or to know if LIVNate can be used to treat NASH as a stand-alone drug or as part of combination therapy. Finally, the market for
treatments of metabolic and inflammatory liver diseases may expand to include non-alcoholic fatty liver disease (“NAFLD”)
in the near future. This market expansion may impact the Company’s development plans for LIVNate.
INKmune:
Our NK cell Directed Product Candidate
INKmune
is our lead product candidate that converts resting NK cells into primed NK cells, an essential step in them becoming activated
cancer-killing NK cells. We have shown this works ex vivo in human tissue cell cultures, and we believe that this will work in
vivo which is the purpose of our planned clinical trials.
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Cancers
grow and relapse because they evade the immune system. NK cells are the most important cell for the elimination of residual
disease that causes cancer relapse. NK cells target cells based on a series of complex antigens on the cancer cell surface
that signal the NK cells to activate and kill the cancer cell. We call these cancer antigens “priming signals”
and “triggering signals” respectively. An NK cell must receive a series of multiple signals through a network
of cell surface receptors constituting of both priming and triggering signals. Crucially, we have shown that the priming signals
can be delivered independent of the triggering such that one cell, such as INKmune, may deliver priming signals and the patient
cancer cell deliver the second set and induce killing. Cancer cells defective in priming signals evade NK killing so the cancer
cell survives and grows. Both priming and triggering signals are not a single surface molecule on the NK cell, but a complex
combination of signals from multiple cell surface ligands which lead to NK priming and triggering respectively. Cancer cells
also express molecules which can inhibit NK cell priming and triggering and the final outcome of the NK-cancer cell conjugation
is a balance of all of these signals. In summary, INKmune shifts that balance of stimulating and inhibitory signals to enhance
the ability of resting NK cells to kill a wide range of patient cancers. [Sabry Lowdell Frontiers, North et al JI and Sabry
et al JI and Tsirogianni et al AmJ Hematol]. This concept is shown in the schematic form in Figure 1 below.
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The
main “job” of a cancer cell is to survive and grow. Unfortunately, the “successful” cancer cell ultimately
kills the host. The first priority for survival is to evade NK cell killing. The vast majority, >98%, of cancer cells do
this by downregulating expression of priming ligands. When an NK cell interrogates a cancer cell lacking sufficient priming
signals the NK cell is unable to trigger lysis. This allows the cancer to evade NK cell killing to grow, and, we believe,
is one of the causes of cancer relapse.
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We
have described the functional biology underlying the interaction of NK cells and cancer cells. We believe that we have learned
to counteract the loss of the priming signals by artificially providing these signaling ligands to the resting NK cell by
exposure to a proprietary tumor cell line which constitutively expresses them. We call this product candidate INKmune. When
we deliver INKmune to a resting NK cell, it provides priming signals to convert the resting NK cell into a tumor primed NK
cell (“TpNK”). TpNK are poised to kill any cancer cell that expresses adequate triggering ligands. Based on our
extensive pre-clinical testing, we believe this covers a large and heterogenous array of primary human cancers including hematologic
malignancies such as acute myelogenous leukemia, multiple myeloma, lymphoma, and solid tumors such as breast, prostate, renal,
lung, and ovarian cancer. The TpNK binds to the cancer cell, becomes an activated NK cell that will kill the cancer cell that
was previously resistant to NK cell killing. Based on the pre-clinical data, we believe INKmune will convert the patient’s
resting NK cells to primed NK cells will allow the patient’s NK cells to kill their tumor.
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We
believe there are advantages of NK cells primed with INKmune (“TpNK”) compared to cytokine primed NK cells (“LAK”)
or monoclonal antibody targeted NK cells (“MabNK”). Both LAK and MabNK require the priming/targeting agent to
be present at all times for the NK cell to be a cancer killing cell. As soon as the cytokine or Mab are removed, the NK cell
becomes a resting NK cell that cannot kill the cancer cell. INKmune provides a sustained “on” switch even after
the INKmune reagent has been removed. Once INKmune causes the resting NK cell to become a TpNK, the NK cell remains primed
and ready to kill until its lytic capacity has been exhausted by lysis of tumor cells. The second advantage is that TpNK can
prime resting NK cells by contact-dependent activation and thus enhance the initial INKmune-mediated priming. Third, TpNK
do not require a specific target compared to MabNK. Trastuzumab (Herceptin™), a Mab targeting HER2 on breast cancer
is an illustrative example. Women with HER2 positive breast cancer, 20% of all women with breast cancer, can be treated with
and benefit from Herceptin immunotherapy. Unfortunately, the other 80% who are HER2 negative, have a worse survival rate because
they can not avail themselves to Trastuzumab immunotherapy. INKmune may benefit the women with HER2 negative breast cancer.
We believe the pre-clinical and clinical data using tumor primed NK cells indicates that signals delivered by cancer cells
are adequate to provide priming and activation of NK cells to kill the cancer and possibly eliminate the need for MabNK.
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We
have demonstrated TpNK killing of many tumor types in laboratory studies. Tumor priming is effective regardless of the source
of the NK cells and in many types of tumors – both cell lines and primary tumors from patients. The principle of TpNK
killing has also been demonstrated in two Phase I trials in patient with acute myelogenous leukemia (“AML”). These
trials were not supported by us and used a first-generation personalized cell therapy product. In these trials, haplo-identical
NK cells obtained from a first degree relative by leukapheresis were primed ex-vivo using a lysate of the parent cell line
from which we derived INB16 - INKmune. Once the TpNK therapy has been produced and passed quality testing, the patient received
conditioning therapy with chemotherapy (cyclophosphamide and fludarabine), the primed haplo-identical NK cells were given
to patients by intravenous infusion. Two Phase I clinical trials have been performed using the first-generation treatment
strategy. An investigator initiated trial performed at the Royal Free Hospital in London 2009 was funded by a UK charity.
Fifteen patients with relapsed, high-risk AML were enrolled in the trial. Because of drop-out due to disease progression,
delays in product production and complications of conditioning therapy, only 7 of the fifteen patients were treated with the
TpNK cell product. Four of seven patients showed clear benefit from the treatment with the TpNK product with prolonged relapse
free remission and, in one patient, conversion of a partial remission to full remission. None of the remissions were durable;
all patients ultimately died from disease progression. The safety of the product was found to be a combination of toxicity
from the chemotherapy conditioning regimen and the TpNK therapy. In general, the complications were well tolerated although
did require medical intervention including prolonged periods of aplasia in two heavily pretreated patients that resolved with
supportive care. The results of this study have been published in a medical journal (PLoS One. 2015 Jun 10;10(6):e0123416.
doi: 10.1371/journal.pone.0123416. eCollection 2015). In 2013, a second open label, multi-center trial was performed in the
US using virtually the same product and procedures but targeting a slightly different patient population. In the second trial,
12 patients in first remission with AML were treated with the haplo-identical TpNK product produced using the first generation
ex-vivo priming process. After conditioning with chemotherapy, the patients received TpNK in three dosing cohorts –
3x10^5, 1x10^6 or 3x10^6 TpNK per kilogram. Patients were followed for safety and relapse free survival. This trial confirmed
the safety of the TpNK treatment in patients with AML and reinforced many of the efficacy findings seen in the first trial
with none of the previously experienced side effects. Patients benefited from haplo-identical TpNK therapy with prolonged
relapse free survival including two patients that remain in remission more than 42 months after treatment. This trial has
been published. (Biol Blood Marrow Transplant. 2018 Mar 26. pii: S1083-8791(18)30132-0. doi: 10.1016/j.bbmt.2018.03.019.)
The results of the laboratory and Phase I studies provide evidence that our strategy for treating residual disease is sensible
but unproven.
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Because INKmune
primes NK cells to target naturally occurring antigens, we believe INKmune can be used in to treat a wide variety of cancers
including hematologic malignancy (AML, MM, CML, high risk MDS) and solid tumors (renal, prostate, breast, ovarian, pancreas
and lung). We expect the list of INKmune sensitive tumors to continue to expand.
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The primary role
for INKmune will be an immunotherapy targeting residual disease in patients after debulking cancer therapies such as cytotoxic
chemotherapy and surgery. At this time, we plan to give INKmune as monotherapy. We do not rule out the possibility of using
INKmune as part of combination therapy in the future. We do not expect to need to modify INKmune to treat these additional
types of cancer, because we believe INKmune is a universal cancer therapy where “one size fits all”. We believe
for INKmune to receive regulatory approval for each cancer indication, clinical trials will need to be performed which demonstrate
its safety and effectiveness as a treatment for each such cancer. We believe the difficulty and cost of achieving these labels
extensions will decline with each successive approval, if and when achieved. For example, if INKmune is proven to be effective
therapy in patients with ovarian cancer and high-risk MDS, we will need to perform separate pivotal trials for approval in
lung, prostate or renal cancer.
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Three
step process to preparation for INKmune human clinical trials:
INKmune
GMP scale-up for Phase I/II clinical material
The
working cell banks and individual INKmune product to be used in the patients for the clinical trial have been produced at the
Royal Free Hospital in the CCGTT to full cGMP (MHRA MIA(IMP)11149). All manufacturing has been under the direction of Professor
Mark Lowdell. The Company can produce enough INKmune to complete both Phase I clinical trials in women with ovarian cancer and
in patients with high-risk MDS. We have validated storage of INKmune for up to 12 months in vapor phase nitrogen and have a fully
scalable, closed system manufacturing process which can produce up to 6 patient doses per week during phase I and II trials. At
intermediate scale we can manufacture 40 doses per week in a single 80 liter bioreactor. Importantly, we have validated the storage
of INKmune at -80oC for up to three months which greatly facilitates the delivery and local storage of the drug for clinical trials
and post commercialization. In contrast, as far as we know all other NK cell therapies and T cell therapies require complex shipping
of drug products in vapor phase nitrogen below -150oC and specialized arrangements for ongoing storage at the clinical
sites. We may need additional INKmune for future clinical trials.
INKmune
Biomarker Development Program
We
have discovered two biomarker strategies that we believe can be used to demonstrate: i) who should receive INKmune therapy; ii)
if the INKmune therapy is working; and iii) when INKmune therapy should be repeated. For the initial Phase I/II trials in patients
with ovarian cancer and high-risk MDS, we expect the biomarker testing will be performed in a single laboratory under our direction.
In the near future, we will develop assay systems with standard operating procedures to ensure uniform testing of the biomarker
across clinical sites. This will facilitate expansion of the clinical programs to multiple sites. We anticipate that, in the future,
the biomarker program may be a surrogate marker for both clinical effectiveness and marketing purposes.
Interaction
with Regulatory Authorities Regarding INKmune Development
The
INKmune Phase I studies in high-risk MDS and ovarian cancer will be performed in the UK. We met with the Medicines and Healthcare
Products Regulatory Agency (“MHRA”), the UK version of the FDA as part of a Scientific Advice Meetings in preparation
for submitting the CTA for each program. The purpose of the meeting was to explain to the MHRA our manufacturing process and clinical
plan for the development of INKmune in a Phase I relapse/refractory ovarian cancer and high risk MDS respectively.
INKmune
Product Development Path Proposed Phase I Study in patients with ovarian cancer
Pending
the evolution of the COVID-19 pandemic in 2021, we plan to initiate an open label Phase I cancer study in patients with ovarian
carcinoma. Patients will be enrolled who have a low burden of relapse refractory disease and have peripheral blood or ascites
NK cells which can respond to INKmune in a laboratory test on NK function. The study design agreed upon after discussion with
the MHRA on September 12, 2017 was for a two-step Phase I/II study but this has been modified to an classic Phase I study followed
by a randomized phase II. At present we anticipate the Phase I to be performed under the modified CTA at a single UK site, Sheffield
University Hospital. We expect to initiate trial by the third quarter of 2021. In the Phase I trial, women with relapse refractory
ovarian cancer will be treated with INKmune, given as an intra-peritoneal infusion through an indwelling peritoneal catheter in
a traditional open label study to demonstrate safety and determine the dose of INKmune to be carried into the larger Phase II
portion of the study. Based on pre-clinical studies that indicate that women with relapsed/refractory ovarian cancer have NK cells
in their peritoneal cavity that response to INKmune to kill SKOV3, an NK-resistant ovarian cell line, we believe intra-peritoneal
delivery of INKmune will be therapeutically effective. Three clinical trials support this observation. Two clinical trials have
been performed using the first generation haplo-identical TpNK product in patients with AML. Both of those studies have been published
(PLoS One. 2015 Jun 10;10(6):e0123416. doi: 10.1371/journal.pone.0123416. eCollection 2015) and (Biol Blood Marrow Transplant.
2018 Mar 26. pii: S1083-8791(18)30132-0. doi: 10.1016/j.bbmt.2018.03.019.). In summary, the studies showed that TpNK therapy,
when delivered by intravenous infusion after conditioning therapy, was effective in providing prolong remissions with a toxicity
profile that was manageable. TpNK therapy has not been delivered via intraperitoneal infusion, but a similar treatment strategy
is used for the delivery of TALL-104 cells. TALL-104 is a replication incompetent human MHC non-restricted cytotoxic T-cell leukemic
cell line that has been extensively studied and used to treat a number of cancers. Currently, Galileo Research, an Italian biotech
company, has used TALL-104 in a Phase II clinical trial to treat women with ovarian cancer (http://www.galileoresearch.it/en/pipeline/TALL-104.html).
In that study, TALL-104 is delivered via intraperitoneal infusion. Although the efficacy of the therapy is not yet known, the
therapy is well tolerated with toxicities mainly related to the infusion catheter, not related to the TALL-104 infusion. The primary
end points of the INKmune Phase I trial are safety and determining the dose of INKmune to take into the Phase II portion of the
clinical trial. The key secondary efficacy end-points to be studied are i) increased NK cell priming as determined by multicolor
flow cytometry of NK cells from the patient; ii) increased NK cell killing of SKOV3 tumor in a bioassay as shown in Figure 2 below;
and iii) a decrease in tumor burden as measured by CA125 levels in the blood. Once safety and the optimal INKmune dose have been
determined, a randomized study of women treated with INKmune will be compared to a group of control patients who receive only
standard of care. We expect to treat six patients in the Phase I portion of the trial, but this number can increase by as many
as 18.
INKmune
Product Development Path Proposed Phase I Study in patients with high-risk MDS
During
2021, we plan to initiate an open label Phase I cancer study in patients with high-risk myelodysplastic syndrome (“MDS”).
Patients will be enrolled who have a low burden of disease after completion of conventional therapy and have peripheral blood
NK cells which can respond to INKmune in a laboratory test of NK function. At present we anticipate the Phase I to be performed
at a single UK site, University Hospital Southampton. A UK contract research organization has been appointed and we expect to
initiate trial by the third quarter of 2021. In the Phase I trial, patients with detectable residual disease in bone marrow and/or
peripheral blood (<15% blasts by conventional tests) will be treated with intravenous infusions of INKmune and monitored for
changes in peripheral blood NK activation, NK function and changes in residual blast counts in blood and bone marrow. We and others
have previously shown that MDS patients with inadequate NK function have statistically significantly poorer prognosis than matched
patients with normal levels of NK function (Tsirogianni et al 2019) and we have shown in laboratory experiments that the functional
activity of NK cells from MDS patients can be enhanced by exposure to INKmune. Moreover, INKmune-primed NK cells are not inhibited
by the hypoxic conditions of the diseased bone marrow microenvironment. Because both INKmune programs are being run in the UK,
delays due to the COVID-19 pandemic may delay initiation of the clinical trial.
INKmune
Registration Studies and/or Partnering
After
completion of proof-of-concept Phase II studies with INKmune, we will decide whether to continue to develop INKmune as a treatment
for ovarian carcinoma indication and/or high risk MDS. Other solid cancers are of interest including nasopharyngeal cancer (“NPC”)
which is a known target for NK cells and an important unmet clinical need in emerging markets such as mainland China. We expect
to have biopharma partners participate in this decision. We may also seek to be acquired at this stage or partner INKmune. Although
our development strategy is focused on North America and Europe, we believe INKmune will also be attractive for markets on the
Pacific Rim, South Asia and South America, but will wait for partners to help with the development in those regions, however,
at this time, we are not negotiating with any potential partners.
Importantly,
we have published data demonstrating INKmune efficacy at priming allogeneic NK cells ex-vivo (described above) and this includes
priming of NK cells differentiated from cord-blood derived hematopoietic stem cells (Domogala et al Cytotherapy 2017: 19:710-720).
Numerous companies are developing therapeutic strategies using cord blood derived NK cell products and one or more may wish to
partner with us to potentiate their product by co-incubation or co-administration with INKmune.
INKmune
Regulatory Strategy
INKmune
is a new therapy for the treatment of cancer that will need to be proven safe and effective by well-designed clinical trials that
show a meaningful clinical benefit to patients. We believe that registration trials will need to be designed as randomized trials
in patients with cancer where one group of patients received INKmune and another receive best available care. We received advice
from the MHRA on September 12, 2017 on the design clinical trial for ovarian cancer. And have used that advice to plan both current
phase I trials. We plan to perform the Phase I trials with INKmune in the United Kingdom under two clinical trials authorizations
(“CTA”) – one for each indication. If either phase I elicits “positive” data we plan to open one
or more Phase II programs to additional sites in the United Kingdom and the US. We will meet with the FDA once we have data from
the Phase I trials. Because there are no therapies similar to INKmune approved in any market, we plan to take advantage of the
regulatory opportunities afforded to therapies that treat small markets with a high unmet need. In the U.S., this includes Orphan
Drug Designation and expedited programs for approval including Accelerated Approval, Breakthrough Therapy Designation, Fast Track
Designation, and priority review (see “Government Regulation”). We cannot predict which of these programs we will
benefit from, if any at all, without further discussions with the FDA. Similar programs exist in the EU with the European Medicines
Agencies (“EMA”).
Emerging
Market Opportunity
The
cancer therapy market is large, diverse and competitive. Although the concept of immunotherapy with monoclonal antibodies has
been around for more than 20 years, the concept that patient derived immunosuppressive factors was a barrier to effective cancer
treatment was recently recognized and had its first therapy approved just four years ago (ipilimumab, Yervoy, BMS, March 2011).
Since then, five additional “check point” inhibitors have been approved, but the market is in its infancy. Most of
the focus on strategies for modulating tumor-based immunosuppression focus is on the adaptive immune system (“T-cells”).
The role of, and the importance of manipulating the innate immune system has more recently become a target of therapeutic development.
NK cells are part of the innate immune system and are critical in both tumor surveillance (prevention) and treatment (killing).
MDSCs are part of the innate immune system that only appear once the patient has chronic inflammation, a common occurrence in
patients with cancer. The main role of the MDSC is to protect the tumor from attack by the patient’s immune system. Because
T-cell focused strategies do not have an effect on the innate immune system, patient’s receiving such treatments may fail
to recruit half of the patient’s immune system, the innate immune system, to attack the patient’s cancer. Clinicians
increasingly recognize that durable responses to cancer require a coordinated attack by the patient’s adaptive and innate
immune system. Normalizing the response of the innate immune system requires eliminating the dysregulated innate immune response
that decreases the patient’s ability to see and attack the cancer as well as mechanisms the protect the cancer from immunologic
attack (effector and protector function respectively). INKmune primes NK cells to enable them to attack the tumor. INB03, by decreasing
the proliferation and function of MDSC, will lessen the immunosuppressive shield that protects the tumor from immunologic attack
and, through NK/DC crosstalk, recruit the adaptive immune system to the fight.
Challenges
in the Market for Our Product Candidates
The
market for new oncology therapies is busy, complicated, and rapidly evolving. We will be competing with companies that are older,
larger, better financed and have greater experience. There are two types of drug companies – development companies and commercial
companies. Development companies take the risk of developing new products to proof-of-concept. Once proof-of-concept has been
achieved, if the drug provides clinical benefit, the product is usually acquired by a commercial company, which completes the
drug’s clinical development and markets the product. We are a development company which will seek to develop products such
as INKmune from the bench to the bedside to demonstrate proof-of-concept. The goal for us is to successfully develop such products
to the point where they are attractive targets for potential partners/acquirers.
According
to a recent Markets and Markets report, the immunotherapy market is growing rapidly at an annual rate of over 13%. Recently, the
market is biased towards T cell-based immunotherapies including bi-specific antibody therapies, checkpoint inhibitors and CAR-T
cell-based therapies. There are substantial numbers of clinical trials that are focused on the adaptive immune system versus clinical
trials that are focused on the innate immune system for the treatment of cancer. Our challenge will be to educate partners on
the value of NK cell-based therapeutic strategies. The need to educate people of the importance of INB03 is equally challenging.
At the academic level, there is recognition that therapies targeting MDSC are needed to improve the results of immunotherapies.
Investors and potential partners are only now learning about MDSC. We will be responsible for educating them on the importance
of MDSC and why INB03 may be an important addition to the oncologist’s armamentarium. We believe educating investors and
partners about new therapeutic opportunities is an easier task than trying to differentiate our company from the many other cancer
immunotherapy companies. We plan to use a combination of publication, presentation and investor relations to promote INKmune and
INB03 and to educate the clinical, biopharma and investor community on the value of these novel therapeutic approaches.
DN-TNF
Competition
To
our knowledge, there are no other innate immune system check-point inhibitors in development that combine the characteristics
of neutralizing soluble TNF, decreasing the population and function of MDSC while promoting NK/DC crosstalk that expands, decreases
expression of MUC4 and recruits the adaptive immune response to attack the patient’s tumor. Lilly is developing LY3022855,
a human IgG1 monoclonal antibody designed to target the CSF1R that should inhibit MDSC from receiving CSF1 signals, decreasing
their survival and relieving the effect of MDSC in the tumor. Daiichi Sankyo Inc., in collaboration with Bristol Myers Squibb,
is testing DS-8273a, a TRIAL-R2 agonistic antibody in combination with a PDL1 inhibitor to decrease the number of MDSC in patients
with colorectal cancer. Rgenix Inc., is developing RGX-104, an orally bioavailable small molecule immunotherapy that targets LXR
(liver X Receptor). RGX-104 reportedly depletes MDSC. Syntrix Biosystems is developing SX-682. SX-682 is a small-molecule dual-inhibitor
of CXCR1 and CXCR2, the chemokine receptors pivotal to tumor metastasis, therapy-resistance, and myeloid cell suppression of cancer
surveillance by the adaptive immune system. By blocking the CXCR1/2 pathway, SX-682 may prevent recruitment of MDSC to the tumor
microenvironment. The University of Minnesota has a trivalent antibody program aimed at treating patients with advanced hematologic
malignancies. This CD16/IL-15/CD33 (161533) Tri-Specific Killer Engagers (TriKes) product may target CD33+ MDSC. Siamab Therapeutics
is developing an anti-sialyl-Tn monoclonal antibody that targets MDSC in some tumor types. Clathera Biosciences, in collaboration
with Incyte, a US based biotech, is developing CB-1158 (INCB01158), an arginase inhibitor to decreases MDSC. A Phase II clinical
trial is open that combines CB-1158 with nivolumab, an anti-PD1 CPI marketed by Bristol Myers Squib. Reata Pharmaceuticals is
testing omaveloxolone (RTA 408) in the phase Ib/II REVEAL trial in combination with either ipilimumab (Yervoy) or nivolumab (Opdivoo)
in patients with advanced unresectable or metastatic melanoma. Currently approved non-selective TNF inhibitors, infliximab, etanercept,
adalimumab and others, are not considered direct competitors of INB03 in the treatment of cancer because of their mechanism of
action and safety side effects. Non- selective TNF inhibitors block the function of both sTNF and tmTNF. Blockade of tmTNF is
immunosuppressive increasing the risk of infection and cancer in patients. This is shown in Figure 3 below where maintaining function
to tmTNF by genetic or pharmacologic means results in an immunocompetent animal that can protect itself against infection. Blockade
or knock-out of both sTNF and tmTNF results in death from infection.
INKmune
Competition
Our
industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large
pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government
agencies and research institutions. We believe that key competitive factors that will affect the development and commercial success
of our product candidates are efficacy, safety, tolerability, reliability, price, and reimbursement level. Many of our potential
competitors, including many of the organizations named below, have substantially greater financial, technical, and human resources
than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other
regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful
than us in obtaining FDA approval for and achieving widespread market acceptance of their drugs. Our competitors’ drugs
may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates
obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates.
We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become
available. Further, the development of new treatment methods for the conditions we are targeting could render our drugs non-competitive
or obsolete.
INKmune
is an immunotherapy that harnesses the biology of NK cells for the treatment of cancer. There is a long list of immunotherapy
strategies for the treatment of cancer and the immunotherapy for cancer market is growing rapidly. There are at least three ways
to classify immunotherapy for cancer. The list below classifies immunotherapy strategies beginning with those that are most closely
related to INKmune:
|
1.
|
Companies in the
NK cell therapy business;
|
|
|
|
|
2.
|
Companies in the
personalized immune-oncology business; and
|
|
|
|
|
3.
|
Companies in the
precision immuno-oncology business.
|
We
are not aware of any approved treatments that are classified as NK cell therapies. We are aware of public companies in the NK
cell therapy business such as NantKwest, Nkarta, Fate Therapeutics and Glycostem. These companies are developing products that
involve replacing or supplementing NK cells of the patient for the treatment cancer. Their product requires extensive ex-vivo
cell manipulations which, with respect to NantKwest and Fate Therapeutics, may include gene therapy. The next larger group of
companies are in the personalized immuno-oncology business with products focused on T cell activation strategies. The most popular
are the CAR-T cell therapies which are a patient specific ex-vivo gene therapy approach to a single disease (for example: pediatric
ALL). CAR-T therapy has become wildly popular of late and includes many private companies, newer public companies such as Bluebird,
Juno Therapeutics and Mustang Bio as well as established companies such as Novartis and Gilead. For many of the companies, CAR-T
cell therapies is their only business. For the latter two, CAR-T cell therapies is a newly in-licensed program with marketing
authorization in the US. Finally, the precision immune-oncology category also includes companies with anti-cancer antibody products
and the newer “check-point” inhibitors. Antibody therapies are all about “illuminating” the cancer to
the innate immune system (NK cells). Monoclonal antibodies were the original immunotherapy that drove the growth of well-known
biopharma companies including Genentech/Roche, Amgen, Merck and others. Each of these products is disease specific (ie: treat
only HER2+ breast cancer). Modern therapeutic antibodies are much more complicated bi-specific and tri-specific antibodies that
attempt to connect the cancer with activated T-cells of the adaptive immune system. Check-point inhibitors are currently the most
rapidly expanding product category in immuno-oncology. These CTLA-4 (ipilimumab) and PD-1 inhibitors (pembrolizumab and nivolumab)
specifically block a mechanism that shields cancers from T-cell killing. The two companies in this business are Merck (pembrolizumab)
and GSK (ipilimumab and nivolumab). There are many others trying to join this promising therapeutic area including large companies
such as BMS and Roche.
There
are several FDA approved drugs that improve the ability of the innate immune system (NK-cells) to treat cancer including mono-clonal
antibody therapies (for example: Rituximab®; Avastin® and Herceptin® marketed by Roche/Genentech); and “check-point”
inhibitors (Yervoy® and Opdivo®, BMS, Keytruda®, Merck and others). There is a large amount of development activity
in the immune checkpoint inhibitor field from both pharmaceutical giants including AstraZeneca, Merck & Co, Pfizer, Merck
KGaA, Roche, GSK, Novartis and Amgen and many start-ups, small companies and university spin-offs which have emerged in the past
two years. Examples (in alphabetical order) include Agenus, Alligator Bioscience, Ambrx, AnaptysBio, argenx, Bioceros, BioNovion,
Cellerant Therapeutics, Checkpoint Therapeutics, Compugen, CureTech, Enumeral, Five Prime Therapeutics, Genmab, GITR, ImmuNext,
IOmet Pharma, iTeos Therapeutics, Jounce Therapeutics, KAHR Medical, Multimeric Biotherapeutics, Nativis, Orega Biotech, Pelican
Therapeutics, Pieris Pharmaceuticals, Prima BioMed, Redx Pharma, Sorrento Therapeutics, Tesaro, TG Therapeutics, Theravectys and
ToleroTech active in the field. The list of companies with poly-specific antibodies that attempt to link the cancer with a cytotoxic
T cell is long, includes both private and public companies (Amgen, Xencor, F-Star, Merus and many others). Finally, two CAR-T
cell therapies were just approved for the treatment of ALL – Kymriah™ (Novartis) and Yescarta™ (Gilead). We
expect additional drugs to gain marketing authorization in the immune-oncology space.
To
our knowledge, there are no innate immune check-point inhibitors in development that have the unique characteristics of INB03
that neutralize sTNF to: i) decreases the proliferation of MDSC; ii) decreasing local and systemic immunosuppression caused by
MDSC by stopping production of immunosuppressive cytokines and; iii) improving NK/DC cross-talk to recruit the adaptive immune
system to fight the cancer.
Intellectual
Property
We
seek to protect our therapeutic programs by continuously developing patent properties covering novel compositions, formulations,
purpose-limited compositions, combination treatments, methods of medical treatment, and other inventions in the United States
Patent & Trademark Office (the “USPTO”), the World Intellectual Property Organization (“WIPO”) under
the Patent Cooperation Treaty (“PCT”), and in patent offices for various foreign jurisdictions. While each invention
is unique and territories for protection are decided on a case by case basis, we generally pursue patents in Australia, Canada,
Europe, Japan, and the United States, and sometimes in Brazil, China and/or Korea. The following sections and corresponding tables
summarize, for each of our current therapeutic programs, our pending and granted patent positions, to the extent publicly available,
as of the time of preparing this document:
DN-TNF
Platform Technology (Cancer, Neurologic Diseases, Metabolic Diseases, COVID-19)
The DN-TNF Platform
Technology covers a variety of dominant negative tumor necrosis factor (“DN-TNF”) variant proteins, including the pegylated
DN-TNF protein variants known as XPro1595, INB03, LIVNate, and Quellor. These DN-TNF protein variants can be considered a platform
technology for treating the underlying immune dysfunction associated with many disease manifestations. The following table summarizes
current IP covering our DN-TNF Platform Technology:
Patent/
Application
|
|
Number
|
|
Name
|
|
Jurisdiction
|
|
Ownership
|
|
Type
|
|
Expiration
Date
|
|
Patent
|
|
EP 1578988
|
|
PROTEIN BASED TNF-ALPHA
VARIANTS FOR THE TREATMENT OF TNF-ALPHA RELATED DISORDERS
|
|
EPO
|
|
Licensed
|
|
Composition
|
|
9/30/2022
|
|
Patent
|
|
JP 4353802
|
|
PROTEIN BASED TNF-ALPHA
VARIANTS FOR THE TREATMENT OF TNF-ALPHA RELATED DISORDERS
|
|
JPO
|
|
Licensed
|
|
Composition
|
|
9/30/2022
|
|
Patent
|
|
US 7610156
|
|
METHODS FOR RATIONAL
PEGYLATION OF PROTEINS
|
|
US
|
|
Licensed
|
|
Composition
|
|
3/31/2024
|
|
Patent
|
|
US 7642340
|
|
PEGYLATED TNF-a VARIANT
PROTEINS
|
|
US
|
|
Licensed
|
|
Composition
|
|
3/31/2024
|
|
XPro1595
(Neurologic Diseases)
The patent suite for
XPro1595 includes the DN-TNF patents (above) and other patents and patent applications directed to methods of treatment of disease.
This patent suite continues to expand with active prosecution on use of XPro1595 (a DN-TNF variant) in neurologic diseases. The
following table summarizes current IP expanding our DN-TNF Platform Technology for CNS-related methods of treatment:
Patent/
Application
|
|
Number
|
|
Name
|
|
Jurisdiction
|
|
Ownership
|
|
Type
|
|
Expiration
Date
|
|
Patent
|
|
EP 2892547 B1
|
|
A DOMINANT NEGATIVE
TNF-ALPHA INHIBITOR FOR USE IN TREATING NEUROLOGICAL DISORDERS OF THE CNS
|
|
EP
|
|
Licensed
|
|
|
|
9/10/2033
|
|
Application
|
|
EP 20178121 A
|
|
METHODS OF TREATING
NEUROLOGICAL DISEASES
|
|
EP
|
|
Licensed
|
|
|
|
TBD
|
|
Application
|
|
14/427,279
|
|
METHODS OF TREATING
NEUROLOGICAL DISEASES
|
|
US
|
|
Licensed
|
|
|
|
TBD
|
|
Application
|
|
16/371,848
|
|
METHODS OF TREATING
NEUROLOGICAL DISEASES
|
|
US
|
|
Licensed
|
|
|
|
TBD
|
|
INB03
(Oncology)
The
patent suite for INB03 includes the DN-TNF patents (above) and other patents and patent applications directed to methods of treatment
of disease. This patent suite continues to expand with active prosecution on use of INB03 (a DN-TNF variant) in oncology. The
following table summarizes current IP expanding our DN-TNF Platform Technology for oncology-related methods of treatment:
Patent/
Application
|
|
Number
|
|
Name
|
|
Jurisdiction
|
|
Ownership
|
|
Type
|
|
Expiration
Date
|
|
Patent
|
|
US 10,543,264
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
US
|
|
Licensed
|
|
Method
|
|
7/7/2038
|
|
Application
|
|
16/688,930
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
US
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
2016876541
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
EP
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
2016371907
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
AU
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
3006767
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
CA
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
20168073849
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
CN
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
1020187020449
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
KR
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
2018531185
|
|
“CANCER PREVENTION
AND THERAPY BY INHIBITING SOLUBLE TUMOR NECROSIS FACTOR”
|
|
JP
|
|
Licensed
|
|
Method
|
|
TBD
|
|
LIVNate
(Metabolic Diseases)
The
patent suite for LIVNate includes the DN-TNF patents (above) and other patents and patent applications directed to methods of
treatment of disease. This patent suite continues to expand with active prosecution on use of LIVNate (a DN-TNF variant) for treating
metabolic diseases. The following table summarizes current IP expanding our DN-TNF Platform Technology for metabolic disease -related
methods of treatment:
Patent/
Application
|
|
Number
|
|
Name
|
|
Jurisdiction
|
|
Ownership
|
|
Type
|
|
Expiration
Date
|
|
Application
|
|
16/652,407
|
|
TREATMENT OF COMPLICATIONS
RELATED TO ACUTE OR CHRONIC HYPERGLYCEMIA
|
|
US
|
|
Jointly-Owned
|
|
Method
|
|
TBD
|
|
Application
|
|
PCT/US20/32649
|
|
TREATMENT OF NON-ALCOHOLIC
STEATOHEPATITIS
|
|
PCT
|
|
Owned
|
|
Method
|
|
N/A
|
|
Quellor
(CRS and COVID-19)
The
patent suite for Quellor includes the DN-TNF patents (above) and other patents and patent applications directed to methods of
treatment of disease. This patent suite continues to expand with active prosecution on use of Quellor (a DN-TNF variant) for treating
cytokine release syndrome (CRS) and complications of COVID-19. We have two patent properties pending as of the date of this document.
INKmune
(Oncology)
The
INKmune program is directed to compositions and methods of treating cancer. INKmune comprises cells and/or membrane portions of
cells derived from a cancer cell line expressing a unique biological signature (that is often downregulated in many cancers),
which cells/membrane portions are inactivated to prevent proliferation, and which are administered to a patient. Once administered,
the inactivated cells/membranes (INKmune) are presented in vivo to the patient’s own resting NK cells, thereby providing
the unique biological signature, and resulting in what we call “NK cell priming,” that is, the change of a resting
NK cell to a non-naturally occurring state, or “primed NK cell,” wherein the primed NK cell has received the signals
often downregulated by cancer cells. Now having the often-downregulated signals, a primed NK cell can subsequently contact, adhere
and commence killing of the patient’s cancer cells. The following table summarizes current IP covering INKmune:
Patent/
Application
|
|
Number
|
|
Name
|
|
Jurisdiction
|
|
Ownership
|
|
Type
|
|
Expiration
Date
|
|
Patent
|
|
10,758,567
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
US
|
|
Licensed
|
|
Method
|
|
9/16/2036
|
|
Application
|
|
CA3009171A
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
CA
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Patent
|
|
EP3349769
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
EP
|
|
Licensed
|
|
Method
|
|
11/14/2036
|
|
Application
|
|
2018534524
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
JP
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Patent
|
|
2018203469
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
AU
|
|
Licensed
|
|
Method
|
|
11/14/2036
|
|
Application
|
|
CA3056631A
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
CA
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
CN201880028522A
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
CN
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
KR20197030017A
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
KR
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
EP18768024A
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
EP
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
16/494,713
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
US
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Application
|
|
17/007,936
|
|
“IN VIVO PRIMING
OF NATURAL KILLER CELLS”
|
|
US
|
|
Licensed
|
|
Method
|
|
TBD
|
|
Our
commercial success depends in part on obtaining and maintaining patent protection and trade secret protection of our current and
future product candidates and the methods used to manufacture them, as well as successfully defending these patents against third-party
challenges. Our ability to stop third parties from making, using, selling, offering to sell or importing our products depends
on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We cannot
assure you that our pending patent applications will result in issued patents.
|
●
|
“N/A”
when used above with respect to provisional patent applications and international PCT patent applications, each of which is
only temporary in nature, and does not mature into a valid enforceable patent by itself, but instead serves to establish a
chain of priority rights for subsequently filed patent applications.
|
|
|
|
|
●
|
“TBD”
when used above with respect to pending patent applications which are undergoing ordinary patent prosecution and may eventually
issue as a valid enforceable patent.
|
International
PCT patent applications cover all 152 nations which are signatories of the PCT. However, our IP strategy generally recognizes
the United States, United Kingdom, European Union, Canada, Japan, Australia and China as targets for extending patent protection
under the PCT. Decisions regarding which countries to extend patent coverage under the PCT is taken on a case by case basis, subject
to normal business considerations such as value and return on investment.
Each
of the above-identified patents and patent applications is subject to change based on strategic patent portfolio building decisions,
which may include refiling and reissue, certain abandonments, including those in favor of continuing patent applications, maturations
from provisional to non-provisional filings, and other regular patent prosecution activities.
Trademarks
The
following table summarizes trademark applications and registrations used or intended for use in connection with products in our
pipeline:
Application
/ Registration
|
|
Number
|
|
Mark
|
|
Jurisdiction
|
|
Application
|
|
90/517,195
|
|
INmune Bio
|
|
US
|
|
Application
|
|
88/857,507
|
|
INKmune
|
|
US
|
|
Application
|
|
90/517,204
|
|
INB16
|
|
US
|
|
Application
|
|
88/862,742
|
|
LIVNate
|
|
US
|
|
Application
|
|
88/907,267
|
|
Quellor
|
|
US
|
|
Each
of the above-identified trademark applications is subject to change as the trademark portfolio develops and we begin to perfect
these registrations with actual use after receiving marketing authorization.
Immune
Ventures, LLC License Agreement
On
October 29, 2015, the Company entered into an exclusive license agreement (the “INKmune License Agreement”) with Immune
Ventures, LLC (“Immune Ventures”). Pursuant to the INKmune License Agreement, we were granted exclusive worldwide,
sub-licensable, royalty-bearing licenses (collectively “Patent Rights”) as well as all applications (the “Field”)
of the Patent Rights, including rights to incorporate any improvements or additions to the patents that may be developed in the
future to the following patents and patent applications:
Patent
Applications:
Property
No.
|
|
Patent
Application Serial No.
|
|
Filing Date:
|
|
Title:
|
|
(1)
|
|
US 62/219,652
|
|
09/16/2015
|
|
IN VIVO ACTIVATION
OF NATURAL KILLER CELLS
|
|
(2)
|
|
US 62/263,951
|
|
12/07/2015
|
|
IN VIVO ACTIVATION
OF NATURAL KILLER CELLS
|
|
(3)
|
|
US 15/268,399
|
|
09/16/2016
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(4)
|
|
PCT/US2016/061835
|
|
11/14/2016
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(5)
|
|
US 62/471,953
|
|
03/15/2017
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(6)
|
|
CA 3,009,171
|
|
06/19/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(7)
|
|
EP 16847576.2
|
|
04/16/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(8)
|
|
JP 2018-534524
|
|
04/16/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(9)
|
|
PCT/US2018/022722
|
|
03/15/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(10)
|
|
AU 2018203469
|
|
05/16/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(11)
|
|
CA 3,056,631
|
|
03/15/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(12)
|
|
CN 201880028522
|
|
03/15/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(13)
|
|
KR 20197030017
|
|
03/15/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(14)
|
|
EP 18768024.4
|
|
03/15/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
(15)
|
|
US 16/494,713
|
|
03/15/2018
|
|
IN VIVO PRIMING OF
NATURAL KILLER CELLS
|
|
Patents:
Property
No.
|
|
Patent
No.
|
|
Issue
Date:
|
|
Title:
|
|
(N/A)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
In
consideration for the Patent Rights, we agreed to the following milestone payments (of which none have been incurred as of December
31, 2020):
Each Phase I initiation
|
|
$
|
25,000
|
|
Each Phase II initiation
|
|
$
|
250,000
|
|
Each Phase III initiation
|
|
$
|
350,000
|
|
Each NDA/EMA filing
|
|
$
|
1,000,000
|
|
Each NDA/EMA awarded
|
|
$
|
9,000,000
|
|
In
addition, we agreed to pay the licensor a royalty of 1% of net sales during the life of each patent granted to us. The Licensor
is owned by Raymond J. Tesi, our President and a member of our Board of Directors, David Moss, our Chief Financial Officer and
Treasurer and Mark Lowdell, our Chief Scientific Officer. In countries where a claim of an issued and unexpired patent or a pending
claim in a pending patent application within the Patent Rights exists a royalty of nine percent of net sales of each of each licensed
product shall be paid for the remaining life of each patent on a country by country basis.
The
term of the agreement began on October 29, 2015 and, if not terminated sooner pursuant to the agreement, ends on a country-by-country
basis on the date of the expiration of the last to expire patent rights where patent rights exists. Upon the termination of the
agreement we shall have a fully paid up, perpetual, royalty-free license without further obligation to Immune Ventures. The agreement
can be terminated by Immune Ventures if, after 60 days from the Company’s receipt of notice that the Company has not made
a payment under the agreement, and the Company still does not make this payment. On July 20, 2018, the parties amended the
agreement under which the Company was required achieve milestones pursuant to the agreement. On October 30, 2020, the parties
executed an additional amendment to the agreement under which the Company is required to achieve the following milestones:
Initiation
of Phase 1 clinical or equivalent trials by October 29, 2021
Initiation
of Phase II clinical trials or equivalent by October 29, 2023
Initiation
of Phase III clinical trials or equivalent by October 29, 2025
Filing
of NDA or equivalent by October 29, 2026 or equivalent
If
the Company doesn’t achieve the above milestones, it is required to negotiate in good faith with Immune Ventures to determine
how it can either remedy the failure or achieve an alternate development. If the Company fails to make any required efforts, or
if the efforts do not remedy the situation within 60 days of written notice by Immune Ventures, then Immune Ventures may provide
notice to terminate the license or convert it to a non-exclusive license.
University
of Pittsburg License Agreement
On
October 3, 2017, the Company entered into an Assignment and Assumption Agreement with Immune Ventures related to intellectual
property licensed from the University of Pittsburgh. Pursuant to the Assignment and Assumption Agreement (the “Assignment
Agreement”), Immune Ventures assigned all of its rights, obligations and liabilities under an Exclusive License Agreement
between the University of Pittsburgh – Of the Commonwealth System of Higher Education (“Licensor”) and Immune
Ventures to INmune Bio (“Licensee”), (the “PITT Agreement”).
Consideration
under the PITT Agreement includes: (i) annual maintenance fees, (ii) royalty payments based on the sale of products making use
of the licensed technology, and (iii) milestone payments.
Annual
maintenance fees under the PITT Agreement include: $5,000 due June 26 of each year 2020-2022; $10,000 due on June 26 of each year
2023-2024; and $25,000 due on June 26 of each year 2025 and annually thereafter until first commercial sale. As of December 31,
2020, the Company has no amounts owed pursuant to the PITT Agreement. The Company is current on its annual maintenance fees pursuant
to the PITT Agreement.
June 26 of each year 2020-2022
|
|
$
|
5,000
|
|
June 26 of each year 2023-2024
|
|
$
|
10,000
|
|
June 26 of each year 2025 until first commercial sale
|
|
$
|
25,000
|
|
Upon
first commercial sale of a product making use of the licensed technology under the PITT Agreement, the Licensee is required to
pay royalties equal to 2.5% of Net Sales each calendar quarter.
Moreover,
under the PITT Agreement the Licensee is required to make milestone payments as follows:
Each Phase I initiation
|
|
$
|
50,000
|
|
Each Phase III initiation
|
|
$
|
500,000
|
|
First commercial sale of product making use of licensed technology
|
|
$
|
1,250,000
|
|
The
Company made a $50,000 milestone payment to the University of Pittsburgh in March 2019 as a result of the initiation of a Phase
I clinical trial. The PITT Agreement expires upon the earlier of: (i) expiration of the last claim of the Patent Rights forming
the subject matter of the PITT Agreement; or (ii) the date that is 20 years from the effective date of the agreement (June 26,
2037).
The
Company may terminate the PITT Agreement upon 3 months prior written notice provided all payments under the license are current.
Licensor may terminate the PITT Agreement upon written notice if: (i) the Company defaults as to performance of material obligations
which have not been cured within 60 days after receiving written notice; or (ii) the Company ceases to carry out its business,
becomes bankrupt or insolvent, applies for or consents to the appointment of a trustee, receiver or liquidator of its assets or
seeks relief under any law for the aid of debtors.
Xencor
License Agreement
On
October 3, 2017, the Company entered into a license agreement with Xencor, Inc. (“Xencor”), which has discovered and
developed a proprietary biological molecule that inhibits soluble tumor necrosis factor (the “Xencor Agreement”).
Pursuant to the Xencor Agreement, Xencor granted the Company an exclusive worldwide, royalty-bearing license in licensed patent
rights, licensed know-how and licensed materials (as defined in the Xencor Agreement) to make, develop, use, sell and import any
pharmaceutical product that comprises, contains, or incorporates Xencor’s proprietary protein known as “XPro1595”
that inhibits soluble tumor necrosis factor (or all modifications, formulations and variants of the licensed protein that specifically
bind soluble tumor necrosis factor) alone or in combination with one or more active ingredients, in any dosage or formulation.
In connection with the Xencor Agreement, we paid Xencor a one-time non-creditable and non-refundable fee of $100,000 and agreed
to issue Xencor 1,585,000 shares of our common stock. We also issued warrants to Xencor which are discussed below.
We
also agreed to pay Xencor a royalty of 5% on net sales of all Licensed Products in a given calendar year, which are payable on
a country-by- country and licensed product by licensed product basis until the date that is the later of (a) the expiration of
the last to expire valid claim covering any pharmaceutical product that contains, comprises, or incorporates Xencor’s proprietary
protein known as XPro1595 alone or in combination with one or more active ingredients, in any dosage or formulation. (“Licensed
Product”) in such country or (b) ten years following the first sale to a third party of the licensed product in such country.
Net Sales with respect to any Licensed Product is the gross amounts invoiced by us for sales of the Licensed Products less deductions
actually incurred.
Under
the Xencor Agreement, we also agreed to pay Xencor a percentage of any sublicensing revenue that it receives equal to (i) 60%
of sublicensing revenue received in respect of any sublicense granted prior to initiation of a Phase 1 Clinical Trial of a Licensed
Product in the applications for the treatment of disease in humans (the “Field”); (ii) 30% of Sublicensing Revenue
received in respect of any sublicense granted on or after initiation of a Phase 1 Clinical Trial of a Licensed Product in the
Field and prior to initiation of a Phase 2 Clinical Trial of a Licensed Product in the Field; (iii) 15% of Sublicensing Revenue
received in respect of any sublicense granted on or after initiation of a Phase 2 Clinical Trial of a Licensed Product in the
Field and prior to initiation of a Phase 3 Clinical Trial of a Licensed Product in the Field; (iv) 10% of Sublicensing Revenue
received in respect of any sublicense granted on or after initiation of a Phase 3 Clinical Trial of a Licensed Product in the
Field and prior filing of the first NDA application for any Licensed Product in the Field; and (v) 5% of Sublicensing Revenue
received in respect of any sublicense granted on or after the approval of the first NDA application for any Licensed Product in
the Field. For clarity, initiation of a clinical trial shall mean dosing of a first patient in said clinical trial.
A
valid claim is an issued, unexpired or pending claim with the patent rights that Xencor controls as of October 3, 2017 which
patent rights are necessary to make, develop, use, sell, have sold, offer for sale and import a Licensed Product in the Field
(the Field means all applications for the treatment of diseases in humans) or the Product Patent Rights, which claim has not lapsed,
been abandoned, been revoked or been held to be unpatentable, invalid or unenforceable by a final judgment of a court or other
governmental agency or competent jurisdiction from which no appeal can be or is taken within the time allowed for appeal and which
has not been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise. Product Patent
Rights shall mean any and all our patent rights that are necessary to make, develop, use, sell, have sold, offer for sale and
import a Licensed Product in the Field, including any improvements or patent rights directed to the Licensed Product. Either party
may terminate the Xencor Agreement upon 60 days’ (10 days for any payment default) prior written notice to the other party
after the breach of any material provision of the agreement by the other party if the breaching party has not cured the breach
within the 60-day period (10-day period for any payment default) following written notice of termination by the non-breaching
party. We can terminate the Xencor Agreement upon 180 days prior written notice to Xencor. Xencor may terminate the Xencor Agreement
in its entirety or with respect to any specific Licensed Product upon written notice in the event that we contest, oppose or challenge
or assist any party in contesting, opposing or challenging, Xencor’s ownership of, or the enforceability or validity of
the Patent Rights that Xencor controls as of October 3, 2017 which Patent Rights are necessary to make develop, use, sell, have
sold, offered for sale and import a Licensed Product in the Field. Either party may terminate the Xencor Agreement upon written
notice to the other party upon or after the insolvency, bankruptcy, dissolution or winding up of such other party or the making
or seeking to make or arrange an assignment for the benefit of creditors of such other party or the initiation of proceedings
in voluntary or involuntary bankruptcy which proceeding or action remains undismissed or unstayed for a period of more than 60
days.
In
connection with the Xencor Agreement, we entered into a stock issuance agreement with Xencor pursuant to which it agreed to issue
Xencor 1,585,000 shares of its common stock and fully vested warrants to purchase an additional number of shares of common stock
equal to 10% our the fully diluted company shares immediately following such purchase. In August 2018, we entered into a First
Amendment to Stock Issuance Agreement. Pursuant to the amendment, the purchase price for the additional shares may only be paid
by cash.
University
College London License Agreement – MSC
On
July 19, 2019, the Company entered into license agreement with UCL Business PLC (“UCLB”) with a ten-year term. Pursuant
to the license agreement, the Company acquired an exclusive license (and a right to sub-license) to the technology and know-how
relating to an isolation and commercial scale expansion methodology of GMP grade human umbilical cord mesenchymal stem/stromal
cells (“MSC”).
In
exchange for the license agreement, the Company paid UCLB an initial license fee of approximately $10,000 and shall pay annual
licensing fees of approximately $13,000 per year for the remaining term of the agreement beginning in July 2020. The Company will
pay UCLB a royalty of 3-3.5% of the net sales value (as defined in the agreement) of all licensed products sold or used by the
Company. As of December 31, 2020, no amounts are owed to UCLB pursuant to this license agreement. In the event the Company sub-licenses
the technology and know-how, the Company will pay UCLB a royalty of 12 percent of the consideration (cash or non-cash) received
by the Company in relation to the development or sub-licensing of any of the technology and know-how.
INKmune
Research and Development
We
expect to use third parties to conduct our preclinical and clinical trials under the direct supervision of management.
INKmune
Manufacturing
We
intend to contract with third parties for the manufacture of our compounds for investigational purposes, for preclinical and clinical
testing and for any FDA approved products for commercial sale. Pre-clinical and clinical material for the early clinical trials
with INKmune has been manufactured under the direction of Mark Lowdell at a licensed Good Manufacturing Practice (“GMP”)
facility. The master cell bank, working cell bank and individual product doses were completed in July 2018. This clinical material
is planned for use in the Phase I/II clinical trials in ovarian cancer. If we raise adequate capital to initiate the high-risk
MDS Phase I/II trials, additional working cell banks and therapeutic product will be produced from the existing master cell bank.
This process takes approximately 6 months and is not anticipated to delay the initiation of the high-risk MDS Phase I/II trials.
We may transfer the manufacturing to a different commercial contract manufacturing organization after completion of these Phase
II studies.
Human
Mesenchymal Stem Cells
In
November 2017, we entered into a Material Transfer and License Agreement with the Anthony Nolan Cord Blood Bank (“AN”),
the oldest and largest non-directed cord blood bank in the United Kingdom for the supply the starting material for the mesenchymal
stem cells - umbilical cords not used after cord blood harvest. Mark Lowdell’s research group developed and validated a
methodology for producing large numbers of clinical-grade pooled human umbilical cord derived mesenchymal stem cells (“HucMSC”).
We believe the reproducible and reliable supply of large quantities of high-quality a may solve one of the major problems associated
with the development of mesenchymal stem cell therapies for medicine. Under this agreement we were granted a license to produce
and sell these cells for medical research, including clinical trials. The agreement provides that Immune Bio Internal shall pay
to AN £200 plus VAT (if applicable) for each umbilical cord tissue sample (and any intellectual property, developed, or
conceived by Immune Bio International in exercising its rights under the agreement (“Licensed Product”)) Immune Bio
International receives pursuant to the agreement. Additionally, during the entire term of the agreement, Immune Bio International
shall pay AN a royalty of 2% of the net sales of the Licensed Product. We believe we are well positioned to become a preferred
manufacturing partner for companies who need MSC for clinical programs. Manufacture of HucMSC is performed under the direction
of Mark Lowdell in a licensed GMP facility that is contracted to the Company as part of existing research and development agreements.
The starting material for the HucMSC product is provided by the AN. The HucMSC product produced in this facility are fully qualified
to be used for either research or clinical trials. Currently, we plan to supply HucMSC to third parties for their research use
and in clinical trials as part of the development process for commercial pro/ducts. We may decide to expand this agreement in
the future if the commercial and/or development opportunities warrant such expansion. At the current time, we expect this program
to be funded by revenues from commercial sales. The agreement with AN terminates on November 29, 2027. AN may terminate the license
on written notice to us, if a donor withdraws consent to the continued use of umbilical cord tissue samples that were obtained
by AN. Additionally, either party may terminate the agreement on 30 days prior written notice to the other if that other party
materially breach any term of the agreement and such breaches (to the extent it is remediable) is not remedied within 30 days
of the written request to the other party to do so.
Challenges
in the Market for Immunotherapy Products
Government
Regulation
The
FDA and other federal, state, local and foreign regulatory agencies impose substantial requirements upon the clinical development,
approval, labeling, manufacture, marketing, and distribution of drug products. These agencies regulate, among other things, research
and development activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage,
record keeping, advertising and promotion of our product candidates. The regulatory approval process is generally lengthy and
expensive, with no guarantee of a positive result. Moreover, failure to comply with applicable FDA or other requirements may result
in civil or criminal penalties, recall or seizure of products, injunctive relief including partial or total suspension of production,
or withdrawal of a product from the market.
Various
regulatory authorities regulate, among other things, the research, manufacture, promotion, and distribution of drugs in the United
States under the FDA and other statutes and implementing regulations. The process required by the FDA before prescription drug
product candidates may be marketed in the United States generally involves the following:
|
●
|
completion
of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA’s
Good Laboratory Practice regulations;
|
|
|
|
|
●
|
submission
to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may
begin;
|
|
|
|
|
●
|
for
some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA’s regulations,
including Good Clinical Practices, to establish the safety and efficacy of the product candidate for each proposed indication;
|
|
|
|
|
●
|
submission
to the FDA of a new drug application or NDA;
|
|
|
|
|
●
|
satisfactory
completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced to assess compliance
with current Good Manufacturing Practice, or cGMP, regulations; and
|
|
|
|
|
●
|
FDA
review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
|
The
testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals
for our product candidates will be granted on a timely basis, if at all.
Preclinical
tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity
in animals and other animal studies. The results of preclinical tests, together with manufacturing information and analytical
data, are submitted as part of an IND to the FDA. Some preclinical testing may continue even after an IND is submitted. The IND
also includes one or more protocols for the initial clinical trial or trials and an investigator’s brochure. An IND automatically
becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions
relating to the proposed clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases,
the IND sponsor and the FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical
trial holds also may be imposed at any time before or during studies due to safety concerns or non-compliance with regulatory
requirements. An independent institutional review board, or IRB, at each of the clinical centers proposing to conduct the clinical
trial must review and approve the plan for any clinical trial before it commences at that center. An IRB considers, among other
things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated
benefits. The IRB also approves the consent form signed by the trial participants and must monitor the study until completed.
The
FDA offers several regulatory mechanisms that provide expedited or accelerated approval procedures for selected drugs in the indications
on which we are focusing our efforts. These include accelerated approval under Subpart H of the agency’s NDA approval regulations,
fast track drug development procedures and priority review.
We
plan to seek orphan drug designation for INKmune for the treatment of ovarian carcinoma. The United States, European Union and
other jurisdictions may grant orphan drug designation to drugs intended to treat a “rare disease or condition,” which,
in the United States, is generally a disease or condition that affects no more than 200,000 individuals. In the European Union,
orphan drug designation can be granted if: the disease is life threatening or chronically debilitating and affects no more than
50 in 100,000 persons in the European Union; without incentive it is unlikely that the drug would generate sufficient return to
justify the necessary investment; and no satisfactory method of treatment for the condition exists or, if it does, the new drug
will provide a significant benefit to those affected by the condition. If a product that has an orphan drug designation subsequently
receives the first regulatory approval for the indication for which it has such designation, the product is entitled to orphan
exclusivity, meaning that the applicable regulatory authority may not approve any other applications to market the same drug for
the same indication, except in limited circumstances, for a period of seven years in the United States and 10 years in the European
Union Orphan drug designation does not prevent competitors from developing or marketing different drugs for the same indication
or the same drug for different indications. Orphan drug designation must be requested before submitting an NDA. After orphan drug
designation is granted, the identity of the therapeutic agent and its potential orphan use are publicly disclosed. Orphan drug
designation does not convey an advantage in, or shorten the duration of, the review and approval process. However, this designation
provides an exemption from marketing and authorization (NDA) fees. We plan to follow a similar path with INB03, although the precise
indication cannot be determined until we are farther along in the development process.
Clinical
Trials
Phase
1 clinical trials typically involve the initial introduction of the product candidate into healthy human volunteers. In Phase
1 clinical trials, the product candidate is typically tested for safety, dosage tolerance, absorption, metabolism, distribution,
excretion and pharmacodynamics.
Phase
2 clinical trials are conducted in a limited patient population to gather evidence about the efficacy of the product candidate
for specific, targeted indications; to determine dosage tolerance and optimal dosage; and to identify possible adverse effects
and safety risks.
Phase
3 clinical trials are undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically
dispersed clinical trial sites. The size of Phase 3 clinical trials depends upon clinical and statistical considerations for the
product candidate and disease, but sometimes can include several thousand patients. Phase 3 clinical trials are intended to establish
the overall risk-benefit ratio of the product candidate and provide an adequate basis for product labeling.
Clinical
trials involve the administration of the product candidate to human subjects under the supervision of qualified medical investigators
according to approved protocols that detail the objectives of the study, dosing procedures, subject selection and exclusion criteria,
and the parameters to be used to monitor participant safety. Regulatory procedures differ in each country we will be working in.,
For example, in the US, each protocol is submitted, to the FDA as part of the IND for their review and consent before enrolling
patients in the clinical trial. The US is not the only place to perform clinical trials. Most countries have systems in place
to allow academics and companies to sponsor clinical trials of novel therapies in patients. For financial and technical reasons,
the Company will perform the Phase I clinical trials of our programs in the United Kingdom and Australia. The US will be included
in the Phase II programs. Other venues such as Europe, Canada, Japan and other Pacific Rim countries may be included in the development
program in the future. The first clinical trial with INKmune will be initiated in the United Kingdom. In the United Kingdom, the
regulatory submission is made to the MHRA for a clinical trials authorization (“CTA”). This is a multistep process.
The Company had a Scientific Advice meeting with the MHRA in September 2017 to discuss the INKmune Phase I/II trial in women with
relapse/refractory ovarian cancer including trial design, manufacturing processes and clinical trial execution. The MHRA gave
recommendations on trial design, manufacturing controls and the regulatory procedures needed to initiate the clinical trial. We
received CTA approval from the MHRA for an INKmune trial in ovarian cancer on December 18, 2018. The approval allows for the execution
of the Phase I/II INKmune clinical trial in the United Kingdom. We plan to have two cancer clinics referring the 6 patients needed
for the Phase I portion of the trial. The patients will be treated at the Phase I unit a university hospital. We expect all of
the Phase I sites to be in London, United Kingdom. If the Phase I trial proceeds as planned, we expect to open the Phase II portion
of the trial in early 2020. The Phase II trial will include at least 3 other clinical sites in the United Kingdom and may include
clinical sites in the US. Because 30 patients will be required to complete the Phase II portion of the trial, we expect to need
sites in both the US and United Kingdom. The additional clinical sites in the United Kingdom or US have not been identified at
this time. No additional regulatory procedures will be needed to add sites in the United Kingdom. To add sites in the US, we will
need to file an IND with the FDA. Once the FDA approves the IND, clinical sites can be opened. We have chosen relapsed/refractory
ovarian cancer as the anticipated Phase 1 study for INKmune for a number of reasons. Relapsed refractory is a disease with poor
treatment options. Our pre-clinical data suggests INKmune may have advantages over other immunotherapies in the treatment of ovarian
cancer. Ovarian cancer has a sensitive and validated biomarker to measure disease burden – CA125. This allows the Company
to accurately select patients for the clinical trial and determine if INKmune therapy is effective. We believe that intraperitoneal
delivery of INKmune is a low-risk delivery strategy for a phase 1 study. The patients we plan to enroll in the trial have their
disease concentrated in the peritoneal cavity further supporting the use of intra-peritoneal delivery. Finally, relapsed refractory
ovarian cancer is an Orphan indication in the US. This provides regulatory advantages for registration of INKmune. INB03 will
follow a similar development strategy, but will use Australia for the Phase I programs. In Australia, clinical trials for INB03
are performed under the clinical trials notification (“CTN”) scheme authorized by the Therapeutic Good Administration
(“TGA”). The TGA is the equivalent agency to the FDA in the US and the MHRA in the United Kingdom. We filed an Australian
Clinical Trial Notification, or CTN, for INB03 and XPro1595 during the second quarter of 2018 and 2019 respectively. Applications
were accepted in May 2018 and 2019 to allow us to initiate the Phase I trials in cancer and Alzheimer’s disease respectively.
We have completed the oncology Phase 1 open label dose escalation trial in patients with advanced solid tumors and biomarkers
of inflammation in their blood.
The
Phase I trial has been completed and provided evidence of safety and a pharmacodynamic drug affect, decrease of inflammatory biomarkers,
needed to move the program to a Phase II clinical trial in cancer. The Phase II clinical trial that will combine INB03 with approved
second line therapy in patients with brain metastasis in women with Her2+ breast cancer. This is a combination trial where the
addition of INB03 to approved second line therapy may provide a therapeutic alternative in a disease without any drugs approved.
The Company has not lost interest in combining INB03 with CPI, but competition for patients is fierce in this arena. Our plan
is to pursue treatment of tumors that express MUC4 as our lead indication. Tumors that express MUC4 are resistant to all forms
of immunotherapy due to a combination of increased MDSC in the tumor, decreased inflammation in the tumor (a “cold”
tumor) and direct effects of MUC4 and soluble TNF on HER2 function. If combination therapy with INB03 decreases MUC4 expression
and changes the TME to make the “cold” tumor “hot”, then addition of a CPI will be warranted. Checkpoint
inhibitors are immunotherapy drugs that target proteins in the tumor and immune cells to improve the adaptive immune response
to the tumor by reversing immunologic strategies the cancer uses to evade the immune system. These drugs target PD1, PDL-1 or
CTLA-4. As of April 2018, there are six checkpoint inhibitors approved in the US (Ipilimumab, Atezolizumab, Avelumab, Durvalumab,
Pembrolizumab, and Nivolumab). Additional checkpoint inhibitors to new and existing targets are in development and will be approved
in the coming years. Checkpoint inhibitors are having a significant impact on the treatment of cancer and are expected to be the
largest selling class of cancer therapies by 2027. INB03 can impact the cancer market for CPI in two ways; i) increase the number
of patients eligible for CPI by making “cold” tumors “hot” and ii) reverse resistance to CPI due to immunologic
factors in the TME such as increased MDSC. Currently, only 25-30% of patients treated with currently approved checkpoint inhibitors
respond to therapy and many of these become refractory after a period of treatment. This means at least 70% of patients are resistant
to, or refractory to, checkpoint inhibitors. Experts agree that combination therapy is needed and necessary to improve the response
to checkpoint inhibitor therapy in resistant and refractory patients. To that end, companies with approved checkpoint inhibitors
are looking for companion drugs improve patient response and expand market opportunities. The INB03 development program in cancer
is designed to take advantage of our pre-clinical data and the needs to the cancer community to improve the safety and efficacy
of checkpoint inhibitors. At this time, the combination trial to treat trastuzumab resistant HER2+ expressing cancer is our lead
registration strategy for INB03. Current therapies for trastuzumab resistant cancers are used on a trial by error approach. Using
MUC4 expression as a biomarker for to predict trastuzumab resistance brings a precision medicine approach to this difficult clinical
scenario. Addition of INB03 to the treatment regimen for treating HER2+ cancers may convert “cold” tumors to “hot”
tumors making the eligible for treatment with CPI. Finally, the clinical development landscape for CPI combination therapies to
treat CPI resistant therapies is chaotic. The design and successful completion of a Phase II trial is not guarantee of clinical
relevance or commercial viability. There are multiple therapies on the market or in development for the treatment of trastuzumab
resistant breast cancer. The most prominent of antibody conjugates including ado-trastuzumab emtansine (Kadycycla/T-DM1, Genentech/Roche)
and trastuzumab deruxtecan (Enhertu, Daiichi Sankyo). To our knowledge, there are no drugs approved for the treatment of patients
with HER2+ brain metastasis. CPI are not active in HER2+ cancers but there is considerable interest in attempting to modify the
TME to allow effective use of CPI in patients with advanced disease. Checkpoint inhibitor companies announced large partnering
deal with companies producing checkpoint inhibitor potentiators – BMS/Nektar; BMS/IFM and Merck/Incyte. Experts agree that
partnering in this arena will continue. The registration and development strategy for INB03 is multinational. The Phase II program
may enroll patients in other countries, including the United States after submitting an Investigational New Drug application,
or IND, to the U.S. Food and Drug Administration, or FDA. If partnering is successful at any stage of INB03 development, we expect
the partner to influence the development and regulatory decisions needed with moving the drug to commercialization. Finally, combination
therapy to treat patients resistant to trastuzumab or CPI are not the only oncology application for INB03. INB03 can be combined
with other immune-oncology therapy to improve efficacy, safety or both. INB03 can be used as part of combination therapy with
immuno-oncology drugs, paired with tradition therapies such as cytotoxic chemotherapy, kinase inhibitors, cell therapies or radiation
therapy. The company is pursuing pre-clinical data in some of these areas. When and if positive developments occur, we will communicate
them to our shareholders. There are other regulatory venues that will be important for both our products – the largest and
most important is Europe. In Europe, the European Medicines Agencies (“EMA”) is responsible for authorization of clinical
trials in member states. In EU, there may be a requirement to get individual country authorization at the same time as EMA authorization.
The initial development of INB03. XPro1595 and LIVNate will occur in AUS followed by trials in the US. The development of INKmune
will occur primarily in the United Kingdom followed by trials in the US. XPro1595 is being developed for the treatment of Alzheimer’s
disease under a Part-the-Cloud Award received Feb 2019. The biomarker directed Phase I trial is being performed in AUS using a
regulatory strategy identical to that used for INB03 in cancer. Regulatory approval to initiate the trial was received on February
8, 2019. XPro1595 treats microglial activation and innate immune dysregulation may be the cause with Alzheimer’s disease
in some patients. To our knowledge, there are few companies using an anti-inflammatory strategy for the treatment of Alzheimer’s
disease. Those companies include Denali Therapeutics (NASDAQ: DNLI); developing DNL747 that targets critical signaling proteins
in the TNF pathway that regulate inflammation and cell death. Alector (NASDAQ: ALEC) in partnership with Abbvie is developing
AL002 that targets TREM2 on microglial cells. Gliacure is targeting microglial cells in Alzheimer’s disease with a small
molecule candidate GC021109. LIVNate is being developed for the treatment of NASH. The Phase II trial will occur in AUS and NZ,
is expected to require fewer than 5 clinical sites to complete enrollment. LIVNate offers a unique therapeutic strategy for the
treatment of NASH by targeting peripheral, regional and local cycles of pathology that contribute to the development and progression
of the disease. There are many drugs in development for NASH classified in three groups – anti-fibrotic, metabolic and anti-inflammatory
therapies. Drug development for the treatment of NASH has been difficult. In 2019, several programs failed in late stage development
including seldapar (CYMABAY) and selonsertib (GILEAD). Currently, ocaliva by Intercept is expected to be the first drug to receive
FDA approval for the treatment of NASH with by elafibranor by GENFIT is expected to be second. The list of companies with NASH
therapies in earlier stages of development is long, including cenicriviroc by ALLERGAN, MGL-3196 by MADRIGAL, VK2809 by VIKING
Therapeutics and belapectin by GALECTIN. To our knowledge, the only true anti-inflammatory strategy in development is an
anti-IL11 being developed by Boheringer Ingelheim most likely as part of combination therapy.
Clinical
testing must satisfy extensive FDA regulations. Reports detailing the results of the clinical trials must be submitted at least
annually to the FDA and safety reports must be submitted for serious and unexpected adverse events. Success in early stage clinical
trials does not assure success in later stage clinical trials. The FDA, an IRB or we may suspend a clinical trial at any time
on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
New
Drug Applications
Assuming
successful completion of the required clinical trials, the results of product development, preclinical studies and clinical trials
are submitted to the FDA as part of an NDA. An NDA also must contain extensive manufacturing information, as well as proposed
labeling for the finished product. An NDA applicant must develop information about the chemistry and physical characteristics
of the drug and finalize a process for manufacturing the product in accordance with cGMP. The manufacturing process must be capable
of consistently producing quality product within specifications approved by the FDA. The manufacturer must develop methods for
testing the quality, purity and potency of the final product. In addition, appropriate packaging must be selected and tested and
stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf
life. Prior to approval, the FDA will conduct an inspection of the manufacturing facilities to assess compliance with cGMP.
The
FDA reviews all NDAs submitted before it accepts them for filing. The FDA may request additional information rather than accept
an NDA for filing. In this event, the NDA must be resubmitted with the additional information and is subject to review before
the FDA accepts it for filing. After an application is filed, the FDA may refer the NDA to an advisory committee for review, evaluation
and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation
of an advisory committee, but it considers them carefully when making decisions. The FDA may deny approval of an NDA if the applicable
regulatory criteria are not satisfied. Data obtained from clinical trials are not always conclusive and the FDA may interpret
data differently than we interpret the same data. The FDA may issue a complete response letter, which may require additional clinical
or other data or impose other conditions that must be met in order to secure final approval of the NDA. If a product receives
regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may
otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require us to conduct
Phase 4 testing which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA approval,
and may require surveillance programs to monitor the safety of approved products which have been commercialized. Once issued,
the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety or efficacy questions are raised
after the product reaches the market.
Post-Approval
Requirements
Any
products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the
FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting,
distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding
new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user
fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application
fees for supplemental applications with clinical data. Pharmaceutical manufacturers and their subcontractors 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 GMP, which impose certain procedural and documentation requirements upon us and our
third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of
the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction
of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to
use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory compliance. If our future suppliers are not able to comply with
these requirements, the FDA may, among other things, halt our clinical trials, require us to recall a product from distribution,
or withdraw approval of the product.
The
FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after
the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated
severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions
to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety
risks; or imposition of distribution restrictions or other restrictions under a REMS program.
The
FDA closely regulates the marketing, labeling, advertising and promotion of pharmaceutical products. A company can make only those
claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions
of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label
uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective
advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are
not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label
uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients
in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however,
restrict manufacturer’s communications on the subject of off-label use of their products.
Other
Healthcare Laws and Compliance Requirements
Our
sales, promotion, medical education, clinical research and other activities following product approval will be subject to regulation
by numerous regulatory and law enforcement authorities in the United States in addition to FDA, including potentially the Federal
Trade Commission, the Department of Justice, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S.
Department of Health and Human Services and state and local governments. Our promotional and scientific/educational programs must
comply with the federal Anti-Kickback Statute, the civil False Claims Act, physician payment transparency laws, privacy laws,
security laws, and additional federal and state laws similar to the foregoing.
The
federal Anti-Kickback Statute prohibits, among other things, the knowing and willing, direct or indirect offer, receipt, solicitation
or payment of remuneration in exchange for or to induce the referral of patients, including the purchase, order or lease of any
good, facility, item or service that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs.
Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price
items and services. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers
on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other. Although there are a number of statutory
exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are
drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations
may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of
a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal
Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative
review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that
if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the
federal Anti-Kickback Statute has been violated. The government has enforced the federal Anti-Kickback Statute to reach large
settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians. Further,
a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a
violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal
Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Many states have similar laws
that apply to their state health care programs as well as private payors.
Federal
false claims and false statement laws, including the federal civil False Claims Act, or FCA, imposes liability on persons or entities
that, among other things, knowingly present or cause to be presented claims that are false or fraudulent or not provided as claimed
for payment or approval by a federal health care program. The FCA has been used to prosecute persons or entities that “cause”
the submission of claims for payment that are inaccurate or fraudulent, by, for example, providing inaccurate billing or coding
information to customers, promoting a product off-label, submitting claims for services not provided as claimed, or submitting
claims for services that were provided but not medically necessary. Actions under the FCA may be brought by the Attorney General
or as a qui tam action by a private individual in the name of the government. Violations of the FCA can result in significant
monetary penalties and treble damages. The federal government is using the FCA, and the accompanying threat of significant liability,
in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, for example, in connection
with the promotion of products for unapproved uses and other illegal sales and marketing practices. The government has obtained
multi-million and multibillion dollar settlements under the FCA in addition to individual criminal convictions under applicable
criminal statutes. In addition, certain companies that were found to be in violation of the FCA have been forced to implement
extensive corrective action plans, and have often become subject to consent decrees or corporate integrity agreements, restricting
the manner in which they conduct their business.
The
federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that
prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare
benefit program, including private third-party payors; knowingly and willfully falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services; and willfully obstructing a criminal investigation of a healthcare offense. Like the federal Anti-Kickback
Statute, the Affordable Care Act amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person
or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed
a violation.
Given
the significant size of actual and potential settlements, we expect that the government will continue to devote substantial resources
to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws. Also, many
states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in
addition to items and services reimbursed under Medicaid and other state programs. Additionally, to the extent that our products,
once commercialized, are sold in a foreign country, we may be subject to similar foreign laws.
In
addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare
providers. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or
collectively, the Affordable Care Act, among other things, imposed new reporting requirements on certain manufacturers of drugs,
devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health
Insurance Program, with specific exceptions, for payments or other transfers of value made by them to physicians and teaching
hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Covered manufacturers
are required to collect and report detailed payment data and submit legal attestation to the accuracy of such data to the government
each year. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per
year (or up to an aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or
ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Additionally,
entities that do not comply with mandatory reporting requirements may be subject to a corporate integrity agreement. Certain states
also mandate implementation of commercial compliance programs, impose restrictions on covered manufacturers’ marketing practices
and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other healthcare professionals.
We
may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct
our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and their respective
implementing regulations, imposes specified requirements on certain health care providers, plans and clearinghouses (collectively,
“covered entities”) and their “business associates,” relating to the privacy, security and transmission
of individually identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable
to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain
or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also
increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other
persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to
enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, certain states
have their own laws that govern the privacy and security of health information in certain circumstances, many of which differ
from each other and/or HIPAA in significant ways and may not have the same effect, thus complicating compliance efforts.
Coverage
and Reimbursement
Sales
of pharmaceutical products depend significantly on the extent to which coverage and adequate reimbursement are provided by third-party
payors. Third-party payors include state and federal government health care programs, managed care providers, private health insurers
and other organizations. Although we currently believe that third-party payors will provide coverage and reimbursement for our
product candidates, if approved, we cannot be certain of this. Third-party payors are increasingly challenging the price, examining
the cost-effectiveness, and reducing reimbursement for medical products and services. In addition, significant uncertainty exists
as to the reimbursement status of newly approved healthcare products. The U.S. government, state legislatures and foreign governments
have continued implementing cost containment programs, including price controls, restrictions on coverage and reimbursement and
requirements for substitution of generic products. Adoption of price controls and cost containment measures, and adoption of more
restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. We
may need to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness of our products. The product
candidates that we develop may not be considered cost-effective and thus may not be covered or sufficiently reimbursed. It is
time consuming and expensive for us to seek coverage and reimbursement from third-party payors, as each payor will make its own
determination as to whether to cover a product and at what level of reimbursement. Thus, one payor’s decision to provide
coverage and adequate reimbursement for a product does not assure that another payor will provide coverage or that the reimbursement
levels will be adequate. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate
reimbursement rate will be approved. Reimbursement may not be available or sufficient to allow us to sell our products on a competitive
and profitable basis.
Healthcare
Reform
The
United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals
to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and
payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated
goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry
has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
By
way of example, in March 2010, the Affordable Care Act was signed into law, intended to broaden access to health insurance, reduce
or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for
the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health
policy reforms. Among the provisions of the Affordable Care Act of importance to our potential drug candidates are:
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an
annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government healthcare programs;
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an
increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0%
of the average manufacturer price for branded and generic drugs, respectively;
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a
new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that
are inhaled, infused, instilled, implanted or injected;
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a
new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts
off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition
for a manufacturer’s outpatient drugs to be covered under Medicare Part D;
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extension
of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations;
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expansion
of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the
federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
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expansion
of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and
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a
new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research.
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In
addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include,
among others, the Budget Control Act of 2011, which mandates aggregate reductions to Medicare payments to providers of up to 2%
per fiscal year effective April 1, 2013, and, due to subsequent legislative amendments, will remain in effect through 2024 unless
additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of
2012, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment
centers, increased the statute of limitations period for the government to recover overpayments to providers from three to five
years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material
adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations.
We
expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may result
in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for
any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar
reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent
us from being able to generate revenue, attain profitability or commercialize our drugs.
Human
Capital Resources
As
of December 31, 2020, we had 5 full-time employees. We consider the intellectual capital of our employees to be an important driver
of our business and key to our future prospects. Since the Company’s inception the Company has experienced no employee turnover.
We monitor our compensation programs closely and provide what we consider to be a very competitive mix of compensation and insurance
benefits for all our employees, as well as participation in our equity programs. None of our employees is subject to a collective
bargaining agreement or represented by a trade or labor union. We consider our relations with our employees to be good.
Corporate
Information
We
were incorporated under the laws of the State of Nevada on September 25, 2015. Our principal executive office is located at 1200
Prospect Street, Suite 525, La Jolla, CA 92037 and our telephone number is (858) 964-3720.
Item
1a. Risk Factors
Summary
of Risk Factors
Below
is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not
address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks
that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with
other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common
stock.
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We
have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable
future.
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We
will require additional capital to fund our operations and if we fail to obtain necessary financing we will not be able to complete
the development and commercialization of our product candidates.
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We
are significantly dependent on the success of our DN-TNF product platform and Natural Killer Cell Priming Platform (INKmune) and
our product candidates based on these platforms.
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We
need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources.
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We
depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive disadvantage.
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The
biotechnology and immunotherapy industries are characterized by rapid technological developments and a high degree of competition.
We may be unable to compete with more substantial enterprises.
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We
can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical
studies will be favorable.
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Drug
discovery and development is a complex, time-consuming and expensive process with a high rate of failure.
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We
may face legal claims; legal disputes are expensive and we may not be able to afford the costs.
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We
can provide no assurance of the successful and timely development of new products.
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We
must comply with significant government regulations.
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We
rely upon patents to protect our technology. We may be unable to protect our intellectual property rights.
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The
price of our common stock may be volatile.
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The
market prices for our common stock may be adversely impacted by future events.
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A
limited public trading market may cause volatility in the price of our common stock.
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Our
Rights Agreement contains anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause
our stock price to decline.
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You
should carefully consider the risks described below as well as other information provided to you in this document, including information
in the section of this document entitled “Information Regarding Forward Looking Statements.” If any of the following
risks actually occur, the Company’s business, financial condition or results of operations could be materially adversely
affected, the value of the Company’s Common Stock could decline, and you may lose all or part of your investment.
RISKS
RELATED TO OUR BUSINESS
We
will need additional capital. If additional capital is not available or is available at unattractive terms, we may be forced to
delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or curtail
our operations.
In
order to develop and bring our product candidates to market, we must commit substantial resources to costly and time-consuming
research, preclinical and clinical trials and marketing activities. We anticipate that our existing cash and cash equivalents
will enable us to maintain our current operations for at least the next twelve months. We anticipate using our cash and cash equivalents
to fund further research and development with respect to our lead product candidates. We may, however, need to raise additional
funding sooner if our business or operations change in a manner that consumes available resources more rapidly than we anticipate.
Our requirements for additional capital will depend on many factors, including:
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successful
commercialization of our product candidates;
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the
time and costs involved in obtaining regulatory approval for our product candidates;
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costs
associated with protecting our intellectual property rights;
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development
of marketing and sales capabilities;
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payments
received under future collaborative agreements, if any; and
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market
acceptance of our products, if any.
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To
the extent we raise additional capital through the sale of equity securities, the issuance of those securities could result in
dilution to our shareholders. In addition, if we obtain debt financing, a substantial portion of our operating cash flow may be
dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities.
If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development
programs, reduce our commercialization efforts or curtail our operations. In addition, we may be required to obtain funds through
arrangements with collaborative partners or others that may require us to relinquish rights to technologies, product candidates
or products that we would otherwise seek to develop or commercialize ourselves or license rights to technologies, product candidates
or products on terms that are less favorable to us than might otherwise be available.
The
Company will require substantial additional funds to support its research and development activities, and the anticipated costs
of preclinical studies and clinical trials, regulatory approvals and eventual commercialization. Such additional sources of financing
may not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we may
be unable to initiate clinical trials or obtain approval of any product candidates from the FDA and other regulatory authorities.
In addition, we could be forced to discontinue product development, forego sales and marketing efforts and forego attractive business
opportunities. Any additional sources of financing will likely involve the issuance of our equity securities, which will have
a dilutive effect on our stockholders.
We
face intense competition in the markets targeted by our lead product candidates. Many of our competitors have substantially greater
resources than we do, and we expect that all of our product candidates under development will face intense competition from existing
or future drugs.
We
expect that all of our product candidates under development, if approved, will face intense competition from existing and future
drugs marketed by large companies. These competitors may successfully market products that compete with our products, successfully
identify drug candidates or develop products earlier than we do, or develop products that are more effective, have fewer side
effects or cost less than our products, if any.
Additionally,
if a competitor receives FDA approval before we do for a drug that is similar to one of our product candidates, FDA approval for
our product candidate may be precluded or delayed due to periods of non-patent exclusivity and/or the listing with the FDA by
the competitor of patents covering its newly-approved drug product. Periods of non-patent exclusivity for new versions of existing
drugs such as our current product candidates can extend up to three and one-half years. See “Business — Government
Regulation.”
These
competitive factors could require us to conduct substantial new research and development activities to establish new product targets,
which would be costly and time consuming. These activities would adversely affect our ability to commercialize products and achieve
revenue and profits.
Competition
and technological change may make our product candidates and technologies less attractive or obsolete.
We
compete with established pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications
we are pursuing and that have greater financial and other resources. Other companies may succeed in developing products earlier
than us, obtaining FDA approval for products more rapidly, or developing products that are more effective than our product candidates.
Research and development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments
or cures superior to any therapy we develop. We face competition from companies that internally develop competing technology or
acquire competing technology from universities and other research institutions. As these companies develop their technologies,
they may develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would
result in a decrease in the revenue we would be able to derive from the sale of any products.
There
can be no assurance that any of our product candidates will be accepted by the marketplace as readily as these or other competing
treatments. Furthermore, if our competitors’ products are approved before ours, it could be more difficult for us to obtain
approval from the FDA. Even if our products are successfully developed and approved for use by all governing regulatory bodies,
there can be no assurance that physicians and patients will accept our product(s) as a treatment of choice.
Furthermore,
the pharmaceutical research industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith
are numerous and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations
preclude us from forecasting revenues or income with certainty or even confidence.
If
we fail to protect our intellectual property rights, our ability to pursue the development of our technologies and products would
be negatively affected.
Our
success will depend, in part, on our ability to obtain patents and maintain adequate protection of our technologies and products.
If we do not adequately protect our intellectual property, competitors may be able to use our technologies to produce and market
drugs in direct competition with us and erode our competitive advantage. Some foreign countries lack rules and methods for defending
intellectual property rights and do not protect proprietary rights to the same extent as the United States. Many companies have
had difficulty protecting their proprietary rights in these foreign countries. We may not be able to prevent misappropriation
of our proprietary rights.
We
have received, and are currently seeking, patent protection for numerous compounds and methods of treating diseases. However,
the patent process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in
protecting our products by obtaining and defending patents. These risks and uncertainties include the following: patents that
may be issued or licensed may be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage;
our competitors, many of which have substantially greater resources than us and many of which have made significant investments
in competing technologies, may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability
to make, use, and sell our potential products either in the United States or in international markets; there may be significant
pressure on the United States government and other international governmental bodies to limit the scope of patent protection both
inside and outside the United States for treatments that prove successful as a matter of public policy regarding worldwide health
concerns; countries other than the United States may have less restrictive patent laws than those upheld by United States courts,
allowing foreign competitors the ability to exploit these laws to create, develop, and market competing products.
Moreover,
any patents issued to us may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents.
Third parties may also independently develop products similar to our products, duplicate our unpatented products or design around
any patents on products we develop. Additionally, extensive time is required for development, testing and regulatory review of
a potential product. While extensions of patent term due to regulatory delays may be available, it is possible that, before any
of our product candidates can be commercialized, any related patent, even with an extension, may expire or remain in force for
only a short period following commercialization, thereby reducing any advantages of the patent.
In
addition, the United States Patent and Trademark Office (the “USPTO”) and patent offices in other jurisdictions have
often required that patent applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed
substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection
against competitive challenges. Thus, even if we or our licensors are able to obtain patents, the patents may be substantially
narrower than anticipated.
Our
success depends on patent applications that are licensed exclusively to us and other patents to which we may obtain assignment
or licenses. We may not be aware, however, of all patents, published applications or published literature that may affect our
business either by blocking our ability to commercialize our product candidates, by preventing the patentability of our product
candidates to us or our licensors, or by covering the same or similar technologies that may invalidate our patents, limit the
scope of our future patent claims or adversely affect our ability to market our product candidates.
In
addition to patents, we rely on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions,
and security measures to protect our confidential and proprietary information. These measures may not adequately protect our trade
secrets or other proprietary information. If they do not adequately protect our rights, third parties could use our technology,
and we could lose any competitive advantage we may have. In addition, others may independently develop similar proprietary information
or techniques or otherwise gain access to our trade secrets, which could impair any competitive advantage we may have.
Patent
protection and other intellectual property protection is crucial to the success of our business and prospects, and there is a
substantial risk that such protections will prove inadequate.
We
license our patents from third party owners. If such owners do not properly maintain or enforce the intellectual property underlying
such licenses, our competitive position and business prospects could be harmed. Our licensors may also seek to terminate our license.
We
are a party to a number of licenses that give us rights to third-party intellectual property that is necessary or useful to our
business. To this end, we are dependent on our licenses with Xencor, Inc., Immune Ventures, LLC the University of Pittsburgh and
University College London. Our success will depend in part on the ability of our licensors to obtain, maintain and enforce our
licensed intellectual property. Our licensors may not successfully prosecute any applications for or maintain intellectual property
to which we have licenses, may determine not to pursue litigation against other companies that are infringing such intellectual
property, or may pursue such litigation less aggressively than we would. Without protection for the intellectual property we license,
other companies might be able to offer similar products for sale, which could adversely affect our competitive business position
and harm our business prospects. If we lose any of our right to use third-party intellectual property, it could adversely affect
our ability to commercialize our technologies, products or services, as well as harm our competitive business position and our
business prospects.
We
are dependent on our licensing agreement with Xencor and the termination of this agreement could a have an adverse effect on our
business.
On
October 3, 2017, the Company entered into a license agreement with Xencor, Inc., which has discovered and developed a proprietary
biological molecule that inhibits soluble tumor necrosis factor. Pursuant to the license agreement, Xencor granted the Company
an exclusive worldwide, royalty-bearing license in licensed patent rights, licensed know-how and licensed materials to make, develop,
use, sell and import any pharmaceutical product that comprises, contains, or incorporates Xencor’s proprietary protein known
as “XPro1595” that inhibits soluble tumor necrosis factor (or all modifications, formulations and variants of the
licensed protein that specifically bind soluble tumor necrosis factor) alone or in combination with one or more active ingredients,
in any dosage or formulation. If we breach this Agreement Xencor may be able to terminate it and as a result of this terminate
our business could be negatively impacted.
Our
officers and Directors own the company that we license our INKmune patent from.
On
October 29, 2015, we entered into an exclusive license agreement with Immune Ventures, LLC (Immune Ventures). The license agreement
relates to our natural killer program, INKmune. Immune Ventures is owned by our President and a member of our Board of Directors,
David Moss, our Chief Financial Officer and Treasurer and Mark Lowdell, our Chief Scientific Officer. Because our officers and
directors also own Immune Ventures there may be an inherent conflict of interest which could result in unanticipated actions that
adversely affect us.
We
have a limited operating history, and expect to incur significant additional operating losses.
We
are an early-stage company formed in September 2015 and have only a limited operating history. Therefore, there is limited historical
financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties,
risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We expect to incur
substantial additional operating expenses over the next several years as our research, development, and commercial activities
increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our ability to generate
revenue and achieve profitability will depend on, among other things, successful completion of the preclinical and clinical development
of our product candidate; obtaining necessary regulatory approvals from the FDA and international regulatory agencies; implementing
successful manufacturing, sales, and marketing arrangements; and raising sufficient funds to finance our activities. If we are
unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely
affected.
INKmune
represents a novel approach to cancer treatment that creates significant challenges for us.
We
believe INKmune represents a novel approach to cancer treatment. Advancing this novel therapy creates significant challenges for
us, including:
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Educating
medical personnel regarding the potential side effect profile of INKmune;
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Sourcing
clinical and, if approved, commercial supplies for the materials used to manufacture and process our product candidates;
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Obtaining
regulatory approval, as the FDA and other regulatory authorities have limited experience with commercial development of immunotherapies
for cancer; and
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Establishing
sales and marketing capabilities upon obtaining any regulatory approval to gain market acceptance of a novel therapy.
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Even
if we are able to commercialize any product candidate that we develop, the product may become subject to unfavorable pricing regulations,
third-party payor reimbursement practices or healthcare reform initiatives that could harm our business.
The
commercial success of our product candidates will depend substantially, both domestically and abroad, on the extent to which the
costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management
organizations, or reimbursed by government health administration authorities (such as Medicare and Medicaid), private health coverage
insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be
able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may
not be high enough to allow us to establish and maintain pricing sufficient to realize a meaningful return on our investment.
There
is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals,
pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale
price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing
approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental
control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular
country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods,
which may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing
limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates
obtain marketing approval.
We
depend on obtaining certain patents and protecting our proprietary rights.
Our
success will depend, in part, on our ability to obtain patents, maintain trade secret protection and operate without infringing
on the proprietary rights of third parties or having third parties circumvent our rights. We have filed and are actively pursuing
a patent application for our product candidates. The patent positions of biotechnology, biopharmaceutical and pharmaceutical companies
can be highly uncertain and involve complex legal and factual questions. Thus, there can be no assurance that our patent application
will result in the issuance of a patent, that we will develop additional proprietary products that are patentable, that any patents
issued to us will provide us with any competitive advantages or will not be challenged by any third parties, that the patents
of others will not impede our ability to do business or that third parties will not be able to circumvent our patents. Furthermore,
there can be no assurance that others will not independently develop similar products, duplicate any of our products not under
patent protection, or, if patents are issued to us, design around the patented products we developed or will develop.
We
may be required to obtain licenses from third parties to avoid infringing patents or other proprietary rights. No assurance can
be given that any licenses required under any such patents or proprietary rights would be made available, if at all, on terms
we find acceptable. If we do not obtain such licenses, we could encounter delays in the introduction of products or could find
that the development, manufacture or sale of products requiring such licenses could be prohibited.
A
number of pharmaceutical, biopharmaceutical and biotechnology companies and research and academic institutions have developed
technologies, filed patent applications or received patents on various technologies that may be related to or affect our business.
Some of these technologies, applications or patents may conflict with our technologies or patent applications. Such conflict could
limit the scope of the patents, if any, that we may be able to obtain or result in the denial of our patent applications. In addition,
if patents that cover our activities are issued to other companies, there can be no assurance that we would be able to obtain
licenses to these patents at a reasonable cost or be able to develop or obtain alternative technology. If we do not obtain such
licenses, we could encounter delays in the introduction of products, or could find that the development, manufacture or sale of
products requiring such licenses could be prohibited. In addition, we could incur substantial costs in defending ourselves in
suits brought against us on patents it might infringe or in filing suits against others to have such patents declared invalid.
Much
of our know-how and technology may not be patentable. To protect our rights, we plan to require employees, consultants, advisors
and collaborators to enter into confidentiality agreements. There can be no assurance, however, that these agreements will provide
meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or
disclosure. Further, our business may be adversely affected by competitors who independently develop competing technologies, especially
if we obtain no, or only narrow, patent protection.
We
are subject to various government regulations.
The
manufacture and sale of human therapeutic products in the U.S. and foreign jurisdictions are governed by a variety of statutes
and regulations. These laws require approval of manufacturing facilities, controlled research and testing of products and government
review and approval of a submission containing manufacturing, preclinical and clinical data in order to obtain marketing approval
based on establishing the safety and efficacy of the product for each use sought, including adherence to current cGMP during production
and storage, and control of marketing activities, including advertising and labeling.
The
products we are currently developing will require significant development, preclinical and clinical testing and investment of
substantial funds prior to its commercialization. The process of obtaining required approvals can be costly and time-consuming,
and there can be no assurance that we develop successfully this product or any future products, or that this product or any future
products we develop will prove to be safe and effective in clinical trials or receive applicable regulatory approvals. Potential
investors and shareholders should be aware of the risks, problems, delays, expenses and difficulties which we may encounter in
view of the extensive regulatory environment which controls our business.
If
we are unable to keep up with rapid technological changes in our field or compete effectively, we will be unable to operate profitably.
We
are engaged in a rapidly changing field. Other products and therapies that will compete directly with the product that we are
seeking to develop and market currently exist or are being developed. Competition from fully integrated pharmaceutical companies
and more established biotechnology companies is intense and is expected to increase. Most of these companies have significantly
greater financial resources and expertise in discovery and development, manufacturing, preclinical and clinical testing, obtaining
regulatory approvals and marketing than us. Smaller companies may also prove to be significant competitors, particularly through
collaborative arrangements with large pharmaceutical and established biopharmaceutical or biotechnology companies. Many of these
competitors have significant products that have been approved or are in development and operate large, well-funded discovery and
development programs. Academic institutions, governmental agencies and other public and private research organizations also conduct
research, seek patent protection and establish collaborative arrangements for therapeutic products and clinical development and
marketing. These companies and institutions compete with us in recruiting and retaining highly qualified scientific and management
personnel. In addition to the above factors, we will face competition based on product efficacy and safety, the timing and scope
of regulatory approvals, availability of supply, marketing and sales capability, reimbursement coverage, price and patent position.
There is no assurance that our competitors will not develop more effective or more affordable products, or achieve earlier patent
protection or product commercialization, than our own.
Other
companies may succeed in developing products earlier than ourselves, obtaining FDA and European Medicines Agency (“EMA”)
approvals for such products more rapidly than we will, or in developing products that are more effective than products we propose
to develop. While we will seek to expand our technological capabilities in order to remain competitive, there can be no assurance
that research and development by others will not render our technology or products obsolete or non-competitive or result in treatments
or cures superior to any therapy we develop, or that any therapy we develop will be preferred to any existing or newly developed
technologies.
We
may request priority review for our product candidate in the future. The FDA may not grant priority review for our product candidate.
Moreover, even if the FDA designates such product for priority review, that designation may not lead to a faster regulatory review
or approval process and, in any event, would not assure FDA approval.
We
may be eligible for priority review designation for our product candidate if the FDA determines such product candidate offers
major advances in treatment or provides a treatment where no adequate therapy exists. A priority review designation means that
the goal for the FDA to review an application in six months, rather than the standard review period of ten months. The FDA has
broad discretion with respect to whether or not to grant priority review status to a product candidate, so even if we believe
a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. Thus, while the
FDA has granted priority review to other oncology disease products, our product candidate, should we determine to seek priority
review, may not receive similar designation. Moreover, even if our product candidate is designated for priority review, such a
designation does not necessarily mean a faster regulatory review process or necessarily confer any advantage with respect to approval
compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee approval within an accelerated
timeline or thereafter.
We
believe we may in some instances be able to secure approval from the FDA or comparable non-U.S. regulatory authorities to use
accelerated development pathways. If we are unable to obtain such approval, we may be required to conduct additional preclinical
studies or clinical trials beyond those that we contemplate, which could increase the expense of obtaining, and delay the receipt
of, necessary marketing approvals.
We
anticipate that we may seek an accelerated approval pathway for our product candidates. Under the accelerated approval provisions
in the Federal Food, Drug, and Cosmetic Act, or FDCA, and the FDA’s implementing regulations, the FDA may grant accelerated
approval to a product designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over
available therapies upon a determination that the product has an effect on a surrogate endpoint or intermediate clinical endpoint
that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect
that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes
of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign,
or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate
clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that
is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval
pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage,
but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually
contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to
verify and describe the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical
benefit, the FDA may withdraw its approval of the drug.
Prior
to seeking such accelerated approval, we will seek feedback from the FDA and will otherwise evaluate our ability to seek and receive
such accelerated approval. There can be no assurance that after our evaluation of the feedback and other factors we will decide
to pursue or submit a New Drug Application, or NDA, for accelerated approval or any other form of expedited development, review
or approval. Similarly, there can be no assurance that after subsequent FDA feedback we will continue to pursue or apply for accelerated
approval or any other form of expedited development, review or approval, even if we initially decide to do so. Furthermore, if
we decide to submit an application for accelerated approval or under another expedited regulatory designation (e.g., breakthrough
therapy designation), there can be no assurance that such submission or application will be accepted or that any expedited development,
review or approval will be granted on a timely basis, or at all. The FDA or other non-U.S. authorities could also require us to
conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated
approval or any other form of expedited development, review or approval for our product candidate would result in a longer time
period to commercialization of such product candidate, could increase the cost of development of such product candidate and could
harm our competitive position in the marketplace.
Clinical
drug development involves a lengthy and expensive process with an uncertain outcome. We may incur additional costs or experience
delays in completing, or ultimately be unable to complete the development and commercialization of our product candidate.
Our
product candidates are either in early clinical development or have not entered into clinical trials and are in development stage.
Therefore, the risk of failure of our product candidates is high. It is impossible to predict when or if our product candidates
will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory
authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical
trials to demonstrate the safety and efficacy of our product candidate in humans. Clinical testing is expensive, difficult to
design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials
can occur at any stage of testing. The clinical development of our product candidates is susceptible to the risk of failure inherent
at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a broad population of
patients, the occurrence of severe or medically or commercially unacceptable adverse events, failure to comply with protocols
or applicable regulatory requirements and determination by the FDA or any comparable non-U.S. regulatory authority that a drug
product is not safe or effective for its intended uses. It is possible that even if our product candidate has a beneficial effect,
that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the
size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors,
our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect,
if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates,
or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.
The
outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim
results of a clinical trial do not necessarily predict final results. Many companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and
we cannot be certain that we will not face additional setbacks.
The
design of a clinical trial can determine whether its results will support approval of a product; however, flaws in the design
of a clinical trial may not become apparent until the clinical trial is well advanced or completed. In addition, preclinical and
clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates
performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the
product candidates. Even if we believe that the results of clinical trials for our product candidate warrant marketing approval,
the FDA or comparable non-U.S. regulatory authorities may disagree and may not grant marketing approval of our product candidate.
In
some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same
product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size
and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical
trial participants. Any clinical trials that we may conduct may not demonstrate the efficacy and safety necessary to obtain regulatory
approval to market our product candidate.
If
clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA and comparable
non-U.S. regulators, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the
development and commercialization of our product candidates.
We
are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing
approval from the FDA. Comparable non-U.S. regulatory authorities, such as the EMA, impose similar restrictions. We may never
receive such approvals. We must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy
of our product candidate in humans before we will be able to obtain these approvals.
Clinical
testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome.
We have not previously submitted an NDA to the FDA or similar drug approval filings to comparable non-U.S. regulatory authorities
for any product candidate.
Any
inability to successfully complete preclinical and clinical development could result in additional costs to us and impair our
ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if (1)
we are required to conduct additional clinical trials or other testing of our product candidate beyond the trials and testing
than we contemplate, (2) we are unable to successfully complete clinical trials of our product candidate or other testing, (3)
the results of these trials or tests are unfavorable, uncertain or are only modestly favorable, or (4) there are unacceptable
safety concerns associated with our product candidate, we, in addition to incurring additional costs, may:
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be
delayed in obtaining marketing approval for our product candidate;
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not
obtain marketing approval at all;
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obtain
approval for indications or patient populations that are not as broad as we intended or desired;
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obtain
approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including
boxed warnings;
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be
subject to additional post-marketing testing or other requirements; or
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be
required to remove the product from the market after obtaining marketing approval.
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If
we experience any of a number of possible unforeseen events in connection with clinical trials of any of our product candidates,
potential marketing approval or commercialization of that product candidate could be delayed or prevented.
We
may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent marketing approval
of any of our product candidates, including:
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clinical
trials of our product candidate may produce unfavorable or inconclusive results;
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we
may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
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the
number of patients required for clinical trials of our product candidate may be larger than we anticipate, patient enrollment
in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher
rate than we anticipate;
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data
safety monitoring committees may recommend suspension, termination or a clinical hold for various reasons, including concerns
about patient safety;
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regulators
or institutional review boards, or IRBs, may suspend or terminate the trial or impose a clinical hold for various reasons,
including noncompliance with regulatory requirements or concerns about patient safety;
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patients
with serious, life-threatening diseases included in our clinical trials may die or suffer other adverse medical events for
reasons that may not be related to our product candidate;
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participating patients
may be subject to unacceptable health risks;
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patients may not
complete clinical trials due to safety issues, side effects, or other reasons;
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changes in regulatory
requirements and guidance may occur, which require us to amend clinical trial protocols to reflect these changes;
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our third-party
contractors, including those manufacturing our product candidate or components or ingredients thereof or conducting clinical
trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely
manner or at all;
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regulators
or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective
trial site;
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we
may experience delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols
with prospective trial sites;
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patients
who enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial
protocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the
clinical trial or extend the clinical trial’s duration;
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we
may have to suspend or terminate clinical trials of our product candidate for various reasons, including a finding that the
participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics
of a product candidate;
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the
FDA or comparable non-U.S. regulatory authorities may disagree with our clinical trial design or our interpretation of data
from preclinical studies and clinical trials;
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the
FDA or comparable non-U.S. regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes
or facilities of third-party manufacturers with which we enter into agreements for clinical and commercial supplies;
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the
supply or quality of raw materials or manufactured product candidate or other materials necessary to conduct clinical trials
of our product candidate may be insufficient, inadequate, delayed, or not available at an acceptable cost, or we may experience
interruptions in supply; and
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the
approval policies or regulations of the FDA or comparable non-U.S. regulatory authorities may significantly change in a manner
rendering our clinical data insufficient to obtain marketing approval.
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Product
development costs for us will increase if we experience delays in testing or pursuing marketing approvals and we may be required
to obtain additional funds to complete clinical trials and prepare for possible commercialization of our product candidates. We
do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed
on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have
the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do
and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
In addition, many of the factors that cause, or lead to, clinical trial delays may ultimately lead to the denial of marketing
approval of our product candidates.
If
we experience delays or difficulties in the enrollment of patients in clinical trials, we may not achieve our clinical development
on our anticipated timeline, or at all, and our receipt of necessary regulatory approvals could be delayed or prevented.
We
may not be able to initiate or continue clinical trials for INKmune our DN-TNF product platform or any other product candidate
if we are unable to locate and enroll a sufficient number of eligible patients to participate in clinical trials. Patient enrollment
is a significant factor in the timing of clinical trials, and is affected by many factors, including:
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the
size and nature of the patient population;
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the
severity of the disease under investigation;
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the
proximity of patients to clinical sites;
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the
eligibility criteria for the trial;
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the
design of the clinical trial;
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efforts
to facilitate timely enrollment;
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competing
clinical trials; and
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clinicians’
and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available
therapies, including any new drugs that may be approved for the indications we are investigating.
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Our
inability to enroll a sufficient number of patients for our clinical trials could result in significant delays or may require
us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development
costs for our product candidates, delay or halt the development of and approval processes for our product candidates and jeopardize
our ability to achieve our clinical development timeline and goals, including the dates by which we will commence, complete and
receive results from clinical trials. Enrollment delays may also delay or jeopardize our ability to commence sales and generate
revenues from our product candidates. Any of the foregoing could cause the value of the Company to decline and limit our ability
to obtain additional financing, if needed.
We
will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may
adversely impact our business.
A
pharmaceutical product cannot be marketed in the U.S. or other countries until we have completed rigorous and extensive regulatory
review processes, including approval of a brand name. Any brand names we intend to use for our product candidates will require
approval from the FDA regardless of whether we have secured a formal trademark registration from the U.S. Patent and Trademark
Office, or the USPTO. The FDA typically conducts a review of proposed product brand names, including an evaluation of potential
for confusion with other product names. The FDA may also object to a product brand name if it believes the name inappropriately
implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative
brand name for our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existing trademark
applications for such product candidate and may be required to expend significant additional resources in an effort to identify
a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties
and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or
at all, which would limit our ability to commercialize our product candidates.
We
may rely on orphan drug status to develop and commercialize our product candidates, but orphan drug designation, if obtained,
may not confer marketing exclusivity or other expected commercial benefits as anticipated.
Market
exclusivity afforded by orphan drug designation is generally offered as an incentive to drug developers to invest in developing
and commercializing products for unique diseases that impact a limited number of patients. The FDA may grant orphan drug designation
to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000
individuals in the United States. Qualification to maintain orphan drug status is generally monitored by the regulatory authorities
during the orphan drug exclusivity period, currently seven years from the date of approval in the United States.
We
intend to seek orphan drug designation in the United States for our product candidate for the treatment of AML and ovarian cancer
and we expect to rely on orphan drug exclusivity for our product candidate. Even if granted, orphan drug designation, and related
market exclusivity, in the United States could be lost. Further, even if we are granted orphan drug status, the FDA can still
approve different drugs for use in treating the same indication or disease, which would create a more competitive market for us
and our revenues will be diminished.
Further,
for our product candidate, it is possible that another company also holding orphan drug designation for the same product candidate
will receive marketing approval for the same indication before we do. If that were to happen, our applications for that indication
may not be approved until the competing company’s period of exclusivity expires. Even if we are the first to obtain marketing
authorization for an orphan drug indication, there are circumstances under which a competing product may be approved for the same
indication during the seven-year period of marketing exclusivity, such as if the later product is shown to be clinically superior
to the orphan product, or if the later product is deemed a different product than ours. Further, the seven-year marketing exclusivity
would not prevent competitors from obtaining approval of the same product candidate as ours for indications other than those in
which we have been granted orphan drug designation, or for the use of other types of products in the same indications as our orphan
product.
If
the market opportunities for our product candidates are smaller than we believe they are, our revenues may be adversely affected
and our business may suffer. Because the target patient populations of our product candidates are small, we must be able to successfully
identify patients and capture a significant market share to achieve and maintain profitability.
We
focus our research and product development on treatments for certain cancer indications. Our projections of both the number of
people who have failed other therapies or have limited medical options for such indications, are based on estimates. These estimates
may prove to be incorrect and new studies may change the estimated incidence or prevalence. The number of patients with such diseases
in the United States, Europe and elsewhere may turn out to be lower than expected or may not be otherwise amenable to treatment
with our products, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely
affect our results of operations and our business. Additionally, because our target patient populations are small, we will be
required to capture a significant market share to achieve and maintain profitability.
We
may fail to comply with regulatory requirements.
Our
success will be dependent upon our ability, and our collaborative partners’ abilities, to maintain compliance with regulatory
requirements, including cGMP, and safety reporting obligations. The failure to comply with applicable regulatory requirements
can result in, among other things, fines, injunctions, civil penalties, total or partial suspension of regulatory approvals, refusal
to approve pending applications, recalls or seizures of products, operating and production restrictions and criminal prosecutions.
Even
if our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians,
patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for
the product candidates may be smaller than we estimate.
We
have never commercialized a product. Even if INKmune, our DN-TNF product platform (INB03, XPro1595, Quellor, LIVNate), or any
other product candidate we develop is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless
fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For
example, physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective
or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and
do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack
of reimbursement for existing therapies.
Efforts
to educate the medical community and third-party payors on the benefits of our product candidate may require significant resources
and may not be successful. If our product candidate is approved but does not achieve an adequate level of market acceptance, we
may not generate significant revenues and we may not become profitable. The degree of market acceptance of INmune or any other
product candidate we develop, if approved for commercial sale, will depend on a number of factors, including:
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the
efficacy and safety of the product;
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the
potential advantages of the product compared to alternative treatments;
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the
prevalence and severity of any side effects;
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the
clinical indications for which the product is approved;
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whether
the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy;
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limitations
or warnings, including distribution or use restrictions, contained in the product’s approved labeling;
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our
ability to offer the product for sale at competitive prices;
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our
ability to establish and maintain pricing sufficient to realize a meaningful return on our investment;
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the
product’s convenience and ease of administration compared to alternative treatments;
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the
willingness of the target patient population to try, and of physicians to prescribe, the product;
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the
strength of sales, marketing and distribution support;
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the
approval of other new products for the same indications;
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changes
in the standard of care for the targeted indications for the product;
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the
timing of market introduction of our approved products as well as competitive products and other therapies;
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availability
and amount of reimbursement from government payors, managed care plans and other third-party payors;
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adverse
publicity about the product or favorable publicity about competitive products; and
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potential
product liability claims.
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The
potential market opportunities for our product candidate are difficult to estimate precisely. Our estimates of the potential market
opportunities are predicated on many assumptions, including industry knowledge and publications, third-party research reports
and other surveys. While we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant
judgment on the part of our management, are inherently uncertain and the reasonableness of these assumptions has not been assessed
by an independent source. If any of the assumptions proves to be inaccurate, the actual markets for our product candidate could
be smaller than our estimates of the potential market opportunities.
Even
if we obtain regulatory approvals for INKmune and/or any product from our DN-TNF platform (INB03, XPro1595, Quellor, LIVNate)
those approvals and ongoing regulation of our products may limit how we manufacture and market our products, which could prevent
us from realizing the full benefit of our efforts.
If
we obtain regulatory approvals, INKmune and/or the DN-TNF product platform, and the manufacturing facilities used for its production
will be subject to continual review, including periodic inspections, by the FDA and other United States and foreign regulatory
authorities. In addition, regulatory authorities may impose significant restrictions on the indicated uses or marketing of INKmune
or other products that we may develop. These and other factors may significantly restrict our ability to successfully commercialize
INKmune.
We
and many of our vendors and suppliers will be required to comply with current Good Manufacturing Practices, or GMP, which include
requirements relating to quality control and quality assurance as well as to the corresponding maintenance of records and documentation.
Furthermore, any manufacturing facilities will need to be approved by regulatory agencies before these facilities can be used
to manufacture INKmune, and they will also be subject to additional regulatory inspections. Any material changes we may make to
our manufacturing process may require approval by the FDA and state or foreign regulatory authorities. Failure to comply with
FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products,
partial or total suspension of production or withdrawal of a product from the market.
We
must also report adverse events that occur when our products are used. The discovery of previously unknown problems with INKmune,
the DN-TNF product platform or manufacturing facilities used to manufacture INKmune or the DN-TNF product platform may result
in restrictions or sanctions on our products or manufacturing facilities, including withdrawal of our products from the market.
Regulatory agencies may also require us to reformulate our products, conduct additional clinical trials, make changes in the labeling
of our product or obtain re-approvals. This may cause our reputation in the market place to suffer or subject us to lawsuits,
including class action suits.
If
our product candidates receive marketing approval and we, or others, later discover that the drug is less effective than previously
believed or causes undesirable side effects that were not previously identified, our ability to market the drugs could be compromised.
Clinical
trials of our product candidates will be conducted in carefully defined subsets of patients who have agreed to enter into clinical
trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate
that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following
approval of our product candidate, we, or others, discover that the drug is less effective than previously believed or causes
undesirable side effects that were not previously identified, any of the following adverse events could occur:
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regulatory
authorities may withdraw their approval of the drug or seize the drug;
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we
may be required to recall the drug or change the way the drug is administered;
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additional
restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular drug;
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we
may be subject to fines, injunctions or the imposition of civil or criminal penalties;
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regulatory
authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;
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we
may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution
to patients;
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we
could be sued and held liable for harm caused to patients;
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the
drug may become less competitive; and
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our
reputation may suffer.
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Any
of these events could have a material and adverse effect on our operations and business.
Any
product candidate for which we obtain marketing approval, along with the manufacturing processes, qualification testing, post-approval
clinical data, labeling and promotional activities for such product, will be subject to continual and additional requirements
of the FDA and other regulatory authorities.
These
requirements include submissions of safety and other post-marketing information, reports, registration and listing requirements,
good manufacturing practices, or GMP requirements relating to quality control, quality assurance and corresponding maintenance
of records and documents, and recordkeeping. Even if marketing approval of our product candidate is granted, the approval may
be subject to limitations on the indicated uses for which the product may be marketed or to conditions of approval, or contain
requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. The FDA closely
regulates the post-approval marketing and promotion of pharmaceutical products to ensure such products are marketed only for the
approved indications and in accordance with the provisions of the approved labeling.
In
addition, later discovery of previously unknown problems with our products, manufacturing processes, or failure to comply with
regulatory requirements, may lead to various adverse results, including:
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restrictions
on such products, manufacturers or manufacturing processes;
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restrictions
on the labeling or marketing of a product;
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restrictions
on product distribution or use;
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requirements
to conduct post-marketing clinical trials;
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requirements
to institute a risk evaluation mitigation strategy, or REMS, to monitor safety of the product post-approval;
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warning
letters issued by the FDA or other regulatory authorities;
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withdrawal
of the products from the market;
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refusal
to approve pending applications or supplements to approved applications that we submit;
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recall
of products, fines, restitution or disgorgement of profits or revenue;
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suspension,
revocation or withdrawal of marketing approvals;
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refusal
to permit the import or export of our products; and
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injunctions
or the imposition of civil or criminal penalties.
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We
currently have no marketing and sales organization and have no experience in marketing products. If we are unable to establish
marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may
not be able to generate product revenue.
We
currently have no sales, marketing or distribution capabilities and have no experience as a company in marketing products. If
we develop internal sales, marketing and distribution organization, this would require significant capital expenditures, management
resources and time, and we would have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train
and retain marketing and sales personnel.
If
we are unable or decide not to establish internal sales, marketing and distribution capabilities, we expect to pursue collaborative
arrangements regarding the sales, marketing and distribution of our products. However, we may not be able to establish or maintain
such collaborative arrangements, or if we are able to do so, their sales forces may not be successful in marketing our products.
Any revenue we receive would depend upon the efforts of such third parties, which may not be successful. We may have little or
no control over the sales, marketing and distribution efforts of such third parties and our revenue from product sales may be
lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties
to assist us with the sales, marketing and distribution efforts of our product candidates. There can be no assurance that we will
be able to develop internal sales, marketing distribution capabilities or establish or maintain relationships with third-party
collaborators to commercialize any product in the United States or overseas.
We
face substantial competition from other pharmaceutical and biotechnology companies and our operating results may suffer if we
fail to compete effectively.
The
development and commercialization of new drug products is highly competitive. We expect that we will face significant competition
from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to
INKmune, our DN-TNF product platform, and any other of our product candidates that we may seek to develop or commercialize in
the future. Specifically, due to the large unmet medical need, global demographics and relatively attractive reimbursement dynamics,
the oncology market is fiercely competitive and there are a number of large pharmaceutical and biotechnology companies that currently
market and sell products or are pursuing the development of product candidates for the treatment of cancer. Our competitors may
succeed in developing, acquiring or licensing technologies and drug products that are more effective, have fewer or more tolerable
side effects or are less costly than any product candidates that we are currently developing or that we may develop, which could
render our product candidates obsolete and noncompetitive.
We
rely on key personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able
to grow effectively.
We
are dependent on certain members of our management, the loss of services of one or more of whom could materially adversely affect
us. In particular, our success depends to a significant extent upon the continued services of Dr. Raymond J. Tesi, our President
and CEO. Dr. Tesi has overseen INmune Bio since inception and provides leadership for our growth and operations strategy as well
as being an inventor of our patents. Although we have entered into an employment agreement with Dr. Tesi, if he were to nevertheless
terminate his employment with us, the loss of the services of Dr. Tesi, would have a material adverse effect on our growth, revenues,
and prospective business. We are also highly dependent on the other principal members of our management and scientific team. We
are not aware of any present intention of any of our key personnel to leave our company or to retire. The loss of any of our key
personnel, or the inability to attract and retain qualified personnel, may significantly delay or prevent the achievement of our
research, development or business objectives and could materially adversely affect our business, financial condition and results
of operations.
Our
ability to manage growth effectively will require us to continue to implement and improve our management systems and to recruit
and train new employees. There can be no assurance that we will be able to successfully attract and retain skilled and experienced
personnel.
Product
liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit commercialization
of any products that we may develop.
We
face an inherent risk of product liability claims as a result of the clinical testing of our product candidate despite obtaining
appropriate informed consents from our clinical trial participants. We will face an even greater risk if we commercially sell
any product that we may develop. For example, we may be sued if any product we develop allegedly causes injury or is found to
be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include
allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence,
strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully
defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization
of our product candidate. Regardless of the merits or eventual outcome, liability claims may result in:
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decreased demand
for our product candidate or products that we may develop;
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injury
to our reputation and significant negative media attention;
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withdrawal
of clinical trial participants;
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significant
costs to defend resulting litigation;
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substantial
monetary awards to trial participants or patients;
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loss
of revenue;
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reduced
resources of our management to pursue our business strategy; and
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the
inability to commercialize any products that we may develop.
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Although
we plan to maintain general liability insurance, this insurance may not fully cover potential liabilities that we may incur. The
cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. In addition,
insurance coverage is becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at
an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development
and commercial production and sale of our product candidate, which could adversely affect our business, financial condition, results
of operations and prospects.
We
will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.
To
execute our business plan, we will need to rapidly add other management, accounting, regulatory, manufacturing and scientific
staff. We currently have 5 full time employees and retain the services of additional personnel on an independent contractor basis.
We will need to attract, retain and motivate a significant number of new additional managerial, operational, sales, marketing,
financial, and other personnel, as well as highly skilled scientific and medical personnel, and to expand our capabilities to
successfully pursue our research, development, manufacturing and commercialization efforts and secure collaborations to market
and distribute our products. This growth may strain our existing managerial, operational, financial and other resources. We also
intend to add personnel in our research and development and manufacturing departments as we expand our clinical trial and research
capabilities. Any inability to attract and retain qualified employees to enable our planned growth and establish additional capabilities
or our failure to manage our growth effectively could delay or curtail our product development and commercialization efforts and
harm our business.
If
we or any of our third-party manufacturers do not maintain high standards of manufacturing, our ability to develop and commercialize
our product candidate could be delayed or curtailed.
We
and any third parties that we may use in the future to manufacture our products must continuously adhere to cGMP regulations rigorously
enforced by the FDA through its facilities inspection program. If our facilities or the facilities of third parties who produce
our products do not pass a pre-approval inspection, the FDA will not grant market approval for our product candidates. In complying
with cGMP, we and any third-party manufacturers will need to expend significant time, money and effort in production, record-keeping
and quality control to assure that each component of our product candidates meets applicable specifications and other requirements.
We or any of these third-party manufacturers may also be subject to comparable or more stringent regulations of foreign regulatory
authorities. If we or any of our third-party manufacturers fail to comply with these requirements, we may be subject to regulatory
action, which could delay or curtail our ability to develop, obtain regulatory approval of, and commercialize our product candidates.
If our component part manufacturers and suppliers fail to provide components of sufficient quality, and that meet our required
specifications, our clinical trials or commercialization of our product candidates could be delayed or halted, and we could face
product liability claims. There can be no assurance we can manufacture a scalable quantity of our product for clinical trials
or commercialization.
If
we or our third-party manufacturers use hazardous and biological materials in a manner that causes injury or violates applicable
law, we may be liable for damages.
Our
research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological
materials, by us and any third-party manufacturers. We and such manufacturers will be subject to federal, state and local laws
and regulations in the United States governing the use, manufacture, storage, handling and disposal of medical and hazardous materials.
Although we will seek to ensure that our procedures for using, storing and disposing of these materials comply with legally prescribed
standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As
a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail
the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages
or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from
medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future
environmental regulations may impair our research, development and production efforts, which could harm our business, prospects,
financial condition or results of operations.
We
plan to rely on third parties to conduct clinical trials for our product candidates. Any failure by a third party to meet its
obligations with respect to the clinical development of our product candidate may delay or impair our ability to obtain regulatory
approval for our product candidates.
We
plan to rely on academic institutions and private oncology centers to conduct clinical trials relating to our product candidates.
Our reliance on third parties to conduct clinical trials could, depending on the actions of such third parties, jeopardize the
validity of the clinical data generated and adversely affect our ability to obtain marketing approval from the FDA or other applicable
regulatory authorities.
Such
clinical trial arrangements will provide us with information rights with respect to the clinical data, including access to and
the ability to use and reference the data, including for our own regulatory filings, resulting from the clinical trials. If investigators
or institutions breach their obligations with respect to the clinical trials of our product candidate, or if the data proves to
be inadequate, then our ability to design and conduct any future clinical trials may be adversely affected.
Our
reliance on these third parties for research and development activities will reduce our control over these activities but will
not relieve us of our responsibilities. For example, we will design our clinical trials and will remain responsible for ensuring
that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial.
Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices, or GCPs, for conducting,
recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and
that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not
control will not relieve us of these responsibilities and requirements. We also are required to register ongoing clinical trials
and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes.
Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties
do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with
regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals
for our product candidate and will not be able to, or may be delayed in our efforts to, successfully commercialize our product
candidate.
We
also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure
on the part of our distributors could delay clinical development or marketing approval of our product candidate or commercialization
of our products, producing additional losses and depriving us of potential product revenue.
Recent
legislative and regulatory activity may exert downward pressure on potential pricing and reimbursement for our products, if approved,
could materially affect our opportunity to commercialize such products.
The
United States and several other jurisdictions are considering, or have already enacted, a number of legislative and regulatory
proposals to change the healthcare system in ways that could affect our ability to sell any of our products profitably, if approved.
Among policy-makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare
systems with the stated goals of containing healthcare costs, improving quality and/or expanding access to healthcare. In the
United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by
major legislative initiatives. There have been, and likely will continue to be, legislative and regulatory proposals at the federal
and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot
predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed
care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:
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the
demand for any of our products, if approved;
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our
ability to set a price that we believe is fair for any of our products, if approved;
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our
ability to generate revenues and achieve or maintain profitability;
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the
level of taxes that we are required to pay; and
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the
availability of capital.
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In
March 2010, the Affordable Care Act, or the ACA, became law in the United States (see “Business — Government Regulation”).
The goal of ACA is to reduce the cost of healthcare, broaden access to health insurance, constrain healthcare spending, enhance
remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes
and fees on the health industry, impose additional health policy reforms, and substantially change the way healthcare is financed
by both governmental and private insurers. While we cannot predict what impact on federal reimbursement policies this legislation
will have in general or on our business specifically, ACA may result in downward pressure on pharmaceutical reimbursement, which
could negatively affect market acceptance of any of our products, if they are approved.
We
cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state and foreign legislative
and regulatory developments are likely, and we expect ongoing initiatives to increase pressure on drug pricing. Such reforms could
have an adverse effect on anticipated revenues from product candidates that we may successfully develop and for which we may obtain
regulatory approval and may affect our overall financial condition and ability to develop product candidates.
Changes
in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As
is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly on obtaining
and enforcing patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity,
and therefore, is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is
currently implementing wide-ranging patent reform legislation. Further, recent U.S. Supreme Court rulings have either narrowed
the scope of patent protection available in certain circumstances or weakened the rights of patent owners in certain situations.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has
created uncertainty with respect to the value of patents, once obtained.
In
September 2011, the Leahy-Smith America Invents Act, or the American Invents Act, or AIA, was signed into law. The AIA includes
a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted
and may also affect patent litigation. The USPTO is currently developing regulations and procedures to govern administration of
the AIA, and many of the substantive changes to patent law associated with the AIA. It is not clear what other, if any, impact
the AIA will have on the operation of our business. Moreover, the AIA and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent application, which could have a material adverse effect on our business and
financial condition.
An
important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a “first-to-file”
system for deciding which party should be granted a patent when two or more patent applications are filed by different parties
claiming the same invention. A third party that files a patent application in the USPTO after that date but before us could therefore
be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This
will require us to be cognizant going forward of the time from invention to filing of a patent application. Furthermore, our ability
to obtain and maintain valid and enforceable patents depends on whether the differences between our technology and the prior art
allow our technology to be patentable over the prior art. Since patent applications in the United States and most other countries
are confidential for a period of time after filing, we cannot be certain that we were the first to either (1) file any patent
application related to our product candidates or (2) invent any of the inventions claimed in our patents or patent applications.
Among
some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and
providing opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents,
even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary
standard in United States federal court necessary to invalidate a patent claim, a third party could potentially provide evidence
in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to
invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures
to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in
a district court action.
Business
or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses.
Broad-based
business or economic disruptions could adversely affect our ongoing or planned research and development activities. For example,
in December 2019 an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to a number of
other countries, including the United States. To date, this outbreak has already resulted in extended shutdowns of certain businesses
in the Wuhan region and has had ripple effects to businesses around the world. Global health concerns, such as coronavirus, could
also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate.
We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the
third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom
we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner
and on the timelines presently planned could be materially and negatively impacted. It is also possible that global health concerns
such as this one could disproportionately impact the clinical sites in which we conduct any of our clinical trials, which could
have a material adverse effect on our business and our results of operation and financial condition. The Company has not
yet experienced any known business disruptions as a result of the coronavirus.
We
may face business disruption and related risks resulting from President Biden’s invocation of the Defense
Production Act, which could have a material adverse effect on our business.
In
response to the COVID-19 pandemic, President Biden invoked the Defense Production Act (the “Defense Production
Act”). Pursuant to the Defense Production Act, the federal government may, among other things, require domestic industries
to provide essential goods and services needed for the national defense. While we have not experienced any impact on our business
as a result of such actions, we continue to assess the potential impact that the invocation of the Defense Production Act may
have on our ability to effectively conduct our business operations as planned, either as a result of becoming directly subject
to the requirements of the Defense Production Act, our suppliers becoming so subject and diverting deliveries of raw materials
elsewhere, or otherwise. There can be no assurance that we will not be impacted by any action taken by the federal government
under the Defense Production Act, and any resulting disruption on our ability to conduct business could have a material adverse
effect on our financial condition and results or operations.
A
cybersecurity incident and other technology disruptions could negatively affect our business and our relationships with customers.
We
use technology in substantially all aspects of our business operations. The widespread use of technology, including mobile devices,
cloud computing, and the internet, give rise to cybersecurity risks, including security breach, espionage, system disruption,
theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive
and/or confidential information and intellectual property, including information relating to suppliers, private information about
employees, and financial and strategic information about us and our business partners. If we fail to effectively assess and identify
cybersecurity risks associated with the use of technology in our business operations, we may become increasingly vulnerable to
such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative
measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release
of sensitive and/or confidential information or intellectual property, or interference with our information technology systems
or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage,
violation of privacy laws, loss of customers, potential liability and competitive disadvantage.
Risks
Related to our Common Stock
We
do not intend to pay dividends for the foreseeable future.
We
have paid no dividends on our common stock to date, and we do not anticipate paying any dividends to holders of our common stock
in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs of the business,
we anticipate that we will retain any earnings to finance our future expansion and for the implementation of our business plan.
As an investor, you should take note of the fact that a lack of a dividend can further affect the market value of our common stock,
and could significantly affect the value of any investment in our Company.
We
are subject to the reporting requirements of federal securities laws, which can be expensive and may divert resources from other
projects, thus impairing our ability grow.
We
are a public reporting company and, accordingly, subject to the information and reporting requirements of the Exchange Act and
other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).
The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing
audited reports to stockholders would cause our expenses to be higher than they would be if we remained privately held.
It
may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in
order to develop and implement appropriate internal controls and reporting procedures.
We
are an “emerging growth company” within the meaning of the Securities Act of 1933, as amended, or the Securities Act,
and if we decide to take advantage of certain exemptions from various reporting requirements applicable to emerging growth companies,
our common stock could be less attractive to investors.
We
will remain an emerging growth company until the earliest of (1) the last day of the fiscal year during which we have total annual
gross revenues of $1.07 billion or more, (2) December 31, 2024 (the last day of the fiscal year following the fifth anniversary
of the completion of our initial public offering), (3) the date on which we have, during the previous three-year period, issued
more than $1.0 billion in non-convertible debt, and (4) the date on which we are deemed to be a “large accelerated filer”
under the Securities Exchange Act of 1934, as amended, or the Exchange Act (i.e., the first day of the fiscal year after we have
(a) more than $700.0 million in outstanding common equity held by our non-affiliates, measured each year on the last day
of our second fiscal quarter, and (b) been public for at least 12 months).
Even
after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which
would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock
less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result,
there may be a less active trading market for our common stock and our stock price may be more volatile.
Our
stock price may be volatile.
The
market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors,
many of which are beyond our control, including the following:
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changes in our industry;
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competitive pricing
pressures;
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our ability to obtain
working capital financing;
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additions or departures
of key personnel;
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limited “public
float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing
pressure on the market price for our common stock;
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sales of our common
stock;
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our ability to execute
our business plan;
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operating results
that fall below expectations;
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loss of any strategic
relationship;
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regulatory developments;
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economic and other
external factors;
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period-to-period
fluctuations in our financial results; and
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inability to develop
or acquire new or needed technology or products.
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In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market
price of our Common Stock.
You
may have difficulty trading and obtaining quotations for our common stock.
Our
securities are not actively traded, and the bid and asked prices for our common stock may fluctuate widely. As a result, investors
may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the
liquidity of the common stock and would likely reduce the market price of our common stock and hamper our ability to raise additional
capital. There is a limited market for our securities. Accordingly, investors may therefore bear the economic risk of an investment
in the Securities thereof, for an indefinite period of time.
Additional
stock offerings in the future may dilute your percentage ownership of our company.
Given
our plans and expectations that we may need additional capital and personnel, we may need to issue additional shares of common
stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible
notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of
then current stockholders.
Anti-takeover
provisions in our stockholder rights plan could make a third-party acquisition of us difficult.
We
have a stockholder rights plan that may have the effect of discouraging unsolicited takeover proposals. Specifically, the rights
issued under the stockholder rights plan could cause significant dilution to a person or group that attempts to acquire us on
terms not approved in advance by our board of directors. The rights plan is not intended to prevent a takeover, and we believe
it will enable all our stockholders to realize the full potential value of their investment in the Company and protect the Company
and its stockholders from efforts to obtain control of the Company that are inconsistent with the best interests of the Company
and its stockholders. The rights under the plan will expire on December 30, 2021, subject to a possible earlier expiration to
the extent provided in the stockholder rights plan, unless extended.