Business
Overview
Relmada
Therapeutics is a clinical-stage, publicly traded biotechnology company developing new chemical entities (“NCEs”) together with
novel versions of proven drug products that potentially address areas of high unmet medical need in the treatment of central nervous
system (“CNS”) diseases. The Company has a diversified portfolio of four products at various stages of development, including d-Methadone
(dextromethadone, REL-1017), an N-methyl-D-aspartate (“NMDA”) receptor antagonist for treating depression and neuropathic pain;
LevoCap ER (REL-1015), an abuse resistant, sustained release dosage form of the opioid analgesic levorphanol; BuTab (oral buprenorphine,
REL-1028), an oral dosage form of the opioid analgesic buprenorphine; and MepiGel (topical mepivacaine, REL-1021), an orphan drug
designated topical formulation of the local anesthetic mepivacaine.
Following
the results of three P1 clinical studies and additional three pre-clinical predictive model of antidepressant activity for dextromethadone,
we performed a pipeline prioritization and strategic review of our business and we emerged with clear priorities as a research
and clinical development company. We identified dextromethadone as the most promising clinical program on which we will focus
the majority of our development efforts going forward. We believe that this refined strategy will drive Relmada’s long-term
success and support the development of the legacy pipeline, through direct development or selected partnerships.
As
we continue the development of d-Methadone, we are seeking strategic partnerships with established healthcare companies to pursue
further development, regulatory approval and commercialization of our remaining pipeline programs. We do not expect to manufacture
finished products in-house, nor conduct direct or indirect sales of products which may allow the Company to avoid significant
capital investment in production facilities and sales and marketing teams. It is difficult to predict whether we will be able
to enter into beneficial commercial partner relationships with recognized healthcare companies.
Our
lead product candidate, d-Methadone, is a NCE being developed as a rapidly acting, oral agent for the treatment of depression,
pain, and/or other potential conditions affecting the brain functions. We have completed three Phase I single and multiple ascending
dose studies and have confirmed safety, tolerability, and dose range for a planned Phase II study in treatment-resistant depression
(“TRD”).
Our
four development projects are briefly described below:
d-Methadone
(dextromethadone, REL-1017) and Treatment-Resistant Depression (TRD)
Background
In
2014, the National Institute of Mental Health (“NIMH”) estimated that 15.7 million adults aged 18 or older in the United States
had at least one major depressive episode in the past year. Overall, only about half of Americans diagnosed with major depression
in a given year receive treatment. Of those receiving treatment with as many as four different standard antidepressants, 33% of
drug-treated depression patients do not achieve adequate therapeutic benefits according to the Sequenced Treatment Alternatives
to Relieve Depression (STAR*D) trial published in the
American Journal of Psychiatry
. Accordingly, we believe that approximately
3 million patients with such treatment-resistant depression (TRD) are in need of new treatment options.
In
addition to the high failure rate, none of the marketed products for depression can demonstrate rapid antidepressant effects and
most of the products take several weeks to show effectiveness. The urgent need for improved, faster acting antidepressant treatments
is underscored by the fact that severe depression can be life-threatening, due to heightened risk of suicide.
Recent
studies have shown that ketamine, a drug known previously as an anesthetic, can lift depression in many patients within hours.
However, it is unlikely that ketamine itself will become a practical treatment for most cases of depression. It must be administered
through intravenous infusion, requiring a hospital setting, and more importantly can potentially trigger adverse side effects
including psychedelic symptoms (hallucinations, memory defects, panic attacks), nausea/vomiting, somnolence, cardiovascular stimulation
and, in a minority of patients, hepatoxicity. Ketamine also hasn’t been thoroughly studied for long-term safety and effectiveness,
and the U.S. Food and Drug Administration (“FDA”) hasn’t approved it to treat depression.
d-Methadone
Overview and Mechanism of Action
d-Methadone’s
mechanism of action, as a non-competitive NMDA channel blocker or antagonist, is fundamentally differentiated from all currently
FDA-approved antidepressants, as well as all atypical antipsychotics used adjunctively with standard, FDA-approved antidepressants.
Working through the same brain mechanisms as ketamine but potentially lacking its adverse side effects, Relmada’s d-Methadone
is being developed as a rapidly acting, oral agent for the treatment of depression, neuropathic pain, and/or other potential CNS
pathological conditions.
In
chemistry an enantiomer, also known as an optical isomer, is one of two stereoisomers that are mirror images of each other that
are non-superposable (not identical), much as one’s left and right hands are the same except for being reversed along one
axis. A racemic compound, or racemate, is one that has equal amounts of left- and right-handed enantiomers of a chiral molecule.
For racemic drugs, often only one of a drug’s enantiomers is responsible for the desired physiologic effects, while the
other enantiomer is less active or inactive.
Racemic
methadone has been used since the 1950s as a treatment for opioid addiction and has remained the primary therapy for this condition
for more than 40 years. Recently, methadone has been used to manage cancer pain and other chronic pain states. Methadone is a
highly lipophilic molecule that is suitable for a variety of administration routes, with oral bioavailability close to 80% compared
with 26% for morphine.
As
a single isomer of racemic methadone, d-Methadone has been shown to possess NMDA antagonist properties with virtually no traditional
opioid or ketamine-like adverse events at the expected therapeutic doses. In contrast, racemic methadone is associated with common
opioid side effects that include anxiety, nervousness, restlessness, sleep problems (insomnia), nausea, vomiting, constipation,
diarrhea, drowsiness, and others. It has been shown that the left (levo) isomer, l-Methadone, is largely responsible for methadone’s
opioid activity, while the right (dextro) isomer, d-Methadone, is much less active as an opioid while maintaining affinity for
the NMDA receptor.
NMDA
receptors are present in many parts of the central nervous system and play important roles in neuronal plasticity and other functions
that are important for cognitive functions such as learning and memory. They also contribute to the maladaptive plasticity, which
results in neuropathic pain. Based on these premises, d-Methadone is potentially a platform that could be developed and could
show benefits in several different indications.
d-Methadone
Phase 1 Clinical Safety Studies
Summary
The
safety data from two Company-funded d-Methadone Phase 1 clinical safety studies and a third study conducted by researchers at
Memorial Sloan-Kettering Cancer Center indicate that d-Methadone was safe and well tolerated in healthy subjects at all doses
tested.
In
November 2014, Health Canada approved a Clinical Trial Application (“CTA”) to conduct the first Phase I study with
d-Methadone. This was a Single Ascending Dose (“SAD”) study and was followed by a Multiple Ascending Dose (“MAD”)
study, both in healthy volunteers. The two studies were designed to assess the safety, tolerability and pharmacokinetics of d-Methadone
in healthy, opioid-naïve subjects. The SAD study included single escalating oral doses of d-Methadone to determine the maximum
tolerated dose, defined as the highest dose devoid of significant opioid- or ketamine-like adverse events. In the MAD study, healthy
subjects received daily oral doses of d-Methadone for several days to assess its safety, pharmacokinetics and tolerability. In
March 2015, we reported that d-Methadone demonstrated a safe profile with no dose limiting side effects after four cohorts were
exposed to increasing higher doses. In April 2015, the Company received clearance from Health Canada to continue with dose escalation
and explore even higher single doses of d-Methadone. In June 2015, the Company successfully completed the SAD study and subsequently
received a No Objection Letter (“NOL”) from Health Canada to conduct the MAD clinical study in August 2015. The MAD study was completed
in January 2016 and the results successfully demonstrated a potential therapeutic dosing regimen for d-Methadone with a favorable
side effect and tolerability profile. The data from these studies will inform the design of a subsequent Phase II proof-of-concept
study in patients with depression and/or other suitable indications.
d-Methadone
In Vivo Study for Depression
In
May 2016, we announced the results of an in vivo study showing that administration of d-Methadone results in antidepressant-like
effects in a well-validated treatment model, known as the forced swim test (“FST”), providing preclinical support for its potential
as a novel treatment of depression.
According
to the Journal of Visualized Experiments, the FST is based on the assumption that when placing an animal in a container filled
with water, it will first make efforts to escape by swimming or climbing, but eventually will exhibit “immobility”
that may be considered to reflect a measure of behavioral despair. This test has been extensively used because it involves the
exposure of the animals to stress, which was shown to have a role in the tendency for major depression. Additionally, the FST
has been shown to share some of the factors that are influenced or altered by depression in humans, including changes in food
consumption and sleep abnormalities. The main advantages of this procedure are that it is relatively easy to perform and that
its results are easily and quickly analyzed. Importantly, the FST’s sensitivity to a broad range of antidepressant drugs
makes it a suitable screening test and is one of the most important features leading to its high predictive validity.
In
the Company’s FST study, male Sprague Dawley rats were administered single doses of placebo, ketamine, or d-Methadone on
day one (after habituation; 24 hours prior to forced swim testing). At all doses tested, d-Methadone significantly decreased immobility
of the rats compared to the placebo, suggesting antidepressant-like activity. In addition, the effect of d-Methadone on immobility
at the two highest doses tested was larger than the effect seen with ketamine. Moreover, the effects of d-Methadone in the forced
swim test were not caused by a stimulant effect on spontaneous locomotor activity of the rats. Locomotor activity of lab animals
is often monitored to assess the behavioral effects of drugs.
A
separate in vitro electrophysiology study of d-Methadone was conducted using 2 subtypes of cloned human NMDA receptors. The results
of this study demonstrated functional antagonist activity with d-Methadone comparable to that of both racemic ketamine and the
isomer [S]-ketamine.
Planned
Phase II Program for d-Methadone
Combined
with the results of our Phase I studies, the encouraging results of in vivo and in vitro studies support our belief that d-Methadone
warrants further evaluation in a Phase II program as a rapidly acting, oral agent for the treatment of depression. Relmada filed
an Investigational New Drug (“IND”) application for the Phase II program with the FDA before the end of December 2016,
which was accepted on January 25, 2017.
On
April 13, 2017, we announced that the FDA granted Fast Track designation for d-Methadone (REL-1017 dextromethadone) for the adjunctive
treatment of major depressive disorder. Fast Track designation is a process designed to facilitate the development and expedite
the review of drugs to treat serious conditions and fill an unmet medical need. The purpose, according to the FDA, is to get important
new drugs to the patient earlier. Drugs that receive Fast Track designation may be eligible for more frequent meetings and written
communications with the FDA, accelerated review and priority approval, and rolling New Drug Application review.
LevoCap
ER (REL-1015)
Our
most-advanced novel version of a proven drug product, LevoCap ER (REL-1015), is an extended release, abuse deterrent, and proprietary
formulation of levorphanol (levo-3-hydroxy-N-methyl-morphinan), a unique, broad spectrum opioid with additional “non-opioid”
mechanisms of action. In particular, levorphanol binds to all three opioid receptor subtypes involved in analgesia (mu, kappa,
and delta), the NMDA receptor, and the norepinephrine and serotonin reuptake pumps, whereas morphine, oxycodone, hydrocodone,
and other opioids are highly selective for the mu receptor subtype. Due to its multi-modal mechanism of action, levorphanol could
achieve analgesia in patients resistant to other strong opioids. In clinical studies, levorphanol has demonstrated a remarkably
broad spectrum of analgesic activity against many different types of pain including neuropathic pain, post-surgical pain, and
chronic pain in patients refractory to other opioids. To our knowledge, the analgesic tapentadol (Nucynta®) is the only other
commercially available, multimodal opioid with non-opioid analgesic benefits. However, in contrast to levorphanol’s strong
opioid effects, tapentadol is a low affinity mu opioid receptor agonist and a norepinephrine reuptake inhibitor.
Levorphanol
is a potent opioid analgesic first introduced in the U.S. around 1953 for the treatment of moderate to severe pain where an opioid
analgesic is appropriate. It is currently available as an immediate release (short-acting opioid), non-abuse deterrent formulation
produced by Sentynl Therapeutics, Inc. However, extended-release (long-acting opioid) agents may be preferable due to better patient
adherence, less dose-watching, and result in improved sleep.
Both
immediate- and extended-release opioids can potentially be crushed to produce concentrated drug with greater appeal to abusers.
Intentional crushing or extracting the active ingredient from the extended-release dosage form by addicts and recreational drug
users can destroy the timed-release mechanism and result in a rapid surge of drug into the bloodstream for the purpose of achieving
a high or euphoric feeling. Serious side effects and death have been reported from such misuse.
LevoCap
ER is the first product candidate utilizing SECUREL™, Relmada’s proprietary abuse deterrent extended release technology
for opioid drugs. SECUREL dosage forms cannot be easily crushed for inhalation or to obtain rapid euphoria from high blood levels
when swallowed. It is also exceedingly difficult for intravenous abusers to extract the active drug from the dosage form using
common solvents, including alcohol.
Relmada
is developing LevoCap ER under the 505(b)(2) regulatory pathway. Following an exchange of correspondence and meeting with the
FDA in January 2017, we have defined a path forward for the Phase III clinical plan for LevoCap ER and new drug application (“NDA”)
filing. As a result of our budget and pipeline prioritization effort, at this time we do not plan to advance LevoCap ER into
any further clinical studies.
BuTab
(REL-1028)
Our
second-most-advanced novel version of a proven drug product, BuTab (REL-1028), represents novel formulations of oral, modified
release buprenorphine as a potential therapeutic for both chronic pain and opioid dependence. Buprenorphine has been widely used
by the sublingual and transdermal routes of administration, but was believed to be ineffective by the oral route because of poor
oral bioavailability. We have completed a preclinical program to better define the pharmacokinetic profile of BuTab and to assess
the time course of systemic absorption of buprenorphine using several different oral modified release formulations of buprenorphine
in dogs, compared to an intravenous administration. Based on the results of this work, we obtained approval from Health Canada
and initiated a Phase I pharmacokinetic study in healthy volunteers in the second quarter of 2015. This trial was completed in
the fourth quarter of 2015. The absolute bioavailability of BuTab relative to intravenous (IV) administration exceeded published
data with non-modified buprenorphine when administered orally and compares favorably with a currently marketed transdermal buprenorphine
patch. There were no safety or tolerability issues. The data generated by this study will guide formulation optimization and inform
the design of subsequent clinical pharmacology studies.
MepiGel
(REL-1021)
MepiGel
(REL-1021), is a proprietary topical dosage form of the local anesthetic mepivacaine for the treatment of painful peripheral neuropathies,
such as painful diabetic neuropathy, PHN, and painful HIV-associated neuropathy. Mepivacaine is an anesthetic (numbing medicine)
that blocks the nerve impulses that send pain signals to the brain. It is chemically related to bupivacaine but pharmacologically
related to lidocaine. Mepivacaine is currently indicated for infiltration, nerve block and epidural anesthesia. Relmada has received
two FDA Orphan Drug Designations for mepivacaine, one each for “the treatment of painful HIV-associated neuropathy”
and for “the management of postherpetic neuralgia,” or PHN. We have selected the formulations to be advanced into
clinical studies for MepiGel after the evaluation of results from in vitro and ex vivo studies comparing various topical prototypes
of mepivacaine that were conducted by MedPharm Ltd, a specialist formulation development company recognized internationally for
its expertise in topical and transdermal products. Multiple toxicology studies were successfully conducted and completed in 2015.
Research
and Development Expenses
A
significant portion of our operating expenses is related to research and development and we intend to maintain our strong commitment
to research and development. Research and development expense for the year ended June 30, 2017 and the year ended June 30, 2016,
was approximately $1,293,500 and $6,206,700, respectively.
Overview
of the 505(b)(2) Regulatory Pathway
The
majority of our drug development pipeline is based on the application of drug delivery technologies and/or new dosage forms/indications
to existing drugs for the creation of novel products. We then seek proprietary protection and FDA approval, and subsequently plan
to commercialize these products ourselves or through partners. We believe that research and development efforts focused on novel
dose forms of FDA approved drugs is less risky than attempting to discover new drugs, sometimes called new chemical entities (known
as NCEs).
Part of our strategy is the utilization of FDA’s 505(b)(2)
new drug application process, (“NDA”) for approval. The 505(b)(2) NDA is one of three FDA drug approval pathways and
represents an appealing regulatory strategy for many companies. The pathway was created by the Hatch-Waxman Amendments of 1984,
with 505(b)(2) referring to a section of the Federal Food, Drug, and Cosmetic Act. The provisions of 505(b)(2) were created, in
part, to help avoid unnecessary duplication of studies already performed on a previously approved (“reference” or
“listed”) drug; the section gives the FDA express permission to rely on data not developed by the NDA applicant.
A
505(b)(2) NDA contains full safety and effectiveness reports but allows at least some of the information required for NDA approval,
such as safety and efficacy information on the active ingredient, to come from studies not conducted by or for the applicant.
This can result in a much less expensive and much faster route to approval, compared with a traditional development path [such
as 505(b)(1)], while creating new, differentiated products with tremendous commercial value.
Overview
of Orphan Drug Status
In
accordance with laws and regulations pertaining to the Regulatory Agencies, a sponsor may request that the Regulatory Agencies
designate a drug intended to treat a “Rare Disease or Condition” as an “Orphan Drug.” For example, in
the United States, a “Rare Disease or Condition” is defined as one which affects less than 200,000 people in the United
States, or which affects more than 200,000 people but for which the cost of developing and making available the product is not
expected to be recovered from sales of the product in the United States. Upon the approval of the first NDA or BLA for a drug
designated as an orphan drug for a specified indication, the sponsor of that NDA or BLA is entitled to 7 years of exclusive marketing
rights in the United States unless the sponsor cannot assure the availability of sufficient quantities to meet the needs of persons
with the disease. In Europe, this exclusivity is 10 years, and in Australia it is 5 years. However, orphan drug status is particular
to the approved indication and does not prevent another company from seeking approval of an off-patent drug that has other labeled
indications that are not under orphan or other exclusivities. Orphan drugs may also be eligible for federal income tax credits
for costs associated with such as the disease state, the strength and complexity of the data presented, the novelty of the target
or compound, risk-management approval and whether multiple rounds of review are required for the agency to evaluate the submission.
There is no guarantee that a potential treatment will receive marketing approval or that decisions on marketing approvals or treatment
indications will be consistent across geographic areas.
Our
Corporate History and Background
We
are a clinical-stage, publicly traded biotechnology company developing NCEs together with novel versions of proven drug products
that potentially address areas of high unmet medical need in the treatment of CNS diseases - primarily depression and chronic
pain.
Currently,
none of our drugs have been approved for sale in the United States or elsewhere. We have no commercial products nor do we have
a sales or marketing infrastructure. In order to market and sell our products we must conduct clinical trials on patients and
obtain regulatory approvals from appropriate regulatory agencies, like the FDA in the United States, and similar organizations
elsewhere in the world.
We have not generated revenues and do not anticipate generating revenues for the foreseeable future. We
had net loss of approximately $6,287,000 and $2,975,000 for the years ended June 30, 2017 and June 30, 2016, respectively. At June
30, 2017, we have an accumulated deficit of approximately $85,383,000.
Business
Strategy
Our
strategy is to leverage our considerable industry experience, understanding of CNS markets and development expertise to identify,
develop and commercialize product candidates with significant market potential that can fulfill unmet medical needs in the treatment
of depression. We have assembled a management team along with both scientific and business advisors, including recognized experts
in the fields of depression, with significant industry and regulatory experience to lead and execute the development and commercialization
of d-Methadone.
We
plan to further develop our novel, proprietary drug products via the 505(b)(2) development pathway and also to gain exclusivity
under the Hatch-Waxman Act for new indications and also orphan drug designation in certain indications. We plan to also generate
intellectual property (“IP”) that will further protect our products from competition. As the drug d-Methadone is not an already
approved product by the FDA, the regulatory pathway to approval will be the more traditional NDA development, which may consist
of conducting a full clinical development program. We will continue to prioritize our product development activities after taking
into account the resources we have available, market dynamics and potential for adding value. We will continue to outsource development
of our products, while retaining scientific, operational and financial oversight and control.
We
intend to seek and execute licensing and/or co-development agreements with companies capable of supporting the final stage development
of the Company’s products and their subsequent commercialization in the U.S. and international markets.
We
may in-license late-stage or approved drugs to accelerate the pathway to become a fully integrated biopharmaceutical company with
commercial capability. Alternatively, we might consider a trade sale of our products or the entire company if we deem that it
is in the best interests of our shareholders.
Market
Opportunity
We
believe that the market for addressing areas of high unmet medical need in the treatment of CNS diseases will continue to be large
for the foreseeable future and that it will represent a sizable revenue opportunity for Relmada. For example, the World Health
Organization (“WHO”) has estimated that CNS diseases affect nearly 2 billion people globally, making up approximately 40% of total
disease burden (based on disability adjusted life years), compared with 13% for cancer and 12% for cardiovascular disease. We
also believe that each of our product candidates is designed to have value added features that will provide product related competitive
advantages versus the existing drugs available on the market.
Depression
The
depression treatment market is segmented on the basis of antidepressants drugs, devices, and therapies. Antidepressants are the
largest and most popular market segment. According to Research and Markets, every year more than 5 billion antidepressant prescriptions
are written globally. The antidepressants segment consists of large pharmaceutical and generic companies, such as Eli Lily, Pfizer,
GlaxoSmithKline and Forest Laboratories. Some of the popular drugs produced by these companies are Cymbalta® (Eli Lily) and
Effexor® (Pfizer) and Pristiq® (Pfizer).
Chronic
Pain
The
pain market is well established, with many pharmaceutical companies marketing innovative products as well as generic versions
of older, non-patent protected products. In 2014, according to data from IMS Health, there were 328 million pain prescriptions
representing $13 billion in annual sales in the U.S. Analgesics continue to be among the most widely prescribed medications and
there is little to suggest that their preeminence will change in the near future, given the prominent role of pain in many diseases.
Survey data indicate substantial patient dissatisfaction with current pain management modalities.
Intellectual
Property Portfolio and Market Exclusivity
We
have secured three Orphan Drug Designations from the FDA: 1) d-Methadone for “the treatment of postherpetic neuralgia”;
2) MepiGel for “the treatment of painful HIV-associated neuropathy”; and MepiGel for “the management of postherpetic
neuralgia.” Each would, upon NDA approval, carry 7-year FDA Orphan Drug marketing exclusivity. In the European Union, some
of our products may be eligible up to 10 years of market exclusivity, which includes 8 years data exclusivity and 2 years market
exclusivity. In addition to any granted patents, our products will be eligible for market exclusivity to run concurrently with
the term of the patent for 3 years in the U.S. (Hatch Waxman plus pediatric exclusivity) and up to 10 years of in the E.U. We
believe an extensive intellectual property estate of several patents will protect our technology and products once our patent
applications for our products are approved.
The
following is a summary of our patents and patent applications:
Levorphanol:
These patents and patent applications cover the Levorphanol product.
US
Patent No. 9,125,833, filed 4/28/08, granted on 9/8/15. Multimodal Abuse Resistant and Extended Release Opioid Formulations. Owned
by Relmada. Estimated expiry in 2030. This patent covers the SECUREL technology platform and Relmada’s lead product candidate,
LevoCap ER (REL-1015, levorphanol extended-release, abuse deterrent capsules) as well as providing additional coverage for multiple
opioid molecules that are prone to abuse.
EU
patent No. 2,448,406, filed 2/26/10, granted on 4/20/16. Extended Release Oral Pharmaceutical Compositions of 3-Hydroxy-N-Methylmorphinan
and Method of Use. Owned by Relmada. Estimated expiry in 2030.
Patent
application 12/223.327 filed 1/29/07, Abuse Resistant and Extended Release Formulations and Method of Use Thereof. Cover US. Owned
by Relmada. Currently pending.
Patent
application 13/320,989 filed 2/26/10 Extended Release Oral Pharmaceutical Compositions of 3-Hydroxy-N-Methylmorphinan and Method
of Use. Owned by Relmada. Currently pending.
d-Methadone:
These patents and patent application cover the d-Methadone product.
US
Patent No. 6,008,258 filed 1/21/98, d-Methadone, a Nonopioid Analgesic, Cover US, Patent granted, estimated expiry in 2018.
Patent
application 13/803,375 filed 3/14/13 as PCT. US application is allowed on 6/23/16. d-Methadone for the Treatment of Psychiatric
Symptoms. This patent covers the use of d-methadone for the treatment of depression. Other countries are currently pending. Owned
by Relmada. Estimated expiry in 2033.
Buprenorphine:
This patent application covers the buprenorphine product.
Patent
application 12/989,209 filed 3/9/09, Oral Pharmaceutical Compositions of Buprenorphine and Method of Use. Cover US and EU. Owned
by Relmada. Currently pending.
Mepivacaine
:
This patent application covers the Mepivacaine product.
Patent
application PCT/US2011/032,381 filed 4/13/11, Dermal Pharmaceutical Composition of 1-Methyl-2,6-Pipecoloxylidide and Method of
Use. Cover US, EU, Canada, China, India, Japan, and South Korea. Owned by Relmada. Currently pending.
Key
Strengths
We
believe that the key elements for our market success include:
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A
multiple product portfolio with a balanced risk reward profile: We have four products at various stages of development, and
each has its own development risk profile and indication. Accordingly, management believes that we are well positioned to
become a competitive player in a large unsatisfied market.
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Products
are differentiated and address significant unmet needs: All four lead development programs are well differentiated, value
added CNS drugs that address significant unmet medical needs.
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Scientific
support of leading experts: Our scientific and business advisors include clinicians and scientists who are affiliated with
a number of highly regarded medical institutions. The group consists of individuals who have served as executives of leading
national and international societies in depression, pain, and the FDA.
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Substantial
IP portfolio and market protection: Upon the approval of our filed patent applications for our products we will have secured
an intellectual property portfolio comprised of several patents. In addition, some of our drugs have also been designated
as Orphan Drugs by the FDA, thereby providing seven years of market exclusivity at launch.
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Experienced
management and advisors: We combine business expertise with what we believe is an internationally recognized research team.
We believe our highly experienced drug development advisors provide us with a significant competitive advantage in designing
highly efficient clinical programs with predictable regulatory outcomes.
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Competition
Overview
The
pharmaceutical and biotechnology industry is characterized by intense competition, rapid product development and technological
change. Competition is intense among manufacturers of prescription pharmaceuticals and other product areas where we may develop
and market products in the future. Most of our competitors are large, well-established pharmaceutical or healthcare companies
with considerably greater financial, marketing, sales and technical resources than are available to us. Additionally, many of
our competitors have research and development capabilities that may allow such competitors to develop new or improved products
that may compete with our products. Our products could be rendered obsolete or made uneconomical by the development of new products.
Regarding
our competitive position in the industry, none of our products have been approved for sale.
Currently,
there are no FDA-approved therapies for TRD with the mechanism of action of d-Methadone. However, products approved for other
indications, for example, low doses of the anesthetic ketamine, are being or may be increasingly used off-label for treating depression,
as well as other CNS indications for which d-Methadone may have therapeutic potential. Additionally, other treatment options,
such psychotherapy and electroconvulsive therapy, are sometimes used instead of and before antidepressant medications to treat
patients with TRD.
In
the field of new generation antidepressants focused on specifically blocking the NMDA receptor channel, our principal competitor
is intranasal esketamine, an isomer of ketamine, currently in Phase III clinical trials sponsored by Johnson & Johnson subsidiary
Janssen Pharmaceutica. Other potential competitors focused on modulation of the NMDA receptor at its glycine co-agonist site include
Allergan plc, which is developing rapastinel (formerly GLYX-13) and NRX-1074 for treatment-resistant major depressive disorder
(“MDD”). On August 28, 2015, Allergan acquired rapastinel and NRX-1074 from Naurex, Inc. in an all-cash transaction of $571.7 million,
plus future contingent payments up to $1.15 billion. These two drug candidates are modified peptides and only one may be orally
active (rapastinel is only administered intravenously; NRX-1074 is orally bioavailable). VistaGen Therapeutics, Inc. is developing
AV-101, an orally available prodrug candidate that gains access to the CNS after systemic administration and is rapidly converted
in the brain into its active metabolite, 7-chlorokynurenic acid (7-Cl-KYNA), a well-characterized, potent and highly selective
antagonist of the NMDA receptor at the glycine co-agonist site. A Phase 2a clinical study of AV-101 in approximately 25 subjects
with treatment-resistant MDD is being conducted and funded by the U.S. National Institute of Mental Health (NIMH) under a February
2015 Cooperative Research and Development Agreement (“CRADA”) with the NIMH.
The
pain market has peculiar characteristics with regards to competition. While there are several products in development both in
the narcotic and neuropathic pain space, the market history has shown that a new entry in the therapeutic area does not necessarily
cannibalize existing products, but instead expands the market. The reasons behind this behavior can be found in the “opioid
rotation” phenomena. As there is considerable variability in the efficacy and side effect response of patients to opioid
analgesics, many patients rotate from one opioid to another, offering growth opportunity to new entries. In the case of the neuropathic
pain indication, it is mostly the limited efficacy of the existing therapies that creates a strong demand for new entries, a model
also supported by the considerable off-label use of opioids, tricyclic antidepressants, and NSAIDS in neuropathic pain.
Government
Regulation
Governmental
authorities in the United States and other countries extensively regulate, among other things, the research, development, testing,
manufacture, labeling, promotion, advertising, distribution and marketing of active pharmaceutical ingredients, excipients, controlled
substances and finished pharmaceutical products such as those being developed by Relmada.
In
the United States, the FDA regulates such products under the Federal Food, Drug and Cosmetic Act (“FDCA”), as amended and regulations
pursuant to the FDCA.
The
U.S. Drug Enforcement Agency (“DEA”), a division of the Department of Justice, administers the federal Controlled Substances Act
(“CSA”) of 1970, as amended. The CSA imposes various registration, record-keeping and reporting requirements, procurement
and manufacturing quotas, import and export controls, labeling and packaging requirements, security controls, and a restriction
on prescription refills on certain pharmaceutical products.
To
meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlled substances.
Failure of companies to maintain compliance, particularly as manifested in loss or diversion, can result in regulatory action
including civil and criminal penalties, refusal to renew necessary registrations, or initiating proceedings to revoke those registrations.
If a manufacturer or distributor has its registration revoked, it can no longer lawfully possess or distribute controlled substances
meaning effectively that the operations of such an organization must cease with respect to controlled substances. In certain circumstances,
violations also can lead to criminal proceedings.
Most
states impose similar controls over controlled substances under state law as regulated by the Board of Pharmacy or other state
regulatory authorities.
The
U.S. Federal Trade Commission (“FTC”) and the Office of the Inspector General of the U.S. Department of Health and Human Services
(“HHS”) also regulate certain pharmaceutical marketing practices. Thus, reimbursement practices of the HHS covering medicine and
medical services are important to the success of our products.
We
are also subject to United States regulation under the Controlled Substances Act (“CSA”). Drug Enforcement Administration regulations
require Scheduled II controlled substances to be manufactured in the United States if the products are to be marketed in the United
States. Our only products that contain Schedule II controlled substances are LevoCap ER and d-Methadone. We are in the process
of transferring all third party manufacturing of these products to the United States, and we intend to comply with this CSA requirement.
We
are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing
practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances.
Failure
to comply with applicable FDA, DEA, FTC, HHS and other federal and state regulations and requirements, both before and after drug
approval may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve
pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines and/or criminal prosecution.
Relmada
believes that a two tiered approach can reduce overall clinical development risks. Our approach consists of: (1) developing improved
versions of proven drug candidates and filings under 505(b)(2) which may require an abbreviated clinical development program;
and (2) developing a drug in treating conditions that have not been approved by the FDA, and filings under the traditional NDA
which would require a full clinical development program. In general, drugs for the 505(b)(2) filing possess less risks as compared
to drugs filed under the traditional NDA route. As with all drugs filed with the FDA, there is no guarantee of approval.
Please
see “Company Overview” above for a status of our drug development.
U.S.
Food and Drug Administration Regulation
Our
research, development and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation
in the United States and other countries. Most notably, all of our products sold in the United States are subject to the FDCA
as implemented and enforced by the FDA. Certain of our product candidates in the United States require FDA pre-marketing approval
of an NDA pursuant to 21 C.F.R. § 314. Foreign countries may require similar or more onerous approvals to manufacture or
market these products.
Failure
by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA, the DEA
or other regulatory authorities, which may result in sanctions including, but not limited to: untitled letters, warning letters,
fines, injunctions, consent decrees and civil penalties; customer notifications or repair, replacement, refunds, recall, detention
or seizure of our products; operating restrictions or partial suspension or total shutdown of production; refusing or delaying
our requests for NDA premarket approval of new products or modified products; withdrawing NDA approvals that have already been
granted; refusal to grant export approval for our products; or criminal prosecution.
Corporate
Information
Our principal executive office is located at 750 Third Avenue,
9th Floor, New York, New York 10017 and our telephone number is (212) 547-9591. Our website address is
www.relmada.com.
The information contained in, or that can be accessed through, our website is not part of, and is not incorporated in, this Annual
Report. The information contained therein or connected thereto shall be deemed to be incorporated into this 10-K which it forms
a part.
Employees
As
of June 30, 2017, we have three (3) full-time employees and no part-time employees. None of these employees are covered by a collective
bargaining agreement, and we believe our relationship with our employees is good. We also engage consultants on an as-needed basis
to supplement existing staff.
A
vailable
Information
Reports
we file with the SEC pursuant to the Exchange Act of 1934, as amended (the “Exchange Act”), including annual and quarterly
reports, and other reports we file, can be inspected and copied at the public reference facilities maintained by the SEC at 100
F Street NE, Washington, D.C. 20549.
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together
with all of the other information included in this report, before making an investment decision. If any of the following risks
actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our
shares of common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Forward-Looking
Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance
of such statements in the context of this Annual Report.
Risk
Related to Our Business
Our
product candidates are in early stages of clinical testing.
Our
product candidates are still in the early stages of clinical testing. None has gone beyond the Phase I/Phase IIa stage and FDA
approval requires that a drug candidate complete a Phase III study program, to test the safety and efficacy of the drug candidate
on a large sample of patients. The timeline between a Phase I study and a Phase III study and subsequent filing of a NDA can be
several years. We will need to commit substantial time and additional resources to conducting further nonclinical studies and
clinical trials before we can submit an NDA with respect to any of these product candidates. We cannot predict with any certainty
if or when we might submit an NDA for regulatory approval of any of our product candidates.
We
have generated no revenue from commercial sales to date and our future profitability is uncertain.
We
have a limited operating history and our business is subject to all of the risks inherent in the establishment of a new business
enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with this. Since we began our business, we have focused on research, development and clinical
trials of product candidates, and have incurred significant losses since inception and generated no product revenues. If we continue
to incur operating losses and fail to become a profitable company, we may be unable to continue our operations. We expect to continue
to operate at a net loss for at least the next several years as we continue our research and development efforts, continue to
conduct clinical trials and develop manufacturing, sales, marketing and distribution capabilities. There can be no assurance that
the products under development by us will be approved for sales in the US or elsewhere. Furthermore, there can be no assurance
that if such products are approved they will be successfully commercialized, and the extent of our future losses and the timing
of our profitability are highly uncertain.
International
commercialization of our product candidates faces significant obstacles.
We
may plan to commercialize some of our products internationally through collaborative relationships with foreign partners. We have
limited foreign regulatory, clinical and commercial resources. Future partners are critical to our international success. We may
not be able to enter into collaboration agreements with appropriate partners for important foreign markets on acceptable terms,
or at all. Future collaborations with foreign partners may not be effective or profitable for us. We will need to obtain approvals
from the appropriate regulatory, pricing and reimbursement authorities to market any of our proposed products internationally,
and we may be unable to obtain foreign regulatory approvals. Pursuing foreign regulatory approvals will be time-consuming and
expensive. The regulations can vary among countries and foreign regulatory authorities may require different or additional clinical
trials than we conducted to obtain FDA approval for our product candidates. In addition, adverse clinical trial results, such
as death or injury due to side effects, could jeopardize not only regulatory approval, but if approval is granted, may also lead
to marketing restrictions. Our product candidates may also face foreign regulatory requirements applicable to controlled substances.
We
need to raise additional capital to operate our business.
We are a company focused on product development and have not generated any product revenues to date. Until,
and if, we receive approval from the FDA and other regulatory authorities for our product candidates, we cannot sell our drugs
and will not have product revenues. Therefore, for the foreseeable future, we will have to fund all of our operations and capital
expenditures from the net proceeds of future offerings and grants. We believe that we have sufficient capital on hand to fund future
operations until the end of the calendar year 2017. Our actual capital requirements will depend on many factors. If we experience
unanticipated cash requirements, we may need to seek additional sources of financing, which may not be available on favorable terms,
if at all. If we do not succeed in raising additional funds on acceptable terms, we may be unable to complete planned nonclinical
studies and clinical trials or obtain approval of our product candidates from the FDA and other regulatory authorities. In addition,
we could be forced to discontinue product development, reduce or forego sales and marketing efforts and attractive business opportunities,
or discontinue operations.
We
have a history of losses and we may never achieve or sustain profitability.
We have incurred substantial losses since our inception, and we
may not achieve profitability for the foreseeable future, if at all. Since inception, we have an accumulated deficit of approximately
$85.4 million at June 30, 2017. The Company has cash and cash equivalents of approximately $1.71 million at June 30, 2017. Even
if we succeed in developing and commercializing one or more of our product candidates, we expect to incur substantial net losses
and negative cash flows for the foreseeable future due in part to increasing research and development expenses, including clinical
trials, and increasing expenses from leasing additional facilities and hiring additional personnel. As a result, we will need to
generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or
achieve profitability in the future. Even if we do achieve profitability, we may not be able to sustain or increase profitability.
We
have a limited operating history upon which to base an investment decision.
Our
limited operating history may limit your ability to evaluate our prospects due to our limited historical financial data and our
unproven potential to generate profits. You should evaluate the likelihood of financial and operational success in light of the
risks, uncertainties, expenses and difficulties associated with an early-stage business, many of which may be beyond our control,
including:
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our
potential inability to continue to undertake nonclinical studies, pharmaceutical development and clinical trials,
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our
potential inability to obtain regulatory approvals, and
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our
potential inability to manufacture, sell and market our products.
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Our
operations have been limited to organizing and staffing, on a limited basis, our company, acquiring, developing and securing our
proprietary technology and undertaking nonclinical studies and early stage clinical trials of our principal product candidates.
These operations provide a limited basis for you to assess our ability to commercialize our product candidates and the advisability
of investing in our common stock.
If
we fail to obtain the capital necessary to fund our operations, we will be unable to continue or complete our product development
and you will likely lose your entire investment.
The Company has cash and cash equivalents of approximately $1.71
million at June 30, 2017, which will not be sufficient to capitalize the development and commercialization of d-Methadone and we
will need to continue to seek capital from time to time to continue the development beyond the initial Phase I and II clinical
trials and to acquire and develop other product candidates. Our first product is not expected to be commercialized until at least
2019 and the revenues it will generate may not be sufficient to fund our ongoing operations. The Company believes that with current
cash on hand it will be able to fund the Company’s operations until the end of the calendar year 2017. Accordingly, we believe
that we will need to raise substantial additional capital to fund our continuing operations and the development and commercialization
of our product candidates in or before the end of calendar year 2017. Our business or operations may change in a manner that would
consume available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations,
fund expansion, develop new or enhanced products, acquire complementary products, business or technologies or otherwise respond
to competitive pressures and opportunities, such as a change in the regulatory environment or a change in preferred pain treatment
modalities. In addition, we may need to accelerate the growth of our sales capabilities and distribution beyond what is currently
envisioned and this would require additional capital. However, we may not be able to secure funding when we need it or on favorable
terms. If we cannot raise adequate funds to satisfy our capital requirements, we will have to delay, scale-back or eliminate our
research and development activities, clinical studies or future operations. We may also be required to obtain funds through arrangements
with collaborators, which arrangements may require us to relinquish rights to certain technologies or products that we otherwise
would not consider relinquishing, including rights to future product candidates or certain major geographic markets. We may further
have to license our technology to others. This could result in sharing revenues which we might otherwise retain for ourselves.
Any of these actions may harm our business, financial condition and results of operations.
The
amount of capital we may need depends on many factors, including the progress, timing and scope of our product development programs;
the progress, timing and scope of our nonclinical studies and clinical trials; the time and cost necessary to obtain regulatory
approvals; the time and cost necessary to further develop manufacturing processes and arrange for contract manufacturing; our
ability to enter into and maintain collaborative, licensing and other commercial relationships; and our partners’ commitment
of time and resource to the development and commercialization of our products.
We
have limited access to the capital markets and even if we can raise additional funding, we may be required to do so on terms that
are dilutive to you.
We
have limited access to the capital markets to raise capital. The capital markets have been unpredictable in the recent past for
other pain companies and unprofitable companies such as ours. In addition, it is generally difficult for companies to raise capital
under current market conditions. The amount of capital that a company such as ours is able to raise often depends on variables
that are beyond our control. As a result, we may not be able to secure financing on terms attractive to us, or at all. If we are
able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds
are not available on acceptable terms, or at all, our business, results of operations, financial condition and our continued viability
will be materially adversely affected.
Risks
Related to Clinical and Regulatory Matters
If
we or our potential collaborators fail to obtain the necessary regulatory approvals, or if such approvals are limited, we and
our potential collaborators will not be allowed to commercialize our drug candidates, and we will not generate product revenues.
Satisfaction
of all regulatory requirements for commercialization of a drug candidate typically takes many years, is dependent upon the type,
complexity and novelty of the drug candidate, and requires the expenditure of substantial resources for research and development.
Our research and clinical approaches may not lead to drugs that the FDA considers safe for humans and effective for indicated
uses we are studying. The FDA may require additional studies, in which case we or our collaborators would have to expend additional
time and resources and would likely delay the date of potentially receiving regulatory approval. The approval process may also
be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur
prior to or during our regulatory review. Delays in obtaining regulatory approvals would:
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delay
commercialization of, and product revenues from, our drug candidates; and
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diminish
the competitive advantages that we may have otherwise enjoyed, which would have an adverse effect on our operating results
and financial condition.
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Even
if we or our collaborators comply with all FDA regulatory requirements, our drug candidates may never obtain regulatory approval.
If we or our collaborators fail to obtain regulatory approval for any of our drug candidates we will have fewer commercial products,
if any, and corresponding lower product revenues, if any. Even if our drug candidates receive regulatory approval, such approval
may involve limitations on the indications and conditions of use or marketing claims for our products. Further, later discovery
of previously unknown problems or adverse events could result in additional regulatory restrictions, including withdrawal of products.
The FDA may also require us or our collaborators to commit to perform lengthy Phase IV post-approval clinical efficacy or safety
studies. Our expending additional resources on such trials would have an adverse effect on our operating results and financial
condition.
In
jurisdictions outside the United States, we or our collaborators must receive marketing authorizations from the appropriate regulatory
authorities before commercializing our drugs. Regulatory approval processes outside the United States generally include all of
the aforementioned requirements and risks associated with FDA approval.
If
we or our collaborators are unable to design, conduct and complete clinical trials successfully, our drug candidates will not
be able to receive regulatory approval.
In
order to obtain FDA approval for any of our drug candidates, we or our collaborators must submit to the FDA an NDA that demonstrates
with substantive evidence that the drug candidate is both safe and effective in humans for its intended use. This demonstration
requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are
referred to as clinical trials.
Results
from Phase I clinical programs may not support moving a drug candidate to Phase II or Phase III clinical trials. Phase III clinical
trials may not demonstrate the safety or efficacy of our drug candidates. Success in preclinical studies and early clinical trials
does not ensure that later clinical trials will be successful. Results of later clinical trials may not replicate the results
of prior clinical trials and preclinical studies. Even if the results of Phase III clinical trials are positive, we or our collaborators
may have to commit substantial time and additional resources to conducting further preclinical studies and clinical trials before
obtaining FDA approval for any of our drug candidates.
Clinical
trials are very expensive and difficult to design and implement, in part because they are subject to rigorous requirements. The
clinical trial process also consumes a significant amount of time. Furthermore, if participating patients in clinical trials suffer
drug-related adverse reactions during the course of such clinical trials, or if we, our collaborators or the FDA believe that
participating patients are being exposed to unacceptable health risks, such clinical trials will have to be suspended or terminated.
Failure can occur at any stage of the clinical trials, and we or our collaborators could encounter problems that cause abandonment
or repetition of clinical trials.
Our
clinical trials and our future clinical trials for other drug candidates for treatment of pain measure clinical symptoms, such
as pain and physical dependence that are not biologically measurable. The success in clinical trials and our other drug candidates
designed to reduce risks of unintended use depends on reaching statistically significant changes in patients’ symptoms based
on clinician-rated scales. Due in part to a lack of consensus on standardized processes for assessing clinical outcomes, these
scores may or may not be reliable, useful or acceptable to regulatory agencies.
We
have no history of developing drug candidates. We do not know whether any of our planned clinical trials will result in marketable
drugs.
In
addition, completion of clinical trials can be delayed by numerous factors, including:
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delays
in identifying and agreeing on acceptable terms with prospective clinical trial sites;
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slower
than expected rates of patient recruitment and enrollment;
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unanticipated
patient dropout rates;
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increases
in time required to complete monitoring of patients during or after participation in a clinical trial; and
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Any
of these delays could significantly impact the timing, approval and commercialization of our drug candidates and could significantly
increase our overall costs of drug development.
Even
if clinical trials are completed as planned, their results may not support expectations or intended marketing claims. The clinical
trials process may fail to demonstrate that our drug candidates are safe and effective for indicated uses. Such failure would
cause us to abandon a drug candidate and could delay development of other drug candidates.
With
respect to the Phase III clinical trial, these discussions are not binding obligations on the part of regulatory authorities.
Regulatory
authorities may revise previous guidance or decide to ignore previous guidance at any time during the course of our clinical activities
or after the completion of our clinical trials. Even with successful clinical safety and efficacy data, including such data from
a clinical trial conducted pursuant to an SPA, we or our collaborators may be required to conduct additional, expensive clinical
trials to obtain regulatory approval.
Developments
by competitors may establish standards of care that affect our ability to conduct our clinical trials as planned.
Changes
in standards related to clinical trial design could affect our ability to design and conduct clinical trials as planned. For example,
regulatory authorities may not allow us to compare our drug candidates to placebo in a particular clinical indication where approved
products are available. In that case, both the cost and the amount of time required to conduct a clinical trial could increase.
The
DEA limits the availability of the active ingredients in certain of our current drug candidates and, as a result, quotas for these
ingredients may not be sufficient to complete clinical trials, or to meet commercial demand or may result in clinical delays.
The
U.S. Drug Enforcement Administration, or DEA, regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule
I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. Certain active
ingredients in our current drug candidates, such as oxycodone, are listed by the DEA as Schedule II under the Controlled Substances
Act of 1970. Consequently, their manufacture, research, shipment, storage, sale and use are subject to a high degree of oversight
and regulation. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist
and may not be refilled without a new prescription. Furthermore, the amount of Schedule II substances that can be obtained for
clinical trials and commercial distribution is limited by the DEA and quotas for these substances may not be sufficient to complete
clinical trials or meet commercial demand. There is a risk that DEA regulations may interfere with the supply of the drugs used
in clinical trials for our product candidates, and, in the future, the ability to produce and distribute our products in the volume
needed to meet commercial demand.
Conducting
clinical trials of our drug candidates or commercial sales of a drug candidate may expose us to expensive product liability claims
and we may not be able to maintain product liability insurance on reasonable terms or at all.
The
risk of product liability is inherent in the testing of pharmaceutical products. If we cannot successfully defend ourselves against
product liability claims, we may incur substantial liabilities or be required to limit or terminate testing of one or more of
our drug candidates. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against product
liability claims could prevent or inhibit the commercialization of our drug candidates. We currently carry clinical trial insurance
but do not carry product liability insurance. If we successfully commercialize one or more of our drug candidates, we may face
product liability claims, regardless of FDA approval for commercial manufacturing and sale. We may not be able to obtain such
insurance at a reasonable cost, if at all. Even if our agreements with any current or future corporate collaborators entitle us
to indemnification against product liability losses, such indemnification may not be available or adequate should any claim arise.
If
our drug candidates receive regulatory approval, we and our collaborators will also be subject to ongoing FDA obligations and
continued regulatory review, such as continued safety reporting requirements, and we and our collaborators may also be subject
to additional FDA post-marketing obligations or new regulations, all of which may result in significant expense and limit our
and our collaborators’ ability to commercialize our drugs.
Any
regulatory approvals that our drug candidates receive may also be subject to limitations on the indicated uses for which the drug
may be marketed or contain requirements for y costly post-marketing follow-up studies. In addition, if the FDA approves any of
our drug candidates, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping for
the drug will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with the
drug, including but not limited to adverse events of unanticipated severity or frequency, or the discovery that adverse events
previously observed in preclinical research or clinical trials that were believed to be minor actually constitute much more serious
problems, may result in restrictions on the marketing of the drug, and could include withdrawal of the drug from the market.
The
FDA’s policies may change and additional government regulations may be enacted that could prevent or delay regulatory approval
of our drug candidates. For example, on July 9, 2012, the FDA approved a risk management program, known as a Risk Evaluation
and Mitigation Strategy, or REMS, for extended-release and long-acting opioid analgesics, or ER/LA opioid analgesics. This REMS
will require companies affected by the REMS to make available training for health care professionals who prescribe ER/LA opioid
analgesics on proper prescribing practices and also to distribute educational materials to prescribers and patients on the safe
use of ER/LA opioid analgesics.
We
cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative
action, either in the United States or abroad. If we are not able to maintain regulatory compliance, we may be subject to fines,
suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Any of these events could prevent us from marketing our drugs and our business could suffer drug candidates and we will not become
competitive with our drug candidates being developed. If time and resources devoted are limited or there is a failure to fund
the continued development other opioid drug candidates or there is otherwise a failure to perform as we expect, we may not achieve
clinical and regulatory milestones and regulatory submissions and related product introductions may be delayed or prevented, and
revenues that we would receive from these activities will be less than expected.
We
may depend on independent investigators and collaborators, such as universities and medical institutions, to conduct our clinical
trials under agreements with us. These investigators and collaborators are not our employees and we cannot control the amount
or timing of resources that they devote to our programs. They may not assign as great a priority to our programs or pursue them
as diligently as we would if we were undertaking such activities ourselves. If these investigators or collaborators fail to devote
sufficient time and resources to our drug development programs, or if their performance is substandard, the approval of our regulatory
submissions and our introductions of new drugs will be delayed or prevented.
Our
potential collaborators may also have relationships with other commercial entities, some of which may compete with us. If outside
collaborators assist our competitors to our detriment, the approval of our regulatory submissions will be delayed and the sales
from our products, if any are commercialized, will be less than expected.
We
may not succeed at in-licensing drug candidates or technologies to expand our product pipeline.
We
may not successfully in-license drug candidates or technologies to expand our product pipeline. The number of such candidates
and technologies is limited. Competition among large pharmaceutical companies and biopharmaceutical companies for promising drug
candidates and technologies is intense because such companies generally desire to expand their product pipelines through in-licensing.
If we fail to carry out such in-licensing and expand our product pipeline, our potential future revenues may suffer.
If
we fail to obtain or maintain necessary U.S. Food and Drug Administration clearances for our pain therapy products, or if such
clearances are delayed, we will be unable to commercially distribute and market our products.
Our
products are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities.
The process of seeking regulatory clearance or approval to market a pain therapy product, in particular a controlled substance
is expensive and time consuming and, notwithstanding the effort and expense incurred, clearance or approval is never guaranteed.
If we are not successful in obtaining timely clearance or approval of our products from the FDA, we may never be able to generate
significant revenue and may be forced to cease operations. In particular, the FDA permits commercial distribution of a new pain
therapy product only after the product has received approval of a New Drug Application (“NDA”) filed with the FDA
pursuant to 21 C.F.R. § 314, seeking permission to market the product in interstate commerce in the United States. The NDA
process is costly, lengthy and uncertain. Any NDA application filed by the Company will have to be supported by extensive data,
including, but not limited to, technical, nonclinical, clinical trial, manufacturing and labeling data, to demonstrate to the
FDA’s satisfaction the safety and efficacy of the product for its intended use.
Obtaining
clearances or approvals from the FDA and from the regulatory agencies in other countries could result in unexpected and significant
costs for us and consume management’s time and other resources. The FDA and other agencies could ask us to supplement our
submissions, collect non-clinical data, conduct additional clinical trials or engage in other time-consuming actions, or they
could simply deny our applications. In addition, even if we obtain an NDA approval or pre-market approvals in other countries,
the approval could be revoked or other restrictions imposed if post-market data demonstrates safety issues or lack of effectiveness.
We cannot predict with certainty how, or when, the FDA will act. If we are unable to obtain the necessary regulatory approvals,
our financial condition and cash flow may be adversely affected, and our ability to grow domestically and internationally may
be limited. Additionally, even if cleared or approved, the Company’s products may not be approved for the specific indications
that are most necessary or desirable for successful commercialization or profitability.
Our
clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which could prevent or delay
regulatory approval and commercialization.
Before
obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy,
complex and expensive nonclinical testing and clinical trials that the product is both safe and effective for use in each target
indication. Clinical trial results from the study of depression, chronic pain (e.g., osteoarthritis and chronic low back pain)
and neuropathic pain (e.g., painful diabetic neuropathy, postherpetic neuralgia and painful HIV-associated neuropathy) are inherently
difficult to predict. The primary measure of pain is subjective and can be influenced by factors outside of our control, and can
vary widely from day to day for a particular patient, and from patient to patient and site to site within a clinical study. The
results we have obtained in completed animal studies or we have observed in published clinical trials conducted by third parties
of other dosage forms of the same drug (e.g., sublingual, immediate release oral, parenteral) may not be predictive of results
from our future clinical trials. Additionally, we may suffer significant setbacks in advanced clinical trials, even after promising
results in earlier studies.
We
cannot predict whether regulatory agencies will determine that the data from our clinical trials support marketing approval.
The
FDA’s and other regulatory agencies’ decision to approve our analgesic product candidates will depend on our ability
to demonstrate with substantial clinical evidence through well-controlled clinical trials, that the product candidates are effective,
as measured statistically by comparing the overall improvement in pain in actively-treated patients against improvement in pain
in the control group (usually a placebo control). However, there is a possibility that our data may fail to show a statistically
significant difference from the placebo-control or the active control. Alternatively, there is a possibility that our data may
be statistically significant, but that the actual clinical benefit of the product candidates may not be considered to be clinically
significant, clinically relevant or clinically meaningful. Consequently, we believe that the FDA may consider additional data,
such as a “responder” analysis, secondary efficacy endpoints and even safety when evaluating whether our product can
be approved. We believe that the FDA views “responders” as patients who experience at least a 30% reduction in overall
pain. We cannot predict whether the regulatory agencies will find that our clinical trial results provide compelling “responder”
or other secondary endpoint data. Even if we believe that the data from our trials will support marketing approval in the United
States or in Europe, we cannot predict whether the agencies will agree with our analysis and approve our applications.
We
may need to focus our future efforts in new therapeutic areas where we have little or no experience.
Although
our primary strategic interest is in the areas of depression and pain management, a number of our products have potential efficacy
in other therapeutic areas such as addiction. If our drug development efforts in depression or pain management fail, or if the
competitive landscape or investment climate for antidepressant or analgesic dug development is less attractive, we may need to
change the company’s strategic focus to include development of our product candidates or of newly acquired product candidates
for therapeutic areas other than depression and pain. We have very limited drug development experience in other therapeutic areas
and we may be unsuccessful in making this change from a depression and pain management company to a company with a focus in areas
other than depression and pain or a company with a focus in multiple therapeutic areas including pain.
Our
product candidates contain controlled substances, the supply of which may be limited by U.S. government policy and the use of
which may generate public controversy.
The
active ingredients in our current product candidates, including levorphanol, buprenorphine and d-Methadone are listed by the DEA,
as “Controlled Substances” or schedule substances, under the Controlled Substances Act of 1970. The DEA regulates
chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk
of substance abuse and Schedule V substances the lowest risk. These product candidates are subject to DEA regulations relating
to manufacturing, storage, distribution and physician prescription procedures. For example, all regular Schedule II drug prescriptions
must be signed by a physician and may not be refilled.
Some
of our drug products (e.g., buprenorphine, REL-1041) have a less restrictive controlled substance schedule (i.e., within the Schedule
III to V range) than Schedule II drugs. According to the DEA, Schedule V drugs have lower abuse potential than Schedule II, III
and IV drugs, Schedule IV drugs have lower abuse potential than Schedule II and III drugs and Schedule III drugs have lower abuse
potential than Schedule II. However, despite the foregoing reduced risk of abuse from Schedule III, IV and V drugs, when compared
to Schedule II drugs, there is no assurance that such reduced risk can be demonstrated in well controlled non-clinical and/or
clinical studies in models of physical dependence, psychic dependence, addiction or precipitated withdrawal, or in studies of
addiction or abuse liability in opioid addicts, opioid ex-addicts or recreational drug users. In the event that a reduced risk
of abuse from Schedule III, IV and V drugs, when compared to Schedule II drugs is demonstrated in well controlled non-clinical
and/or clinical studies, there is no assurance that the FDA will agree to incorporation of such favorable language in the products
prescribing information.
Our
LevoCap ER is a Schedule II drug in an abuse resistant, abuse deterrent or tamper resistant dosage form. Although the dosage form
is referred to as abuse resistant, abuse deterrent or tamper resistant, a determined or persistent abuser can defeat, wholly or
partially, the tamper resistance within the dosage form. In addition, opioid addicts and recreational opioid users can over time
find new methods to defeat the tamper resistance mechanism within the dosage form.
Although
our LevoCap ER is a tamper resistant dosage form, we may elect to not seek specific language in the prescribing information to
describe this feature in order to reduce the amount of data required for our NDA, the time required to file the NDA and/or the
probability of a protracted review process. The absence of such language in the prescribing information may reduce the commercial
value of the product. Even if we do seek specific language in the prescribing information to describe the tamper resistance feature,
there is no assurance that FDA will agree to any such language.
Products
containing controlled substances may generate public controversy. Opponents of these products may seek restrictions on marketing
and withdrawal of any regulatory approvals. In addition, these opponents may seek to generate negative publicity in an effort
to persuade the medical community to reject these products. Political pressures and adverse publicity could lead to delays in,
and increased expenses for, and limit or restrict the introduction and marketing of our product candidates.
Failure
to comply with the Drug Enforcement Administration regulations, or the cost of compliance with these regulations, may adversely
affect our business.
A
number of our products are opioids and subject to extensive regulation by the DEA, due to their status as controlled substances
or scheduled drugs. Although d-Methadone is substantially devoid of opioid activity, the DEA may elect to designate it as a controlled
substance falling under a Schedule, up to the Schedule II [C-II]. Any level of DEA scheduling for d-Methadone, particularly Schedule
II, III or IV, would substantially reduce commercial interest in d-Methadone. Additionally, d-Methadone is produced by separation
from racemic methadone, a scheduled drug subject to extensive regulation by the DEA.
The
manufacture, shipment, storage, sale and use of controlled substances are subject to a high degree of regulation, including security,
record-keeping and reporting obligations enforced by the DEA. For example, all Schedule II drug prescriptions must be signed by
a physician, physically presented to a pharmacist and may not be refilled. This high degree of regulation can result in significant
costs in order to comply with the required regulations, which may have an adverse effect on the development and commercialization
of our product candidates.
The
DEA limits the availability and production of all scheduled substances, including our product candidates, through a quota system.
The DEA requires substantial evidence and documentation of expected legitimate medical and scientific needs before assigning quotas
to manufacturers. In future years, we may need greater amounts of controlled substances to sustain our Phase III development program,
and we will need significantly greater amounts to implement our commercialization plans if the FDA approves our proposed formulations.
Any delay or refusal by the DEA in establishing the procurement quota or a reduction in our quota for scheduled controlled substances
or a failure to increase it over time as we anticipate could delay or stop the clinical development or commercial sale of some
of our products or product candidates. This could have a material adverse effect on our business, results of operations, financial
condition and prospects.
Some
of our products for clinical trials are manufactured outside the United States including Schedule II controlled substances.
Drug
Enforcement Administration regulations require Scheduled II controlled substances to be manufactured in the United States if the
products are to be marketed in the United States. There is no guarantee that we will secure a commercial supply agreement with
a manufacturer based in the United States. Switching or adding commercial manufacturing capability can involve substantial cost
and require extensive management time and focus, as well as additional regulatory filings. In addition, there is a natural transition
period when a new manufacturing facility commences work. As a result, delays may occur, which can materially impact our ability
to meet our desired commercial timelines, thereby increasing our costs and reducing our ability to generate revenue.
The
facilities of any of our future manufacturers of controlled substances must be approved by the FDA after we submit our NDA and
before approval. We are dependent on the continued adherence of third party manufacturers to GMP manufacturing and acceptable
changes to their process. If our manufacturers cannot successfully produce material that conforms to our specifications and the
FDA’s strict regulatory requirements, they will not be able to secure FDA approval for their manufacturing facilities. If
the FDA does not approve these facilities for the commercial manufacture, we will need to find alternative suppliers, which would
result in significant delays in obtaining FDA approvals. These challenges may have a material adverse impact on our business,
results of operations, financial condition and prospects.
We
manufacture some products outside the United States for development and to conduct human clinical studies either in the US or
outside the US. These products are for development purposes only, and not for commercial manufacturing.
If
the supplier of active pharmaceutical ingredient (API) or pharmaceutical excipient fails to provide us sufficient quantities,
we may not be able to obtain an alternative supply on a timely or acceptable basis.
We
currently rely on a single source for our supply of levorphanol. There are presently no alternative sources of pharmaceutical
grade levorphanol. We may also not be able to find alternative suppliers in a timely manner that would provide levorphanol at
acceptable quantities and prices. Any interruption in the supply of levorphanol would disrupt our ability to manufacture LevoCap
ER and could have a material adverse effect on our business. Currently this single source supplies the API for research and development
purposes only. There is no material agreement for commercial supply at this time.
Our
pharmaceutical excipients and other API’s are multisource, although not all sources have an active Drug Master File (DMF)
with the FDA. (A DMF is a submission to the FDA used to provide confidential detailed information about facilities, processes,
or articles used in the manufacturing, processing, packaging, and storing of drugs to support a drug development and approval).
In addition, some of the countries for our multisource APIs are not the same as our drug manufacturing locations. Thus, any disruption
in supply from our preferred vendor could result in significant delays with our pharmaceutical development, clinical trials, NDA
filing, NDA approval or commercial sale of the finished product due to contract delays, the need to manufacture a new batch of
API, out of specification API, the need for import and export permits, and the failure of the newly sourced API to perform to
the standards of the previously sourced API.
Our
pain product candidates are in the early stages of development and we have not demonstrated that any of our products can actually
treat pain.
Adverse
or inconclusive results from pre-clinical testing or clinical trials of product candidates may substantially delay, or halt entirely,
any further development of one or more of our products. The projected timetables for continued development of the technologies
and related product candidates by us may otherwise be subject to delay or suspension.
Modifications
to our products may require new NDA approvals.
Once
a particular company product receives FDA approval or clearance, expanded uses or uses in new indications of our products may
require additional human clinical trials and new regulatory approvals or clearances, including additional IND and NDA submissions
and premarket approvals before we can begin clinical development, and/or prior to marketing and sales. If the FDA requires new
clearances or approvals for a particular use or indication, we may be required to conduct additional clinical studies, which would
require additional expenditures and harm our operating results. If the products are already being used for these new indications,
we may also be subject to significant enforcement actions.
Conducting
clinical trials and obtaining clearances and approvals can be a time consuming process, and delays in obtaining required future
clearances or approvals could adversely affect our ability to introduce new or enhanced products in a timely manner, which in
turn would harm our future growth.
There
is no guarantee that the FDA will grant NDA approval of our future products and failure to obtain necessary clearances or approvals
for our future products would adversely affect our ability to grow our business.
We
are currently preparing to conduct several Phase I/II clinical trials for our drug candidates and in the future expect to submit
NDAs to the FDA for approval of these products. The FDA may not approve or clear these products for the indications that are necessary
or desirable for successful commercialization. Indeed, the FDA may refuse our requests for NDA market approval of new products,
new intended uses or indications to existing or future products. Failure to receive approval for our new products would have an
adverse effect on our ability to expand our business.
We
have no manufacturing capabilities and depend on other parties for our manufacturing operations. If these manufacturers fail to
meet our requirements and strict regulatory requirements, our product development and commercialization efforts may be materially
harmed.
We
currently depend on contract manufacturers. We plan to enter into long-term commercial supply agreements for our product candidates.
If any manufacturer is unable to produce required quantities on a timely basis or at all, our operations would be delayed and
our business harmed. Our reliance on contract manufacturers exposes us to additional risks, including:
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failure
of our future manufacturers to comply with strictly-enforced regulatory requirements;
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failure
to manufacture to our specifications, or to deliver sufficient quantities in a timely manner;
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the
possibility that we may terminate a contract manufacturer and need to engage a replacement;
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the
possibility that our future manufacturers may not be able to manufacture our product candidates and products without infringing
the intellectual property rights of others;
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the
possibility that our future manufacturers may not have adequate intellectual property rights to provide for exclusivity and
prevent competition; and
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insufficiency
of intellectual property rights to any improvements in the manufacturing processes or new manufacturing processes for our
products.
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Any
of these factors could result in significant delay or suspension of our clinical trials, regulatory submissions, receipt of required
approvals or commercialization of our products and harm our business.
Delays
in the commencement or completion of pharmaceutical development, manufacturing or clinical efficacy and safety testing could result
in increased costs to us and delay our ability to generate revenues.
We
do not know whether our pharmaceutical development, manufacturing or clinical efficacy and safety testing will begin on time or
be completed on schedule, if at all. For example, we may encounter delays during the manufacture of pilot scale batches including
delays with our contract development or manufacturing organization, sourcing satisfactory quantities of active pharmaceutical
ingredient, narcotic import and export permits, sourcing of excipients, contract disputes with our third party vendors and manufacturers,
or failure of the product to meet specification. Similar delays may occur a during our GMP manufacture of the product.
The
commencement and completion of clinical trials can be disrupted for a variety of reasons, including difficulties in:
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recruiting
and enrolling patients to participate in a clinical trial;
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obtaining
regulatory approval to commence a clinical trial;
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reaching
agreement on acceptable terms with prospective clinical research organizations and trial sites;
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manufacturing
sufficient quantities of a product candidate;
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investigator
fraud, including data fabrication by clinical trial personnel;
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diversion
of controlled substances by clinical trial personnel; and
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clinical trial may also be suspended or terminated by us, 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 in accordance with our clinical protocols;
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inspection
of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a
clinical hold;
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unforeseen
safety issues; or
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inadequate
patient enrollment or lack of adequate funding to continue the clinical trial.
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In
addition, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect
these changes, which could impact the cost, timing or successful completion of a clinical trial. If we experience delays in the
commencement or completion of our clinical trials, the commercial prospects for our product candidates will be harmed, and our
ability to generate product revenues will be delayed. Many of the factors that cause, or lead to, a delay in the commencement
or completion of clinical trials may also lead to the denial of regulatory approval of a product candidate.
We
intend to rely on third parties to conduct our clinical trials. If these third parties do not perform as contractually required
or otherwise expected, we may not be able to obtain regulatory approval for our product candidates.
At
this time we do not have any ongoing clinical trials. However, we do not currently intend to conduct clinical trials on our own,
and instead will rely on third parties, such as contract research organizations, medical institutions, clinical investigators
and contract laboratories, to assist us with our clinical trials. We are also required to comply with regulations and standards,
commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure
that data and reported results are credible and accurate and that the trial participants are adequately protected. If these third
parties do not successfully carry out their duties to us or regulatory obligations or meet expected deadlines, if the third parties
need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our
clinical protocols or regulatory requirements or for other reasons, our nonclinical development activities or clinical trials
may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for our product candidates.
Clinical
trials necessary to support NDA approval of our future products will be time consuming and expensive. Delays or failures in our
clinical trials will prevent us from commercializing our products and will adversely affect our business, operating results and
prospects and could cause us to cease operations.
Initiating
and completing clinical trials necessary to support NDA approval of a new formulation of an existing product or a new product,
will be time consuming and expensive and the outcome uncertain. Moreover, the results of early clinical trials are not necessarily
predictive of future results, and any product we advance into clinical trials may not have favorable results in later clinical
trials.
Some
of the trials we undertake are not designed to support final NDA approval of the product and additional trials will have to be
conducted in the future before we file an NDA. In addition, there can be no assurance that the data generated during the trials
will meet our chosen safety and effectiveness endpoints or otherwise produce results that will eventually support the filing or
approval of an NDA.
Conducting
successful clinical studies may require the enrollment of large numbers of patients, and suitable patients may be difficult to
identify and recruit.
Patient
enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size
of the patient population; the nature of the trial protocol; the attractiveness of, or the discomforts and risks associated with,
the treatments received by enrolled subjects; the availability of appropriate clinical trial investigators; support staff; and
proximity of patients to clinical sites and ability to comply with the eligibility and exclusion criteria for participation in
the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the
trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness
of our products or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable
risks or discomforts. Patients may also not participate in our clinical trials if they choose to participate in contemporaneous
clinical trials of competitive products.
Development
of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop
such protocols to support clearance and approval.
The
FDA may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up
period or change the data collection requirements or data analysis applicable to our clinical trials. They may also require additional
data on certain categories of patients, should it emerge during the conduct of our clinical trials that certain categories of
patients are likely to be affected in different and/or additional manner than most of the patients. In addition to FDA requirements,
our clinical trial requires the approval of the institutional review board, or IRB, at each site selected for participation in
our clinical trial.
Additional
delays to the completion of clinical studies may result from modifications being made to the protocol during the clinical trial,
if such modifications are warranted and/or required by the occurrences in the given trial.
Each
of such modifications has to be submitted to the FDA. This could result in the delay or halt of a clinical trial while the modification
is evaluated. In addition, depending on the magnitude and nature of the changes made, FDA could take the position that the data
generated by the clinical trial cannot be pooled because the same protocol was not used throughout the trial. This might require
the enrollment of additional subjects, which could result in the extension of the clinical trial and the FDA delaying clearance
or approval of a product.
There
can be no assurance that the data generated using modified protocols will be acceptable to FDA.
There
can be no assurance that the data generated using modified protocols will be acceptable to FDA or that if future modifications
during the trial are necessary, any such modifications will be acceptable to FDA. If FDA believes that its prior approval is required
for a particular modification, it can delay or halt a clinical trial while it evaluates additional information regarding the change.
Serious
injury or death resulting from a failure of one of our drug candidates during current or future clinical trials could also result
in the FDA delaying our clinical trials or denying or delaying clearance or approval of a product.
Even
though an adverse event may not be the result of the failure of our drug candidate, FDA or an IRB could delay or halt a clinical
trial for an indefinite period of time while an adverse event is reviewed, and likely would do so in the event of multiple such
events.
Any
delay or termination of our current or future clinical trials as a result of the risks summarized above, including delays in obtaining
or maintaining required approvals from IRBs, delays in patient enrollment, the failure of patients to continue to participate
in a clinical trial, and delays or termination of clinical trials as a result of protocol modifications or adverse events during
the trials, may cause an increase in costs and delays in the filing of any product submissions with the FDA, delay the approval
and commercialization of our products or result in the failure of the clinical trial, which could adversely affect our business,
operating results and prospects. Lengthy delays in the completion of clinical trials of our products would adversely affect our
business and prospects and could cause us to cease operations.
On
November 29, 2006, the FDA imposed a bold warning on the label of racemic methadone, a parent compound to our d-Methadone related
to cardiac death. Although the decision was based on case reports and not on a controlled clinical trial, as part of the development
of d-Methadone we will likely have to conduct a specific study to evaluate the effects of d-Methadone on QTc interval prolongation.
QT interval is a measure of the time between the start of the Q wave and the end of the T wave in the heart’s electrical
cycle. Drugs that prolong the corrected QT interval (QTc) are associated with an increased risk of serious disturbances in heart
rhythm, leading to sudden death. QT interval studies can be extremely costly and there is no assurance that we will have funds
to undertake such a study. In addition, even if we do a QT interval prolongation study in accordance with regulatory guidelines,
there is no assurance that the results of the study will demonstrate an absence of QT interval prolongation with d-Methadone.
An adverse safety outcome from such study could result in a similar bolded warning on the label of d-Methadone or in a decision
not to approve d-Methadone, either one of which could have serious consequences for our continued operation.
If
the third parties on which we rely to conduct our clinical trials and to assist us with pre-clinical development do not perform
as contractually required or expected, we may not be able to obtain regulatory approval for or commercialize our products.
We
do not have the ability to independently conduct all the pre-clinical and clinical trials for our products and we must rely on
third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories
to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations
or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain
is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our pre-clinical
development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain
regulatory approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating
results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting
our clinical trials for reasons outside of their control.
The
future results of our current or future clinical trials may not support our product candidate claims or may result in the discovery
of unexpected adverse side effects.
Even
if our clinical trials are completed as planned, we cannot be certain that their results will support our drug candidate claims
or that the FDA or foreign authorities will agree with our conclusions regarding them. Success in pre-clinical studies and early
clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will
replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our drug
candidates are safe and effective for the proposed indicated uses. If FDA concludes that the clinical trials for any of our products
for which we might seek clearance, have failed to demonstrate safety and effectiveness, we would not receive FDA clearance to
market that product in the United States for the indications sought. In addition, such an outcome could cause us to abandon the
product candidate and might delay development of others. Any delay or termination of our clinical trials will delay the filing
of any product submissions with the FDA and, ultimately, our ability to commercialize our product candidates and generate revenues.
It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part
of the product candidate’s profile. In addition, our clinical trials performed until now involve a relatively small patient
population. Because of the small sample size, their results may not be indicative of future results.
Future
products may never achieve market acceptance.
Future
products that we may develop may never gain market acceptance among physicians, patients and the medical community. The degree
of market acceptance of any of our products will depend on a number of factors, including the actual and perceived effectiveness
and reliability of our products; the results of any long−term clinical trials relating to use of our products; the availability,
relative cost and perceived advantages and disadvantages of alternative technologies; the degree to which treatments using our
products are approved for reimbursement by public and private insurers; the strength of our marketing and distribution infrastructure;
and the level of education and awareness among physicians and hospitals concerning our products. Failure of any of our products
to significantly penetrate current or new markets would negatively impact our business, financial condition and results of operations.
To
be commercially successful, physicians must be persuaded that using our products for treatment of pain are effective alternatives
to existing therapies and treatments.
We
believe that pain doctors and other physicians will not widely adopt our products unless they determine, based on experience,
clinical data, and published peer reviewed journal articles, that the use of our products provides an effective alternative to
other means of treating pain. Patient studies or clinical experience may indicate that treatment with our products does not provide
patients with sufficient benefits in pain intensity and/or quality of life. We believe that recommendations and support for the
use of our products from influential physicians will be essential for widespread market acceptance. Our products are still in
the development stage and it is premature to attempt to gain support from physicians at this time. We can provide no assurance
that such support will ever be obtained. If our products do not receive such support from these physicians and from long-term
data, physicians may not use or continue to use, and hospitals may not purchase or continue to purchase, our products.
Even
if our products are approved by regulatory authorities, if we or our suppliers fail to comply with ongoing FDA regulation or if
we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the
market.
Any
product for which we obtain clearance or approval, and the manufacturing processes, reporting requirements, post-approval clinical
data and promotional activities for such product, will be subject to continued regulatory review, oversight and periodic inspections
by the FDA. In particular, we and our suppliers are required to comply with FDA’s Quality System Regulations, or QSR, and
International Standards Organization, or ISO, regulations for the manufacture of our products and other regulations which cover
the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and
shipping of any product for which we obtain clearance or approval. Regulatory bodies, such as the FDA, enforce these regulations
through periodic inspections. The failure by us or one of our suppliers to comply with applicable statutes and regulations administered
by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations
or product safety issues could result in, among other things, enforcement actions by the FDA.
If
any of these actions were to occur it would harm our reputation and cause our product sales and profitability to suffer and may
prevent us from generating revenue. Furthermore, our key component suppliers may not currently be or may not continue to be in
compliance with all applicable regulatory requirements which could result in our failure to produce our products on a timely basis
and in the required quantities, if at all.
Even
if regulatory clearance or approval of a product is granted, such clearance or approval may be subject to limitations on the intended
uses for which the product may be marketed and reduce the potential to successfully commercialize the product and generate revenue
from the product. If the FDA determines that the product promotional materials, labeling, training or other marketing or educational
activities constitute promotion of an unapproved use, it could request that we or our commercialization partners cease or modify
our training or promotional materials or subject us to regulatory enforcement actions. It is also possible that other federal,
state or foreign enforcement authorities might take action if they consider such training or other promotional materials to constitute
promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as
laws prohibiting false claims for reimbursement.
In
addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of
our products, and we must comply with adverse event and pharmacovigilance reporting requirements, including the reporting of adverse
events which occur in connection with, and whether or not directly related to, our products. Later discovery of previously unknown
problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing
problems, or failure to comply with regulatory requirements, may result in changes to labeling, restrictions on such products
or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to recall,
replace or refund the cost of any product we manufacture or distribute, fines, suspension of regulatory approvals, product seizures,
injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and
prospects.
Some
of our other product candidates will require Risk Evaluation and Mitigation Strategies (REMS).
The
FDA Amendments Act of 2007 implemented safety-related changes to product labeling and requires the adoption of REMS. Some of our
product candidates, the controlled substance-based and maybe others, will require REMS. The REMS may include requirements for
special labeling or medication guides for patients, special communication plans to health care professionals and restrictions
on distribution and use. We cannot predict the specific REMS to be required as part of the FDA’s approval of any of our
products. Depending on the extent of the REMS requirements, our costs to commercialize our products may increase significantly.
Furthermore, controlled substances risks that are not adequately addressed through proposed REMS for our product candidates may
also prevent or delay their approval for commercialization.
Our
revenue stream will depend upon third party reimbursement.
The
commercial success of our products in both domestic and international markets will be substantially dependent on whether third-party
coverage and reimbursement is available for patients that use our products. However, the availability of insurance coverage and
reimbursement for newly approved drugs to treat pain is uncertain, and therefore, third-party coverage may be particularly difficult
to obtain even if our products are approved by the FDA as safe and efficacious. Many patients using existing approved therapies
are generally reimbursed all or part of the product cost by Medicare or other third-party payors. Medicare, Medicaid, health maintenance
organizations and other third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and
the level of reimbursement of new drugs, and, as a result, they may not cover or provide adequate payment for these products.
Submission of applications for reimbursement approval generally does not occur prior to the filing of an NDA for that product
and may not be granted for as long as many months after NDA approval. In order to obtain reimbursement arrangements for these
products, we or our commercialization partners may have to agree to a net sales price lower than the net sales price we might
charge in other sales channels. The continuing efforts of government and third-party payors to contain or reduce the costs of
healthcare may limit our revenue. Initial dependence on the commercial success of our products may make our revenues particularly
susceptible to any cost containment or reduction efforts.
We
are dependent on third parties for manufacturing and marketing of our proposed proprietary products. If we are not able to secure
favorable arrangements with such third parties, our business and financial condition could be harmed.
We
are not planning to manufacture any of our proposed proprietary products for commercial sale nor do we have the resources necessary
to do so. In addition, we currently do not have the capability to market our drug products ourselves. We intend to contract with
specialized manufacturing companies to manufacture our proposed proprietary products and partner with larger pharmaceutical companies
for commercialization of our products, retaining the marketing and promotion rights for specialty medical areas. In connection
with our efforts to commercialize our proposed proprietary products, we will seek to secure favorable arrangements with third
parties to distribute, promote, market and sell our proposed proprietary products. If we are not able to secure favorable commercial
terms or arrangements with third parties for distribution, marketing, promotion and sales of our proposed proprietary products,
we may have to retain promotional and marketing rights and seek to develop the commercial resources necessary to promote or co-promote
or co-market certain or all of our proprietary drug candidates to the appropriate channels of distribution in order to reach the
specific medical market that we are targeting. We may not be able to enter into any partnering arrangements on this or any other
basis. If we are not able to secure favorable partnering arrangements, or are unable to develop the appropriate resources necessary
for the commercialization of our proposed proprietary products, our business and financial condition could be harmed. In addition,
we will have to hire additional employees or consultants, since our current employees have limited experience in these areas.
Sufficient employees with relevant skills may not be available to us. Any increase in the number of our employees would increase
our expense level, and could have an adverse effect on our financial position.
In
addition, we, or our potential commercial partners, may not successfully introduce our proposed proprietary products or our proposed
proprietary products may not achieve acceptance by patients, health care providers and insurance companies. Further, it is possible
that we may not be able to secure arrangements to manufacture, market, distribute, promote and sell our proposed proprietary products
on favorable commercial terms that would permit us to make a profit. To the extent that corporate partners conduct clinical trials,
we may not be able to control the design and conduct of these clinical trials.
We
must enter into an agreement with, and depend upon, one or more partners to assist us in commercializing our product candidates.
Because
of our limited financial and other resources, we must actively seek and enter into a collaboration with one or more partners to
assist us in our product launch, if marketing approval is granted. Any collaboration agreement we enter into may contain unfavorable
terms, for example, with respect to product candidates covered, control over decisions and responsibilities, termination rights,
payment, and other significant terms. Our ability to receive any significant revenue from our product candidates covered by the
collaboration agreement will be dependent on the efforts of our collaboration partner and may result in lower levels of income
to us than if we marketed our product candidates entirely on our own. The collaboration partner may not fulfill its obligations
or commercialize our product candidates as quickly as we would like. We could also become involved in disputes with our partner,
which could lead to delays in or termination of our commercialization programs and time-consuming and expensive litigation or
arbitration. If a collaboration partner terminates or breaches its agreement with us, or otherwise fails to complete its obligations
in a timely manner, the chances of successfully developing or commercializing our product candidates would be materially and adversely
affected.
Additionally,
depending upon the collaboration partner that we choose, other companies that might otherwise be interested in developing products
with us could be less inclined to do so because of our relationship with the collaboration partner. If our ability to work with
present or future strategic partners or collaborators is adversely affected as a result of our collaboration agreement, our business
prospects may be limited and our financial condition may be adversely affected.
We
may have conflicts with our partners that could delay or prevent the development or commercialization of our product candidates.
We
may have conflicts with our partners, such as conflicts concerning the interpretation of nonclinical or clinical data, the achievement
of milestones, the interpretation of contractual obligations, payments for services, development obligations or the ownership
of intellectual property developed during our collaboration. If any conflicts arise with any of our partners, such partner may
act in a manner that is adverse to our best interests. Any such disagreement could result in one or more of the following, each
of which could delay or prevent the development or commercialization of our product candidates, and in turn prevent us from generating
revenues: unwillingness on the part of a partner to pay us milestone payments or royalties we believe are due to us under a collaboration;
uncertainty regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent
us from entering into additional collaborations; unwillingness by the partner to cooperate in the development or manufacture of
the product, including providing us with product data or materials; unwillingness on the part of a partner to keep us informed
regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those
activities; initiating of litigation or alternative dispute resolution options by either party to resolve the dispute; or attempts
by either party to terminate the agreement.
We
have no experience selling, marketing or distributing products and no internal capability to do so.
We
currently have no sales, marketing or distribution capabilities. In order to commercialize our products, if any are approved,
we intend to develop internal sales, marketing and distribution capabilities to target particular markets for our products, as
well as make arrangements with third parties to perform these services for us with respect to other markets for our products.
We may not be able to establish these capabilities internally or hire marketing and sales personnel with appropriate expertise
to market and sell our products, if approved. In addition, even if we are able to identify one or more acceptable collaborators
to perform these services for us, we may not be able to enter into any collaborative arrangements on favorable terms, or at all.
If we enter into any collaborative arrangements for the marketing or sale of our products, our product revenues are likely to
be lower than if we marketed and sold our products ourselves. In addition, any revenues we receive would depend upon the efforts
of our collaborators, which may not be adequate due to lack of attention or resource commitments, management turnover, change
of strategic focus, business combinations, and their inability to comply with regulatory requirements or other factors outside
of our control. Depending upon the terms of our collaboration, the remedies we have against an under-performing collaborator may
be limited. If we were to terminate a relationship, it may be difficult or impossible to find a replacement collaborator on acceptable
terms, if at all.
Upon
commercialization of our products, we may be dependent on third parties to market, distribute and sell our products.
Our
ability to receive revenues may be dependent upon the sales and marketing efforts of any future co-marketing partners and third-party
distributors. At this time, we have not entered into an agreement with any commercialization partner and only plan to do so after
the successful completion of Phase II clinical trials and prior to commercialization. If we fail to reach an agreement with any
commercialization partner or upon reaching such an agreement that partner fails to sell a large volume of our products, it may
have a negative impact on our business, financial condition and results of operations.
Our
products will face significant competition in the markets for such products, and if they are unable to compete successfully, our
business will suffer.
Our
products candidates face, and will continue to face, intense competition from large pharmaceutical companies, specialty pharmaceutical
and biotechnology companies as well as academic and research institutions. We compete in an industry that is characterized by:
(i) rapid technological change, (ii) evolving industry standards, (iii) emerging competition and (iv) new product introductions.
Our competitors have existing products and technologies that will compete with our products and technologies and may develop and
commercialize additional products and technologies that will compete with our products and technologies. Because several competing
companies and institutions have greater financial resources than us, they may be able to: (i) provide broader services and product
lines, (ii) make greater investments in research and development, (R&D
)
, and (iii) carry on larger R&D initiatives.
Our competitors also have greater development capabilities than we do and have substantially greater experience in undertaking
nonclinical and clinical testing of products, obtaining regulatory approvals, and manufacturing and marketing pharmaceutical products.
They also have greater name recognition and better access to customers than us. Our chief competitors include companies such as
Purdue Pharma, Pfizer, Eli Lilly, Endo, Astra Zeneca, among others.
We
are faced with intense competition and rapid technological change, which may make it more difficult for us to achieve significant
market penetration. If we cannot compete successfully for market share against other drug companies, we may not achieve sufficient
product revenues and our business will suffer.
The
market for our product candidates is characterized by intense competition and rapid technological advances. If our product candidates
receive FDA approval, they will compete with a number of existing and future drugs and therapies developed, manufactured and marketed
by others. If our competitors’ existing products or new products are more effective than or considered superior to our future
products, the commercial opportunity for our product candidates will be reduced or eliminated. Existing or future competing products
may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or may
offer comparable performance at a lower cost. We face competition from fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private
research organizations. If we are successful in penetrating the market for pain treatment with our product candidates, other companies
may be attracted to the market. Many of our competitors have analgesics already approved or in development. In addition, many
of these competitors, either alone or together with their collaborative partners, are larger than we are and have substantially
greater financial, technical, research, marketing, sales, distribution and other resources than we do. Our competitors may develop
or market products that are more effective or commercially attractive than any that we are developing or marketing. Our competitors
may obtain regulatory approvals, and introduce and commercialize products before we do. These developments could have a significant
negative effect on our financial condition. Even if we are able to compete successfully, we may not be able to do so in a profitable
manner.
Adverse
events involving our products may lead the FDA to delay or deny clearance for our products or result in product recalls that could
harm our reputation, business and financial results.
Once
a product receives FDA clearance or approval, the agency has the authority to require the recall of commercialized products in
the event of adverse side effects, material deficiencies or defects in design or manufacture. The authority to require a recall
must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury or death. Manufacturers
may, under their own initiative, recall a product if any material deficiency in a product is found. A government-mandated or voluntary
recall by us or one of our distributors could occur as a result of adverse side effects, impurities or other product contamination,
manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert
managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires
that certain classifications of recalls be reported to FDA within 10 working days after the recall is initiated. Companies are
required to maintain certain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls
involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations,
they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers
and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they
were conducted.
We
may be exposed to liability claims associated with the use of hazardous materials and chemicals.
Our
research and development activities involve the controlled use of hazardous materials and chemicals. Although we believe that
our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws
and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event
of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our
business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing
the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to
incur substantial compliance costs that could materially adversely affect our business and financial condition.
We
may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability
lawsuits.
The
testing and marketing of medical products entail an inherent risk of product liability. We may be held liable if serious adverse
reactions from the use of our product candidates occur. If we cannot successfully defend ourselves against product liability claims,
we may incur substantial liabilities or be required to limit commercialization of our product candidates. Our inability to obtain
sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent
or inhibit the commercialization of pharmaceutical products we develop, alone or with corporate collaborators. We currently do
not carry product liability insurance. We, or any corporate collaborators, may not be able to obtain insurance at a reasonable
cost, if at all. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses,
such indemnification may not be available or adequate if any claim arises.
Our
business depends upon securing and protecting critical intellectual property.
Our
commercial success will depend in part on our obtaining and maintaining patent, trade secret, copyright and trademark protection
of our technologies in the United States and other jurisdictions as well as successfully enforcing this intellectual property
and defending this intellectual property against third-party challenges. We will only be able to protect our technologies from
unauthorized use by third parties to the extent that valid and enforceable intellectual property protection, such as patents or
trade secrets, cover them. In particular, we place considerable emphasis on obtaining patent and trade secret protection for significant
new technologies, products and processes. Furthermore, the degree of future protection of our proprietary rights is uncertain
because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our
competitive advantage. Moreover, the degree of future protection of our proprietary rights is uncertain for products that are
currently in the early stages of development because we cannot predict which of these products will ultimately reach the commercial
market or whether the commercial versions of these products will incorporate proprietary technologies.
Our
patent position is highly uncertain and involves complex legal and factual questions.
Accordingly,
we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. For example,
we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications and
issued patents; we or our licensors might not have been the first to file patent applications for these inventions; others may
independently develop similar or alternative technologies or duplicate any of our technologies; it is possible that none of our
pending patent applications or the pending patent applications of our licensors will result in issued patents; our issued patents
and issued patents of our licensors may not provide a basis for commercially viable technologies, or may not provide us with any
competitive advantages, or may be challenged and invalidated by third parties; and, we may not develop additional proprietary
technologies that are patentable.
As
a result, our owned and licensed patents may not be valid and we may not be able to obtain and enforce patents and to maintain
trade secret protection for the full commercial extent of our technology. The extent to which we are unable to do so could materially
harm our business.
We
or our licensors have applied for and will continue to apply for patents for certain products. Such applications may not result
in the issuance of any patents, and any patents now held or that may be issued may not provide us with adequate protection from
competition. Furthermore, it is possible that patents issued or licensed to us may be challenged successfully. In that event,
if we have a preferred competitive position because of such patents, any preferred position held by us would be lost. If we are
unable to secure or to continue to maintain a preferred position, we could become subject to competition from the sale of generic
products. Failure to receive, inability to protect, or expiration of our patents would adversely affect our business and operations.
Patents
issued or licensed to us may be infringed by the products or processes of others. The cost of enforcing our patent rights against
infringers, if such enforcement is required, could be significant, and the Company does not currently have the financial resources
to fund such litigation. Further, such litigation can go on for years and the time demands could interfere with our normal operations.
There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical
industry. We may become a party to patent litigation and other proceedings. The cost to us of any patent litigation, even if resolved
in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation more effectively
than we can because of their substantially greater financial resources. Litigation may also absorb significant management time.
Unpatented
trade secrets, improvements, confidential know-how and continuing technological innovation are important to our scientific and
commercial success. Although we attempt to and will continue to attempt to protect our proprietary information through reliance
on trade secret laws and the use of confidentiality agreements with our corporate partners, collaborators, employees and consultants
and other appropriate means, these measures may not effectively prevent disclosure of our proprietary information, and, in any
event, others may develop independently, or obtain access to, the same or similar information.
Certain
of our patent rights are licensed to us by third parties. If we fail to comply with the terms of these license agreements, our
rights to those patents may be terminated, and we will be unable to conduct our business.
The
following is a summary of our patents and patent applications:
Levorphanol:
These patent applications cover the Levorphanol product.
US
Patent No. 9,125,833, filed 4/28/08, granted on 9/8/15. Multimodal Abuse Resistant and Extended Release Opioid Formulations. Owned
by Relmada. Estimated expiry in 2030. This patent covers the SECUREL technology platform and Relmada’s lead product candidate,
LevoCap ER (REL-1015, levorphanol extended-release, abuse deterrent capsules) as well as providing additional coverage for multiple
opioid molecules that are prone to abuse.
EU
patent No. 2,448,406, filed 2/26/10, granted on 4/20/16. Extended Release Oral Pharmaceutical Compositions of 3-Hydroxy-N-Methylmorphinan
and Method of Use. Owned by Relmada. Estimated expiry in 2030.
Patent
application 12/223.327 filed 1/29/07, Abuse Resistant and Extended Release Formulations and Method of Use Thereof. Cover US. Owned
by Relmada. Currently pending.
Patent
application 13/320,989 filed 2/26/10 Extended Release Oral Pharmaceutical Compositions of 3-Hydroxy-N-Methylmorphinan and Method
of Use. Owned by Relmada. Currently pending.
d-Methadone:
These patent and patent application cover the d-Methadone product.
US
Patent No. 6,008,258 filed 1/21/98, d-Methadone, a Nonopioid Analgesic, Cover US, Patent granted, estimated expiry in 2018.
Patent
application 13/803,375 filed 3/14/13 as PCT. US application is allowed on 6/23/16. d-Methadone for the Treatment of Psychiatric
Symptoms. This patent covers the use of d-methadone for the treatment of depression. Other countries are currently pending. Owned
by Relmada. Estimated expiry in 2033.
Buprenorphine:
This patent application covers the buprenorphine product.
Patent
application 12/989,209 filed 3/9/09, Oral Pharmaceutical Compositions of Buprenorphine and Method of Use. Cover US and EU. Owned
by Relmada. Currently pending.
Mepivacaine
:
This patent application covers the Mepivacaine product.
Patent
application PCT/US2011/032,381 filed 4/13/11, Dermal Pharmaceutical Composition of 1-Methyl-2,6-Pipecoloxylidide and Method of
Use. Cover US, EU, Canada, China, India, Japan, and South Korea. Owned by Relmada. Currently pending.
If
we are found to be infringing on patents or trade secrets owned by others, we may be forced to cease or alter our product development
efforts, obtain a license to continue the development or sale of our products, and/or pay damages.
Our
manufacturing processes and potential products may violate proprietary rights of patents that have been or may be granted to competitors,
universities or others, or the trade secrets of those persons and entities. As the pharmaceutical industry expands and more patents
are issued, the risk increases that our processes and potential products may give rise to claims that they infringe the patents
or trade secrets of others. These other persons could bring legal actions against us claiming damages and seeking to enjoin clinical
testing, manufacturing and marketing of the affected product or process. If any of these actions are successful, in addition to
any potential liability for damages, we could be required to obtain a license in order to continue to conduct clinical tests,
manufacture or market the affected product or use the affected process. Required licenses may not be available on acceptable terms,
if at all, and the results of litigation are uncertain. If we become involved in litigation or other proceedings, it could consume
a substantial portion of our financial resources and the efforts of our personnel.
Our
ability to protect and enforce our patents does not guaranty that we will secure the right to commercialize our patents.
A
patent is a limited monopoly right conferred upon an inventor, and his successors in title, in return for the making and disclosing
of a new and non-obvious invention. This monopoly is of limited duration but, while in force, allows the patent holder to prevent
others from making and/or using his invention. While a patent gives the holder this right to exclude others, it is not a license
to commercialize the invention, where other permissions may be required for permissible commercialization to occur. For example,
a drug cannot be marketed without the appropriate authorization from the FDA, regardless of the existence of a patent covering
the product. Further, the invention, even if patented itself, cannot be commercialized if it infringes the valid patent rights
of another party.
We
rely on confidentiality agreements to protect our trade secrets. If these agreements are breached by our employees or other parties,
our trade secrets may become known to our competitors.
We
rely on trade secrets that we seek to protect through confidentiality agreements with our employees and other parties. If these
agreements are breached, our competitors may obtain and use our trade secrets to gain a competitive advantage over us. We may
not have any remedies against our competitors and any remedies that may be available to us may not be adequate to protect our
business or compensate us for the damaging disclosure. In addition, we may have to expend resources to protect our interests from
possible infringement by others.
If
we are unable to obtain the statutory patent extension related to the review time in the United States, we may need to rely on
the 3-year Hatch-Waxman Act marketing exclusivity, the six month pediatric exclusivity, any approved 7- year Orphan Drug exclusivities,
potential future formulation patents and up to ten years of data exclusivity in Europe.
We
may not be able to obtain or maintain orphan drug exclusivity for our products.
The
FDA Office of Orphan Products (OOPD) has granted orphan drug designation for mepivacaine to which we have secured rights. The
orphan designations cover postherpetic neuralgia (PHN) and painful HIV neuropathy. We have also received orphan designation covering
d-Methadone for PHN. If a product that has orphan drug designation subsequently receives FDA approval for the indication for which
it has such designation, the product is entitled to orphan exclusivity, i.e., for seven years, the FDA may not approve any other
applications to market the same drug for the same indication, except in very limited circumstances. We may be unable to obtain
orphan drug designations for any additional product candidates or orphan exclusivity for any of our product candidates, or our
potential competitors may obtain orphan drug exclusivity for d-Methadone or mepivacaine-based products competitive with our product
candidates before we do, in which case we may be excluded from that market for the exclusivity period. Even if we obtain orphan
drug exclusivity for any of our product candidates, we may not be able to maintain it if a competitive product is shown to be
clinically superior to our product. Although obtaining FDA approval to market a product with orphan exclusivity can be advantageous,
there can be no assurance that it would provide us with a significant commercial advantage.
We
may not be able to obtain Hatch-Waxman Act marketing exclusivity or equivalent regulatory data exclusivity protection in other
jurisdictions for our products.
We
intend to rely, in part, on Hatch-Waxman exclusivity for the commercialization of our products in the United States. The Hatch-Waxman
Act provides marketing exclusivity to the first applicant to gain approval of an NDA under specific provisions of the Food, Drug
and Cosmetic Act for a product using an active ingredient that the FDA has not previously approved (five years) or for a new dosage
form, route or indication (three years). This market exclusivity will not prevent the FDA from approving a competitor’s
NDA if the competitor’s NDA is based on studies it has performed and not on our studies.
There
can be no assurance that European authorities will grant data exclusivity for our products, because it does not contain a new
active molecule. Even if European data exclusivity is granted for our products, that may not protect us from direct competition.
Given the well-established use of our product candidates as pain relievers, a competitor with a generic version of our products
may be able to obtain approval of their product during our product’s period of data exclusivity, by submitting a marketing
authorization application (MAA) with a less than full package of nonclinical and clinical data.
We
may undertake international operations, which will subject us to risks inherent with operations outside of the United States.
Although
we do not have any foreign operations at this time, we intend to seek to obtain market clearances in foreign markets that we deem
to generate significant opportunities. However, even with the cooperating of a commercialization partner, conducting drug development
in foreign countries involves inherent risks, including, but not limited to: difficulties in staffing, funding and managing foreign
operations; unexpected changes in regulatory requirements; export restrictions; tariffs and other trade barriers; difficulties
in protecting, acquiring, enforcing and litigating intellectual property rights; fluctuations in currency exchange rates; and
potentially adverse tax consequences.
If
we were to experience any of the difficulties listed above, or any other difficulties, any international development activities
and our overall financial condition may suffer and cause us to reduce or discontinue our international development and registration
efforts.
We
may not be successful in hiring and retaining key employees.
Our
future operations and successes depend in large part upon the continued service of key members of our senior management team whom
we are highly dependent upon to manage our business, specifically Dr. Sergio Traversa, our Chief Executive Officer/interim Chief
Financial Officer. If he terminates employment with us, such a departure would have a material adverse effect on our business.
Our
future success also depends on our ability to identify, attract, hire or engage, retain and motivate other well-qualified managerial,
technical, clinical and regulatory personnel. We will need to hire additional qualified personnel with expertise in nonclinical
pharmacology and toxicology, pharmaceutical development, clinical research, regulatory affairs, manufacturing, sales and marketing.
We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions.
Competition for such individuals, particularly in the United States, is intense, and we may not be able to hire sufficient personnel
to support our efforts. There can be no assurance that these professionals will be available in the market, or that we will be
able to retain existing professionals or to meet or to continue to meet their compensation requirements. Furthermore, the cost
base in relation to such compensation, which may include equity compensation, may increase significantly, which could have a material
adverse effect on us. Failure to establish and maintain an effective management team and work force could adversely affect our
ability to operate, grow and manage our business.
Our
employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We
are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to:
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comply
with FDA regulations or similar regulations of comparable foreign regulatory authorities; provide accurate information to
the FDA or comparable foreign regulatory authorities;
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comply
with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced
by comparable foreign regulatory authorities;
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report
financial information or data accurately; or
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disclose
unauthorized activities to us.
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In
particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations
intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit
a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business
arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials,
which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Ethics, but it is not
always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may
not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other
actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted
against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact
on our business and results of operations, including the imposition of significant fines or other sanctions.
Our
relationships with customers and payors will be subject to applicable anti-kickback, fraud and abuse, transparency, and other
healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational
harm, administrative burdens, and diminished profits and future earnings.
Healthcare
providers, physicians and payors play a primary role in the recommendation and prescription of any product candidates for which
we may obtain marketing approval. Our arrangements with payors and customers may expose us to broadly applicable fraud and abuse
and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through
which we market, sell and distribute any product candidates for which we may obtain marketing approval. Restrictions under applicable
federal, state and foreign healthcare laws and regulations may affect our ability to operate, including:
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the
federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, offering, receiving
or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual
for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state
healthcare programs such as Medicare and Medicaid;
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the
federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for
payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money
to the federal government;
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state
and foreign anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare
items or services reimbursed by non-governmental payors, including private insurers;
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the
federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability
for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations,
which also imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses
as well as their business associates that perform certain services involving the use or disclosure of individually identifiable
health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission
of individually identifiable health information;
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laws
which require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government or otherwise restricting payments that may be made
to healthcare providers; and
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federal
laws requiring drug manufacturers to report information related to payments and other transfers of value made to physicians
and other healthcare providers, as well as ownership or investment interests held by physicians and their immediate family
members, including under the federal Open Payments program, as well as other state and foreign laws regulating marketing activities.
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Managing
our growth as we expand operations may strain our resources.
We
expect to need to grow rapidly in order to support additional, larger, and potentially international, pivotal clinical trials
of our drug candidates, which will place a significant strain on our financial, managerial and operational resources. In order
to achieve and manage growth effectively, we must continue to improve and expand our operational and financial management capabilities.
Moreover, we will need to increase staffing and to train, motivate and manage our employees. All of these activities will increase
our expenses and may require us to raise additional capital sooner than expected. Failure to manage growth effectively could harm
our business, financial condition or results of operations.
We
may not successfully manage our growth.
Our
success will depend upon the expansion of our operations and the effective management of our growth. We expect to experience significant
growth in the scope of our operations and the number of our employees. If we grow significantly, such growth will place a significant
strain on our management and on our administrative, operational and financial resources. To manage this growth, we must expand
our facilities, augment our operational, financial and management systems, internal controls and infrastructure and hire and train
additional qualified personnel. Our future success is heavily dependent upon growth and acceptance of our future products. If
we are unable to scale our business appropriately or otherwise adapt to anticipated growth and new product introduction, our business
and financial condition will be harmed.
We
may expand our business through the acquisition of rights to new drug candidates that could disrupt our business, harm our financial
condition and may also dilute current stockholders’ ownership interests in our company.
Our
business strategy includes expanding our products and capabilities, and we may seek acquisitions of drug candidates or technologies
to do so. Acquisitions involve numerous risks, including substantial cash expenditures; potentially dilutive issuance of equity
securities; incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify at the time
of acquisition; difficulties in assimilating the acquired technologies or the operations of the acquired companies; diverting
our management’s attention away from other business concerns; risks of entering markets in which we have limited or no direct
experience; and the potential loss of our key employees or key employees of the acquired companies.
We
cannot assure you that any acquisition will result in short-term or long-term benefits to us. We may incorrectly judge the value
or worth of an acquired product, company or business. In addition, our future success would depend in part on our ability to manage
the rapid growth associated with some of these acquisitions. We cannot assure you that we will be able to make the combination
of our business with that of acquired products, businesses or companies work or be successful. Furthermore, the development or
expansion of our business or any acquired products, business or companies may require a substantial capital investment by us.
We may not have these necessary funds or they might not be available to us on acceptable terms or at all. We may also seek to
raise funds by selling shares of our preferred or common stock, which could dilute each current stockholder’s ownership
interest in the Company.
We
are unable to develop our own sales, marketing and distribution capabilities, or if we are not successful in contracting with
third parties for these services on favorable terms, or at all, our product revenues could be disappointing.
We
currently have no sales, marketing or distribution capabilities. In order to commercialize our products, if any are approved by
the FDA, we will either have to develop such capabilities internally or collaborate with third parties who can perform these services
for us. If we decide to commercialize any of our drugs ourselves, we may not be able to hire the necessary experienced personnel
and build sales, marketing and distribution operations which are capable of successfully launching new drugs and generating sufficient
product revenues. In addition, establishing such operations will take time and involve significant expense.
If
we decide to enter into new co-promotion or other licensing arrangements with third parties, we may be unable to locate acceptable
collaborators because the number of potential collaborators is limited and because of competition from others for similar alliances
with potential collaborators. Even if we are able to identify one or more acceptable new collaborators, we may not be able to
enter into any collaborative arrangements on favorable terms, or at all.
In
addition, any revenues we receive would depend upon our collaborators’ efforts which may not be adequate due to lack of
attention or resource commitments, management turnover, change of strategic focus, business combinations or other factors outside
of our control. Depending upon the terms of our collaboration, the remedies we have against an under-performing collaborator may
be limited. If we were to terminate the relationship, it may be difficult or impossible to find a replacement collaborator on
acceptable terms, or at all.
If
we cannot compete successfully for market share against other drug companies, we may not achieve sufficient product revenues and
our business will suffer.
The
market for our drug candidates is characterized by intense competition and rapid technological advances. If our drug candidates
receive FDA approval, they will compete with a number of existing and future drugs and therapies developed, manufactured and marketed
by others. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for
a specific indication than our products, or may offer comparable performance at a lower cost. If our products are unable to capture
and maintain market share, we may not achieve sufficient product revenues and our business will suffer.
We
and our collaborators will compete for market share against fully integrated pharmaceutical companies or other companies that
are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private
research organizations. Many of these competitors have drugs already approved or drug candidates in development that will or may
compete against our approved drug candidates. In addition, many of these competitors, either alone or together with their collaborative
partners, operate larger research and development programs and have substantially greater financial resources than we do, as well
as significantly greater experience in:
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developing
drugs;
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conducting
preclinical testing and human clinical trials;
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obtaining
FDA and other regulatory approvals of drugs;
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formulating
and manufacturing drugs; and
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launching,
marketing, distributing and selling drugs.
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Government
agencies, professional and medical societies, and other groups may establish usage guidelines that apply to our Law enforcement
concerns over diversion of opioids and social issues around abuse of opioids may make the regulatory approval process and commercialization
of our drug candidates very difficult.
Media
stories regarding the diversion of opioids and other controlled substances are commonplace. Law enforcement agencies or regulatory
agencies may apply policies that seek to limit the availability of opioids. Such efforts may adversely affect the regulatory approval
and commercialization of our drug candidates.
Developments
by competitors may render our products or technologies obsolete or non-competitive.
Alternative
technologies and products are being developed to improve or replace the use of opioids for pain management, several of which are
in clinical trials or are awaiting approval from the FDA. In addition, the active ingredients in nearly all opioid drugs are available
in generic form. Drug companies that sell generic opioid drugs represent substantial competition. Many of these organizations
competing with us have substantially greater capital resources, larger research and development staffs and facilities, greater
experience in drug development and in obtaining regulatory approvals and greater manufacturing and marketing capabilities than
we do. Our competitors may market less expensive or more effective drugs that would compete with our drug candidates or reach
market with competing drugs before we are able to reach market with our drug candidates. These organizations also compete with
us to attract qualified personnel and partners for acquisitions, joint ventures or other collaborations.
Business
interruptions could limit our ability to operate our business.
Our
operations as well as those of our collaborators on which we depend are vulnerable to damage or interruption from computer viruses,
human error, natural disasters, electrical and telecommunication failures, international acts of terror and similar events. We
have not established a formal disaster recovery plan and our back-up operations and our business interruption insurance may not
be adequate to compensate us for losses we may suffer. A significant business interruption could result in losses or damages incurred
by us and require us to cease or curtail our operations.
Unfavorable
media coverage of opioid pharmaceuticals could negatively affect our business.
Opioid
drug abuse receives a high degree of media coverage. Unfavorable publicity regarding, for example, the use or misuse of oxycodone
or other opioid drugs, the limitations of abuse-resistant formulations, public inquiries and investigations into prescription
drug abuse, litigation or regulatory activity, or the independent actions regarding the sales, marketing, distribution or storage
of our drug products, could adversely affect our reputation. Such negative publicity could have an adverse effect on the potential
size of the market for our drug candidates and decrease revenues and royalties, which would adversely affect our business and
financial results.
Risks
Related to Ownership of Our Common Stock
There
is a limited market for our common stock that may make it more difficult to dispose of your stock.
Our
common stock is currently quoted on the OTCQB under the symbol “RLMD”. There is a limited trading market for our common
stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability
of holders of our common stock to sell shares of our common stock, or the prices at which holders may be able to sell their common
stock.
A
sale of a substantial number of shares of our common stock may cause the price of the common stock to decline.
If
our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could
fall. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and
price that we deem reasonable or appropriate. Stockholders who have been issued shares in the Reverse Merger will be able to sell
their shares pursuant to Rule 144 under the Securities Act of 1933, beginning one year after the stockholders acquired their shares,
subject to limitations imposed by the lock-up agreements.
We
are subject to the reporting requirements of federal securities laws, which can be expensive and may divert resources from other
projects, thus impairing our ability grow.
We
are a public reporting company and, accordingly, subject to the information and reporting requirements of the Exchange Act and
other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).
The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing
audited reports to stockholders would cause our expenses to be higher than they would be if we remained privately held and did
not consummate the Reverse Merger.
It
may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in
order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the independent accountant certifications required
by such act, which may preclude us from keeping our filings with the SEC current.
If
we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results
accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation
and adversely impact the trading price of our Common Stock.
Effective
internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment
existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control
deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an
in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover
areas of our internal control that need improvement.
Public
company compliance may make it more difficult to attract and retain officers and directors.
The
Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of
public companies. As a public company, we expect these new rules and regulations to increase our compliance costs in 2012 and
beyond and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules
and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future
and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or
similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of
directors or as executive officers.
Our
stock price may be volatile.
The
market price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various factors,
many of which are beyond our control, including the following:
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changes
in our industry;
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competitive
pricing pressures;
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our
ability to obtain working capital financing;
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additions
or departures of key personnel;
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limited
“public float” in the hands of a small number of persons whose sales or lack of sales could result in positive
or negative pricing pressure on the market price for our common stock;
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sales
of our common stock;
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our
ability to execute our business plan;
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operating
results that fall below expectations;
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loss
of any strategic relationship;
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regulatory
developments;
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economic
and other external factors;
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period-to-period
fluctuations in our financial results; and
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inability
to develop or acquire new or needed technology or products.
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addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market
price of our Common Stock.
Our
Common Stock may be deemed a “penny stock,” which would make it more difficult for our investors to sell their shares.
Our
common stock may be subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny
stock rules generally apply to companies whose common stock is not listed on The NASDAQ Stock Market or other national securities
exchange and trades at less than $5.00 per share, other than companies that have had average revenue of at least $6,000,000 for
the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for
three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established
customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information
concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number
of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules
for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject
to the penny stock rules, investors will find it more difficult to dispose of our securities.
You
may have difficulty trading and obtaining quotations for our Common Stock.
Our
securities are not actively traded, and the bid and asked prices for our Common Stock on the Over-the-Counter Bulletin Board may
fluctuate widely. As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of,
our securities. This severely limits the liquidity of the Common Stock, and would likely reduce the market price of our Common
Stock and hamper our ability to raise additional capital. There is a limited market for our securities. Accordingly, investors
may therefore bear the economic risk of an investment in the Securities thereof, for an indefinite period of time. Even if an
active market develops for the common stock, Rule 144 promulgated under the Securities Act (“Rule 144”), which provides
for an exemption from the registration requirements under the Securities Act under certain conditions, requires, among other conditions,
a one-year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having
to satisfy the registration requirements under the Securities Act. There can be no assurance that we will fulfill any reporting
requirements in the future under the Securities Exchange Act of 1934, as amended, or disseminate to the public any current financial
or other information concerning the Company, as is required by Rule 144 as part of the conditions of its availability. Our securities
have not been registered under the Securities Act.