Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following discussion should be read
in conjunction with the information contained in the financial statements of the Company and the notes thereto appearing elsewhere
herein and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations
set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018. Readers should carefully review the
risk factors disclosed in this Form 10-K and other documents filed by the Company with the SEC.
As used in this report, the terms “Company”,
“we”, “our”, “us” and “NNVC” refer to NanoViricides, Inc., a Nevada corporation.
PRELIMINARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Report contains forward-looking statements
within the meaning of the federal securities laws. All statements other than statements of historical fact made in this report
are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial
position are forward-looking statements. These include statements about our expectations, beliefs, intentions or strategies for
the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,”
“plan,” “will,” “we believe,” “Company believes,” “management believes”
and similar language. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,”
“could,” “possibly,” “probably,” “anticipates,” “projects,” “expects,”
“may,” “will,” or “should,” or other variations or similar words. No assurances can be given
that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s
current expectations and are inherently uncertain. The forward-looking statements are based on the current expectations of NanoViricides,
Inc. and are inherently subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. Actual
results may differ materially from results anticipated in these forward-looking statements.
Investors are also advised to refer to
the information in our previous filings with the Securities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K,
in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic
results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors
to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.
Recent Developments
We are pleased to report that Dr. Irach
B. Taraporewala has joined as our new Chief Executive Officer (CEO) as of September 1, 2018. Dr. Taraporewala was previously the
founding CEO and President of Ohr Pharmaceutical, Inc. (“Ohr”), from April 2010 until December 2015. During his 5 years
of leadership at Ohr, he played a critical role in taking the company from preclinical stage through successful Phase II clinical
trials. Dr. Taraporewala ensured that the Company was well capitalized, oversaw the up-listing of the Company’s
common stock to the NASDAQ exchange, and completed several successful rounds of financing.
Prior to Ohr, Dr. Taraporewala was Vice
President of Regulatory Affairs and Clinical Research at Mystic Pharmaceuticals Inc., Austin, TX, from April 2008 to March 2010.
At Mystic, he led the regulatory strategy for the Company's ophthalmic and intranasal drug products, as well as drug delivery systems.
Earlier, Dr. Taraporewala served at a well-known pharmaceutical consulting and clinical research organization, PAREXEL International
Corp., as Senior Consultant in the Drug Development Consulting Division. In this position, he provided technical expertise and
regulatory advice to small and large biotechnology and pharmaceutical company clients worldwide.
Dr. Taraporewala holds a Ph.D. degree in
Medicinal Chemistry from the Philadelphia College of Pharmacy, University of the Sciences in Philadelphia (1984). He holds
a Master of Science degree in Organic Chemistry, and a Bachelor of Science degree in Chemistry and Microbiology, both from the
University of Bombay, India.
Dr. Taraporewala was appointed as a member
of the Board of Directors by the Board as of November 1, 2018.
In addition we are pleased to report that
Mr. James Sapirstein has joined the Board of Directors of the Company as of November 1, 2018, as an independent director. He has
also become a member of the Audit Committee, the Compensation Committee, and the Nomination Committee of the Board.
Mr. Sapirstein has over 35 years of experience
in the pharmaceutical industry. He has held various roles in small as well as big pharmaceutical companies, including as CEO for
multiple small companies. He has also served and is currently serving as a Director of multiple pharmaceutical companies and of
pharmaceutical industry associations. He has been part of almost two dozen drug product launches and specifically either led or
has been a key member of several HIV product launches into different new classes of therapeutics at the time.
Mr. Sapirstein began his career in 1984
with big pharmaceutical companies, joining Eli Lilly in Sales; moving on to Hoffmann-LaRoche in 1987 where he served for almost
a decade as part of its commercial teams in the USA and abroad, rising to become a Product Director; and thereafter at Bristol
Myers Squibb (BMS) as the Director of International Marketing in the Infectious Diseases group in 1996. While at BMS, he worked
on several important HIV/AIDS projects including Secure the Future.
Mr. Sapirstein’s entry into the world
of smaller pharma companies began with Gilead Sciences, Inc. (GILD) in 2000 where he led the Global Marketing team in its launch
of Viread (tenofovir). Later, in 2002, he accepted the position of Executive Vice President, Metabolic and Endocrinology, for Serono
Laboratories, acquired by Merck GMBH in 2006. Thereafter in 2006, he became the founding CEO of Tobira Therapeutics, then a private
company. In 2012, Mr. Sapirstein became the CEO of Alliqua Biomedical at Alliqua, Inc. Thereafter, he served as CEO of Contravir
Pharmaceuticals (CTRV) from March 2014 until October 2018. Mr. Sapirstein has raised over $120 Million dollars in venture capital
and public capital markets financing in his various engagements as CEO. He was named as a Finalist for Ernst & Young Entrepreneur
of the Year award in 2015 as well as in 2016. Mr. Sapirstein received an MBA from Fairleigh Dickinson University in 1997, and a
BS (Pharmacy) from Rutgers University in 1984.
Mr. Sapirstein currently holds Board positions
on Enochian Biosciences (ENOB), RespireRx Pharmaceuticals (RSPI) and the privately held company Leading Biosciences. He is the
Chairman of the Board for BioNJ, an association of biopharma industries in New Jersey. In addition, he is a Board Director for
BIO, the leading Biopharma Industries Organization promoting public policy and networking in the healthcare space, where he sits
on both the Health Section and Emerging Companies Section Governing Boards.
Mr. Sapirstein’s appointment as an
Independent Director of the Board, as well as Dr. Taraporewala’s appointment as a Member of the Board, are to be ratified
by shareholder vote at the forthcoming Annual General Meeting of the Company, scheduled on November 30, 2018.
As a result of Mr. Sapirstein’s appointment,
the Company has regained full compliance with the listing requirements of NYSE-American for having a majority of independent directors
and three members on its Audit Committee.
With the appointments, of Dr. Taraporewala
and Mr. Sapirstein the Company his significantly bolstered its pharmaceutical industry expertise at both the executive management
level and the Board level.
Additilanlly, management has continued
and accelerated its efforts at investor outreach and communications significantly.
Dr. Irach B. Taraporewala, Chief Executive
Officer of the Company, presented a corporate overview and discussed the Company’s progress in taking its first drug candidate
into human clinical trials at the MicroCap Investment Conference, held on October 1-2, 2018 at the Essex House Hotel in New York
City.
Dr. Anil Diwan, President and Chairman
of the Board of NanoViricides, presented the Company and introduced the Company’s new CEO, Dr. Irach Taraporewala, at the
20th Annual Rodman & Renshaw Global Investment Conference, sponsored by H.C. Wainwright & Co., LLC, held on September 4-6,
2018 at the St. Regis New York Hotel in New York City.
Subsequent to this reporting period, the
Company has engaged Zacks Investment Research for the purpose of developing and disseminating investment research analysis reports
on the Company. Previously, the Company has reported that we have engaged The Money Channel NYC for the purpose of investor and
brokerage outreach.
Background - The Nanoviricide®
Platform Technology
NanoViricides, Inc. is a globally leading
company in the application of nanomedicine technologies to the complex issues of viral diseases. The nanoviricide® technology
enables direct attacks at multiple points on a virus particle. It is believed that such attacks would lead to the virus particle
becoming ineffective at infecting cells. Antibodies in contrast attack a virus particle at only a maximum of two attachment points
per antibody. In addition, the nanoviricide technology also simultaneously enables attacking the rapid intracellular reproduction
of the virus by incorporating one or more active pharmaceutical ingredients (APIs) within the core of the nanoviricide. The nanoviricide
technology is the only technology in the world, to the best of our knowledge, that is capable of both (a) attacking extracellular
virus, thereby breaking the reinfection cycle, and simultaneously (b) disrupting intracellular production of the virus, thereby
enabling complete control of a virus infection.
Our anti-viral therapeutics, that we call
“nanoviricides®” are designed to appear to the virus like the native host cell surface to which it binds. Since
these binding sites for a given virus do not change despite mutations and other changes in the virus, we believe that our drugs
will be broad-spectrum, i.e. effective against most if not all strains, types, or subtypes, of a given virus, provided the virus-binding
portion of the nanoviricide is engineered appropriately. Viruses would not be able to escape the nanoviricide by viral mutations
since they continue to bind to the same cellular receptor and thus would be captured by the nanoviricide. Virus escape by mutations
is a major problem in the treatment of viral diseases using conventional drugs.
The Company develops its class of drugs,
that we call nanoviricides®, using a platform technology. This approach enables rapid development of new drugs against a number
of different viruses. A nanoviricide is a “biomimetic” - it is designed to “look like” the cell surface
to the virus. To accomplish this, we have developed a polymeric micelle structure composed of PEG and fatty acids that is designed
to create a surface like the cell membrane, with the fatty acids going inside of the micelle. On this surface, we chemically attach,
at regular intervals, virus-binding ligands. The virus is believed to be attracted to the nanomicelle by these ligands, and thereby
binds to the nanoviricide using the same glycoproteins that it uses for binding to a host cell. Upon such binding, a “lipid
mixing” interaction between the lipid envelope of the virus and the nanomicelle is thought to take place, leading to the
virus attempting to enter the nanomicelle. We believe many different kinds of viruses are likely to get destroyed in this process.
We engineer the ligands to “mimic”
the same site on the cell surface protein to which the virus binds. These sites do not change no matter how much a given virus
mutates. Thus, we believe that if a virus so mutates that it is not attacked by our nanoviricide, then it also would not bind to
the human host cell receptor effectively and therefore would be substantially reduced in its pathogenicity. Our success at developing
broad-spectrum nanoviricides depends upon how successfully we can design decoys of the cell surface receptor as ligands, among
other factors.
NanoViricides, Inc. is one of a few bio-pharma
companies that has all the capabilities needed from research and development to marketable drug manufacture in the small quantities
needed for human clinical trials. At our campus at 1 Controls Drive, Shelton, CT, we possess state of the art nanomedicines characterization
facilities that we believe enable us to perform pre-IND nanomedicine analysis and characterization studies of any of our various
drug candidates in house. In addition, we believe we now have the ability to scale up production of any of our drug candidates,
and implement state of the art in-process controls as well as post-process analysis controls in order to establish robust c-GMP-capable
production methodologies. We also have a Biological Safety Level 2 (BSL2) certified virological cell culture lab at this campus.
We are able to perform initial cell culture based screening of large numbers of drug candidates for effectiveness and safety against
certain of the viruses that we have targeted for drug development. This capability boosts our drug development capabilities significantly.
Other than this limited initial screening, all of the biological testing and characterization of our drug candidates continues
to be performed by external academic or institutional collaborators and contract research organizations (CRO). In particular, all
of the animal studies are performed by our collaborators and CROs.
Our Product Pipeline
We have focused our efforts almost exclusively
on the HerpeCide™ program, given our budgets and current financial condition.
We currently have at least eight different
drug development programs, attesting to the strength of our platform technology. Of these, 4 of the indications are under the HerpeCide™
program. We are currently working on 3 of these indications (VZV, HSV-1 and HSV-2) in parallel, as explained below (priority level
1). The v-ARN program is at a lower priority level. In addition, we continue to work on the FluCide™ program at the lower
priority 3. HIVCide™ program is at priority level 4. We will continue to seek funding for further development in the remaining
programs, namely Dengue and Ebola/Marburg antivirals.
The potential broad-spectrum nature of
our anti-HSV drug candidates is enabling several anti-Herpes indications under our HerpeCide™ program. Of these, our (i)
Topical Treatment for Shingles (VZV) is currently moving most rapidly towards clinical stage. We believe that the other anti-Herpes
drug candidates, would follow this lead drug to the clinical stage, namely, (ii) skin cream for the treatment of orolabial herpes
(“cold sores”) and recurrent herpes labialis (RHL) mostly caused by HSV-1, and (iii) skin cream for the treatment of
genital herpes caused by HSV-2.
In addition, a fourth indication, (iv)
ocular eye drops treatment for external eye herpes keratitis (HK), caused by HSV-1 or HSV-2, is expected to follow with the same
API or a close variant thereof into further drug development.
Further, we have announced that we have
begun preclinical drug development work on a fifth indication under the HerpeCide program, namely (v) viral Acute Retinal Necrosis
(v-ARN), intravitreal injection.
The Company reports that it is close to
identifying a clinical candidate for VZV shingles skin cream topical treatment. We are currently scaling up the production of our
lead candidates to make sufficient amounts for IND-enabling toxicology studies.
The Company has announced that it has expanded
its
in vivo
testing agreement with the University of Wisconsin to encompass testing its topical anti-herpes agents in animal
models of HSV-induced dermal, ocular and genital herpes virus infections, in March 2018.
The Company announced on December 6, 2017,
that it has begun an initial safety and toxicology evaluation of its optimized nanoviricides® drug candidates developed against
varicella-zoster virus (VZV), the shingles virus. This preliminary safety/toxicology study in the rat animal model is an important
step in the drug development pathway for a treatment for shingles, a debilitating infection of human skin by VZV.
A preliminary non-GLP safety and toxicology
study in rats was performed at AR Biosystems, Beverly, MA to provide information for designing the IND enabling non-GLP and GLP
safety/toxicology (“Tox Package) studies. That study was designed to (i) evaluate the direct effects of topical delivery
of the drug candidates on the skin, (ii) assess if the drugs attain detectable levels in the blood, and also (iii) evaluate whether
there are any effects on the blood and primary organs, in uninfected animals. The results of this study will provide the basis
and focus for the IND-enabling GLP safety and toxicology studies that are required for the IND submission to the U.S. FDA. As a
result of the success of its drug lead optimization process, the Company selected two clinical development candidates for further
evaluation in this initial safety/toxicology study. The animal experiment portion of this study has been completed as of the end
of January 2018.
No clinically observable adverse safety
and toxicology effects were seen in this study of the Company’s optimized topical dermal drug candidates. There were no adverse
effects on the skin at the treatment sites. Equally importantly, the results of the non-GLP safety and toxicology study showed
that there were no overall observable systemic effects either. There were no observable direct effects on the primary organ function
whether the drug was administered to the skin or administered systemically. This includes liver and kidney function. This is important
as the liver and kidneys are major organs involved in drug toxicity.
These results are consistent with the positive
findings in a model of VZV (the shingles virus) infection of human skin in which no safety or toxicology concerns have been observed,
further demonstrating the safety of these drug candidates. The drug candidates have shown strong effectiveness in these shingles
virus studies as well, as previously reported. Further, these candidates have demonstrated strong anti-viral activities against
HSV-1, HSV-2, and VZV in cell culture studies using multiple cell lines.
Dermal topical treatment of rats with formulated
drug candidates was evaluated in this study as a primary objective, since skin is the primary breakout site of HSV-1, HSV-2, and
VZV infections. Additionally, the same drug candidates as formulated for systemic delivery were employed to evaluate potential
systemic safety/toxicological effects.
The success of our drug candidates in this
preliminary rat safety/toxicology study has cleared the path for taking these candidates into formal GLP safety/toxicology studies
that are required for filing an IND. We believe that, additionally, the results of this preliminary rat safety/toxicology study
also give us confidence that the dermal topical treatments we are developing for the treatment of HSV-1 cold sores, and HSV-2 genital
ulcers also should also exhibit similar strong safety characteristics.
The Company’s drug candidates in
HerpeCide™ program are being developed for direct topical application on the affected areas to control the infections. Direct
topical application enables delivery of the highest possible concentrations of the active substance directly at the site of infection.
This allows for maximal clinical effectiveness, while at the same time minimizing side effects that are seen with systemic therapy
(such as oral drugs or injectables).
We have already begun to scale up production
of these tested candidates to the larger amounts as estimated to be required for the ensuing IND-enabling Toxicology (“Tox
Package”) studies. We have estimated the amount of the candidate that will be needed to be supplied for such a study, based
on discussions with BASi, Inc., IN, the service provider, and Biologics Consulting Group, VA, our regulatory consultants. We have
increased the scale of production to meet this required quantity and have the ability to produce kilogram quantities of materials.
We are also working on detailed optimization of the manufacture and characterization of the materials at different synthetic steps
as will be needed for the Chemistry, Manufacture, and Controls (CMC) section of an IND application.
The market size for anti-shingles drugs
is currently estimated to be in the range of several billions of dollars, even after a new shingles vaccine, Shingrix® (GlaxoSmithKline)
has become available, based on a recent report by Dr. Myers of BioEnsemble, LLC, pharma industry consultants, commissioned by the
Company.
More specifically, the report estimated
that our anti-shingles drug could reach peak annual sales of as much as $2 Billion, depending upon the effectiveness determined
in clinical trials, at an assumed 50% market penetration, if it is effective in reducing incidence of post-herpetic neuralgia (PHN).
Based on current pre-clinical data, we believe that there is a very strong probability that our shingles treatment would significantly
minimize the shingles pain, accelerate healing, and minimize nerve damage, thereby minimizing the occurrence and severity of post-herpetic
neuralgia (PHN). Our pre-clinical drug design efforts have been aimed at developing a treatment for shingles that would have pain
reduction effects as well as healing effects on skin.
Initially, we plan on performing clinical
trials based on VZV related biomarkers and clinical pathology, which we believe would be sufficient for a first indication for
approval of the drug for treatment of shingles by the US FDA. Sales of an effective drug against shingles with this limited indication
are projected to reach several hundreds of millions of dollars. We plan on performing observations regarding PHN in these clinical
trials so that an informed PHN clinical trial may be performed later to extend the drug indication.
We have developed strong chemical manufacturing
process controls that enable us to produce the backbone polymers with highly restricted and reproducible molecular size range.
In fact, we have achieved highly reproducible and scalable processes that have yielded the same polymer molecular sizes across
production scales from 10g to 500g. In other words, we are now able to control the length of the backbone polymer to within one
monomer unit, irrespective of production scale (at least up to about 1 kg scale).
We believe that this is a remarkable and
possibly unmatched achievement in the field of nanomedicines. We have scaled up the production of the polymer backbone “nanomicelle”
to kilogram scales, and do not anticipate any manufacturing constraints at present.
Typically, the synthesis of small chemicals,
such as the ligands we use to direct the nanoviricide against a specific type of virus, is substantially easier to scale up than
the synthesis of polymers. We have been able to scale up production of the two different ligands under potential clinical development
consideration for VZV shingles treatment already. We anticipate being able to scale up to approximately 500g levels or more, as
necessary.
The process of chemically covalently connecting
the ligands to the polymer backbone, to produce the nanoviricides, is now being optimized for scalability.
Our polymer backbone itself is designed
based on the route of application. In the case of the shingles drug candidate, as well as for HSV-1 cold sores, and for HSV-2 genital
ulcers, the route is dermal topical application.
We are now working on final formulation
of the “drug product” as well. After synthesizing the active chemical component, additional substances called “excipients”
are added to it to provide specific desired characteristics. The resulting substance is called the drug product.
Thus we are on course to be able to manufacture
the required quantities of materials for the Tox Package studies.
In addition to VZV, we are also developing
dermal topical drugs against HSV-1 cold sores and HSV-2 genital ulcers. Dr. Brandt’s Lab at CORL, the University of Wisconsin,
Madison, WI, is validating animal models for the study and evaluation of relative efficacies of different treatments for HSV-1
infection in mice as well as for HSV-2 infection in mice. If their animal models are successful in differentiating effectiveness
of different drug candidates, then we will be able to evaluate our drug candidates for the treatment of HSV-1 cold sores as well
as for the treatment of HSV-2 genital ulcers, in addition to the VZV testing being performed.
The ligands currently in use for the nanoviricide
drug candidates against VZV shingles were actually developed using computer models of HSV binding to its cellular receptor, and
not against VZV itself. Our program shifted to advance a VZV candidate as our first indication due to various considerations that
led to the prioritization of the different drug indications. The Company identified certain advantages that would enable earlier
entry into clinical trials for the shingles candidates. The Company is currently negotiating for a license for VZV, Shingles Virus,
from the Company’s licensor, TheraCour Pharma, Inc. (“TheraCour”). The shingles drug development program has
been moving rapidly primarily because of the quick turnaround time and high responsiveness of the Dr. Moffat Lab at SUNY Syracuse,
our critical collaborator for human skin effectiveness studies of our drug candidates.
One of the advantages of the shingles program
is that the pre-clinical drug development is performed directly in a human skin model, bypassing any animal model, providing significant
confidence that a human clinical studies outcome would parallel the preclinical study outcome. VZV does not infect animals other
than humans.
We are currently scheduling the time-slots
for the IND-enabling non-GLP and GLP Safety/Toxicology (“Tox Package”) studies with BASi, IN, our CRO for this task.
Thus, we have made significant and substantial progress in the reporting quarter towards the goal of filing our first IND application,
and we continue to build on this progress.
NanoViricides, Inc. reported in July 2017,
that its anti-shingles nanoviricides® drug candidates achieved dramatic reduction in infection of human skin by the varicella-zoster
virus (VZV), the shingles virus. These findings corroborate the previously reported findings of inhibition of VZV infection of
human cells in culture. VZV is restricted to human tissue and only infects and replicates in human tissue.
Over the time course of VZV infection,
the nanoviricides® drug candidates showed marked inhibition of VZV infection, replication and spread in human skin cultured
ex vivo
. The data suggest that select nanoviricides® drug candidates may have direct virucidal activity based on their
antiviral effects within the first 24 hours after viral infection.
The antiviral effect of certain nanoviricide
drug candidates was substantially greater than the effect of the standard positive control of cidofovir added into media. Even
more remarkably, the effect of these nanoviricides drug candidates was equivalent to a topical formulation of 1% cidofovir applied
directly onto the skin patch. A topical skin cream containing 2% cidofovir is clinically used in very severe cases of shingles.
However, the cytotoxicity of cidofovir is known to cause ulceration of the skin to which it is applied, followed by natural wound
healing.
Histopathology
studies have demonstrated a lack of VZV-associated lesions in nanoviricide-treated skin patches. This work was presented as a
poster presentation by the Moffat group at the 31st International Conference on Antiviral Research held June 11 - June 15, 2018
in Porto, Portugal,
(
https://www.isar-icar.com/page/31icar
)
.
Since VZV causes skin lesions as a result
of direct attack of the re-awakened virus released from nerve endings onto the human skin cells, this ex vivo human skin patch
model involving VZV infection of cultured human skin
ex vivo
is considered to be a close representation of natural course
of shingles.
The Company has previously reported that
these same nanoviricides® compounds displayed potent inhibition of VZV infection of a human retinal epithelial pigment cell
line in an
in vitro
cell culture virus infection model with no evidence of toxicity to the cells. These
ex vivo
and
in vitro
studies are a critical step in the selection of final clinical drug development candidates for safety and toxicology
studies with the goal of an IND submission to the FDA for the topical treatment of shingles in humans.
These human skin studies were performed
in the laboratory of Dr. Jennifer Moffat at SUNY Upstate Medical University in Syracuse, NY. The Company previously reported the
collaboration with Dr. Moffat, an internationally recognized expert on varicella-zoster virus. She has extensive experience in
varicella-zoster virus (VZV) infection, pathogenesis, and anti-viral agent discovery. The National Institutes of Health has a contract
with Dr. Moffat’s lab for evaluating anti-viral compounds against VZV, although the Company chose to set up a direct collaboration
with Dr. Moffat rather than going through the NIH program.
Dr. Vivien Boniuk, then Consultant in Ophthalmology
at the Company, presented the successful results of certain anti-herpes nanoviricide treatments for v-ARN at the 2017 Annual meeting
of the Ocular Microbiology and Immunology Group (OMIG) of the American Academy of Ophthalmology held in New Orleans, LA, on November
10, 2017. In this study, HSV-2 infection was given to mice as a single injection to cause v-ARN. The mice that received either
of two nanoviricides drug candidates simultaneously with the virus in this single injection, showed significant improvements using
a number of parameters. In contrast, mice that received foscarnet injection simultaneously with the virus did not show any improvements.
Of note, foscarnet is a current standard of treatment, although the treatment is long in duration and arduous, being multiple intravitreal
injections. In addition, another group of HSV-2 infected animals received acyclovir by intraperitoneal injection (50mg/kg), twice
daily for 7 days, as a positive control. Acyclovir and its derivatives are also used currently for treating v-ARN, although the
clinical efficacy is limited and generally requires long durations of treatment. Vehicle treated and untreated negative controls
also were employed. These studies were performed in the lab of Dr. Curtis Brandt at CORL, University of Wisconsin, Madison, WI.
Both nanoviricides tested showed remarkable
efficacy using multiple parameters. In particular, nanoviricide-A treated group showed viral load going down to undetectable levels
by day 7 itself (approximately 4 logs viral load reduction from baseline), whereas acyclovir group showed no reduction in viral
load from baseline at day 7, but approximately 2 logs reduction at day 9, indicating a much lower efficacy.
Both nanoviricides A and B resulted in
100% maintenance of body mass by day 9, indicating complete control of infection. However, the acyclovir group showed a loss of
at least 10% body mass, close to the nearly 15% loss in the negative controls, indicating that it was either much less effective
than the nanoviricides A and B or was somewhat toxic to the animals.
The mean disease score for the vitreous
infiltrate (fluid inside the eye) was zero (best) for 9 days with nanoviricide A treatment, and was about 0.5 for acyclovir treated
group, whereas it was about 4 (worst) in untreated and vehicle groups, indicating that nanoviricide A was more effective than the
acyclovir treatment in this model.
In both nanoviricide A and nanoviricide
B groups, the retina was protected fully from viral damage, which is very significant. In contrast, the acyclovir treated group
showed retinal damage approximately similar to the vehicle treated group, in spite of reduced viral load in the acyclovir group,
indicating that acyclovir may have been toxic. These results were also confirmed by histological staining of retinal sections.
Taken together, both nanoviricide A and
nanoviricide B had substantial effectiveness in protecting the retina, in spite of the high infectious dose of HSV-2 employed in
this model. Significantly, they were both substantially more effective than foscarnet (single injection) or acyclovir (bid 7days)
in this particular study. If these results are reproducible, then the Company would be able to identify a clinical candidate for
v-ARN as well.
Of note, both nanoviricides tested against
v-ARN are closely chemically related to those that have shown significant efficacy against varicella zoster virus (VZV) in the
human skin patch model in Professor Moffat’s lab at the Upstate Medical Center, SUNY, Syracuse, NY. We have previously shown
that closely chemically related nanoviricides were also effective against HSV-1 in animal models as well as in cell culture models.
This is important because about 50% of v-ARN cases are caused by VZV, about 40+% caused by HSV-2, with HSV-1 and CMV accounting
for a small percentage of cases. VZV does not infect mice, and therefore the HSV-2 v-ARN model should be indicative model for our
drug development. Thus the broad-spectrum activity of our nanoviricides against multiple different herpesvirus types has been instrumental
in rapid expansion of our HerpeCide program.
Additional successful studies on v-ARN
are expected to add a fifth indication to the Company’s growing portfolio of anti-herpes drug indications, further expanding
the potential market. The Company intends to maximize shareholder value from its broad-spectrum anti-herpes nanoviricides asset
by aggressively expanding its portfolio of herpesvirus indications.
v-ARN is a disease of the retina of the
eye caused by various herpes viruses that leads to severe loss of vision and blindness. The infecting agent in this study was herpes
simplex virus-2 (HSV-2), the type of herpes virus that also causes genital herpes.
Acute Retinal Necrosis is characterized
by severe ocular inflammation, retinal necrosis, and a high incidence of retinal detachment (RD) leading to visual loss and blindness.
This disease is caused by members of the herpesvirus family, including, herpes simplex virus-2 (HSV-2), varicella zoster virus
(VZV), and herpes simplex virus (HSV-1). An estimated 50,000 new and recurrent cases of ocular herpes per year are reported in
the United States alone, and in a small proportion of the patients, the disease escalates to v-ARN. We anticipate that ocular herpes
or v-ARN may qualify for an orphan disease indication.
Our current development has focused on
API suitable for formulating into a skin ointment for the treatment of VZV shingles, HSV-1 cold sores, or HSV-2 genital ulcers.
As these drug candidates advance further, we plan on performing fully integrated drug development for developing eye drops for
treatment of external eye infections such as herpes keratitis (a disease of the external eye). Thereafter we plan on undertaking
the development of suitable materials for intravitreous or sub-retinal injections for the treatment of certain viral diseases involving
the retina.
We have recently reported that we have
extended the contracts with both the Moffat Lab, UMC, SUNY Syracuse, as well as the Brandt Lab, CORL, UW, Madison to continue to
perform more advanced studies in preparation of an IND for shingles topical treatment and for v-ARN intravitreal treatment, respectively.
In addition, we have continued work on
our other drug candidates albeit at a very low priority. These include (vi) Injectable FluCide™ for hospitalized patients
with severe influenza, (vii) Oral FluCide™ for out-patients, (viii) DengueCide™, a broad spectrum nanoviricide designed
to attack all types of dengue viruses and expected to be effective in the Severe Dengue Disease syndromes including Dengue Hemorrhagic
Fever (DHS) and Dengue Shock Syndrome (DSS), and (ix) HIVCide™ for HIV/AIDS. In addition, the Company has research programs,
enabled by the robust nanoviricides platform technology, to develop drugs against Rabies virus, Ebola and Marburg viruses, and
other viruses.
To date, the Company does not have any
commercialized products. The Company continues to add to its existing portfolio of products through our internal discovery and
clinical development programs and also seeks to do so through an in-licensing strategy.
The Company received an “Orphan Drug
Designation” for our DengueCide™ drug from the USFDA as well as the European Medicines Agency (EMA). This orphan drug
designation carries significant economic benefits for the Company, upon approval of a drug.
We believe we have demonstrated that we
can rapidly develop different types of formulations for different routes of administration, such as injectable, skin cream, lotion,
gel, and even oral, because of the inherent strength of the nanoviricide platform tailorable technology. The technology also enables
us to develop nasal sprays and bronchial aerosols. We plan to develop the appropriate formulations as necessary.
All of our drug programs are established
to target what we believe are unmet medical needs.
Herpes simplex viral infections cause keratitis
of the eye, and severe cases of infection may sometimes necessitate corneal transplants. Oral and genital herpes is also a well-known
disease, with no cure and existing treatments that are not very effective. Shingles, caused by VZV, a herpesvirus, does not have
an effective treatment at present, although some drugs are approved for use in shingles. Adenoviral Epidemic Kerato-Conjunctivitis
(EKC) is a severe pink eye disease that may lead to blurry vision in certain patients after recovery. The epidemic and pandemic
potential as well as the constantly changing nature of influenza viruses is well known. The HIV/AIDS worldwide epidemic and the
“curse of slow death” nature of HIV viral infection are also well known. Dengue viral infection is also known as “breakbone
fever”. What is worse, is that when a patient is infected with a dengue virus a second time, if the virus is a different
serotype, then it can cause a severe dengue disease, or dengue hemorrhagic syndrome, with very high morbidity and a high rate of
fatality. This is because, the patient’s immune system mounts an attack, but the antibodies that it generates, directed at
the previous infecting virus, are not effective against the new infection, and instead the new infecting virus uses them to hitch
a ride into host cells that it infects more severely. This phenomenon is called “Antibody-Dependent Enhancement” or
“ADE” for short.
In the United States alone, approximately
1 million cases of shingles (i.e. zoster) occur annually. The risk of zoster increases with age, and with decreased immune system
function, such as occurs in diabetics. Zoster is characterized by pain and rash. Discrete cutaneous lesions occur in groups on
the skin. The Company believes that this presentation enables topical therapy for control of the viral outbreak.
One in four patients develop zoster-related
pain that lasts more than 30 days. If it persists more than 3 months, it is called post-herpetic neuralgia (PHN), and may persist
for years. It is thought that zoster-associated pain and PHN is a result of chronic ganglionitis, i.e. continued low-grade production
of the virus in the infected ganglia and related immune response. The Company believes that effective control of the virus production
would minimize or eliminate PHN, a debilitating morbidity of zoster.
Zoster occurs mostly in the abdominal region.
However, in 20% of cases, it occurs in the head area, with reactivation involving trigeminal distribution. These cases of zoster
can lead to serious complications including hemorrhagic stroke (VZV vasculopathy), VZV encephalitis, ophthalmic complications,
and may result in fatalities.
Currently available anti-herpes drugs have
had limited impact on zoster. Thus, an effective drug with a good safety profile could have a dramatic impact on zoster as well
as possibly PHN.
External eye infections with HSV-1 have
been reported to be the leading cause of infectious blindness in the developed world, with recurrent episodes of viral reactivation
leading to progressive scarring and opacity of the cornea. HSV epithelial keratitis afflicts the epithelium of the cornea. In some
cases, the disease progresses to HSV stromal keratitis, which is a serious condition. HSV stromal keratitis involves the stroma,
the layer of tissue in the cornea, which is deeper in the eye than the epithelium. Its pathology disease involves the HSV infection
of stromal cells, and also involves the inflammatory response to this infection. It can lead to permanent scarring of the cornea
resulting in diminished vision. More serious cases require corneal replacement surgery. About 75% of corneal replacements are known
to fail in a 20-year time frame, due to graft versus host disease (i.e. rejection of the foreign implant by the body), requiring
a new procedure, or resulting in blindness.
Herpes keratitis incidence rates in the
USA alone are reported to be in the range of 65,000 to 150,000 patients per year. Of these approximately 10,000 per year may be
estimated as requiring corneal transplants. The estimates of incidence rates vary widely based on source, and are also assumed
to be underreported. A corneal transplant costs approximately $15,000 to $25,000 for the surgery, with additional costs for follow
on drugs and treatments.
This scenario exists in spite of available
drugs, namely the acyclovir class of drugs, trifluridine, and others, that are used for treatment of herpes keratitis. The failure
of these drugs is primarily due to limited safety resulting in insufficient drug availability at the site of infection.
In addition, the Company is developing
broad-spectrum eye drop formulations that are expected to be effective against a majority of the viral infections of the external
eye. Most of these viral infections are from adenoviruses or from herpesviruses. The Company has shown excellent efficacy of its
drug candidates against EKC (adenoviral epidemic kerato-conjunctivitis) in an animal model. Further, our anti-HSV drug candidates
have shown excellent efficacy in cell culture studies, as well as in a lethal skin infection animal model.
Thus, an effective drug with a good safety
profile could have a dramatic impact on ocular viral infections. Merit-based compensation for the herpes keratitis treatment would
enable strong financial incentive and could result in potential revenues in the several hundreds of millions range, depending upon
the effectiveness of the drug. The Company believes that it has sufficient production capacity at its current site to supply the
US requirement of the drug for treatment of (ocular) herpes keratitis upon drug licensure.
Topical treatment of herpesvirus infections
is important because of the disfiguring nature of herpesvirus breakouts, the associated local pain, and the fact that the virus
grows in these breakouts to expand its domain within the human host further. Topical treatment can deliver much higher local levels
of drugs than a systemic treatment can, and thus can be more effective and safer at the same time. Systemic drug treatment results
in side effects because of the high systemic drug concentrations that need to be achieved and the large drug quantities that must
be administered. Since the virus remains mostly localized in the area of the rash and connected nerve apparatus, using high concentrations
of drugs delivered in small quantities topically would allow maximizing the effectiveness while minimizing the side effects.
Herpesviruses become latent in neuronal
cells or in ganglia, and cause periodic localized breakouts that appear as skin rashes and lesions. Systemic drug treatment results
in side effects because of the high systemic drug concentrations that need to be achieved and the large drug quantities that must
be administered. Since the virus remains mostly localized in the area of the rash and connected nerve apparatus, using high concentrations
of drugs delivered in small quantities topically would allow maximizing the effectiveness while minimizing the side effects, leading
to minimizing viral production at the site. Such effective local control of the virus titer is expected to lead to reduction in
recurrence of herpesvirus “cold sores” or genital ulcers, and reduction in shingles related PHN.
The potential broad-spectrum nature of
our anti-HSV drug candidates is expected to enable several antiviral indications. Thus, HSV-1 primarily affects skin and mucous
membranes causing “cold sores”. HSV-2 primarily affects skin and mucous membranes leading to genital herpes. HSV-1
infection of the eye causes herpes keratitis that can lead to blindness in some cases. In addition, human herpesvirus-3 (HHV-3),
a.k.a. varicella-zoster virus (VZV), causes chickenpox in children and when reactivated in adults, causes shingles. Shingles breakouts
are amenable to topical treatment, as are the HSV cold sores, genital lesions, and herpes keratitis of the eye. Most of these indications
do not have satisfactory treatments at present, if any. Further, the treatment of herpesvirus infections caused by acyclovir- and
famciclovir- resistant mutants is currently an unmet medical need. Drugs with mechanisms of action other than DNA-polymerase inhibitors
(such as acyclovir) are needed for effective treatment.
The childhood chickenpox vaccine has reduced
the cases of chickenpox, but this is a live attenuated virus vaccine that persists in the body. All adults who have had chickenpox
in childhood continue to harbor the chickenpox virus, and are expected to develop shingles at some time, with the risk of shingles
increasing with age or weakening of the immune system surveillance. In addition to the shingles breakout itself, post-herpetic
neuralgia (pain) (PHN) is a significant morbidity of shingles, and to a lesser extent, of oral and genital herpes. PHN is initially
caused probably by the inflammation and immune response related to the local virus expansion, but persists well after the virus
has subsided, the blisters have scabbed off, and the skin has recovered, due to the nerve damage that results from the local large
viral load during infection. Current PHN treatments are symptomatic, affecting the pain signaling circuit (such as novocaine, pramoxine,
capsaicin, etc.), and do not produce lasting control. An effective therapy that results in strong local control of the virus production
during the breakout itself is expected to minimize the resulting immune responses and nerve damage, and thereby minimize or possibly
eliminate PHN.
The Company thus believes that it can develop
its broad-spectrum anti-herpes drug candidate towards at least five topical indications, namely, (a) shingles, (b) oral herpes
(“cold sores”), (c) genital herpes, (d) herpes keratitis (external eye infection), and (e) ocular herpes including
v-ARN (internal eye infection). As the HerpeCide™ program progresses, it is likely that additional herpesvirus related pathologies
may become amenable to treatment with our herpesvirus drug candidates.
Our nanoviricides in the HerpeCide™
program at present are designed as topical treatment for the breakout of shingles or herpes sores. Our animal studies results are
very significant considering that topical acyclovir in the form of a cream as well as an ointment, are approved for the treatment
of cold sores. We believe our strong anti-herpes nanoviricide® drug candidates are capable of reaching approval as a drug for
topical use against herpes cold sores, based on these datasets. Further drug development is necessary towards the goal of drug
approval.
Currently, valacyclovir (Valtrex®)
is approved as an oral drug for the treatment of severe shingles, but it has limited effectiveness. Another oral drug known as
“FV-100” was studied in clinical trials for the treatment of shingles by Bristol-Myers Squibb, and later by Contravir.
FV-100 works only against VZV and does not work against other herpesviruses. A Phase 3 study with PHN as end-point was completed
in November 2017. Further development appears to have been stopped for FV-100.
There is also a new preventive vaccine
for shingles, “Shingrix”. Given the number of cases of severe shingles, we believe that there is an unmet medical need
for developing a topical skin cream for the treatment of shingles, even with a successful introduction of this vaccine. The Shingrix
vaccine has been recently also been shown to produce adverse effects such as painful injection site reactions and pain in a significant
number of patients. Local application of a nanoviricide drug should enable delivery of stronger, local doses of medicine, with
a stronger patient benefit, than oral systemic dosing allows.
Existing therapies against HSV include
acyclovir and drugs chemically related to it. These drugs must be taken orally or by injection. Available topical treatments, including
formulations containing acyclovir or chemically related anti-HSV drugs, are not very effective. Currently, there is no cure for
herpes infection. Brincidofovir (CMX001) is being developed by Chimerix. It failed in a Phase 3 clinical trial for hCMV in organ
transplants, and its Phase1/2 clinical trial for HSV in neonates was withdrawn recently. Cidofovir is a known highly effective
but also toxic, broad-spectrum nucleoside analog, drug that was modified with a lipidic chain structure to create brincidofovir.
Pritelivir, by AiCuris, is a DNA Helicase/Primase inhibitor (HSV-1 and HSV-2) that has successfully completed certain Phase 2 clinical
trials, and its indication in immune-compromised patients has received a fast track status from the US FDA. Letermovir (Merck/AiCuris),
a terminase complex inhibitor, is effective only against hCMV and has entered a Phase 3 clinical study in kidney transplant patients.
Both the safety and effectiveness of any
new drug has to be determined experimentally. The safety of a nanoviricide drug is expected to depend upon the safety of the nanomicelle
portion as well as the safety of the antiviral ligand. We have observed excellent safety of our injectable anti-influenza drug
candidates. This leads us to believe that the nanomicelle backbones of these drug candidates that were evaluated in preliminary
safety studies should be safe in most if not all routes of administration.
The current market size for drugs for the
treatment of various herpes infections is well over $4B. Similarly, the current market size for the treatment of influenza infections
is in excess of $4B, and that for HIV treatments is in excess of $40B. The total market sizes for the drug development programs
we have in progress are estimated at around $100B.
We believe that when effective topical
treatments against VZV shingles, HSV-1 cold sores and HSV-2 genital ulcers are introduced, their market sizes are likely to expand
substantially, as has been demonstrated in the case of HIV as well as Hepatitis C.
Our timelines depend upon several assumptions,
many of which are outside the control of the Company, and thus are subject to delays.
We are currently focused on topical drug
development against several indications related to infections by herpes family viruses. The Company recognized, after consultations
with its FDA regulatory advisors, namely Biologics Consulting Group (of Alexandria, VA), and several other experts in the field,
that the development of these topical drug candidates towards human clinical trials is likely to be considerably faster than the
development of our anti-influenza systemic (injectable) drug candidate.
We believe we are now one of the very few
small pharmaceutical drug innovators that possess their own cGMP or cGMP-capable manufacturing facility (see below). With our new
campus and pilot-scale c-GMP-capable manufacturing facility, we are now in a position to advance our drug candidates into clinical
trials, produce the pre-clinical “tox package” batches, and the clinical drug substance batches.
Management Discussion - Current Drug
Development Strategy
During the reported quarter we have continued
to focus our drug development work plans primarily on our lead anti-shingles and anti-Herpes-virus programs. In particular, we
have focused on a work plan towards clinical development candidate for the topical skin ointment for the treatment of shingles
outbreak. Because of the broad-spectrum nature of our anti-herpes drug candidates, we have also simultaneously continued further
development of our drug candidates for four additional indications in the HerpeCide™ project, namely, cold sores, genital
ulcers, external ocular viral infections, and viral acute retinal necrosis. We have also continued to work on our anti-influenza
drug development programs under the FluCide™ project at a slow pace. The FluCide program is expected to be quite expensive
for development, based on our pre-IND discussions with the US FDA. We have therefore prioritized our resources with the goal of
filing our first IND in the shortest possible timeframe.
The anti-VZV drug development program has
moved rapidly towards clinical candidate declaration stage because of several factors, namely (a) that it was simply the existing
HSV-1 drug program in which the existing candidates were re-tested for effectiveness against VZV, (b) that we have had a highly
successful collaboration with Dr. Moffat Lab at SUNY Syracuse with rapid turnaround times, and (c) the drug candidates were found
to be highly effective against VZV in these studies.
NanoViricides currently has existing licenses
from TheraCour Pharma, Inc., (TheraCour), our development partner and where the intellectual property has originated, for HSV-1
and HSV-2, but not for the remaining herpesviruses. NanoViricides has disclosed our intention to obtain licenses for VZV as well
as other remaining unlicensed herpesvirus indications from TheraCour Pharma. As is the standard process with such agreements, and
the process that we have followed in the past, the Company needs to obtain a valuation of the assets under consideration. We retained
Dr. Carolyn Myers of BioEnsemble LLC, an expert in in-licensing, out-licensing, valuations, and M&A in pharmaceutical industry
to help with the valuations and related matters. Dr. Myers presented her initial report to our Board of Directors on December 9,
2017. Thereafter, we have asked that further modeling and analysis be performed incorporating additional assumptions that reflect
the current situation more closely than in the model that was presented, such as the subsequent approval of Shingrix vaccine in
early 2018. Dr. Myers has recently presented us with a revised valuation report on the VZV as of October 2018. Additional consultations
with Dr. Myers on various aspects of the licenses sought are ongoing. We anticipate license agreements will be drafted and the
terms and conditions will be negotiated soon. TheraCour has in the past not denied any licenses for any virus programs that we
initiated. We have retained counsel to prepare and negotiate the new license agreement on our behalf. The Company intends to complete
these new license negotiations soon. Due to the departure of our former Chief Executive Officer, we were unable to negotiate such
terms until the vacancy was just recently filled by Dr. Taraporewala. If we cannot come to an agreement with TheraCour for the
shingles license, we will continue and accelerate our work on the HSV-1 (cold sores) and HSV-2 (genital ulcers) indications, which
we believe will be using essentially the same or closely related dermal topical drug candidates as in development under the VZV
banner at present in the HerpeCide™ program. The Company already has licenses for these indications.
The Company has continued the development
of anti-HSV-1 and anti-HSV-2 drug candidates, and has tested the same against VZV in cell cultures, in addition to against HSV-1
and HSV-2. Since the candidates showed preliminary efficacy against VZV as well, the Company added shingles as an additional indication
to pursue under the HerpeCide™ program.
Our earlier animal studies for efficacy
testing of HSV-1 drug candidates in a mouse dermal model of the infection were performed by Professor Ken Rosenthal’s Lab
at NEOUCOM/NEOMED.
We have engaged Dr. Brandt’s Lab
at CORL, University of Wisconsin, Madison, WI, to further develop their animal models of dermal HSV-1 and HSV-2 infections in mice
and to make them suitable for screening of drugs for relative efficacy. They are working on validating their HSV-1 mouse model
for discriminative efficacy of different existing drugs. Once they can establish that the model distinguishes different effective
drugs, we will be able to use the model for testing our HerpeCide drug candidates against HSV-1, and optimizing the same only if
necessary. Following HSV-1 model development, we have commissioned Dr. Brandt’s Lab to perform similar studies for their
HSV-2 genital infection mouse model as well. Dr. Brandt’s Lab developed the mouse model of viral Acute Retinal Necrosis (v-ARN)
caused by HSV-1 that we have tested some of our drug candidates in as reported elsewhere.
Recent developments and our discussions
with our regulatory advisors and consultants indicate that the shingles drug candidate may be likely to reach the human clinical
evaluation phase earliest compared to the other drug candidates. Other drug candidates in the HerpeCide project are expected to
follow into clinical stage rapidly thereafter. This is primarily because of the topical treatment nature of the drug candidates
we have chosen to develop in these indications. The FluCide drug candidates are now expected to enter human clinical stage later
than the HerpeCide drug candidates.
Animal model studies of lethal herpesvirus
infection using the highly pathogenic and neurotropic HSV-1 H129 strain in two different sites resulted in 85% to 100% survival
in animals treated with certain anti-HSV nanoviricide drug candidates, while control animals uniformly died. We reported on these
studies in April 2015, from Professor Emeritus Ken Rosenthal’s lab at NEOMED, and in August 2015, from TransPharm Preclinical
Solutions, LLC, Jackson, MI (TransPharm), a CRO. Previously, we have improved the anti-HSV drug candidates in cell culture studies
and were able to achieve significant effectiveness before engaging into animal studies. We re-designed the anti-HSV drug candidates
so that the solutions would not run off the skin when applied. With this redesign, our drug candidates demonstrated complete survival
of HSV-1 H129 lethally infected animals.
The Company thus has achieved animal studies
efficacy proof of concept for HSV-1 skin topical treatment. The Company believes that the broad-spectrum nature of these drug candidates
should allow effectiveness against related herpesvirus types such as HSV-2 as well as the more distantly related HHV-3 aka VZV
or chickenpox/shingles virus.
The Company has established additional
collaborations towards IND-enabling development of drug candidates against the four indications listed earlier. We now have collaboration
agreements with the CORL at the University of Wisconsin, the Campbell Lab at the University of Pittsburgh, and, the Moffat Lab
at SUNY Upstate Medical Center, for the evaluation of our nanoviricides® drug candidates in models of ocular herpesvirus and
adenovirus infections as well as VZV infections in
in vitro
and
ex vivo
models. The Company also now has the ability
to perform initial screening of our drug candidates in our BSL2 certified Virology Lab in Shelton, CT, against several viruses
that include various strains and subtypes of HSV-1, HSV-2, VZV, and Influenza.
The Company has previously reported the
successes of its nanoviricides drug candidates in pre-clinical studies of dermal herpes virus infections in mouse models. The studies
in Dr. Brandt’s laboratory, namely CORL, at the University of Wisconsin will be critical in optimizing our anti-herpes drug
candidates against ocular herpes virus infections. The goal of these studies will be to identify a drug development candidate as
a treatment for ocular keratitis in humans caused by herpes simplex virus infections. We anticipate undertaking these studies
as we are testing our HerpeCide drug candidates developed as skin ointment/cream against all three of dermal HSV-1, genital HSV-2,
and VZV models. The treatment of ocular keratitis requires an eye drops formulation. We have tested certain of our polymer backbones
in eye drop formulation application successfully previously. However, we are at present constrained by resource availability and
the workload of moving our first drug candidate into IND stage.
The Company has continued to test several
drug candidates with different formulation consistencies in multiple studies in order to select a clinical development candidate
for the topical treatment of shingles. Following identification of the clinical development candidate, the Company will engage
into scaled up production of said drug candidate at our Scale-Up Lab at our Shelton, CT campus. The Scale-up Lab has been in operation
since June 2015, and we have scaled most production operations to 200g scale previously, and some steps to kilogram level scales
recently; levels sufficient to provide clinical trial material supplies.
The Company has initiated manufacture of
our shingles drug candidates as it is scaling up the production processes to meet the quantity requirements for the IND-enabling
safety/toxicology studies. We will also continue to perform additional pre-clinical studies in parallel to the “Tox Package"
studies. These studies include formulation optimization studies, dose-response efficacy studies, efficacy studies with different
viral strains, and PK/PD studies (pharmacokinetics and pharmacodynamics studies) in standard animal models.
The Company believes that its anti-herpes
drug candidates for the treatment of cold sores and for genital lesions should lead to effective control of the cold sores rapidly,
and may also lead to a long lag time before a new recurrence episode occurs. This is because it is believed that recurrence rates
increase by virtue of further infection of new nerve endings from the site of the herpesvirus outbreak, which result in additional
nerve cells harboring the virus. If this in situ re-infection is limited, which we believe is the primary mechanism of nanoviricide
drugs, then it is expected that the number of HSV harboring reservoir cells should decrease, and recurrence rate should go down.
The Company believes that it will be able
to expand its anti-herpes portfolio in the future to include many other herpesviruses such as cytomegalovirus (CMV), HHV-6A, HHV-6B,
KSHV, and Epstein-Barr virus (EBV, cause of mononucleosis). This would lead to a very large number of therapeutic indications beyond
the four or five indications we are currently targeting.
The Company thus continues to expand its
portfolio of opportunities, while also making progress towards the clinical trials stage.
The Company continues to work on its anti-influenza
drug candidates in parallel to its HerpeCide program. We are developing Injectable FluCide™ for hospitalized patients with
severe influenza as our first, broad-spectrum anti-influenza drug candidate. We have demonstrated the very first effective orally
available nanomedicine, namely oral FluCide™ for outpatients with influenza. The development of Oral FluCide is expected
to follow behind Injectable FluCide. These programs are being conducted at a much lower priority, with the highest priority being
given to the various indications in the HerpeCide programs. Development of an anti-Influenza drug candidate has been estimated
to be an extremely expensive process with a long drug development timeframe. This is because of the large number of virus types
and subtypes that change rapidly within and over seasons. The Company at present does not have the resources to engage into a full-fledged
anti-Influenza drug development program. Additionally, Xofluza®, a new drug with a novel mechanism of action (an endonuclease
inhibitor) was very recently approved in the USA (Roche/Genentech). While it reduced viral load significantly in clinical trials,
it did not have a significant effect on the time course of the clinical pathology of influenza infection in the clinical trials
that led to its approval.
Thus, an effective therapy for patients
hospitalized with severe influenza continues to be an unmet need. In addition, a single injection treatment of non-hospitalized
patients would be a viable drug if it provides superior benefits to existing therapies.
Because of our limited
resources, we have now assigned lower development priorities to our other drug candidates in our pipeline such as DengueCide™
(a broad spectrum nanoviricide designed to attack all types of dengue viruses and expected to be effective in the Severe Dengue
Disease syndromes including Dengue Hemorrhagic Fever (DHS) and Dengue Shock Syndrome (DSS)) and HIVCide™ (a potential “Functional
Cure” for HIV/AIDS).
We believe we have demonstrated that we
can rapidly develop different types of formulations for different routes of administration, such as injectable, skin cream, lotion,
gel, and even oral, because of the inherent strength of the nanoviricide platform tailorable technology. The technology also enables
us to develop nasal sprays and bronchial aerosols. We plan to develop the appropriate formulations as necessary.
Our Campus in Shelton, CT
Our campus at Shelton, CT, is now fully operative. With our R&D discovery labs, Analytical Labs, the
Bio labs for virology R&D, the Process Scale-Up production facility, and the cGMP-capable manufacturing facility established
at our new Shelton campus, we are in a strong position than ever to move our drug development programs into the clinic rapidly.
Staff is being trained to achieve full cGMP compliance to support clinical trial manufacture.
Process Scale-Up Production Capability
The Process Scale-up area is operational
at scales of about 200g to 1kg per step for different chemical synthesis and processing steps. It comprises reactors and process
vessels on chassis or skids, ranging from 1L to 50L capacities, as needed. Many of the reactors or vessels have been designed by
us for specific tasks related to our unique manufacturing processes.
cGMP Production Capability
Our versatile, customizable cGMP-capable
manufacturing facility is designed to support the production of kilogram-scale quantities of any of our nanoviricides drugs. In
addition, it is designed to support the production of the drug in any formulation such as injectable, oral, skin cream, eye drops,
lotions, etc. The production scale is designed so that clinical batches for Phase I, Phase II, and Phase III can be made in this
facility. The clean room suite contains areas suitable for the production of sterile injectable drug formulations, which require
special considerations.
We have planned certain minimal infrastructure
modifications to improve the capabilities of the cGMP-compliant facility, based on our experience in the Scale-up operations. Certain
of these improvements are expected to add a separate production suite for the manufacture of skin cream in an area that was designated
for such further expansion. These infrastructure improvements will be undertaken only after appropriate level of funding becomes
available, of which there can be no assurance.
After these infrastructure improvements,
we plan to produce at least three consecutive batches of a drug product and satisfy that said drug product is within our own defined
specifications. If we are satisfied with such strong reproducibility of our processes, we plan to register the facility as a cGMP
manufacturing facility with the US FDA.
At present, we plan on moving operations
to our cGMP-capable manufacturing suite as the operational steps are developed to the level needed for moving them into this facility.
This requires the development of draft-level Standard Operating Procedures, training, and drill-through of operations. We will
also need to establish a Quality Assurance and Quality Control Department. As yet we have not hired any dedicated Quality Assurance
and Quality Control personnel due to constraints on our budget. Our current staff is busy developing our pre-clinical HerpeCide
programs.
If we are able to attract and hire quality
candidates that we severely need, we anticipate that it will take at least six months to one year for each such person to be fully
productive as an integrated part of our team. In the past, we have been very fortunate that newly hired personnel were immediately
productive in tasks delineated to them, and they were productively integrated within a short time frame of several months into
independent but integrated parts of our team. However, this is not always the case.
We operate in a completely novel area of
medicines, which is broadly described as polymeric-micelle based drug conjugates and complex nanomedicines. Our technologies are
also completely novel, and unmatched in the industry. As such, we anticipate a longer training period for new employees than in
normal small chemical or biological drugs. We continue to seek talented scientists and engineers with specialized training. However,
it is difficult to attract such talent for a small, pre- revenue pharma company such as ours.
We employ the same team that developed
the small-scale synthesis chemistry for translation of those chemical syntheses into clinical-scale processes, and also to perform
the related chemical engineering, quality control, quality assurance, and regulatory tasks along the way. Because of the small
size of our scientific staff, this results in significant serialization of efforts. However, the personnel cost, as well as the
time and expense cost of transfer of knowledge and training of a separate dedicated team is avoided because the same expert scientists
who have developed the chemistries are also involved in scaling them up into process scale. To enable such extensive multi-tasking,
we have a continuous training program in place, with both formal and informal components. We believe that this approach helps us
keep drug development costs as low as possible.
Our BSL-2 Certified Virology Lab
We have significantly enhanced our internal
anti-viral cell culture testing capabilities at our Shelton campus. We have achieved BSL-2 (Biological Safety Level 2) certification
from the State of Connecticut for our Virology suite at the new campus. This suite comprises three individual virology workrooms,
enabling us to work on several different viruses and strains at the same time. This facility is designed only for cell culture
studies on viruses, and no animal studies can be conducted at any of our own facilities. We have brought in Brian Friedrich, Ph.D.
as the Company’s Virologist. Dr. Friedrich has previously performed drug screening of hundreds of candidates against several
viruses including alphaviruses, bunyaviruses, and filoviruses (namely, Ebola and Marburg, which are BSL-4), to discover potential
therapeutics, while he was at United States Army Medical Research Institute of Infectious Diseases (USAMRIID). Brian has also worked
extensively on Flaviviruses, specifically West Nile Virus, while at University of Texas Medical Branch (UTMB). He has also worked
on HIV as part of his PhD thesis. Dengue viruses as well as the Zika virus belong to the Flavivirus family.
Dr. Friedrich has established several different
types of assays for screening of candidates against VZV, HSV-1 and HSV-2 in our lab, and is establishing assays for Influenza viruses
and HIV. We believe that having developed the internal capabilities for cell culture testing of our ligands and nanoviricides against
a variety of viruses has substantially strengthened and accelerated our drug development programs. We believe that this internal
screening enables speedy evaluation of a much larger number of candidates than external collaborations allow. This has significantly
improved our ability of finding highly effective ligands and performing structure-activity-relationship studies of the same in
a short time period.
Manufacturing Requirements of Some of
Our Drug Candidates
The HerpeCide program drug product batch
requirements are estimated to be fairly modest because of the topical nature of treatment. In consultation with BASi and BCG, we
have currently estimated a batch size of approximately 1~2 kg will be sufficient for the full “Tox Package” (i.e.
safety and toxicology) studies of our dermal topical shingles drug candidate. We are estimating that a ~500g batch will be more
than sufficient for initial Phase-I human clinical studies as well. Our current estimate for a Phase IIa human clinical efficacy
study is also in the range of a ~500g batch requirement. We already have the facilities for producing up to 1kg per batch or more.
Many of our synthesis steps have already been scaled up to ~1kg scales. Thus we believe that we have sufficient production capability
for the amounts of the HerpeCide drugs that would be needed for tox package as well as clinical studies.
As we move our drug candidates into clinical
studies, we plan to perform further scale-up studies to get to about 1kg per batch production scale. In the current facility, we
may be able to manufacture about 10kg to 20kg of cGMP product annually. Depending upon the drug’s potency and indication,
this production size may fetch modest revenues of around $50M to $500M, depending upon the cost metrics, enabling profitable market
entry. Such initial commercialization would allow the Company to turn itself into a stand-alone pharmaceutical company, by enabling
capital formation for larger scale manufacturing facilities and fueling further growth.
NanoViricides Business Strategy in
Brief
NanoViricides, Inc. intends to perform
the regulatory filings and own all the regulatory licenses for the drugs it is currently developing. The Company will develop these
drugs in part via subcontracts to TheraCour Pharma, Inc., the exclusive source for these nanomaterials. The Company plans to market
these drugs either on its own or in conjunction with marketing partners. The Company also plans to actively pursue co-development,
as well as other licensing agreements with other Pharmaceutical companies. Such agreements may entail up-front payments, milestone
payments, royalties, and/or cost sharing, profit sharing and many other instruments that may bring early revenues to the Company.
Such licensing and/or co-development agreements may shape the manufacturing and development options that the company may pursue.
There can be no assurance that the Company will be able to enter into co-development or other licensing agreements.
The Company has kept its capital expenditures
to a minimum in the past, and we intend to continue to do the same, in order to conserve our cash for drug development purposes,
and in order to minimize additional capital requirements.
Collaborations, Agreements and Contracts
Our strategy is to minimize capital expenditure.
We therefore rely on third party collaborations for the testing of our drug candidates. We continue to engage with our previous
collaborators. We also seek to engage with additional collaborators, as necessitated for the progress of our programs.
We have signed a collaboration agreement
with the Professor Moffat Lab at SUNY Upstate Medical Center, Syracuse, NY, for evaluating safety and effectiveness studies of
our drug candidates in cell culture and in animal models for shingles VZV infections.
We have signed a collaboration agreement
with the CORL at the University of Wisconsin, Madison, WI, for HSV-1 and HSV-2, with focus on small animal models for ocular disease.
We have engaged Biologics Consulting Group,
Inc., to help us with the US FDA regulatory submissions. We are also engaged with Australian Biologics Pty, Ltd to help us with
clinical trials and regulatory approvals in Australia. We believe that cGMP-like manufactured product is acceptable for entering
human clinical trials in Australia.
We anticipate completing master services
agreements, after performing our due diligence, with additional parties in furtherance of our anti-viral drug development programs.
We have continued to achieve significant
milestones in our drug development activities. All of our drug development programs are presently at pre-clinical or advanced pre-clinical
stage. We believe we are advancing these programs at a faster pace than industry peers. We continue to test several drug candidates
under each program even though we may achieve extremely strong results with some of the candidates
Patents, Trademarks, Proprietary
Rights: Intellectual Property
The nanomedicine technologies licensed
from TheraCour Pharma, Inc. (“TheraCour”) serve as the foundation for our intellectual property. NanoViricides holds
a worldwide exclusive perpetual license to this technology for several drugs with specific targeting mechanisms in perpetuity for
the treatment of the following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis
C Virus (HCV), Rabies, Herpes Simplex Virus (HSV-1 and HSV-2), Influenza and Asian Bird Flu Virus. The Company has entered into
an Additional License Agreement with TheraCour granting NanoViricides the exclusive licenses in perpetuity for technologies developed
by TheraCour for the additional virus types: Dengue viruses, Japanese Encephalitis virus, West Nile Virus, Viruses causing viral
Conjunctivitis (a disease of the eye) and Ocular Herpes, and Ebola/Marburg viruses. NanoViricides may want to add further virus
types to its drug pipeline, which would require negotiation with TheraCour for the same.
These licenses are not limited to underlying
patents, but also include the know-how, trade secrets, and other important knowledge base that is utilized for developing the drugs
and making them successful.
In addition, these extremely broad licenses
are not limited to some specific chemical structures, but comprise all possible structures that we could deploy against the particular
virus, based on these technologies. In addition, the licenses are held in perpetuity by NanoViricides for worldwide use. The licenses
are also exclusively provided to NanoViricides for the licensed products so NanoViricides is the only party that can further sublicense
the resulting drugs to another party, if it so desires. The licenses can revert only in the case of a default by NanoViricides.
The terms of default are such that, effectively, TheraCour would be able to take the licenses back only in the event that NanoViricides
files bankruptcy or otherwise declares insolvency and the inability to conduct its business.
A fundamental Patent Cooperation Treaty
(“PCT”) patent application, on which the nanoviricides® technology is based, has resulted in additional issued
patents in Europe and Korea. As with issuances in other countries including the United States, these patents have been allowed
with a very broad range of claims to a large number of families of chemical structure compositions, pharmaceutical compositions,
methods of making the same, and uses of the same. The corresponding original “pi-polymer” international application,
namely, PCT/US06/01820, was filed under the Patent Cooperation Treaty (PCT) system in 2006. Several other patents have already
been granted previously in this patent family in various countries and regions, including Australia, ARIPO, Canada, China, Hong
Kong, Indonesia, Israel, Japan, Mexico, New Zealand, OAPI, Philippines, Singapore, Vietnam, South Africa, and the USA. Prosecution
in several other countries continues. In May 2012, the US Patent (No. 8,173,764) was granted for “Solubilization and Targeted
Delivery of Drugs with Self-Assembling Amphiphilic Polymers.” The US patent term is expected to last through October 1, 2028,
including anticipated extensions in compensation for time spent in clinical trials. This US Patent has been allowed with a very
broad range of claims to a large number of families of chemical structure compositions, pharmaceutical compositions, methods of
making the same, and uses of the same. The disclosed structures enable self-assembling, biomimetic nanomedicines. Estimated expiry
dates for these patents range nominally from 2027 to 2029 with various extensions accounting for delays in clinical trials. Additional
issuances are expected in Europe, and in several other countries around the world.
In addition to this basic PCT application
that covers the “pi-polymer” structure itself, another PCT application, PCT/US2007/001607, that discloses making antiviral
agents from the TheraCour family of polymers and such structures is in various stages of prosecution in several countries, and
has already issued in at least seven countries and regions. The counterparts of the international PCT application have issued as
a granted patent in Australia, Japan, China, ARIPO, Mexico, New Zealand, OAPI, Pakistan, and, South Africa to date. Additional
issuances are expected in Europe, USA, and in several other countries around the world. This patent application covers antivirals
based on the TheraCour polymeric micelle technologies, their broad structures and compositions of matter, pharmaceutical compositions,
methods of making the same, and their uses. The nominal expiry dates are expected to range from 2027 to 2029.
More than 61 patents have been issued globally
on the basis of the two international PCT patent families that cover the fundamental aspects of our platform technology. Additional
patent grants are expected to continue as the applications progress through prosecution processes. All of the resulting patents
have substantially broad claims.
The patents are issued to the inventors
Anil R. Diwan, PhD, Jayant G. Tatake, PhD, and Ann L. Onton, all of who are among the founders of NanoViricides, Inc. The patents
have been assigned to AllExcel, Inc., the Company at which the groundbreaking work was performed. AllExcel, Inc. has contractually
transferred this intellectual property to TheraCour Pharma, Inc.
NanoViricides has entered into a Memorandum
of Understanding with TheraCour, whereby TheraCour will initiate discovery and development for drug candidates for a new virus
or indication upon request. If the resulting drug candidates are worthy of further drug development, NanoViricides may determine
that it should enter into a licensing agreement with TheraCour. In such a case, NanoViricides would obtain an independent asset
valuation for the asset(s) to be licensed from a party experienced in such valuations. NanoViricides and TheraCour would thereafter
negotiate the terms of compensation for the new license agreement. However, there can be no assurance that an agreement for licenses
for new viruses will be entered into on terms that are favorable to NanoViricides. We believe this process has been generally beneficial
for NanoViricides, since this process saves NanoViricides from the cost of acquiring and paying for licenses that it may not want
to pursue further. At present, TheraCour has licensed to NanoViricides HSV-1 and HSV-2, but has not licensed the VZV area, nor
has it licensed any of the remaining herpesviruses. Licensing of these assets is currently in process as described earlier. However,
there can be no assurance that the Company will be able to enter into an agreement with TheraCour for such license or that the
agreement will be on terms that are favorable to the Company.
Patents and other proprietary rights are
essential for our operations. If we have a properly designed and enforceable patent, it can be more difficult for our competitors
to use our technology to create competitive products and more difficult for our competitors to obtain a patent that prevents us
from using technology we create. As part of our business strategy, we actively seek patent protection both in the United States
and internationally and intend to file additional patent applications, when appropriate, to cover improvements in our compounds,
products and technology. We also rely on trade secrets, internal know-how, technological innovations and agreements with third
parties to develop, maintain and protect our competitive position. Our ability to be competitive will depend on the success of
this strategy.
The Company believes that the drugs by
themselves, Shingles antiviral topical treatment, HerpeCide for Cold Sores, HerpeCide for genital ulcers, antiviral nanoviricide
eye drops, Injectable FluCide, Oral FluCide, DengueCide, HIVCide, RabiCide, and others, may be eligible for patent protection.
The Company plans on filing patent applications for protecting these drugs when we have definitive results from in-vitro or in-vivo
studies that enable further drug development and IND application filing.
The issued patents have nominal expiry
dates in 2026 to 2029. The dates can be further extended in several countries and regions for the additional allowances due to
the regulatory burden of drug development process, or other local considerations, such as licensing to a local majority held company.
Many countries allow up to five years extension for regulatory delays.
No patent applications have been filed
for the actual drug candidates that we intend to develop as drugs as of now. We intend to file the patent application for FluCide
and HerpeCide compounds before entering human clinical trials. The estimated expiry date for the FluCide and HerpeCide patents,
if and when issued, would be no earlier than 2038.
We may obtain patents for our compounds
many years before we obtain marketing approval for them. Because patents have a limited life, which may begin to run prior to the
commercial sale of the related product, the commercial value of the patent may be limited. However, we may be able to apply for
patent term extensions, based on delays experienced in marketing products due to regulatory requirements. There is no assurance
we would be able to obtain such extensions. The Company controls the research and work TheraCour performs on its behalf and no
costs may be incurred without the prior authorization or approval of the Company.
Patents relating to pharmaceutical, biopharmaceutical
and biotechnology products, compounds and processes such as those that cover our existing compounds, products and processes and
those that we will likely file in the future, do not always provide complete or adequate protection. Future litigation or reexamination
proceedings regarding the enforcement or validity of our licensor, TheraCour Pharma Inc.’s existing patents or any future
patents, could invalidate TheraCour’s patents or substantially reduce their protection. In addition, the pending patent applications
and patent applications filed by TheraCour, may not result in the issuance of any patents or may result in patents that do not
provide adequate protection. As a result, we may not be able to prevent third parties from developing the same compounds and products
that we have developed or are developing. In addition, certain countries do not permit enforcement of our patents, and manufacturers
are able to sell generic versions of our products in those countries.
We also rely on unpatented trade secrets
and improvements, unpatented internal know-how and technological innovation. In particular, a great deal of our material manufacturing
expertise, which is a key component of our core material technology, is not covered by patents but is instead protected as a trade
secret. We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants and
vendors. These agreements provide that all confidential information developed or made known to an individual during the course
of their relationship with us will be kept confidential and will not be used or disclosed to third parties except in specified
circumstances. In the case of employees, the agreements provide that all inventions made by the individual while employed by us
will be our exclusive property. We cannot be certain that these parties will comply with these confidentiality agreements, that
we have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered
by our competitors.
Trademarks
On April 20, 2010, the United States Patent
and Trademark Office granted trademark registration number 3,777,001 to the Company for the standard character mark “nanoviricides”
(the “Mark”) for International Class 5, pharmaceutical preparation for the treatment of viral diseases. The Mark was
registered on the Principal Register and is protected in all its letterforms, including corresponding plural and singular forms,
various forms of capitalization, and fonts and designs.
Analysis of Financial Condition,
and Result of Operations
As of September 30, 2018, we had cash and
equivalents of $6,082,365, prepaid expenses of $201,532, and net property and equipment of $10,707,027. Accounts payable and accrued
expenses were $1,269,729 and current derivative liabilities-warrants were $122,541. Stockholders’ equity was $15,978,251
at September 30, 2018.
In comparison, as of June 30, 2018, we
had cash and equivalents of $7,081,771, and $240,257 in prepaid expenses, and net property and equipment stood at $10,841,093.
Accounts payable and accrued expenses were $583,856 and current derivative liabilities-warrants were $298,092. Stockholders’
equity was $17,664,264 at June 30, 2018.
During the three-month period ended September
30, 2018 we used $962,152 in cash toward operating activities.
We do not anticipate any major capital
costs going forward in the near future.
Management adjusted its planned expenditures,
activities, and programs, in accordance with budgetary constraints and in accordance with its expectations of obtaining additional
financing.
The Company has made several adjustments to its past expenditures in the ensuing annual budget, eliminating
several expenses including a reduction in workforce and consultants to the extent feasible without affecting its program of drug
development. In addition, the Company has focused its efforts primarily on a single lead program to minimize cost outlays, namely
taking the shingles drug candidate against VZV into human clinical trials. Management’s budget indicates that these changes
have freed up sufficient funds to allow for the ensuing costs of the external advanced IND-enabling studies of this drug candidate.
Management has considered several options for obtaining additional funds that will be needed for future human clinical trials and
the license of VZV. The Company is also evaluating the possibility of obtaining a mortgage on its fully owned cGMP-capable laboratory
facility in Shelton, CT, in order to free up a portion of the fixed capital for usage as liquid working capital.
In addition, the Company believes that
it has several important milestones that it will be achieving in the ensuing year. Management believes that as it achieves these
milestones, the Company would experience substantial improvement in the liquidity of the Company’s stock, and would significantly
improve the Company’s ability to raise funds on the public markets at terms that may be substantially superior to the terms
we are offered at present.
Management believes that as a result of
the management plan, the Company’s existing resources and access to the capital markets will be sufficient to fund the
Company’s planned operations and expenditures through November 2019. However, the Company cannot provide assurance that its
plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than
it currently anticipates.
The Company does not currently have any
revenue. All of the Company’s products are in the development stage and require successful development through regulatory
processes before commercialization. We have generated funding through the issuances of debt and private placement of common stock
and also the sale of our registered securities. The Company does not currently have any long-term debt. We have not generated any
revenues and we may not be able to generate revenues in the near future. We may not be successful in developing our drugs and start
selling our products when planned, or we may not become profitable in the future. We have incurred net losses in each fiscal period
since inception of our operations.
Research and Development Costs
The Company does not maintain separate
accounting line items for each project in development. The Company maintains aggregate expense records for all research and development
conducted. Because at this time all of the Company’s projects share a common core material, the Company allocates expenses
across all projects at each period-end for purposes of providing accounting basis for each project. Project costs are allocated
based upon labor hours performed for each project. Far fewer man-hours are spent on the projects at low priority than the projects
at high priority. In this quarter, we have focused primarily on our HerpeCide program drug candidates, while continuing limited
work on our FluCide program
The Company has signed several cooperative
research and development agreements with different agencies and institutions. The Company expects to enter into additional cooperative
agreements with other governmental and non-governmental, academic, or commercial, agencies, institutions, and companies. There
can be no assurance that a final agreement may be achieved and that the Company will execute any of these agreements. However,
should any of these agreements materialize, the Company will need to implement a system to track these costs by project and account
for these projects as customer-sponsored activities and show these project costs separately.
The Company has limited experience with
pharmaceutical drug development. Thus, our budget estimates are not based on experience, but rather based on advice given by our
associates and consultants. As such these budget estimates may not be accurate. In addition, the actual work to be performed is
not known at this time, other than a broad outline, as is normal with any scientific work. As further work is performed, additional
work may become necessary or change in plans or workload may occur. Such changes may have an adverse impact on our estimated budget.
Such changes may also have an adverse impact on our projected timeline of drug development.
We believe that this coming year’s
work plan will lead us to obtain certain information about the safety and efficacy of one of the drugs under development in animal
models. If our studies are not successful, we will have to develop additional drug candidates and perform further studies. If our
studies are successful, then we expect to be able to undertake further studies in animal models to obtain necessary data regarding
the pharmaco-kinetic and pharmaco-dynamic profiles of our drug candidates, provided that appropriate levels of funding become available.
We believe this data will enable us to file an Investigational New Drug Application, towards the goal of obtaining FDA approval
for testing the drugs in human patients.
Results of Operations
The Company is a biopharmaceutical company
and did not have any revenue for the three-month periods ended September 30, 2018 and 2017.
Revenues
– The
Company is currently a non-revenue producing entity.
Research and Development Expenses
–
Research and development expenses for the three months ended September 30, 2018 decreased $40,423 to $1,411,483 from $1,451,906
for the three months ended September 30, 2017.
General and Administration Expenses
–
General and administrative expenses for the three months ended September 30, 2018 decreased $150,925 to $627,615 from $778,540
for the three months ended September 30, 2017
.
Interest Income
– Interest
income decreased $2,310 to $22,084 for the three months ended September 30, 2018 from interest income of $24,394 for the three
months ended September 30, 2017. Interest income included interest on cash equivalent deposits in interest-bearing accounts at
market rates. The decrease is due to a decrease in the balances in our investment accounts.
Interest Expense
–
Interest expense decreased $125,000, to $-0- for the three months ended September 30, 2018, from $125,000 for the three months
ended September 30, 2017 due to the redemption of the Company’s Series C Debenture as of November 13, 2017.
Other Expenses
–
Discount on convertible debentures for the three months ended September 30, 2018 decreased $239,351 to $0 from the three months
ended September 30, 2017 due to the redemption of the Company’s Series C Debenture as of November 13, 2017.
Change in fair value of derivatives
–
Change in fair value of derivatives for the three months ended September 30, 2018 decreased $389,297 to $175,551 from $564,848
for the three months ended September 30, 2017.
Income Taxes
– There is no provision
for income taxes due to ongoing operating losses.
Net Loss
- For the
three months ended September 30, 2018, the Company had a net loss of ($1,841,463), or ($0.03) per share on a fully diluted basis
compared to a net loss of ($2,005,555) or ($0.03) per share on a fully diluted basis for the three months ended September 30,
2017. The decrease in the reported loss for the three-month period ended September 30, 2018 is attributable mainly to a decrease
in operating expenses of approximately $191,000, and a decrease of expenses related to the Company’s Series C Debenture
which was redeemed as of November 13, 2017, which resulted in a decrease for the three months ended September 30, 2018 of $125,000
in interest expense and a decrease in discount on convertible debentures of $239,351. These decreased expenses were offset by
a decrease in the gain on the change in fair value of derivatives for the three months ended September 30, 2018 of $389,297. Additionally
the cost of compensation paid in Company Securities was reduced.
Liquidity and Capital Reserves
The Company had cash and cash equivalents
of $6,082,365 as of September 30, 2018 and current liabilities of $1,392,270, inclusive of account payables to a related party,
TheraCour Pharma, Inc.
Since inception, the Company has expended
substantial resources on research and development. Consequently, we have sustained substantial losses. The Company has an accumulated
deficit of approximately $85,533,600 at September 30, 2018.
Management adjusted its planned expenditures,
activities, and programs, in accordance with budgetary constraints and in accordance with its expectations of obtaining additional
financing.
The Company has made several
adjustments to its past expenditures in the ensuing annual budget, eliminating several expenses including a reduction in
workforce and consultants to the extent feasible without affecting its program of drug development. In addition, the Company
has focused its efforts primarily on a single lead program to minimize cost outlays, namely taking the shingles drug
candidate against VZV into human clinical trials. Management’s budget indicates that these changes have freed up
sufficient funds to allow for the ensuing costs of the external advanced IND-enabling studies of this drug candidate.
Management has considered several options for obtaining additional funds that will be needed for future human clinical trials
and license of VZV. The Company is also evaluating the possibility of obtaining a mortgage on its fully owned
cGMP-capable laboratory facility in Shelton, CT, in order to free up a portion of the fixed capital for usage as liquid
working capital
In addition, the Company believes that
it has several important milestones that it will be achieving in the ensuing year. Management believes that as it achieves these
milestones, the Company would experience substantial improvement in the liquidity of the Company’s stock, and would significantly
improve the Company’s ability to raise funds on the public markets at terms that may be substantially superior to the terms
we are offered at present.
Management believes that as a result of
the management plan, the Company’s existing resources and access to the capital markets will be sufficient to fund the
Company’s planned operations and expenditures through November 2019. However, the Company cannot provide assurance that its
plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than
it currently anticipates.
Our estimates for external costs are based
on various preliminary discussions and “soft” quotes from contract research organizations that provide pre-clinical
and clinical studies support. The estimates are also based on certain time estimates for achievement of various objectives. If
we miss these time estimates or if the actual costs of the development are greater than the early estimates we have at present,
our drug development cost estimates may be substantially greater than anticipated now. In that case, we may have to re-prioritize
our programs and/or seek additional funding.
The Company does not have direct experience
in taking a drug through human clinical trials. In addition, we depend upon external collaborators, service providers and consultants
for much of our drug development work.
Management intends to use capital and debt
financing, as required, to fund the Company’s operations. Management also intends to pursue non-diluting funding sources
such as government grants and contracts as well as licensing agreements with other pharmaceutical companies. There can be no assurance
that the Company will be able to obtain such additional capital resources or that such financing will be on terms that are favorable
to the Company.
Off Balance Sheet Arrangements
We have not entered into any off-balance
sheet arrangements during the three months ended September 30, 2018.