Item
1. Business
Company
Overview
Immune
Therapeutics, Inc. (the “Company”) was initially incorporated in Florida on December 2, 1993 as Resort Clubs International,
Inc. (“Resort Clubs”). It was formed to manage and market golf course properties in resort markets throughout the
United States. Galliano International Ltd. (“Galliano”) was incorporated in Delaware on May 27, 1998 and began trading
in November 1999 through the filing of a 15C-211. On November 10, 2004, Galliano merged with Resort Clubs. Resort Clubs was the
surviving corporation. On August 23, 2010, Resort Clubs changed its name to pH Environmental Inc. (“pH Environmental”).
On
April 23, 2012, pH Environmental completed a name change to TNI BioTech, Inc., and on April 24, 2012, we executed a share exchange
agreement for the acquisition of all of the outstanding shares of TNI BioTech IP, Inc. On September 4, 2014, a majority of our
shareholders approved an amendment to our Amended and Restated Articles of Incorporation, as amended, to change our name to Immune
Therapeutics, Inc. We filed our name change amendment with the Secretary of State of Florida on October 27, 2014 changing our
name to Immune Therapeutics, Inc.
The
Company currently operates out of Orlando, Florida. In July 2012, the Company’s focus turned to acquiring patents that would
protect and advance the development of new uses of opioid-related immune- therapies, such as low dose naltrexone (“LDN”)
and Methionine [Met5]-enkephalin (“MENK”). The Company’s therapies are believed to stimulate and/or regulate
the immune system in such a way that they provide the potential to treat a variety of diseases. We believe our therapies may be
able to correct abnormalities or deficiencies in the immune system in diseases such as HIV infection, autoimmune disease, immune
disorders, or cancer; all of which can lead to disease progression and life-threatening situations when the immune system is not
functioning optimally.
In
December 2013, the Company formed a subsidiary, Cytocom Inc. (“Cytocom”), to focus on conducting LDN and MENK clinical
trials in the United States. In December 2014, the Company finalized the distribution of common stock of Cytocom to its shareholders.
As part of the transaction (“Original Agreement”), the Company transferred to Cytocom certain of its rights, title
and interest in or relating to intellectual property (i) patents, patent applications, and all divisional, continuations and continuations-in-part
thereof, together with all reissues, reexaminations, renewals and extensions thereof and all rights to obtain such divisionals,
continuations and continuations-in-part, reissues, reexaminations, renewals and extensions, and all utility models and statutory
invention registrations and any other such analogous rights, (ii) trademarks, service marks, Internet domain names, trade dress,
trade styles, logos, trade names, services names, brand names, corporate names, assumed business names and general intangibles
and other source identifiers of a like nature, together with the goodwill associated with any of the foregoing, and all registrations
and applications for registrations thereof, together with all renewals and extensions thereof and all rights to obtain such renewals
and extensions, (iii) copyrights, mask work rights, database and design rights, moral rights and rights in Internet websites,
whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof and all applications
in connection therewith, together with all renewals, continuations, reversions and extensions thereof and all rights to obtain
such renewals, continuations, reversions and extensions, and (iv) confidential and proprietary information, including, trade secrets
and know-how.
The
Original Agreement also granted the Company rights to market Lodonal™ and Met-Enkephalin (“MENK”) in “Emerging
Markets,” which included all countries excluding Canada, Italy, Japan, France, Germany, United Kingdom, European Community
and the United States. Pursuant to the Original Agreement, the Company was required to pay Cytocom a 5% royalty on all sales all
ongoing drug development and fees due in connection with the underlying patents until such time as Cytocom was funded.
On
December 8, 2014, the number of Cytocom shares of common stock that were issued to our shareholders totaled 113,242,522 shares.
In connection with the Original Agreement, Cytocom issued an additional 140,100,000 shares of its common stock to the Company,
which gave the Company a 55.3% stake in Cytocom on that date. In April 2016, the Board of Directors and a majority of shareholders
of Cytocom approved a reverse stock split of Cytocom’s outstanding common stock with one new share of stock for each twenty
old shares of common stock. Cytocom effectuated and finalized the reverse split in June 2016.
On
May 1, 2018, the Company entered into an amended and restated licensing agreement (the “Restated Agreement”) with
Cytocom. The Restated Agreement restates the licensing arrangement between the Company and Cytocom as provided by the Original
Agreement. The Restated Agreement grants the Company distribution and marketing rights for Lodonal™ and MENK for humans
in Emerging Markets. In addition, the Company has been granted the rights to distribute and market Lodonal™ and MENK for
animal use in the United States. The royalty due to Cytocom has been reduced from 5% to 1% of sales and the Company no longer
has any ongoing obligations to pay for costs in connection with the assets of Cytocom. While the Company formalized the agreement
to deconsolidate on May 1, 2018, Cato Research Ltd and Penn State University, both vendors of the Company, did not consent to
assign the payables to Cytocom.
On
June 4, 2018, the Company and Cytocom entered into a Stock Purchase Agreement (the “Stock Agreement. Pursuant to the Stock
Agreement, the Company cancelled approximately $4,000,000 of debt owed to it by Cytocom in exchange for ten percent (10%) of the
issued and outstanding common stock of Cytocom, as calculated on a fully diluted basis. The Restated Agreement was a condition
of the Stock Agreement.
On
April 8, 2019, the Company signed a second amendment to its licensing agreement (the “Second Amendment”) with Cytocom.
The Second Amendment confirmed that, as of its effective date (December 31, 2018) the Company owned 15.57% of the common shares
issued and outstanding on that date. The Company agreed to assume the obligation to repay all accounts payable obligations and
accrued liabilities owed by Cytocom as of the effective date, except those accounts’ payable obligations and accrued liabilities
as specified in the Second Amendment. The Company also assumed the obligation to repay all notes payable, together with any interest
or fees payable thereon, owed by Cytocom as of the effective date, except those notes’ payable obligations, together with
any interest or fees payable thereon, as specified by the Second Amendment. The parties further agreed that in the event of a
change of control of Cytocom, and at the option of Cytocom, the Company would have the right to purchase outright the Company’s
licensing rights to Emerging Markets for humans under the License Agreement at a price equal to value of those licensing rights
as determined by and independent valuator acceptable to the Company and Cytocom.
At
December 31, 2019, the Company’s equity interest in Cytocom stood at 14.6% of Cytocom’s issued and outstanding common
stock. The Company’s policies with respect to accounting for its equity interest in Cytocom is described in Note 2 to the
“Notes to the Condensed Consolidated Financial Statements” below (“Summary of Significant Accounting Policies:
Non-Controlling Interest in Consolidated Subsidiaries”).
On
February 27, 2020, the Company approved and entered into a license agreement (the “License Agreement”) with Forte
Biotechnology International Corp. (“Forte”). Under the License Agreement, the Company granted Forte an exclusive license
to develop and commercialize pharmaceutical products consisting of Lodonal and MENK for use in veterinary applications for all
indications world-wide.
At
present, the Company is a late development-stage biopharmaceutical company focused on the licensing, development and commercialization
of innovative prescription medications for humans in Africa, Central and South America, the Caribbean and China (hereinafter referred
to as “Emerging Markets”). The Company is not permitted to market its licensed products in the United States.
Current
Business Strategy
We
are currently focused on developing safe and effective treatments for diseases caused by immune disfunction, inflammation or viral
infections for humans in Emerging Markets. We seek to identify drugs for indications already demonstrated safe and effective in
humans in order to develop therapeutics, based on these drugs. We believe our development approach enables us to reduce risks
associated with obtaining regulatory approval for unproven product candidates while shortening development times to bring our
product candidates to market.
We
have an active in-licensing effort focused on identifying human therapeutics for development. We are seeking to identify compounds
that have demonstrated safety and effectiveness in at least two species and are in, or have completed, Phase I or Phase II clinical
trials in humans, with well-developed active pharmaceutical ingredients (“API”), process chemistry and a well-defined
manufacturing process.
The
Company’s licensed technology platform is based on two interrelated cytokine drug therapies—Lodonal™ (low dose
Naltrexone (“LDN”)) and Methionine Enkephalin (“MENK”)—which work by triggering a number of receptors,
such as opioid and T Cell receptors on immune cells and activate or balance various cells of the immune system. Lodonal™
is a novel, immunodulator agent which has a basic normalizing effect locally on the gut, and activating and rebalancing the immune
system this mechanism of action has the potential to benefit multiple disorders. Lodonal™ is in development for multiple
possible follow-on indications, including cancer therapy-related toxic side effects to increase safety and improve efficacy. Our
therapies also trigger the tolling receptors to shift Th1 (pro-inflammatory) to Th2 (anti- inflammatory), which is critical when
dealing with autoimmune and inflammatory disease in humans. Lodonal™ is approved in the Republic of Nigeria as an immune
system regulator in the management of HIV patients. The Republic of Malawi has approved Lodonal™ as an adjunct treatment
in cancer patients, and in the Dominican Republic Lodonal™ has been approved in the treatment of HIV/AIDS, Fibromyalgia,
Crohn’s Disease, Inflammatory Disease, cancer and adjunct to standard of care in the treatment of cancer. Finally, Lodonal
is approved in the Republic of Equatorial New Guinea for treatment of cancer, infection with human immunodeficiency virus (HIV),
multiple sclerosis.
There
is need for immune-modulatory therapies that act via a mechanism distinct from the current therapies and hence offer an alternate
treatment option to patients non-responsive to standard of care, while also providing an option to patients responsive to standard
of care but with unacceptable levels of adverse effects. Both drug candidates have more than 15 years of clinical trials in the
treatment of various diseases based on published reports in peer-reviewed journals.
We
believe there are significant unmet medical needs for pets, and that the pet therapeutics and diagnostics segments of the animal
health industry are likely to grow substantially as new treatments and diagnostic processes are identified, developed and marketed
specifically for companion animals. By licensing veterinary applications to Forte, we are able to focus on the development
and commercialization of Lodonal and MENK in developing markets for humans while still in parallel receiving milestones and royalties.
During
the past year, the Company has added new members to both its Board of Directors as well its Scientific Advisory Board to guide
it in the sale of follow-on indications currently planned for Lodonal. The Scientific Advisory Board will focus primarily on physician
education, and community and global awareness regarding the importance and availability of solutions for neglected comorbidities,
such as the first-in-class immunodulator for Lodonal for its currently approved indication in Emerging Markets. The Company has
developed relationships with more than 20 physicians, pharmacists and patient advocates around the world who are recognized specialists
and key opinion leaders in the planned Lodonal follow-on indications, and is seeking their membership on the Scientific Advisory
Board. As announced on August 7, 2018, Dr. Roscoe Moore Jr, a nationally-recognized medical Epidemiologist and veterinarian, joined
Company as both a director and a member of the Scientific Advisory Board. In addition to Dr. Moore Jr., we added Dr. Gary Blick,
a leading Key Opinion Leader and HIV advocate, to the Scientific Advisory Board.
Therapeutics
Industry for Humans
The
Company is focused on its lead therapies designed for the treatment in Emerging Markets of cancer, HIV/AIDS, Crohn’s disease,
fibromyalgia and Multiple Sclerosis. Management believes the pharmaceutical industry is eager to acquire advanced clinical-phase
and approved products. However, despite the strong demand for advanced clinical-phase products worldwide, nearly 4,000 known compounds
have had their development suspended in Phase II or earlier. Many of these are promising therapeutic drug candidates, but their
development was discontinued because of strategic or financial constraints rather than for clinical reasons. Therefore, management
believes there are clear market opportunities with a significant amount of unmet needs and a robust potential for partnering activities.
As
described more fully above, Cytocom has granted the Company distribution and marketing rights for Lodonal™ and MENK for
humans in Emerging Markets.
Lodonal™
Naltrexone
hydrochloride (Naltrexone) is an oral opioid receptor antagonist that was initially approved by the United States (US) Food &
Drug Administration (FDA) in 1984 (NDA 018932) for opiate addiction and in 1994 for alcohol dependency. Naltrexone has also been
approved in Europe since at least 1989 for the treatment of opiate addiction and more recently alcohol dependency. The standard
regimen for these conditions is one 50 mg tablet per day. Multiple generic versions of naltrexone have been approved by FDA over
the last three decades. FDA approval of all naltrexone products is for use in the management of opioid addiction and alcohol dependence.
At
lower doses (approximately 1/10 for the approved dose [4.5 mg/day]), naltrexone has been reported to exhibit immune modulatory
functions that have potential therapeutic benefits in the treatment of autoimmune and/or inflammatory conditions. Low dose naltrexone
therapy has shown promise in placebo-controlled clinical trials for use in the treatment of diseases with compromised immune system
such as acquired immunodeficiency syndrome (AIDS) caused by infection with human immunodeficiency virus (HIV), cancer, Crohn’s
disease and other inflammatory diseases. Immune Therapeutics, Inc. (Immune Therapeutics) has developed a Low Dose Naltrexone (LDN)
formulation, known as LDN and trade name Lodonal™ for use as an active immunotherapy drug containing 4.5 mg naltrexone.
Lodonal™ is available as tablets, capsules, and liquid formulations for oral administration.
Lodonal™
acts primarily by blocking of the opiate receptors on immune cells for a short time period which results in a reactive increase
in the production of opioid receptors on the cells, and an increase in circulating levels of beta-endorphins and enkephalins.
Increased levels of beta- endorphin and enkephalins have been shown to stimulate the immune system, promoting an increase in the
number and functions of T lymphocytes and natural killer (NK) cells. The increase in the T-cell and NK cell numbers and functions,
in turn, appears to restore a more normal balance of the immune cells such that effects of inflammatory diseases are significantly
reduced. In controlled clinical trials, treatment with LDN led to up to 300% increases in the numbers of T- cells, both CD4+ helper
T cells and CD8+ cytotoxic T cells in patients with Crohn’s Disease, HIV/AIDS, Fibromyalgia, Multiple Sclerosis (MS), autism
or cancer. In addition to the antagonist effect on μ-opioid receptors (opioid receptors with a high affinity for enkaphalins
and beta-endorphin) and other opioid receptors, LDN also exhibited an antagonist effect on non- opioid receptors [Toll-like receptor
4 (TLR4) or TLR-9 as well as the TLR-p receptors) that are found on macrophages such as microglia, which led to shift in Th1 to
Th2 resulting in reduced inflammation.
Lodonal™
is believed to have other biological effects as well. The opioid growth factor (OGF), chemically termed [Met(5)]-enkephalin, is
an endogenous opioid peptide that interacts with the OGF receptor (OGFr) which delays the cell cycle by modulating cyclin-dependent
inhibitory kinase pathways. The OGF-OGFr axis is an inhibitory pathway that plays a role in the onset and progression of autoimmune
diseases and cancer. Studies have shown that the modulation of the OGF-OGFr axis can be accomplished by the use of low doses of
naltrexone. By regulating the OGF-OGFr pathway with LDN, this can have an immune modulation and anti-inflammatory effect. Endogenous
opioids (enkephalins and endorphins) and opioid receptors are found not only in the central nervous system but also on other cells
including immune-mediating cells, and epithelial cells (including those in the gastrointestinal tract) where they play a role
in regulation of inflammation, growth, and mucosal repair. Opioid receptors have been associated with most types of immune cells
and chemokine receptors, where their interaction involves changes in cell proliferation, alteration of functions, and release
of inflammatory cytokines. Due to its ability to block the opioid receptors on a variety of cells, LDN may have effects in a broad
range of immune system disorders.
Extensive
pharmacokinetic (PK) and metabolism data in humans at doses of 50 mg/day (Wall et al., 1981, Meyer at el., 1984) is available
for naltrexone. Additionally, multiple single and repeat dose non-clinical studies have been conducted with naltrexone to evaluate
its toxicity profile at a wide range of doses including doses lower than the marketed dose of 50mg/day. Naltrexone has a good
safety profile at daily doses of up to 50-100 mg. Based on the available information, LDN is also considered to have a safe profile,
accordingly, no additional major non-clinical toxicity studies are deemed necessary for market approval in the US and other regions
of the World. The drug product for Lodonal™ does not include any new excipients.
The
product may be manufactured as a tablet, capsule and a liquid formulation. All of the ingredients in Lodonal™ are used in
similar formulations, and are used in amounts below the maximum daily limit established by FDA for the oral route of administration.
The excipients are pregelatinized starch, silicified microcrystalline cellulose, carboxymethy cellulose, crospovidone and stearic
acid.
The
opioid growth factor (OGF), chemically termed [Met(5)]-enkephalin (MENK), is an endogenous opioid peptide that interacts with
the OGF receptor (OGFr) which delays the cell cycle by modulating cyclin-dependent inhibitory kinase pathways. The OGF-OGFr axis
is an inhibitory pathway that plays a role in the onset and progression of autoimmune diseases and cancer. Studies have shown
that the modulation of the OGF-OGFr axis can be accomplished by the use of low doses of naltrexone (Zagon et al., 2013-A, McLaughlin
PJ et al., 2012-A). This effect is credited with the biological response seen with treatment of low dose naltrexone in multiple
disease model studies.
Major
studies have been conducted with low doses of naltrexone into the treatment of HIV/AIDS, Cancer and Crohn’s Disease. Other
studies have been conducted for the treatment of fibromyalgia, chronic pain, Haley-Haley Disease, hypothyroidism, and Lichen Planopilaris.
HIV/AIDS
In
an in vitro setting, activated CD4+ lymphocytes were infected with a HIV-1 isolate. Naltrexone was used at a concentration of
10−12–10−10 M in cell culture. At this dose, naltrexone did not affect HIV-1 expression; however, naltrexone
was able to increase the antiviral activity of Azidothymidine (AZT) and indinavir 2- to 3-fold. The results of this in vitro study
suggested that the use of LDN in HIV-1-infected patients is most likely to cause a synergistic activity with adjunctive therapy,
specifically anti-viral drugs used to treat HIV-1 infection (Gekker G, et al., 2001).
Cancer
Significant
nonclinical studies have been conducted to evaluate the potency of treatment with naltrexone in cancer disease models. The OGF-OGFr
peptide and receptor have been detected in a wide variety of cancers, including thyroid cancer (e.g. follicular-derived thyroid
cancers), ovarian cancer, triple negative breast cancer, Hepatocellular carcinoma, squamous cell carcinoma of the head and neck,
pancreatic cancer, renal cancer, neuroblastoma, and colon cancer (Zagon et al., 2013-A&B, McLaughlin PG et al., 2009, Meng
J et al., 2013, Avella DM et al., 2010, McLaughlin et al., 2012-B, Zagon et al., 2000, Bisignani GJ et al., 1999, Zagon et al.,
1996, McLaughlin et al., 1999). It has been shown in a number of animal studies that the OGF- OGFr axis can be directly targeted
by the administration of LDN for treatment of a number of cancers. LDN has been shown to stimulate the production of OGF and OGFr
for subsequent interaction following blockade of the receptor, thus having a direct impact on this biological pathway,
stopping the cell cycle, and therefore having the ability to stop cancerous cell growth. Preclinical data from Zagon et al (2013-A)
support the above findings and the use of LDN for the treatment of cancer.
It
has also been demonstrated that immune cell activation and proliferation are sensitive to the effects of LDN. The use of LDN on
both phenotypic and functional maturation of Bone Marrow- derived Dendritic Cells (BMDCs) was tested (Meng J et al., 2013). This
study showed that LDN enhanced maturation of BMDCs by 1) up-regulating the expression of major histocompatibility complex (MHC)
II, CD40, CD83, CD80 and CD86 molecules; 2) down-regulating the rates of pinocytosis and phagocytosis; 3) mounting potential of
BMDCs to drive T cell; and 4) inducing higher levels of Interleukin (IL)-12 and Tumor Necrosis Factor-alpha (TNF-α). Based
upon these data, it was concluded that LDN can efficiently promote the maturation of BMDCs suggesting LDN’s ability for
enhancing host immunity, specifically in cancer therapy.
Female
nude mice were transplanted intraperitoneally (i.p.) with SKOV-3 human ovarian cancer cells. These mice were then treated daily
with OGF (10 mg/kg), LDN (0.1 mg/kg), or an equivalent volume of vehicle (saline, control arm). Tumor burden, as well as DNA synthesis,
apoptosis, and angiogenesis were assessed in tumor tissue after completion of 40 days of treatment. Low doses of naltrexone blocked
the endogenous opioids from opioid receptors for about 4-6 hours post treatment. Both OGF and LDN markedly reduced ovarian tumor
burden by a decrease in tumor nodule numbers and tumor weight (Donahue RN et al., 2011-A).
In
another study, nude mice were transplanted with BxPC-3 human pancreatic cancer cells and then were administered 5 mg/kg of OGF
three times daily. The treated mice exhibited a marked retardation in tumorigenicity compared to animals injected with only sterile
water (controls). OGF-treated animals had a delay of 43% in initial tumor appearance compared to control subjects at 10.6 days
post inoculation. While all of the control mice had tumors, 62% of the mice in the OGF group had no signs of neoplasia. Tumor
tissue excised from mice after 30 days was assayed for levels of OGF and zeta opioid receptors. Tumor tissue levels of OGF were
24-fold greater in OGF-treated mice than controls, but plasma levels of OGF were 8.6-fold lower in animals receiving OGF (Zagon
et al., 1997).
Zagon
and team transplanted nude mice with HT-29 human colon cancer cells. On the same day, mice were administered OGF at dosages of
0.5, 5, or 25 mg/kg/day. More than 80% of the mice receiving OGF once daily beginning at the time of tumor cell transplantation
did not exhibit neoplasia at 3 weeks post-transplantation, compared with a tumor incidence rate of 93% in control mice. At 7 weeks
post-transplantation, 57% of the mice given OGF did not display a tumor. OGF delayed both tumor appearance and growth in animals
developing colon cancer in a xenograft model (Zagon et al., 1996).
Mice
with established ovarian tumors were treated with LDN and cisplatin. The combination treatment resulted in an additive inhibitory
effect on tumorigenesis. LDN alleviated the toxicity associated with cisplatin (e.g. weight loss). LDN had also upregulated the
expression of OGF and OGFr, showing its benefits as a stand-alone or combination therapy in the treatment of cancer (Donahue et
al., 2011-B). These animal studies support the use of LDN as a non-toxic therapy for the treatment of ovarian, pancreatic, colon
and other forms of cancers.
Crohn’s
Disease
Crohn’s
disease is another indication where significant nonclinical and clinical research has been conducted using LDN. The nonclinical
studies are described below, while the clinical studies in Crohn’s disease are described in the following sections. All
the studies point towards promising results in Crohn’s disease with LDN
A
study in mice was conducted to determine if low dose naltrexone could reduce inflammation of the bowel in a chemically-induced
mouse model of Inflammatory Bowel Disease (IBD). To establish the model, C57BL/6J mice were given either untreated drinking water
or water containing 2% dextran sulfate sodium (DSS) in two parallel regimens to establish moderate and severe colitis. After colitis
was established, animals with moderate colitis were administered either saline (control) or naltrexone (8 µg/kg or 400 µg/kg)
daily, while those with severe colitis received 0.1 or 10 mg/kg of naltrexone. DSS-treated animals had significant weight loss
(p = 0.006) and higher disease activity index (DAI) scores (p < 0.001) compared to water controls. Mice that had moderate colitis
and were administered naltrexone at doses of 8 µg/kg or 400µg/kg exhibited less weight loss, lower DAI scores, and
less histologic evidence of inflammation compared to positive controls (DSS + saline). Mice with severe colitis did not significantly
respond to treatment with naltrexone at either dose (Matters et al., 2008).
In
addition to monitoring weight loss, DAI score, and histology, the expression of several genes of interest, including cytokines
and downstream mediators, was examined by real-time reverse transcription polymerase chain reaction. Expression of Interleukin
5 (IL-5), IL-6, IL-12, and signal transducer and activator of transcription 3 (STAT3) and STAT4 were assessed. IL-5 levels were
not significantly changed treated and control mice populations. The levels of mRNA encoding the cytokines IL-6 and IL-12, known
to be up-regulated in IBD, were reduced in naltrexone treated mice compared to the untreated controls to almost normal levels.
There was no effect on the mRNA levels for cytokine signaling intermediate STAT3 but that for STAT4 were improved in the naltrexone-treated
mice. There was no significant effect on the levels of inflammatory cytokine markers (Matters et al., 2008).
Other
Diseases
Although
LDN has been evaluated in several additional indications in clinical trials including fibromyalgia, chronic pain, Haley-Haley
Disease, hypothyroidism, Lichen Planopilaris, and autoimmune diseases, there are few non-clinical studies in these indications.
The
long term effects of OGF and LDN on expression of myelin oligodendrocyte glycoprotein (MOG)-induced autoimmune encephalomyelitis
(EAE) were examined in a C57BL/6 mouse model. The mice were administered daily injections of 10 mg/kg OGF, 0.1 mg/kg LDN or saline
at the time of EAE induction. This treatment regimen continued for 60 days. One hundred percent (100%) of the saline control group
had behavioral symptoms of EAE, in comparison to 63% and 68% of the OGF and LDN mice, respectively. Both severity and disease
indices of the OGF- and LDN-treated mice were notably decreased from saline control cohorts. By the end of the study (day 60),
6- and 3-fold more animals in the OGF and LDN treated groups, respectively, had remission compared to the saline control mice.
The results of this study indicate that treatment with OGF or LDN has no long-term repercussions and did not exacerbate EAE, but
rather halted progression of the disease, reversed neurological deficits, and prevented the onset of neurological dysfunction
(Rahn KA et al., 2011).
The
Company has licensed the following intellectual property from Cytocom for sale in Emerging Markets
Cytocom has licensed to the Company the right to use the intellectual
property discussed in this section in the following countries (“Emerging Markets”):
Argentina
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Ecuador
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Peru
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Angola
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Gabon
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Rwanda
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Antigua and Barbuda
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Gambia
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São Tomé and Príncipe
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Benin
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Ghana
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Senegal
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Bhutan
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Guatemala
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Seychelles
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Bolivia
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Guinea
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Sierra Leone
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Botswana
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Guinea-Bissau
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Solomon Islands
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Burkina Faso
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Guyana
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Somalia
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Burundi
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Haiti
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South Africa
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Brazil
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Honduras
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South Sudan
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Cameroon
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Kenya
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Sri Lanka
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Cape Verde
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Kiribati
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St Vincent and the Grenadines
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Central African Republic
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Lesotho
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Sudan
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Chad
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Liberia
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Swaziland
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Chile
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Madagascar
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Tajikistan
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Congo, Rep
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Malawi
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Tanzania
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Congo, Dem
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Mali
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Togo
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Côte d'Ivoire
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Mauritania
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Uruguay
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Columbia
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Mauritius
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Tonga
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Coro
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Mozambique
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Uganda
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Cuba
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Namibia
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Uzbekistan
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Djibouti
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Nicaragua
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Vanuatu
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Dominica
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Niger
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Venezuela
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Eritrea
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Nigeria
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Zambia
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Ethiopia
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Pakistan
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Zimbabwe
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Equatorial Guinea
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Peoples Republic of China
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For
LDN/LodonalTM for Crohn’s disease, Patent Number 7879870, filed April 16, 2007, issued February 1, 2011, Methods
for the treatment of inflammatory and ulcerative diseases of the bowel (e.g., Crohn’s disease and ulcerative colitis) with
low dose opioid antagonists (e.g., naltrexone, nalmefene or naloxone), pharmaceutical compositions for use in such methods, and
methods for the manufacture of such pharmaceutical compositions.
For
the development of MENK for pancreatic cancer, US Patent Numbers 6,737,397, CA 2,557,504, US 20010046968, US 6737397, US 6136780,
US 20080015211, US 20070053838, US 8003630, US 20110123437, US 7807368, US 7576180, US 7517649, US 20080146512, US 7122651, US
20060073565, US 20050191241, Patent No 8,003,630 issued between 2001 and 2011.
The
license permits any use in products covered by the license that is consistent with the label approved by the FDA or applicable
foreign regulatory authority in the country of sale, including the use of product for the treatment of immune dysfunction and
immune dysfunction. As it relates to use of a product in animals, the license permits any use that is consistent with the label
approved by the Office of Minor Use and Minor Species or applicable foreign regulatory authority in the country of sale for the
use of such product.
In addition to the above patent family the Company has rights under
the following intellectual property:
Name
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Patent or App
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Status
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Patent/Pub Number
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Country
|
|
|
|
|
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An Enkephalin Peptide Composition.pdf
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Patent
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Approved
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PTC220265 GER32746503.8 UK02746509.8 FR02746503.8
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Germany;#UK;#France;#PCT
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Combinatorial Therapies for the Treatment of Neoplasias Using the Opioid Growth Factor Receptor(A).pdf
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Application
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Continued
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20110123437
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US
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Combinatorial Therapies for the Treatment of Neoplasias Using the Opioid Growth Factor Receptor (A2).pdf
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Application
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Pending;#Continued
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2005-091241 A1
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US
|
Combinatorial Therapies for the Treatment of Neoplasias Using the Opioid Growth Factor Receptor (A3).pdf
|
|
Application
|
|
Pending
|
|
US 2016/0256517
|
|
US
|
Combinatorial Therapies for The Treatment of Neoplasias
Using the Opioid Growth Factor Receptor.Pdf
|
|
Patent
|
|
Continued
|
|
PTC/US2005/005268
|
|
PCT
|
Combinatorial Therapies for the Treatment of Neoplasias Using the Opioid Growth Factor.pdf
|
|
Patent
|
|
Approved
|
|
8,003,630
|
|
US
|
Combinatorial Therapies for the Treatment of Neoplasias Using the Opioid Growth.pdf
|
|
Patent
|
|
Approved
|
|
9,375,458
|
|
US
|
Control of Cancer Growth Through the Interaction of [MET] Enkephalin and Zeta Receptor.pdf
|
|
Patent
|
|
Approved
|
|
6,737,397
|
|
US
|
Control of Cancer Growth Through the Interaction of [MET] Enkephalin and the zeta receptor.pdf
|
|
Patent
|
|
Continued
|
|
6,136,780
|
|
US
|
Method for Inducing a Sustained Immune Response (cancer) 15437386 (A).pdf
|
|
Application
|
|
Pending
|
|
20170239239
|
|
US
|
Method for Inducing Sustained Immune Response (HIV).pdf
|
|
Patent
|
|
Approved
|
|
10,111,870
|
|
US / EU/ PTC
|
Method for Treating and Preventing Protozoal Infections (Malaria) (A).pdf
|
|
Application
|
|
Pending
|
|
US20180055835 A1
|
|
US
|
Method of treating cancer of the prostate.pdf
|
|
Patent
|
|
Approved
|
|
6,384,044
|
|
US
|
Method of Treating Lymphoproliferative Syndrome.pdf
|
|
Patent
|
|
Approved
|
|
6,288,074
|
|
US
|
Method of Treating Multiple Sclerosis.pdf
|
|
Patent
|
|
Approved
|
|
6,586,443
|
|
US
|
Methods for Inducing Sustained Immune Response (US).pdf
|
|
Patent
|
|
Approved
|
|
8,633,150
|
|
US
|
Methods for inducing sustained immune response.pdf
|
|
Patent
|
|
Approved
|
|
Germany DE60216458Europe (German, French, UK, Ireland) 1401474Australia AU2002031622
|
|
Germany;#UK;#Europe;
#France;#Ireland;#Australia
|
Methods of Detecting Opioid Growth Factor Receptor (OGFR) in Tissue.pdf
|
|
Patent
|
|
Approved
|
|
7,517,649
|
|
US
|
Methods of Reducing Side Effects in Cancer Therapy.pdf
|
|
Patent
|
|
Approved
|
|
WO2007067753A2
|
|
PCT
|
Methods of Reducing side Effects in Cancer Therapy (A).pdf
|
|
Application
|
|
Continued;
|
|
US 2010/0016209
|
|
US
|
Novel Nucleic Acid Molecules Encoding Opioid Growth Factor Receptors (A).pdf
|
|
Application
|
|
Approved
|
|
20060073565
|
|
US
|
Opioid Growth Factor Receptors.pdf
|
|
Patent
|
|
Approved
|
|
7,576,180
|
|
US
|
Treatment of Inflammatory and Ulcerative Diseases of the Bowel (A).pdf
|
|
Application
|
|
Pending;#Provisional
|
|
Provisional
|
|
US
|
Treatment of Inflammatory and Ulcerative Diseases of the Bowel with Opioid (A).pdf
|
|
Application
|
|
Approved
|
|
US 20080015211
|
|
US
|
Treatment of Inflammatory and Ulcerative Diseases of the Bowel with Opioid Antagonists.pdf
|
|
Patent
|
|
Approved
|
|
7,879,870
|
|
US
|
Met-enkephalin, its application in in treating leukemia and other blood cancer
|
|
patent
|
|
Approved
|
|
CN 200710158742.7
|
|
China
|
Met-enkephalin, its application in preparation of human and animal vaccine;
|
|
Patent
|
|
Approved
|
|
CN 200710158742.7
|
|
China
|
A nasal spray formulation containing Met enkephalin;
|
|
Patent
|
|
Approved
|
|
CN 200610046249.1
|
|
China
|
Low dose naltrexone, combined with MENK, its application in preparation of anticancer drug
|
|
Patent
|
|
Approved
|
|
CN 201210290150.1
|
|
China
|
Low dose naltrexone, combined with MENK, its application in preparation of leukapheresis for anticancer;
|
|
|
|
|
|
|
|
China
|
Compound met-enkephalin as a drug for colon cancer and pancreatic cancer using a method of by isolating and enriching a patient’s own immune cells and following an enriching external incubation are transfused back into the patient thereby providing the patient with a passive immunity containing large amounts of auto-amplified immune cells that combat cancer cells
|
|
|
|
|
|
CN 200810229085.5
|
|
China
|
Low Dose Naltrexone, application in treating autoimmune disease
|
|
Patent
|
|
Approved
|
|
CN 200910011030.1
|
|
China
|
Application of combination of low-dose naltrexone and methionine-enkephalin to preparation of anti-cancer drug
|
|
Patent
|
|
Approved
|
|
CN 201210302259
|
|
China
|
|
|
Patent
|
|
Approved
|
|
NG/P/2017/602 a
|
|
Nigeria
|
Treatment of Inflammatory and Ulcerative Diseases of the Bowel with Opioid Antagonists
|
|
Patent
|
|
Approved
|
|
194734
|
|
Israel
|
Cyclin-dependent kinase inhibitors as targets for opioid growth factor
|
|
Patent
|
|
Pending
|
|
US 7,807,368
(US PgPub 2008-
0146512 A1)
|
|
US
|
Novel nucleic acid molecules encoding opioid growth factor receptors.
|
|
Patent
|
|
Granted
|
|
US 7,122,651
|
|
US
|
Approvals
for sale for human therapies
Lodonal™
has been approved for sale in the following countries:
Republic
of Equatorial Guinea
|
●
|
Drug Approval: Dated 6 December 2013 (4.5mg)
Tablet
|
|
●
|
Indications approved for: Immune system stimulator
for Cancer, HIV infection and MS
|
Nigeria
|
●
|
Drug approval: Dated 19 April 2016
|
|
●
|
Indications approved for: an immune system regulator
in the management of HIV patients
|
Malawi
|
●
|
Drug approval: Dated 16 April 2014
|
|
●
|
Indications approved for: Adjunct treatment
in cancer
|
Dominican
Republic
|
●
|
Approval for sale: October 2018
|
|
●
|
Indications approved for: Immune system regulator
in the management of HIV, adjunct to cancer therapy, fibromyalgia, Crohn’s disease, malaria, inflammatory bowel disease,
multiple sclerosis and cancer as a mon-therapy.
|
Since
the Company received approval from the National Agency for Food & Drug Administration & Control of Nigeria (“NAFDAC”)
to sell LodonalTM in Nigeria, the Company has reached agreements with distributors to sell the product in Nigeria and
some surrounding countries. In October 2013, the Company announced the signing of a Distribution Agreement with AHAR Pharma, a
Nigerian company, to market Lodonal™, in Nigeria for the treatment of autoimmune diseases and cancer. Due to the fact that
AHAR Pharma failed to meet its contractual purchase obligations, in April 2018, AHAR Pharma transferred its rights under the distribution
agreement to Fidson Healthcare Plc (“Fidson”), and Fidson signed an exclusive distribution agreement with the Company
to distribute Lodonal™. In October 2018, the Company shipped 250,000 pills to Fidson. There were no discussions
with Fidson regarding the Distribution Agreement in 2019.
On
August 22, 2017, the Company entered into a Distribution Agreement with TNI BioTech International Ltd. (“TNI”), a
wholly-owned subsidiary, and Omaera Pharmaceuticals Ltd. (“Omaera”). Pursuant to the Agreement, Omaera will be the
sole distributor of the Company’s Products, as listed in Section 2 of the Agreement, for sale in Kenya. The Products to
be distributed by Omaera will be manufactured by Acromax Dominicana, SA (“Acromax”) in the Dominican Republic. The
term of the Agreement began on August 22, 2017 and is to continue for a period of three (3) years, unless earlier terminated.
There were no discussions with Omaera regarding the Distribution Agreement in 2019.
On
October 25, 2016, the Company and Acromax entered into a contract for manufacturing of LDN tablets, capsules and/or creams (“Agreement”).
Subject to the terms and conditions of the Agreement, Acromax will obtain all necessary licenses and permits to carry out the
manufacturing and packaging of LDN in exchange for a fixed fee per tablet plus an additional fee for packaging, shipping and customs
clearance. The Agreement has an initial term of five years unless terminated by either party in accordance with the terms. Acromax
will also distribute LDN in the Dominican Republic.
On
October 18, 2012, the Company and Hubei Qianjiang Pharmaceutical Co., Ltd. (“Qianjiang Pharmaceutical”), signed a
Venture Cooperation Agreement on New Drug Methionine Enkephalin (the “Venture Agreement”) pursuant to which Qianjiang
Pharmaceutical acquired an exclusive license for the production of MENK in China. The Venture Agreement requires that Qianjiang
Pharmaceutical conduct drug research and pilot testing for MENK, organize pre-clinical studies, and apply for clinical trials
for MENK with the Chinese State Food and Drug Administration. The Venture Agreement was amended on February 24, 2013 to expand
the clinical trials from pancreatic to both pancreatic and liver cancer and amended on March 6, 2014 to require Qianjiang Pharmaceutical
to commence studies and clinical trials in China and place funds in the co-administration account.
On
August 6, 2014, the Company entered into a Supplementary Agreement on New Drug Methionine – Enkephalin Cooperation (the
“Amendment”) with Qianjiang Pharmaceutical, amending the Venture Agreement, as amended. The Company and Qianjiang
Pharmaceutical executed the Amendment to accelerate clinical trials in both the United States and China, and agreed to immediately
initiate three month Good Laboratory Practice (“GLP”) Toxicology Studies (rat and dog) within 30 days of signing the
Amendment. The Amendment requires that the GLP Toxicology Studies Trials are conducted in China in accordance with international
standards and standards acceptable to the FDA.
China
In
February 2013, the Company signed a Strategic Framework Agreement for Cooperation with Qianjiang Pharmaceutical. Under the agreement,
the parties will work together to further the development of new products and conduct research and development on the Company’s
licensed patented technology. Specifically, the parties aim to co-invest to develop and market products focusing on HIV, cancer
and related autoimmune system therapies, develop co-ventured manufacturing facilities in China, and develop co-ventured distribution
of the developed products in China and Africa. The agreement does not have a definitive term, as each new agreement resulting
from the cooperation will set forth the material terms, including, but not limited to, fees, duration and termination therein.
In
December of 2016 Qianjiang Pharmaceutical delivered various documents under the agreements related to its studies of Exploratory
Toxicology (nGLP) and Definitive Toxicology (GLP). In addition to the pharmacology and toxicology studies, Qianjiang Pharmaceutical
and China Peptide completed the formulation and CMC necessary to scale up manufacturing of MENK.
There
has been no progress under the agreements in the past 12 months, since a change of ownership of Qianjiang Pharmaceutical in 2017.
Production
On
October 25, 2016, the Company and Acromax Dominicana, SA (“Acromax”) entered into a contract for manufacturing of
LDN tablets, capsules and/or creams (“Agreement”). In accordance with the terms and conditions of the Agreement, Acromax
will obtain all necessary licenses and permits to carry out the manufacturing and packaging of LDN in exchange for a fixed fee
per tablet plus an additional fee for packaging, shipping and customs clearance. The Agreement has an initial term of five years
unless terminated by either party in accordance with its terms.
In
January 2017, Acromax obtained from the Ministry of Public Health and Social Assistance a Medications and Specialized Pharmaceuticals
Registration Certification for LodonalTM, which allows for the manufacture and sale of LodonalTM in the
Dominican Republic and for export. The Ministry also issued a Certificate of Pharmaceutical Product for Nigeria, Kenya, Senegal
and Malawi, which will allow for the export of LodonalTM to those countries where the Company has drug and marketing
approval.
In
February 2018, the Company shipped the first Lodonal products made by Acromax to Nigeria.
Raw
Materials and Principal Suppliers
The
Company relies on third parties for raw materials for the clinical production of its products and product candidates for use in
humans.
In
prior years, American Peptide Company has been the Company’s supplier of the API in MENK, and S.A.L.A.R.S SpA has supplied
the API in LDN. The Company may seek additional sources of the API in the future.
Competition
The
industry for treatment of humans is highly competitive and subject to rapid and significant technological change. While we believe
that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face potential
competition from many different sources including large pharmaceutical and biotechnology companies, specialty pharmaceutical and
generic drug companies, academic institutions, government agencies and research institutions. We believe that key competitive
factors that will affect the development and commercial success of our product candidates are efficacy, safety, tolerability,
reliability, and price and reimbursement level.
Many
of our potential competitors, including many of the organizations named below, have substantially greater financial, technical
and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining
FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be
more successful than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors’
drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product
candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product
candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies
become available. Further, the development of new treatment methods for the conditions we are targeting could render our drugs
non-competitive or obsolete.
Lodonal™/LDN
The
key competitive factors affecting the success of Lodonal™, if approved, are likely to be efficacy, safety, tolerability,
frequency and route administration, convenience and price, the level of branded and generic competition and the availability of
coverage and reimbursement from government and other third-party payors.
The
markets for medicines to treat Crohn’s disease, fibromyalgia, MS, HIV and other autoimmune diseases are well developed and
populated with established drugs marketed by large and small pharmaceutical, biotechnology and generic drug companies. Pfizer
(Lyrica), Eli Lilly (Cymbalta) and Forest Laboratories/Cyprus Biosciences (Savella) market FDA approved drugs for fibromyalgia.
We are aware of several companies pursuing treatments for fibromyalgia, including Chelsea Therapeutics, Johnson and Johnson, Meda,
Pfizer, Synthetic Biologics, Teva Pharmaceutical Industries Ltd., and Theravance. Clinical trials in the U.S. are registered with
the FDA and reported on the FDA’s website at www.clinicaltrials.gov.
Large
pharmaceutical companies have extensive experience in clinical testing and obtaining regulatory approval for drugs. In addition,
many universities and private and public research institutes are active in cancer research, some in direct competition with us.
We also may compete with these organizations to recruit scientists and clinical development personnel. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies.
We
expect Lodonal™, if approved for the treatment of Crohn’s disease, to compete directly with Centocor Ortho Biotech
Inc.’s Remicade (infliximab), UCB S.A.’s Cimzia (certolizumab pegol) and Abbott Laboratories’ Humira (adalimumab),
each of which is currently approved for the treatment of various diseases, including inflammatory bowel disease, ulcerative colitis
and Crohn’s disease, and several other products. Lodonal, if developed and approved for the treatment of MS, would compete
with Biogen Idec’s Avonex (interferon beta-1a), Bayer Healthcare Pharmaceuticals’ Betaseron (interferon beta-1b) and
Teva Pharmaceuticals Industries Ltd.’s Copaxone (Glatiramer Acetate) and several other products. New developments, including
the development of other pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences
industries at a rapid pace.
The
Company believes that LodonalTM will provide the first affordable, non-toxic approach for treatment of immune dysfunction,
cancer and chronic inflammatory state in Emerging Markets. Competitive advantages and benefits of LodonalTM in Emerging
Markets include:
|
●
|
Lower production costs and sales price of treatments.
|
|
●
|
LodonalTM can be manufactured and
delivered in Emerging Markets for under $.90 cents a day
|
|
●
|
Lodonal™ should be able to substantially
reduce health care costs for a number of reasons, including:
|
|
●
|
Lodonal™ can provide a new, non-toxic
inexpensive method of medical treatment by mobilizing the natural defenses of one’s own immune system.
|
|
●
|
It can be used as a stand-alone therapy or an
adjunct to existing immunosuppressive therapies by reducing the toxic side effects of immunosuppressive drugs.
|
|
●
|
Lodonal™ does not require the medical
supervision of antiretroviral or immunosuppressive therapies.
|
|
●
|
Lodonal™ has not been found to have any
no toxic side effects as it is an immunomodulator and activates and re-balances the immune system.
|
|
●
|
Lodonal™ as an immunomodulator has a way
of helping what is now referred to as “non-AIDS morbidity”, and, in the popular press, “premature aging”.
|
|
●
|
Lodonal™ studies show it enhances maturation
of bone marrow dendritic cells (BMDCs).
|
|
●
|
Lodonal™ has been shown to be a safe as
placebo in clinical trials between .03mg and 50mg.
|
|
●
|
Lodonal™ studies show it does not compromise
the immune system.
|
|
●
|
Lodonal™ has been shown to reduce the
number of opportunistic infections with HIV/AIDS.
|
|
●
|
Lodonal™ may provide a new, non-toxic
inexpensive method of medical treatment by mobilizing the natural defenses of one’s own immune system. It can be used
as a stand-alone therapy or an adjunct to existing immunosuppressive therapies by reducing the toxic side effects of immunosuppressive
drugs.
|
|
●
|
Lodonal™ may can improve compliance. When
used correctly, antiretroviral therapy (ART) is effective. However, according to recent studies, ART regimens require 70–90%
adherence in order to be effective. Sustaining adherence to ART over the long term requires accurate and consistent monitoring,
and this is a particular challenge for countries in sub-Saharan Africa.
|
MENK/MENK
The
key competitive factors affecting the success of MENK, if approved, are likely to be efficacy, safety, tolerability, frequency
and route administration, convenience and price, the level of branded and generic competition and the availability of coverage
and reimbursement from government and other third-party payors.
Each
cancer indication for which we are developing products has a number of established therapies with which our candidates will compete.
Most major pharmaceutical companies and many biotechnology companies are aggressively pursuing new cancer development programs,
including both therapies with traditional, as well as novel, mechanisms of action. Some of the anticipated competitor treatments
for acute myelogenous leukemia include Genzyme Corporation’s Clolar (clofarabine), currently approved as a treatment for
acute lymphoblastic leukemia, Eisai Corporation’s Dacogen (decitabine), currently approved as a treatment for myelodysplastic
syndrome, Celgene Corporation’s Vidaza (azacitidine), currently approved as a treatment for myelodysplastic syndrome, and
Vion Pharmaceuticals, Inc.’s Onrigin (laromustine) currently being developed as a treatment for acute myelogenous leukemia,
any or all of which could change the treatment paradigm of acute leukemia. Each of these compounds is further along in clinical
development than is MENK activated NK cell product.
Customers
The
Company reported no sales in 2019. In 2018, there were Lodonal™ sales totaling $113,500 to a distributor in Nigeria.
Available
Information
Our
Current Reports on Form 8-K, and Quarterly Reports are electronically filed with or furnished to the Securities and Exchange Commission
(SEC), and all such reports and amendments to such reports have been and will be made available, free of charge, through our website
(http://www.immunetherapeutics.com) as soon as reasonably practicable after such submission to the SEC. Such reports will remain
available on our website for at least 12 months. The contents of our website are not incorporated by reference into this Annual
Report on Form 10-K. The public may read and copy any materials filed by us with the SEC at the SEC’s Public Reference Room
at 100 F Street, NW, Washington, D.C. 20549.
Item
1A. Risk Factors
You
should carefully consider the following factors and other information in this Annual Report and our other SEC filings before making
a decision to invest in our common stock. Additional risks and uncertainties that we are unaware of may become important factors
that affect us. If any of the following events occur, our business, financial conditions and operating results may be materially
and adversely affected. In that event, the trading price of our common stock may decline, and you could lose all or part of your
investment.
Risks
Related to our Business
We
have a limited operating history and are expected to incur significant operating losses during the early stage of our corporate
development.
We
have a limited operating history. Our historical financial information consists only of an audit of our financial results at and
for the years ended December 31, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and 2012. There is limited historical financial information
upon which to base an evaluation of our performance. We are an emerging company, and thus our prospects must be considered in
light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operation,
particularly in the pharmaceutical industry.
Since
inception, we have invested a substantial portion of our time and financial resources in the acquisition and development of our
most advanced drug candidate, LDN. We have generated cumulative losses of approximately $385 million and $14.1 million stockholders’
deficit since inception, and we expect to continue to incur losses until LDN is approved by the FDA and foreign regulatory authorities
for sale for our therapies. Even if regulatory approval is obtained, there is a risk that we will not be able to generate material
sales of LDN, which would cause us to continue to incur losses.
We
may never generate revenue, are not profitable and may never become profitable.
We
expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain
profitability. Even if we are able to launch LDN we expect to incur substantial losses for the foreseeable future and may never
become profitable.
We
may not generate significant revenue from the sale of our products for the foreseeable future. In addition, if approved, we expect
to incur significant costs to commercialize our drug candidates and our drugs may never gain market acceptance. If our drug candidates
fail to demonstrate safety and efficacy in clinical trials, do not gain regulatory approval, or do not achieve market acceptance,
we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in
subsequent periods. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.
Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the
extent of any future losses or whether we will become profitable.
We
will see losses from our clinical trials conducted either directly or through our licensors for the foreseeable future, and if
we or they fail at one or more of our clinical trials, it could affect the value of the Company’s stock.
We
rely on financings to fund and conduct clinical trials directly or through our licensors needed for NDA submission with respect
to LDN. Any of the following events or factors could have a material adverse effect on our ability to generate revenue from the
commercialization of LDN:
|
●
|
The Company or its licensor may be unable to
successfully complete the clinical development of LDN;
|
|
●
|
The Company or its licensor must comply with
any possible additional requests and recommendations from the FDA, including additional clinical trials;
|
|
●
|
The Company or its licensor may not obtain all
necessary approvals from the FDA and similar foreign regulatory agencies;
|
|
●
|
The Company or its licensor may not commit sufficient
resources to the development, regulatory approval, marketing and distribution of LDN;
|
|
●
|
LDN must be manufactured in compliance with
requirements of the FDA and similar foreign regulatory agencies and in commercial quantities sufficient to meet market demand;
|
|
●
|
LDN may not achieve market acceptance by physicians,
patients, veterinarians and third party payers;
|
|
●
|
LDN may not successfully compete against alternative
products and therapies; and
|
|
●
|
The Company or any other pharmaceutical organization
may independently develop products that compete with LDN.
|
To
obtain approval from the FDA of an NDA for LDN for treatment of humans, The Company or its licensor will need to demonstrate through
evidence of adequate and well-controlled clinical trials that LDN is safe and effective for each proposed indication. However,
LDN may not be approved even though it achieved its specified endpoints in future Phase III clinical trials intended to support
an NDA, which may be conducted by the Company or its licensor. The FDA may disagree with the trial design and the interpretation
of data from clinical trials, may ask the Company or licensor to conduct additional costly and time consuming clinical trials
in order to obtain marketing approval or approval to enter into an advanced phase of development, or may change the requirements
for approval even after it has reviewed and commented on the design for our future clinical trials. The FDA may also approve LDN
for fewer or more limited indications than the Company or its licensor may request, or may grant approval contingent on the performance
of costly post-approval clinical trials. In addition, the FDA may not approve the labeling claims that we believe are necessary
or desirable for the successful commercialization of LDN.
The
Company anticipates that to initiate a clinical trial for humans in the next 12 months, it would need approximately $2-$5 million
to fully develop products and for clinical trials. The trials would focus the use of MENK for treatment of cancer in Africa.
The
development of new drugs is a highly risky undertaking which involves a lengthy process, and therefore our drug discovery and
development activities may not result in products that are approved by the applicable regulatory authorities on the time schedule
we have planned, or at all.
Our
drug candidates for treatment of humans are in early stages of drug discovery or clinical trials and are prone to the risks of
failure inherent in drug development. As of the date of this Form 10-K, both of our current drug candidates, MENK and LDN have
been tested on human beings. We or our licensor will need to conduct additional clinical trials before we can demonstrate that
our drug candidates are safe and effective to the satisfaction of the FDA and other regulatory authorities. Clinical trials are
expensive and uncertain processes that can take multiple years to complete. We cannot assure you that our ongoing clinical trials
or any future clinical trial of any of our other drug candidates, will be completed on schedule, or at all, or whether our planned
clinical trials will start in a timely manner. The commencement of our planned clinical trials could be substantially delayed
or prevented by a number of factors, including:
|
●
|
delays or failures in obtaining sufficient quantities
of the API and/or drug product;
|
|
●
|
delays or failures in reaching an agreement
on acceptable clinical trial agreement terms or clinical trial protocols with prospective sites and with the FDA or other
foreign regulatory bodies;
|
|
●
|
delays or failures in obtaining approvals to
conduct a clinical trial at a prospective site;
|
|
●
|
the need to successfully complete, on a timely
basis, preclinical safety pharmacology studies (for MENK);
|
|
●
|
the limited number of, and competition for,
suitable sites to conduct the clinical trials;
|
|
●
|
the limited number of, and competition for,
suitable patients for enrollment in the clinical trials; and
|
|
●
|
delays or failures in obtaining regulatory approval
to commence a clinical trial.
|
The
completion of clinical trials by us or its licensor could also be substantially delayed or prevented by a number of factors, including:
|
●
|
slower than expected rates of patient recruitment
and enrollment;
|
|
●
|
failure of patients to complete the clinical
trials;
|
|
●
|
failure of our third party vendors to timely
or adequately perform their contractual obligations relating to the clinical trials;
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inability or unwillingness of patients or medical
investigators to follow our clinical trial protocols;
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inability to monitor patients adequately during
or after treatment;
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termination of the clinical trials by one or
more clinical trial sites;
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unforeseen safety issues;
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lack of efficacy demonstrated during clinical
trial results;
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lack of adequate funding to continue the clinical
trials;
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the need for unexpected discussions with the
regulatory agencies regarding the scope or design of our clinical trials or the need to conduct additional trials;
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unforeseen delays by the regulatory agencies
after submission of our results;
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an unfavorable FDA inspection of our contract
manufacturers of APIs or drug products; and/or
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inspection of the clinical trial operations
or trial sites by regulatory authorities resulting in the imposition of a clinical hold.
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Any
failure or significant delay in completing clinical trials for our licensor’s or our drug candidates will harm the commercial
prospects for our drug candidates and adversely affect our financial results.
Additionally,
changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes.
Amendments may require us to resubmit our clinical trial protocols to regulatory agencies for reexamination, which may impact
the costs, timing or successful completion of a clinical trial. If we experience delays in completion of a clinical trial, or
if we terminate any of our clinical trials, the commercial prospects for our drug candidates may be harmed and our ability to
generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement
or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a drug candidate.
If
we or our licensor are required to suspend or discontinue clinical trials due to side effects or other safety risks, or if we
are required to conduct studies on the long-term effects associated with the use of our drug candidates, our efforts to commercialize
our products could be delayed or halted.
Our
or our licensor’s clinical trials may be suspended or terminated at any time for a number of safety-related reasons. For
example, administering any drug candidate to humans may produce undesirable side effects. We may voluntarily suspend or terminate
our clinical trials if at any time we believe that our drug candidates present an unacceptable safety risk to the clinical trial
patients. In addition, agencies may order the temporary discontinuation or termination of our clinical trials at any time if they
believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements, including if they
present an unacceptable safety risk to patients. The existence of undesirable side effects resulting from our drug candidates
could cause us or regulatory authorities to interrupt, delay or halt clinical trials of our drug candidates and could result in
the regulatory agencies denying further development or approval of our drug candidates for any or all targeted indications.
Further,
cytokine receptors and opiate growth factor receptors are a novel class of targets. As a result, we may experience unforeseen
adverse side effects with our existing and future drug candidates, including MENK and LDN. As of the date of this registration
statement, although we have not observed harmful side effects in prior studies of LDN or MENK, later trials could reveal such
side effects. The pharmacokinetic profile and results of preclinical studies may not be indicative of results in any clinical
trial.
Neither
we nor or our licensor have not conducted studies on the long-term effects associated with the use of our drug candidates. Studies
of long-term effects and chronic dosing (approximately 1 year of dosing); will be required for regulatory approval and may delay
introduction of our therapies or our other drug candidates into the market. Additional studies could also be required at any time
after regulatory approval of any of our drug candidates. Some or all of our drug candidates may prove to be unsafe for human use.
Even
if our or our licensor’s drug candidates do obtain regulatory approval, they may never achieve market acceptance or
commercial success.
Even
if we or our licensor obtain regulatory approval, our drug candidates may not achieve market acceptance among physicians, veterinarians,
patients and/or third-party payers or they may be used only in applications more restricted than we anticipate, and ultimately,
may not be commercially successful. Our treatments, if successfully developed, will compete with a number of traditional products
manufactured and marketed by major pharmaceutical and biotechnology companies. Our treatments may also compete with new products
currently under development by such companies and others. Physicians or veterinarians will prescribe a product only if they determine,
based on experience, clinical data, side effect profiles and other factors, that it is beneficial as compared to other products
currently available and in use. Physicians or veterinarians also will prescribe a product based on their traditional preferences.
Market acceptance of our drug candidates for which we receive approval depend on a number of factors, including:
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the efficacy and safety of our drug candidates
as demonstrated in clinical trials;
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the clinical indications for which the drug
is approved;
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acceptance by physicians or veterinarians, major
operators of clinics and patients of the drug as a safe and effective treatment;
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the potential and perceived advantages of our
drug candidates over alternative treatments;
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the safety of drug candidates seen in a broader
patient group, including its use outside the approved indications;
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the cost of treatment in relation to alternative
treatments;
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the availability of adequate reimbursement and
pricing by third parties and government authorities;
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relative convenience and ease of administration;
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the prevalence and severity of adverse side
effects; and
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the effectiveness of our sales and marketing
efforts.
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If
our drug candidates that obtain regulatory approval fail to achieve market acceptance or commercial success, the Company’s
financial results will be adversely affected.
The
commercial success of LDN depends, in part, on Cytocom’s ability to develop and market the drug in North America, and if
it fails in its initiatives, our ability to generate future revenue in Emerging Markets could be reduced.
Any
of the following events or factors could have a material adverse effect on our ability to generate revenue in Emerging Markets
from the commercialization of LDN:
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Cytocom may be unable to successfully complete
the clinical development of LDN;
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our lack of experience in commercializing and
marketing drug products in Emerging Markets;
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we may not have or be able to obtain sufficient
financial resources to develop and commercialize LDN in Emerging Markets;
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we may not be able to identify a suitable co-development
partner in Emerging Markets;
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we, or any of our future partners, may fail
to fulfill our responsibilities in a timely manner or fail to commit sufficient resources to the development, regulatory approval,
and commercialization efforts related to LDN in Emerging Markets;
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we, or any of our future partners, must comply
with additional requests and recommendations from regulatory agencies in Emerging Markets, including additional clinical trials;
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we, or any of our future partners, may not obtain
all necessary approvals from foreign regulatory agencies;
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LDN must be manufactured in compliance with
requirements of foreign regulatory agencies and in commercial quantities sufficient to meet market demand;
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LDN may not achieve market acceptance by physicians,
veterinarians, patients and third party payers in our markets;
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LDN may not compete successfully against alternative
products and therapies; and
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we, or any pharmaceutical company, may independently
develop products that compete with LDN.
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Changes
in pharmaceutical and biotechnology industry trends could adversely affect the Company’s operating results.
Industry
trends, economic and political factors that affect pharmaceutical, biotechnology, medical device companies and academic/government
entities sponsoring clinical research directly affect the Company’s business. For example, many companies in such industries
and government organizations have been hiring companies to conduct large development projects. The Company’s operations,
financial condition and growth rate could be materially and adversely affected if these industries reduce outsourcing of such
projects. In the past, mergers, product withdrawals, liability lawsuits and other factors in the pharmaceutical industry have
slowed decision making by pharmaceutical companies and correlating government bodies significantly delaying and/or halting drug
development projects. Continuation or increases in such trends could have an adverse effect on the Company’s business. Additionally,
numerous government agencies have undertaken efforts to control growing healthcare costs through legislation, regulation and voluntary
agreements with medical care providers and pharmaceutical companies. If future regulatory cost-containment efforts limit potential
profits derived from new drugs, the Company’s clients may reduce their drug discovery and development spending. A reduction
in drug discovery and development spending could have a material adverse effect on the Company’s results and operations
creating a significant reduction of the Company’s revenue.
We
currently rely on our licensor and third parties to conduct all our clinical trials. If they do not successfully carry out their
contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our
drug candidates.
We
currently do not have the ability to independently conduct clinical trials. We rely on medical institutions, clinical investigators,
contract laboratories, collaborative partners and other third parties, such as contract research organizations, to conduct clinical
trials on our drug candidates. The third parties with whom we contract for execution of our clinical trials play a significant
role in the conduct of these trials and the subsequent collection and analysis of data. These third parties are not our employees,
and except for contractual duties and obligations, we have limited ability to control the amount or timing of resources that they
devote to our programs. Although we rely on these third parties to conduct our clinical trials, we remain responsible for ensuring
that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol.
Moreover, foreign regulatory authorities require us to comply with regulations and standards, commonly referred to as current
Good Clinical Practices (“cGCPs”) for conducting, monitoring, recording and reporting the results of clinical trials
to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed
of the potential risks of participating in clinical trials.
In
addition, the execution of preclinical studies and clinical trials, and the subsequent compilation and analysis of the data produced,
requires coordination among various parties. In order for these functions to be carried out effectively and efficiently, it is
imperative that these parties communicate and coordinate with one another. Moreover, these third parties may also have relationships
with other commercial entities, some of which may compete with us. In most cases, these third parties may terminate their agreements
upon a material breach by us that is not cured within 30 days by providing us with 30 days’ prior written notice. Many of
these agreements may also be terminated by such third parties under certain other circumstances, including our insolvency or our
failure to comply with applicable laws. In general, these agreements require such third parties to reasonably cooperate with us
at our expense for an orderly winding down of services of such third parties under the agreements. If the third parties conducting
our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines,
terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised
due to their failure to adhere to our clinical trial protocols or cGCPs, or for any other reason, we may need to enter into new
arrangements with alternative third parties, which could be costly, and our clinical trials may be extended, delayed or terminated
or may need to be repeated, and we may not be able to obtain regulatory approval for or commercialize the drug candidate being
tested in such trials.
If
any of our drug candidates receive marketing approval, and the Company or others later identify undesirable side effects caused
by the drug candidate, our ability to market and derive revenue from the drugs could be compromised.
If
the Company or others identify undesirable side effects caused by one of our drug candidates, any of the following adverse events
could occur:
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regulatory authorities may withdraw approval
of the drug or seize the drug;
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we may be required to recall the drug or change
the way the drug is administered;
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additional restrictions may be imposed on the
marketing or the manufacturing processes of the particular drug;
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we may be subject to fines, injunctions or the
imposition of civil or criminal penalties;
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regulatory authorities may require the addition
of labeling statements, such as a “black box” warning or a contraindication;
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we may be required to create a medication guide
outlining the risks of such side effects for distribution to patients;
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we could be sued and held liable for harm caused
to patients;
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the drug may become less competitive; and
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our reputation may suffer.
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Any
of these could result in the loss of significant revenues, which would materially and adversely affect our results of operations
and business.
We
may need additional financing and may be unable to raise capital on acceptable terms, or at all, when needed, which could force
us to delay, reduce or eliminate our research and development programs and other operations or commercialization efforts.
We
are advancing multiple drug candidates through discovery and development and will require substantial funds to conduct development,
including preclinical studies and clinical trials, of our drug candidates. Commercialization of any drug candidate will also require
substantial expenditures. To further the development and commercialization efforts of our drug candidates, we may need additional
financing to hire additional employees to co-promote drug candidates or to commercialize drug candidates that may not be covered
by our current collaboration agreements.
At
December 31, 2019, we had $4,925 in cash and cash equivalents. We do not believe that our available cash and cash equivalents
will be sufficient to fund our anticipated level of operations for the next 12 months and we will likely need to seek outside
sources of funding. Assuming that anticipated investment and revenue does not materialize, business operations would not be able
to continue more than 30 days. We believe we require at least $5 million for our operations over the next 12 months. Our future
financing requirements will depend on many factors, some of which are beyond our control, including:
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the rate of progress and cost of our clinical
trials, preclinical studies and other discovery and research and development activities;
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the timing of, and costs involved in, seeking
and obtaining regulatory approvals;
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the continuation and success of our strategic
alliances and future collaboration partners;
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the exercise of remaining options under current
collaborative agreements;
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the costs of preparing, filing, prosecuting,
maintaining and enforcing any patent claims and other intellectual property rights, including litigation costs and the results
of such litigation;
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our ability to enter into additional collaboration,
licensing, government or other arrangements and the terms and timing of such arrangements;
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potential acquisition or in-licensing of other
products or technologies; and
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the technologies or other adverse market developments.
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Future
capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products
and technologies. We currently have no understandings, commitments or agreements relating to any of these types of transactions.
Until
we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance
future cash needs primarily through public or private equity offerings, debt financings, government grants and contracts and/or
strategic collaborations. Additional financing may not be available to us when we need it or it may not be available on favorable
terms, if at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or eliminate
one or more of our clinical trials or research and development programs or our commercialization efforts. We may be required to
enter into collaborative partnerships for one or more of our drug candidate programs at an earlier stage of development or on
less favorable terms, which may require us to relinquish rights to some of our drug candidates that we would otherwise have pursued
on our own. We may also be required to pursue strategic alternatives that may affect our business or corporate structure in order
to make ourselves more attractive to investors.
In
addition, if the Company or any of its future collaboration partners does not perform in the manner we expect or fulfill its responsibilities
in a timely manner, or at all, the clinical development, regulatory approval, and commercialization efforts related to LDN could
be delayed or terminated. It may be necessary for us to assume the responsibility at our own expense for the development of LDN.
In that event, we would likely be required to seek additional funding.
We
may form additional strategic alliances in the future with respect to our independent programs, and we may not realize any benefits
of such alliances.
We
may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties
with respect to our independent programs that we believe will complement or augment our existing business. For example, we plan
to find a partner to co-develop and commercialize MENK and LDN outside North America upon completion of clinical development of
LDN for the treatment of pediatric and adult patients with Crohn’s disease. We face significant competition in seeking appropriate
strategic partners. The negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to
establish a strategic partnership or other alternative arrangements for any future product candidates and programs because our
research and development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a
stage of development for collaborative effort and/or third parties may not view our product candidates and programs as having
the requisite potential to demonstrate safety and efficacy. We cannot be certain that, following a strategic transaction or license,
we will achieve the revenues or specific net income that justifies such transactions. Any delays in entering into new strategic
partnership agreements related to our product candidates could also delay the development and commercialization of our product
candidates and reduce their competitiveness even if they reach the market.
We
do not currently manufacture Low Dose Naltrexone (LDN) and therefore must rely on third-party manufacturing to supply the drug
for clinical trials. If one of our suppliers or manufacturers fails to perform adequately or fulfill our needs, we may be required
to incur significant costs and devote significant efforts to find new suppliers or manufacturers, which would cause delays in
the development and commercialization of our drug candidates.
The
manufacture of pharmaceutical products in compliance with cGMPs requires significant expertise and capital investment, including
the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter
difficulties in production, including difficulties with production costs and yields, quality control, including stability of the
drug candidate and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced regulatory
and cGMP requirements, other regulatory requirements, and foreign regulations. If our manufacturers were to encounter any of these
difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to provide
study drugs in our preclinical studies and clinical trials would be jeopardized. Any delay or interruption in the supply of preclinical
study or clinical trial materials could delay the completion of our preclinical studies and clinical trials, increase the costs
associated with maintaining our preclinical study and clinical trial programs and, depending upon the period of delay, require
us to commence new trials at significant additional expense or terminate the studies and trials completely.
All
manufacturers of our drug candidates must comply with cGMP requirements. These requirements include, among other things, quality
control, quality assurance and the maintenance of records and documentation. Manufacturers of our component materials may be unable
to comply with these cGMP requirements and with other regulatory requirements. Regulatory agencies at any time may also implement
new standards, or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products.
We have little control over our manufacturers’ compliance with these regulations and standards. A failure to comply with
these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval,
product seizure or recall, or withdrawal of product approval. If the safety of any product supplied is compromised due to our
manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval
for or successfully commercialize our products, and we may be held liable for any injuries sustained as a result. Any of these
factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of our drug candidates
or entail higher costs or impair our reputation.
We
source the API for LDN from third-party vendors. Another pharmaceutical company manufactures the API for MENK. Our current agreements
with our suppliers provide for the entire supply of the API necessary for additional clinical trials or for full-scale commercialization.
In the event that we and our suppliers cannot agree to the terms and conditions for them to continue to provide some or all of
our API clinical and commercial supply needs, or if any single source supplier terminates the agreement in response to a breach
by us, we would not be able to manufacture the API on a commercial scale until a qualified alternative supplier is identified,
which could also delay the development of, and impair our ability to commercialize, our drug candidates.
Although
alternative sources of supplies exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise
and facilities are limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers,
which could have a material adverse effect on our business. New suppliers of any API would be required to qualify under applicable
regulatory requirements and would need to have sufficient rights to the method of manufacturing such ingredients under applicable
intellectual property laws. Obtaining the necessary regulatory approvals or other qualifications under applicable regulatory requirements
and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply
and could require the new manufacturer to bear significant additional costs which may be passed on to us.
We
currently have only a limited distribution organization with no direct sales and marketing staff. If we are unable to develop
sales and marketing and expand distribution capability on our own or through collaborations with marketing partners, we will not
be successful in commercializing our future products.
We
currently have only a limited distribution organization with no sales or marketing staff. If our products are approved for sale
in the United States, we will need to execute a number of sales and marketing agreements, but there can be no assurance that the
Company will be able to sign an agreement to market and distribute our products. To the extent we rely on third parties for marketing
and distributing our approved products, any revenue we receive will depend upon the efforts of third parties, which may not be
successful, and are only partially within our control. Our reliance on third parties makes it likely that our product revenue
is likely to be lower than if we directly marketed or sold our products. If we are unable to enter into arrangements with third
parties to commercialize the approved products on acceptable terms or at all, we may not be able to successfully commercialize
our future products or we will have to market these products ourselves, which will be expensive and require us to build our own
sales force, which we do not have experience doing. We cannot assure you we will be successful in any of these initiatives. If
we are not successful in commercializing our future products, either on our own or through collaborations with one or more third
parties, our future product revenue will be materially adversely affected.
We
are dependent on market acceptance of compounding pharmacies and compounded formulations, and physicians may be unwilling to prescribe,
and patients may be unwilling to use, our proprietary LDN compounded formulation.
We
are currently distributing our proprietary LDN formulation for human use through third-party compounding pharmacies and distributors
in Emerging Markets. Our formulation has not undergone the FDA approval process and only limited data, if any, may be available
with respect to the safety and efficiency of our formulation for any particular indication. Some physicians may be hesitant to
prescribe, and some patients may be hesitant to purchase and use, this non-FDA approved compounded formulation. In addition, certain
compounding pharmacies have been the subject of widespread negative media coverage in recent years, and the actions of these pharmacies
have resulted in increased scrutiny of compounding pharmacy activities from regulatory agencies. As a result, physicians may be
unwilling to prescribe a compounded formulation when an FDA-approved alternative is available, even if they believe the compounded
formulation to be superior and less expensive. Other reasons physicians may be unwilling to prescribe or patients may be unwilling
to use our proprietary LDN compounded formulation could include the following, among others: our proprietary formulation is not
required to be, and has not been, approved for marketing and sale by the FDA; there may be limited or no data available with respect
to the clinical efficacy or safety of our compounded formulation the physician is prescribing; and to the extent there is such
data available, we are limited in our ability to discuss the efficacy or safety of our formulation with potential purchasers of
our formulation.
We
aim to generate revenue from our proprietary LDN formulation through agreements with compounding pharmacies outside of the United
States, but we may not be successful in our efforts to generate revenue from such formulation.
One
aspect of our business strategy is to enter into other sub-licensing arrangements with compounding pharmacies outside of the U.S.,
through which we can generate revenue from the sale of our proprietary LDN formulation. We have limited experience commercializing
our formulation through licensing arrangements with compounding pharmacies. Even if we are successful, we may be unable to generate
sufficient revenue to recover our costs.
We
have minimal experience sub-licensing products to pharmacies and outsourcing facilities and we may not be successful in our efforts
to develop our licensing arrangements. If we elect to sub-license our proprietary LDN formulation to one or more pharmacies or
outsourcing facilities outside of the U.S., we may not be able to enter into licensing agreements when desired, on acceptable
terms, or at all. Establishing licensing or other relationships with pharmacies and outsourcing facilities could be expensive
and time consuming, disrupt our other operations, require significant capital expenditures and distract management and our other
employees from other aspects of our business.
Failure
to achieve and maintain effective internal controls could have a material adverse effect on our business.
Effective
internal controls are necessary for us to safeguard our assets and provide reliable financial reports. If we cannot provide reliable
financial reports, our operating results could be harmed. All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
While
we continue to evaluate and improve our internal controls, we are a small company with limited staff, and we cannot be certain
that the measures we implement will ensure that we design, undertake and maintain adequate controls over our financial processes
and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to fail to meet our reporting obligations.
Failure
to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial
information, which could have a material adverse effect on our stock price. In addition, if our efforts to comply with new or
changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities
related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Our
independent registered public accounting firm has identified material weaknesses in our financial reporting process.
At
December 31, 2019, our independent registered public accounting
firm has identified two material weaknesses in our financial reporting process. Specifically, our independent registered public
accounting firm identified material weaknesses with respect to:
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currently inadequate segregation of duties by
management in the financial reporting area; and
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the lack of an audit committee to oversee the
financial reporting process.
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In April 2020, the full Board constituted itself as the audit
committee and has met subsequently to oversee the Company’s financial reporting. We intend to remediate this weakness
by increasing the size of our accounting staff when we have the financial resources to do so, and by appointing a separate
audit committee with membership that is qualified to oversee the Company’s financial reporting. However, there can be
no assurance that we will be able to successfully implement our plans to remediate the material weaknesses in our financial reporting
process. Our failure to successfully implement our plans to remediate these material weaknesses could cause us to fail to meet
our reporting obligations, to produce timely and reliable financial information, and to effectively prevent fraud. Additionally,
such failure, or other weaknesses that we may experience in our financial reporting process or other internal controls, could
cause investors to lose confidence in our reported financial information, which could have a negative impact on our financial
condition and stock price.
We
will need to increase the size of our organization, but we may experience difficulties in managing growth.
We
will need to continue to expand our managerial, operational, financial and other resources in order to manage our operations and
clinical trials, continue our development activities and commercialize our drug candidates. Our current management, personnel
systems and facilities may not be adequate to support this future growth. Our need to effectively execute our growth strategy
requires that we:
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manage our clinical trials effectively, including
our clinical trials for LDN which will be conducted at numerous trial sites throughout the world;
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manage our internal development efforts effectively
while carrying out our contractual obligations to licensors, contractors, collaborators, government agencies and other third
parties;
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manage operations in both regulated and unregulated
businesses;
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continue to improve our operational, financial
and management controls and reporting systems and procedures; and
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identify, recruit, maintain, motivate and integrate
additional employees.
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If
we are unable to expand our managerial, operational, financial and other resources to the extent required to manage our development
and commercialization activities, our business will be materially adversely affected.
We
face substantial competition. Our competitors may discover, develop or commercialize products faster or more successfully than
us.
The
biotechnology and pharmaceutical industries are highly competitive. We face significant competition from companies in the pharmaceutical,
biotechnology and other related markets that are researching and marketing products designed to address inflammatory disorders,
HIV/AIDS and cancer in Emerging Markets. Established pharmaceutical companies that currently sell or are developing drugs in our
markets of interest include, for example; Abbott Laboratories, Glaxo Smith Kline, Pfizer, and ViiV in the field of cancer treatment.
Johnson & Johnson, Merck, Merck Serono, Takeda, Novartis, Pfizer, Reata, Sanofi-Aventis and Teva compete with us in all fields.
Many or all of these established competitors are also involved in research and drug development regarding various OGF receptors.
Pharmaceutical and biotechnology companies which are known to be involved in immunotherapy research and related drug development
include Pfizer, Bristol-Myers Squibb, Merck, Takeda, Sanofi-Aventis, Incyte, and UCB Pharma among others.
Many
of our competitors have greater name recognition and financial, manufacturing, marketing, research and drug development resources
than we do. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources
being concentrated in our competitors. Large pharmaceutical companies in particular have extensive expertise in preclinical and
clinical testing and in obtaining regulatory approvals for drugs. In addition, academic institutions, government agencies, and
other public and private organizations conducting research may seek patent protection with respect to potentially competitive
products or technologies. These organizations may also establish exclusive collaborative or licensing relationships with our competitors,
thus giving our competitors a significant advantage. We may be unable to respond to competitive forces presently in the marketplace,
which would severely impact our business.
In
addition, in terms of the sub-licensing of LDN formulation to Acromax in the Dominican Republic, we compete against branded drug
companies, generic drug companies, outsourcing facilities and other compounding pharmacies. We expect to continue our efforts
on making available our proprietary compounded formulation through Acromax and other compounding pharmacies outside of the U.S.
The drug products available through branded and generic drug companies with which our formulation competes have been approved
for marketing and sale by the FDA and are required to be manufactured in facilities compliant with cGMP standards. As a result,
some physicians may be unwilling to prescribe them. Because our proprietary LDN formulation is not required to be, and has not
been, approved for marketing and sale by the FDA, our business may be subject to limitations our competitors with FDA-approved
drugs may not face.
We
may be subject to costly product liability claims related to our clinical trials and drug candidates and, if we are unable to
obtain adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of,
our insurance coverage, a material liability claim could adversely affect our financial condition.
Because
we conduct clinical trials in Emerging Markets with human patients, we face the risk that the use of our drug candidates may result
in adverse side effects to patients and to otherwise healthy volunteers in our clinical trials. We face even greater risks upon
any commercialization of our drug candidates. Although we will maintain product liability insurance for clinical trials, our insurance
may be insufficient to reimburse us for any expenses or losses we may suffer, and we will be required to increase our product
liability insurance coverage for the advanced clinical trials that we plan to initiate. We do not know whether we will be able
to continue to obtain product liability coverage and obtain expanded coverage on acceptable terms, or at all. We may not have
sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage.
There is also a risk that third parties that we have agreed to indemnify could incur liability. An individual may bring a product
liability claim against us if one of our drug candidates, products or compounded formulations cause, or is claimed to have caused,
an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit,
could result in:
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withdrawal of clinical trial volunteers, investigators,
patients or trial sites;
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the inability to commercialize our drug candidates;
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decreased demand for our drug candidates;
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regulatory investigations that could require
costly recalls or product modifications;
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loss of revenues;
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substantial costs of litigation;
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liabilities that substantially exceed our product
liability insurance, which we would then be required to pay ourselves;
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an increase in our product liability insurance
rates or the inability to maintain insurance coverage in the future on acceptable terms, if at all;
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the diversion of management’s attention
from our business; and
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damage to our reputation and the reputation
of our products.
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Our
business involves the use of hazardous materials. As a result, we, including our third-party manufacturers, must comply with environmental
laws and regulations, which may be expensive and restrict how we do business.
Our
third-party manufacturers’ activities involve the controlled storage, use and disposal of hazardous materials, including
the components of our pharmaceutical products, test samples and reagents, biological materials and other hazardous compounds.
We and our manufacturers are subject to foreign laws and regulations governing the use, generation, manufacture, storage, handling
and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claims relating
to the use of hazardous materials. Although we believe that our safety procedures for handling and disposing of these materials
and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental
injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of an accident, applicable
authorities may curtail our use of these materials and/or interrupt our business operations. In addition, if an accident or environmental
discharge occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties
we acquire, we could be liable for cleanup obligations, damages and fines. The substantial unexpected costs we may incur could
significantly harm our financial condition and results of operations.
Future
financings may adversely affect our stockholders or impose restrictions on our assets or operations, which may harm our business.
If
we raise additional capital by issuing equity securities or convertible debt securities, our existing stockholders’ ownership
will be diluted and the terms of any new equity securities may have preferences over our common stock. If we raise additional
capital through the issuance of debt securities, the debt will have rights senior to the holders of our common stock and may contain
covenants that restrict our operational flexibility or impose liens or other restrictions on our assets. In addition, the terms
of future financings may restrict our ability to raise additional capital, which would delay or prevent the further development
or commercialization of our drug candidates.
If
we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially
valuable rights to our current drug candidates, potential products or proprietary technologies, or grant licenses on terms that
are not favorable to us. Additionally, we may consider pursuing strategic opportunity for our business and corporate structure
that may make us a more attractive investment candidate. If adequate funds are not available, our ability to achieve profitability
or to respond to competitive pressures would be significantly limited and we may be required to delay, significantly curtail or
eliminate the development of one or more of our drug candidates.
We
may be adversely affected by the current economic environment.
Our
ability to attract and retain collaboration partners or customers, invest in and grow our business and meet our financial obligations
depends on our operating and financial performance, which, in turn, is subject to numerous factors, including the prevailing economic
conditions and financial, business and other factors beyond our control, such as the rate of unemployment, the number of uninsured
persons in the United States and inflationary pressures. We cannot anticipate all the ways in which the current economic climate
and financial market conditions could adversely impact our business.
We
are exposed to risks associated with reduced profitability and potential financial instability of our collaboration partners or
customers, many of which may be adversely affected by volatile conditions in the financial markets. For example, unemployment
and underemployment, and the resultant loss of insurance, may decrease the demand for healthcare services and pharmaceuticals.
If fewer patients are seeking medical care because they do not have insurance coverage, our collaboration partners or customers
may experience reductions in revenues, profitability and/or cash flow that could lead them to reduce their support of our programs
or financing activities. If collaboration partners or customers are not successful in generating sufficient revenue or are precluded
from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us. This,
in turn, could adversely affect our financial condition and liquidity. To the extent economic challenges result in fewer individuals
pursuing or being able to afford our products once commercialized, our business, results of operations, financial condition and
cash flows could be adversely affected.
A
pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and
operations.
We
intend to conduct a number of clinical trials for product candidates in the fields of cancer and other indications in geographies
which are affected by the coronavirus pandemic. We believe that the coronavirus pandemic will have an impact on various aspects
of our clinical trials. For example, investigators may not want to take the risk of exposing cancer patients to COVID-19 since
the dosing of patients is conducted within an in-patient setting. Other potential impacts of the coronavirus pandemic on our various
clinical trials include patient dosing and study monitoring, which may be paused or delayed due to changes in policies at various
clinical sites, federal, state, local or foreign laws, rules and regulations, including quarantines or other travel restrictions,
prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical
trial investigators and reduced availability of site staff supporting the conduct of our clinical trials, interruption or delays
in the operations of the government regulators, or other reasons related to the coronavirus pandemic. If the coronavirus pandemic
continues, other aspects of our clinical trials may be adversely affected, delayed or interrupted, including, for example, site
initiation, patient recruitment and enrollment, availability of clinical trial materials, and data analysis. Some patients and
clinical investigators may not be able to comply with clinical trial protocols and patients may choose to withdraw from our studies
or we may have to pause enrollment or we may choose to or be required to pause enrollment and or patient dosing in our ongoing
clinical trials in order to preserve health resources and protect trial participants. It is unknown how long these pauses or disruptions
could continue.
Our
internal computer systems, or the computer systems of our contractors or consultants, may fail or suffer security breaches, which
could result in a material disruption of our drug development programs.
Despite
the implementation of security measures, our internal computer systems and the computer systems of our contractors and consultants
are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and
electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event
were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs.
For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our drug candidates could result
in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur liability and the further development of our drug candidates could
be delayed.
Our
current and future operations substantially depend on our management team and our ability to have or recruit other key personnel,
the loss of any of whom could disrupt our business operations.
The
Company’s future success depends on the efforts and abilities of principal members of its senior management and scientific
staff to provide strategic direction, business development, operations management and maintenance of a cohesive and stable work
environment. If we are unable to recruit qualified personnel, or if we lose their services or the services of any other key member
of management, it could be impossible to replace them.
Additionally,
the Company’s ability to maintain, expand and renew existing business with its clients and maximize potential business opportunities
from new clients (in both the drug development and the drug discovery areas) depends on its ability to hire and retain scientists
with necessary skills. The scientists working for the Company must have the ability to lead ahead of continuing changes and trends
in drug discovery and development technologies to create the most innovative products on the market in order to remain competitive
within the drug development industry. The Company faces risks, challenges and competition attracting and retaining experienced
scientists and healthcare providers.
The
Company’s inability to hire qualified personnel may increase the workload for both existing and new personnel. The Company
may not be successful in attracting new healthcare providers, scientists and management or in retaining/motivating existing personnel.
The shortage of experienced healthcare providers and scientists or other factors may lead to increased recruiting, relocation
and compensation costs for the Company. Such increased costs may reduce profit margins or make hiring necessary experts (i.e.
healthcare providers or scientists) impracticable. If the Company is unable to attract or retain any of its key personnel its
ability to execute a competitive and profitable business plan will be adversely affected. Services and products will be less competitive
if not obsolete. If competing companies introduce superior technologies that compete with the Company’s services and products,
the Company may not be able to make the necessary enhancements to its services and products that will maintain a competitive position
in the marketplace. The Company’s competitive position, business, revenues and financial condition will be materially and
adversely affected.
Any
failure by the Company to comply with existing health care and drug regulations could harm its reputation, operating results,
the quality of the Company’s business strategy and the quality of the Company’s products.
The
Company has not experienced any failure to comply and has not received any notice or violation of either good clinical practices,
laboratory practices or good manufacturing practices. Any future failure by the Company to comply with existing health care and
drug regulations could result in the termination of ongoing research and/or the disqualification of data for submission to regulatory
authorities. Failure to comply with existing regulations will harm the Company’s reputation, brand name, its prospects for
immediate and future work and its operating results. For example, if the Company fails to verify that informed consent is obtained
from patient participants in connection with a particular clinical trial or grant deviations from the inclusion/exclusion criteria
in a study protocol, the data collected from that trial could be disqualified at which point the Company may be required to conduct
the trial again at no further cost to its client. Furthermore, the issuance of an FDA notice based on a finding of a material
violation of good clinical practice, good laboratory practice or good manufacturing practice requirements could materially and
adversely affect the Company.
Proposed
and future legislation or regulation may increase the cost of the Company’s business or limit its service and product offerings.
Authorities
in Emerging Markets may adopt healthcare legislation or regulations that are more burdensome than existing regulations. Possible
changes in regulation could increase the Company’s expenses or limit its ability to offer some of its services or products.
For example, the confidentiality of patient-specific information and the circumstances under which it may be released for inclusion
in the Company’s databases or used in other aspects of business are subject to substantial government regulation. Additional
legislation or regulation governing the possession, use and dissemination of medical record information or other personal health
information may require the Company to implement new security measures requiring substantial expenditures or limiting the ability
to offer services and products. These regulations might also increase costs by creating new privacy requirements for the Company’s
business mandating additional privacy procedures for its clinical research business.
Requirements
associated with being a public company will increase our costs significantly, as well as divert significant company resources
and management attention.
We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be
made to our financial and management control systems to manage our growth and our obligations as a public company. These areas
include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and
accounting systems. We have made, and will continue to make, changes in these and other areas. However, the expenses that will
be required in order to adequately prepare for being a public company could be material.
Compliance
with the various reporting and other requirements applicable to public companies will also require considerable time and attention
of management. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private
company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and U.S. stock exchanges, have imposed various
requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to these
compliance initiatives. In addition, the changes we make may not be sufficient to allow us to satisfy our obligations as a public
company on a timely basis.
Moreover,
we anticipate that compliance with these rules and regulations will increase our legal, accounting and financial compliance costs
substantially. In addition, these rules and regulations may make our activities related to legal, accounting and financial compliance
more difficult, time-consuming and costly and may also place undue strain on our personnel, systems and resources. If these requirements
divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on
our business, financial condition and results of operations.
In
addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including
directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult
for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
We
estimate the additional costs we may incur to respond to these requirements to range from $100 to $500 thousand annually, although
unforeseen circumstances could increase actual costs.
As
an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements, which could
leave our stockholders without information or rights available to stockholders of more mature companies.
For
as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (which
we refer to herein as the JOBS Act), we have elected to take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not “emerging growth companies” including, but not limited
to:
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not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
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taking
advantage of an extension of time to comply with new or revised financial accounting standards;
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reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
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exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.
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We
expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” Because
of these lessened regulatory requirements, our stockholders would be left without information or rights available to stockholders
of more mature companies.
If
we are unable to attract suitable and willing investigators and volunteers for clinical trials and product development, business
may suffer.
Our
clinical research studies rely on the accessibility and participation of physician investigators and volunteer subjects. Investigators
are typically located at hospitals, clinics or other sites and supervise administration of the study drug to patients during the
course of a clinical trial. Volunteer subjects generally include individuals from the locale where the studies are conducted.
Our clinical research development business could be adversely affected if it is unable to attract suitable and willing investigators
or volunteers on a consistent basis.
We
may not obtain government approval for our products and/or uses.
The
development and commercialization of pharmaceutical products are subject to extensive governmental regulation in the United States
and Emerging Markets. Government approvals are required to develop, market and sell potential drug candidates. Obtaining government
approval to develop, market and sell drug candidates is time-consuming and expensive. The clinical trial results for a particular
drug candidate might not satisfy necessary requirements to obtain government approvals. Even if we are successful in obtaining
all required approvals to market and sell a drug candidate, post-approval requirements and the failure to comply with other regulations
could result in suspension or limitation of government approvals.
In
connection with drug discovery activities in Emerging Markets, we and our licensors will be subject to foreign regulatory requirements
governing testing, approval, manufacturing, labeling, marketing and sale of pharmaceutical products. These requirements vary with
location. Even if approval has been obtained by a licensor for a product in the United States, approval in a foreign country must
be obtained prior to marketing the product. The approval process in foreign countries may be more or less rigorous than the United
States and the time required for approval may be longer or shorter. Clinical studies conducted outside of a specific country may
not be acceptable. The approval of a pharmaceutical product in one country does not guarantee approval in another.
Even
if approved, the products that we may develop and market may be later withdrawn from the market or subject to promotional limitations.
We
may not be able to obtain the labeling claims necessary or desirable for the promotion of our treatments if approved. We may also
be required to undertake post-marketing clinical trials. If the results of such post-marketing studies are not satisfactory or
if adverse events or other safety issues arise after approval, regulatory agency in Emerging Markets may withdraw marketing authorization
or may condition continued marketing on commitments from us that may be expensive and/or time consuming to complete. In addition,
if we or others identify adverse side effects after any of our products are on the market, or if manufacturing problems occur,
regulatory approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our
products and additional marketing applications may be required. Any reformulation or labeling changes may limit the marketability
of our products if approved.
Florida
Law and our Articles of Incorporation may protect our Directors and Officers from certain types of lawsuits.
Florida
law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all but certain
types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages
incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have
the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor
judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers
and directors against claims, including claims arising out of their negligence, poor judgment or other circumstances.
We
may seek to grow our business through acquisitions of or investments in new or complementary businesses, products or technologies,
and the failure to manage acquisitions or investments, or the failure to integrate them with our existing business, could have
a material adverse effect on us.
From
time to time we expect to consider opportunities to acquire or make investments in other technologies, products and businesses
that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. Potential
and completed acquisitions and strategic investments involve numerous risks, including:
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problems
assimilating the purchased technologies, products or business operations;
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issues
maintaining uniform standards, procedures, controls and policies;
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unanticipated
costs associated with acquisitions;
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diversion
of management’s attention from our core business;
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adverse
effects on existing business relationships with suppliers and customers;
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risks
associated with entering new markets in which we have limited or no experience;
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potential
loss of key employees of acquired businesses; and
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increased
legal and accounting compliance costs.
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We
have no current commitments with respect to any acquisition or investment. We do not know if we will be able to identify acquisitions
we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether
we will be able to successfully integrate any acquired business, product or technology into our business or retain any key personnel,
suppliers or distributors. Our ability to successfully grow through acquisitions depends upon our ability to identify, negotiate,
complete and integrate suitable target businesses and to obtain any necessary financing. These efforts could be expensive and
time-consuming, and may disrupt our ongoing business and prevent management from focusing on our operations. If we are unable
to integrate any acquired businesses, products or technologies effectively, our business, results of operations and financial
condition will be materially adversely affected.
We
may expend our limited resources to pursue a particular opportunity and fail to capitalize on current research and products that
may be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and managerial resources, we have focused on specific research programs, treatments, and products. As
a result, we may forego or delay pursuit of opportunities with other products or research that later may prove to have greater
commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial treatments or
profitable market opportunities. Our spending on current and future research and development programs may not yield any commercially
viable treatments.
We
are subject to risks associated with our operations in Emerging Markets.
The
Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally
prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or
retaining business. The FCPA also imposes accounting standards and requirements on publicly traded U.S. corporations and their
foreign affiliates which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper
payments, and to prevent the establishment of “off books” slush funds from which such improper payments can be made.
Because of the predominance of government-sponsored healthcare systems around the world, many of our customer or regulatory relationships
outside of the United States are with governmental entities and are therefore subject to such anti-bribery laws. Our internal
control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents.
Violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction
and result in a material adverse effect on our business, results of operations and financial condition. We also could suffer severe
penalties, including criminal and civil penalties, disgorgement and other remedial measures, including further changes or enhancements
to our procedures, policies and controls, as well as potential personnel changes and disciplinary actions.
Furthermore,
we are subject to the export controls and economic embargo rules and regulations of the United States, including, but not limited
to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office
of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department
of Commerce. These regulations limit our ability to market, sell, distribute or otherwise transfer our products or technology
to prohibited countries or persons. A determination that we have failed to comply, whether knowingly or inadvertently, may result
in substantial penalties, including fines and enforcement actions and civil and/or criminal sanctions, the disgorgement of profits,
the imposition of a court-appointed monitor, the denial of export privileges and/or an adverse effect on our reputation.
These
and other factors may have a material adverse effect on our international operations or on our business, results of operations
and financial condition generally.
Our
independent auditors have expressed substantial doubt about our ability to continue as a going concern.
Due
to our net losses, negative cash flow and negative working capital, in their report on our audited financial statements for the
years ended December 31, 2019 and 2018, our independent auditors included an explanatory paragraph regarding substantial doubt
about our ability to continue as a going concern.
We
have incurred substantial losses since inception. Because of these losses, we will require additional working capital to develop
our business operations. We intend to raise additional working capital through private placements, public offerings, bank financing
and/or advances from related parties or shareholder loans.
There
are no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations.
To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient,
we will have to raise additional working capital. No assurance can be given that additional financing will be available, or, if
available, will be on terms acceptable to us. If adequate working capital is not available, we may not increase our operations.
These
conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities
that might be necessary should we be unable to continue as a going concern.
Risks
Related to Intellectual Property
Our
inability to adequately protect our intellectual property rights could hurt business.
Our
commercial success will depend in part on obtaining and maintaining intellectual property protection for our products, formulations,
processes, methods and other technologies. We will only be able to protect these technologies and products from unauthorized use
by third parties to the extent that our licensor maintains valid and enforceable intellectual property rights, including patents
or other market exclusionary rights.
The
patent positions of pharmaceutical companies, like those of our licensor, can be highly uncertain and involve complex legal and
factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims
allowed in such companies’ patents has emerged to date in the United States. The general environment for pharmaceutical
patents outside the United States also involves significant uncertainty. Accordingly, we cannot predict the breadth of claims
that may be allowed or enforced, or that the scope of these patent rights could provide a sufficient degree of future protection
that could permit us to gain or keep our competitive advantage with respect to these products and technologies. For example, we
cannot predict:
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the
degree and range of protection any patents will afford us against competitors, including whether third parties will find ways
to make, use, sell, offer to sell or import competitive products without infringing our patents;
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if
and when patents will issue;
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whether
or not others will obtain patents claiming inventions similar to those covered by our patents and patent applications; or
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whether
we or our licensor will need to initiate litigation or administrative proceedings in connection with patent rights, which
may be costly whether we or the licensor win or lose.
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Some
of the patents we have licensed may be subject to challenge and possibly invalidated or rendered unenforceable by third parties.
Changes in either the patent laws or in the interpretations of patent laws in the United States or other countries may diminish
the value of our intellectual property.
In
addition, others may independently develop similar or alternative products and technologies that may be outside the scope of our
intellectual property. Furthermore, others may have invented technology claimed by our patents before our licensors or we did
so, and they may have filed patents claiming such technology before we did so, weakening our ability to obtain and maintain patent
protection for such technology. Should third parties obtain patent rights to similar products or technology, this may have an
adverse effect on our business.
We
may also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate
or obtainable. Trade secrets, however, are difficult to protect. While we believe that we will use reasonable efforts to protect
our trade secrets, our own or our strategic partners’ employees, consultants, contractors or advisors may unintentionally
or willfully disclose our information to competitors. We seek to protect this information, in part, through the use of non-disclosure
and confidentiality agreements with employees, consultants, advisors and others. These agreements may be breached, and we may
not have adequate remedies for a breach. In addition, we cannot ensure that those agreements will provide adequate protection
for our trade secrets, know-how or other proprietary information or prevent their unauthorized use or disclosure.
If
competitors that have greater experience and financial resources learn our trade secrets, the competitors may copy or use our
trade secrets and other proprietary information in the advancement of their products, methods or technologies. If we were to prosecute
a claim that a third party had illegally obtained and was using our trade secrets, it could be expensive and time consuming and
the outcome could be unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade
secrets than courts in the United States. Moreover, if our competitors independently develop equivalent knowledge, we would lack
any legal or contractual claim to prevent them from using such information, and our business could be harmed.
The
Company’s most important licenses for intellectual property include:
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For
LDN for Treatment for Immune Dysfunction application number 15/437,365 issued 10/30/2018
Patent No 10111870HIV/AIDs and Crohn’s disease, we license from Cytocom Patent
Number 7879870, filed April 16, 2007, issued February 1, 2011, Methods for the treatment
of as both a mon-therapy and adjunct therapy consisting of molluscum contagiosum infection,
HTLV infection, HTLV-1 infection, hepatitis-A, HCV, HBV, HIV/AIDS infection, human papilloma
virus infection, viral dysentery, flu, measles, rubella, chickenpox, mumps, polio, rabies,
mononucleosis, Ebola, respiratory syncytial virus, dengue fever, yellow fever,
lassa fever, arena virus, bunyavirus, filovirus, flavivirus, hantavirus, rotavirus, viral
meningitis, west Nile fever, arbovirus, parainfluenza, smallpox, Epstein-Barr virus,
dengue hemorrhagic fever, cytomegalovirus, infant cytomegalic virus, progressive multifocal
leukoencephalopathy, viral gastroenteritis, a hepatitis, meningitis, encephalitis, shingles,
encephalitis, california serogroup viral, St. Louis encephalitis, rift valley fever,
hand, foot, and mouth disease, hendra virus, enteroviruses, astrovirus, adenoviruses,
Japanese encephalitis, lymphocytic choriomeningitis, roseola infantum, sandfly fever,
SARS, warts, cat scratch disease, slap-cheek syndrome, orf, pityriasis rosea and lyssavirus.
The
Company intends to use the pre-clinical and clinical data and country approvals to fast track our development in Emerging
Markets. The Company plans to use the data from pre-clinical and clinical work done in the United States by Cytocom to
support our drug approval for companion pets with the FDA and Regulatory Authorities in Emerging Markets to fast track
our approvals.
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For
the development of MENK for pancreatic cancer, we depend extensively on our sub-license of Cytocom’s license agreement
with Pennsylvania State University covered by patents US Patent Numbers 6,737,397, CA 2,557,504, US 20010046968, US 6737397,
US 6136780, US 20080015211, US 20070053838, US 8003630, US 20110123437, US 7807368, US 7576180, US 7517649, US 20080146512,
US 7122651, US 20060073565, US 20050191241, Patent No 8,003,630 issued between 2001 and 2011. Our sub-license agreement with
Pennsylvania State University may be terminated if we or Cytocom materially breach the agreement and fail to cure our breach
during an applicable cure period. Our failure to use commercially reasonable efforts to develop and commercialize MENK in
Emerging Markets or to perform our other diligence obligations under the sub-license would constitute a material breach of
the license agreement. In the event that Cytocom’s license agreement with Pennsylvania State University is terminated,
we will lose all of our rights to develop and commercialize the drug candidates covered by such license, which would harm
our business and future prospects. We have rights to a number of other patents having to do with the development of MENK which
would allow us to continue our development of those indications.
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We
may become subject to intellectual property suits that could cause us to incur significant costs or pay significant damages or
that could prohibit us from selling its products.
The
Company’s competitors also seek to obtain patents or other protection of their proprietary rights. Third parties may claim
in the future that the Company’s products infringe upon their proprietary rights. To date, there have been no claims of
infringement. However, in the future, intellectual property claims could force the Company or Cytocom to alter its existing products
or withdraw them from the market or could delay the introduction of new products.
Various
patents have been issued to the Company’s competitors and these competitors may assert that Cytocom’s or the Company’s
products infringe their patent or other proprietary rights. If those products are found to infringe third-party intellectual property
rights, the Company may be unable to maintain its sub-license to use such technology, and it could incur substantial costs to
redesign its products or to defend legal actions.
The
drug discovery and development industry has a history of patent and other intellectual property litigation; thus, we may be involved
in costly intellectual property lawsuits.
There
has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical
and biotechnology industries. We or Cytocom may be subject to third party claims in the future that would cause us to incur substantial
expenses and, if successful against us, could cause us to pay substantial damages, including treble damages and attorney’s
fees if we are found to be willfully infringing a third party’s patents. Further, if a patent infringement suit were brought
against us or Cytocom, we could be forced to stop or delay research, development, manufacturing or sales of the product or drug
candidate that is the subject of the suit. As a result of patent infringement claims, or in order to avoid potential claims, we
or Cytocom may choose to seek, or be required to seek, a license from the third party and would most likely be required to pay
license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or Cytocom were
able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property.
Ultimately, we could be prevented from commercializing a product, or forced to redesign it, or to cease some aspect of our business
operations if, as a result of actual or threatened patent infringement claims, we or Cytocom are unable to enter into licenses
on acceptable terms. This could harm our business significantly.
In
addition to infringement claims against us, if third parties prepare and file patent applications in the United States that also
claim technology to which we have rights, we may have to participate in interference proceedings with the United States Patent
and Trademark Office (“USPTO”) to determine the priority of invention. We may also become involved in similar opposition
proceedings in the European Patent Office regarding our intellectual property rights with respect to our products and technology.
The
failure to obtain or maintain patents, licensing agreements and other intellectual property could impact our ability to compete
effectively.
Our
success will depend, in part, on our ability to obtain and maintain patent protection for our drug candidates, preserve our trade
secrets, prevent third parties from infringing upon our licenses proprietary rights and operate without infringing upon the proprietary
rights of others. While the patents we license have been issued, pending patent applications we have filed may not result in issued
patents or may take longer than we expect to result in issued patents. We cannot be certain that patents will be issued as a result
of any of our pending applications, and we cannot be certain that any of our issued patents, whether issued pursuant to our pending
applications or licensed from third parties, will give us adequate protection from competing products.
Composition
of Matter patents on APIs are generally considered to be the strongest form of intellectual property protection for pharmaceutical
products, as they apply without regard to any method of use. Entirely new individual chemical compounds, often referred to as
new chemical entities, are typically entitled to Composition of Matter coverage. However, we cannot be certain that the current
law will remain the same, or that our drug candidates will be considered novel and non-obvious by patent regulators and courts.
In
addition to Composition of Matter patents and patent applications, we also have licensed Method of Use patent applications. This
type of patent protects the use of the product only for the specified method. However, this type of patent does not prevent a
competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of
the patented method. Moreover, even if these competitors do not actively promote their product for our targeted indication, physicians
may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement
of Method of Use patents, the practice is common and such infringement is difficult to prevent or prosecute.
Patent
applications in the United States and most other countries are confidential for a period of time until they are published. The
publication of discoveries in scientific or patent literature typically lags actual discoveries by several months or more. As
a result, we cannot be certain whether the Company or another inventor were the inventors of the issued patents and applications
or that the Company or another inventor were the first to conceive of the inventions covered by such patents and pending patent
applications or that the Company or another inventor were the first to file patent applications covering such inventions.
Others
may obtain issued patents that could prevent us from commercializing our product candidates or require us to obtain licenses requiring
the payment of considerable fees or royalties in order to enable us to conduct our business. As to those patents that we have
licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may
be unable to do so.
We
have numerous issued patents and some patent applications pending before the USPTO. The protection may lapse before we manage
to obtain commercial value from the patents, which might result in increased competition and materially affect our position in
the market.
We
may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our
employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not
successfully do so, we may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.
Many
of our employees were previously employed at universities, biotechnology or pharmaceutical companies, including our competitors
or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees
or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.
Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product
could hamper our ability to commercialize, or prevent us from commercializing our drug candidates, which could severely harm our
business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction
to management.
Some
of our intellectual property that was discovered through government funded programs may be subject to federal regulation such
as “march-in” rights, certain reporting requirements, and a preference for United States industry. Compliance with
such regulations may limit our exclusive rights, subject us to expenditure of resources with respect to reporting requirements,
and limit our ability to contract with foreign manufacturers.
Some
of our existing drug candidates, including LDN and MENK, and some of the research and development work conducted before we had
licensing rights may have been funded, at least in part, by the U.S. government and therefore would be subject to certain federal
regulations. Under the “march-in” provisions of the Bayh-Dole Act, the government may have the right under limited
circumstances to require the patent owners to grant exclusive, partially exclusive or non-exclusive rights to third parties for
intellectual property discovered through the government-funded program. The government can exercise its march-in rights if it
determines that action is necessary because the patent owner fails to achieve practical application of the new invention or because
action is necessary to alleviate health concerns or address the safety needs of the public. Intellectual property discovered under
the government-funded program is also subject to certain reporting requirements, compliance with which may require us to expend
substantial resources. Such intellectual property is also subject to a preference for U.S. industry, which may limit our ability
to contract with foreign product manufacturers for products covered by such intellectual property. We may apply for additional
U.S. government funding, and it is possible that we may discover compounds or drug candidates as a result of such funding. Intellectual
property under such discoveries would be subject to the applicable provisions of the Bayh-Dole Act.
Risks
Related to Government Regulation
The
regulatory approval process is expensive, time consuming and uncertain and may prevent us or our collaboration partners from obtaining
approvals for the commercialization of some or all of our drug candidates.
The
research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products are
subject to extensive regulation by regulatory authorities in the United States and other countries. Regulations differ from country
to country. Neither we nor our licensor are permitted to market our drug candidates until we receive approval of an NDA
from the applicable regulatory agency. Neither we nor our licensor have submitted an application for or received marketing approval
for any of our drug candidates. Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. In addition, failure
to comply with applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions,
including:
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warning
letters;
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civil
and criminal penalties;
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injunctions;
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withdrawal
of approved products;
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product
seizure or detention;
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product
recalls;
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total
or partial suspension of production; and
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refusal
to approve pending NDAs or supplements to approved NDAs.
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Regulatory
approval of an NDA or NDA supplement is not guaranteed, and the approval process is expensive and may take several years. Regulatory
agencies have substantial discretion in the approval process. Despite the time and expense exerted, failure can occur at any stage,
and we could encounter problems that cause us to abandon or repeat clinical trials, or perform additional preclinical studies
and clinical trials. The number of preclinical studies and clinical trials that will be required for approval varies depending
on the drug candidate, the disease or condition that the drug candidate is designed to address, and the regulations applicable
to any particular drug candidate. The regulatory agencies can delay, limit or deny approval of a drug candidate for many reasons,
including, but not limited to, the following:
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a
drug candidate may not be deemed safe or effective;
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regulatory
agency officials may not find the data from preclinical studies and clinical trials sufficient;
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regulatory
agencies might not approve our or our third party manufacturer’s processes or facilities; or
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regulatory
agencies may change their approval policies or adopt new regulations.
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If
any of our drug candidates fail to demonstrate safety and efficacy in clinical trials or do not gain regulatory approval, our
business and results of operations will be materially and adversely harmed.
Even
if we receive regulatory approval for a drug candidate, we will be subject to ongoing regulatory obligations and continued regulatory
review which may result in considerable additional expense and subject us to penalties if we fail to comply with applicable regulatory
requirements.
Once
regulatory approval has been granted for us to sell our products, the approved product and its manufacturer are subject to continual
review by regulatory agencies. Any regulatory approval that we or our licensors or our distributors receive for our drug candidates
may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially
costly post-marketing follow-up studies to monitor the safety and efficacy of the product. In addition, if the regulatory agencies
approve any of our drug candidates, we will be subject to extensive and ongoing regulatory requirements by regulatory agencies
with regard to the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for our products.
In addition, manufacturers of our drug products are required to comply with current cGMP regulations which include requirements
related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further,
regulatory authorities must approve these manufacturing facilities before they can be used to manufacture our drug products, and
these facilities are subject to continual review and periodic inspections by the regulatory agencies for compliance with cGMP
regulations. If we or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated
severity or frequency, or problems with the facility where the product is manufactured, a regulatory authority may impose restrictions
on that product, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing.
If we, our drug candidates or the manufacturing facilities for our drug candidates fail to comply with regulatory requirements
of the regulatory agencies, we could be subject to administrative or judicially imposed sanctions, including:
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warning
letters;
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civil
or criminal penalties;
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injunctions;
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suspension
of or withdrawal of regulatory approval;
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suspension
of any ongoing clinical trials;
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voluntary
or mandatory product recalls and publicity requirements;
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refusal
to approve pending applications for marketing approval of new drugs or supplements to approved applications filed by us;
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restrictions
on operations, including costly new manufacturing requirements; or
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seizure
or detention of our products or import bans.
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The
regulatory requirements and policies may change and additional government regulations may be enacted for which we may also be
required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation
or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory compliance,
we will not be permitted to market our future products and our business will suffer.
The
availability of adequate third-party coverage and reimbursement for newly approved drugs is uncertain, and failure to obtain adequate
coverage and reimbursement from third-party payers could impede our ability to market any future products we may develop and could
limit our ability to generate revenue.
There
is significant uncertainty related to the third-party payor coverage and reimbursement of newly approved drugs. The commercial
success of our future products in both domestic and international markets depends on whether such third-party coverage and reimbursement
is available for our future products. Governmental payers, health maintenance organizations and other third-party payers are increasingly
attempting to manage their healthcare expenditures by limiting both coverage and the level of reimbursement of new drugs and,
as a result, they may not cover or provide adequate reimbursement for our future products. These payers may not view our future
products as cost-effective, and coverage and reimbursement may not be available to our customers or may not be sufficient to allow
our future products to be marketed on a competitive basis. Third-party payers are exerting increasing influence on decisions regarding
the use of, and coverage and reimbursement levels for, particular treatments. Such third-party payers are challenging the prices
charged for medical products and services, and many third-party payers limit or delay coverage and reimbursement for newly approved
healthcare products. In particular, third-party payers may limit the covered indications. Cost-control initiatives could cause
us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the
prices for our drug candidates decrease or if governmental and other third-party payers do not provide adequate coverage or reimbursement,
our prospects for revenue and profitability will suffer.
Even
if Cytocom obtains FDA approval of any product candidate it may develop or acquire in the future, we may never obtain approval
or commercialize those products we license for sale outside of the U.S., which would limit our ability to realize their full market
potential. If foreign approval is obtained, there are risks in conducting business in international markets.
We
have and continue to seek other distribution and marketing partners for MENK and LDN outside North America that will and may market
future products in Emerging Markets. In order to market any of our products we may license, develop or acquire outside of the
U.S., we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy.
Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval
in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries
and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory
approvals could result in significant delays, difficulties and costs for us and require additional preclinical studies or clinical
trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay
or prevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly,
time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in the U.S.
or any foreign country may delay or have negative effects on the process for regulatory approval in other countries. If we fail
to comply with regulatory requirements in a foreign country or to obtain and maintain required approvals, our potential market
for our products will be reduced and our ability to realize the full market potential of our products will be harmed.
The
Company, either directly or through its collaborating partners, is working with drug regulatory authorities in Emerging Markets
where an FDA equivalent exists. The Company is working with the agencies to obtain local approval for the therapies for each modality
that we intend to market for. We believe this will reduce our risk due to The Agreement on Trade Related Aspects of Intellectual
Property Rights (“TRIPS”) which is an international agreement administered by the World Trade Organization (“WTO”).
TRIPS allows emerging nations to manufacture drugs around existing patents.
If
our licensed products are approved for commercialization in a foreign country, we intend to enter into agreements with third parties
to market our products whenever they may be approved and wherever we have the right to market them. Consequently, we expect that
we will be subject to additional risks relating to entering into international business relationships, including:
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lack
of adequate protection from intellectual property rights in foreign countries, which could occur if we do not have issued
patents in force in such foreign countries covering our products, their methods of use and methods of manufacture;
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the
potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices
(for instance, because the goods have patent protection in such country), opts to import goods from a foreign market (with
low or lower prices) rather than buy them locally;
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unexpected
changes in tariffs, trade barriers and regulatory requirements
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economic
weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance
with laws for employees traveling abroad;
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foreign
taxes, including withholding of payroll taxes;
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foreign
currency fluctuations, which could result in increased operating expenses and reduced revenues;
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workforce
uncertainty in countries where labor unrest is more common than in the U.S.;
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production
shortages resulting from any events affecting the API and/or finished drug product supply or manufacturing capabilities abroad;
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business
interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes,
typhoons, floods and fires; and
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failure
to comply with Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act
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These
and other risks may materially adversely affect our ability to attain or sustain revenue from international markets.
Healthcare
policy changes may have a material adverse effect on us.
Our
business may be affected by the efforts of government and third-party payers to contain or reduce the cost of healthcare through
various means. With regard to pharmaceutical products, among other things, legislation in Emerging Markets is expected to expand
and increase industry rebates for drugs covered and make changes to the coverage requirements under that legislation. This adds
to the uncertainty of the legislative changes enacted, and we cannot predict the impact that legislative or regulatory proposals
will have on our business, in particular our access to licensed products for sale.
If
we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial
condition could be adversely affected.
Even
though we do not and will not control referrals of healthcare services or bill directly to government or other third-party payers,
certain healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to
our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by governments and regulators where
we conduct our business. The regulations that may affect our ability to operate include, without limitation:
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healthcare
anti-kickback statutes in our markets, which prohibit, among other things, any person from knowingly and willfully offering,
soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for
an item or service or the purchasing or ordering of a good or service, for which payment may be made under healthcare programs;
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false
claims statutes, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented,
false claims, or knowingly using false statements to obtain payment from the federal government, and which may apply to entities
like us which may provide coding and billing advice to customers;
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criminal
laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare
matters; and
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statutes
that govern the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health
information.
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If
our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply
to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring
of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability
to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully
defend against it, could cause us to incur significant legal expenses and divert Management’s attention from the operation
of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws
may prove costly.
Regulators
may not accept the results of clinical trials conducted outside of the United States.
It
is possible that regulators in our markets may not accept the results of our clinical trials. We would also need to ensure that
trials are conducted in accordance with local legal and regulatory requirements and all applicable International Conference on
Harmonisation of Good Clinical Practice guidelines and any other applicable regulatory requirements for the overall conduct of
the clinical investigation.
Risks
Related to our Common Stock
If our chief executive officer,
our other executive officers, and our directors and principal stockholders acquire significant stock ownership,
they may be able to exert control over us and our significant corporate decisions. Our other stockholders will have limited
ability to influence corporate actions or decisions.
This
concentration of ownership may harm the value of our common stock by, among other things:
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delaying,
deferring or preventing a change in control of our company;
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impeding
a merger, consolidation, takeover or other business combination involving our company; or
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causing
us to enter into transactions or agreements that are not in the best interests of all stockholders
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As a group, at March 31, 2020, our officers,
directors and certain related parties owned 13.89% of the outstanding common stock of the Company. Our other stockholders
will have limited ability to influence corporate actions or decisions.
The
price of our common stock may be volatile, and you may not be able to resell your shares.
An
active and liquid trading market for our common stock may not develop or be sustainable. Shareholders may be unable to sell shares
of common stock at or above their purchase price due to fluctuations in the market price of our common stock. The market price
of our common stock may fluctuate significantly in response to factors, some of which are beyond our control. Factors that could
cause volatility in the market price of our common stock include, but are not limited to:
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results
from, and delays in, clinical trial programs relating to LDN, MENK and other drug candidates;
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announcements
of regulatory approvals or disapprovals of our drug candidates including LDN and MENK or delays in any regulatory agency review
or approval processes;
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failure
or discontinuation of any of our research programs;
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loss
of significant clients or customers;
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loss
of significant strategic relationships;
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announcements
relating to future collaborations or our existing collaborations;
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our
failure to achieve and maintain profitability;
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changes
in earnings estimates and recommendations by financial analysts;
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changes
in market valuations of similar companies;
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wholesalers’
buying patterns;
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addition
or termination of clinical trials or funding support;
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regulatory
developments affecting our drug candidates or those of our competitors;
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the
Company’s sales decrease internationally;
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variations
in the level of expenses related to our drug candidates or future development programs;
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ability
to secure new government contracts and allocation of our resources to or away from performing work under government contracts;
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general
economic conditions in the United States and our markets;
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acquisitions
and sales of new products, technologies or business;
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market
conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors;
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the
issuance of new or changed securities analysts’ reports or recommendations regarding us, our competitors or our industry
in general;
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actual
and anticipated fluctuations in our quarterly operating results;
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disputes
concerning our intellectual property or other proprietary rights;
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introduction
of technological innovations or new products by us or our competitors;
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manufacturing
issues related to our drug candidates for clinical trials or future products for commercialization;
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market
acceptance of our future products;
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deviations
in our operating results from the estimates of analysts;
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third
party payor coverage and reimbursement policies;
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new
legislation relating to the sale or pricing of pharmaceuticals;
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regulatory
actions affecting us or our industry;
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product
liability claims or other litigation or public concern about the safety of our drug candidates or future drugs;
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our
ability to obtain and maintain necessary intellectual property licenses including, those relating to LDN, MENK and other drug
candidates;
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the
outcome of any future legal actions to which we are a party;
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sales
of our common stock by our officers, directors or significant stockholders;
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frequent,
irregular, under market, or large sales of shares of our common stock by any shareholder;
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additions
or departures of key personnel; and
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external
factors, including natural disasters and other crises.
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In
addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular,
have experienced extreme volatility that has often been unrelated to the operating performance of the issuer. These broad market
fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a
stock has been volatile, holders of that stock have sometimes instituted securities class action litigation suits against the
issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit
and the attention of our management would be diverted from the operation of our business.
Future
sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.
If
our existing stockholders or holders of our convertible notes, options or warrants sell, or indicate an intention to sell substantial
amounts of our common stock in the public market, the trading price of our common stock could decline. The perception in the market
place that these sales may occur could also cause the trading price of our common stock to decline.
Certain
holders of shares of our common stock, warrants to purchase our common stock, and shares of common stock issuable upon exercise
of warrants will be entitled to rights with respect to the registration of their shares under the Securities Act. Registration
of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities
Act, except for shares purchased by affiliates. In addition, our directors may, and we expect that our executive officers will
establish programmed selling plans under Rule 10b5-1 of the Exchange Act, for the purpose of effecting sales of our common stock.
Any sales of securities by these stockholders, or the perception that those sales may occur, including the entry into such programmed
selling plans, could have a material adverse effect on the trading price of our common stock.
If
we sell shares of our common stock in future financings, common stockholders may experience immediate dilution and, as a result,
our stock price may decline.
We
may from time to time issue additional shares of common stock at a discount from the current trading price of our common stock.
As a result, our common stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold
at such a discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the
future, including the issuance of debt securities, preferred stock or common stock.
Provisions
of our charter documents or Florida law could delay or prevent an acquisition of the Company, even if the acquisition would be
beneficial to our stockholders, and could make it more difficult for stockholders to change management.
Provisions
of our amended and restated articles of incorporation, as amended, and amended and restated bylaws may discourage, delay or prevent
a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders
might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our
stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors.
We
do not anticipate paying any cash dividends on our capital stock in the foreseeable future, therefore capital appreciation, if
any, of our common stock will be our shareholders sole source of gain for the foreseeable future.
We
have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital
stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development
and growth of our business. As a result, capital appreciation, if any, of the common stock will be our shareholders sole source
of gain for the foreseeable future.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The
trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish
about us or our business. Securities and industry analysts do not currently, and may never, publish research on our Company. If
no securities or industry analysts commence coverage of our Company, the trading price for our stock would likely be negatively
impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade
our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition,
if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these
analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our stock could decrease, which
might cause our stock price and trading volume to decline.
Our
board of directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder
approval.
Our
amended and restated articles of incorporation, as amended, authorize our board of directors, without the approval of our stockholders,
to issue shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions
of our amended and restated articles of incorporation, as amended, as shares of preferred stock in series, and to establish from
time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations or restrictions thereof. The powers, preferences and rights
of these additional series of preferred stock may be senior to or on parity with our common stock, which may reduce its value.
We do not currently have any class of preferred stock authorized.
Our
shares may be subject to the “penny stock” rules, which may subject you to restrictions on marketability and limit
your ability to sell your shares.
Broker-dealer
practices in connection with transactions in “Penny Stocks” are regulated by certain penny stock rules adopted by
the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share (other than securities registered
on certain national securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer must make
a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the
secondary market for a stock that becomes subject to the penny stock rules. The Company’s securities may be subject to the
penny stock rules, and investors may find it more difficult to sell their securities.
An
active and visible trading market for our common stock may not develop.
We
cannot predict whether an active market for our common stock will develop in the future. In the absence of an active trading market:
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Investors
may have difficulty buying and selling or obtaining market quotations;
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Market
visibility for our common stock may be limited; and
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A
lack of visibility for our common stock may have a depressive effect on the market price for our common stock
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Our
common stock is currently quoted on the OTC Market under the trading symbol “IMUN”. The OTC Market is unorganized,
inter-dealers, over-the-counter markets that provides significantly less liquidity than the New York Stock Exchange or NASDAQ.
No assurances can be given that we will ever obtain a listing for our securities on a senior exchange. The trading price of our
common stock is therefore expected to be subject to significant fluctuations in response to variations in quarterly operating
results, changes in analysts’ earnings estimates, announcements of innovations by us or our competitors, general conditions
in the industry in which we operate and other factors. These fluctuations, as well as general economic and market conditions,
may have a material or adverse effect on the market price of our common stock.
Because
we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging
growth company” our financial statements may not be comparable to companies that comply with public company effective dates.
We
have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1)
of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective
dates for public and private companies until those standards apply to private companies. As a result of this election, our financial
statements may not be comparable to companies that comply with public company effective dates, and thus investors may have difficulty
evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative
impact on the value and liquidity of our common stock.
We
may not register or qualify our securities with any state agency pursuant to blue sky regulations.
The
holders of our shares of common stock and persons who desire to purchase them in the future should be aware that there may be
significant state law restrictions upon the ability of investors to resell our shares. We currently do not intend to and may not
be able to qualify securities for resale in other states which require shares to be qualified before they can be resold by our
shareholders.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements contained or incorporated by reference in this Form 10-K are considered forward-looking statements (within the meaning
of the Private Securities Litigation Reform Act of 1995) concerning our business, results of operations, economic performance
and/or financial condition, based on management’s current expectations, plans, estimates, assumptions and projections. Forward-looking
statements are included, for example, in the discussions about:
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strategy;
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new
product discovery and development;
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current
or pending clinical trials;
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our
products’ ability to demonstrate efficacy or an acceptable safety profile;
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actions
by the FDA and other regulatory authorities;
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product
manufacturing, including our arrangements with third-party suppliers;
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product
introduction and sales;
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royalties
and contract revenues;
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expenses
and net income;
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credit
and foreign exchange risk management;
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liquidity;
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asset
and liability risk management;
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the
outcome of litigation and other proceedings;
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intellectual
property rights and protection;
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economic
factors;
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competition;
and
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legal
risks.
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Any
statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking
statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,”
“estimates,” “aims,” “plans,” “may,” “could,” “will,”
“will continue,” “seeks,” “should,” “predict,” “potential,” “outlook,”
“guidance,” “target,” “forecast,” “probable,” “possible” or the negative
of such terms and similar expressions. Forward-looking statements are subject to change and may be affected by risks and uncertainties,
most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date
they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events,
except as required by law, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities
laws and other applicable laws.
We
caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed
in, or implied by, the forward-looking statements, and therefore you should not place too much reliance on them. These factors
include, among others, those described herein, under “Risk Factors” and elsewhere in this Annual Report and in our
other public reports filed with the Securities and Exchange Commission. It is not possible to predict or identify all such factors,
and therefore the factors that are noted are not intended to be a complete discussion of all potential risks or uncertainties
that may affect forward-looking statements. If these or other risks and uncertainties materialize, or if the assumptions underlying
any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from
those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations
will prove accurate or that we will be able to achieve our strategic and operational goals.
Forward-looking
statements are based on information we have when those statements are made or management’s good faith belief as of that
time with respect to future events, and are subject to significant risks and uncertainties that could cause actual performance
or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that
could cause such differences include, but are not limited to:
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our
lack of operating history;
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our
current and future capital requirements and our ability to satisfy our capital needs;
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our
inability to keep up with industry competition;
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interpretations
of current laws and the passages of future laws;
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acceptance
of our business model by investors and our ability to raise capital;
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our
drug discovery and development activities may not result in products that are approved by the applicable regulatory authorities.
Even if our drug candidates do obtain regulatory approval, they may never achieve market acceptance or commercial success;
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our
reliance on key personnel, including our ability to attract and retain scientists;
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our
reliance on third party manufacturing to supply drugs for clinical trials and sales;
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our
limited distribution organization with no sales and marketing staff;
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our
being subject to product liability claims;
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our
reliance on key personnel, including our ability to attract and retain scientists;
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legislation
or regulation that may increase the cost of our business or limit our service and product offerings;
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risks
related to our intellectual property, including our ability to adequately protect intellectual property rights;
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risks
related to government regulation, including our ability to obtain approvals for the commercialization of some or all of our
drug candidates, and ongoing regulatory obligations and continued regulatory review which may result in significant additional
expense and subject us to penalties if we fail to comply with applicable regulatory requirements; and
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our
ability to obtain regulatory approvals in foreign jurisdictions to allow us to market our products internationally.
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Moreover,
new risks regularly emerge and it is not possible for our management to predict or articulate all risks we face, nor can we assess
the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to
differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus are
based on information available to us on the date of this registration statement. Except to the extent required by applicable laws
or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information,
future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on
our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this registration
statement.