ITEM 1. DESCRIPTION OF BUSINESS
We are a biotechnology acceleration and
development company focused on acquiring and in-licensing pre-clinical, clinical-stage and approved life sciences therapeutic products.
We aim to accelerate the monetization of biomedical technologies through rapid innovation and collaborative partnerships with industry
leading researchers. We have acquired or licensed assets in oncology, vascular disease, and rare orphan diseases that address unmet
medical needs in large markets Currently, we have a portfolio therapeutic products, including two FDA approved products, Metastron
™ (approved in 22 countries) and its generic, Strontium 89 Chloride, a radiopharmaceutical for the non-opiate treatment of
metastatic cancer bone pain, and several development stage products including: QBM-001 for rare pediatric non-verbal autism spectrum
disorder, Uttroside-B for liver cancer, and MAN 01 for glaucoma as well as other MAN assets in development for infectious diseases,
cardiovascular diseases and kidney disease. We aim to maximize risk-adjusted returns by focusing on multiple assets throughout
the discovery and development cycle. We expect to benefit from early positioning in illiquid and/or less well known privately-held
assets, thereby enabling us to capitalize on valuation growth as these assets move forward in their development.
Our mission is to:
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(i)
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license and acquire pre-commercial
innovative life sciences assets in different stages of development and therapeutic areas from academia or small private companies;
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(ii)
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license and acquire FDA
approved drugs and medical devices with limited current and commercial activity; and
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(iii)
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accelerate and advance
our assets to the next value inflection point by providing: strategic capital, business development and financial advice and experienced
sector specific advisors.
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In 2019, we plan: (i) to generate revenue
from our Metastron and Strontium 89 products for pain palliation in bone metastases as well as commence a therapeutic expansion
post-marketing phase 4 trial for this product; and (ii) to commence a phase 2/3 pivotal trial with our QBM-001 asset to address
a non-verbal learning disorder in autistic children.
We also intend to file investigational
new drug applications, or INDs late in 2019 or early 2020, with the FDA for each of our Uttroside-B and MAN 01 assets for the treatment
of liver cancer and glaucoma, respectively.
Following is a summary of our product pipeline.
Our Strategy
Our goal is to become a leading biotechnology
acceleration and development company with a diversified portfolio of therapeutic products commercially available and in development.
To achieve this goal, we are executing on the following strategy:
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Strategically collaborate or in- and out-license
select programs.
We seek to collaborate or in- and out-license certain potentially therapeutic candidate products to biotechnology
or pharmaceutical companies for preclinical and clinical development and commercialization.
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Highly leverage external talent and resources.
We plan to maintain and further build our team which is skilled in evaluating technologies for development and product
development towards commercialization. By partnering with industry specific experts, we are able to identify undervalued assets
that we can fund and assist in enhancing inherent value. We plan to continue to rely on the extensive experience of our management
team to execute on our objectives.
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Evaluate commercialization and monetization
strategies on a product-by-product basis in order to maximize the value of our product candidates or future potential products.
As we move our drug candidates through development toward regulatory approval, we will evaluate several options for each
drug candidate’s commercialization or monetization strategy. These options include building our own internal sales force;
entering into a joint marketing partnership with another pharmaceutical or biotechnology company, whereby we jointly sell and
market the product; and out-licensing any product that we develop by ourselves or jointly with another party, whereby another
pharmaceutical or biotechnology company sells and markets such product and pays us a royalty on sales. Our decision will be made
separately for each product and will be based on a number of factors including capital necessary to execute on each option, size
of the market to be addressed and terms of potential offers from other pharmaceutical and biotechnology companies. It is too early
for us to know which of these options we will pursue for our drug candidates, assuming their successful development.
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Acquire commercially or near-commercially ready
products and build out the current market for such.
In addition to acquiring pre-clinical products, in assembling a diversified
portfolio of healthcare assets, we plan on acquiring assets that are either FDA approved or are reasonably expected to be FDA
approved within 12 months of our acquiring them. We anticipate hiring a contract sales organization to assume the bulk of the
sales and distribution efforts related to any such product.
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General Information
We were incorporated in the State of Nevada
on November 22, 2013 under the name ISMO Technology Solutions. On August 5, 2015, we recorded a stock split effectuated in the
form a stock dividend. The stock dividend was paid at a rate of 1.5 “new” shares for every one issued and outstanding
share held. On June 1, 2015, our Board of Directors determined it was in the best interest of the Company to establish a base of
operations in the biomedical industry. As a result, the Board of Directors approved a change in the Company’s name from
“ISMO Tech Solutions, Inc.” to “Q BioMed Inc.” Q BioMed Inc. established its business as a biomedical
acceleration and development company focused on licensing, acquiring and providing strategic resources to life sciences and healthcare
companies.
On October 27, 2015, we filed a Certificate
of Amendment to our Articles of Incorporation with the Secretary of State of Nevada to increase the number of shares of common
stock that we are authorized to issue from 100,000,000 shares to 250,000,000 shares. The Certificate of Amendment affected
no provisions of our Articles of Incorporation other than the number of common stock that we are authorized to issue, and we are
still authorized to issue 100,000,000 shares of preferred stock.
Our Drug Discovery Approach
We aim to acquire or license and have assembled
a pipeline of multiple therapeutics in development stages ranging from early pre-clinical to commercial ready. Our model seeks
to diversify risk by broadening the therapeutic areas we work in as well as providing multiple catalysts as we advance assets through
the clinical and regulatory process.
Our mission is to:
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(i)
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license and acquire
pre-commercial innovative life sciences assets in different stages of development and therapeutic areas from academia or small
private companies;
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(ii)
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license and acquire
FDA approved drugs and medical devices with limited current and commercial activity;
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(iii)
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accelerate and advance
our assets to the next value inflection point by providing: (A) strategic capital, (B) business development and financial advice
and (C) experienced sector specific advisors.
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Our Research and Development Activities
As a biomedical acceleration and development
company, research and development is a core aspect of our business. In addition to fulfilling our obligations under the agreements
pursuant to which we license some of our intellectual property, in our coming fiscal year we intend to incur research and development
expenses for the initiation of the Phase IV study for our Metastron product, initiate IND enabling studies and filings for our
QBM01 Non-Verbal Autism Spectrum drug and Man 01 our Open Angle Glaucoma Drug as well as our chemotherapeutic liver cancer drug
Uttroside B. In the fiscal years ended November 30, 2018 and 2017, we have incurred approximately $3.2 million and $3.1 million,
respectively, on research and development activities.
Metastron
On November 23, 2018, we entered into an
Asset Sale Agreement (“ASA”) with GE Healthcare Limited (“GE”) whereby we acquired GE’s radiopharmaceutical
drug, Metastron®, for cancer bone pain therapy. Metastron® is an FDA approved drug that GE had sold for over 20 years.
In addition to continuing the sales of Metastron®, we plan on exploring options to broaden the technology platform in scope
to uses beyond metastatic cancer bone pain. Under the ASA, we also acquired all related intellectual property including, but not
limited to sales and distribution data, market authorizations and trademarks for Metastron® in various countries. We acquired
these assets in exchange for an upfront payment of $500,000, a one-time milestone payment based on future sales, and royalty payments
based on future sales. We did not acquire any workforce, manufacturing, inventory, sales agreements, or distribution agreements
associated with Metastron®. Our first commercial sale of Metastron™ by the Company will occur only after the establishment
of new manufacturing sites for Metastron® and under the appropriate regulatory filings required by the jurisdictions in which
it is sold. Metastron has regulatory approval in 22 countries around the world. We are working with GE and the regulatory authorities
to transfer the ownership of Metastron to Q BioMed and make the required regulatory filings in each jurisdiction. We are intending
supply Metastron from a US based contract manufacturer and we are investigating establishing a European based facility to augment
our capabilities for Europe and Asian markets. These efforts will take some time, but we do anticipate generating revenue in 2019.
We are currently preparing the required regulatory filing for the US FDA to approve our US based contract manufacturer to produce
Metastron.
About Metastron (Strontium89 Chloride Injection
USP)
Metastron (Strontium89) is an FDA approved
drug for pain palliation in bone metastases, primarily from breast, prostate and lung cancers. It is Medicare and Healthcare insurance
reimbursable. It is a pure beta emitting radiopharmaceutical. It is a chemical analog of calcium and for this reason, localizes
in bone. There is a significant concentration of both calcium and strontium analogs at the site of active osteoblastic activity.
This is the biochemical basis for its use in treating metastatic bone disease.
Strontium89 shows prolonged retention in
metastatic bone lesions with a biological half-life of over 50 days, remaining up to 100 days after injection of the radiopharmaceutical,
whereas the half-life in normal bone tissue is approximately 14 days. Strontium-89 has been shown to decrease pain in patients
with osteoblastic metastases resulting from prostate cancer. When Strontium89 Chloride is used, pain palliation occurs in up to
80% of patients within 2 to 3 weeks after administration and lasts from 3 to 12 months with an average of about 6 months.
The National Institute for Health and Care
Excellence’s clinical guideline on “Prostate cancer: diagnosis and treatment” (2014) stated that “Strontium-89
should be considered for men with hormone-relapsed prostate cancer and painful bone metastases, especially those men who are unlikely
to receive myelosuppressive chemotherapy”.
It is estimated the approximately 2,000,000 around the world
are suffering from pain associated with metastatic disease in the bone. In the United States, of the estimated 450,000 individuals
newly diagnosed with either breast or prostate cancer, one in three will develop bone metastases, a common cause of pain in cancer
patients. These figures are expected to increase as the potential patient population ages.
Strontium-89 is a non-opioid drug for the
treatment of debilitating metastatic cancer pain in the bone. We believe there is a significant opportunity to market this effective
drug as practitioners and caregivers are being encouraged to reexamine their use of opiates for treating patients in pain. We estimate
the palliation market to be approximately $300 million annually. Additional therapeutic indications for Strontium 89 are possible,
and we intend to pursue those in 2019, hopefully resulting in entry into a multi-billion dollar therapeutic.
BioNucleonics Intellectual Property
On May 30, 2016, we entered into a Patent
and Technology License and Purchase Option Agreement with BNI, which agreement was amended on September 6, 2016, whereby we were
granted a worldwide, exclusive license on certain BNI intellectual property and the option to acquire the BNI IP within three years
of the BNI.
The BNI IP consists of generic Strontium89
Chloride - SR89 (Generic Metastron®) and all of BNI’s intellectual property relating to it. Currently, SR89 is a radiopharmaceutical
therapeutic for cancer bone pain therapy. We plan on exploring options to broaden the technology platform in scope to uses beyond
metastatic cancer bone pain. In exchange for the consideration, we agreed, upon reaching various milestones, to issue to BNI an
aggregate of 110,000 shares of common stock that are subject to certain restrictions from trading. Once we have funded up to $850,000
in cash, we may exercise the option to acquire the BNI IP at no additional charge. As of November 30, 2018, we have paid BNI in
excess of $1.0 Million.. We have exercised our option to acquire the BNI IP, but BNI has not transferred the BNI IP to us.
As a result, we have commenced litigation to, among other actions, obtain all of the BNI IP. We also seek judgments against BNI
and related parties for the misappropriation of funds, breach of contract, fraud and fraudulent inducement.
In the event that: (i) we do not exercise
the option to purchase the BNI IP; (ii) we fail to invest the $850,000 within three years from the date of the exclusive license;
or (iii) we fail to make a diligent, good faith and commercially reasonable effort to progress the BNI IP, all BNI IP shall revert
back to BNI and we shall be granted the right to collect twenty percent of the monies invested through that date of reversion by
way of a royalty until such time that the aggregate of royalties paid exceeds twice the aggregate of all total cash investment
paid by Q Bio along with other consideration which may be perpetual.
Over the last 12 months we have funded
the setup and validation of a manufacturing suite at our contract manufacturing facility in south Texas. Raw materials have been
purchased and several validation lots of the drug have been produced for testing and stability as required by the FDA. All of these
efforts to support various regulatory filings required by the FDA to approve the facility as a commercial production facility for
Strontium 89. These filings included a CBE (Change Being Affected in 30 days) with the FDA required to be resubmitted as a PAS
(Prior Approval Supplement), a more substantial dossier. These filings were completed and the FDA and BNI are going through the
Q&A process. An inspection of facility is expected at any time, subsequent to which, if cleared, we expect to be in a position
to produce commercial drug and initiate sales.
Mannin Intellectual Property
On October 29, 2015, we entered into a
Patent and Technology License and Purchase Option Agreement with Mannin whereby we were granted a worldwide, exclusive license
on, and option to acquire, certain Mannin intellectual property, or IP, within a four-year term.
The Mannin
IP is initially focused on developing a first-in-class eye drop treatment for glaucoma. The technology platform may be expanded
in scope beyond ophthalmological uses and may include cystic kidney disease
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cardiovascular
diseases and infectious disease. This platform technology has application in many disease states that result in ‘leaky’
vessels and the inefficient flow of fluids. Pursuant to the exclusive license from Mannin, we may purchase the Mannin IP within
four years of entry into the agreement in exchange for investing a minimum of $4,000,000 into the development of the Mannin IP.
Through November 30, 2018, we have funded an aggregate of $5.1 million to Mannin under the Exclusive License. The purchase price
for the Mannin IP is $30,000,000 less the amount of cash paid by us for development and the value of the common stock issued to
the vendor. This payment may be made in stock and cannot exceed 15% of the issued and outstanding Q BioMed stock.
In the event that: (i) we do not exercise
the option to purchase the Mannin IP; (ii) we fail to invest the $4,000,000 within four years from the date of the exclusive license;
or (iii) we fail to make a diligent, good faith and commercially reasonable effort to progress the Mannin IP, all Mannin IP shall
revert back to Mannin and we shall be granted the right to collect twice the monies invested through that date of reversion by
way of a royalty along with other consideration which may be perpetual.
MAN 01 – New Vascular Therapeutics
including Primary Open Angle Glaucoma
Mannin is utilizing a proprietary research
platform technology to address the need for a new class of drugs to treat various vascular diseases. Our lead indication is for
a first-in-class therapeutic eye-drop for the treatment of Primary Open Angle Glaucoma.
We are developing a first-in-class drug
targeting the Schlemm's canal and its role in regulating interocular eye pressure, one of the leading causes of glaucoma. No other
glaucoma company is targeting the Schlemm's canal, the main drainage pathway in the eye. This unique vessel is responsible for
70-90% of the fluid drainage in the eye. The MAN 01 drug is currently in the lead optimization stage of its pre-clinical testing.
We have also partnered with expert formulation and drug delivery specialists to assist in the final formulation of the novel eye
drop treatment. We aim to initiate IND enabling studies is 2019 and file an IND in late 2019 or early 2020, to be flowed by a short
phase 1 clinical trial lasting approximately 3 months.
A deep pipeline of novel therapeutics
is being developed from this research platform, which would treat a spectrum of vascular diseases including Cystic Kidney Disease,
cardiovascular disease and infectious diseases. We expect to advance these efforts in 2019.
GDF15 - A Novel Biomarker for the detection
and measurement of Glaucoma
We have an option to
exclusively license GDF15, a diagnostic marker for determining the severity of glaucoma using the expression levels of
Growth Differentiation Factor 15 (GDF15) from the Washington University in St. Louis. Determining the severity of glaucoma
using this biomarker will aid in treatment decisions for patients diagnosed with, and being treated for, glaucoma. We expect
to exercise our option in the next 30 days.
Currently, no single examination or diagnostic
test is able to accurately predict disease progression. Accurate monitoring for disease progression is critical to preserve visual
function in glaucoma patients. Today, physicians only have surrogate measures to evaluate glaucomatous neurodegeneration. GDF15
represents an attractive biomarker for glaucoma with distinct advantages including early detection, over conventional clinical
tests and has the potential to be a first-in-class diagnostic test. GDF15 was discovered by Dr. Rajendra Apte, the Paul A. Cibis
Distinguished Professor of Ophthalmology and Visual Sciences at Washington University School of Medicine. Dr Apte is currently
conducting a clinical trial to further validate GDF15 as a surrogate clinical tool in the treatment of Glaucoma patients.
Q BioMed plans to offer the GDF15 biomarker
as a companion diagnostic to its MAN-01 small molecule therapeutic with a novel mechanism of action for Primary Open-Angle Glaucoma.
By offering both a diagnostic and a therapeutic, Q BioMed and its technology partner Mannin Research Inc. are addressing the needs
of both patients and physicians, as well as bringing innovation to the global glaucoma market.
ASDERA Intellectual Property –
QBM001 Drug for the Treatment of Non-Verbal Autistic Spectrum Disorder
On April 21, 2017, we entered into a License
Agreement on Patent & Know-How Technology with ASDERA whereby we were granted a worldwide, exclusive, license on certain ASDERA
intellectual property.
Among the more than 60,000 US children
who develop autism spectrum disorders, or ASD, every year, approximately 20,000 become nonverbal and will have to rely on assisted
living for the rest of their lives. The ASDERA IP is intended to treat the rare pediatric condition (nonverbal disorder) during
the second year of life, when children learn to speak. Many of the children who miss this treatment window will become non-verbal
for all of their lives. Currently, there is no treatment for this nonverbal disorder. The ASDERA IP is not intended to treat other
aspects of ASD or to be used beyond the estimated treatment window. The ASDERA IP consists of patent-rights and know-how relating
to a product candidate named ASD-002 (now identified as QBM001).
The initial cost to acquire the exclusive
license from ASDERA was $50,000 and the issuance of 125,000 shares of our unregistered common stock subject to a leak-out conditions
after the Rule 144 period has ended. In addition to royalties based upon net sales of the product candidate, if any, we are required
to make additional payments upon the following milestones:
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the filing of an investigational
new drug application, or IND, with the US Food and Drug Administration;
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successful interim results
of Phase II/III clinical trial of the product candidate;
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FDA acceptance of a
new drug application;
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FDA approval of the
product candidate; and
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achieving certain worldwide
net sales.
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Subject to the terms of the Agreement,
we will be in control of the development and commercialization of the product candidate and are responsible for the costs of such
development and commercialization. We have undertaken a good-faith commitment to (i) initiate a Phase II/III clinical trial
at the earlier of the two-year anniversary of the Agreement or one year from the FDA’s approval of the IND and (ii) to make
our first commercial sale by the fifth-anniversary of the Agreement. Failure to show a good-faith effort to meet those goals
would mean that the ASDERA IP would revert to ASDERA. Upon such reversion, ASDERA would be obligated to pay us royalties
on any sales of products derived from the ASDERA IP until such time that ASDERA has paid us twice the sum that we had provided
ASDERA prior to the reversion.
About QBM-001 - Addressing Rare Pediatric
Non-verbal Spectrum Disorder
Causes of non-verbal learning disorder
have been linked to several complications that range from a specific mutated gene as with Fragile X Syndrome and Dravet Syndrome
or autoimmunity, where the body’s immune system is attacking parts of the brain. Trauma, microbial infections and environmental
factors have also been linked to non-verbal learning disorder. Ongoing research is helping to further explain the root cause of
why children become non-verbal or minimally verbal.
Children born into families where there
is a genetic history of autism or epileptic spectrum disorders or that have a sibling that has been diagnosed with an autistic
or epileptic spectrum disorder have a much higher chance of becoming non-verbal.
More than 60,000 US children develop Autism
Spectrum Disorders (“ASD”) every year, of whom 20,000 become non-verbal. A similar number of children with ASD symptoms
in Europe develop pediatric non-verbal disorder each year. No drugs are currently available to ameliorate this condition. In the
United States, of the estimated 20,000 who become non- or minimally verbal and will require assisted living for the rest of their
life. The lifetime cost of that care is estimated at $10 million per person.
Cognitive intervention is the only form
for treatment that has shown to help improve speech capability and social interaction, however, it has not been able to alleviate
the lifetime burden of $10 million per person for cost of care. This is compounded by an additional $10 million during the
lifespan of the person due to loss in productivity in addition to severe emotional strain for the child and the parents. The US
healthcare system bears an annual cost of over $200 Billion to treat non-verbal patients.
QBM-001 is proposed to be given to high-risk
genetically identified children during the second year of life to regulate faulty membrane channels that are known to cause migraines
and/or seizures. This drug acts as an allosteric regulator of these faulty channels in the brain to potentially alleviate the condition
and allow toddlers to actively develop language and speech and avoid life-long speech and intellectual disability of being non-verbal
As there are no treatment option for these
patients, we believe there is a significant economic opportunity to bring a drug to market in this indication. The active ingredient
in our compound is well known and has been approved by worldwide regulators for many years. New research and clinical data has
further validated our approach and given us insight into additional pathways we could be targeting to ameliorate this condition.
As a result, a multi-component formulation is being investigated, that we hope will be more effective than previously planned.
Using a novel delivery and formulation for the active ingredient, we intend to advance this drug through the 505(b)2 pathway in
a single phase 2/3 clinical trial expected to commence in 2019, subject to FDA feedback and approval of an IND. We expect to also
file an Orphan Drug application for this drug in 2019.
RGCB and OMRF Intellectual Property
– Uttroside B Liver Cancer Chemotherapeutic
On June 15, 2017, we entered into a Technology
License Agreement with RGCB and OMRF whereby they granted us a worldwide, exclusive, license on intellectual property related to
Uttroside-B. Uttroside-B is a chemical compound derived from the plant Solanum nigrum Linn, also known as Black Nightshade
or Makoi. We seek to use the Uttroside-B IP to create a chemotherapeutic agent against liver cancer.
The initial cost to acquire the exclusive
license for Uttroside is $10,000. In addition to royalties based upon net sales of the product candidate, if any, we are required
to make additional payments upon the following milestones:
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the completion of certain
preclinical studies;
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the filing of an investigational
new drug application with the US Food and Drug Administration or the filing of the equivalent application with an equivalent governmental
agency;
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successful completion
of each of Phase I, Phase II and Phase III clinical trials;
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FDA approval of the
product candidate;
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approval by the foreign
equivalent of the FDA of the product candidate;
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achieving certain worldwide
net sales; and
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a change of control
of our Company.
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Subject to the terms of the exclusive license
for Uttroside, we will be in control of the development and commercialization of the product candidate and are responsible for
the costs of such development and commercialization. We have undertaken a good-faith commitment to (i) fund the pre-clinical
trials and (ii) to initiate a Phase II clinical trial within six years of the date of the Agreement. Failure to show a good-faith
effort to meet those goals would mean that the exclusive license for Uttroside would revert to the licensors.
UTTROSIDE-B - A Novel Chemotherapeutic
for Liver Cancer
Hepatocellular carcinoma (HCC) is the fifth
most diagnosed cancer in the world and the third leading cause of death. Incidence rates have tripled since 1980. Unfortunately,
when diagnosed two thirds of patients have an advanced disease for which only palliative treatment can be proposed and most likely
systemic therapy. Today, very few systemic therapies have been validated in the treatment of advanced HCC, tyrosine kinase inhibitors
(TKI): Sorafenib (Nexavar) and
regorafenib (Stivarga), and lenvatinib (Lenvima)
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Treatment options are therefore lacking. Other TKIs have been studied with some disappointing results. Current sales of Sorafenib
are estimated at $1 billion per year.
The liver is the football-sized organ in
the upper right area of the belly. Symptoms of liver cancer are uncommon in the early stages. Liver cancer treatments vary, but
may include removal of part of the liver, liver transplant, chemotherapy, and in some cases radiation. Primary liver cancer (hepatocellular
carcinoma) tends to occur in livers damaged by birth defects, alcohol abuse, or chronic infection with diseases such as hepatitis
B and C, hemochromatosis (a hereditary disease associated with too much iron in the liver), and cirrhosis. In the United States,
the average age at onset of liver cancer is 63 years. Men are more likely to develop liver cancer than women, by a ratio of 2 to
1.
Uttroside-B appears to affect phosphorylated
JNK (pro survival signaling) and capcase activity (apoptosis in liver cancer). It is a natural compound fractionated Saponin derived
from the Solarim Nigrum plant. It is a small molecule that showed in early investigation to increase the cytotoxicity of a variety
of liver cancer cell types and importantly to be up to ten times more potent than Sorafenib in pre-clinical studies. This potency
motivates us to work with our partners to synthesize the molecule and move into a clinical program. After completing some very
complicated chemistry work, we believe we will have a final molecule and several analogues in Q1 2019. We plan to initiate pre-clinical
testing shortly thereafter and clinical work in late 2019.
Patents and Intellectual Property Rights
If products we acquired do not have adequate
intellectual protection, we will take the necessary steps to protect our proprietary therapeutic product candidate assets and associated
technologies that are important to our business consisting of seeking and maintaining domestic and international patents. These
may cover our products and compositions, their methods of use and processes for their manufacture and any other inventions that
may be commercially important to the development of our business. We also rely on trade secrets to protect aspects of our business.
Our competitive position depends on our ability to obtain patents on our technologies and our potential products, to defend our
patents, to protect our trade secrets and to operate without infringing valid and enforceable patents or trade secrets of others.
We seek licenses from others as appropriate to enhance or maintain our competitive position.
We hold a license to all intellectual property
related to each of (i) MAN 01, the drug candidate for the treatment of Primary Open Angle Glaucoma, (ii) ASD-002 (QBM001), the
drug candidate related to a nonverbal disorder associated with autism, (iii) SR89, our generic Strontium 89 Chloride product candidate
for metastatic cancer bone pain therapy, and (iv) the Uttroside platform.
We do not hold, and have not applied for,
any patents in our own right. All patents are held in the licensors or inventors names and are assignable under license agreements
to Q BioMed Inc.
Competition
We operate in highly competitive segments
of the biotechnology and biopharmaceutical markets. We face competition from many different sources, including commercial pharmaceutical
and biotechnology enterprises, academic institutions, government agencies, and private and public research institutions. Our product
candidates, if successfully developed and approved, will compete with established therapies, as well as new treatments that may
be introduced by our competitors. Many of our competitors have significantly greater financial, product development, manufacturing
and marketing resources than us. Large pharmaceutical companies have extensive experience in clinical testing and obtaining regulatory
approval for drugs. In addition, many universities and private and public research institutes are active in the fields in which
we research, some in direct competition with us. We also may compete with these organizations to recruit management, scientists
and clinical development personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. New developments, including the development of other biological
and pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a
rapid pace. Developments by competitors may render our product candidates obsolete or noncompetitive. We will also face competition
from these third parties in recruiting and retaining qualified personnel, establishing clinical trial sites and patient registration
for clinical trials and in identifying and in-licensing new product candidates.
Government Regulation
The clinical development, manufacturing,
labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates
are subject to extensive regulation by the FDA in the United States and by comparable health authorities in foreign markets. In
the United States, we are not permitted to market our product candidates until we receive approval of a BLA from the FDA. The process
of obtaining BLA approval is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty
of the products involved. In addition to the significant clinical testing requirements, our ability to obtain marketing approval
for these products depends on obtaining the final results of required non-clinical testing, including characterization of the manufactured
components of our product candidates and validation of our manufacturing processes. The FDA may determine that our product manufacturing
processes, testing procedures or facilities (or those of third parties upon which we rely) are insufficient to justify approval.
Approval policies or regulations may change and the FDA has substantial discretion in the pharmaceutical approval process, including
the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in
clinical development of product candidates, regulatory approval is never guaranteed.
The FDA or another regulatory agency can
delay, limit or deny approval of a product candidate for many reasons, including, but not limited to:
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the FDA or comparable
foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
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we may be unable to
demonstrate to the satisfaction of the FDA that a product candidate is safe and effective for any indication;
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the FDA may not accept
clinical data from trials which are conducted by individual investigators or in countries where the standard of care is potentially
different from the United States;
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the results of clinical
trials may not meet the level of statistical significance required by the FDA for approval;
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we may be unable to
demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
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the FDA may disagree
with our interpretation of data from preclinical studies or clinical trials;
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the FDA may fail to
approve our manufacturing processes or facilities or those of third-party manufacturers with which we or our collaborators contract
for clinical and commercial supplies; or
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the approval policies
or regulations of the FDA may significantly change in a manner rendering our clinical data insufficient for approval.
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With respect to foreign markets, approval
procedures vary among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative
review periods and agreements with pricing authorities. In addition, recent events raising questions about the safety of certain
marketed pharmaceuticals may result in increased cautiousness by the FDA and comparable foreign regulatory authorities in reviewing
new pharmaceuticals based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining
regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us from commercializing
our product candidates.
Costs and Effects of Compliance with
Environmental Laws
Federal, state, and international environmental
laws may impose certain costs and restrictions on our business. We do not believe that we have yet spent or lost money due to these
laws and regulations.
Product Liability and Insurance
We face an inherent risk of product liability
exposure related to the testing of our product candidates in human clinical trials and the eventual sale and use of any product
candidates, and claims could be brought against us if use or misuse of one of our product candidates causes, or merely appears
to have caused, personal injury or death. While we have and intend to maintain product liability insurance relating to our clinical
trials, our coverage may not be sufficient to cover claims that may be made against us and we may be unable to maintain such insurance.
Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other
resources or destroy the prospects for commercialization of the product which is the subject of any such claim. We are unable to
predict if we will be able to obtain or maintain product liability insurance for any products that may be approved for marketing.
Additionally, we have entered into various agreements where we indemnify third parties for certain claims relating to our product
candidates. These indemnification obligations may require us to pay significant sums of money for claims that are covered by these
indemnifications. We currently do not maintain product liability insurance.
Employees
As of November 30, 2018, we had 1 employee
and 20 consultants and management consultants.
ITEM 1A. RISK FACTORS
Investing in our securities involves a
high degree of risk. You should carefully consider and evaluate all of the information included and incorporated by reference or
deemed to be incorporated by reference in this report. Our business, results of operations or financial condition could be adversely
affected by any of these risks or by additional risks and uncertainties not currently known to us or that we currently consider
immaterial.
Risks Related to our Company
If we do not obtain additional financing,
our business may be at risk or execution of our business plan may be delayed.
As of the date hereof, we have raised our
operating funds through contacts, high net-worth individuals and strategic investors situated in the United States and
Cayman Islands. We have not generated any revenue from operations since inception. We have limited assets upon which to commence
our business operations and to rely otherwise. At November 30, 2018, we had cash and cash equivalents of approximately
$2.7 million. On September 21 and November 1, 2018, we netted approximately $3.9 million from the registered sale of
convertible notes. As such, we anticipate that we will have to raise additional funds and/or generate revenue from drug sales within
twelve months to continue operations. Additional funding will be needed to implement our business plan that includes various expenses
such as fulfilling our obligations under licensing agreements, legal, operational set-up, general and administrative, marketing,
employee salaries and other related start-up expenses. Obtaining additional funding will be subject to a number of factors, including
general market conditions, investor acceptance of our business plan and initial results from our business operations. These factors
may impact the timing, amount, terms or conditions of additional financing available to us. If we are unable to raise sufficient
funds, we will be forced to scale back or cease our operations.
Our independent registered public
accountant has issued a going concern opinion after auditing our consolidated financial statements; our ability to continue depends
on our ability to raise additional capital and our operations could be curtailed if we are unable to obtain required additional
funding when needed.
We will be required to expend substantial
amounts of working capital in order to acquire and market our proposed products and establish the necessary relationships to implement
our business plan. We were incorporated on November 22, 2013. Our operations to date were funded entirely by capital raised from
our private offering of securities. Notwithstanding the offering, we will continue to require additional financing to execute
our business strategy. We totally depend on external sources of financing for the foreseeable future. Failure to raise
additional funds in the future will adversely affect our business operations, and may require us to suspend our operations, which
in turn may result in a loss to the purchasers of our common stock. We entirely depend on our ability to attract and receive additional
funding from either the sale of securities or the issuance of debt securities. Needed funds might never be available to us on
acceptable terms or at all. The inability to obtain sufficient funding of our operations in the future could restrict our ability
to grow and reduce our ability to continue to conduct business operations. The report of our independent registered public
accounting firm on our consolidated financial statements, included herein, raised substantial doubt about our ability to continue
as a going concern. Our ability to continue as a going concern depends on our ability to raise additional capital. If we are unable
to obtain necessary financing, we will likely be required to curtail our development plans which could cause us to become dormant.
Any additional equity financing may involve substantial dilution to our then existing stockholders.
Our business relies on intellectual
property owned by third parties, and this reliance exposes us to the termination of the right to use that intellectual property
and may result in inadvertent infringement of patents and proprietary rights of others.
Currently, we have four assets. Our business
depends on:
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our ability to continuously
use the technology related to an eye drop treatment for glaucoma, our Mannin platform, that we have licensed from Mannin Research
Inc.,
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our ability to continuously
use our intellectual property relating to generic Strontium Chloride-89, our BioNucleonics platform, that we have licensed from
Bio-Nucleonics, Inc.,
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our ability to continuously
use our intellectual property relating to a rare pediatric condition (nonverbal disorder), our ASDERA platform, that we have licensed
from ASDERA LLC and
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our ability to continuously
use our intellectual property relating to a chemical compound derived from the plant Solanum nigrum Linn, also known as Black
Nightshade or Makoi, that we seek to use to create a chemotherapeutic agent against liver cancer, our Uttroside platform,
and that we have licensed from the Rajiv Gandhi Centre for Biotechnology, an autonomous research institute under the Government
of India, known as RGCB, and the Oklahoma Medical Research Foundation, or the OMRF.
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If the licenses were to terminate, we would
lose the ability to conduct our business pursuant to our plan of operations. Our ability to pursue our business plan
would then depend on finding alternative platforms to license. We may not be able to find an attractive platform on
a timely and cost effective basis, and even if we did, such platform might be inferior to the ones we currently have a license
to use and may not be attractive to potential customers.
Many entities, including some of our competitors,
have or may obtain patents and other intellectual property rights that cover or affect products or services related to those assets
that we license. If a court determines that one or more aspect of the licensed platform infringes on intellectual property
owned by others, we may be required to cease using that platform, to obtain licenses from the owners of the intellectual property
or to redesign the platform in such a way as to avoid infringing the intellectual property rights. If a third party holds intellectual
property rights, it may not allow us to use its intellectual property at any price, which could materially adversely affect our
competitive position.
The Mannin platform, BioNucleonics platform,
the ASDERA platform and the Uttroside platform may potentially infringe other intellectual property rights. U.S. patent applications
are generally confidential until the Patent and Trademark Office issues a patent. Therefore, we cannot evaluate the extent to which
the licensed platform may infringe claims contained in pending patent applications. Further, without lengthy litigation, it is
often not possible to determine definitively whether a claim of infringement is valid. We may not be in a position to
protect the intellectual property that we license as we are not the owners of that intellectual property and do not currently have
the financial resources to engage in lengthy litigation.
Failure to maintain the license for,
or to acquire, the intellectual property underlying any license or sublicense on which our plan of operations is based may force
us to change our plan of operations.
We have to meet certain conditions to maintain the licenses
for the intellectual property underlying the Mannin platform, the ASDERA platform and the Uttroside platform and to acquire
such intellectual property. Such conditions include payments of cash and shares of common stock, obtaining certain governmental
approvals, initiating sales of products based on the intellectual property and other matters. We might not have the resources
to meet these conditions and as a result may lose the licenses to the intellectual property that is vital to our business.
We lack an operating history and
have not generated any revenues to date. Future operations might never result in revenues. If we cannot generate sufficient revenues
to operate profitably, we may have to cease operations.
As we were incorporated on November 22,
2013 and more recently changed business direction, we do not have any operating history upon which an evaluation of our future
success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow depends upon our ability
to manufacture a product and to earn profit by attracting enough clients who will buy our products or services. We might
never generate revenues or, if we generate revenues, achieve profitability. Failure to generate revenues and profit will eventually
cause us to suspend, curtail or cease operations.
We may be exposed to potential risks
and significant expenses resulting from the requirements under section 404 of the Sarbanes-Oxley Act of 2002.
We are required, pursuant to Section 404
of the Sarbanes-Oxley Act of 2002, to include in our annual report our assessment of the effectiveness of our internal control
over financial reporting. We expect to incur significant continuing costs, including accounting fees and staffing costs, in order
to maintain compliance with the internal control requirements of the Sarbanes-Oxley Act of 2002. Our management concluded that
our internal controls and procedures were not effective to detect the inappropriate application of US GAAP for our most recent
fiscal year. As we develop our business, hire employees and consultants and seek to protect our intellectual property rights, our
current design for internal control over financial reporting must be strengthened to enable management to determine that our internal
controls are effective for any period, or on an ongoing basis. Accordingly, as we develop our business, such development
and growth will necessitate changes to our internal control systems, processes and information systems, all of which will require
additional costs and expenses.
In the future, if we fail to complete the
annual Section 404 evaluation in a timely manner, we could be subject to regulatory scrutiny and a loss of public confidence in
our internal controls. In addition, any failure to implement required new or improved controls, or difficulties encountered in
their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.
Limited oversight of our management
may lead to corporate conflicts.
We have only three directors, of whom two
are also officers. Accordingly, we cannot establish board committees comprised of independent members to oversee functions like
compensation or audit issues. In addition, since we only have three directors, they have significant control over all corporate
issues.
Because we are not subject to compliance
with rules requiring the adoption of certain corporate governance measures, our shareholders have limited protections against interested
director transactions, conflicts of interest and similar matters. The Sarbanes-Oxley Act of 2002, as well as rules enacted
by the SEC, the New York Stock Exchange and the Nasdaq Stock Market, requires the implementation of various measures relating to
corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and
apply to securities which are listed on the New York Stock Exchanges or the Nasdaq Stock Market. Because we are not presently required
to comply with many of the corporate governance provisions, we have not yet adopted these measures and, currently, would not be
able to comply with such corporate governance provisions. We do not have an audit or compensation committee comprised of independent
directors. Two of our three directors who perform these functions and are not independent directors. Thus, there is a potential
conflict in that our directors are also engaged in management and participate in decisions concerning management compensation and
audit issues that may affect management performance.
Until we have a larger board of
directors that would include a majority of independent members, if ever, there will be limited oversight of our directors’
decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions,
even if they are not in the best interests of minority shareholders.
Additionally, our directors beneficially
own approximately 27% of our common stock. Although it is possible for them to be outvoted by the remaining shareholders at a general
or special meeting if the two directors voted together, the size of their shareholdings and the absence of any other person beneficially
owning more than 10% of our common stock would make this a difficult undertaking.
Because the results of preclinical studies and early clinical
trials are not necessarily predictive of future results, any product candidate we advance into clinical trials may not have favorable
results in later clinical trials, if any, or receive regulatory approval.
Pharmaceutical development has inherent
risk. We will be required to demonstrate through well-controlled clinical trials for our product candidates for our Mannin platform,
the ASDERA platform and the Uttroside platform and any additional uses based on the BioNucleonics and Metastron platforms
that our product candidates are effective with a favorable benefit-risk profile for use in their target indications before we can
seek regulatory approvals for their commercial sale. Success in early clinical trials does not mean that later clinical trials
will be successful as product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite
having progressed through initial clinical testing. We also may need to conduct additional clinical trials that are not currently
anticipated. Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have
shown promising results. In addition, only a small percentage of drugs under development result in the submission of a New Drug
Application or Biologics License Application, known as BLA, to the U.S. Food and Drug Administration and even fewer are approved
for commercialization.
Any product candidates we advance
into clinical development are subject to extensive regulation, which can be costly and time consuming, cause unanticipated delays
or prevent the receipt of the required approvals to commercialize our product candidates.
The clinical development, manufacturing,
labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidate,
Man-01, are subject to extensive regulation by the FDA in the United States and by comparable health authorities in foreign markets.
In the United States, we are not permitted to market our product candidates until we receive approval of a BLA from the FDA. The
process of obtaining BLA approval is expensive, often takes many years and can vary substantially based upon the type, complexity
and novelty of the products involved. In addition to the significant clinical testing requirements, our ability to obtain marketing
approval for these products depends on obtaining the final results of required non-clinical testing, including characterization
of the manufactured components of our product candidates and validation of our manufacturing processes. The FDA may determine that
our product manufacturing processes, testing procedures or facilities are insufficient to justify approval. Approval policies or
regulations may change and the FDA has substantial discretion in the pharmaceutical approval process, including the ability to
delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development
of product candidates, regulatory approval is never guaranteed.
The FDA or another regulatory agency can
delay, limit or deny approval of a product candidate for many reasons, including, but not limited to:
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the FDA or comparable foreign regulatory authorities
may disagree with the design or implementation of our clinical trials;
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we may be unable to demonstrate to the satisfaction
of the FDA that a product candidate is safe and effective for any indication;
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the FDA may not accept clinical data from trials which
are conducted by individual investigators or in countries where the standard of care is potentially different from the United
States;
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results of clinical trials may not meet the level
of statistical significance required by the FDA for approval;
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we may be unable to demonstrate that a product candidate’s
clinical and other benefits outweigh its safety risks;
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the FDA may disagree with our interpretation of data
from preclinical studies or clinical trials;
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the FDA may fail to approve our manufacturing processes
or facilities or those of third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies;
or
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the approval policies or regulations of the FDA may
significantly change in a manner rendering our clinical data insufficient for approval.
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With respect to foreign markets, approval
procedures vary among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative
review periods and agreements with pricing authorities. In addition, recent events raising questions about the safety of certain
marketed pharmaceuticals may result in increased cautiousness by the FDA and comparable foreign regulatory authorities in reviewing
new pharmaceuticals based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining
regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us from commercializing
our product candidates.
Any product candidate we manufacture
or advance into clinical trials may cause unacceptable adverse events or have other properties that may delay or prevent their
regulatory approval or commercialization or limit their commercial potential.
Unacceptable adverse events caused by any
of our product candidates that we manufacture or advance into clinical trials could cause us or regulatory authorities to interrupt,
delay or halt production or clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory
authorities for any or all targeted indications and markets. This, in turn, could prevent us from commercializing the affected
product candidate and generating revenues from its sale.
Except for our Strontium Chloride 89, known
as SR89, and Metastron product candidates, there is not yet completed testing of any of our product candidates for the treatment
of the indications for which we intend to seek product approval in humans, and we currently do not know the extent of adverse events,
if any, that will be observed in patients who receive any of our product candidates. If any of our product candidates cause unacceptable
adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product or, if such product
candidate is approved for marketing, future adverse events could cause us to withdraw such product from the market.
Delays in the commencement of our
clinical trials could result in increased costs and delay our ability to pursue regulatory approval.
The commencement of clinical trials can
be delayed for a variety of reasons, including delays in:
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obtaining regulatory clearance to commence a clinical
trial;
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identifying, recruiting and training suitable clinical
investigators;
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reaching agreement on acceptable terms with prospective
clinical research organizations (“CROs”) and trial sites, the terms of which can be subject to extensive negotiation,
may be subject to modification from time to time and may vary significantly among different CROs and trial sites;
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obtaining sufficient quantities of a product candidate
for use in clinical trials;
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obtaining Investigator Review Board, or IRB, or ethics
committee approval to conduct a clinical trial at a prospective site;
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identifying, recruiting and enrolling patients to
participate in a clinical trial; and
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retaining patients who have initiated a clinical trial
but may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process or personal
issues.
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Any delays in the commencement of our clinical
trials will delay our ability to pursue regulatory approval for our product candidates. In addition, many of the factors that cause,
or lead to, a delay in the commencement of clinical trials may also ultimately lead to the denial of regulatory approval of a product
candidate.
Suspensions or delays in the completion
of clinical testing could result in increased costs to us and delay or prevent our ability to complete development of that product
or generate product revenues.
Once a clinical trial has begun, patient
recruitment and enrollment may be slower than we anticipate. Clinical trials may also be delayed as a result of ambiguous or negative
interim results or difficulties in obtaining sufficient quantities of product manufactured in accordance with regulatory requirements
and on a timely basis. Further, a clinical trial may be modified, suspended or terminated by us, an IRB, an ethics committee or
a data safety monitoring committee overseeing the clinical trial, any clinical trial site with respect to that site, or the FDA
or other regulatory authorities due to a number of factors, including:
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failure to conduct the clinical trial in accordance
with regulatory requirements or our clinical protocols;
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inspection of the clinical trial operations or clinical
trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
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stopping rules contained in the protocol;
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unforeseen safety issues or any determination that
the clinical trial presents unacceptable health risks; and
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lack of adequate funding to continue the clinical
trial.
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Changes in regulatory requirements and
guidance also may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to
resubmit our clinical trial protocols to IRBs for re-examination, which may impact the costs, timing and the likelihood of a successful
completion of a clinical trial. If we experience delays in the completion of, or if we must suspend or terminate, any clinical
trial of any product candidate, our ability to obtain regulatory approval for that product candidate will be delayed and the commercial
prospects, if any, for the product candidate may suffer as a result. In addition, any of these factors may also ultimately lead
to the denial of regulatory approval of a product candidate.
Our product candidates (if approved)
or any other product candidates that we may develop and market may be later withdrawn from the market or subject to promotional
limitations.
We may not be able to obtain the labeling
claims necessary or desirable for the promotion of our product candidates if approved. We may also be required to undertake post-marketing
clinical trials. If the results of such post-marketing studies are not satisfactory or if adverse events or other safety issues
arise after approval, the FDA or a comparable regulatory agency in another country may withdraw marketing authorization or may
condition continued marketing on commitments from us that may be expensive and/or time consuming to complete. In addition, if we
or others identify adverse side effects after any of our products are on the market, or if manufacturing problems occur, regulatory
approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products and
additional marketing applications may be required. Any reformulation or labeling changes may limit the marketability of our products
if approved.
Our dependence on third party suppliers
or our inability to successfully produce any product could adversely impact our business.
We rely on third parties to supply us with
component and materials required for the development and manufacture of our product candidates. If they fail to provide the required
components or we are unable to find a partner to manufacture the necessary products, there would be a significant interruption
of our supply, which would materially adversely affect clinical development and potential commercialization of the product. In
the event that the FDA or such other agencies determine that we or any third-party suppliers have not complied with cGMP, our clinical
trials could be terminated or subjected to a clinical hold until such time as we or any third party are able to obtain appropriate
replacement material. Furthermore, if any contract manufacturers who supply us cannot successfully manufacture material that conforms
to our specifications and with FDA regulatory requirements, we will not be able to secure and/or maintain FDA approval for our
product candidates. We, and any third-party suppliers are and will be required to maintain compliance with cGMPs and will be subject
to inspections by the FDA or comparable agencies in other jurisdictions to confirm such compliance.
We do and will also rely on our partners
and manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our anticipated
clinical trials. We do not have any control over the process or timing of the acquisition of raw materials by our manufacturers.
Moreover, we currently do not have any agreements for the commercial production of these raw materials. Any significant delay in
the supply of a product candidate or the raw material components thereof for an ongoing clinical trial could considerably delay
completion of our clinical trials, product testing and potential regulatory approval of our product candidates.
We may not have the resources or capacity
to commercially manufacture our product candidates, and we will likely continue to be dependent upon third party manufacturers.
Our current inability, or our dependence on third parties, to manufacture and supply us with clinical trial materials and any approved
products may adversely affect our ability to develop and commercialize our product candidates on a timely basis or at all.
We intend to contract with third
parties either directly or through our licensors for the manufacture of our product candidates. This reliance on third parties
increases the risk that we will not have sufficient quantities of our product candidates or that such supply will not be available
to us at an acceptable cost, which could delay, prevent or impair our commercialization efforts.
We do not have any manufacturing facilities.
We expect to use third-party manufacturers for the manufacture of our product candidates and have entered into contracts with manufacturers
through the licensor of our radio-pharmaceutical product, SR89. Even with such contracts in place, reliance on third-party manufacturers
entails additional risks, including:
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reliance on the third party for regulatory compliance
and quality assurance;
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the possible breach of the manufacturing agreement
by the third party;
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the possible termination or nonrenewal of the agreement
by the third party at a time that is costly or inconvenient for us; and
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reliance on the third party for regulatory compliance,
quality assurance, and safety and pharmacovigilance reporting.
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Third-party manufacturers may not be able
to comply with current good manufacturing practices, or cGMP, regulations or similar regulatory requirements outside the United
States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions
being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of product candidates or medicines, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect supplies of our medicines and harm our business and results of operations.
Any product that we may produce may compete
with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers
that operate under cGMP regulations and that might be capable of manufacturing for us.
Any performance failure
on the part of future manufacturers could result in a decrease or end to revenue. If any a contract manufacturer cannot perform
as agreed, we may be required to replace that manufacturer. We may incur added costs and delays in identifying and qualifying any
such replacement.
Our anticipated future dependence upon
others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to commercialize
any medicines that receive marketing approval on a timely and competitive basis.
We will likely rely on third parties
to conduct our clinical trials. If these third parties do not meet our deadlines or otherwise conduct the trials as required, our
clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize
our product candidates when expected or at all.
We do not have the ability to conduct all
aspects of our preclinical testing or clinical trials ourselves. We intend to use and do use Mannin, BioNucleonics, ASDERA, RGCB,
OMRF and CROs to conduct our planned clinical trials and will and do rely upon such CROs, as well as medical institutions,
clinical investigators and consultants, to conduct our trials in accordance with our clinical protocols. Our CROs, investigators
and other third parties will and do play a significant role in the conduct of these trials and the subsequent collection and analysis
of data from the clinical trials.
There is no guarantee that any CROs, investigators
and other third parties upon which we rely for administration and conduct of our clinical trials will devote adequate time and
resources to such trials or perform as contractually required. If any of these third parties fail to meet expected deadlines, fail
to adhere to our clinical protocols or otherwise perform in a substandard manner, our clinical trials may be extended, delayed
or terminated. If any of our clinical trial sites terminate for any reason, we may experience the loss of follow-up information
on patients enrolled in our ongoing clinical trials unless we are able to transfer the care of those patients to another qualified
clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants
to us from time to time and receive cash or equity compensation in connection with such services. If these relationships and any
related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable
clinical trial site may be jeopardized.
If our competitors develop treatments
for the target indications of our product candidates that are approved more quickly, marketed more successfully or demonstrated
to be more effective than our product candidates, our commercial opportunity will be reduced or eliminated.
We operate in highly competitive segments
of the biotechnology and biopharmaceutical markets. We face competition from many different sources, including commercial pharmaceutical
and biotechnology enterprises, academic institutions, government agencies, and private and public research institutions. Our product
candidates, if successfully manufactured and/or developed and approved, will compete with established therapies, as well as new
treatments that may be introduced by our competitors. Many of our competitors have significantly greater financial, product development,
manufacturing and marketing resources than us. Large pharmaceutical companies have extensive experience in clinical testing and
obtaining regulatory approval for drugs. In addition, many universities and private and public research institutes are active in
cancer research, some in direct competition with us. We also may compete with these organizations to recruit management, scientists
and clinical development personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. New developments, including the development of other biological
and pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a
rapid pace. Developments by competitors may render our product candidates obsolete or noncompetitive. We will also face competition
from these third parties in recruiting and retaining qualified personnel, establishing clinical trial sites and patient registration
for clinical trials and in identifying and in-licensing new product candidates.
If competitors introduce their own generic equivalent
of our SR89 product candidate, our revenues and gross margin from such products could decline rapidly.
Revenues and gross margin derived from
generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that we believe are unique to
the generic pharmaceutical industry. As the patent(s) for a brand name product or the statutory marketing exclusivity period (if
any) expires, the first generic manufacturer to receive regulatory approval for a generic equivalent of the product often is able
to capture a substantial share of the market. However, as other generic manufacturers receive regulatory approvals for their own
generic versions, that market share, and the price of that product, will typically decline depending on several factors, including
the number of competitors, the price of the branded product and the pricing strategy of the new competitors. The number of our
competitors producing a generic version equivalent to our SR89 product candidate could increase to such an extent that we may stop
marketing our product for which we previously obtained approval, which would have a material adverse impact on our revenues, if
we ever achieve revenues, and gross margin.
If we are unable to establish sales
and marketing capabilities or fail to enter into agreements with third parties to market, distribute and sell any products we may
successfully develop, we may not be able to effectively market and sell any such products and generate product revenue.
We do not currently have the infrastructure
for the sales, marketing and distribution of any of our product candidates, and must build this infrastructure or make arrangements
with third parties to perform these functions in order to commercialize any products that we may successfully develop. The establishment
and development of a sales force, either by us or jointly with a partner, or the establishment of a contract sales force to market
any products we may develop will be expensive and time-consuming and could delay any product launch. If we, or our partners, are
unable to establish sales and marketing capability or any other non-technical capabilities necessary to commercialize any products
we may successfully develop, we will need to contract with third parties to market and sell such products. We may not be able to
establish arrangements with third parties on acceptable terms, or at all.
We may expend our limited resources
to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications for which there
may be a greater likelihood of success.
Because we have limited financial and managerial
resources, we will focus on a limited number of research programs and product candidates for specific indications. As a result,
we may forego or delay pursuit of opportunities with other product candidates for other indications for which there may be a greater
likelihood of success or may prove to have greater commercial potential. Notwithstanding our investment to date and anticipated
future expenditures on MAN 01 (Mannin), Uttroside-B (OMRF), QBM001 (Asdera) and the BioNucleonics IP, we have not yet developed,
and may never successfully develop, any marketed treatments using these products other than the SR89 product candidate for which
there is FDA approval. Research programs to identify new product candidates or pursue alternative indications for current product
candidates require substantial technical, financial and human resources. Although we intend to, and do, support certain investigator-sponsored
clinical trials of MAN 01, Uttroside-B, QBM001 evaluating various indications, as well as other uses of SR89, these activities
may initially show promise in identifying potential product candidates or indications, yet fail to yield product candidates or
indications for further clinical development.
We depend upon the services of our
key management personnel, and the loss of their services would likely result in disruptions of our operations and have a material
adverse effect on our business.
Our management and operations are dependent
on the services of our management team, namely Mr. Denis Corin, our Chief Executive Officer and Chairman, and Mr. William Rosenstadt,
our Chief Legal Officer and a Director. We do not have employment or non-compete agreements with or maintain key-man life
insurance in respect of either of these individuals. Because of their knowledge of the industry and our operations and their
experience with us, we believe that our future results depend upon their efforts, and the loss of the services of either of these
individuals for any reason could result in a disruption of our operations which will likely have a material adverse effect on our
business.
Other than our Chief Executive Officer,
we currently do not have full-time employees, but we retain the services of independent contractors/consultants on a contract-employment
basis. 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. We might not be able to successfully attract and retain skilled and experienced personnel.
If we fail to attract and retain
key management and clinical development personnel, we may be unable to successfully develop or commercialize our product candidates.
We will need to expand and effectively
manage our managerial, operational, financial and other resources in order to successfully pursue our clinical development and
commercialization efforts. As a company with a limited number of personnel, we highly depend on the development, regulatory, commercial
and financial expertise of the members of our senior management and advisors, in particular Denis Corin, our chairman and chief
executive officer. The loss of this individual or the services of any of our other senior management could delay or prevent the
further development and potential commercialization of our product candidates and, if we are not successful in finding suitable
replacements, could harm our business. Our success also depends on our continued ability to attract, retain and motivate highly
qualified management and scientific personnel and we may not be able to do so in the future due to the intense competition for
qualified personnel among biotechnology and pharmaceutical companies, as well as universities and research organizations. If we
are not able to attract and retain the necessary personnel, we may experience significant impediments to our ability to implement
our business strategy.
Applicable regulatory requirements,
including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to retain or attract
qualified officers and directors, which could adversely affect the management of our business and our ability to retain listing
of our common stock.
We may be unable to attract and retain
those qualified officers, directors and members of board committees required to provide for effective management because of the
rules and regulations that govern publicly-held companies, including, but not limited to, certifications by principal executive
officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations and
the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the
stock exchanges. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting
roles as directors and executive officers.
Further, some of these changes heighten
the requirements for board or committee membership, particularly with respect to an individual’s independence from our business
and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite
qualifications. If we are unable to attract and retain qualified officers and directors, the management of our business and our
ability to obtain or retain listing of our shares of common stock on any stock exchange could be adversely affected.
We may be exposed to potential risks
and significant expenses resulting from the requirements under section 404 of the Sarbanes-Oxley Act of 2002.
We are required, pursuant to Section 404
of the Sarbanes-Oxley Act of 2002, to include in our annual report our assessment of the effectiveness of our internal control
over financial reporting. We expect to incur significant continuing costs, including accounting fees and staffing costs, in order
to maintain compliance with the internal control requirements of the Sarbanes-Oxley Act of 2002. Our management concluded that
our internal controls and procedures were not effective to detect the inappropriate application of US GAAP for our most recent
fiscal year. As we develop our business, hire employees and consultants and seek to protect our intellectual property rights, our
current design for internal control over financial reporting must be strengthened to enable management to determine that our internal
controls are effective for any period, or on an ongoing basis. Accordingly, as we develop our business, such development
and growth will necessitate changes to our internal control systems, processes and information systems, all of which will require
additional costs and expenses.
In the future, if we fail to complete the
annual Section 404 evaluation in a timely manner, we could be subject to regulatory scrutiny and a loss of public confidence in
our internal controls. In addition, any failure to implement required new or improved controls, or difficulties encountered in
their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.
Because of the small size of our
company, we do not have separate Chairman, Chief Executive Officer and Chief Financial Officer positions, which may expose us to
potential risks, including our failure to produce reliable financial reports and prevent and/or detect fraud.
We have not adopted a formal policy to
separate or combine the positions of Chairman and Chief Executive Officer, both of which are currently held by Denis Corin who
is also our acting principal financial officer. In addition, our two employees also comprise our Board of Directors.
As such, there is no division of labor between our management and of our Board of Directors. This structure exposes us to
a number of risks, including a failure to maintain adequate internal controls, our failure to produce reliable financial reports
and our failure to prevent and/or detect financial fraud. Any such failures would adversely affect our financial condition
and overall business operations.
We are required, pursuant to Section 404
of the Sarbanes-Oxley Act of 2002, to include in our annual report our assessment of the effectiveness of our internal control
over financial reporting. We expect to incur significant continuing costs, including accounting fees and staffing costs, in order
to maintain compliance with the internal control requirements of the Sarbanes-Oxley Act of 2002. Our management concluded that
our internal controls and procedures were not effective to detect the inappropriate application of US GAAP for our most recent
fiscal year. As we develop our business, hire employees and consultants and seek to protect our intellectual property rights, our
current design for internal control over financial reporting must be strengthened to enable management to determine that our internal
controls are effective for any period, or on an ongoing basis. Accordingly, as we develop our business, such development
and growth will necessitate changes to our internal control systems, processes and information systems, all of which will require
additional costs and expenses. Among other outcomes, a downturn in general economic conditions could:
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increase the cost of raising, or decrease our ability
to raise, additional funds; as we do not anticipate generating sufficient revenue in the next twelve months to cover our operating
costs, we may need to raise additional funding to implement our business if we do not raise sufficient funds in this offering.
A recession or other negative economic factors could make this more difficult or prohibitive; or
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interfere with services provided by third parties;
we use third parties for research purposes and intend to use third parties for the production and distribution of our generic
SR89 product candidate, and a general recession or other economic conditions could jeopardize the ability of any third parties
to fulfill their obligations to us;
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In the future, if we fail to complete
the annual Section 404 evaluation in a timely manner, we could be subject to regulatory scrutiny and a loss of public confidence
in our internal controls. In addition, any failure to implement required new or improved controls, or difficulties encountered
in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.
Two of our assets may compete with
each other and we will need to address how to proceed with each asset
Our Strontium Chloride 89 product from
BNI is the generic version of our Metastron product that we acquired from GE Healthcare Limited. Having two products based on the
same [drug] for the same bone cancer pain mediation therapy may prove to be redundant. We have not yet decided how to proceed with
these assets if they prove to be redundant, but we may have to abandon one of the products or severely curtail our plans for its
development. Any such abandonment or curtailment would reduce potential income from such product.
We might not be successful in our
litigation against BNI
On December 28, 2018, we commenced litigation
against and parties related to BNI in connection with a license agreement that we entered into with BNI in 2016 and amended from
time to time. Under the agreement with BNI, we were granted a worldwide, exclusive license on certain BNI intellectual property
and the option to acquire the BNI IP within three years of the agreement. The BNI IP consists of generic Strontium Chloride SR89
(generic Metastron®) (“SR89”) and all of BNI’s intellectual property relating to it (“BNI IP”).
SR89 is a radiopharmaceutical therapeutic for cancer bone pain therapy.
Under the agreement, once we have funded
up to $850,000 in cash, we may exercise the option to acquire the BNI IP at no additional charge. By our accounts, we have provided
BNI with over $950,000 in cash. We have exercised our option to acquire the BNI IP, but BNI has not transferred the BNI IP to us.
As a result, we have commenced litigation to, among other actions, obtain all of the BNI IP. We also seek judgments against BNI
and related parties for the misappropriation of funds, breach of contract, fraud and fraudulent inducement.
If we are not successful in our litigation,
the BNI IP could remain the property of BNI or be sold by BNI to a third party. Not only would our potential income be reduced
if the BNI IP were not ours, but it could directly compete with our Metastron product.
Risks Related to our Industry
We are subject to general economic
conditions outside of our control.
Projects for the acquisition and development
of our products are subject to many factors, which are outside our control. These factors include general economic conditions
in North America and worldwide (such as recession, inflation, unemployment, and interest rates), shortages of labor and materials
and price of materials and competitive products and the regulation by federal and state governmental authorities. If any or several
of these facts develop in a way that is adverse to our interest, we will not be in a position to reverse them, and we may not be
able to survive such a development.
If any product candidate that we
successfully develop does not achieve broad market acceptance among physicians, patients, healthcare payors and the medical community,
the revenues that it generates from their sales will be limited.
Even if we successfully produce product
candidates, they may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Coverage
and reimbursement of our product candidates by third-party payors, including government payors, generally is also necessary for
commercial success. The degree of market acceptance of any approved products will depend on a number of factors, including:
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the efficacy and safety as demonstrated in clinical
trials;
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the clinical indications for which the product is
approved;
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acceptance by physicians, major operators of hospitals
and clinics and patients of the product as a safe and effective treatment;
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acceptance of the product by the target population;
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the potential and perceived advantages of product
candidates over alternative treatments;
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the safety of product candidates seen in a broader
patient group, including its use outside the approved indications;
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the cost of treatment in relation to alternative treatments;
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the availability of adequate reimbursement and pricing
by third parties and government authorities;
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relative convenience and ease of administration;
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the prevalence and severity of adverse events;
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the effectiveness of our sales and marketing efforts;
and
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unfavorable publicity relating to the product.
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If any product candidate is approved but
does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate
sufficient revenue from these products and may not become or remain profitable.
We may incur substantial product
liability or indemnification claims relating to the clinical testing and/or use of our product candidates.
We face an inherent risk of product liability
exposure related to the testing of our product candidates in human clinical trials, as well as related to the manufacture and consumption
of product candidates that we successfully commercialize. Claims could be brought against us if use or misuse of one of our product
candidates causes, or merely appears to have caused, personal injury or death. While the manufacturer of our SR89 product maintains
a $5 Million product liability policy, and BioNucleonics, the holder of the Abbreviated New Drug Application (“ANDA”s)
are responsible for having their own coverage, we intend to obtain supplemental coverage, but do not currently have our own product
liability insurance. When we initiate commercial activity or additional clinical trials, we intend to obtain the relevant coverage.
As a result, such coverage may not be sufficient to cover claims that may be made against us and we may be unable to maintain such
insurance. Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management
and other resources or destroy the prospects for commercialization of the product which is the subject of any such claim. We are
unable to predict if we will be able to obtain or maintain product liability insurance for any products that may be approved for
marketing. Additionally, we have entered into various agreements where we indemnify third parties for certain claims relating to
our product candidates. These indemnification obligations may require us to pay significant sums of money for claims that are covered
by these indemnifications.
Healthcare reform and restrictions
on reimbursements may limit our financial returns.
Our ability or the ability of our collaborators
to commercialize any of our product candidates that we successfully develop may depend, in part, on the extent to which government
health administration authorities, private health insurers and other organizations will reimburse consumers for the cost of these
products. These third parties are increasingly challenging both the need for and the price of new drug products. Significant uncertainty
exists as to the reimbursement status of newly approved therapeutics. Adequate third-party reimbursement may not be available for
our product candidates to enable us or our collaborators to maintain price levels sufficient to realize an appropriate return on
their and our investments in research and product development.
Our success depends upon intellectual
property, proprietary technologies and regulatory market exclusivity periods, and the intellectual property protection for our
product candidates depends significantly on third parties.
Our success depends, in large part, on
obtaining and maintaining patent protection and trade secret protection for our product candidates and their formulations and uses,
as well as successfully defending these patents against third-party challenges. The parties from which we license our intellectual
property are responsible for prosecuting and maintaining patent protection relating to the intellectual property to which we have
a license from that party. If any of these parties fails to appropriately prosecute and maintain patent protection for the intellectual
property, our ability to develop and commercialize the respective product candidate may be adversely affected and we may not be
able to prevent competitors from making, using and selling competing products. This failure to properly protect the intellectual
property rights could have a material adverse effect on our financial condition and results of operations.
The patent application process is subject
to numerous risks and uncertainties, and we or our partners might not be successful in protecting our product candidates by obtaining
and defending patents. These risks and uncertainties include the following:
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patent applications may not result in any patents
being issued;
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patents that may be issued or in-licensed may be challenged,
invalidated, modified, revoked, circumvented, found to be unenforceable, or otherwise may not provide any competitive advantage;
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our competitors, many of which have substantially
greater resources than we or our partners 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;
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there may be significant pressure on the U.S. government
and other international governmental bodies to limit the scope of patent protection both inside and outside the United States
for disease treatments that prove successful as a matter of public policy regarding worldwide health concerns; and
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countries other than the United States may have patent
laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create,
develop, and market competing products.
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In addition to patents, we and our partners
also rely on trade secrets and proprietary know-how. Although we have taken steps to protect our trade secrets and unpatented know-how,
including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with
employees, consultants and advisors, third parties may still obtain this information or come upon this same or similar information
independently.
We also intend to rely on our ability to
obtain and maintain a regulatory period of market exclusivity for any of our biologic product candidates that are successfully
developed and approved for commercialization. Although this period in the United States is currently 12 years from the date of
marketing approval, there is a risk that the U.S. Congress could amend laws to significantly shorten this exclusivity period, as
proposed by President Obama. Once any regulatory period of exclusivity expires, depending on the status of our patent coverage
and the nature of the product, we may not be able to prevent others from marketing products that are biosimilar to or interchangeable
with our products, which would materially adversely affect us.
In addition, U.S. patent laws may change
which could prevent or limit us from filing patent applications or patent claims to protect our products and/or technologies or
limit the exclusivity periods that are available to patent holders. For example, on September 16, 2011, the Leahy-Smith America
Invents Act, or the America Invents Act, was signed into law, and includes a number of significant changes to U.S. patent law.
These include changes to transition from a “first-to-invent” system to a “first-to-file” system and to
the way issued patents are challenged. These changes may favor larger and more established companies that have more resources to
devote to patent application filing and prosecution. The U.S. Patent and Trademark Office implemented the America Invents Act on
March 16, 2013, and it remains to be seen how the judicial system and the U.S. Patent and Trademark Office will interpret
and enforce these new laws. Accordingly, it is not clear what impact, if any, the America Invents Act will ultimately have on the
cost of prosecuting our patent applications, our ability to obtain patents based on our discoveries and our ability to enforce
or defend our issued patents.
If we or our partners are sued for
infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that
litigation would have a material adverse effect on our business.
Our success also depends on our ability
and the ability of any of our current or future collaborators to develop, manufacture, market and sell our product candidates without
infringing the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which
are owned by third parties, exist in the fields in which we are developing products, some of which may be directed at claims that
overlap with the subject matter of our intellectual property. Because patent applications can take many years to issue, there may
be currently pending applications, unknown to us, which may later result in issued patents that our product candidates or proprietary
technologies may infringe. Similarly, there may be issued patents relevant to our product candidates of which we are not aware.
There is a substantial amount of litigation
involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third-party
claims that we or any of our licensors, suppliers or collaborators infringe the third party’s intellectual property rights,
we may have to:
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obtain licenses, which may not be available on commercially
reasonable terms, if at all;
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abandon an infringing product candidate or redesign
our products or processes to avoid infringement;
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pay substantial damages, including the possibility
of treble damages and attorneys’ fees, if a court decides that the product or proprietary technology at issue infringes
on or violates the third party’s rights;
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pay substantial royalties, fees and/or grant cross
licenses to our technology; and/or
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defend litigation or administrative proceedings which
may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.
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We may be involved in lawsuits to
protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents or
the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which
can be expensive and time-consuming. An adverse result in any litigation or defense proceedings could put one or more of our patents
at risk of being invalidated, found to be unenforceable, or interpreted narrowly and could put our patent applications at risk
of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation,
there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
We may be subject to claims that
our consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former
employers to us.
As is common in the biotechnology and pharmaceutical
industry, we engage the services of consultants to assist us in the development of our product candidates. Many of these consultants
were previously employed at, or may have previously been or are currently providing consulting services to, other biotechnology
or pharmaceutical companies, including our competitors or potential competitors. We may become subject to claims that we or these
consultants have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers
or their former or current customers. Litigation may be necessary to defend against these claims. Even if we are successful in
defending against these claims, litigation could result in substantial costs and be a distraction to management.
Risks Related to our Securities
Our shares of common stock are subject
to the “penny stock’ rules of the securities and exchange commission and the trading market in our securities will
be limited, which will make transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The U.S. Securities and Exchange Commission
has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks.” Penny
stocks generally are equity securities with a price of less than $5 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which
specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer
must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales
person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from
those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. If a
trading market for our common stock develops, our common stock will probably become subject to the penny stock rules, and shareholders
may have difficulty in selling their shares.
Any additional financing may dilute
existing shareholders and decrease the market price for shares of our common stock.
If we raise additional capital, our existing
shareholders may incur substantial and immediate dilution. We estimate that we will need approximately $20,000,000 in additional funds
over the next two years to complete our business plan. The most likely source of future funds available to us is through the sale
of additional shares of common stock. Such sales might occur below market price and below the price of which existing shareholders
purchased their shares.
Our Articles of Incorporation provide
indemnification for officers, directors and employees.
Our governing instruments provide that
officers, directors, employees and other agents and their affiliates shall only be liable to our Company for losses, judgments,
liabilities and expenses that result from the negligence, misconduct, fraud or other breach of fiduciary obligations. Thus certain
alleged errors or omissions might not be actionable by us. The governing instruments also provide that, under the broadest circumstances
allowed under law, we must indemnify our officers, directors, employees and other agents and their affiliates for losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with our Company, including
liabilities under applicable securities laws.
The market price of our common stock
may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
Our shares of common stock trading on the
OTCQB will fluctuate significantly. There is a volatility associated with Bulletin Board securities in general and the value of
your investment could decline due to the impact of any of the following factors upon the market price of our common stock:
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sales or potential sales of substantial amounts of
our common stock;
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delay or failure in initiating or completing pre-clinical
or clinical trials or unsatisfactory results of these trials;
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announcements about us or about our competitors, including
clinical trial results, regulatory approvals or new product introductions;
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developments concerning our licensors, product manufacturers
or our ability to produce Man-01;
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developments concerning our licensors, product manufacturers
or our ability to produce SR89;
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litigation and other developments relating to our
patents or other proprietary rights or those of our competitors;
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conditions in the pharmaceutical or biotechnology
industries;
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governmental regulation and legislation;
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variations in our anticipated or actual operating
results;
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change in securities analysts’ estimates of
our performance, or our failure to meet analysts’ expectations;
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change in general economic trends; and
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investor perception of our industry or our prospects.
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Many of these factors are beyond our control.
The stock markets in general, and the market for pharmaceutical and biotechnological companies in particular, have historically
experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating
performance of these companies. These broad market and industry factors could reduce the market price of our common stock, regardless
of our actual operating performance.
Sales of a substantial number of
shares of our common stock, or the perception that such sales may occur, may adversely impact the price of our common stock.
A large number of our shares may be sold
without restriction in public markets. These include:
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approximately 10,000,000 of our outstanding shares
of common stock recorded by our transfer agent as of November 30, 2018 as unrestricted and freely tradable;
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shares of our common stock that are, or are eligible
to be, unrestricted and free trading pursuant to Rule 144 or other exemptions from registration under the Securities Act that
have not yet been recorded by our transfer agent as such;
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Any such sales, or the fear of such sales,
could substantially decrease the market price of our common stock and the value of your investment.
We have not paid dividends to date
and do not intend to pay any dividends in the near future.
We have never paid dividends on our common
stock and presently intend to retain any future earnings to finance the operations of our business. You may never receive any dividends
on our shares.
The exercise of warrants and options
or future sales of our common stock may further dilute the shares of common stock you receive in this offering.
As of the date hereof, we have outstanding
vested and unvested options and warrants exercisable into 5,768,558 shares of common stock. The issuance of any shares of common
stock pursuant to exercise of such options and warrants or the conversion of such notes would dilute your percentage ownership
of our Company, and the issuance of any shares of common stock pursuant to exercise of such options and warrants or the conversion
of such notes at a per share price below the offering price of shares being acquired in this offering which would dilute the net
tangible value per share for such investor.
Our Board of Directors is authorized to
sell additional shares of common stock, or securities convertible into shares of common stock, if in their discretion they determine
that such action would be beneficial to us. Approximately 95% of our authorized shares of common stock and 100% of our shares of
preferred stock are available for issuance. Any such issuance would dilute the ownership interest of persons acquiring common
stock in this offering, and any such issuance at a share price lower than then net tangible book value per share at the time an
investor purchased its shares would dilute the net tangible value per share for such investor.