Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated
filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer”, “non-accelerated
filer” or “emerging growth company” in Rule 12b-2 of the Exchange Act.
Unless indicated or the context otherwise requires, (i) all references
in this report to our common shares as of any date prior to March 13, 2018 refer to the common shares of Auris Medical (Switzerland) (having
a nominal value of CHF 0.40 per share (pre-2019 Reverse Share Split)) prior to the 10:1 “reverse share split” effected through
the Merger, (ii) all references to our common shares as of, and after, March 13, 2018 and prior to the Redomestication refer to the common
shares of Auris Medical (Switzerland) (having a nominal value of CHF 0.02 per share (pre-2019 Reverse Share Split)) after the 10:1 “reverse
share split” effected through the Merger, (iii) all references to our common shares as of, and after, the Redomestication on March
18, 2019 refer to the common shares of Auris Medical (Bermuda) (having a par value of CHF 0.02 per share (pre-2019 Reverse Share Split)),
(iv) the Company’s common shares on or after May 1, 2019, the date of the 2019 Reverse Share Split, have a par value of CHF 0.40
and (v) the Company’s common shares on or after June 30, 2020, being the date the par value of our common shares was reduced to
CHF 0.01 per share. At the annual general meeting of the shareholders of the Company held on June 4, 2020, the shareholders approved the
increase in the number of authorized common shares of the Company from 10,000,000 common shares to 25,000,000 common shares and the reduction
the par value of the Company’s common shares to CHF 0.01, with such reduction having effect on June 30, 2020.
PART
I
ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. | Directors
and senior management |
Not
applicable.
Not
applicable.
Not
applicable.
ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not
applicable.
B. | Method
and expected timetable |
Not
applicable.
ITEM
3. KEY INFORMATION
B. | Capitalization
and indebtedness |
Not
applicable.
C. | Reasons
for the offer and use of proceeds |
Not
applicable.
You
should carefully consider the risks and uncertainties described below and the other information in this Annual Report. Our business,
financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result,
the market price of our common shares could decline. This Annual Report also contains forward-looking statements that involve risks and
uncertainties. See “Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated
in these forward-looking statements as a result of certain factors.
Summary
of Risk Factors
An investment in our common shares is subject to a number of risks.
The following summarizes some, but not all, of these risks. Please carefully consider all of the information discussed in “Item
3. Key Information-D. Risk Factors” in this annual report for a more thorough description of these and other risks.
|
● |
We are a drug development-stage
company and have a limited operating history and a history of operating losses. We anticipate that we will continue to incur losses
for the foreseeable future. |
|
● |
We expect that we will
need substantial additional funding before we can expect to become profitable from sales of our products. If we are unable to raise
capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. |
|
● |
We intend to reposition
our Company around RNA therapeutics and to divest or spin off our business in neurotology, rhinology and allergology. We cannot give
any assurance that this repositioning will be successful and that we will be able to divest or spin off our non-RNA business at attractive
conditions and within a reasonable period of time. |
|
● |
We
have started to commercialize Bentrio™, our most advanced product, in Germany and several other European countries and by entering
into distribution agreements with third parties. Bentrio™ has not received clearance as a medical device in the U.S., yet.
The product is marketed as an “over the counter” consumer healthcare product. The business of selling consumer healthcare
products is highly competitive and characterized by a large number of suppliers with substantially larger resources than us. We cannot
give any assurance that we will be successful in commercializing Bentrio™ or with reasonable investments or within a reasonable
time period.
|
|
● |
Apart from Bentrio™,
we depend entirely on the success of AM-125 and AM-401 which are still in preclinical and clinical development, respectively. If
our preclinical studies or clinical trials are unsuccessful, we do not obtain regulatory approval or we are unable to commercialize
AM-125 or AM-401, or we experience significant delays in doing so, our business, financial condition and results of operations will
be materially adversely affected. |
|
● |
We face risks related to
health epidemics and outbreaks, including the COVID-19 “coronavirus” outbreak, which could significantly disrupt our
preclinical studies and clinical trials, drug development and sales efforts. |
|
● |
Clinical drug development
involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier studies and trials
may not be predictive of future trial results. If clinical trials of our drug product candidates are prolonged or delayed, we may
be unable to obtain required regulatory approvals, and therefore be unable to commercialize our drug product candidates on a timely
basis or at all. |
|
● |
If serious adverse, undesirable
or unacceptable side effects are identified during the development of our product candidates or following approval, if any, we may
need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may
be subject to other significant negative consequences following marketing approval, if any. |
|
● |
We depend on enrollment
of patients in our clinical trials for our product candidates. If we are unable to enroll patients in our clinical trials, our research
and development efforts could be materially adversely affected. |
|
● |
We may become exposed to
costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage; and our
product liability insurance may not cover all damages from such claims. |
|
● |
We cannot give any assurance
that any of our drug product candidates will receive regulatory approval, which is necessary before they can be commercialized. |
|
● |
We cannot give any assurance
that Bentrio™ will receive regulatory clearance under a 510(k) by the FDA, which is necessary before it can be commercialized
in the US for its intend use in allergic rhinitis, or through a different regulatory pathway for its intended use in viral infections,
or that Bentrio™ can be upclassified as a Class II medical device in the EU by 2024, which is necessary to keep the product
on the market under new European medical device regulations. |
|
● |
Substantial additional
data may need to be generated in order to obtain marketing approval for AM-125. |
|
● |
Even if our product candidates
obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant
additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market
withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems
with our products. |
|
● |
Healthcare legislative
or regulatory reform measures, including government restrictions on pricing and reimbursement, may have a negative impact on our
business and results of operations. |
|
● |
The successful commercialization
of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate
coverage and reimbursement levels and pricing policies. |
|
● |
We may seek to form additional
strategic alliances in the future with respect to our product candidates, and if we do not realize the benefits of such alliance,
our business, financial condition, commercialization prospects and results of operations may be materially adversely affected. |
|
● |
We rely on third parties
to conduct our nonclinical and clinical trials and perform other tasks for us. If these third parties do not successfully carry out
their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory
approval for or commercialize our product candidates and our business could be substantially harmed. |
|
● |
We currently rely on third-party
suppliers and other third parties for production of Bentrio™ and our product candidates and our dependence on these third parties
may impair the advancement of our research and development programs and the development of our product candidates. |
|
● |
If we or our licensors
are unable to obtain and maintain effective patent rights for our technologies, product candidates or any future product candidates,
or if the scope of the patent rights obtained is not sufficiently broad, we may not be able to compete effectively in our markets. |
|
● |
Our future growth and ability
to compete depends on retaining our key personnel and recruiting additional qualified personnel. |
|
● |
The price of our common
shares may be volatile and may fluctuate due to factors beyond our control. |
Risks
Related to Our Business and Industry
We
are a drug development-stage company and have a limited operating history and a history of operating losses. We anticipate that we will
continue to incur losses for the foreseeable future.
We
are a drug development-stage biopharmaceutical company with limited operating history. Since inception, we have incurred significant
operating losses. We incurred net losses (defined as net loss attributable to owners of the Company) of CHF 17.4 million, CHF 8.2 million
and CHF 6.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated
deficit of CHF 176.0 million.
Our
losses have resulted principally from expenses incurred in research and development of our product candidates, pre-clinical research
and general and administrative expenses that are required for maintaining our business infrastructure and operating as a publicly listed
company. In 2021 we started to incur sales and marketing expenses as we initiated the commercialization of Bentrio™. We expect
to continue to incur significant operating losses in the future as we continue our research and development efforts for our product candidates
in clinical development and continue with the roll-out of Bentrio™. In our financial year ended December 31, 2021, we incurred
CHF 17.1 million in operating loss and capitalized development expenditures of its AM-125 project of CHF 2.8 million, and we expect our
total cash need in 2022 to be in the range of CHF 11 to 13 million.
To
date, we have financed our operations through the initial public offering and a follow-on offering of our common shares, private placements
of equity securities and short- and long-term loans. On July 19, 2016, we entered into a Loan and Security Agreement with Hercules Technology
Growth Capital, Inc., or Hercules. The agreement provided us with a senior secured term loan facility for up to $20 million. On January
31, 2019, we made the final payment to Hercules under the facility, comprising the last amortization payment as well as an end of term
charge. With the final payment, all covenants and collaterals in favor of Hercules have been lifted. On September 8, 2020, FiveT Capital
Holding Ltd., or FiveT, provided a convertible loan to Altamira Medica AG, or Altamira, one of our subsidiaries. The loan had a principal
amount of CHF 1.5 million, a duration of 18 months, and carried an interest rate of 8% p.a. Under the terms of the agreement, FiveT had
the right to convert the loan or parts thereof including accrued interest into common shares of either Altamira or Auris Medical Holding
Ltd., subject to additional provisions and certain restrictions. On December 2, 2020, FiveT converted part of the loan and on March 4,
2021 the remaining outstanding amount into common shares of Auris Medical Holding Ltd., thus retiring the loan. On February 4, 2022,
FiveT Investment Management Ltd., or FiveT IM, an affiliate of FiveT, provided a convertible loan to the Company with a principal amount
of CHF 5 million, a duration of 12 months, and carrying an interest rate of 10% p.a. Under the terms of the agreement, FiveT IM has the
right to convert the loan or parts thereof including accrued interest into common shares of the Company, subject to additional provisions
and certain restrictions.
We
have only one product approved for commercialization and have generated limited revenues from product sales. Biopharmaceutical product
development is a highly speculative undertaking and involves a substantial degree of risk. It may be several years, if ever, before we
have another product candidate approved for commercialization and begin to generate more revenues from product sales.
We
have never generated meaningful revenue from product sales and may never be profitable.
We
only started to generate first revenues with Bentrio™, our first commercial product, in late 2021. Our ability to generate meaningful
revenue and achieve profitability depends on our ability to successfully commercialize Bentrio™ through our own efforts and through
our distributors and to successfully complete the development of, and obtain the marketing approvals necessary to commercialize, one
or more of our other product candidates. We do not anticipate generating revenue from sales of our other product candidates unless and
until we obtain regulatory approval or clearance for, and commercialize, AM-125 and AM-401. Our ability to generate future revenue from
product sales depends heavily on our success in many areas, including but not limited to:
|
● |
building customer awareness of Bentrio™ and successful conversion
into sales; |
|
|
|
|
● |
success of our distributors in commercializing
Bentrio™ in their territories and contracting distributors for additional key markets in Europe and North America; |
|
|
|
|
● |
completing research and clinical
development of our drug product candidates and further clinical testing of Bentrio™; |
|
● |
obtaining marketing approvals
for our drug product candidates, including AM-125 or AM-401, and additional clearance or approvals for Bentrio™, for which
we will have to complete development, including the conduct of clinical trials; |
|
● |
developing a sustainable
and scalable manufacturing process for any approved product candidates and maintaining supply and manufacturing relationships with
third parties that can conduct the process and provide adequate (in amount and quality) products to support clinical development
and the market demand for our product candidates, if approved; |
|
● |
launching and commercializing
product candidates for which we obtain marketing approval, either directly or with a collaborator or distributor; |
|
● |
obtaining market acceptance
of our product candidates as viable treatment options; |
|
● |
addressing any competing
technological and market developments; |
|
● |
identifying, assessing,
acquiring and/or developing new product candidates; |
|
● |
negotiating favorable terms
in any collaboration, licensing, or other arrangements into which we may enter; |
|
● |
maintaining, protecting,
and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and |
|
● |
attracting, hiring, and
retaining qualified personnel. |
Even
as we have started to commercialize Bentrio™ in Germany and several other European markets, our first product candidate cleared
for commercial sale, we anticipate incurring significant costs associated with penetrating markets and building revenues. Because of
the numerous risks and uncertainties with medical device and pharmaceutical product development and commercialization, we are unable
to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses
could increase beyond expectations if we are required by the FDA, the EMA, or other regulatory agencies, domestic or foreign, to change
our manufacturing processes, or to perform clinical, nonclinical, or other types of trials in addition to those that we currently anticipate.
In cases where we are successful in obtaining regulatory approvals to market further of our product candidates, our revenue will be dependent,
in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the
ability to obtain coverage and reimbursement at any price, and whether we own the commercial rights for that territory. If the number
of our addressable patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than
we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant
revenue from sales of such products, even if approved. Additionally, if we are not able to generate sufficient revenue from the sale
of any approved products, we may never become profitable.
We
may be unable to develop and commercialize AM-125, AM-401 or any other product candidate or we may be unable to grow revenues for Bentrio™
to meaningful levels, and, even if we do, may never achieve profitability. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a semiannual or annual basis. Our failure to become and remain profitable would decrease the value
of the Company and could impair our ability to raise capital, expand our business or continue our operations.
We
expect that we will need substantial additional funding before we can expect to become profitable from sales of our products. If we are
unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization
efforts.
We
expect our research and development expenses to remain significant in connection with our ongoing roll-out with Bentrio™ and our
clinical development activities, particularly as we initiate new trials with AM-125 and Bentrio™, and advance or initiate the pre-clinical
and clinical development of AM-401 or any other product candidate. We expect our total cash need in 2022 to be in the range of CHF 11
to 13 million. As of December 31, 2021, our cash and cash equivalents were CHF 1.0 million. Our assumptions may prove to be wrong, and
we may have to use our capital resources sooner than we currently expect. If we are unable to raise capital when needed, we could be
forced to delay, suspend, reduce or terminate our product development programs or commercialization efforts. Also, should we fail to
raise sufficient funds to cover our operating expenditures for at least a 12-month period, we may no longer be considered a “going
concern.” The lack of a going concern assessment may negatively affect the valuation of the Company’s investments in its
subsidiaries and result in a revaluation of these holdings. The board of directors will need to consider the interests of our creditors
and take appropriate action to restructure the business if it appears that we are insolvent or likely to become insolvent. Our future
funding requirements will depend on many factors, including but not limited to:
|
● |
the amount of our investments
in raising market awareness of and growing market penetration for Bentrio™; |
|
|
|
|
● |
the
success of our distributors in commercializing Bentrio™ in their territories and our ability to access additional geographies
through further distributors;
|
|
● |
the scope, rate of progress,
results and cost of our clinical trials, nonclinical testing, and other related activities; |
|
● |
the cost of manufacturing
clinical supplies, and establishing commercial supplies, of our product candidates and any products that we may develop; |
|
● |
the number and characteristics
of product candidates that we pursue; |
|
● |
the cost, timing, and outcomes
of regulatory approvals; |
|
● |
the cost and timing of
establishing sales, marketing, and distribution capabilities; and |
|
● |
the terms and timing of
any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments
thereunder. |
We
expect that we will require additional funding to continue our roll out of Bentrio™ and our ongoing clinical development activities
and seek to obtain regulatory approval for, and commercialize, our product candidates. If we receive regulatory approval or clearance
for any of our product candidates, and if we choose to not grant any licenses to partners, we expect to incur significant commercialization
expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. We also
expect to continue to incur additional costs associated with operating as a public company. Additional funds may not be available on
a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement
our long-term business strategy. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our
product development programs or commercialization efforts.
Raising
additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual
property or future revenue streams.
Until
such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity
offerings, debt financings, grants, and license and development agreements in connection with any collaborations. We do not have any
committed external source of funds. In the event we need to seek additional funds, we may raise additional capital through the sale of
equity or convertible debt securities. In such an event, our shareholders’ ownership interests will be diluted, and the terms of
these new securities may include liquidation or other preferences that adversely affect our shareholders’ rights as holders of
our common shares. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to
take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If
we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third
parties, we may have to relinquish valuable rights to our intellectual property or future revenue streams. If we are unable to raise
additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization
efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
We
do not have a history of commercializing medical devices or pharmaceutical products, which may make it difficult to evaluate the prospects
for our future viability.
Our
operations to date have been limited to financing and staffing the Company, developing our technology and developing our product candidates.
We have not yet demonstrated an ability to successfully complete large-scale, pivotal clinical trials, obtain marketing approvals, manufacture
a commercial scale product or conduct sales and marketing activities necessary for successful product commercialization. Consequently,
predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully developing
and commercializing medical devices or pharmaceutical products.
We
are in the process of repositioning our Company around RNA therapeutics and intend to divest or spin off our business in neurotology,
rhinology and allergology. We cannot give any assurance that this repositioning will be successful and that we will be able to divest
or spin off our non-RNA business at attractive conditions and within a reasonable period of time.
In
June 2021 we acquired Trasir Therapeutics Inc. (“Trasir”) whose main asset is the proprietary peptide polyplex platform OligoPhore™
/ SemaPhore™ that can engage any type of RNA in rapid self-assembly and allows for safe and effective oligonucleotide delivery
to extrahepatic tissues using systemic administration. We announced on that occasion our intention to strategically reposition the Company
to focus on the development of RNA therapeutics while in the medium term evaluating opportunities to spin off or divest its existing
business in neurotology, rhinology and allergology within the next 12-18 months. This non-RNA business comprises Bentrio™ for the
protection against airborne allergens and viruses, AM-125 for the treatment of vertigo, Keyzilen® (AM-101) for the treatment of acute
tinnitus, Sonsuvi® (AM-111) for the treatment of acute hearing loss and certain early-stage assets such as AM-102 for the treatment
of tinnitus.
Any
sale process is time consuming and requires substantial management time and attention, which may have an effect on our business and results
of operations.
Valuation
of assets in one or several partial divestiture transactions depends on a variety of factors such as the valuation of comparable assets,
interest for the type of assets and conditions on capital markets. We can provide no assurances that we will successfully sell the non-RNA
business, that we will do so in accordance with our expected timeline or that we will recover the carrying value of the assets. Additionally,
any decisions made regarding our deployment or use of any sales proceeds we receive in any sale involves risks and uncertainties. As
a result, our decisions with respect to such proceeds may not lead to increased long-term shareholder value, or may result in a material
charge to our statement of operations. If a sale of the non-RNA business at what we consider to be a reasonable price is not available,
we may decide to cease efforts to sell the non-RNA business.
The
purchase price and availability of certain components of Bentrio™ could be affected as a result of the Russian invasion of the
Ukraine.
In
the context of Russia’s recent invasion of the Ukraine, oil and gas prices, which are key input factors for plastic parts such
as those used for the primary packaging of Bentrio™, have increased significantly and shown high volatility. Continued escalation
of political tensions, economic instability, military activity or civil hostilities in Ukraine could result in significant price increases
for such components or difficulties of our component suppliers to supply such components on a timely basis. If we are unable to pass
on such price increases, or if component supplies are interrupted, our business, financial condition and results of operation could be
adversely affected.
Cyber-attacks
or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant
disruption of our business operations.
We
and certain of our collaborators depend on information technology and telecommunications systems for significant aspects of operations.
These information technology and telecommunications systems support a variety of functions, including clinical trial management, clinical
data capture and analysis, purchasing and production planning, production, logistics, quality control, customer service and support,
billing, and general and administrative activities. Information technology and telecommunications systems are vulnerable to damage from
a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. If we are subjected
to one or more cyber-attacks or security breaches, we would suffer financial loss. Furthermore, as use of digital technologies has increased,
cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased
in frequency and sophistication and make us even more at risk. These threats pose a risk to the security of our systems and networks,
the confidentiality and the availability and integrity of our data. Any disruption or loss of information technology or telecommunications
systems on which critical aspects of our operations depend could have an adverse effect on business.
Risks
Related to the Development and Clinical Testing of Our Product Candidates
AM-125
and AM-401 are still in preclinical or clinical development. If our studies and trials are unsuccessful, we do not obtain regulatory
approval or we are unable to commercialize AM-125 or AM-401, or we experience significant delays in doing so, our business, financial
condition and results of operations will be materially adversely affected.
We
have invested a significant portion of our efforts and financial resources in the development of AM-125 and AM-401, which are still
in preclinical and clinical development, respectively. Our ability to generate product revenues from these drug product candidates,
which we do not expect to occur for at least the next few years, if ever, will depend heavily on successful clinical development,
obtaining regulatory approval or clearance and eventual commercialization of these product candidates. The success of AM-125 or
AM-401 and our other product candidates will depend on several factors, including the following:
|
● |
completing clinical trials
that demonstrate the efficacy and safety of our product candidates; |
|
● |
receiving marketing approvals
or clearance from competent regulatory authorities; |
|
● |
establishing commercial
manufacturing capabilities; |
|
● |
launching commercial sales,
marketing and distribution operations; |
|
● |
acceptance of our product
candidates by patients, the medical community and third-party payors; |
|
● |
a continued acceptable
safety profile following approval; |
|
● |
competing effectively with
other therapies; and |
|
● |
qualifying for, maintaining,
enforcing and defending our intellectual property rights and claims. |
If
we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to
successfully commercialize AM-125 or AM-401, which would materially adversely affect our business, financial condition and results of
operations.
We
face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical
studies and clinical trials, and therefore our receipt of necessary regulatory approvals could be delayed or prevented.
In
December 2019, a novel strain of coronavirus COVID-19 was reported to have surfaced in Wuhan, China. The extent to which COVID-19 may
impact our preclinical and clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted
with confidence, such as the duration and geographic reach of the outbreak, the severity of COVID-19, and the effectiveness of actions
to contain and treat COVID-19. In particular, the COVID-19 outbreak has impacted enrollment of patients into our “TRAVERS”
phase 2 trial with AM-125. Candidates for participation in this trial undergo certain types of neurosurgery, which are elective procedures.
In case of increasing case numbers, the COVID-19 pandemic may impact enrolment also into our planned Phase 3 trial.
The
continued spread of COVID-19 globally could otherwise adversely impact our clinical trial operations, including our ability to recruit
and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19
if an outbreak occurs in their geography. Disruptions or restrictions on our ability to travel to monitor data from our clinical trials,
or to conduct clinical trials, or the ability of patients enrolled in our studies to travel, or the ability of staff at study sites to
travel, as well as temporary closures of our facilities or the facilities of our clinical trials partners and their contract manufacturers,
would negatively impact our clinical trial activities. In addition, we rely on independent clinical investigators, contract research
organizations and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical
studies and clinical trials, including the collection of data from our clinical trials, and the outbreak may affect their ability to
devote sufficient time and resources to our programs or to travel to sites to perform work for us. Similarly, our preclinical trials
could be delayed and/or disrupted by the outbreak. As a result, the expected timeline for data readouts of our preclinical studies and
clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect our ability to obtain regulatory
approval for and to commercialize our product candidates, increase our operating expenses and have a material adverse effect on our financial
results.
On
the other hand, in March 2022 we initiated the COVAMID clinical trial with Bentrio™ in patients with acute COVID-19 infection.
If case numbers in the study country or countries decrease, our ability to complete the study on time may be negatively affected, additional
measures and expenditures may be required to ensure enrollment, and we may experience delays in our regulatory submissions in support
of obtaining a label claim for Bentrio™ also for viral infections.
Clinical
drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier studies
and trials may not be predictive of future trial results. If clinical trials of our drug product or device candidates are prolonged or
delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our drug product candidates
on a timely basis or at all.
To
obtain the requisite regulatory approvals or approvals to market and sell any of our drug product or device candidates, we must demonstrate
through extensive pre-clinical studies and clinical trials that our products are safe and effective in humans. Clinical testing is expensive
and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial
process. The results of pre-clinical studies and early clinical trials of our product candidates may not be predictive of the results
of later-stage clinical trials. For example, positive results generated to date in clinical trials for our product candidates do not
ensure that later clinical trials will demonstrate similar results. Product candidates in later stages of clinical trials may fail to
show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number
of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy
or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be successful.
Clinical
trials must be conducted in accordance with FDA, EMA and comparable foreign regulatory authorities’ legal requirements, regulations
or guidelines, and are subject to oversight by these governmental agencies and Institutional Review Boards, or IRBs, at the medical institutions
where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our product candidates produced
under current good manufacturing practices, or cGMP, and other requirements. We depend on medical institutions and clinical research
organizations, or CROs, to conduct our clinical trials in compliance with current good clinical practice, or cGCP, standards. To the
extent the CROs fail to enroll participants for our clinical trials, fail to conduct the trials to cGCP standards or are delayed for
a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays
or both, which may harm our business.
To
date, we have not completed all clinical trials required for the approval of AM-125, which is currently in Phase 2 clinical development.
In addition, we need to generate clinical data to support the approval of Bentrio™ for protection against airborne viruses.
The
completion of clinical trials for AM-125 or Bentrio™ may be delayed, suspended or terminated as a result of many factors, including
but not limited to:
|
● |
the delay or refusal of
regulators or IRBs to authorize us to commence a clinical trial at a prospective trial site and changes in regulatory requirements,
policies and guidelines; |
|
● |
delays or failure to reach
agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation
and may vary significantly among different CROs and trial sites; |
|
● |
delays in patient enrollment
and variability in the number and types of patients available for clinical trials; |
|
● |
the inability to enroll
a sufficient number of patients in trials to ensure adequate statistical power to detect statistically significant treatment effects; |
|
● |
negative or inconclusive
results, which may require us to conduct additional pre-clinical or clinical trials or to abandon projects that we expect to be promising; |
|
● |
safety or tolerability
concerns could cause us to suspend or terminate a trial if we find that the participants are being exposed to unacceptable health
risks; |
|
● |
regulators or IRBs requiring
that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory
requirements or safety concerns, among others; |
|
● |
lower than anticipated
retention rates of patients and volunteers in clinical trials; |
|
● |
our CROs or clinical trial
sites failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, deviating
from the protocol or dropping out of a trial; |
|
● |
delays relating to adding
new clinical trial sites; |
|
● |
difficulty in maintaining
contact with patients after treatment, resulting in incomplete data; |
|
● |
errors in survey design,
data collection and translation; |
|
● |
delays in establishing
the appropriate dosage levels; |
|
● |
the quality or stability
of the product candidate falling below acceptable standards; |
|
● |
the inability to produce
or obtain sufficient quantities of the product candidate to complete clinical trials; and |
|
● |
exceeding budgeted costs
due to difficulty in accurately predicting costs associated with clinical trials. |
Any
delays in completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability
to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly.
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 our drug product candidates.
Positive
or timely results from pre-clinical or early-stage trials do not ensure positive or timely results in late-stage clinical trials or product
approval by the FDA, the EMA or comparable foreign regulatory authorities. Product candidates that show positive pre-clinical or early
clinical results may not show sufficient safety or efficacy in later stage clinical trials and therefore may fail to obtain regulatory
approvals.
Also,
pre-clinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product
candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval
for the product candidates. The FDA, the EMA and comparable foreign regulatory authorities have substantial discretion in the approval
process and in determining when or whether regulatory approval will be obtained for any of our product candidates. Even if we believe
the data collected from clinical trials of AM-125 or Bentrio™ are promising, such data may not be sufficient to support approval
by the FDA, the EMA or any other regulatory authority.
In
some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate
due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient
populations, adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants.
If
we are required to conduct additional clinical trials or other testing of AM-125 or Bentrio™ or any other drug product candidate
that we develop beyond the trials and testing that we currently contemplate, if we are unable to successfully complete clinical trials
or other testing, if the results of these trials or tests are unfavorable or are only modestly favorable or if there are safety concerns
associated with AM-125 our other drug product candidates, or Bentrio™, we may:
|
● |
be delayed in obtaining
marketing approval; |
|
● |
not obtain marketing approval
at all; |
|
● |
obtain approval for indications
or patient populations that are not as broad as intended or desired; |
|
● |
obtain approval with labeling
that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings; |
|
● |
be subject to additional
post-marketing testing or other requirements; or |
|
● |
remove the product from
the market after obtaining marketing approval. |
Our
product development costs will also increase if we experience delays in testing or marketing approvals or if we are required to conduct
additional clinical trials or other testing of AM-125 or other drug product candidates or Bentrio™ beyond the trials and testing
that we currently contemplate or conduct and we may be required to obtain additional funds to complete such additional clinical trials.
We cannot assure you that our clinical trials will begin as planned or be completed on schedule, if at all, or that we will not need
to restructure our trials after they have begun. Significant clinical trial delays also could shorten any periods during which we may
have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do or
shorten any periods during which we have the exclusive right to commercialize our product candidates, which may harm our business and
results of operations. In addition, some of the factors that cause, or lead to, clinical trial delays may ultimately lead to the denial
of regulatory approval of AM-125, any other drug product candidate, or Bentrio™ for its intended use in protection against airborne
viruses.
If
serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates or following
approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may
be limited, or we may be subject to other significant negative consequences following marketing approval, if any.
If
our product candidates are associated with serious adverse, undesirable or unacceptable side effects, we may need to abandon their development
or limit development to certain uses or sub-populations in which such side effects are less prevalent, less severe or more acceptable
from a risk-benefit perspective. Many compounds that initially showed promise in pre-clinical or early-stage testing have later been
found to cause side effects that restricted their use and prevented further development of the compound for larger indications.
In
our clinical trials of AM-125 to date, adverse events included a low number of transient and dose-dependent nasal congestion or discomfort.
No treatment-related serious adverse events were observed. Occurrence of serious procedure- or treatment-related side effects could impede
clinical trial enrollment and receipt of marketing approval from the FDA, the EMA and comparable foreign regulatory authorities. They
could also adversely affect physician or patient acceptance of our product candidates.
Additionally,
if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused
by such products, a number of potentially significant negative consequences could result, including:
|
● |
regulatory authorities
may withdraw approvals of such product; |
|
● |
regulatory authorities
may require additional warnings on the label; |
|
● |
we may be required to create
a medication guide outlining the risks of such side effects for distribution to patients; |
|
● |
we could be sued and held
liable for harm caused to patients; and |
|
● |
our reputation and physician
or patient acceptance of our products may suffer. |
Any
of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and
could significantly harm our business, results of operations and prospects.
We
depend on enrollment of patients in our clinical trials for our product candidates. If we are unable to enroll patients in our clinical
trials, our research and development efforts could be materially adversely affected.
Successful
and timely completion of clinical trials will require that we enroll a sufficient number of patient candidates. Trials may be subject
to delays as a result of patient enrollment taking longer than anticipated or patient withdrawal. Patient enrollment depends on many
factors, including the size and nature of the patient population, eligibility criteria for the trial, the proximity of patients to clinical
sites, the design of the clinical protocol, the availability of competing clinical trials, the availability of new drugs approved for
the indication the clinical trial is investigating, and clinicians’ and patients’ perceptions as to the potential advantages
of the drug being studied in relation to other available therapies.
The
specific target population of patients and therapeutic time windows may make it difficult for us to enroll enough patients to complete
our clinical trials in a timely and cost-effective manner. Delays in the completion of any clinical trial of our product candidates will
increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability
to commence product sales and generate revenue. 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 our product candidates.
We
may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial
stage; and our product liability insurance may not cover all damages from such claims.
We
are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing,
marketing and use of pharmaceutical products. The current and future use of product candidates by us in clinical trials, and the sale
of Bentrio™ or any future-approved products, may expose us to liability claims. These claims might be made by patients that use
the product, healthcare providers, medical device or pharmaceutical companies or others selling such products. Any claims against us,
regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our product candidates,
commercial products or any prospects for commercialization of our product candidates.
Although
the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug or medical device,
even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects
during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients
may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates.
We
purchase liability insurance in connection with each of our clinical trials and for commercial stage products. It is possible that our
liabilities could exceed our insurance coverage. However, we may not be able to maintain insurance coverage at a reasonable cost or obtain
insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of
claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover
such claims and our business operations could be impaired.
Should
any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of
operations.
Due
to our limited resources and access to capital, we must and have in the past decided to prioritize development of certain product candidates;
these decisions may prove to have been wrong and may adversely affect our revenues.
Because
we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount
of resources to allocate to each. As such, we have been primarily focused on the development of AM-125, AM-201, AM-301, Keyzilen®
or Sonsuvi®, with our current commercial focus being limited to Bentrio™, AM-125 and AM-401 while we have
deprioritized AM-201, and Keyzilen® and Sonsuvi® until we will be able to out-license or sell these programs.
Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular compounds, product
candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better
opportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties in respect of certain product
development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations
regarding the market potential of our product candidates or misread trends in the biopharmaceutical industry our business, financial
condition and results of operations could be materially adversely affected.
Our
research and development activities could be affected or delayed as a result of possible restrictions on animal testing.
Certain
laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal
testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals
have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities
through protests and other means. To the extent the activities of these groups are successful, our research and development activities
may be interrupted, delayed or become more expensive.
Risks
Related to Regulatory Approval of Our Product Candidates
We
cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be
commercialized.
Our
future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize
one or more product candidates. We currently have one drug product candidate, AM-125, in Phase 2 clinical development and another, AM-401,
in preclinical development. We are not permitted to market or promote any of our drug product candidates before we receive regulatory
approval from the FDA, EMA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of
our product candidates.
Although
certain of our employees have prior experience with submitting marketing applications to the FDA, EMA or comparable foreign regulatory
authorities, we as a company have not submitted such applications for our drug product candidates. We cannot be certain that any of our
product candidates will be successful in clinical trials or receive regulatory approval. Applications for our product candidates could
fail to receive regulatory approval for many reasons, including but not limited to the following:
|
● |
the FDA, EMA or comparable
foreign regulatory authorities may disagree with the design or implementation of our clinical trials; |
|
● |
the population studied
in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek
approval; |
|
● |
the FDA, EMA or comparable
foreign regulatory authorities may disagree with our interpretation of data from nonclinical trials or clinical trials; |
|
● |
the data collected from
clinical trials of our product candidates may not be sufficient to support the submission of a new drug application, or NDA, or other
submission or to obtain regulatory approval in the United States or elsewhere; |
|
● |
we may be unable to demonstrate
to the FDA, EMA or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio for its proposed
indication is acceptable; |
|
● |
the FDA, EMA or other regulatory
authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers
with which we contract for clinical and commercial supplies; and |
|
● |
the approval policies or
regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical
data insufficient for approval. |
In
addition, our current product candidates or any of our other future product candidates could take a significantly longer time to gain
regulatory approval than expected or may never gain regulatory approval. This could delay or eliminate any potential product revenue
by delaying or terminating the potential commercialization of our product candidates.
We
generally plan to seek regulatory approval to commercialize our product candidates in the United States, the European Union and in additional
foreign countries where we have commercial rights. To obtain regulatory approval in other countries, we must comply with numerous and
varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical trials,
commercial sales, pricing, and distribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction,
we cannot ensure that we will obtain approval in any other jurisdictions. Failure to obtain marketing authorization for our product candidates
will result in our being unable to market and sell such products, which would materially adversely affect our business, financial conditional
and results of operations. If we fail to obtain approval in any jurisdiction, the geographic market for our product candidates could
be limited. Similarly, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization
of our product candidates.
We
cannot give any assurance that Bentrio™ will receive regulatory clearance in the US, which is necessary before it can be
commercialized in the US.
Bentrio™
is a spray product for intranasal protection against airborne viruses or allergens.
Unless
an exemption applies, any medical device that is to be marketed in the U.S. must first receive from the FDA either 510(k) clearance,
by filing a 510(k) premarket notification, or premarket application (PMA) approval, after submitting a PMA. Alternatively, the device
may be cleared through the de novo classification process by the FDA. In September 2021 we submitted a 510(k) application for premarket
clearance of Bentrio™ as a Class II device for the intended use of promoting alleviation of mild allergic symptoms triggered by
the inhalation of various airborne allergens. The FDA’s review is currently ongoing.
To
obtain 510(k) clearance, a company must submit a premarket notification demonstrating substantial equivalence between the proposed device
and a legally marketed “predicate” device, which is defined as a legally marketed device, that (i) was legally marketed prior
to May 28, 1976, for which the FDA has not yet called for submission of a PMA application; (ii) has been reclassified from Class III
to Class II or Class I; (iii) has been cleared through the 510(k) premarket notification process; or (iv) has been previously determined
to be exempt from the 510(k) process. Substantial equivalence means that the proposed device has the same intended use and the same technological
characteristics as the predicate device, or, if the new device has different technological characteristics, that the device is as safe
and effective as the predicate device and does not raise different questions of safety and effectiveness. We have identified two such
predicate devices and have referenced them in our 510(k) submission.
Bentrio™
is also intended for use in the reduction of the intranasal infectious viral load following inspiration of airborne viruses such as SARS-CoV-2.
Since there appears to be no valid predicate device available for this intended use, we may have to submit a de novo request to the FDA.
Under the de novo pathway, we would have to prove that Bentrio™ does not present substantial risk to the patient (rather than just
demonstrating substantial equivalence with the safety of the relevant predicate device(s)), which may require additional testing. The
review by the FDA in the de novo process is longer than the 510(k) process and requires higher fees. Any device that has been classified
through the de novo process may be marketed and used as predicate for future 510(k) submissions. The FDA may also, instead of accepting
a 510(k) submission, require us to submit a PMA, which is typically a much more complex, lengthy, and burdensome application than a 510(k).
To support a PMA, the FDA would likely require that we conduct one or more clinical studies to demonstrate that the device is safe and
effective. In some cases such studies may be requested for a 510(k) as well. We may not be able to meet the requirements to obtain 510(k)
clearance or PMA approval, in which case the FDA may not grant any necessary clearances or approvals. In addition, the FDA may place
significant limitations upon the intended use of our products as a condition to a 510(k) clearance or PMA approval. Product applications
can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following
clearance or approval. Any delays or failure to obtain FDA clearance or approval of new products we develop, any limitations imposed
by the FDA on new product use or the costs of obtaining FDA clearance or approvals could have a material adverse effect on our business,
financial condition and results of operations.
The
marketing and commercialization of Bentrio™ in other countries is subject to varying regulatory requirements, including in some
cases also the approval of certain marketing materials and messages, which are evolving over time.
Many
foreign countries in which we currently commercialize or intend to market Bentrio™ have regulatory bodies and restrictions similar
to those of the FDA. International sales are subject to foreign government regulation, the requirements of which vary substantially from
country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance
and the requirements may differ.
In
particular, marketing of medical devices in the European Union (EU) is subject to compliance with the Medical Devices Directive 93/92/EEC
(MDD). A medical device may be placed on the market within the EU only if it conforms to certain “essential requirements”
and bears the CE Mark. The most fundamental and essential requirement is that a medical device must be designed and manufactured in such
a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition,
the device must achieve the essential performance(s) intended by the manufacturer and be designed, manufactured and packaged in a suitable
manner.
Manufacturers
must demonstrate that their devices conform to the relevant essential requirements through a conformity assessment procedure. The nature
of the assessment depends upon the classification of the device. The classification rules are mainly based on three criteria: the length
of time the device is in contact with the body, the degree of invasiveness and the extent to which the device affects the anatomy. Conformity
assessment procedures for all but the lowest risk classification of device involve a notified body. Notified bodies are often private
entities and are authorized or licensed to perform such assessments by government authorities. Manufacturers usually have some flexibility
to select a notified body for the conformity assessment procedures for a particular class of device and to reflect their circumstances,
e.g., the likelihood that the manufacturer will make frequent modifications to its products. Conformity assessment procedures require
an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products
already marketed. Notified bodies also may review the manufacturer’s quality systems. If satisfied that the product conforms to
the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for
its own declaration of conformity and application of the CE Mark. Application of the CE Mark allows the general commercializing of a
product in the EU. The product can also be subjected to local registration requirements depending on the country. We maintain CE Marking
on all of our products that require such markings as well as local registrations as required.
In
May 2017, the EU adopted a new Medical Devices Regulation (EU) 2017/745 (MDR), which replaced the MDD with effect from May 26, 2021.
The MDR clearly envisages, among other things, stricter controls of medical devices, including strengthening of the conformity assessment
procedures, increased expectations with respect to clinical data for devices and pre-market regulatory review of high-risk devices. The
MDR also envisages greater control over notified bodies and their standards, increased transparency, more robust device vigilance requirements
and clarification of the rules for clinical investigations. Under transitional provisions, medical devices such as Bentrio™ with
certificates of conformity issued under the MDD prior to May 26, 2021 may continue to be placed on the market for the remaining validity
of the certificate, until May 27, 2024 at the latest. After the expiry of any applicable transitional period, only devices that have
been CE marked under the MDR may be placed on the market in the EU.
Under
the MDD, Bentrio™ is classified as a Class I device which does not require a notified body for the conformity assessment procedure.
Under the MDR, AM-301 will be classified as a Class II device which will require a notified body. We expect to register Bentrio™
in the EU prior to the transition from the MDD to the MDR and plan to meet the requirements for conformity as Class II during the transition
period ending May 27, 2024. With the transition from MDD to MDR, there is strong demand for the services of notified bodies, and we cannot
assure you that we will be able to contract a notified body in due time, or that we will be able to meet the requirements for conformity
for Bentrio™ as Class II medical device under MDR and that we will be able to maintain the current labelling of the product.
The labelling and promotion of treatments for infectious diseases such
as SARS-CoV-2 is subject to special regulations in many countries. For example, in Germany we are not allowed to present or mention the
potential protective effects of Bentrio™ against SARS-CoV-2 directly to consumers but must communicate them to health care providers
only. ANSM, the French National Agency for the Safety of Medicines and Health Products, has requested that our indication of use for viral
infections such as SARS-CoV-2 be supported by clinical data, which we currently do not have. In other countries, such as Italy, any advertisement
material for medical devices must be pre-approved by the Ministry of Health, which has broad discretion over the approval process, including
review timelines. As a consequence, the access to certain markets requires substantial adaptations to packaging materials, instructions
for use, labelling and marketing materials, may take much longer than usual, and the sales potential for Bentrio™ may be substantially
restrained.
Because
we are developing therapies for which there is little clinical experience and, in some cases, using new endpoints, there is more risk
that the outcome of our clinical trials will not be favorable. Even if the results of our trials are favorable, there is risk that they
will not be acceptable to regulators or physicians.
There
are currently no drugs with proven efficacy for acute peripheral vertigo. In addition, there has been limited historical clinical trial
experience generally for the development of drugs to treat this condition. Regulatory authorities in the United States and European Union
have not issued definitive guidance as to how to measure the efficacy of treatments for acute peripheral vertigo, and regulators have
not yet established what is required to be demonstrated in a clinical trial in order to signify a clinically meaningful result and/or
obtain marketing approval.
Whereas
various balance tests and questionnaires are widely used in the diagnosis and management of vertigo, there is no universally recognized
definition of the clinical meaningfulness of outcomes, and regulatory authorities have not issued guidelines for demonstrating efficacy
for drug-based treatments such as AM-125. Therefore, we cannot be certain that AM-125 will be approved even if it were to show statistically
significant improvements in these tests.
Substantial
additional data may need to be generated in order to obtain marketing approval for AM-125.
Oral
betahistine has been in clinical use for several decades and is reported to be currently marketed in 115 countries world-wide. However,
in the United States oral betahistine is not approved since the FDA revoked the drug product’s marketing authorization in the early
1970s over issues with unsubstantiated information about some patients in the efficacy studies upon which approval had been based. Given
the absence of an approved betahistine drug product in the United States and to the extent that existing data may not be deemed sufficient,
the FDA may require a full development package for AM-125.
Furthermore,
additional data will be required for the specific formulation of AM-125 and the intranasal administration route. Since intranasal delivery
of betahistine has the potential to result in substantially higher systemic exposures as measured by concentrations in blood plasma compared
to oral delivery, existing safety assessments conducted with or for the approved drug product may not be sufficient. In addition, some
of these assessments were performed a long time ago and may not be in line with current regulations and guidelines. Therefore, the scope
of our development program for AM-125 may ultimately not be much smaller than one for new chemical entities.
Even
if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which
may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other
restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience
unanticipated problems with our products.
If
marketing authorization is obtained for any of our product candidates, the product will remain subject to continual regulatory review
and therefore authorization could be subsequently withdrawn or restricted. Any regulatory approvals that we receive for our product candidates
may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval,
or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor
the safety and efficacy of the product candidate. In addition, if the FDA or a comparable foreign regulatory authority approves any of
our product candidates, we will be subject to ongoing regulatory obligations and oversight by regulatory authorities, including with
respect to the manufacturing processes, labeling, packing, distribution, adverse event reporting, storage, advertising and marketing
restrictions, and recordkeeping and, potentially, other post-marketing obligations, all of which may result in significant expense and
limit our ability to commercialize such products. These requirements include submissions of safety and other post-marketing information
and reports, registration, as well as continued compliance with cGMPs, cGDPs and cGCPs for any clinical trials that we conduct post-approval.
In the European Union, the marketing authorization holder has to operate a pharmacovigilance system which conforms with and is equivalent
to the respective Member State’s pharmacovigilance system, requiring the holder to evaluate all information scientifically, to
consider options for risk minimization and prevention and to take appropriate measures as necessary. As part of this system, we will
have to, inter alia, have a qualified person responsible for pharmacovigilance, maintain a pharmacovigilance system master file, operate
a risk management system for each medicinal product, monitor the outcome of risk minimization measures, and update continuously all pharmacovigilance
data to update the risk assessment.
Later
discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our
third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
|
● |
restrictions on the marketing
or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls; |
|
● |
fines, warning letters
or holds on clinical trials; |
|
● |
refusal by the FDA to approve
pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; |
|
● |
product seizure or detention,
or refusal to permit the import or export of products; and |
|
● |
injunctions or the imposition
of civil or criminal penalties. |
If
any of these events occurs, our ability to sell such drug product may be impaired, and we may incur substantial additional expense to
comply with regulatory requirements, which could materially adversely affect our business, financial condition and results of operations.
The FDA’s or any other regulatory authority’s policies may change and additional government regulations may be enacted that
could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing
requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any
marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain
profitability.
Healthcare
legislative or regulatory reform measures, including government restrictions on pricing and reimbursement, may have a negative impact
on our business and results of operations.
In
the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and
proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate
post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
Among
policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems
with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical
industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example,
in the United States, the Patient Protection and Affordable Care Act of 2010 (“ACA”) substantially changed the way healthcare
is financed by both the government and private insurers, and significantly affects the pharmaceutical industry. Many provisions of the
ACA impact the biopharmaceutical industry, including that in order for a biopharmaceutical product to receive federal reimbursement under
the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts
to entities eligible to participate in the drug pricing program under the Public Health Services Act, or PHS. Since its enactment, there
have been judicial and Congressional challenges and amendments to certain aspects of the ACA. There is continued uncertainty about the
implementation of the ACA, including the potential for further amendments to the ACA and legal challenges to or efforts to repeal the
ACA.
Additionally,
there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost
of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal
and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing
and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the
now-departed Trump administration proposed numerous prescription drug cost control measures. Similarly, the new Biden administration
has made lowering prescription drug prices one of its priorities. The Biden administration has not yet proposed any specific plans, but
we expect that these will be forthcoming in the near term. At the state level, legislatures are increasingly passing legislation and
implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing. Other examples of proposed changes include, but are
not limited to, expanding post-approval requirements, changing the Orphan Drug Act, and restricting sales and promotional activities
for pharmaceutical products.
We
cannot be sure whether additional legislative changes will be enacted, or whether government regulations, guidance or interpretations
will be changed, or what the impact of such changes would be on the marketing approvals, sales, pricing, or reimbursement of our drug
candidates or products, if any, may be. We expect that these and other healthcare reform measures that may be adopted in the future,
may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved drug.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue,
attain profitability, or commercialize our drugs.
In
addition, FDA regulations and guidance may be revised or reinterpreted by the FDA in ways that may significantly affect our business
and our products. Any new regulations or guidance, or revisions or reinterpretations of existing regulations or guidance, may impose
additional costs or lengthen FDA review times for our product candidates. We cannot determine how changes in regulations, statutes, policies,
or interpretations when and if issued, enacted or adopted, may affect our business in the future. Such changes could, among other things,
require:
|
● |
additional clinical trials
to be conducted prior to obtaining approval; |
|
● |
changes to manufacturing
methods; |
|
● |
recalls, replacements,
or discontinuance of one or more of our products; and |
|
● |
additional recordkeeping. |
Such
changes would likely require substantial time and impose significant costs or could reduce the potential commercial value of our product
candidates. In addition, delays in receipt of or failure to receive regulatory clearances or approvals for any other products would harm
our business, financial condition, and results of operations.
In
the European Union, a new clinical trial regulation centralizes clinical trial approval, which eliminates redundancy, but in some cases
this may extend timelines for clinical trial approvals due to potentially longer wait times. The regulation requires specific consents
for use of data in research which, among other measures, may increase the costs and timelines for our product development efforts. The
regulation also provides an obligation for clinical trial sponsors to make summaries of all trial results, accompanied by a summary understandable
to laypersons, as well as the clinical trial report publicly available in a new database. Beyond this obligation, the EMA makes available
to the public all clinical trials submitted with the EMA as well as raw data results (“individual patient data”). These publication
requirements can conflict with legitimate secrecy interests of the sponsors and may lead to valuable clinical trial data falling into
the public domain.
Austerity
measures in certain European nations may also affect the prices we are able to seek if our products are approved, as discussed below.
Both
in the United States and in the European Union, legislative and regulatory proposals have been made to expand post-approval requirements
and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will
be enacted, or whether the regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing
approvals of our product candidates, if any, may be.
Our
relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations,
which, if violated, would expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual
damages, reputational harm and diminished profits and future earnings, among other penalties.
Healthcare
providers, payors and others play a primary role in the recommendation and prescription of any products for which we obtain marketing
approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other
healthcare laws and regulations, primarily in the United States, that may constrain the business or financial arrangements and relationships
through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable U.S.
healthcare laws and regulations, include the following:
|
● |
the U.S. healthcare anti-kickback
statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration,
directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order
or recommendation of, any good or service, for which payment may be made under U.S. government healthcare programs such as Medicare
and Medicaid; |
|
● |
the U.S. False Claims Act
imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly
presenting, or causing to be presented, to the U.S. government, claims for payment that are false or fraudulent or making a false
statement to avoid, decrease or conceal an obligation to pay money to the federal government; |
|
● |
the U.S. Health Insurance
Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any
healthcare benefit program or making false statements relating to healthcare matters; |
|
● |
HIPAA, as amended by the
Health Information Technology for Economic and Clinical Health Act, or HITECH, imposes obligations, including mandatory contractual
terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; |
|
● |
the transparency requirements
under the Health Care Reform Law require manufacturers of drugs, devices, biologics and medical supplies to report to the U.S. Department
of Health and Human Services information related to payments and other transfers of value made by such manufacturers to physicians
and teaching hospitals, and ownership and investment interests held by physicians or their immediate family members; and |
|
● |
analogous laws and regulations,
such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items
or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government in addition to requiring manufacturers to report information related to payments to physicians
and other health care providers or marketing expenditures. |
Similar
laws exist in other jurisdictions.
In
the European Union, there is currently no central European anti-bribery or similar legislation. However, more and more European Union
member states as well as life sciences industry associations are enacting increasingly specific anti-bribery rules for the healthcare
sector which are as severe and sometimes even more severe than in the United States. Germany, for example, has recently adopted new criminal
provisions dealing with granting benefits to healthcare professionals. This new law has increased the legal restrictions as well as the
legal scrutiny for the collaboration and contractual relationships between the pharmaceutical industry and its customers.
Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the U.S. federal Anti-Kickback
Statute, it is possible that some of our future business activities could be subject to challenge under one or more of such laws. In
addition, recent health care reform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things,
amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs
to have actual knowledge of this statute or specific intent to violate it. Moreover, the Health Care Reform Law provides that the government
may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false
or fraudulent claim for purposes of the False Claims Act.
Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current
or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations
are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant
civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare
and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom
we expect to do business with are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative
sanctions, including exclusions from government funded healthcare programs.
Risks
Related to Commercialization of Our Products and Product Candidates
The
high level of competition in OTC consumer health care, much of which comes from competitors with greater resources, could adversely affect
our business, financial condition and results of operations.
The
business of selling brand name consumer products in the OTC Healthcare category is highly competitive. This market includes numerous
manufacturers, distributors, marketers and retailers that actively compete for consumers’ business both in the United States and
abroad. Many of these competitors are larger and have substantially greater resources than we do, and may therefore have the ability
to spend more aggressively on research and development, advertising and marketing, and to respond more effectively to changing business
and economic conditions. If this were to occur, it could have a material adverse effect on our financial condition and results of operations.
We
compete for consumers’ attention based on a number of factors, including brand recognition, product quality, performance, value
to consumers, price and product availability at the retail level. Advertising, promotion, merchandising and packaging also have a significant
impact on consumer buying decisions and, as a result, on our sales. Our markets are highly sensitive to the introduction of new products,
which may rapidly capture a significant share of the market. New product innovations by our competitors or our failure to develop new
products or the failure of a new product launch by the Company, could have a material adverse effect on our business, financial condition
and results of operations. If our advertising, marketing and promotional programs are not effective, we may be unable to grow our revenues
to profitable levels or our sales may decline.
Price
increases for raw materials, labor, energy, transportation costs and other manufacturer, logistics provider or distributor demands could
have an adverse impact on our margins.
The
costs to manufacture and distribute Bentrio™ are subject to fluctuation based on a variety of factors. Increases in commodity raw
material, packaging component prices, and labor, energy and fuel costs and other input costs could have a significant impact on our financial
condition and results of operations if our third party manufacturers, logistics providers or distributors pass along those costs to us.
If we are unable to increase the price for our products to our customers or continue to achieve cost savings in a rising cost environment,
any such cost increases would reduce our gross margins and could have a material adverse effect on our financial condition and results
of operations. If we increase the price of Bentrio™ in order to maintain our current gross margins for our products, such increase
may adversely affect demand for, and sales of, Bentrio™, which could have a material adverse effect on our business, financial
condition and results of operations.
Product
liability claims and product recalls and related negative publicity could adversely affect our sales and operating results.
We
are dependent on consumers’ perception of the safety and quality of Bentrio™. Negative consumer perception may arise from
product liability claims and product recalls, regardless of whether such claims or recalls involve us or our product. The mere publication
of information asserting concerns about the safety of our product or the ingredients used in our product could have a material adverse
effect on our business and results of operations.
Product
liability claims could be based on allegations that, among other things, Bentrio™ contains contaminants, include inadequate instructions
or warnings regarding their use or include inadequate warnings concerning side effects and interactions with other substances. Whether
or not successful, product liability claims could result in negative publicity that could adversely affect the reputation of our brand
and our business, sales and operating results. Additionally, we may be required to pay for losses or injuries purportedly caused by our
products. In addition, we could be required for a variety of reasons to initiate product recalls. Any product recalls could have a material
adverse effect on our business, financial condition and results of operations.
In
addition, although we maintain, and require our suppliers and third party manufacturers to maintain, product liability insurance coverage,
potential product liability claims may exceed the amount of insurance coverage or may be excluded under the terms of the policy, which
could have a material adverse effect on our financial condition. In addition, in the future we may not be able to obtain adequate insurance
coverage or we may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage.
We
operate in highly competitive and rapidly changing industries, which may result in others discovering, developing or commercializing
competing products before or more successfully than we do.
The
biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Our
success is highly dependent on our ability to discover, develop and obtain marketing approval for new and innovative products on a cost-effective
basis and to market them successfully. In doing so, we face and will continue to face intense competition from a variety of businesses,
including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic
institutions, government agencies and other private and public research institutions in Europe, the United States and other jurisdictions.
These organizations may have significantly greater resources than we do and conduct similar research, seek patent protection and establish
collaborative arrangements for research, development, manufacturing and marketing of products that compete with our product candidates.
The
highly competitive nature of and rapid technological changes in the biotechnology and pharmaceutical industries could render our product
candidates or our technology obsolete or non-competitive. Our competitors may, among other things:
|
● |
develop and commercialize
products that are safer, more effective, less expensive, or more convenient or easier to administer; |
|
● |
obtain quicker regulatory
approval; |
|
● |
establish superior proprietary
positions; |
|
● |
have access to more manufacturing
capacity; |
|
● |
implement more effective
approaches to sales and marketing; or |
|
● |
form more advantageous
strategic alliances. |
Should
any of these occur, our business, financial condition and results of operations could be materially adversely affected.
The
successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health
insurers establish adequate coverage and reimbursement levels and pricing policies.
The
successful commercialization of any of our products or product candidates will depend, in part, on the extent to which coverage and reimbursement
for our products or procedures using our products will be available from government and health administration authorities, private health
insurers and other third-party payors. To manage healthcare costs, many governments and third-party payors increasingly scrutinize the
pricing of new technologies and require greater levels of evidence of favorable clinical outcomes and cost-effectiveness before extending
coverage. In light of such challenges to prices and increasing levels of evidence of the benefits and clinical outcomes of new technologies,
we cannot be sure that coverage will be available for our products or product candidates that we commercialize and, if available, that
the reimbursement rates will be adequate.
Third-party
payors may deny coverage and reimbursement status altogether of a given drug product, or cover the product but may also establish prices
at levels that are too low to enable us to realize an appropriate return on our investment in product development. Because the rules
and regulations regarding coverage and reimbursement change frequently, in some cases at short notice, even when there is favorable coverage
and reimbursement, future changes may occur that adversely impact the favorable status. Further, the net reimbursement for drug products
may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they
may be sold at lower prices than in the United States.
The
unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance
of our products and product candidates and the future revenues we may expect to receive from those products. In addition, we are unable
to predict what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may
be enacted in the future, or what effect such legislation or regulation would have on our business.
Our
products may not gain market acceptance, in which case we may not be able to generate product revenues, which will materially adversely
affect our business, financial condition and results of operations.
Even
if the FDA, the EMA or other regulatory authority clears or approves the marketing of any product candidates that we develop, physicians,
healthcare providers, patients or the medical community may not accept or use them. Efforts to educate the medical community and third-party
payors on the benefits of our product candidates may require significant resources and may not be successful. If Bentrio™ or our
drug product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits
from operations. The degree of market acceptance of Bentrio™ or any of our drug product candidates that is cleared or approved
for commercial sale will depend on a variety of factors, including:
|
● |
how clinicians and potential
patients perceive our novel products; |
|
● |
the timing of market introduction; |
|
● |
the number and clinical
profile of competing products; |
|
● |
our ability to provide
acceptable evidence of safety and efficacy; |
|
● |
the prevalence and severity
of any side effects; |
|
● |
relative convenience and
ease of administration; |
|
● |
patient diagnostics and
screening infrastructure in each market; |
|
● |
marketing and distribution
support; |
|
● |
availability of coverage,
reimbursement and adequate payment from health maintenance organizations and other third-party payors, both public and private; and |
|
● |
other potential advantages
over alternative treatment methods. |
If
our product candidates fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenues to
provide a satisfactory, or any, return on our investments. Even if some products achieve market acceptance, the market may prove not
to be large enough to allow us to generate significant revenues.
In
addition, the potential market opportunity of Bentrio™ or our drug product candidates are difficult to precisely estimate. Our
estimates of the potential market opportunity are predicated on several key assumptions such as industry knowledge and publications,
third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, these assumptions involve
the exercise of significant judgment on the part of our management, are inherently uncertain and the reasonableness of these assumptions
could not have been assessed by an independent source in every detail. If any of the assumptions proves to be inaccurate, then the actual
market for Bentrio™ or our drug product candidates could be smaller than our estimates of the potential market opportunity. If
the actual market for Bentrio™ or our drug product candidates is smaller than we expect, or if the products fail to achieve an
adequate level of acceptance by physicians, health care payors and patients, our product revenue may be limited and it may be more difficult
for us to achieve or maintain profitability.
We
may lack the necessary expertise, personnel and resources to successfully commercialize our products on our own or together with suitable
partners.
Before
Bentrio™ we have never commercialized a product candidate. To achieve commercial success for Bentrio™ and our drug product
candidates, we will have to continue to develop our own sales, marketing and distribution organization or outsource these activities
to third parties.
Risks
Related to Our Reliance on Third Parties
If
we fail to maintain our current strategic relationship with Washington University, Wellesta Holdings or Nuance Pharma, our business,
commercialization prospects and financial condition may be materially adversely affected.
We
have an exclusive license agreement with Washington University located in St. Louis, Missouri (“WU”). Under this agreement
with WU, we are given an exclusive, worldwide, royalty-bearing license (with the right to sublicense) under certain patent rights owned
or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical products covered under
such patent rights for all fields of use. Such licensed products may include drug products formulated as nanoparticles, comprising a
peptide for delivery as well as a therapeutic nucleotide, for intracellular delivery. These intellectual property rights have been the
basis of our research and development of AM-401.
Good
relationships with WU are important for our business prospects. If our relationship with WU were to deteriorate substantially or WU were
to challenge our use of their intellectual property or our calculations of the payments we owe under our agreements, our business, financial
condition, commercialization prospects and results of operations could be materially adversely affected.
We
have entered into exclusive distribution and marketing agreements for Bentrio™ with a number of partners such as Wellesta Holdings
(“Wellesta”) for India and certain other Asian markets, Nuance Pharma (“Nuance”) for China and South Korea or
Avernus Pharma (“Avernus”) for certain Middle East countries. Under these agreements, these distributors have the exclusive
right to market and distribute Bentrio™ for a certain period of time in their territory subject to certain conditions. In order
to maintain their exclusive rights, they are required to purchase certain quantities of Bentrio™. Good relationships with the distributors
are important for our business prospects. If our relationships with them were to deteriorate substantially, or they fail to perform adequately,
our business, financial condition, commercialization prospects and results of operations could be materially adversely affected.
We
may seek to form additional strategic alliances in the future with respect to Bentrio™ or our drug product candidates, and if we
do not realize the benefits of such alliance, our business, financial condition, commercialization prospects and results of operations
may be materially adversely affected.
The
commercialization of Bentrio™ requires substantial cash to fund expenses and access to distribution networks, which we do not currently
possess. Therefore, in addition to our relationships with Wellesta, Nuance and other distributors, we may decide to enter into strategic
alliances, or create joint ventures or collaborations with further OTC consumer health companies, notably in Europe and North America
for the further commercialization of Bentrio™.
Our
product development programs and the potential commercialization of our drug product candidates will require substantial additional cash
to fund expenses and may require expertise, such as sales and marketing expertise, which we do not currently possess. Therefore, in addition
to our relationship with WU for our AM-401 product candidate, for one or more of our drug product candidates, we may decide to enter
into strategic alliances, or create joint ventures or collaborations with pharmaceutical or biopharmaceutical companies for the further
development and potential commercialization of those product candidates.
We
face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate and document.
Any delays in entering into new strategic partnership agreements related to our product candidates could delay the development and commercialization
of our product candidates and reduce their competitiveness even if they reach the market. We may also be restricted under existing and
future collaboration agreements from entering into strategic partnerships or collaboration agreements on certain terms with other potential
collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all, for any of our existing or future product
candidates and programs because the potential partner may consider that our research and development pipeline is insufficiently developed
to justify a collaborative effort, or that our product candidates and programs do not have the requisite potential to demonstrate safety
and efficacy in the target population. If we are unsuccessful in establishing and maintaining a collaboration with respect to a particular
product candidate, we may have to curtail the development of that product candidate, reduce the scope of or delay its development program
or one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales or marketing
activities, or increase our expenditures and undertake development or commercialization activities at our own expense for which we have
not budgeted. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to
obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will
not be able to bring our product candidates to market and generate product revenue. Even if we are successful in establishing a new strategic
partnership or entering into a collaboration agreement, we cannot be certain that, following such a strategic transaction or license,
we will be able to progress the development and commercialization of the applicable product candidates as envisaged, or that we will
achieve the revenues that would justify such transaction, and we could be subject to the following risks, each of which may materially
harm our business, commercialization prospects and financial condition:
|
● |
we may not be able to control
the amount and timing of resources that the collaboration partner devotes to the product development program; |
|
● |
the collaboration partner
may experience financial difficulties; |
|
● |
we may be required to relinquish
important rights such as marketing, distribution and intellectual property rights; |
|
● |
a collaboration partner
could move forward with a competing product developed either independently or in collaboration with third parties, including our
competitors; or |
|
● |
business combinations or
significant changes in a collaboration partner’s business strategy may adversely affect our willingness to complete our obligations
under any arrangement. |
We
rely on third parties to conduct our nonclinical and clinical trials and perform other tasks for us. If these third parties do not successfully
carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory
approval for or commercialize our product candidates and our business could be substantially harmed.
We
have relied upon and plan to continue to rely upon third-party CROs to monitor and manage data for our ongoing nonclinical and clinical
program. We rely on these parties for execution of our nonclinical and clinical studies and control only certain aspects of their activities.
Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal,
regulatory, and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our
CROs and other vendors are required to comply with cGMP, cGCP, and Good Laboratory Practice, or GLP, which are regulations and guidelines
enforced by the FDA, the Competent Authorities of the Member States of the European Union and comparable foreign regulatory authorities
for all of our product candidates in nonclinical and clinical development. Regulatory authorities enforce these regulations through periodic
inspections of study sponsors, principal investigators, trial sites and other contractors. If we or any of our CROs or vendors fail to
comply with applicable regulations, the data generated in our nonclinical and clinical trials may be deemed unreliable and the EMA, FDA,
other regulatory authorities may require us to perform additional nonclinical and clinical trials before approving our marketing applications.
We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that all of our clinical
trials comply with cGCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations.
Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
If
any of our relationships with these third-party CROs terminates, we may not be able to enter into arrangements with alternative CROs
or do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under
our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going nonclinical
and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they
need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols,
regulatory requirements, or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to
obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated.
As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase,
and our ability to generate revenue could be delayed.
Switching
or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition
period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical
development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter
similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business,
financial condition, and prospects.
We
rely on a single source for the production of Bentrio™ and may face difficulties in case of delivery problems, delays, issues with
product quality or other aspects.
Bentrio™
is produced by a single third-party manufacturer. Our ability to retain our current manufacturing relationship is critical to our ability
to deliver quality products to our customers in a timely manner. Without adequate supplies of quality merchandise, our sales would decrease
materially and our business would suffer. In the event that our contract manufacturer is unable or unwilling to ship products to us in
a timely manner, we would have to identify and qualify new manufacturing relationships. Because of the unique manufacturing requirement
of Bentrio™, we may be unable to qualify new suppliers in a timely way or at the quantities, quality and price levels needed. In
addition, identifying alternative manufacturers without adequate lead times may involve additional manufacturing expense, delay in production
or product disadvantage in the marketplace. In general, the consequences of not securing adequate, high quality and timely supplies of
merchandise would negatively impact inventory levels, which could damage our reputation and result in lost customers and sales, and could
have a material adverse effect on our business, financial condition and results of operations.
We
currently rely on third-party suppliers and other third parties for production of our drug product candidates and our dependence on these
third parties may impair the advancement of our research and development programs and the development of our drug product candidates.
We
currently rely on and expect to continue to rely on third parties, for the manufacturing and supply of chemical compounds for preclinical
studies and clinical trials of our product candidates, including AM-125 and AM-401. and others for the manufacturing and supply of the
drug product candidates. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture of any of
our drug product candidates on a clinical or commercial scale, if any of our product candidates receives regulatory approval. Reliance
on third-party providers may expose us to different risks than if we were to manufacture product candidates ourselves. The facilities
used by our contract manufacturers to manufacture our drug product candidates must be approved by the FDA or other regulatory authorities
pursuant to inspections that will be conducted after we submit our NDA or comparable marketing application to the FDA or other regulatory
authority. Although we have auditing rights with all our manufacturing counterparties, we do not have control over a supplier’s
or manufacturer’s compliance with these laws, regulations and applicable cGMP standards and other laws and regulations, such as
those related to environmental health and safety matters. If our contract manufacturers cannot successfully manufacture material that
conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain
regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers
to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority
does not approve these facilities for the manufacture of our drug product candidates or if it withdraws any such approval in the future,
we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory
approval for or market our drug product candidates, if approved. Any failure to achieve and maintain compliance with these laws, regulations
and standards could subject us to the risk that we may have to suspend the manufacturing of our drug product candidates or that obtained
approvals could be revoked, which would adversely affect our business and reputation. Furthermore, third-party providers may breach agreements
they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreements because of their
own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us. If we were
unable to find adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities
could be harmed.
In
addition, the fact that we are dependent on our suppliers and other third parties for the manufacture, storage and distribution of our
drug product candidates means that we are subject to the risk that our product candidates and, if approved, commercial products may have
manufacturing defects that we have limited ability to prevent or control. The sale of drug products containing such defects could result
in recalls or regulatory enforcement action that could adversely affect our business, financial condition and results of operations.
Growth
in the costs and expenses of components or raw materials may also adversely influence our business, financial condition and results of
operations. Supply sources could be interrupted from time to time and, if interrupted, that supplies could be resumed (whether in part
or in whole) within a reasonable time frame and at an acceptable cost or at all.
Our
current and anticipated future dependence upon others for the manufacturing of AM-125, AM-401 and any other product candidate that we
develop may adversely affect our future profit margins and our ability to commercialize any drug products that receive marketing approval
on a timely and competitive basis.
Certain
ingredients and the primary packaging for Bentrio™ and our drug product candidates are currently acquired from single-source suppliers.
The loss of these suppliers, or their failure to supply us with the ingredients or the primary packaging, could materially and adversely
affect our business.
We
do not currently, and do not expect to in the future, independently conduct manufacturing activities for Bentrio™ and our drug
product candidates, including AM-125 and AM-401. We currently have a relationship with one supplier each, for the supply of the drug
substance of AM-125 and AM-401, the peptide for AM-401, and for the key component of Bentrio™. We do not currently have any other
suppliers for the drug substance, certain other ingredients, and primary packaging of our drug product candidates and Bentrio™
and, although we believe that there are alternate sources of supply that could satisfy our clinical and commercial requirements, and
we have performed some preliminary investigations to assess this availability, we cannot assure you that identifying alternate sources
and establishing relationships with such sources would not result in significant delay in the development of our drug product candidates
or in significant interruptions in commercial supplies of Bentrio™. Additionally, we may not be able to enter into supply arrangements
with alternative suppliers on commercially reasonable terms, or at all. A delay in the development of our drug product candidates, interruption
in commercial supplies of Bentrio™ or having to enter into a new agreement with a different third party on less favorable terms
than we have with our current suppliers could have a material adverse impact upon on our business.
Risks
Related to Intellectual Property
If
we or our licensors are unable to obtain and maintain effective patent rights for our technologies, commercial products, drug product
candidates or any future product candidates, or if the scope of the patent rights obtained is not sufficiently broad, we may not be able
to compete effectively in our markets.
We
rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related
to our technologies, commercial products and drug product candidates. Our success depends in large part on our and our licensors’
ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect
to our proprietary technology and products.
We
have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies
and products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute
all necessary or desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions. It is also possible
that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications,
or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not
be prosecuted and enforced in a manner consistent with the best interests of our business.
The
patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions
for which legal principles remain unsolved. The patent applications that we own or in-license may fail to result in issued patents with
claims that cover our product candidates in the United States or in other foreign countries. Publications of discoveries in the scientific
literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions remain confidential
for a period of time after filing, and some remain so until issued. We cannot be certain that we were the first to file any patent application
related to our product candidates, or whether we were the first to make the inventions claimed in our owned patents or pending patent
applications, nor can we know whether those from whom we license patents were the first to make the inventions claimed or were the first
to file. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. There
is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate
a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such
patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such
patents being narrowed, found unenforceable or invalidated, which could allow third parties to commercialize our technology or products
and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing
third party patent rights. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect
our intellectual property, provide exclusivity for commercial products or drug product candidates, prevent others from designing around
our claims or provide us with a competitive advantage. Any of these outcomes could impair our ability to prevent competition from third
parties, which may have an adverse impact on our business.
We,
independently or together with our licensors, have filed several patent applications covering various aspects of our commercial products,
drug product candidates or technologies. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such
patent or whether any issued patents will be found invalid and unenforceable or will be challenged by third parties. Any successful opposition
to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful
commercialization of our commercial products or any drug product candidates that we may develop. Further, if we encounter delays in regulatory
approvals, the period of time during which we could market a product candidate under patent protection could be reduced.
We
may not have sufficient patent terms to effectively protect our products and business.
Patents
have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Although various
extensions may be available, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly
after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights
to exclude others from commercializing products similar or identical to ours or otherwise provide us with a competitive advantage. Even
if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition
from generic medications.
While
patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may
be available to extend the patent exclusivity term for Bentrio™ and our drug product candidates, we cannot provide any assurances
that any such patent term extension will be obtained and, if so, for how long. In addition, upon issuance in the United States any patent
term can be adjusted based on certain delays caused by the applicant(s) or the U.S. Patent and Trademark Office, or USPTO. For example,
a patent term can be reduced based on certain delays caused by the patent applicant during patent prosecution.
While
in the United States there is a possibility of obtaining market protection independent from any patent protection for up to 3 and 5 years
from approval, and in the European Union one may obtain data exclusivity of eight years from approval with an additional two years of
market exclusivity (which can potentially be extended by one year), there is no assurance that we can obtain such data exclusivity and
market protection with respect to Bentrio™, AM-125, AM-401 , or any of our other drug product candidates. Our issued patents and
pending patent applications are expected to expire for AM-125 in 2038, for AM-401 in 2034 and for Bentrio™ in 2040, prior to any
patent term extensions to which we may be entitled under applicable laws.
If
we are unable to maintain effective proprietary rights for our technologies, commercial products, drug product candidates or any future
drug product candidates, we may not be able to compete effectively in our markets.
In
addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary
know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements
of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not
covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes,
in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek
to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical
and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems,
agreements or security measures may be breached, and we may not have adequate remedies for any breach. Moreover, if any of our trade
secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from
using that technology or information to compete with us, which could harm our competitive position.
Although
we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, and
any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we
cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary
information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially
equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive
position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed
inadequate, we may have insufficient recourse against third parties for misappropriating such trade secrets. In addition, others may
independently discover our trade secrets and proprietary information. For example, the FDA, as part of its Transparency Initiative, is
currently considering whether to make additional information publicly available on a routine basis, including information that we may
consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure
policies may change in the future, if at all.
Further,
the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S.
As a result, we may encounter significant problems in protecting and defending our intellectual property both in the U.S. and abroad.
If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not
be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, financial
condition and results of operations.
Third-party
claims of intellectual property infringement may expose us to substantial liability or prevent or delay our development and commercialization
efforts.
Our
commercial success depends in part on our ability to develop, manufacture, market and sell our commercial products or drug product candidates
and use our proprietary technology without alleged or actual infringement, misappropriation, or other violation of the patents and proprietary
rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights
in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, and reexamination
proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S.- and foreign-issued patents and pending patent applications,
which are owned by third parties, exist in the fields in which we are marketing commercial products or developing drug product candidates.
Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property
litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely
on extracting royalties and settlements by enforcing patent rights may target us. As the biotechnology and pharmaceutical industries
expand and more patents are issued, the risk increases that our commercial products and drug product candidates may be subject to claims
of infringement of the patent rights of third parties.
Third
parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent
applications with claims to materials, formulations, methods of manufacture, or methods of treatment related to the use or manufacture
of our commercial products or drug product candidates. Although we generally conduct certain freedom to operate search and review with
respect to our product candidates, we cannot guarantee that any of our search and review is complete and thorough, nor can we be sure
that we have identified each and every patent and pending application in the United States and abroad that is relevant or necessary to
the commercialization of our commercial products or drug product candidates. Because patent applications can take many years to issue,
there may be currently pending patent applications that may later result in issued patents that our commercial products or drug product
candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes
upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any
of our commercial products or drug product candidates, any molecules formed during the manufacturing process or any final product itself,
the holders of any such patents may be able to block our ability to continue commercialization of such commercial product or to commercialize
such drug product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined
to be invalid or unenforceable. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects
of our formulations, processes for manufacture, or methods of use, the holders of any such patents may be able to block our ability to
continue the commercialization of our commercial products or to develop and commercialize the applicable drug product candidate unless
we obtained a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license
may not be available on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive,
thereby giving our competitors access to the same technologies licensed to us.
Parties
making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further commercialize
our commercial products or develop and commercialize one or more of our drug product candidates. Defense of these claims, regardless
of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’
fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which
may be impossible or require substantial time and monetary expenditure.
Additional
competitors could enter the market with generic versions of our products, which may result in a material decline in sales of affected
products.
Under
the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic
copy of an approved innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit an NDA under section 505(b)(2) that
references the FDA’s prior approval of the innovator product. A 505(b)(2) NDA product may be for a new or improved version of the
original innovator product. Hatch-Waxman also provides for certain periods of regulatory exclusivity, which preclude FDA approval (or
in some circumstances, FDA filing and reviewing) of an ANDA, or 505(b)(2) NDA. These include, subject to certain exceptions, the period
during which an FDA-approved drug is subject to orphan drug exclusivity. In addition to the benefits of regulatory exclusivity, an innovator
NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed
with the product in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the
“Orange Book.” If there are patents listed in the Orange Book, a generic or 505(b)(2) applicant that seeks to market its
product before expiration of the patents must include in the ANDA what is known as a “Paragraph IV certification,” challenging
the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Notice of the certification must be
given to the innovator, too, and if within 45 days of receiving notice the innovator sues to protect its patents, approval of the ANDA
is stayed for 30 months, or as lengthened or shortened by the court.
Accordingly,
if AM-125 and AM-401 are approved, competitors could file ANDAs for generic versions of AM-125 and AM-401, or 505(b)(2) NDAs that reference
AM-125 and AM-401, respectively. If there are patents listed for AM-125 and AM-401 in the Orange Book, those ANDAs and 505(b)(2) NDAs
would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to
challenge the patent. We cannot predict whether any patents issuing from our pending patent applications will be eligible for listing
in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of
any such suit.
We
may not be successful in securing or maintaining proprietary patent protection for drug products and technologies we develop or license.
Moreover, if any patents that are granted and listed in the Orange Book are successfully challenged by way of a Paragraph IV certification
and subsequent litigation, the affected drug product could immediately face generic competition and its sales would likely decline rapidly
and materially. Should sales decline, we may have to write off a portion or all of the intangible assets associated with the affected
drug product and our results of operations and cash flows could be materially and adversely affected.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements
imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic
maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime
of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary,
fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured
by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result
in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure
to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal
documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.
If
we fail to comply with the obligations in our Exclusive License Agreement with WU, , we could lose intellectual property rights that
are important to our AM-401 drug product candidate and further potential drug product candidates.
Our
Exclusive License Agreement with WU imposes various development, milestone payment, royalty, and other obligations on us. If we fail
to comply with our obligations under the agreement and fail to cure such breach, or we are subject to a bankruptcy, WU has the right
to terminate the agreement, in which event we would not be able to develop or market AM-401 or any future drug product candidates covered
by the license.
We
may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming,
and unsuccessful.
Competitors
may infringe our patents or the patents of our licensors. To counter such infringement, we may be required to file claims against those
competitors, which can be expensive and time-consuming. If we or one of our licensing partners were to initiate legal proceedings against
a third party to enforce a patent covering one of our commercial products or drug product candidates, the defendant could counterclaim
that the patent covering our commercial product or drug product candidate is invalid, overbroad and/or unenforceable, or that we infringe
the defendant’s patents. In patent litigation in the United States, defendant counterclaims alleging invalidity, overbreadth and/or
unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,
including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone
connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution.
The outcome following legal assertions of invalidity and unenforceability is unpredictable. A court may decide that a patent of ours
is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop a third party from using
the technology in question on the grounds that our patents do not cover that technology. An adverse result in any litigation proceeding
could put one or more of our patents at risk of being invalidated or interpreted narrowly, which could adversely affect us.
Interference
proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions
with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using
the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing
party does not offer us a license on commercially reasonable terms or at all. Our defense of litigation or interference proceedings may
fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties
associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue the commercial
roll-out of Bentrio™, our clinical trials, continue our research programs, license necessary technology from third parties, or
enter into development partnerships that would help us bring our drug product candidates to market. We may not be able to prevent, alone
or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect
those rights as fully as in the United States.
Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some
of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements
of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these
results to be negative, it could have a material adverse effect on the price of our common shares.
We
may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information
of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We
employ and utilize the services of individuals who were previously employed or provided services to universities or other biotechnology
or pharmaceutical companies. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary
information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent
contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information,
of any of our employee’s, consultant’s or independent contractor’s former employer or other third parties. Litigation
may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we
may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in
defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Our
reliance on our advisors, employees and third parties requires us to share our intellectual property and trade secrets, which increases
the possibility that a competitor will discover them or that our intellectual property will be misappropriated or disclosed.
Because
we rely on our advisors, employees and third-party contractors and consultants to research and develop and to manufacture our commercial
products and drug product candidates, we must, at times, share our intellectual property with them. We seek to protect our intellectual
property and other proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements,
consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning
research or disclosing proprietary information. These agreements typically limit the rights of these advisors, employees and third parties
to use or disclose our confidential information, including our intellectual property and trade secrets. Despite the contractual provisions
employed when working with these advisors, employees and third parties, the need to share intellectual property and other confidential
information increases the risk that such confidential information becomes known by our competitors, are inadvertently incorporated into
the product development of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based,
in part, on our know-how, intellectual property and trade secrets, a competitor’s discovery of our intellectual property or trade
secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.
In
addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish
data potentially relating to our intellectual property, although our agreements may contain certain limited publication rights. For example,
any academic institution that we may collaborate with in the future may expect to be granted rights to publish data arising out of such
collaboration, provided that we are notified in advance and given the opportunity to delay publication for a limited time period in order
for us to secure patent protection of intellectual property rights arising from the collaboration, in addition to the opportunity to
remove confidential or trade secret information from any such publication. In the future, we may also conduct joint research and development
programs that may require us to share intellectual property under the terms of our research and development or similar agreements. Despite
our efforts to protect our intellectual property, our competitors may discover our trade secrets or know how, either through breach of
our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s
discovery of our intellectual property would impair our competitive position and have an adverse impact on our business.
We
may be subject to claims challenging the inventorship of our patents and other intellectual property.
We
may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual
property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants
or others who are involved in developing our drug product candidates. Litigation may be necessary to defend against these and other claims
challenging inventorship or our ownership of our patents or other intellectual property. If we fail in defending any such claims, in
addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use,
valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending
against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We
may not be able to protect our intellectual property rights throughout the world.
Filing,
prosecuting, and defending patents in all countries throughout the world would be prohibitively expensive, and our intellectual property
rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some
foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently,
we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling
or importing products made using our inventions in and into the United States or other jurisdictions. As part of ordinary course prosecution
and maintenance activities, we determine whether to seek patent protection outside the U.S. and in which countries. This also applies
to patents we have acquired or in-licensed from third parties. In some cases this means that we, or our predecessors in interest or licensors
of patents within our portfolio, have sought patent protection in a limited number of countries for patents covering our product candidates.
Competitors may use our technologies in jurisdictions where we have not obtained or are unable to adequately enforce patent protection
to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but
enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual
property rights may not be effective or sufficient to prevent them from competing.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets,
and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for
us to stop the infringement of our patents, the reproduction of our manufacturing or other know-how or marketing of competing products
in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful,
could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk
of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert
claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be
commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain
a significant commercial advantage from the intellectual property that we develop or license.
Risks
Related to Employee Matters and Managing Growth
Our
future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.
Our
success depends upon the continued contributions of our key management, scientific and technical personnel, many of whom have substantial
experience with or been instrumental for us and our projects. Key management includes our executive officers Thomas Meyer, our founder,
Chairman and Chief Executive Officer, Samuel Wickline, Trasir’s founder and our Chief Scientific Officer for RNA therapeutics,
and Marcel Gremaud, Chief Financial Officer, who constitute the Executive Management Committee. Marcel Gremaud has been working as a
consultant for our Company since 2013; he replaced as Chief Financial Officer Elmar Schärli, who continues to manage certain of
our finance and treasury activities.
As
we have been expanding our activities in the field of RNA therapeutics and started commercial operations with Bentrio™, we have
been doubling our headcount through the hiring of experienced staff. The new hires include a Chief Development Officer for our activities
in RNA therapeutics and a head of our newly created “OTC Consumer Health” business unit for our Bentrio™ related activities.
Both of them will join our Company in 2022.
All
our staff are engaged in project management or general management, and we do not have any inhouse laboratories or manufacturing facilities.
During the COVID-19 pandemic, all our staff worked for several time periods remotely in accordance with Swiss public health regulations
or by voluntary Company decision. Overall, the remote work did not have any significant impact on our ability to manage projects or processes
effectively.
The
loss of key managers and senior scientists could delay our research and development activities. Laws and regulations on executive compensation,
including legislation in Switzerland, may restrict our ability to attract, motivate and retain the required level of qualified personnel.
In addition, the competition for qualified personnel in the biopharmaceutical and pharmaceutical field is intense, and our future success
depends upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees. We face competition
for personnel from other companies, universities, public and private research institutions and other organizations. If our recruitment
and retention efforts are unsuccessful in the future, it may be difficult for us to implement business strategy, which could have a material
adverse effect on our business.
We
expect to expand our sales and marketing, development, and regulatory capabilities, and as a result, we may encounter difficulties in
managing our growth, which could disrupt our operations.
We
expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of
sales and marketing, and to a lesser extent, drug development and regulatory affairs. To manage our anticipated future growth, we must
continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and
train additional qualified personnel. Due to our limited financial resources, we may not be able to effectively manage the expansion
of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs
and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business
plans or disrupt our operations.
Risks
Related to Our Common Shares
The
price of our common shares may be volatile and may fluctuate due to factors beyond our control.
The
share price of publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and
is likely to remain highly volatile in the future. For example, during the last year, our common shares have traded as high as $6.25
in March 2021 and as low as $1.21 in December 2021. The market price of our common shares may fluctuate significantly in the future
due to a variety of factors, including:
|
● |
delays in the commercial
roll out of Bentrio™; |
|
|
|
|
● |
positive or negative results
of testing and clinical trials by us, strategic partners, or competitors; |
|
● |
delays in executing on
our plans to reposition the Company around RNA therapeutics and / or to divest or spin off our business in neurotology, rhinology
and allergology; |
|
● |
technological innovations
or commercial product introductions by us or competitors; |
|
● |
changes in government regulations; |
|
● |
developments concerning
proprietary rights, including patents and litigation matters; |
|
● |
public concern relating
to the commercial value or safety of any of our product candidates; |
|
● |
financing or other corporate
transactions; |
|
● |
publication of research
reports or comments by securities or industry analysts; |
|
● |
general market conditions
in the pharmaceutical industry or in the economy as a whole; |
|
● |
our ability to maintain
the listing of our common shares on Nasdaq; or |
|
● |
other events and factors
beyond our control. |
Additionally,
these factors may affect the liquidity of our common shares, which may hurt your ability to sell our common shares in the future. In
addition, the stock market in general has recently experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of individual companies. Broad market and industry factors may materially affect the market
price of companies’ stock, including ours, regardless of actual operating performance.
Our
common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to comply with the continued listing
requirements. A delisting of our common shares is likely to reduce the liquidity of our common shares and may inhibit or preclude our
ability to raise additional financing.
We
are required to comply with certain Nasdaq continued listing requirements, including a series of financial tests relating to shareholder
equity, market value of listed securities and number of market makers and shareholders. If we fail to maintain compliance with any of
those requirements, our common shares could be delisted from The Nasdaq Capital Market.
In
2017, 2019 and 2020, we failed to maintain compliance with the minimum bid price requirement. To address that non-compliance, on March
13, 2018, we effected the Merger, pursuant to which we effected a “reverse share split” at a ratio of 10-for-1, and on May
1, 2019, we effected a “reverse share split” at a ratio of 20-for-1. In 2020, we regained compliance as our share price increased.
Additionally, on January 11, 2018, we received a letter from Nasdaq indicating that we were not in compliance with Nasdaq’s market
value of listed securities requirement. As a result of the July 2018 Registered Offering, we resolved the non-compliance with the market
value of listed securities requirement by complying with Nasdaq’s minimum equity standard. However, there can be no assurance that
we will be able to successfully maintain compliance with the several Nasdaq continued listing requirements.
If,
for any reason, Nasdaq should delist our common shares from trading on its exchange and we are unable to obtain listing on another national
securities exchange or take action to restore our compliance with the Nasdaq continued listing requirements, a reduction in some or all
of the following may occur, each of which could have a material adverse effect on our shareholders:
|
● |
the liquidity of our common
shares; |
|
● |
the market price of our
common shares; |
|
● |
our ability to obtain financing
for the continuation of our operations; |
|
● |
the number of institutional
and general investors that will consider investing in our common shares; |
|
● |
the number of investors
in general that will consider investing in our common shares; |
|
● |
the number of market makers
in our common shares; |
|
● |
the availability of information
concerning the trading prices and volume of our common shares; and |
|
● |
the number of broker-dealers
willing to execute trades in shares of our common shares. |
Moreover,
delisting may make unavailable a tax election that could affect the U.S. federal income tax treatment of holding, and disposing of, our
common shares. See “Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders” below.
In
the event that our common shares are delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares
of our common shares because they may be considered penny stocks and thus be subject to the penny stock rules.
On
February 6, 2019, we received a letter from Nasdaq stating that due to our continued non-compliance with the minimum $1.00 bid price
requirement, our common shares were subject to delisting unless we timely requested a hearing before the Nasdaq Hearings Panel. We timely
requested such a hearing on February 8, 2019, which request has stayed any delisting or suspension action by Nasdaq pending the hearing
and the expiration of any additional extension period granted following the hearing. On May 20, 2019, we announced that the Nasdaq Hearings
Panel notified us in a letter that we had regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2).
The Nasdaq Hearings Panel further determined that we were in compliance with all applicable Nasdaq listing standards.
The
SEC has adopted a number of rules to regulate “penny stock” that restrict transactions involving stock which is deemed to
be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange
Act of 1934 (the “Exchange Act”). These rules may have the effect of reducing the liquidity of penny stocks. “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 Stock Market if current price and volume information with respect to transactions
in such securities is provided by the exchange or system). Our common shares have in the past constituted, and may again in the future
constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed
upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in our common shares, which could severely limit
the market liquidity of such common shares and impede their sale in the secondary market.
A
U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally,
an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or
her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to
the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock”
regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule
prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction
is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered
representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing
recent price information with respect to the “penny stock” held in a customer’s account and information with respect
to the limited market in “penny stocks.”
Shareholders
should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud
and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to
the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press
releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping
of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses.
Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a
position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns from being established with respect to our securities.
Certain
principal shareholders and members of our executive team and board of directors own a significant portion of our common shares and as
a result will be able to exercise significant control over us, and your interests may conflict with the interests of such shareholders.
Certain principal shareholders
and their affiliated entities as well as members of our executive team and board of directors own approximately 9.5% of our common shares.
Depending on the level of attendance at our general meetings of shareholders, these shareholders may be in a position to determine the
outcome of decisions taken at any such general meeting. Any shareholder or group of shareholders controlling more than 50% of the shares
represented at our general meetings of shareholders may control any shareholder resolution requiring an absolute majority of the shares
represented, including the election of members to the board of directors of the Company, certain decisions relating to our capital structure,
the approval of certain significant corporate transactions and certain amendments to our bye-laws (the “Bye-laws”). To the
extent that the interests of these shareholders may differ from the interests of the Company’s other shareholders, the latter may
be disadvantaged by any action that these shareholders may seek to pursue. Among other consequences, this concentration of ownership may
have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of our common shares.
Future
sales, or the possibility of future sales, of a substantial number of our common shares could adversely affect the price of our common
shares.
Future
sales of a substantial number of our common shares, or the perception that such sales will occur, could cause a decline in the market
price of our common shares. Approximately 11.4% of our common shares issued and outstanding are held by affiliates. If these shareholders
sell substantial amounts of common shares in the public market, or the market perceives that such sales may occur, the market price of
our common shares and our ability to raise capital through an issue of equity securities could be adversely affected. Additionally, as
of the date of this Annual Report we have warrants outstanding, which are exercisable for an aggregate of 246,102 common shares at a
weighted average exercise price of $59.85 per share, an equity commitment to sell up to $8.5 million of additional common shares to Lincoln
Park Capital Fund, LLC (“LPC”) pursuant to the commitment purchase agreement we entered into on April 23, 2020 with LPC (the
“LPC Purchase Agreement”) and an at-the-market offering program pursuant to the sales agreement we entered into with A.G.P./Alliance
Global Partners (“A.G.P.”) on November 30, 2018, as amended on April 5, 2019 (the “A.G.P. Sales Agreement”) for
sales of up to $18.3 million of additional common shares. We have also filed registration statements to register the resale of the common
shares underlying the warrants that we have offered and sold in unregistered transactions, the common shares that are sold to LPC and
the common shares and other equity securities that we have issued under our prior equity incentive plans or may issue under our new omnibus
equity compensation plan. These common shares may be freely sold in the public market upon issuance, subject to certain limitations applicable
to affiliates. In addition, we have filed a registration statement covering the issuance and sale by us of up to $79 million of common
shares, debt securities, warrants, purchase contracts, units and common shares. We may issue such securities, including our common shares
and warrants to purchase common shares, at any time and from time to time subject to the limitations set forth in General Instruction
I.B.5 of Form F-3. If a large number of our common shares and/or warrants to purchase common shares are sold in the public market, the
sales could reduce the trading price of our common shares and impede our ability to raise future capital.
We
do not expect to pay dividends in the foreseeable future.
We
have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we
currently intend that any earnings will be reinvested in our business and that dividends will not be paid until we have an established
revenue stream to support continuing dividends. The proposal to pay future dividends to shareholders will in addition effectively be
at the discretion of our board of directors after taking into account various factors including our business prospects, cash requirements,
financial performance and new product development. In addition, payment of future dividends is subject to certain limitations pursuant
to Bermuda law or by our Bye-laws. We are subject to Bermuda law restrictions on the payment of dividends including that no dividends
may be declared by our board of directors or paid by the Company if there are reasonable grounds for believing that: (i) we are, or would
after the payment be, unable to pay our liabilities as they become due; or (ii) that the realizable value of our assets would thereby
be less than our liabilities. Accordingly, investors cannot rely on dividend income from our common shares and any returns on an investment
in our common shares will likely depend entirely upon any future appreciation in the price of our common shares.
If we are or become classified as a passive foreign investment
company (“PFIC”), our U.S. shareholders may suffer adverse tax consequences as a result.
A non-U.S. corporation,
such as our Company, will be considered a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income or
(ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable
to assets that produce or are held for the production of passive income.
Based upon our current and
projected income and assets, and projections as to the value of our assets, we do not anticipate that we will be a PFIC for the 2022 taxable
year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we will be or become
a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income and assets, and we have
not and will not obtain an opinion of counsel regarding our classification as a PFIC. Fluctuations in the market price of our common shares
may cause us to be classified as a PFIC in any taxable year because the value of our assets for purposes of the asset test, including
the value of our goodwill and unbooked intangibles, may be determined by reference to the market price of our common shares from time
to time (which may be volatile). If our market capitalization subsequently declines, we may be or become classified as a PFIC for the
2022 taxable year or future taxable years. Furthermore, the composition of our income and assets may also be affected by how, and how
quickly, we use our liquid assets and any future fundraising activity. Under circumstances where our revenues from activities that produce
passive income significantly increases relative to our revenues from activities that produce non-passive income, or where we determine
not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. It
is also possible that the Internal Revenue Service (the “IRS”) may challenge the classification or valuation of our Company’s
assets, including its goodwill and other unbooked intangibles, or the classification of certain amounts received by our Company, which
may result in our Company being, or becoming classified as, a PFIC for the 2022 taxable year or future taxable years. Accordingly, there
can be no assurance that we will not be a PFIC in the current or for any future taxable year and U.S. investors should invest in our common
shares only if they are willing to bear the U.S. federal income tax consequences associated with investments in PFICs.
If we were a PFIC for any
taxable year during which a U.S. investor held our common shares, certain adverse U.S. federal income tax consequences could apply to
the U.S. Holder. See “Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders.”
We
are a holding company with no material direct operations.
We
are a holding company with no material direct operations. As a result, we would be dependent on dividends, other payments or loans from
our subsidiaries in order to pay a dividend. Our subsidiaries are subject to legal requirements of their respective jurisdictions of
organization that may restrict their paying dividends or other payments, or making loans, to us.
We
are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations
that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
We
report under the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer
under the Exchange Act and although we are subject to Bermuda laws and regulations with regard to such matters and furnish semiannual
financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public
companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect
of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their
stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the
rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other
specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private
issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S.
domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each
fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective
disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies
that are not foreign private issuers.
As
a foreign private issuer and as permitted by the listing requirements of Nasdaq, we follow certain home country governance practices
rather than the corporate governance requirements of Nasdaq.
We
are a foreign private issuer. As a result, in accordance with Nasdaq Listing Rule 5615(a)(3), we comply with home country governance
requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq.
Bermuda
law does not require that a majority of our board of directors consists of independent directors. Our board of directors therefore may
include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are
not subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors regularly have scheduled meetings at which only
independent directors are present.
Bermuda
law does not require that we disclose information regarding third-party compensation of our directors or director nominee. As a result,
our practice varies from the third-party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3). We follow the requirements
of Bermuda law with respect to our compensation committee, disclosure of compensation of our directors and executive officers and information
regarding third-party compensation of our directors or director nominee, each of which differ from the requirements of the Nasdaq Listing
Rules.
In
addition, as permitted by Bermuda law, we have opted not to implement a standalone nominating committee. To this extent, our practice
varies from the independent director oversight of director nominations requirements of Nasdaq Listing Rule 5605(e).
The
quorum for a general meeting of shareholders is as set out in our Bye-laws, which provides for a quorum of two or more persons present
at the start of the meeting and representing in person or by proxy issued and outstanding voting shares in the company. Our practice
thus varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable
quorum, and that such quorum may not be less than one-third of the outstanding voting stock. We must provide shareholders with an agenda
and other relevant documents for the general meeting of shareholders. However, Bermuda law has no regulatory regime for the solicitation
of proxies, thus our practice varies from the requirement of Nasdaq Listing Rule 5620(b), which sets forth certain requirements regarding
the solicitation of proxies. In addition, we have opted out of shareholder approval requirements for the issuance of securities in connection
with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based
compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from
the requirements of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities
in connection with such events.
As
a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.
We
may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime
and cause us to incur significant legal, accounting and other expenses.
We
are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements
of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either
(a) a majority of our common shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i)
a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than 50 percent of our assets
cannot be located in the United States and (iii) our business must be administered principally outside the United States. These criteria
are tested on the last business day of our second fiscal quarter, each year. If we lost this status, we would be required to comply with
the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the
requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance
with various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to
comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur
as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial
compliance costs and would make some activities highly time-consuming and costly. We also expect that if we were required to comply with
the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director
and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.
If
we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial
results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm
our business and the trading price of our common shares.
Effective
internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure
controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered
in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection
with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may
reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective
or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls
could also subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue and cause investors to lose confidence
in our reported financial information, which could have a negative effect on the trading price of our common shares.
We
are required to disclose changes made in our internal controls and procedures, and our management is required to assess the effectiveness
of these controls annually. However, for as long as we are a “non-accelerated filer” under Securities and Exchange Commission
rules, our independent registered public accounting firm is not required to attest to the effectiveness of our internal controls over
financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems
that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement
restatements and require us to incur the expense of remediation.
If
securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price
of our common shares and our trading volume could decline.
The
trading market for our common shares depends in part on the research and reports that securities or industry analysts publish about us
or our business. We do not have any control over these analysts. We cannot assure you that analysts will cover us or provide favorable
coverage. If one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about
our business, the price of our common shares would likely decline. If one or more of these analysts cease coverage of the Company or
fail to publish reports on us regularly, demand for our common shares could decrease, which might cause the price of our common shares
and trading volume to decline.
As
a Bermuda company, it may be difficult for you to enforce judgments against us or our directors and executive officers.
We
are a Bermuda exempted company. As a result, the rights of holders of our common shares are governed by Bermuda law and our memorandum
of continuance (the “Memorandum of Continuance”) and Bye-laws. The rights of shareholders under Bermuda law may differ from
the rights of shareholders of companies incorporated in other jurisdictions. Many of our directors referred to in this Annual Report
are not residents of the United States, and a substantial portion of our assets are located outside the United States. As a result, it
may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States
judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. It
is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us
or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors
or officers under the securities laws of other jurisdictions.
Bermuda
law differs from the laws in effect in the United States and may afford less protection to holders of our common shares.
We
are subject to the laws of Bermuda. As a result, our corporate affairs are governed by the Companies Act 1981 of Bermuda (the “Companies
Act”), which differs in some material respects from laws typically applicable to U.S. corporations and shareholders, including
the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification
of directors. Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda
companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances.
Class actions are not available under Bermuda law. The circumstances in which derivative actions may be available under Bermuda law are
substantially more proscribed and less clear than they would be to shareholders of U.S. corporations. The Bermuda courts, however, would
ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where
the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the
company’s memorandum of association (or memorandum of continuance) or bye-laws. Furthermore, consideration would be given by a
Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires
the approval of a greater percentage of the company’s shareholders than that which actually approved it.
When
the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one
or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating
the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders
or by the company. Additionally, under our Bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of
action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for
actions involving fraud or dishonesty. In addition, the rights of holders of our common shares and the fiduciary responsibilities of
our directors under Bermuda law are not as clearly established as under statutes or judicial precedent in existence in jurisdictions
in the United States, particularly the State of Delaware. Therefore, holders of our common shares may have more difficulty protecting
their interests than would shareholders of a corporation incorporated in a jurisdiction within the United States.
Our
Bye-laws restrict shareholders from bringing legal action against our officers and directors.
Our
Bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any
of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director
to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the
part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless
the act or failure to act involves fraud or dishonesty.
We
have anti-takeover provisions in our Bye-laws that may discourage a change of control.
Our
Bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors.
These provisions provide for:
|
● |
directors only to be removed
for cause; |
|
● |
restrictions on the time
period in which directors may be nominated; |
|
● |
our board of directors
to determine the powers, preferences and rights of our preference shares and to issue the preference shares without shareholder approval;
and |
|
● |
an affirmative vote of
66 2/3% of our voting shares for certain “business combination” transactions which have not been approved by our board
of directors. |
These
provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial
by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.
Legislation
enacted in Bermuda as to economic substance may affect our operations.
Pursuant
to the Economic Substance Act 2018 (as amended) of Bermuda (the “ES Act”) that came into force on January 1, 2019, a registered
entity other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda (“non-resident entity”)
that carries on as a business any one or more of the “relevant activities” referred to in the ES Act must comply with economic
substance requirements. The ES Act may require in-scope Bermuda entities which are engaged in such “relevant activities”
to be directed and managed in Bermuda, have an adequate level of qualified employees in Bermuda, incur an adequate level of annual expenditure
in Bermuda, maintain physical offices and premises in Bermuda or perform core income-generating activities in Bermuda. The list of “relevant
activities” includes carrying on any one or more of the following activities: banking, insurance, fund management, financing, leasing,
headquarters, shipping, distribution and service center, intellectual property and holding entities. The ES Act could affect the manner
in which Altamira Therapeutics operates its business, which could adversely affect its business, financial condition and results of operations.
Although
it is presently anticipated that the ES Act will have no material impact on Altamira Therapeutics or its operations, as the legislation
is new and remains subject to further clarification and interpretation, it is not currently possible to ascertain the precise impact
of the ES Act on Altamira Therapeutics.
ITEM
4. INFORMATION ON THE COMPANY
A. |
History
and development of the Company |
Overview
We
are a biopharmaceutical company dedicated to developing therapeutics that address important unmet medical needs. For the most part since
the formation of our Company, we have been focusing on the development of therapeutics for inner ear disorders: (i) Keyzilen®
(AM-101) in acute inner ear tinnitus, (ii) Sonsuvi® (AM-111) in acute inner ear hearing loss and (iii) AM-125 in
acute peripheral vertigo. We advanced Keyzilen® and Sonsuvi® to Phase 3 clinical trials, and we are currently in Phase 2 clinical
development with AM-125. In 2021 we launched Bentrio™, a drug free medical device for protection against airborne allergens and
viruses in selected European markets. Further, through the acquisition of Trasir Therapeutics (“Trasir”) in 2021, we entered
the field of RNA delivery. In this context, we announced our intention to reposition the Company around RNA therapeutics with AM-401
for the treatment of KRAS driven cancers being our first project, and to divest or spin off our non-RNA businesses, which are our assets
in neurotology, rhinology and allergology, including Bentrio™, AM-125, Keyzilen®, Sonsuvi® and certain early-stage drug
product candidates.
AM-125
We
are developing AM-125 for the intranasal treatment of acute peripheral vertigo. In February 2017 we entered into an asset purchase agreement
with Otifex, pursuant to which we have purchased various assets related to betahistine dihydrochloride in a spray formulation. The assets
include preclinical and clinical data as well as certain intellectual property rights. In a Phase 1 clinical trial conducted by Otifex
in 40 healthy volunteers intranasal betahistine showed good tolerability and significantly higher betahistine concentrations in blood
plasma than reported for oral betahistine administration.
In
2018, we conducted a second Phase 1 clinical trial with AM-125 in 72 healthy volunteers. The randomized double blind placebo controlled
trial demonstrated superior bioavailability over a range of four intranasal betahistine doses compared to oral betahistine, with plasma
exposure being 5 to 29 times higher (unadjusted for dose; p-value between 0.056 and p < 0.0001). Further, it confirmed the favorable
safety profile of intranasal betahistine and showed that the treatment was well tolerated when administered three times daily for three
days. Single doses were escalated up to 60 mg, and repeated doses up to 40 mg. For the latter, the maximum tolerated dose based on local
tolerability was determined at 40 mg.
In
July 2019, we started enrollment into a randomized placebo-controlled Phase 2 clinical study with AM-125. The “TRAVERS” Phase
2 trial is expected to enroll 118 patients suffering from acute vertigo following neurosurgery (for surgical removal of a vestibular
schwannoma, a tumor growing behind the inner ear, resection of the vestibular nerve, which is called vestibular neurectomy, or surgical
removal of parts of the inner ear, which is called labyrinthectomy). Starting three days after neurosurgery, trial participants self-administer
AM-125 or placebo 3 x daily for four weeks; they are then followed for a further two weeks. The trial is being conducted in several countries
ex US.
In
September 2020 we announced the results of an interim analysis from Part A of the trial, which comprised a dose escalation – 1,
10 or 20 mg or placebo – in 33 patients. The interim analysis showed a dose-dependent improvement in balance as well as good safety
and tolerability of ascending doses of AM-125. At the highest dose of 20 mg (3 x daily), AM-125-treated patients improved their performance
of the “Tandem Romberg” and the “Standing on Foam” balance tests from baseline to 14 days post-surgery (primary
endpoint) on average 1.9 to 2.4 times more than placebo-treated patients (6.0 vs. 3.1 and 10.5 vs. 4.3 seconds, respectively). In contrast
to placebo, the improvement from baseline was statistically significant for AM-125 20 mg and for all active dose groups, respectively
(p<0.02 and p<0.01 to p<0.05, respectively). These positive results were supported by similar improvements in additional efficacy
measures, including additional objective as well as clinician- and patient-reported outcomes.
Based
on the results from the interim analysis, we selected the two highest doses, 10 and 20 mg, for testing against placebo in 72 patients
in Part B of the trial. As we remained blinded to treatment allocation during the interim analysis, the corresponding data from Part
A will be pooled with those from Part B. Prior to starting Part B of the trial in October 2020, we tested oral betahistine (48 mg) open
label for reference purposes.
Enrollment
into TRAVERS has been impacted by the COVID-19 pandemic, as the type of neurosurgery required for participation in the trial is classified
as an elective procedure and hence was postponed and as many participating sites temporarily reduced or suspended clinical research activities.
The effect was particularly felt in the spring of 2020 and then again in early 2021. In February 2022 we announced the completion of
enrollment into TRAVERS. We expect to obtain top-line results in the second quarter of 2022.
We
have discussed the regulatory requirements for AM-125 during a pre-Investigational New Drug (“IND”) meeting with the FDA
and in the context of scientific advice meetings with the EMA and two European national health authorities to further define the development
program. We expect to have further exchanges with regulatory agencies following conclusion of the TRAVERS trial, upon which we aim to
obtain an IND. We expect to initiate a Phase 3 clinical trial with AM-125 in acute peripheral vertigo in late 2022. We believe that, if
approved, AM-125 could become the first betahistine product for the treatment of acute peripheral vertigo in the United States. We are
currently evaluating the feasibility of a clinical study with AM-125 in central vertigo, which may lead to the initiation of a Phase
2 trial later in 2022.
Under
product code AM-201, we evaluated intranasal betahistine also for its potential use in the prevention of antipsychotic induced weight
gain and drowsiness. In 2019, we initiated a Phase 1b trial in Europe to evaluate AM-201’s safety and therapeutic effects in this
indication. Participants received either AM-201 (1, 2.5, 5, 10, 20 or 30 mg) or placebo in parallel with oral olanzapine (10 mg) once
a day for four weeks. In May 2020, we announced that at AM-201 30 mg, the mean weight gain from baseline to the end of the treatment
period was 2.8 kg compared against 3.7 kg in control subjects; the primary efficacy endpoint of mean reduction in weight gain was 0.9
kg and statistically significant (p<0.02; n=81 with pre-specified Bayesian augmented controls). In the context of our strategic repositioning,
we have decided to deprioritize project AM-201 and suspended all development work.
Bentrio™
(AM-301)
In
September 2020 we announced the launch of the development of Bentrio™ (AM-301), a drug-free nasal spray for protection against
airborne viruses and allergens through a newly created subsidiary, Altamira Medica Ltd. Bentrio™, which is now being commercialized
in Germany and other European countries under the CE mark as an “over the counter” product under the brand name Bentrio™,
is a gel emulsion which works by forming a protective layer on the nasal mucosa that acts as a mechanical barrier against airborne viruses
allergens. The barrier consists of two elements: (1) a mucoadhesive film lining the nasal cavity and preventing contact of airborne viruses
or allergens with the nasal mucosa to reduce the risk of viral infection or allergic reactions; (2) the trapping / binding of such viruses
or allergens through electrostatic effects, allowing for their removal e.g. through mucociliary clearance. In addition, the product helps
to humidify and thus maintain the nasal mucosa’s function in clearing viruses and allergens from the nasal cavity. The key component
of Bentrio™ is bentonite, a naturally occurring clay.
Following
formulation development, we tested Bentrio™ in vitro in a series of experiments using reconstituted human nasal epithelia
infected with SARS-CoV-2 or H1N1 influenza virus. Daily treatment with AM-301, beginning right before inoculation or 24-30 hours thereafter
showed significant reductions of the viral titer compared to saline treated controls. In case of SARS-CoV-2, a protective effect was
observed with the original virus, the Delta variant as well as the Omicron variant.
Based
on these in vitro results, we believe that AM-301 could help to reduce the risks of exposure from airborne transmission of SARS-CoV-2.
It is estimated that about 90% of air is inhaled via the nose, and it has been established that infection with SARS-CoV-2 via the nose
is a major transmission pathway for COVID-19. In 2021 we prepared a randomized placebo-controlled clinical trial in acute COVID-19 (“COVAMID”)
for further confirmation of the protective effects of Bentrio™; due to the largely unpredictable waves of infection on one hand
and varying regulatory timelines and requirements, the trial could start enrollment only in March 2022.
In
2021 we conducted an open-label randomized cross-over study with AM-301 that enrolled 36 patients with allergic rhinitis caused by grass
pollen. Study participants were administered a single dose of BentrioTM nasal spray or hydroxypropylmethylcellulose, a comparator
product, prior to controlled pollen exposure for four hours in an allergen challenge chamber. The challenge was repeated with the alternate
treatment following a wash-out period. The study demonstrated a rapid onset and long durability of Bentrio’s protective effect,
established substantial equivalence to the marketed comparator with superior efficacy ratings by patients and clinicians, and showed
good tolerability.
We
believe that Bentrio™ could provide help to people suffering from allergic rhinitis by reducing their exposure to airborne allergen
particles e.g. from pollens, house dust or animal hair. For further clinical data, in December 2021 we initiated a randomized open-label
trial with Bentrio™ and saline nasal spray as control in seasonal allergic rhinitis (SAR) and an open-label clinical trial with
AM-301 in perennial allergic rhinitis (PAR) with controlled house dust mite exposure. We expect the PAR trial to read out in the second
quarter of 2022 and the SAR trial in late 2022.
Since
Bentrio™ does not contain any active substance, it is regulated and marketed as an “over-the-counter” medical device.
In May 2021 we completed the conformity assessment procedure for marketing the product in the member states of the European Union (EU),
and in September 2021 we filed a 510(k) premarket notification with the FDA, which is currently under review for the intended use of
promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens.
We
intend to market Bentrio™ primarily through third parties. We already have entered into marketing and distribution agreements with
several collaboration partners in Asia and Europe and intend to cover further markets in particular in Europe and North America.
AM-401
Through
the acquisition of Trasir in June 2021 we entered the field of RNA therapeutics. Trasir’s core technology is the proprietary peptide
polyplex platform OligoPhore™ and its equivalent SemaPhore™ that can engage any type of short interfering RNA (siRNA) or
messenger RNA (mRNA), respectively, in rapid self-assembly. The technology allows for safe and effective systemic delivery of RNA payloads
with efficient cellular uptake and full endosomal release. Importantly, it enables delivery to target tissues outside the liver, creating
the potential for developing RNA-based therapies for a range of indications with substantial unmet need.
In
various murine models of disease, OligoPhore™ and SemaPhore™ have been shown to protect the RNA payload (siRNA and/or mRNA)
from degradation in the circulation, while enabling pH-dependent nucleotide endosomal escape and cytoplasmic delivery. Proof-of-concept
for efficient delivery and target knockdown has been demonstrated for targets in the NF-kB family, various members of the ETS transcription
factor family, and targets in the JNK and TAM pathways, enabling a preclinical development pathway for several oncology indications,
rare diseases, as well as rheumatoid and osteoarthritis and inflammatory pathologies such as atherosclerosis.
In
July 2021 we announced the selection of KRAS-driven cancer as the first therapeutic indication for our OligoPhore™ oligonucleotide
delivery platform. We aim to advance the AM-401 program through preclinical studies with the objective of filing for an NDA in 2023.
In parallel, we will seek to leverage the OligoPhore™ / SemaPhore™ platform through collaborations with other biopharmaceutical
companies and the out-licensing of technology for specific indications.
Keyzilen®
We
have been developing Keyzilen®, Esketamine gel for injection, for the treatment of acute inner ear tinnitus. Esketamine
is a potent, small molecule non-competitive NMDA receptor antagonist. Keyzilen® is formulated in a biocompatible gel and
delivered via intratympanic injection. It demonstrated a favorable safety profile and positive effect on PROs associated with tinnitus
in two Phase 2 clinical trials. In two Phase 3 clinical trials (TACTT2 and TACTT3), we were unable to confirm the efficacy of Keyzilen™
as both of them did not meet their primary efficacy endpoints. We believe we have identified two principal sources for the negative outcomes
from the TACTT trials: (i) the high frequency of tinnitus loudness ratings over an extended period of time and (ii) an unexpectedly high
level of variability in outcomes among study sites. A survey among a number of TACTT3 participants revealed that the daily capture of
tinnitus loudness and annoyance caused a number of patients to excessively focus on their tinnitus symptoms. In addition, it was observed
that a non-negligible number of study participants presumably became tired of the daily ratings after some time and stopped providing
actual values. With respect to variability, our analysis subsequent to the unblinding of the trial data has shown positive outcomes at
numerous sites, including many of the high enrolling study centers, but inconclusive or contradictory outcomes at other sites.
In
April 2019, we announced that we had completed the design of a pivotal Phase 2/3 trial for Keyzilen®. The trial shall,
in two stages, reaffirm the compound’s efficacy in the treatment of acute tinnitus and provide confirmatory efficacy data to support
a filing for marketing authorization. In September 2019, we announced that we have obtained advice on the development plan and regulatory
pathway from the U.S. Food and Drug Administration (“FDA”) in the context of a Type C meeting and from the European Medicines
Agency (“EMA”) in the context of a Scientific Advice procedure for Keyzilen®. In the context of our strategic
repositioning, we aim to divest or spin off the Keyzilen® program.
Sonsuvi®
We
also have been developing Sonsuvi® for acute inner ear hearing loss. In our Phase 2 clinical trial, AM-111 showed a favorable
safety profile. Furthermore, in patients with severe to profound ASNHL, we observed a clinically relevant improvement in hearing threshold,
speech discrimination and a higher rate of complete tinnitus remission compared with placebo. In November 2017, we announced that the
HEALOS Phase 3 clinical trial that investigated Sonsuvi® in the treatment of acute inner ear hearing loss did not meet
the primary efficacy endpoint. However, a post-hoc analysis of the subpopulation with profound acute hearing loss (PTA ≥ 90 dB at
baseline in accordance with a commonly used classification of hearing loss severity) revealed a clinically meaningful and nominally significant
improvement in the Sonsuvi® 0.4 mg/mL treatment group.
Based
on the HEALOS results, we submitted the design of a new pivotal trial with AM-111 0.4 mg/mL in patients suffering from acute profound
hearing loss to the EMA and subsequently also to the FDA for review. Through a Protocol Assistance procedure the EMA endorsed the proposed
trial design, choice of efficacy and safety endpoints, as well as the statistical methodology. In a Type C meeting with written responses,
the proposed choice of primary and secondary efficacy endpoints, the safety endpoints, as well as the planned sample size and statistical
methodology were also endorsed by the FDA. In the context of our strategic repositioning, we aim to divest or spin off the Sonsuvi®
program.
Trasir
Acquisition
On
June 1, 2021, the Company, Auris Medical Inc., an Illinois corporation and wholly owned subsidiary of the Company (“Subco”),
Trasir Therapeutics, Inc., a Delaware corporation (“Trasir”), and each of the stockholders of Trasir (the “Trasir Stockholders”)
entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, the Company acquired
Trasir through the merger of Subco with and into Trasir (the “Merger”), with Trasir surviving the merger as the surviving
entity (the “Surviving Corporation”). The Merger closed on June 1, 2021. As a result of the Merger, the shares of common
stock of Trasir immediately prior to the effective time of the Merger converted into the right to receive: (i) the applicable pro rata
share of an aggregate of 764,370 common shares, calculated based on a value of $2,500,000 divided by the average closing price of the
common shares on the 15 trading days preceding the closing date; (ii) contingent on the occurrence of positive results from a subsequent
post-closing scientific study led by Trasir (“Positive Results”), the applicable pro rata share of $1,500,000 of common shares,
to be calculated based on the average closing price of the common shares on the 15 trading days preceding the occurrence of Positive
Results; and (iii) $210,000 for expenses (the “Trasir Stockholder Expenses”) incurred in connection with the execution, delivery
and performance of the Merger Agreement by certain Trasir Stockholders, paid partially in cash and partially in common shares based on
the average closing price of the common shares on the 15 trading days preceding the closing date. In connection with the Merger, the
Company also entered into an employment agreement with Dr. Samuel Wickline. Effective June 1, 2021, Dr. Wickline became the Chief Scientific
Officer of the Company.
Capital expenditure and divestitures
Our actual capital expenditures for the years
ended December 31, 2021, 2020 and 2019 amounted to CHF 6.7 million, CHF 2.3 million and CHF 3.2 million, respectively. Our capital expenditures
primarily consist of intangible assets (capitalized expenditures) related to AM-125 (mainly in Switzerland and Australia) and the upfront
and milestone payments related to the acquisition of Trasir.
Corporate
information
We are an exempted company
organized under the laws of Bermuda. We began our current operations in 2003. On April 22, 2014, we changed our name from Auris Medical
AG to Auris Medical Holding AG and transferred our operational business to our newly incorporated subsidiary Auris Medical AG, which is
now our main operating subsidiary. On March 13, 2018, we effected a corporate reorganization through the Merger into a newly formed holding
company for the purpose of effecting the equivalent of a 10-1 “reverse share split.” Following shareholder approval at an
extraordinary general meeting of shareholders held on March 8, 2019 and upon the issuance of a certificate of continuance by the Registrar
of Companies in Bermuda on March 18, 2019, the Company discontinued as a Swiss company and, pursuant to Article 163 of the Swiss Federal
Act on Private International Law and pursuant to Section 132C of the Companies Act 1981 of Bermuda (the “Companies Act”),
continued existence under the Companies Act as a Bermuda company with the name “Auris Medical Holding Ltd.” (the “Redomestication”).
By resolution of a Special General Meeting of Shareholders held on July 21, 2021 we adopted the new company name Altamira Therapeutics
Ltd. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda, telephone number +1 (441) 295 5950.
We maintain a website at www.altamiratherapeutics.com where general information about us is available. Investors can obtain copies of
our filings with the SEC from this site free of charge, as well as from the SEC website at www.sec.gov. We are not incorporating the contents
of our website into this Annual Report.
Strategy
Our
goal is to become a leading biomedical company focused on developing and commercializing RNA therapeutics. We believe that the use of
RNA therapeutics – be it siRNA, mRNA or other types – to control the expression of disease-relevant genes holds great promise.
By engaging targets that are otherwise ‘undruggable’ by small molecules and proteins, whole new avenues are expected to open
up with RNA therapeutics for treating intractable diseases. However, delivering RNA therapeutics into the right cell of the right tissue
has been one of the key challenges preventing their more widespread adoption so far.
So
far, most RNA therapeutics have been directed at the liver using delivery platforms based on lipid nanoparticles or GalNAc, an amino
sugar derivative of galactose. In contrast, delivery to non-liver (that is extrahepatic) tissues has been largely elusive so far. Our
proprietary peptide polyplex platform OligoPhore™ and its equivalent SemaPhore™ can engage any type of short interfering
RNA (siRNA) or messenger RNA (mRNA), respectively, in rapid self-assembly. The technology allows for safe and effective systemic delivery
of RNA payloads with efficient cellular uptake and full endosomal release. Importantly, it enables delivery to target tissues outside
the liver, creating the potential for developing RNA-based therapies for a range of indications with substantial unmet need.
The
key elements of our strategy are:
|
● |
Demonstrate preclinical
and clinical proof of concept with OligoPhore™ in KRAS driven cancer as first indication. Based on positive results obtained
with Oligophore™ delivering various siRNA payloads in more than ten different murine disease models, we have selected KRAS
driven cancer as the first indication in which we will seek to demonstrate clinical proof of concept. |
|
● |
Leverage OligoPhore™
/ SemaPhore™ platform through partnering. Considering the suitability of our peptide polyplex platform for multiple therapeutic
indications especially in oncology and immune diseases but also elsewhere, and for various types of therapeutics nucleotides,
we aim to leverage it through collaborations with other biopharmaceutical companies and the out-licensing of technology for specific
indications. In this way, we intend to become a delivery platform company. |
|
● |
Focus
activities on RNA therapeutics by divesting or spinning off our non-RNA businesses. As we aim to expand our activities in
RNA therapeutics, we intend to dedicate our full resources and management focus on them. Although we continue to believe that
our businesses in neurotology, rhinology and allergology hold great promise, we consider that the related assets should be rather
developed outside our Company. Any proceeds from their divestiture or spin-off shall be applied to growing the activities in
RNA therapeutics.
|
Delivering
RNA therapeutics to extrahepatic tissues
OligoPhore™
/ SemaPhore™ is a versatile platform for safe and effective delivery of oligonucleotides such as siRNA (small interfering ribonucleic
acid) or mRNA (messenger RNA) into target cells, using systemic or local administration. Using the same technology, OligoPhore™
designates the platform for oligonucleotides, whereas SemaPhore™ designates the platform for mRNA. It is based on a proprietary
21 amino acid peptide that can engage any type of RNA in rapid self-assembly into a polyplex. The polyplex has a size, charge, and other
physical features that allow it to escape hepatic clearance and thus to reach other target tissues than the liver. OligoPhore™
/ SemaPhore™ protects the RNA payload from degradation in the circulation and allows for rapid cellular uptake, while enabling
pH-dependent nucleotide full endosomal escape and cytoplasmic delivery.
Effective
delivery and positive treatment outcomes have been demonstrated with OligoPhore™ in more than 10 diverse murine models of disease
for cancer, cardiovascular, and rheumatological targets in the NF-κB family, various members of the ETS transcription factor family,
and targets in the JNK and TAM pathways. With SemaPhore™, positive results have been demonstrated so far in three different murine
disease models in osteoarthritis, atherosclerosis and aortic aneurysm with WNT 16, p27Kip1 and SOD2 as targets. All of these
results have been published in peer-reviewed journals.
The
preparation of the polyplex formulations is relatively straightforward. The peptide carrier rapidly condenses nucleotides within minutes
by mixing at a pre-defined ratio. The interaction between RNA sequence and peptide is initially electrostatic, but importantly an exothermic
process of strong hydrogen bonding takes place between the histidines and nucleic acids to markedly stabilize the polyplex. A thin coating
of albumin or hyaluronic acid is used to further stabilize the system. Once the polyplex is formed it can be injected intravenously or
intraperitoneally, or by any other route that reaches the circulation. It readily escapes the leaky vasculature of various pathologies
and is taken up avidly by cells that are capable of macropinocytosis (“big drinking”) such as cancer cells or macrophages.
However, we also have transfected endothelium, smooth muscle, and other cell types. Once in the endosome, the natural process of acidification
breaks strong bonds between the RNA and the peptide to disassemble the polyplex. The released peptide interacts with the endosomal membrane
to permeabilize it and release the RNA into the cytoplasm. The peptide is then diluted quickly and broken down, causing no unintended
damage to the cell membrane itself.
In
July 2021 we announced the selection of KRAS-driven cancer as the first therapeutic indication for our OligoPhore™ oligonucleotide
delivery platform. We aim to advance the AM-401 program through preclinical studies with the objective of filing for an NDA in 2023.
In parallel, we will seek to leverage the OligoPhore™ / SemaPhore™ through collaborations with other biopharmaceutical companies
and the out-licensing of technology for specific indications.
Market
for RNA therapeutics
RNA
therapeutics is a rapidly emerging field of human medicine that has the potential to change the standard of care for many diseases and
target previously undruggable pathways. Traditional small molecule drugs target active sites of proteins so as to inhibit or alter their
function; however, only ∼1.5% of the human genome encodes proteins (Ezkurdia et al., 2014), and only 10–14% of proteins have
active binding sites that are “druggable” targets for small molecules (Hopkins and Groom, 2002). Thus the “druggable”
targets for small molecule therapies is limited. This limitation was addressed in part by recombinant protein technology which has become
a significant share of the pharmaceutical market (Damase et al., 2021). However, recombinant proteins have limitations as drugs, particularly
due to size and stability issues. By contrast, nucleic-acid based strategies avoid many of these limitations as they make use of the
translational machinery of the human cell.
RNA
therapeutics comprise four broad categories: aptamers, antisense oligonucleotides (ASOs), RNA interference (RNAi) and messenger RNA (mRNA).
Aptamers are oligonucleotide or peptide molecules that bind to a specific target molecule to inhibit signal transduction. ASOs bind to
mRNA, rendering it inactive, whereas RNAi (short interfering RNA or siRNA and micro RNA or miRNA) promote the degradation of specific
mRNA molecules. Rather than silencing defective genes as ASOs and RNAi do, mRNA promotes protein expression to compensate for a defective
gene/protein. Regardless of the type of RNA therapeutic, delivery into target cells and tissues has proved to be a major challenge as
RNA is inherently unstable and tends to show poor cellular uptake. Various delivery technologies have been developed to address these
challenges, including the use of nanocarriers or bioconjugates for targeted delivery. While there has been substantial progress with
delivery of RNA therapeutics to the liver, other target tissues and organs have remained difficult to reach.
In
2016 the FDA approved the first two ASO based therapeutics and in 2018 the first siRNA therapeutic. Further approvals have followed,
and there is a growing number of RNA therapeutics in clinical development. With the rapid development of vaccines against COVID-19, which
use mRNA to instruct muscle cells to produce the non-infectious SARS-CoV-2 spike protein to induce specific neutralizing antibodies,
some key advantages of RNA-based therapeutics such as rapid design and scale-up in manufacturing have been highlighted. According to
a recent report published by Allied Market Research the global market for RNA therapeutics (RNAi and ASOs) reached USD 4.9 billion in
2021 and is expected to grow to USD 25.1 billion in 2030. In another recent report by Research and Markets, it is estimated that the
global market for mRNA therapeutics should grow from USD 46.7 billion in 2021 to USD 101.3 billion by 2026.
Protection
against airborne viruses and allergens
With
our Bentrio™ nasal spray, we are aiming to provide protection against airborne viruses and allergens. The nose is the first organ
of the respiratory system. Its main function is breathing, bringing warm humidified air into the lungs. Filtering of the air by nasal
hair in the nostrils prevents large particles from entering the lungs. The interior of the nose, which is called the nasal cavity, is
lined by the nasal mucosa, one of the anatomical structures which form the physical barriers of the body’s immune system. These
barriers provide mechanical protection from the invasion of infectious and allergenic pathogens. Sneezing is a reflex to expel unwanted
particles from the nose that irritate the mucosal lining.
Through
the intake of air, the nasal cavity and nasal mucosa are exposed to a variety of airborne pathogens such as viruses and bacteria and
allergens such as pollen, house dust mites or animal hair. Unless they are neutralized by the immune system, these pathogens may cause
infections. In case of allergens, the body may develop sensitivity to them, resulting in an inflammatory reaction including the release
of certain chemicals such as histamine affecting the nasal mucosa. This inflammatory condition is called allergic rhinitis. Its main
symptoms include nasal itching and sneezing, runny nose, and nasal congestion.
Market
for allergic rhinitis and viral infection treatments
Allergic
rhinitis is a very frequent condition. According to results from the National Health Interview Survey published in 2010 by Schiller and
colleagues, roughly 7.8% of people 18 and over in the U.S. have hay fever. In 2010, 11.1 million visits to physician offices resulted
with a primary diagnosis of allergic rhinitis, as shown by the National Ambulatory Medical Care Survey. Besides de-sensitization (allergen-specific
immunotherapy), there is no cure for allergic rhinitis. In most cases treatment aims to relieve symptoms. Antihistamines relieve symptoms
of allergic rhinitis by blocking or reducing the action of histamines, which the body releases when under attack from allergens. However,
antihistamines can sometimes cause drowsiness. The most effective and safest way to prevent or decrease the allergic symptoms is to avoid,
remove, or protect against exposure to airborne allergens. In 2020, the market size for “over the counter” allergy medicines
in the US was estimated at USD 4 billion.
Infections
from airborne viruses are very common. Viruses known to spread by airborne transmission (and also other routes) include rhinoviruses
(cause common cold symptoms), influenza viruses (type A, type B, H1N1), varicella viruses (cause chickenpox), measles virus, mumps virus,
enterovirus, norovirus, coronaviruses among others. Worldwide and nearly year-round, human rhinovirus (HRV) is the most common cause
of upper respiratory tract infection and is responsible for more than one-half of cold-like illnesses. The treatment of HRV infection
remains primarily supportive, including over-the-counter products aimed at symptom relief. Revenues in the US for cold and cough remedies
such as antihistamines, antibiotics, decongestants, expectorants and bronchodilators are expected to exceed USD 12 billion in 2021. According
to the US Centers for Disease Control and Prevention (CDC), influenza has resulted in 9-45 million illnesses, 140,000-810,000 hospitalizations
and 12,000- 61,000 deaths annually since 2010. Protection against influenza may be achieved by seasonal vaccination (“flu shots”);
in case of infection, there are a number of approved antiviral drugs available such as oseltamivir, zanamivir, peramivir or baloxavir
marboxil.
The
current COVID-19 pandemic has highlighted the large impact that viral infections can have on health, quality of life and economic activity.
Since outbreak, more than 480 million people have been reported as infected and more than 6.1 million deaths have been counted globally.
Thanks to massive and urgent efforts by public and private entities, vaccines could be developed in record time; in addition, the first
oral antiviral treatments were approved, and dozens of other potential treatments have been under development. Although most of the population
has been vaccinated in industrialized countries, a substantial number of people remain unvaccinated with even lower vaccination rates
in most developing countries. It is uncertain at this point when and to what extent the COVID-19 pandemic can be ended or significantly
mitigated in its effects as vaccine roll-outs take time and mutations of SARS-CoV-2 have developed which appear to reduce the protective
effects of the newly developed vaccines.
Treatment
of neurotologic conditions
The
three most frequent neurotologic disorders are vertigo / dizziness, hearing loss and tinnitus. With AM-125, we are aiming to treat acute
peripheral vertigo, which is a disorder of the vestibular system. The vestibular system is responsible for the sensations of balance
and motion. For this, the brain receives, integrates, and analyzes information it receives from the left and right inner ear on the altitude,
rotation, and linear motion of the head, visual input from the eyes and input from joint and muscle receptors (the propriosensory system).
When vestibular input from each inner ear is equal, the system is in balance, and there is no sense of movement. When inputs are unequal,
the brain interprets this as movement. As a result, compensatory eye movements and postural adjustments occur to maintain balance. However,
when some pathology (e.g., inflammation or trauma) disrupts signaling unilaterally, the result is an imbalance in vestibular input that
can lead to vertigo.
Betahistine,
the active substance of AM-125, has been used for decades for the treatment of vertigo. However, when administered orally, only small
quantities of the drug actually reach the blood stream and can be distributed to the inner ear and the brain due to rapid and pronounced
first pass metabolism. As a consequence of the low bioavailability, there has been significant variability in therapeutic outcomes. With
AM-125, we are using intranasal delivery of betahistine.
The
nasal cavity is highly vascularized and provides a large surface area for drug absorption. In addition, the nasal route allows for avoiding
hepatic first-pass metabolism and degradation of a drug in the gastrointestinal tract when taken orally since the active substance will
be absorbed directly into the blood circulation. Further, intranasal delivery is convenient, non-invasive and suitable for self-administration.
For
our projects Keyzilen® (AM-101) and Sonsuvi® (AM-111), we are targeting specifically the cochlea, which together with the vestibule
and the semicircular canals of the peripheral vestibular system forms the inner ear. The snail-shaped cochlea is the sensory organ at
the periphery of the auditory system, which transmits sound along the auditory pathway up to the brain for hearing. Acute insults to
the cochlea from a variety of sources – for example, loud noise, infection or insufficient blood supply – may lead to excessive
levels of glutamate, the principal neurotransmitter in the cochlea as well as other pathological processes. This in turn may damage cochlear
hair cells, which tune and amplify sound inside the cochlea or convert mechanical movement into neural signals, as well as cochlear neurons.
Such damage may result in the symptoms of inner ear hearing loss and/or inner ear tinnitus that can be transitory as natural repair mechanisms
set in or that become permanent when hair cells or neurons die or are permanently injured.
Because
the cochlea is located deep inside the head and because it is separated from the middle ear by a combination of bone and membranes, the
interior of the cochlea is a challenging location for drug delivery. We have chosen to deliver certain of our products via intratympanic
injection across the ear drum (also known as the tympanic membrane) into the middle ear cavity. By formulating our products with biocompatible
gels, we facilitate the diffusion of active substances across the round window membrane into the cochlea at clinically meaningful concentrations.
The
vestibular system communicates with the cochlea and consists of three semi-circular canals and the vestibule. It is responsible for the
sensations of balance and motion. The vestibular system uses the same kinds of fluids and detection cells (hair cells) as the cochlea
and sends information to the brain regarding the altitude, rotation, and linear motion of the head. The vestibular system works with
the visual system to keep objects in view when the head is moved. Joint and muscle receptors are also important in maintaining balance.
The brain receives, interprets, and processes the information from all these systems to create the sensation of balance.
When
vestibular input from each ear is equal, the system is in balance, and there is no sense of movement. When inputs are unequal, the brain
interprets this as movement. As a result, compensatory eye movements and postural adjustments occur to maintain balance. However, when
some pathology (e.g., inflammation or trauma) disrupts signaling unilaterally, the result is an imbalance in vestibular input that can
lead to vertigo.
Market
for neurotologic treatments
Inner
ear disorders, including hearing loss, tinnitus, and vertigo, are common and often inter-related conditions. Chronic inner ear disorders
such as tinnitus and hearing loss are highly prevalent. According to the National Institute on Deafness and Other Communication Disorders,
or NIDCD, more than four out of 10 Americans, at some point in their lives, experience an episode of dizziness significant enough to
see a doctor. According to research by Saber Tehrani and colleagues published in the journal Academic Emergency Medicine in 2013 there
are almost 4 million emergency room visits per year in the U.S. for problems of dizziness or vertigo. According to data from the National
Health and Nutrition Examination Survey published by Agrawal and colleagues in the journal Archives of Internal Medicine in 2013, 35.4%
of the US population aged 40 years and older is suffering from vestibular dysfunction (i.e. failing the “Standing on Foam”
test).
Also
according to the NICDC, approximately 10% of the U.S. adult population, or about 25 million Americans, have experienced tinnitus lasting
at least five minutes in the past year. Additionally, according to a 2016 publication by Bhatt et al. in the journal JAMA Otolaryngology—Head
and Neck Surgery, 21.4 million (9.6%) U.S. adults experienced tinnitus in the past 12 months. The NIDCD also reports that 37.5 million
Americans, or 15% of the adult U.S. population, report having some trouble hearing. Epidemiological studies reveal comparable prevalence
rates for Europe. Additionally, according to a 2016 publication by Hoffman et al. in the journal JAMA Otolaryngology—Head and Neck
Surgery, the annual prevalence of speech-frequency hearing loss among adults aged 20 to 69 years was 14.1% (27.7 million) in the 2011-2012
period.
Although
there are several drugs available for the treatment of vertigo, they were all introduced several decades ago and have only limited clinical
utility. In the US, diphenhydramine, meclizine, promethazine and benzodiazepines are frequently used as vestibular suppressants; they
act centrally and have a sedating effect which may impose a serious limitation when the activities of the subject require alertness.
Outside the US, betahistine is frequently used as a non-sedating treatment for vertigo; it was also introduced several decades ago. As
for the treatment of tinnitus or hearing loss, there is currently no FDA or EMA approved drug therapy on the market.
Our
Products and Product Candidates
Bentrio™
(AM-301) in the protection against airborne allergens and viruses
Allergic
rhinitis and upper respiratory airway infections
Through
the intake of air, the mucosa-lined nasal cavity as the uppermost part of the respiratory system is exposed to a variety of airborne
pathogens such as viruses and bacteria. Unless they are neutralized by the immune system, these pathogens may cause infections. Viruses
known to spread by airborne transmission (and also other routes) include rhinoviruses (cause common cold symptoms), influenza viruses
(type A, type B, H1N1), varicella viruses (cause chickenpox), measles virus, mumps virus, enterovirus, norovirus, coronaviruses among
others.
Further,
the nasal cavity is exposed to allergens such as pollen, house dust mites or animal hair. The body may develop sensitivity to such allergens,
resulting in an inflammatory reaction (allergic rhinitis), including the release of certain chemicals such as histamine which affect
the nasal mucosa. The main symptoms of allergic rhinitis include nasal itching and sneezing, runny nose, and nasal congestion.
The
nasal mucosa is one of the anatomical structures which form the physical barriers of the body’s immune system. The mucosal lining
of the nasal cavity represents the outer surface of the body to the ambient air and its contents and is prepared for it as the first
line of defense. These barriers provide mechanical protection from the invasion of infectious and allergenic pathogens. Nasal mucociliary
clearance provides another defense mechanism: mucus secreted by the nasal mucosa traps inhaled allergens, pathogens and other particles
and is then transported with the trapped matter by the ciliated cells of the respiratory epithelium to the pharynx, where it is swallowed.
Proper
humidification helps to maintain the nasal mucosa’s function in clearing viruses and allergens from the nasal cavity. Further protection
may be achieved by wearing face masks or avoidance of exposure to potential sources of infection or allergens.
Our
solution – Bentrio™
In
September 2020 we announced the launch of the development of AM-301, a drug-free nasal spray for protection against airborne viruses
and allergens through a newly created subsidiary, Altamira Medica Ltd. AM-301 is a gel emulsion which works by forming a protective layer
on the nasal mucosa that acts as a mechanical barrier against airborne viruses allergens. The barrier consists of two elements: (1) a
mucoadhesive film lining the nasal cavity and preventing contact of airborne viruses or allergens with the nasal mucosa to reduce the
risk of viral infection or allergic reactions; (2) the trapping / binding of such viruses or allergens through electrostatic effects,
allowing for their removal e.g. through mucociliary clearance. In addition, the product helps to humidify and thus maintain the nasal
mucosa’s function in clearing viruses and allergens from the nasal cavity.
The
key component of AM-301 is bentonite, a naturally occurring clay. Following formulation development, we tested Bentrio™ in vitro
in a series of experiments using reconstituted human nasal epithelia infected with SARS-CoV-2 or H1N1 influenza virus. Daily treatment
with AM-301, beginning right before inoculation or 24-30 hours thereafter showed significant reductions of the viral titer compared to
saline treated controls. In case of SARS-CoV-2, a protective effect was observed with the original virus, the Delta variant as well as
the Omicron variant.
Based
on these in vitro results, we believe that AM-301 could help to reduce the risks of exposure from airborne transmission of SARS-CoV-2.
It is estimated that about 90% of air is inhaled via the nose, and it has been established that infection with SARS-CoV-2 via the nose
is a major transmission pathway for COVID-19. In 2021 we prepared a randomized placebo-controlled clinical trial in acute COVID-19 (“COVAMID”)
for further confirmation of the protective effects of Bentrio™; due to the largely unpredictable waves of infection on one hand
and varying regulatory timelines and requirements, the trial could start enrollment only in March 2022.
In
2021 we conducted an open-label randomized cross-over study with AM-301 that enrolled 36 patients with allergic rhinitis caused by grass
pollen. Study participants were administered a single dose of BentrioTM nasal spray or hydroxypropylmethylcellulose, a comparator
product, prior to controlled pollen exposure for four hours in an allergen challenge chamber. The challenge was repeated with the alternate
treatment following a wash-out period. The study demonstrated a rapid onset and long durability of Bentrio’s protective effect,
established substantial equivalence to the marketed comparator with superior efficacy ratings by patients and clinicians, and showed
good tolerability.
We
believe that Bentrio™ could provide help to people suffering from allergic rhinitis by reducing their exposure to airborne allergen
particles e.g. from pollens, house dust or animal hair. For further clinical data, in December 2021 we initiated a randomized open-label
trial with Bentrio™ and saline nasal spray as control in seasonal allergic rhinitis (SAR) and an open-label clinical trial with
AM-301 in perennial allergic rhinitis (PAR) with controlled house dust mite exposure. We expect the PAR trial to read out in the second
quarter of 2022 and the SAR trial in late 2022.
Since
Bentrio™ does not contain any active substance, it is regulated and marketed as an “over-the-counter” medical device.
In May 2021 we completed the conformity assessment procedure for marketing the product in the member states of the European Union (EU),
and in September 2021 we filed a 510(k) premarket notification with the FDA, which is currently under review for the intended use of
promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens.
AM-125
in Vestibular Disorders
Vestibular
Disorders
Balance
disorders are medical conditions that evoke the sensation of unsteadiness, dizziness or vertigo. Patients suffering from balance disorders
are often profoundly impacted in their daily activities. Balance problems can be caused by many different health conditions, medications
or anything that affects certain areas of the brain or the inner ear labyrinth. Balance disorders originating from the inner ear labyrinth
include benign paroxysmal positional vertigo, or positional vertigo, labyrinthitis, vestibular neuronitis and Meniere’s disease,
a chronic condition characterized by severe episodic vertigo, tinnitus, and fluctuating hearing loss.
In
case of vertigo, patients experience a false sensation of movement of oneself or the environment. This can be a spinning or wheeling
sensation, or they simply feel pulled to one side. This may lead to imbalance, nausea or vomiting. The cause of vertigo can be an imbalance
between the left and right vestibular systems in signaling position and acceleration to the brain. The symptom of vertigo may partially
or fully resolve thanks to spontaneous recovery of the peripheral vestibular function and / or through compensation of the imbalance
at the brain level, which is known as vestibular compensation.
The
imbalance between the left and right vestibular systems and thus the sensation of vertigo may be reduced by dampening the vestibular
function in the unaffected, opposite inner ear through pharmacotherapy. This minimizes the extent of the imbalance falsely interpreted
as movement. Most existing therapies rely on this strategy to minimize vertigo symptoms, but also have unintended sedative effects. Examples
include meclizine, benzodiazepines, dimenhydrinate or amitriptyline.
Betahistine
is widely used around the world for the treatment of vestibular disorders, notably Meniere’s disease and vertigo. Its development
goes back to the use of intravenous histamine, which provided symptomatic relief for these disorders. Betahistine is a structural analog
of histamine. It acts as a partial histamine H1-receptor agonist and, more powerfully, as a histamine H3-receptor antagonist. Betahistine
has been shown to increase cochlear, vestibular and cerebral blood flow, facilitate vestibular compensation and inhibit neuronal firing
in the vestibular nuclei. Unlike other drugs, it has no sedating effect. Betahistine is typically taken orally with a recommended daily
dose of 24 to 48 mg, divided in 2 or 3 single doses.
Betahistine
is generally recognized as a safe drug and there exists a large body of data on the pharmacology, pharmacokinetics and toxicology of
the compound. It is approved in about 115 countries world-wide for the treatment of Meniere’s disease and vestibular vertigo,
but not in the United States. In 1970, the Commissioner of FDA withdrew approval of the NDA after the discovery that the submission
contained unsubstantiated information about some patients in the efficacy studies upon which approval was based. Today, betahistine
is available in the United States only from compounding pharmacies or through importation. Despite limited availability, a survey by
Clyde and colleagues published in Otology & Neurotology in 2017 revealed that 56% of U.S. neurotologists and 16% of generalists
use betahistine and 20-30% of neurotologists use it often or always when treating patients with Meniere’s disease.
Various
studies and meta-analyses have demonstrated therapeutic benefits of betahistine in both the treatment of vertigo as well as in supporting
vestibular rehabilitation. However, the evidence for therapeutic benefits is variable, and it has been suggested that efficacy could
be increased with higher doses and / or longer treatment periods. It is well known that orally administered betahistine is rapidly and
almost completely metabolized into 2-pyridylacetic acid, also known as 2-PAA, which lacks pharmacological activity. As a consequence,
the bioavailability of oral betahistine is estimated to be very low.
Our
Solution—AM-125
In
February 2017 we entered into an asset purchase agreement with Otifex, pursuant to which we have purchased various assets related to
betahistine dihydrochloride in a spray formulation, which we are developing for intranasal treatment of vertigo under the product code
AM-125. The assets include preclinical and clinical data as well as certain intellectual property rights. In a Phase 1 clinical trial
conducted by Otifex in 40 healthy volunteers intranasal betahistine showed good tolerability and significantly higher betahistine concentrations
in blood plasma than reported for oral betahistine administration.
Therapeutic
rationale for AM-125 in vertigo
We
are aiming to address the currently limited therapeutic utility of betahistine arising from its low oral bioavailability by avoiding
first pass metabolism by monoamine oxidase. Intranasal administration of betahistine provides substantially higher bioavailability than
oral administration as there is only very little monoamine oxidase activity known to occur in the nose, allowing higher quantities of
betahistine to be absorbed into the blood stream and reach target histamine receptors in the inner ear and brain. As preclinical and
clinical data suggest that betahistine’s therapeutic effects increase with higher systemic exposure, we expect AM-125’s higher
bioavailability to translate into more pronounced therapeutic benefits.
Vertigo
endpoints
Vertigo
cannot be measured directly. Therapy typically aims to a) reduce the symptoms of vestibular dysfunction underlying vertigo and / or b)
accelerate vestibular compensation and recovery. Status and therapeutic outcomes are usually assessed by a battery of tests, addressing
static and dynamic deficits, balance impairment, functional performance and disability, using both objective and subjective measures.
Loss
of postural control affects essentially all patients suffering from acute vertigo and has a substantial impact on day-to-day functioning.
It is assessed relatively easily through a number of widely used balance and functional tests:
|
● |
Static conditions: Romberg
test, standing on foam, single-leg stance |
|
|
|
|
● |
Dynamic conditions: tandem
gait, timed “up and go”, 10 meter walking or other tests |
Other
outcome measures target the interaction between inner ear and ocular sensory input. Nystagmography measures the velocity and direction
of involuntary eye movements (nystagmus) triggered by vestibular imbalance and the head-impulse test measures to which extent the reflex
is disturbed that triggers eye movement as a response to a movement of the head. Further, there are clinician or patient reported clinical
outcomes that subjectively capture the illusion of movement, the duration of the illusion, motion intolerance, neurovegetative signs,
and instability. Examples include the Dizziness Handicap Inventory (DHI) questionnaire, the Vestibular Rehabilitation Benefits Questionnaire
(VRBQ) or the European Evaluation of Vertigo (EEV) questionnaire.
Clinical
development of AM-125
In
2018, we conducted a second Phase 1 clinical trial with AM-125 in 72 healthy volunteers. The randomized double blind placebo controlled
trial demonstrated superior bioavailability over a range of four intranasal betahistine doses compared to oral betahistine, with plasma
exposure being 5 to 29 times higher (unadjusted for dose; p-value between 0.056 and p < 0.0001). Further, it confirmed the favorable
safety profile of intranasal betahistine and showed that the treatment was well tolerated when administered three times daily for three
days. Single doses were escalated up to 60 mg, and repeated doses up to 40 mg. For the latter, the maximum tolerated dose based on local
tolerability was determined at 40 mg.
In
July 2019, we started enrollment into a randomized placebo-controlled Phase 2 clinical study with AM-125. The “TRAVERS” Phase
2 trial is expected to enroll 118 patients suffering from acute vertigo following surgical removal of a vestibular schwannoma, a tumor
growing behind the inner ear, resection of the vestibular nerve (vestibular neurectomy) or surgical removal of parts of the inner ear
(labyrinthectomy). Starting three days after neurosurgery, trial participants self-administer AM-125 or placebo 3 x daily for four weeks;
they are then followed for a further two weeks. The trial is being conducted in several countries ex US.
In
September 2020 we announced the results of an interim analysis from Part A of the trial, which comprised a dose escalation – 1,
10 or 20 mg or placebo – in 33 patients. The interim analysis showed a dose-dependent improvement in balance as well as good safety
and tolerability of ascending doses of AM-125. At the highest dose of 20 mg (3 x daily), AM-125-treated patients improved their performance
of the “Tandem Romberg” and the “Standing on Foam” balance tests from baseline to 14 days post-surgery (primary
endpoint) on average 1.9 to 2.4 times more than placebo-treated patients (6.0 vs. 3.1 and 10.5 vs. 4.3 seconds, respectively). In contrast
to placebo, the improvement from baseline was statistically significant for AM-125 20 mg and for all active dose groups, respectively
(p<0.02 and p<0.01 to p<0.05, respectively). These positive results were supported by similar improvements in additional efficacy
measures, including additional objective as well as clinician- and patient-reported outcomes.
Based
on the results from the interim analysis, we selected the two highest doses, 10 and 20 mg, for testing against placebo in 72 patients
in Part B of the trial. As we remained blinded to treatment allocation during the interim analysis, the corresponding data from Part
A will be pooled with those from Part B. Prior to starting Part B of the trial in October 2020, we tested oral betahistine (48 mg) open
label for reference purposes.
Enrollment
into TRAVERS has been impacted by the COVID-19 pandemic, as the type of neurosurgery required for participation in the trial is classified
as an elective procedure and hence was postponed and as many participating sites temporarily reduced or suspended clinical research activities.
The effect was particularly felt in the spring of 2020 and then again in early 2021. In February 2022 we announced the completion of
enrollment into TRAVERS. We expect to obtain top-line results in the second quarter of 2022.
We
have discussed the regulatory requirements for AM-125 during a pre-Investigational New Drug (“IND”) meeting with the FDA
and in the context of scientific advice meetings with the EMA and two European national health authorities to further define the development
program. We expect to have further exchanges with regulatory agencies following conclusion of the TRAVERS trial, upon which we aim to
obtain an IND. We expect to initiate a Phase 3 clinical trial with AM-125 in acute peripheral vertigo in late 2022. We believe that,
if approved, AM-125 could become the first betahistine product for the treatment of acute peripheral vertigo in the United States. We
are currently evaluating the feasibility of a clinical study with AM-125 in central vertigo, which may lead to the initiation of a Phase
2 trial later in 2022.
In
May 2018, we initiated project AM-201 to evaluate intranasal betahistine also for the prevention of antipsychotic-induced weight gain
and somnolence. Betahistine is thought to counteract the effects of antipsychotics such as olanzapine and to relieve the inhibitory effect
on the H1 receptor by binding to and activating the H1 receptor to normalize/reduce the food take and consequently lead to reduced weight
gain and somnolence. We believe the weight-attenuating effect is intensified by betahistine’s property as antagonist at the H3
receptor.
In
2019, we initiated a Phase 1b trial in Europe to evaluate AM-201’s safety and therapeutic effects in this indication. Participants
received either AM-201 (1, 2.5, 5, 10, 20 or 30 mg) or placebo in parallel with oral olanzapine (10 mg) once a day for four weeks. In
May 2020, we announced that at AM-201 30 mg, the mean weight gain from baseline to the end of the treatment period was 2.8 kg compared
against 3.7 kg in control subjects; the primary efficacy endpoint of mean reduction in weight gain was 0.9 kg and statistically significant
(p<0.02; n=81 with pre-specified Bayesian augmented controls). As expected, intranasal delivery of betahistine allowed for substantially
higher concentrations in blood plasma compared with levels previously reported for oral betahistine. In the context of our strategic
repositioning, we have decided to deprioritize project AM-201 and suspended all development work.
AM-401
in KRAS driven cancers
KRAS
driven cancers
The
KRAS gene encodes the Ras protein which controls - like an “on / off switch” – cell growth, cell maturation, and cell
death. Through mutations, the Ras proteins can be rendered persistently active, causing cancer cells to grow and spread in the body.
Mutations of KRAS are associated with poor prognosis in several cancers, and there is a substantial body of evidence supporting the role
of KRAS in the initiation and maintenance of cancer. Mutated forms of KRAS are found in one-fifth of all human cancers, including 32%
of non-small-cell lung cancers (NSCLCs), 40% of colorectal cancers (CRCs) and 85–90% of pancreatic cancers. According to the American
Cancer Society, overall, almost 150,000 new cases of KRAS mutated tumors are diagnosed in the United States alone across these three
tumor types each year. It has been estimated that mutations in KRAS alone account for approximately one million deaths per year worldwide
(Simanshu et al., 2017).
Since
the original discovery of KRAS as an oncogene in 1982, there have been intense efforts to develop a targeted therapeutic for KRAS mutant
cancers. Although the role of KRAS mutations in cancer has been known for decades, they have remained a challenging target for therapeutic
interventions. KRAS was long considered undruggable, in part because its surface lacked obvious binding sites. Only recently did the
FDA approve with sotorasib the first ever treatment for KRAS driven cancer. Sotorasib, a small molecule, received accelerated approval
as second-line treatment for KRAS G12C-mutated NSCLC.
Our
solution – AM-401
We
are applying our OligoPhore™ technology to KRAS driven cancers for first clinical proof of concept. Our unique approach utilizes
a custom-designed 21 amino acid peptide that rapidly condenses peptide and nucleotide components into a polyplex with a size, charge,
and other physical features that allow it to escape hepatic clearance. The technology has the following features:
| ● | Stability:
siRNA is complexed in nanoparticle polyplex format, and is only released inside of cells
after endosomal uptake and not in the circulation |
| ● | Extrahepatic
delivery: the nanoparticle is not sequestered in liver, but will readily permeate inflamed
pathological tissues |
| ● | Endosomal
escape: we have co-opted the natural cellular process of endosomal acidification to disassemble
the polyplex, which is followed by full release of siRNA into the cytoplasm |
| ● | Selectivity:
the polyplex silences molecular targets in diseased tissues only |
| ● | Safety:
no cellular or adaptive immune responsivity to nanoparticle components or siRNA after multiple
serial doses, and no organ toxicities observed in mice after serial dosing |
The
therapeutic objective for AM-401 is to slow down KRAS driven tumor cell growth and proliferation or to stop it altogether by delivering
siRNA specifically inside tumor cells for gene knock down. As described by Strand and colleagues in a 2019 issue of the scientific journal
Oncotarget, in vitro and in vivo experiments demonstrated efficient uptake of OligoPhore™ nanoparticles with KRAS-targeted
siRNA in colorectal and pancreatic cancer cells, strong inhibition of KRAS expression, reduced viability of tumor cells and significant
reduction in tumor growth and volume. Importantly, a murine model demonstrated the capacity of the OligoPhore™ platform to drive
targeted delivery of the nanoparticles specifically to tumor cells.
Based
on these outcomes, we started in silico and in vitro work to screen and select the most effective siRNA sequences and to
optimize their properties. This will be followed by further in vivo testing. Meanwhile, we have been working on the scale up in
the synthesis of the peptide base of OligoPhore™ and process development for the manufacture of the nanoparticles. We intend to
review and discuss our plans for IND-enabling preclinical studies with the FDA in the context of a Pre-IND meeting. Subject to the opening
of an IND (or equivalent clearance by another regulatory agency), we expect to conduct a Phase 1 clinical trial in patients with KRAS
driven cancer.
Keyzilen®
in Tinnitus
Tinnitus,
frequently perceived as a ringing in the ears, is the perception of sound when no external sound is present. Similar to pain, it is an
unwanted, unpleasant and thus distressing sensation. Tinnitus may result in further symptoms such as inability to concentrate, irritability,
anxiety, insomnia, and clinical depression. In many cases, tinnitus significantly impairs quality of life and affects normal day-to-day
activities. According to the American Tinnitus Association, approximately 16 million persons in the United States have tinnitus symptoms
severe enough to seek medical attention and about two million persons cannot function on a normal day-to-day basis. In addition, tinnitus
is now the number one service-connected disability for all veterans, before hearing loss. In 2012, 9.7% of all veterans received service-related
disability compensation for the condition.
Acoustic
trauma and other insults to the inner ear may trigger increased levels of extra-cellular glutamate, which in turn cause excessive activation
of cochlear NMDA receptors. This process results in damage or killing of sensory cells and is thought to be responsible for abnormal
spontaneous “firing” of auditory nerve fibers, which may be perceived as tinnitus. Under normal circumstances, the NMDA receptors
are thought to play no role in the auditory nerve’s transmission of nerve pulses that carry sound information. In case of a trauma
such as excessive sound exposure these receptors may become pathologically active, and thus tinnitus is triggered.
We
have been developing Keyzilen®, Esketamine gel for injection, for the treatment of acute inner ear tinnitus. Esketamine
is a potent, small molecule non-competitive NMDA receptor antagonist. Keyzilen® is formulated in a biocompatible gel and
delivered via intratympanic injection. It demonstrated a favorable safety profile and positive effect on PROs associated with tinnitus
in two Phase 2 clinical trials. In two Phase 3 clinical trials (TACTT2 and TACTT3), we were unable to confirm the efficacy of Keyzilen™
as both of them did not meet their primary efficacy endpoints. We believe we have identified two principal sources for the negative outcomes
from the TACTT trials: (i) the high frequency of tinnitus loudness ratings over an extended period of time and (ii) an unexpectedly high
level of variability in outcomes among study sites. A survey among a number of TACTT3 participants revealed that the daily capture of
tinnitus loudness and annoyance caused a number of patients to excessively focus on their tinnitus symptoms. In addition, it was observed
that a non-negligible number of study participants presumably became tired of the daily ratings after some time and stopped providing
actual values. With respect to variability, our analysis subsequent to the unblinding of the trial data has shown positive outcomes at
numerous sites, including many of the high enrolling study centers, but inconclusive or contradictory outcomes at other sites.
In
April 2019, we announced that we had completed the design of a pivotal Phase 2/3 trial for Keyzilen®. The trial shall,
in two stages, reaffirm the compound’s efficacy in the treatment of acute tinnitus and provide confirmatory efficacy data to support
a filing for marketing authorization. In September 2019, we announced that we have obtained advice on the development plan and regulatory
pathway from the U.S. Food and Drug Administration (“FDA”) in the context of a Type C meeting and from the European Medicines
Agency (“EMA”) in the context of a Scientific Advice procedure for Keyzilen®. In the context of our strategic
repositioning, we aim to divest or spin off the Keyzilen® program.
Sonsuvi®
(AM-111) in Hearing Loss
Sonsuvi®
is being developed for the treatment of acute sensorineural hearing loss (ASNHL), where there is damage to the sensory cells of
the inner ear. ASNHL may be triggered by a variety of insults, such as exposure to excessively loud sound, infection, inflammation or
certain ototoxic drugs. These insults may also result in tinnitus. According to an article by Alexander and Harris published in Otology
& Neurotology in 2013, the average annual incidence of sudden deafness is 66,954 new cases among the U.S. insured population. There
are no currently approved treatments for this patient population.
Sonsuvi®
contains a synthetic D-form peptide (Brimapitide or D-JNKI-1) that protects sensorineural structures in the inner ear from stress-induced
damage. Sonsuvi® has been granted orphan drug status by both EMA and FDA and has been granted fast track designation by
the FDA for the treatment of sudden sensorineural hearing loss.
We
have been developing Sonsuvi® for acute inner ear hearing loss. In our Phase 2 clinical trial, AM-111 showed a favorable
safety profile. Furthermore, in patients with severe to profound ASNHL, we observed a clinically relevant improvement in hearing threshold,
speech discrimination and a higher rate of complete tinnitus remission compared with placebo. In November 2017, we announced that the
HEALOS Phase 3 clinical trial that investigated Sonsuvi® in the treatment of acute inner ear hearing loss did not meet
the primary efficacy endpoint. However, a post-hoc analysis of the subpopulation with profound acute hearing loss (PTA ≥ 90 dB at
baseline in accordance with a commonly used classification of hearing loss severity) revealed a clinically meaningful and nominally significant
improvement in the Sonsuvi® 0.4 mg/mL treatment group.
Based
on the HEALOS results, we submitted the design of a new pivotal trial with AM-111 0.4 mg/mL in patients suffering from acute profound
hearing loss to the EMA and subsequently also to the FDA for review. Through a Protocol Assistance procedure the EMA endorsed the proposed
trial design, choice of efficacy and safety endpoints, as well as the statistical methodology. In a Type C meeting with written responses,
the proposed choice of primary and secondary efficacy endpoints, the safety endpoints, as well as the planned sample size and statistical
methodology were also endorsed by the FDA. In the context of our strategic repositioning, we aim to divest or spin off the Sonsuvi®
program.
Competition
We
face or may face competition from different sources with respect to our commercial product Bentrio™ and our drug product candidates
AM-125, AM-401 and our other pipeline products or any product candidates that we may seek to develop or commercialize in the future.
Any product candidates that we successfully develop and commercialize will compete with existing therapies, even if they are not licensed
specifically for use in our target therapeutic indications or if they lack clear proof of efficacy.
Possible
competitors may be biotechnology, pharmaceutical and medical device companies as well as academic institutions, government agencies and
private and public research institutions, which may in the future develop products to treat KRAS driven cancer, vertigo, allergic rhinitis
or viral infections. Bentrio™ and any drug product candidates that we successfully develop and commercialize will compete with
new therapies that may become available in the future. We believe that the key competitive factors affecting the success of our product
candidates, if approved, are likely to be efficacy, safety, convenience, price, tolerability and the availability of reimbursement from
government and other third-party payors.
Allergic
rhinitis and upper respiratory airway infections
We
believe that our main competitors for Bentrio™ are Marinomed Biotech AG or Marinomed, SaNOtize Research and Development Corp. or
Sanotize, Nasaleze Ltd. or Nasaleze, Nasus Pharma Ltd. or Nasus Pharma, and larger companies such as GSK, Bayer, Sanofi, Procter &
Gamble, Reckitt Benckiser, and Johnson & Johnson. These companies already market a variety of OTC drug or drug-free products for
the management of allergic rhinitis and/or protection against certain viruses. E.g. Nasaleze and Nasus Pharma market nasal sprays based
on hydroxypropylmethylcellulose (HPMC) powder which serves to establish a barrier on the nasal mucosa. Marinomed is marketing through
various licensees a nasal spray based on carrageenan, a sulfated polymer from red seaweed, for protection against certain respiratory
viral infections. Sanotize is marketing a nasal spray drug that uses nitric oxide to kill viruses. Other marketed products include nasal
sprays, tablets or lozenges (e.g. based on corticosteroids or antihistamines). Some of the aforementioned drugs or medicinal products
are marketed globally, whereas others are marketed only regionally. We believe that we will be able to differentiate AM-301 against competing
products based on its triple mode of action devoid of any active substance, its extended nasal residence time, and utility in protecting
against deleterious effects of both airborne allergens and viruses.
Vestibular
Disorders
There
are a number of product candidates in clinical development by third parties that aim to prevent or treat vertigo. Based on publicly available
information, we have identified the following drug product candidates that are currently in clinical development:
|
● |
Otonomy is developing a
polymer-based formulation for the steroid dexamethasone (Otividex; OTO-104) for patients with Meniere’s disease. In August
2017 Otonomy announced that a Phase 3 clinical trial conducted in the United States had failed to show a treatment effect of OTO-104
against placebo and that a European Phase 3 clinical trial was terminated early. In November 2017 the company announced that the
European study showed a statistically significant reduction in the count of definitive vertigo days. In February 2021 the company
announced that a new Phase 3 trial with OTO-104 had failed to reach its primary efficacy endpoint. |
|
● |
Sound Pharma has a product
candidate (SPI-1005, ebselen), that mimics and prompts production of the enzyme glutathione peroxidase and is designed for oral administration.
In June 2019 Sound Pharmaceuticals announced top-line results from a Phase 2 clinical trial with SP-1005 with Meniere’s disease.
The company reported a significant improvement in hearing; however, no information was provided with regard to any potential treatment
effects on vertigo. In 2020, Sound Pharmaceuticals announced its intention to move SPI-1005 into Phase 3 development. |
The
aforementioned developments have the potential to compete with AM-125. Likewise, AM-125, if approved, will compete with products that
are licensed or used off-label for the treatment of vestibular disorders and Meniere’s disease, including steroids, diuretics,
anti-emetics or anti-nausea medications as well as oral betahistine, the standard of care for treatment of Meniere’s disease and
vestibular vertigo in many countries outside the United States. Although we expect that AM-125 will offer benefits over oral betahistine
due to the ability to bypass the strong first-pass metabolism associated with oral intake and provide for a higher bioavailability and
avoid gastric side effects, it may take time to change prescribing and usage patterns in favor of the newer product.
KRAS
driven cancers
There
are several companies developing treatments for KRAS driven cancers. Amgen obtained an accelerated approval by the FDA for the KRAS G12C
small molecule inhibitor sotorasib as second-line treatment in NSCLC with G12C mutated KRAS (that is a glycine-to-cysteine substitution
at codon 12 of KRAS). G12C mutations are also the targets for small molecule inhibitors under development by Mirati Therapeutics (adagrasib),
Novartis (IDQ443), Genentech (GDC-6036), Eli Lilly (LY3537982), and Boehringer Ingelheim (BI 1823911) with target indications in NSCLC,
colorectal cancer (CRC), pancreatic cancer and other solid tumors carrying the KRAS G12C mutation. Merck and Moderna are in early stage
clinical development with a patient-specific mRNA-based vaccine encoding KRAS neoantigens (mRNA-5671). Revolution Medicines has several
small molecule inhibitors under development, which target G12C (RMC-6291), G12D (RMC-9805), G13C (RMC-8839) or all RAS cancer mutations
(RASMulti (On)). There are also programs using RNAi such as NBF-006 by Nitto Denko, which seeks to inhibit the expression
of glutathione-S-transferase P and uses lipid nanoparticles for delivery, or siG12D LODER by Silenseed Ltd., which releases siRNA targeting
the KRAS G12D mutation from in implanted biodegradable bio polymeric matrix.
The
aforementioned developments have the potential to compete with AM-401. In addition, there exist various treatment paradigms for key targets
such as NSCLC, CRC and pancreatic cancers, including resection, chemotherapy, treatment with biologics and combinations thereof, and
various lines of therapy. The relative positioning within current or future lines of therapy and thus the most relevant competition to
AM-401 are uncertain at this point of development.
RNA
delivery technologies
There
are several companies offering commercial- or developmental-stage technologies for delivering RNA payloads to hepatic or
extrahepatic cells. These include Acuitas Therapeutics Inc., Dicerna Pharmaceuticals, Inc., Genevant Sciences Corp., Entrada
Therapeutics Inc., Sirnaomics Ltd., Ovensa Inc., or Feldan Bio Inc. Although we consider that our OligoPhore™ /
SemaPhore™ platform offers unique advantages over current delivery approaches such as lipid nanoparticles, GalNAc or vector
conjugates through the ability to use of systemic administration, delivery to extrahepatic tissues, efficient cellular uptake and
high levels of endosomal release, it may take time to raise awareness and interest among potential customers within the
biopharmaceutical industry, resulting in its successful adoption.
Acute
inner ear tinnitus
There
are a number of products in pre-clinical research and clinical development by third parties to treat tinnitus in the broader sense. Most
of them are aiming to provide symptomatic relief (without treating the underlying cause) and targeting chronic rather than acute tinnitus.
Examples include TRT or tinnitus maskers as well as more recent approaches like transcranial magnetic stimulation, vagus nerve stimulation,
or customized sound therapy. Otonomy Inc. is developing OTO-313, an NMDA receptor antagonist like Keyzilen®. In February 2022 Otonomy
announced the completion of enrollment into a Phase 2 trial with the compound.
Acute
inner ear hearing loss
There
are a number of product candidates in pre-clinical research and clinical development by third parties that aim to prevent or treat acute
inner ear hearing loss. Based on publicly available information, we have identified the following drug product candidates that are currently
in clinical development:
|
● |
Sound Pharma has a product
candidate (SPI-1005, ebselen), that mimics and prompts production of the enzyme glutathione peroxidase and is designed for oral administration.
In a Phase 2 clinical trial SP-1005 was tested for the prevention of noise-induced hearing loss in young adults. The study showed
a reduction in the temporary hearing threshold that in one dose was better by 2.75 dB than in the placebo group. |
|
● |
Sensorion, a French company,
is developing SENS-401 (R-azasetron besylate) for the treatment of sudden sensorineural hearing loss by way of oral administration.
In January 2022, the company reported that a Phase 2 trial failed to reach its primary endpoint. |
|
● |
Frequency Therapeutics is
developing FX-322, a small molecule for the regeneration cochlear hair cells through activation of progenitor cells already present
in the cochlea. In March 2021 the company reported that four dose regimens of FX-322 did not do better than placebo in a Phase 2
trial. |
We
believe that Sonsuvi® is the only product candidate administered after an incidence of acute hearing loss that so far
has demonstrated in a randomized, placebo controlled clinical trial a clinically relevant and significant improvement in hearing. To
the extent that other drug developers demonstrate clinical efficacy for their product candidates in the prevention and treatment of permanent
hearing loss from ASNHL, our competitive position may be weakened, and the market exclusivity under the orphan drug designation may be
circumvented.
Intellectual
Property
Patents
We
seek regulatory approval for our products in disease areas with high unmet medical need, great market potential and where we have a proprietary
position through patents covering various aspects of our products, e.g., composition, dosage, formulation, and use, etc. Our success
depends on an intellectual property portfolio that supports our future revenue streams as well as erects barriers to our competitors.
For example, we have broad disclosures in our patent applications and can pursue patent claims directed to our own leading product candidates
as well as claims directed to certain potentially competing products. In addition, our earlier filed patent applications are prior art
to others including certain of our competitors who filed their patent applications later than ours. We are maintaining and building our
patent portfolio through: filing new patent applications; prosecuting existing applications and licensing and acquiring new patents and
patent applications.
Despite
these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or
misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current
market trends or otherwise to provide competitive advantages.
As
of December 31, 2021, we own eleven issued U.S. patents and five pending U.S. patent applications along with foreign counterparts of
particular patents and applications in various jurisdictions. We co-own three of our issued U.S. patents, and one of our pending patent
applications with INSERM, along with their foreign counterparts, pursuant to the terms of our co-ownership and exploitation agreement.
In
addition, as of December 31, 2021, we have exclusively licensed from Xigen seven issued U.S. patents , along with their foreign counterparts
in various jurisdictions that cover the composition of matter or method of use of JNK ligand peptides in a limited field including the
intratympanic treatment of ASNHL.
With
respect to our issued patents in the United States, we may also be entitled to obtain a patent term extension to extend the patent expiration
date. For example, in the United States, we can apply for a patent term extension of up to 5 years for one of the patents covering a
product once the product is approved by the FDA. The exact duration of the extension depends on the time we spend in clinical trials
as well as getting a new drug application approval from the FDA.
Bentrio™
In
September 2021, we converted four provisional US patent filings into a non-provisional US patent application relating to the formulation
and use of Bentrio™. The patent application’s key claim is directed towards aqueous compositions comprising a mucoadhesive
polymer and clay particles. In addition, we filed an international PCT application.
Intranasal
Betahistine
We
have acquired from Otifex a patent application on the composition and use of intranasal betahistine, which issued on October 29, 2019,
as a US patent covering the composition and use of intranasal betahistine. Further, we acquired in 2018 two U.S. patents relating to
the use of betahistine for the prevention and treatment of olanzapine induced weight gain, and we acquired in 2019 two U.S. patents relating
to the use of betahistine for the treatment of attention deficit/hyperactivity disorder and atypical depression.
AM-401
We
are the exclusive licensee under our agreement with WU of a portfolio of patents and patent applications that relate to peptide based
polyplexes for RNA delivery. The portfolio includes two issued US patents along with their foreign counterparts in various jurisdictions
that cover the composition of matter or method of use of the peptide based polyplexes. These licensed patents and patent applications
relating to AM-401 and potential further applications of the technology are expected to expire between 2034 and 2037, prior to any patent
term extensions to which we may be entitled under applicable laws.
Keyzilen®
We
are the owner or co-owner of patents and patent applications relating to Ketamine or its use in inner ear tinnitus. In particular, we
have an agreement entitled “Co-Ownership/Exploitation Agreement” with INSERM with respect to its Ketamine patent portfolio.
We have rights to four issued U.S. patents and corresponding patents and applications in other jurisdictions covering formulation and
use of Ketamine. Our issued patents relating to Keyzilen® are expected to expire between 2024 and 2028, prior to any patent
term extensions to which we may be entitled under applicable laws.
Sonsuvi®
We
are the exclusive licensee under our agreement with Xigen of a portfolio of patents that relate, among other things, to JNK ligand peptides
or their use in hearing loss. This portfolio includes seven issued U.S. patents along with their foreign counterparts in various jurisdictions
that cover the composition of matter or method of use of the JNK ligand peptides. These licensed patents and patent applications relating
to Sonsuvi® are expected to expire between 2023 and 2027, prior to any patent term extensions to which we may be entitled
under applicable laws.
Proprietary
Rights
In
addition to patent protection, we intend to use other means to protect our proprietary rights. We may pursue marketing exclusivity periods
that are available under regulatory provisions in certain countries, including the US, Europe and Japan. For example, if we are the first
to obtain market approval of a small molecule product in the United States, we would expect to receive at least 5 years of market exclusivity
in the U.S.
Furthermore,
orphan drug exclusivity has been or may be sought where available. Such exclusivity has a term of 7 years in the United States and 10
years in Europe. We have obtained orphan drug designation for Sonsuvi® for the treatment of ASNHL in the United States
and Europe. Orphan drug protection has been or may be sought where available if such protection also grants 7 years of market exclusivity.
In addition, we have acquired a U.S. orphan drug designation for betahistine for the treatment of obesity associated with Prader-Willi
syndrome.
We
have obtained U.S. trademark registrations for Altamira, Auris Medical Cochlear Therapies (and Design), Keyzilen® and
Sonsuvi®. Further, we have obtained several U.S. trademark registrations for betahistine.
In
addition, we rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive
position. We seek to protect our ownership of know-how and trade secrets through an active program of legal mechanism including assignments,
confidentiality agreements, material transfer agreements, research collaborations and licenses.
Collaboration
and License Agreements
Washington
University
On
December 11, 2020, we entered into an Exclusive License Agreement with Washington University, which Exclusive License Agreement was subsequently
amended and restated in June 2021 (as so amended and restated, the “Agreement”), with effect as of December 11, 2020. Pursuant
to the Agreement, WU granted us an exclusive, worldwide, royalty-bearing license (with the right to sublicense) during the term of the
Agreement under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and
import pharmaceutical products covered under such patent rights for all fields of use. Such licensed products may include “silencing
RNA” (siRNAs) pharmaceutical preparations formulated in combination with our proprietary delivery technologies. In consideration
for such worldwide, exclusive license, we will be obligated to pay WU: annual license maintenance fees in the low five figures through
first commercial sale; pre-clinical and clinical regulatory milestones; sales milestones; and a low single digit royalty based on annual
net sales of licensed products worldwide for at least the applicable patent term or period of marketing exclusivity, whichever is longer,
but in no case less than a minimum royalty term of 12 years; and a percentage share (in the double digits) of sublicensing revenues received
by the Company in connection with licensed products. Such regulatory and sales milestones may total up to an aggregate of $4,375,000.
In the event the Company fails to meet certain regulatory diligence milestones, WU will have the right to terminate the license.
INSERM
In
2006, we entered into a co-ownership/exploitation agreement with the INSERM, a publicly funded government science and technology agency
in France. Pursuant to the terms of the agreement, we were granted the exclusive right to exploit any products derived from patents that
resulted from our joint research program with INSERM that was conducted in 2003 to 2005 and led to the development of Keyzilen®.
Pursuant to the terms of the co-ownership/exploitation agreement, we are given the exclusive right to exploit the patents issuing from
the filed patent applications for all claimed applications, including the treatment of tinnitus, in order to develop, promote, manufacture,
cause to be manufactured, use, sell and distribute any products, processes or services deriving from such patents, including Keyzilen®,
in any country in which these patent applications have been filed during the term of the agreement. INSERM is entitled to use the inventions
covered by the patents and applications for its own research purposes, free of charge, but may not generate any direct or indirect profits
from such use. Pursuant to the terms of our agreement with INSERM, we are required to finance research and development work towards achieving
certain specified marketing authorizations, and to use best efforts in so far as commercially and financially feasible to develop, market,
and obtain regulatory authorization for products covered by such patents.
As
consideration for the exclusive rights granted to us under the agreement, we have agreed to pay INSERM a two tiered low single digit
royalty (where the higher rate is due on any net sales above a certain threshold) on the net sales of any product covered by the patents
(including the use of Keyzilen® in the treatment of tinnitus triggered by cochlear glutamate excitotoxicity) earned in
each country in which these patent applications have been filed during the term of the agreement. We have also agreed to pay INSERM a
low double digit fee on any sums of any nature (except royalties and certain costs) collected by us in respect of the granting of licenses
to third parties.
The
agreement will remain in force until the last of the patents covered by the agreement expires or becomes invalid. The patent covered
by the agreement with the latest expiration date expires in 2028. The agreement will be terminated if we cease operations or are liquidated,
may be terminated by either party in case of non-performance by the other party and may be terminated by INSERM in the absence of sales
of a product deriving from the patents for a period from when it first marketed and if such a product is not marketed for a period from
the date when marketing authorization is obtained.
Xigen
In
October 2003, we entered into a collaboration and license agreement with Xigen, pursuant to which Xigen granted us an exclusive worldwide
license to use specified compounds to develop, manufacture and commercialize “pharmaceutical products as well as drug delivery
devices and formulations for local administration of therapeutic substances to the inner ear for the treatment of ear disorders”
(the Area). We also have a right of first refusal to license certain additional compounds developed by Xigen which may be used for the
Area, specifically any cell permeable inhibitors to effectively block certain signal pathways in apoptotic processes.
Under
this agreement, we made an upfront payment to Xigen of CHF 200,000 and we are obligated to make development milestone payments on an
indication-by-indication basis of up to CHF 1.5 million and regulatory milestone payments on a product-by-product basis of up to CHF
2.5 million, subject to a mid-twenties percentage reduction for smaller indications, e.g., those qualifying for orphan drug status. To
date, we have paid CHF 1.325 million to Xigen under the agreement. We will be required to pay Xigen a mid-single digit percentage royalty
on net sales of each licensed product that uses a compound licensed under the agreement, which royalty for a given indication shall be
partially offset by milestone payments we have paid for such indication, until the later of 10 years after the first commercial sale
of any licensed product using such licensed compound in any country, and the first expiration of a patent owned by or exclusively licensed
to Xigen that covers the use of such licensed compound in any country, subject to our obligation to enter into good faith negotiations
with Xigen, upon expiration of the relevant patent on a licensed compound, about the conditions of our further use of such licensed compound.
Under
this agreement we and Xigen grant each other access to non-clinical or clinical data relating to the compounds licensed under the agreement
free of charge for use in the other party’s proprietary development programs. We have also agreed, upon Xigen’s request,
to offer third parties access to our non-clinical and clinical data relating to compounds licensed under the agreement for use outside
the field of our license, provided that with respect to third party access, we are compensated for a portion of our costs in obtaining
such data.
Xigen
is responsible for maintaining the patents licensed to us under our agreement. New patents filed by us for specific inner ear indications
or formulations of compounds licensed under our agreement are jointly owned by us and Xigen, and exclusively licensed to us in our field.
We retain all know-how and other results from our development of compounds licensed under the agreement.
Our
agreement with Xigen remains in effect until terminated. In August 2019 Xigen was acquired by Kuste Biopharma SAS, or Kuste, a French
company. In February 2021, we were notified by Kuste of its decision to terminate the agreement effective May 10, 2021 due to the alleged
lack of any development work since August 2018. We consider that the purported termination is without effect and that the agreement continues
to be in full force and effect in accordance with its terms. We have retained legal counsel and intend to defend our interests, as appropriate
and necessary.
Manufacturing
We
currently rely on and expect to continue to rely on third parties for the manufacture of Bentrio™ and the supply of raw materials
and to manufacture supplies for clinical trials of our drug product candidates, including AM-125, AM-401 and any other drug product candidate,
Keyzilen® and Sonsuvi®. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture
of any of our products or drug product candidates on a clinical or commercial scale. Reliance on third-party providers may expose us
to more risk than if we were to manufacture product candidates ourselves. The facilities used by our contract manufacturers to manufacture
our product candidates must be approved by the FDA or other regulatory authorities pursuant to inspections that will be conducted after
we submit our NDA or comparable marketing application to the FDA or other regulatory authority. We do not have control over a supplier’s
or manufacturer’s compliance with these laws, regulations and applicable cGMP standards and other laws and regulations, such as
those related to environmental health and safety matters. If our contract manufacturers cannot successfully manufacture material that
conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain
regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers
to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority
does not approve these facilities for the FDA or a comparable foreign regulatory authority does not approve these facilities for the
manufacture of our products or drug product candidates or if it withdraws any such approval in the future, we may need to find alternative
manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our products
or drug product candidates, if approved. Any failure to achieve and maintain compliance with these laws, regulations and standards could
subject us to the risk that we may have to suspend the manufacturing of our products or drug product candidates or that obtained approvals
could be revoked, which would adversely affect our business and reputation. Furthermore, third-party providers may breach agreements
they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreements because of their
own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us. If we were
unable to find adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities
could be harmed.
In
addition, the fact that we are dependent on our suppliers and other third parties for the manufacture, storage and distribution of our
products and drug product candidates means that we are subject to the risk that the products may have manufacturing defects that we have
limited ability to prevent or control. The sale of products containing such defects could result in recalls or regulatory enforcement
action that could adversely affect our business, financial condition and results of operations.
Growth
in the costs and expenses of components or raw materials may also adversely influence our business, financial condition and results of
operations. Supply sources could be interrupted from time to time and, if interrupted, it is not assured that supplies could be resumed
(whether in part or in whole) within a reasonable timeframe and at an acceptable cost or at all.
Commercialization
Strategy
Given
our current stage of product development, we currently have only a limited commercialization infrastructure. For the commercialization
of Bentrio™, which we initiated in July 2021 in selected European countries, we plan to rely primarily on distributors. In this
context, we have already concluded distribution and marketing agreements with companies such as Wellesta, Nuance and Avernus and continue
to seek further commercial partners. However, we may be unable to secure appropriate or timely support and as a result experience a delay
of the product launch or product sales below our expectations. Further, as an “OTC” product, the purchase of AM-301 by
consumers is unlikely to be eligible for reimbursement by health insurance plans and will therefore have to be purchased out of their
own pockets. We expect the lack of reimbursement coverage to reduce the pool of potential buyers.
If
any of our drug product candidates is granted marketing approval, we intend to focus our initial commercial efforts in the United States
and select European markets, which we believe represent the largest market opportunities for us. In those markets, we expect our commercial
operations to include our own specialty sales force that we will specifically develop to target ENTs and specialists in neurotology and
neurology, both in hospitals and in private practice. For these and other markets, we expect to seek partnerships that would maximize
our products’ commercial potential.
For
the commercialization of our AM-301 nasal spray device, which we intend to initiate in 2021 subject to regulatory clearance and approvals,
respectively, we plan to rely on commercial partners with presence in “over-the-counter” markets and / or providers of “go
to market” services. We may be unable to secure appropriate or timely support and as a result experience a delay of the product
launch or product sales below our expectations.
Government
Regulation
Product
Approval Process
The
clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export and marketing,
among other things, of our product candidates are subject to extensive regulation by governmental authorities in the United States and
other countries. The FDA, under the Federal Food, Drug, and Cosmetic Act, regulates pharmaceutical products and medical devices in the
United States.
The
steps required before a drug may be approved for marketing in the United States generally include:
|
● |
the completion of pre-clinical
laboratory tests and animal tests conducted under GLP regulations; |
|
● |
the submission to the FDA
of an IND application for human clinical testing, which must become effective before human clinical trials commence; |
|
● |
the performance of adequate
and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication
and conducted in accordance with cGCP; |
|
● |
the submission to the FDA
of an NDA; |
|
● |
the FDA’s acceptance
of the NDA; |
|
● |
satisfactory completion
of an FDA inspection of the manufacturing facilities at which the product is made to assess compliance with cGMPs; and |
|
● |
the FDA’s review
and approval of an NDA prior to any commercial marketing or sale of the drug in the United States. |
The
testing and approval process requires substantial time, effort and financial resources, and the receipt and timing of any approval is
uncertain.
Pre-clinical
studies include laboratory evaluations of the product candidate, as well as animal studies to assess the potential safety and efficacy
of the product candidate. The results of the pre-clinical studies, together with manufacturing information and analytical data, are submitted
to the FDA as part of the IND, which must become effective before clinical trials may be commenced. The IND will become effective automatically
30 days after receipt by the FDA, unless the FDA raises concerns or questions about the conduct of the trials as outlined in the IND
prior to that time. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed.
Clinical
trials involve the administration of the drug product candidates to healthy volunteers or patients with the disease to be treated under
the supervision of a qualified principal investigator. Clinical trials are conducted under protocols detailing, among other things, the
objectives of the study, the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated. A protocol for each
clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Further, each clinical trial must
be reviewed and approved by an independent Institutional Review Board, or IRB, either centrally or individually at each institution at
which the clinical trial will be conducted. The IRB will consider, among other things, ethical factors, the safety of human subjects
and the possible liability of the institution. There are also requirements governing the reporting of ongoing clinical trials and clinical
trial results to public registries. The FDA, the IRB or the clinical trial sponsor may suspend or terminate clinical trials at any time
on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Additionally,
some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data
safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check
points based on access to certain data from the study. We may also suspend or terminate a clinical trial based on evolving business objectives
and/or competitive climate.
Clinical
trials are typically conducted in three sequential phases prior to approval, but the phases may overlap. These phases generally include
the following:
|
● |
Phase 1. Phase 1
clinical trials represent the initial introduction of a product candidate into human subjects, frequently healthy volunteers. In
Phase 1, the product candidate is usually tested for safety, including adverse effects, dosage tolerance, absorption, distribution,
metabolism, excretion and pharmacodynamics. |
|
● |
Phase 2. Phase 2
clinical trials usually involve studies in a limited patient population to (1) evaluate the efficacy of the product candidate for
specific indications, (2) determine dosage tolerance and optimal dosage and (3) identify possible adverse effects and safety risks. |
|
● |
Phase 3. If a product
candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 studies, the clinical trial program
will be expanded to Phase 3 clinical trials to further demonstrate clinical efficacy, optimal dosage and safety within an expanded
patient population at geographically dispersed clinical study sites. |
Phase
4 clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic
indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise
requested by the FDA in the form of post-market requirements or commitments. Failure to promptly conduct any required Phase 4 clinical
trials could result in withdrawal of approval.
The
results of pre-clinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with
detailed information on the manufacture, composition and quality of the product, are submitted to the FDA in the form of an NDA requesting
approval to market the product. The NDA must be accompanied by a significant user fee payment. The FDA has substantial discretion in
the approval process and may refuse to accept any application or decide that the data is insufficient for approval and require additional
pre-clinical, clinical or other studies.
In
addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and
effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration
for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full
or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation
has been granted. However, if only one indication for a product has orphan designation, a pediatric assessment may still be required
for any applications to market that same product for the non-orphan indication(s).
Once
the NDA submission has been submitted, the FDA has 60 days after submission of the NDA to conduct an initial review to determine whether
it is sufficient to accept for filing. Under the Prescription Drug User Fee Act, the FDA sets a goal date by which it plans to complete
its review. This is typically 12 months from the date of submission of the NDA application. The review process is often extended by FDA
requests for additional information or clarification. Before approving an NDA, the FDA will inspect the facilities at which the product
is manufactured and will not approve the product unless the manufacturing facility complies with cGMPs and may also inspect clinical
trial sites for integrity of data supporting safety and efficacy. The FDA may also convene an advisory committee of external experts
to provide input on certain review issues relating to risk, benefit and interpretation of clinical trial data. The FDA is not bound by
the recommendations of an advisory committee, but generally follows such recommendations in making its decisions. The FDA may delay approval
of an NDA if applicable regulatory criteria are not satisfied and/or the FDA requires additional testing or information. The FDA may
require post-marketing testing and surveillance to monitor safety or efficacy of a product.
After
the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its API will be produced,
it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific
prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete
and the application is not ready for approval. A Complete Response Letter may require additional clinical data and/or an additional pivotal
Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical
studies or manufacturing. Even if such additional information is submitted, the FDA may ultimately decide that the NDA does not satisfy
the criteria for approval. The FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate
risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to
proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or
clinical trials. Such post-market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product’s
safety and effectiveness after commercialization.
Device
Approval Process
Unless
an exemption applies, any medical device that is to be marketed in the U.S. must first receive from the FDA either 510(k) clearance,
by filing a 510(k) premarket notification, or premarket application (PMA) approval, after submitting a PMA. Alternatively, the device
may be cleared through the de novo classification process by the FDA. Based on advice from regulatory consultants and our own research,
we expect AM-301 to be considered a Class II device by FDA and that the 510(k) pathway applies to AM-301’s intended use of promoting
alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens.
To
obtain 510(k) clearance, a company must submit a premarket notification demonstrating substantial equivalence between the proposed device
and a legally marketed “predicate” device, which is defined as a legally marketed device, that (i) was legally marketed prior
to May 28, 1976, for which the FDA has not yet called for submission of a PMA application; (ii) has been reclassified from Class III
to Class II or Class I; (iii) has been cleared through the 510(k) premarket notification process; or (iv) has been previously determined
to be exempt from the 510(k) process. Substantial equivalence means that the proposed device has the same intended use and the same technological
characteristics as the predicate device, or, if the new device has different technological characteristics, that the device is as safe
and effective as the predicate device and does not raise different questions of safety and effectiveness. We have identified two such
predicate devices and plan to reference them in our planned 510(k) submission for Bentrio™.
Bentrio™ is also intended for use in the reduction of the intranasal
infectious viral load following inspiration of airborne viruses such as SARS-CoV-2. Since there may be no valid predicate device available
for this intended use, we may have to submit a de novo request to the FDA. Under the de novo pathway, we would have to prove that AM-301
does not present substantial risk to the patient rather than just demonstrating substantial equivalence with the safety of the relevant
predicate device(s), which may require additional testing. The review by the FDA in the de novo process is longer than the review process
for 510(k) submissions and requires higher fees. Any device that has been classified through the de novo process may be marketed and used
as predicate for future 510(k) submissions.
Many
foreign countries in which we intend to market Bentrio™ have regulatory bodies and restrictions similar to those of the FDA.
International sales are subject to foreign government regulation, the requirements of which vary substantially from country to country.
The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance and the requirements
may differ.
In
particular, Bentrio™ may be marketed in the European Union (EU) is subject to compliance with the Medical Devices Directive 93/92/EEC
(MDD), pursuant to which a medical device may be placed on the market within the EU only if it conforms to certain “essential requirements”
and bears the CE Mark. The most fundamental and essential requirement is that a medical device must be designed and manufactured in such
a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition,
the device must achieve the essential performance(s) intended by the manufacturer and be designed, manufactured and packaged in a suitable
manner. In May 2017, the EU adopted a new Medical Devices Regulation (EU) 2017/745 (MDR), which will repeal and replace the MDD with
effect from May 26, 2021. The MDR clearly envisages, among other things, stricter controls of medical devices, including strengthening
of the conformity assessment procedures, increased expectations with respect to clinical data for devices and pre-market regulatory review
of high-risk devices. The MDR also envisages greater control over notified bodies and their standards, increased transparency, more robust
device vigilance requirements and clarification of the rules for clinical investigations. Under transitional provisions, medical devices
with notified body certificates issued under the MDD prior to May 26, 2021 may continue to be placed on the market for the remaining
validity of the certificate, until May 27, 2024 at the latest. After the expiry of any applicable transitional period, only devices that
have been CE marked under the MDR may be placed on the market in the EU.
Manufacturers
must demonstrate that their devices conform to the relevant essential requirements through a conformity assessment procedure. The nature
of the assessment depends upon the classification of the device. The classification rules are mainly based on three criteria: the length
of time the device is in contact with the body, the degree of invasiveness and the extent to which the device affects the anatomy. Conformity
assessment procedures for all but the lowest risk classification of device involve a notified body. Notified bodies are often private
entities and are authorized or licensed to perform such assessments by government authorities. Manufacturers usually have some flexibility
to select a notified body for the conformity assessment procedures for a particular class of device and to reflect their circumstances,
e.g., the likelihood that the manufacturer will make frequent modifications to its products. Conformity assessment procedures require
an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products
already marketed. Notified bodies also may review the manufacturer’s quality systems. If satisfied that the product conforms to
the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for
its own declaration of conformity and application of the CE Mark. Application of the CE Mark allows the general commercializing of a
product in the EU. The product can also be subjected to local registration requirements depending on the country. We maintain CE Marking
on all of our products that require such markings as well as local registrations as required.
Pharmaceutical
Coverage, Pricing and Reimbursement
In
both domestic and foreign markets, our sales of any approved drug products will depend in part on the availability of coverage and adequate
reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers
and other organizations. Patients who are prescribed treatments for their conditions and providers performing the prescribed services
generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products,
if approved, unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales
of our products will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our products will
be paid by third-party payors. These third-party payors are increasingly focused on containing healthcare costs by challenging the price
and examining the cost-effectiveness of medical products and services.
In
addition, significant uncertainty exists as to the coverage and reimbursement status of newly approved healthcare product candidates.
The market for our product candidates for which we may receive regulatory approval will depend significantly on access to third-party
payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry
competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party
payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when
a less costly generic equivalent or another alternative is available. Furthermore, third-party payor reimbursement to providers for our
product candidates may be subject to a bundled payment that also includes the procedure administering our products. To the extent there
is no separate payment for our product candidates, there may be further uncertainty as to the adequacy of reimbursement amounts.
Because
each third-party payor individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming,
costly and sometimes unpredictable process. We may be required to provide scientific and clinical support for the use of any product
to each third-party payor separately with no assurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomic
studies in order to demonstrate the cost-effectiveness of our products. This process could delay the market acceptance of any product
and could have a negative effect on our future revenues and operating results. We cannot be certain that our product candidates will
be considered cost-effective. Because coverage and reimbursement determinations are made on a payor-by-payor basis, obtaining acceptable
coverage and reimbursement from one payor does not guarantee the Company will obtain similar acceptable coverage or reimbursement from
another payor. If we are unable to obtain coverage of, and adequate reimbursement and payment levels for, our product candidates from
third-party payors, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may
decline to purchase them. This in turn could affect our ability to successfully commercialize our products and impact our profitability,
results of operations, financial condition and future success.
Furthermore,
in many foreign countries, particularly the countries of the European Union, the pricing of prescription drugs is subject to government
control. In some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements
governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to
restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices
of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a
system of direct or indirect controls on the profitability of the Company placing the medicinal product on the market. We may face competition
for our product candidates from lower-priced products in foreign countries that have placed price controls on pharmaceutical products.
In addition, there may be importation of foreign products that compete with our own products, which could negatively impact our profitability.
Healthcare
Reform
In
the United States and foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory
changes to the healthcare system that could affect our future results of operations as we begin to directly commercialize our products.
In
particular, there have been and continue to be a number of initiatives at the U.S. federal and state level that seek to reduce healthcare
costs. Initiatives to reduce the federal deficit and to reform healthcare delivery are increasing cost-containment efforts. We anticipate
that Congress, state legislatures and the private sector will continue to review and assess alternative benefits, controls on healthcare
spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large
insurance purchasing groups, price controls on pharmaceuticals and other fundamental changes to the healthcare delivery system. Any proposed
or actual changes could limit or eliminate our spending on development projects and affect our ultimate profitability.
In
the future, there may continue to be additional proposals relating to the reform of the United States healthcare system, some of which
could further limit the prices we are able to charge for our products candidates, or the amounts of reimbursement available for our product
candidates. If future legislation were to impose direct governmental price controls and access restrictions, it could have a significant
adverse impact on our business. Managed care organizations, as well as Medicaid and other government agencies, continue to seek price
discounts. Some states have implemented, and other states are considering, price controls or patient access constraints under the Medicaid
program, and some states are considering price-control regimes that would apply to broader segments of their populations that are not
Medicaid-eligible. Due to the volatility in the current economic and market dynamics, we are unable to predict the impact of any unforeseen
or unknown legislative, regulatory, payor or policy actions, which may include cost containment and healthcare reform measures. Such
policy actions could have a material adverse impact on our profitability.
The
federal Drug Supply Chain Security Act imposes obligations on manufacturers of pharmaceutical products, among others, related to product
tracking and tracing. Manufacturers will be required to provide certain information regarding the drug product to individuals and entities
to which product ownership is transferred, label drug product with a product identifier, and keep certain records regarding the drug
product. Further, under this new legislation, manufacturers will have drug product investigation, quarantine, disposition, and notification
responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject
of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious
health consequences or death.
Other
Regulatory Requirements
Maintaining
substantial compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time
and financial resources. Drug manufacturers are required to register their establishments with the FDA and certain state agencies, and
after approval, the FDA and these state agencies conduct periodic unannounced inspections to ensure continued compliance with ongoing
regulatory requirements, including cGMPs. In addition, after approval, some types of changes to the approved product, such as adding
new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.
The
FDA may require post-approval testing and surveillance programs to monitor safety and the effectiveness of approved products that have
been commercialized. Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation
by the FDA, including:
|
● |
record-keeping requirements; |
|
● |
reporting of adverse experiences
with the drug; |
|
● |
providing the FDA with
updated safety and efficacy information; |
|
● |
reporting on advertisements
and promotional labeling; |
|
● |
drug sampling and distribution
requirements; and |
|
● |
complying with electronic
record and signature requirements. |
In
addition, the FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the
market. There are numerous regulations and policies that govern various means for disseminating information to health-care professionals
as well as consumers, including to industry sponsored scientific and educational activities, information provided to the media and information
provided over the Internet. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved
label.
The
FDA has very broad enforcement authority and the failure to comply with applicable regulatory requirements can result in administrative
or judicial sanctions being imposed on us or on the manufacturers and distributors of our approved products, including warning letters,
refusals of government contracts, clinical holds, civil penalties, injunctions, restitution and disgorgement of profits, recall or seizure
of products, total or partial suspension of production or distribution, withdrawal of approvals, refusal to approve pending applications,
and criminal prosecution resulting in fines and incarceration. The FDA and other agencies actively enforce the laws and regulations prohibiting
the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant
liability. In addition, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may
result in restrictions on the product or even complete withdrawal of the product from the market.
Other
Healthcare Laws
Because
of our current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-party
payors, we will also be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments
in which we will conduct our business, including our clinical research, proposed sales, marketing and educational programs. Failure to
comply with these laws, where applicable, can result in the imposition of significant civil penalties, criminal penalties, or both. The
U.S. laws that may affect our ability to operate, among others, include: the federal Health Insurance Portability and Accountability
Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct
of certain electronic healthcare transactions and protects the security and privacy of protected health information; certain state laws
governing the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many
of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; the federal
healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting,
receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual
for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs
such as the Medicare and Medicaid programs; federal false claims laws which prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false
or fraudulent; federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters; the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics, and medical
supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of
value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and ownership
and investment interests held by physicians and their immediate family members; and state law equivalents of each of the above federal
laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including
commercial insurers.
In
addition, many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and
may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, to
the extent that our products are sold in a foreign country, we may be subject to similar foreign laws.
C. |
Organizational structure |
The
registrant corporation, Altamira Therapeutics Ltd., had seven wholly-owned subsidiaries as of December 31, 2021, which are each listed
in Exhibit 8.1 filed hereto. We primarily operate our business out of our operating subsidiary Auris Medical AG.
D. |
Property, plants and
equipment |
Our
registered office is in Hamilton, Bermuda. We also lease approximately 4,700 square feet of office space in Basel, Switzerland. This
property serves as the corporate headquarters of our principal operating subsidiary.
ITEM
4A. UNRESOLVED STAFF COMMENTS
Not
applicable.
ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial
condition and results of operations together with our audited consolidated financial statements, including the notes thereto, included
in this Annual Report. The following discussion is based on our financial information prepared in accordance with IFRS as issued by the
IASB, which might differ in material respects from generally accepted accounting principles in other jurisdictions. The following discussion
includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under “Item
3. Key Information—D. Risk factors” and elsewhere in this Annual Report.
Overview
We
are a company dedicated to developing therapeutics that address important unmet medical needs. We are currently active in three areas:
the development of RNA therapeutics for delivery to extrahepatic targets (with AM-401 targeting KRAS driven cancers as first project,
preclinical stage), the development of intranasal betahistine for the treatment of vertigo (AM-125, in Phase 2). Through our affiliate
Altamira Medica, we are commercializing a nasal spray for protection against airborne viruses and allergens (Bentrio™ / AM-301).
To
date, we have financed our operations through public offerings of our common shares, private placements of equity securities, and short-
and long-term loans. As of December 31, 2021, we had cash and cash equivalents of CHF 1.0 million and an accumulated deficit of CHF 176.0
million. In 2021, we started to commercialize our first product, Bentrio™. Based on our current plans, we expect to continue incurring
losses as we continue our clinical and pre-clinical development programs, apply for marketing approval for our product candidates and
build a sales and marketing force. We do not expect to generate royalty or product revenues sufficient to fund our operations unless
and until we achieve substantially higher royalty or product revenues from the commercialization of Bentrio™, complete the development
of AM-125 and successfully commercialize the product, and / or from out-licensing or other partnering transactions.
Collaboration
and License Agreements
Washington
University
In
2020, we entered into an Exclusive License Agreement with Washington University located in St. Louis, Missouri (“WU”), which
Exclusive License Agreement was subsequently amended and restated in June 2021, with effect as of December 11, 2020. Pursuant to the
agreement, WU granted us an exclusive, worldwide, royalty-bearing license (with the right to sublicense) during the term of the agreement
under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical
products covered under such patent rights for all fields of use. Such licensed products may include drug products formulated as nanoparticles,
comprising a peptide for delivery as well as a therapeutic nucleotide, for intracellular delivery. In consideration for such worldwide,
exclusive license, we will be obligated to pay WU: annual license maintenance fees in the low five figures through first commercial sale;
pre-clinical and clinical regulatory milestones; sales milestones; and a low single digit royalty based on annual net sales of licensed
products worldwide for at least the applicable patent term or period of marketing exclusivity, whichever is longer, but in no case less
than a minimum royalty term of 12 years; and a percentage share (in the double digits) of sublicensing revenues received by us in connection
with licensed products. Such regulatory and sales milestones may total up to an aggregate of $4,375,000. In the event we fail to meet
certain regulatory diligence milestones, WU will have the right to terminate the license.
INSERM
In
2006, we entered into a co-ownership/exploitation agreement with the INSERM, a publicly funded government science and technology agency
in France. Pursuant to the terms of the agreement, we were granted the exclusive right to exploit any products derived from patents that
resulted from our joint research program with INSERM that was conducted in 2003 to 2005 and led to the development of Keyzilen®.
Pursuant to the terms of the co-ownership/exploitation agreement, we were given the exclusive right to exploit the patents issuing from
the filed patent applications for all claimed applications, including the treatment of tinnitus, in order to develop, promote, manufacture,
cause to be manufactured, use, sell and distribute any products, processes or services deriving from such patents, including Keyzilen®,
in any country in which these patent applications have been filed during the term of the agreement.
As
consideration for the exclusive rights granted to us under the agreement, we agreed to pay INSERM a two tiered low single digit percentage
royalty (where the higher rate is due on any net sales above a certain threshold) on the net sales of any product covered by the patents
(including the use of Keyzilen® in the treatment of tinnitus triggered by cochlear glutamate excitotoxicity) earned in
each country in which these patent applications have been filed during the term of the agreement. We have also agreed to pay INSERM a
low double-digit fee on any sums of any nature (except royalties and certain costs) collected by us in respect of the granting of licenses
to third parties.
Xigen
In
October 2003, we entered into a collaboration and license agreement with Xigen, pursuant to which Xigen granted us an exclusive worldwide
license to use specified compounds to develop, manufacture and commercialize “pharmaceutical products as well as drug delivery
devices and formulations for local administration of therapeutic substances to the inner ear for the treatment of ear disorders”
(the Area). We also have a right of first refusal to license certain additional compounds developed by Xigen which may be used for the
Area, specifically any cell permeable inhibitors to effectively block certain signal pathways in apoptotic processes.
Under
this agreement, we made an upfront payment to Xigen of CHF 200,000 and we are obligated to make development milestone payments on an
indication-by-indication basis of up to CHF 1.5 million and regulatory milestone payments on a product-by-product basis of up to CHF
2.5 million, subject to a mid-twenties percentage reduction for smaller indications, e.g., those qualifying for orphan drug status. To
date, we have paid CHF 1.325 million to Xigen under the agreement. We will be required to pay Xigen a mid-single digit percentage royalty
on net sales of each licensed product that uses a compound licensed under the agreement, which royalty for a given indication shall be
partially offset by milestone payments we have paid for such indication, until the later of 10 years after the first commercial sale
of any licensed product using such licensed compound in any country, and the first expiration of a patent owned by or exclusively licensed
to Xigen that covers the use of such licensed compound in any country, subject to our obligation to enter into good faith negotiations
with Xigen, upon expiration of the relevant patent on a licensed compound, about the conditions of our further use of such licensed compound.
Otifex
On
February 2, 2017, we entered into an asset purchase agreement with Otifex Therapeutics Pty Ltd (“Otifex”), pursuant to which
we agreed to purchase and Otifex agreed to sell us certain pre-clinical and clinical assets related to a formulation for the intranasal
application of betahistine, which we refer to as AM-125, as well as associated intellectual property rights. We are developing the formulation
for the treatment of vertigo. The Otifex transaction closed in July 2017.
Financial
Operations Overview
We
expect our regular total cash need in 2022 to be in the range of CHF 11 to 13 million. Further cash needs may arise in 2022 related
to the AM-125 and AM-401 programs as a function of their advancement and subject to additional funding.
Research
and development expense
Research
and development expense consists principally of:
|
● |
salaries for research and
development staff and related expenses, including employee benefits; |
|
● |
costs for production of
pre-clinical compounds, drug substances and drug products by contract manufacturers; |
|
● |
fees and other costs paid
to contract research organizations in connection with additional pre-clinical testing and the performance of clinical trials; |
|
● |
costs of related facilities,
materials and equipment; |
|
● |
costs associated with obtaining
and maintaining patents; |
|
● |
costs related to the preparation
of regulatory filings and fees; and |
|
● |
depreciation, amortization
and impairment of tangible and intangible fixed assets used to develop our product candidates. |
Our
research and development expense mainly relates to the following key programs:
|
● |
AM-125 for Vertigo. We
are evaluating the safety and efficacy of AM-125 in the “TRAVERS” Phase 2 trial, which started in the third quarter of
2019 and is conducted in several European countries. The trial is enrolling a total of 118 patients suffering from acute vertigo
following neurosurgery. In September 2020 we announced the results of an interim analysis from Part A of the trial, which comprised
a dose escalation – 1, 10 or 20 mg or placebo – in 33 patients. The interim analysis showed a dose-dependent improvement
in balance as well as good safety and tolerability of ascending doses of AM-125. Based on the results from the interim analysis,
we selected the two highest doses, 10 and 20 mg, for testing against placebo in 72 patients in Part B of the trial. Prior to starting
Part B of the trial in October 2020, we tested oral betahistine (48 mg) open label for reference purposes. Enrollment into TRAVERS
has been impacted by the COVID-19 pandemic, as the type of neurosurgery required for participation in the trial is classified as
an elective procedure and hence was postponed and as many participating sites temporarily reduced or suspended clinical research
activities. We completed enrollment in February 2022. Apart from the clinical evaluation, we have been conducting various preclinical
studies with AM-125 and working on the analytical and process development for the manufacturing of the drug product. |
|
● |
AM-201 for Antipsychotic-Induced
Weight Gain. We conducted a Phase 1b trial in Europe with AM-201 in antipsychotic-induced weight gain. Participants received either
AM-201 (1, 2.5, 5, 10, 20 or 30 mg) or placebo in parallel with oral olanzapine (10 mg) once a day for four weeks. In May 2020, we
announced that at AM-201 30 mg, the mean weight gain from baseline to the end of the treatment period was 2.8 kg compared against
3.7 kg in control subjects; the primary efficacy endpoint of mean reduction in weight gain was 0.9 kg and statistically significant
(p<0.02; n=81 with pre-specified Bayesian augmented controls). There were no activities in 2021 related to the AM-201 program.
|
|
● |
Bentrio™ for Protection
Against Airborne Allergens and Viruses: In September 2020 we announced the launch of the development of AM-301, a drug-free nasal
spray for protection against airborne viruses and allergens. Following formulation development, we tested AM-301 in vitro in a series
of experiments using reconstituted human nasal epithelia infected with SARS-CoV-2 or H1N1 influenza virus. Daily treatment with AM-301,
beginning right before inoculation or 24-30 hours thereafter showed significant reductions of the viral titer compared to saline
treated controls. In 2021 we conducted an open-label randomized cross-over study with AM-301 that enrolled 36 patients with allergic
rhinitis caused by grass pollen. Study participants were administered a single dose of BentrioTM nasal spray or hydroxypropylmethylcellulose,
a comparator product, prior to controlled pollen exposure for four hours in an allergen challenge chamber. The challenge was repeated
with the alternate treatment following a wash-out period. The study demonstrated a rapid onset and long durability of Bentrio’s
protective effect, established substantial equivalence to the marketed comparator with superior efficacy ratings by patients and
clinicians, and showed good tolerability. Further, we prepared a randomized placebo-controlled clinical trial with AM-301 in COVID-19,
and in December 2021 we initiated enrollment into a randomized open-label trial with AM-301 and saline nasal spray as control in
seasonal allergic rhinitis and into an open-label clinical trial with AM-301 in perennial allergic rhinitis (PAR) with controlled
house dust mite exposure. |
| ● | AM-401
for KRAS Driven Cancer. Through the acquisition of Trasir we entered the field of RNA
therapeutics. In July 2021 we announced the selection of KRAS-driven cancer as the first
therapeutic indication for our OligoPhore™ oligonucleotide delivery platform and our
intention to develop an RNA therapeutic under the development code of AM-401. In this context,
we initiated various development work relating to the peptide and siRNA components of AM-401. |
Other
research and development expenses mainly relate to the maintenance of our late-stage projects Sonsuvi® (AM-111) and Keyzilen®
(AM-101) and pre-clinical studies of AM-102 (second generation tinnitus treatment).
For
the years ended December 31, 2021, 2020 and 2019, we spent CHF 2.8 million, CHF 2.7 million and CHF 4.3 million, respectively, on research
and development expenses related to our intranasal betahistine program (before capitalization of expenses related to AM-125). For the
year ended December 31, 2021 and 2020, we spent CHF 4.8 million and 0.8 million on research and development expenses related to AM-301.
For the same time periods, we spent CHF 0.1 million, CHF 0.1 million, and CHF 0.5 million, respectively, on research and development
expenses related to Keyzilen®. For the same time periods, we spent CHF 0.1 million, CHF 0.1 million, and CHF 0.1 million,
respectively, on research and development expenses related to Sonsuvi®. In addition, we incurred research and development
expenses related to our earlier stage products.
The
level of research and development expenses related to AM-301 is expected to decrease in 2022 as development projects will complete, and
further in 2023. On the other hand, research and development expenses related to AM-125 are expected to increase from 2022 onward as
we expect to initiate another Phase 2 clinical trial and move also into Phase 3 clinical development. At this time, we cannot reasonably
estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period,
if any, in which material net cash inflows may commence from any of our product candidates. This is due to numerous risks and uncertainties
associated with developing drugs, including the uncertainty of:
|
● |
the scope, rate of progress,
results and cost of our clinical trials, nonclinical testing, and other related activities; |
|
● |
the cost of manufacturing
clinical supplies, and establishing commercial supplies, of our product candidates and any products that we may develop; |
|
● |
the number and characteristics
of product candidates that we pursue; |
|
● |
the cost, timing, and outcomes
of regulatory approvals and payer discussions; |
|
● |
the cost and timing of
establishing sales, marketing, and distribution capabilities; and |
|
● |
the terms and timing of
any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments
thereunder. |
A
change in the outcome of any of these variables with respect to the development of AM-125, AM-301, AM-401, or any other product candidate
that we may develop could mean a significant change in the costs and timing associated with the development of such product candidate.
For example, if the FDA or other regulatory authority were to require us to conduct pre-clinical and clinical studies beyond those which
we currently anticipate will be required for the completion of clinical development or if we experience significant delays in enrollment
in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of the clinical
development.
In
the context of our strategic repositioning, we have decided to deprioritize the development of Sonsuvi® (AM-111), Keyzilen® (AM-101)
and AM-201 and to seek their divestiture. We therefore do not expect to incur any or any meaningful research and development expenses
for these programs in 2022.
Sales
and marketing expense
In
2021, we incurred for the first time ever sales and marketing expenses as we prepared for and carried out the market launch of Bentrio™
in selected European countries. The expenses amounted to CHF 1.5 million and consisted principally of:
| ● | Fees
for advertising and public relations agencies and consultants; |
| ● | Costs
for advertisements on TV, in printed media and online media; |
| ● | Salaries
for marketing and sales staff and related expenses, including employee benefits; and |
General
and administrative expense
Our
general and administrative expense consists principally of:
|
● |
salaries for general and
administrative staff and related expenses, including employee benefits; |
|
● |
business development expenses,
including travel expenses; |
|
● |
administration expenses
including professional fees for auditors and other consulting expenses not related to research and development activities, professional
fees for lawyers not related to the protection and maintenance of our intellectual property and IT expenses; |
|
● |
cost of facilities, communication
and office expenses; and |
|
● |
depreciation and amortization
of tangible and intangible fixed assets not related to research and development activities. |
Interest
income
Our
policy is to invest funds in low risk investments including interest bearing deposits. Saving and deposit accounts generate a small amount
of interest income.
Interest
expense
In
2021 and 2020, our interest expense consisted principally of interest due on the convertible loan provided by FiveT.
Revaluation
loss/gain from derivative financial instruments
Expenses
related to fair value measurement of derivatives embedded in the FiveT convertible loan of CHF 416,003 were recorded as financial expenses
in profit or loss.
On
February 21, 2017, we issued 10,000,000 (pre-merger) warrants in connection with a registered offering of 10,000,000 common shares (the
“February 2017 Registered Offering”), each warrant entitling its holder to purchase 0.70 of a common share at an exercise
price von $ 1.20 (pre-merger). Additionally, the underwriter was granted a 30-day option to purchase up to 1,500,000 (pre-merger) additional
common shares and/or 1,500,000 (pre-merger) additional warrants. On February 15, 2017, the underwriter partially exercised its option
for 1,350,000 (pre-merger) warrants. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection with
this offering. As of December 31, 2021, the outstanding warrants issued in the February 2017 offering were exercisable for up to 39,725
common shares at an exercise price of $240.00 per common share. As of December 31, 2021, the fair value of the warrants amounted to CHF
0. The revaluation loss of the derivative for the twelve months ended December 31, 2021 amounted to CHF 0 (2020: CHF 0). Since its initial
recognition on February 21, 2017, the fair value decreased by CHF 5,091,817, resulting in a gain in the corresponding amount (fair value
as of February 21, 2017: CHF 5,091,817).
On
January 30, 2018 we issued warrants in connection with a direct offering of 62,499 common shares, each warrant entitling its holder to
purchase 0.6 common share at an exercise price of $100.00 per common share. As of December 31, 2021, the warrants were exercisable for
an aggregate of 37,501 of our common shares (assuming we decide to round up fractional common shares to the next whole common share),
at an exercise price of $100.00 per common share. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection
with this offering. As of December 31, 2021, the fair value of the warrants amounted CHF 1,233. The revaluation gain of the derivative
for the twelve months ended December 31, 2021 amounted to CHF 5,085, compared to 2020 where there was a revaluation loss of CHF 1,965.
Since its initial recognition on January 30, 2018, the fair value of the warrants has decreased by CHF 2,482,514 resulting in a gain
in the corresponding amount (fair value as of January 30, 2018: CHF 2,483,747).
On
July 17, 2018, the Company issued Series A warrants each entitling its holder to purchase 0.35 of a common share for an aggregate of
314,102 common shares, and Series B warrants entitling its holder to purchase 0.25 of a common share for an aggregate of 224,358 common
shares in connection with the July 2018 Registered Offering of 897,435 common shares. The original exercise price was CHF 7.80 per common
share. Revaluation gain/(loss) show the changes in fair value of the outstanding Series B warrant issued in connection with this offering.
As of December 31, 2019, 145,226 Series A warrants were exercised for an aggregate amount of CHF 1,132,762 and 143,221 Series B warrants
were exercised for an aggregate amount of CHF 1,117,125.
As
of December 31, 2019, 143,221 Series B exercised warrants were subject to revaluation at the time that they were exercised and the fair
value amounted to CHF 3,005,348 (2018: CHF 3,005,348). Since its initial recognition on July 17, 2018 the fair value of the warrants
has increased by CHF 2,433,099, resulting in a loss in the corresponding amounts (fair value as of July 17, 2018: CHF 572,249).
As
of December 31, 2019, the number of Series B warrants outstanding subject to revaluation were 34,535 and the fair value amounted to CHF
0.00. On June 18, 2020, the outstanding warrants expired without further warrants being exercised. As a result, no further revaluation
gain or loss was recognized for the year ended December 31, 2020 (fair value as of July 17, 2018: CHF 137,987).
Foreign
currency exchange gain/(loss), net
Our foreign currency exchange gain/(loss), net, consists primarily
of unrealized gains or losses on our USD and EUR denominated cash and cash equivalents. We do not hedge our investments by currency borrowings
or other hedging instruments.
Transaction
costs
Transaction
costs are shown as costs if they are not directly attributable to the equity transaction. Transaction costs decreased by CHF 219,615
to zero in the year ended December 31, 2021 compared to the previous year. In 2020, the costs related to the write-off of the remaining
capitalized derivate financial instrument related to a commitment purchase agreement with LPC dated May 2, 2018 (the “2018 Commitment
Purchase Agreement”).
Other
comprehensive loss
Remeasurements
of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the
effect of the asset ceiling (if any, excluding interest), are recognized in other comprehensive loss.
Assets
and liabilities of our subsidiaries with functional currency other than CHF are included in our consolidated financial statements by
translating the assets and liabilities into CHF at the exchange rates applicable at the end of the reporting period. Income and expenses
for each consolidated statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transaction).
Foreign
currency differences arising from translating the financial statements of our subsidiaries from currencies other than CHF are recognized
in other comprehensive income and presented in the foreign currency translation reserve under equity in the statement of financial position.
When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the
translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.
Results
of Operations
The
numbers below have been derived from our consolidated financial statements included elsewhere herein. The discussion below should be
read along with these consolidated financial statements and it is qualified in its entirety by reference to them.
Comparison
of the years ended December 31, 2021 and 2020
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
|
(in thousands of CHF) |
|
|
% |
|
Revenue |
|
|
64 |
|
|
|
- |
|
|
|
n/a |
|
Cost of goods sold |
|
|
(2,241 |
) |
|
|
- |
|
|
|
n/a |
|
Gross profit |
|
|
(2,177 |
) |
|
|
- |
|
|
|
n/a |
|
Other income |
|
|
461 |
|
|
|
174 |
|
|
|
165 |
% |
Research and development |
|
|
(8,939 |
) |
|
|
(2,863 |
) |
|
|
212 |
% |
Sales and marketing |
|
|
(1,498 |
) |
|
|
- |
|
|
|
n/a |
|
General and administrative |
|
|
(4,947 |
) |
|
|
(2,594 |
) |
|
|
91 |
% |
Operating loss |
|
|
(17,100 |
) |
|
|
(5,283 |
) |
|
|
224 |
% |
Interest income |
|
|
3 |
|
|
|
0 |
|
|
|
100 |
% |
Interest expense |
|
|
(190 |
) |
|
|
(135 |
) |
|
|
41 |
% |
Foreign currency exchange gain / (loss), net |
|
|
329 |
|
|
|
(333 |
) |
|
|
(199 |
)% |
Revaluation gain / (loss) from derivative financial instruments |
|
|
(411 |
) |
|
|
(2,250 |
) |
|
|
(82 |
)% |
Transaction costs |
|
|
- |
|
|
|
(220 |
) |
|
|
(100 |
)% |
Loss before tax |
|
|
(17,369 |
) |
|
|
(8,221 |
) |
|
|
111 |
% |
Income tax gain/(loss) |
|
|
(21 |
) |
|
|
21 |
|
|
|
(205 |
)% |
Net loss attributable to owners of the Company |
|
|
(17,390 |
) |
|
|
(8,200 |
) |
|
|
112 |
% |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Items that will never be reclassified to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
Re-measurements of defined benefits liability, net of taxes of CHF 0 |
|
|
265 |
|
|
|
(26 |
) |
|
|
(1,119 |
)% |
Items that are or may be reclassified to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences, net of taxes of CHF 0 |
|
|
1 |
|
|
|
89 |
|
|
|
(99 |
)% |
Other comprehensive loss |
|
|
266 |
|
|
|
63 |
|
|
|
322 |
% |
Total comprehensive loss attributable to owners of the Company |
|
|
(17,124 |
) |
|
|
(8,137 |
) |
|
|
110 |
% |
Revenue
and cost of goods sold
In
2021, we recorded our first revenues of CHF 0.1 million as we launched Bentrio™ starting in the summer through online pharmacies
in Germany and Austria and, based upon additional stability data which allowed to extend the product’s shelf life to a suitable
range, from December also through stationary pharmacies in Germany. Cost of goods sold of CHF 2.2 million comprised the relevant manufacturing
costs for Bentrio™ incurred through our contract manufacturer, expenses for storage and shipments, including set-up costs for our
third-party central warehouse in Europe, as well as inventory write-offs. The latter concerned products in inventory at December 31,
2021 with only short remaining shelf life and / or in labelling and packaging configurations (stock keeping units, “SKUs”)
for certain European countries where approval of certain marketing materials and messages was still pending.
Other
income
Other income increased 165% from CHF 0.2 million in 2020 to CHF 0.5
million in 2021 as we booked for the first-time research and development tax credits related to clinical projects.
Research
and development expense
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | | |
Change | |
| |
(in thousands
of CHF) | | |
% | |
Research and development expense | |
| | |
| | |
| |
Clinical
projects | |
| (2,958 | ) | |
| (477 | ) | |
| 520 | % |
Pre-clinical
projects | |
| (587 | ) | |
| (243 | ) | |
| 142 | % |
Product
and process development | |
| (1,100 | ) | |
| (615 | ) | |
| 79 | % |
Employee
benefits | |
| (1,897 | ) | |
| (1,121 | ) | |
| 69 | % |
Other
research and development expenses | |
| (2,397 | ) | |
| (407 | ) | |
| 489 | % |
Total | |
| (8,939 | ) | |
| (2,863 | ) | |
| 212 | % |
Research
and development expense increased by 212% from CHF 2.9 million in 2020 to CHF 8.9 million in 2021. Our research and development expense
is dependent on the development phases of our research projects and may therefore fluctuate significantly from year to year. The variances
in expense between 2020 and 2021 are mainly due to the following factors:
|
● |
Capitalization of internal
costs for AM-125. In the year ended December 31, 2021, we capitalized direct costs related to our AM-125 program for a total
amount of CHF 2.8 million, compared to CHF 2.3 million in the year ended December 31, 2020. |
|
● |
Clinical projects.
In the year ended December 31, 2021, we incurred higher service and milestone costs due to our clinical development with AM-301,
reflecting the completion of a clinical investigation in allergic rhinitis (pollen, single dose), the preparation of a study
in COVID-19 patients as well as the initiation of studies in seasonal allergic rhinitis (pollen, repeated dosing) and perennial allergic
rhinitis (house dust mite, repeated dosing). In 2020, expenses for clinical projects were related to the completion of a clinical
trial with AM-201 in antipsychotic-induced weight gain and preparations for the allergic rhinitis study with AM-301. |
|
● |
Pre-clinical projects.
In the year ended December 31, 2021, pre-clinical expenses increased by 142% principally due to the conduct of in vitro and in vivo
studies with AM-301. |
|
● |
Product and process
development. In the year ended December 31, 2021, expenses increased by 79% mainly due to the scale-up and validation of the
manufacturing process for AM-301 as well as analytical development for AM-301. In 2021 they also included for the first-time expenses
related to the development of AM-401. |
|
● |
Employee benefits.
Employee benefit costs rose in 2021 due to higher headcount and increases in recruiting fees and share-based bonus payments. |
|
● |
Other research and development
expenses. Other research and development expenses increased by CHF 2.0 million in the year ended December 31, 2021 compared to
the year ended December 31, 2020 primarily due to impairment costs related to our AM-101, AM-111 and AM-201 programs of CHF 1.5 million
related to our strategic decision to reposition the Company around RNA therapeutics. In addition, we incurred higher expenses for
patents and regulatory affairs as we filed intellectual property around AM-301 and compiled the technical dossier
for the declaration of conformity for AM-301 in the EU and submitted a 510(k) application for premarket clearance for AM-301 to the
FDA. |
Sales
and marketing expense
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | | |
Change | |
| |
(in thousands
of CHF) | | |
% | |
Sales and marketing expense | |
| | |
| | |
| |
Marketing
and sales expenses | |
| (1,133 | ) | |
| - | | |
| - | % |
Employee
benefits and expenses | |
| (204 | ) | |
| - | | |
| - | % |
Product
samples | |
| (161 | ) | |
| - | | |
| - | % |
Total | |
| (1,498 | ) | |
| - | | |
| - | % |
In
2021, we incurred sales and marketing expenses of CHF 1.5 million, which were primarily related to costs for the creation and production
of advertisement and other marketing materials, online campaigns, employee benefits, consulting and product samplings.
General
and administrative expense
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | | |
Change | |
| |
(in thousands
of CHF) | | |
% | |
General and administrative expense | |
| | |
| | |
| |
Employee
benefits | |
| (1,555 | ) | |
| (811 | ) | |
| 92 | % |
Business
development | |
| (967 | ) | |
| (96 | ) | |
| 907 | % |
Travel
expenses | |
| (76 | ) | |
| (29 | ) | |
| 162 | % |
Administration
expenses | |
| (2,246 | ) | |
| (1,646 | ) | |
| 36 | % |
Lease
expenses | |
| (52 | ) | |
| (14 | ) | |
| 271 | % |
Depreciation
tangible assets | |
| (30 | ) | |
| (4 | ) | |
| 650 | % |
Capital
tax expenses | |
| (21 | ) | |
| 6 | | |
| 300 | % |
Total | |
| (4,947 | ) | |
| (2,594 | ) | |
| 91 | % |
General
and administrative expenses increased by 91% from CHF 2.6 million in 2020 to CHF 4.9 million in the year ended December 31, 2021. The
increase was primarily related to higher headcount and share-based bonus payments, business development activities related to Bentrio™
and higher consulting expenses.
Interest
income
Interest
income increased in the year ended December 31, 2021 compared to year the ended December 31, 2020 due to higher balances on interest-bearing
short-term deposits.
Interest
expense
Interest
expense in the year ended December 31, 2021 as well as in December 31, 2020 included mainly the interest accrued on the convertible loan
provided by FiveT Capital.
Foreign
currency exchange gain/(loss), net
In
2021, we recorded a foreign currency exchange gain of CHF 0.3 million compared to a loss of CHF 0.3 million in 2020 as the Swiss Franc
depreciated against some of the major currencies.
Revaluation
gain/(loss) from derivative financial instruments
Expenses
related to fair value measurement of derivatives embedded in the FiveT convertible loan of CHF 416,003 were recorded as financial expenses
in profit or loss for the financial year 2021 compared to CHF 2.3 million in 2020.
On
February 21, 2017, we issued 10,000,000 (pre-merger) warrants, each warrant entitling its holder to purchase 0.70 of a common share at
an exercise price of $1.20. Additionally, the underwriter was granted a 30-day option to purchase up to 1,500,000 (pre-merger) additional
common shares and/or 1,500,000 (pre-merger) additional warrants. On February 15, 2017, the underwriter partially exercised its option
for 1,350,000 (pre-merger) warrants. Revaluation gain/(loss) shows the changes in fair value of the warrants issued in connection with
this offering. As of December 31, 2021, the outstanding warrants issued in the February 2017 offering were exercisable for up to 39,725
common shares at an exercise price of $240.00 per common share. As of December 31, 2021, the fair value of the warrants amounted to CHF
0. The revaluation loss of the derivative for the twelve months ended December 31, 2021 amounted to CHF 0 (2020: CHF 0). Since its initial
recognition as of February 21, 2017, the fair value decreased by CHF 5,091,817 resulting in a gain in the corresponding amount (fair
value as of February 21, 2017: CHF 5,091,817).
On
January 30, 2018 we issued warrants in connection with a direct offering of 62,499 common shares, each warrant entitling its holder to
purchase 0.6 common share at an exercise price of $100.00 per common share. As of December 31, 2020, the warrants were exercisable for
an aggregate of 37,501 of our common shares (assuming we decide to round up fractional common shares to the next whole common share).
Revaluation gain/(loss) shows the changes in fair value of the warrants issued in connection with this offering. As of December 31, 2021,
the fair value of the warrants amounted to CHF 1,233. The revaluation gain of the derivative for the twelve months ended December 31,
2021 amounted to CHF 5,085, compared to 2020 where there was a revaluation loss of CHF 1,965. Since its initial recognition on January
30, 2018, the fair value of the warrants decreased by CHF 2,482,514 resulting in a gain in the corresponding amount (fair value as of
January 30, 2018: CHF 2,483,747).
On
July 17, 2018, the Company issued Series A warrants each entitling its holder to purchase 0.35 of a common share for an aggregate of
314,102 common shares, and Series B warrants entitling its holder to purchase 0.25 of a common share for an aggregate of 224,358 common
shares in connection with the July 2018 Registered Offering of 897,435 common shares. The original exercise price was CHF 7.80 per common
share. Revaluation gain/(loss) shows the changes in fair value of the outstanding Series B warrants issued in connection with this offering.
On
June 18, 2020, the remaining 34,535 outstanding Series B warrants expired without further warrants being exercised. As a result, no further
revaluation gain or loss was recognized for the year ended December 31, 2020 (fair value as of July 17, 2018: CHF 137,987).
Income
tax gain/(loss)
Income
tax gain/(loss) reflects the assessment of deferred tax assets and liabilities.
Remeasurements
of defined benefits liability
Remeasurements
of the net defined benefits liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and
the effect of the asset ceiling (if any, excluding interest), increased 1,119% from a negative adjustment in the amount of CHF 26,000
in 2020 to a positive adjustment of CHF 0.3 million in 2021. The gain in 2021 is primarily due to a change in demographic and financial
assumptions, and a higher return on plan assets.
Foreign
currency translation differences
Foreign
currency translation differences decreased by 99% from CHF 0.1 million in 2020 to a negligible amount in 2021. The decrease was primarily
related to changes in the opening and closing balance of the group’s currency translation differences.
Comparison
of the years ended December 31, 2020 and 2019
| |
Year
Ended December 31, | |
| |
2020 | | |
2019 | | |
Change | |
| |
(in thousands
of CHF) | | |
% | |
Other operating income | |
| 174 | | |
| — | | |
| 100 | % |
Research and development | |
| (2,863 | ) | |
| (3,325 | ) | |
| (14 | )% |
General and administrative | |
| (2,594 | ) | |
| (3,934 | ) | |
| (34 | )% |
Operating
loss | |
| (5,283 | ) | |
| (7,259 | ) | |
| (27 | )% |
Interest income | |
| 0 | | |
| 18 | | |
| (100 | )% |
Interest expense | |
| (135 | ) | |
| (29 | ) | |
| 366 | % |
Foreign currency exchange loss, net | |
| (333 | ) | |
| (219 | ) | |
| 52 | % |
Revaluation gain / (loss) from derivative financial
instruments | |
| (2,250 | ) | |
| 664 | | |
| (439 | )% |
Transaction Costs | |
| (220 | ) | |
| — | | |
| (100 | )% |
Loss
before tax | |
| (8,221 | ) | |
| (6,825 | ) | |
| 20 | % |
Income tax gain/(loss) | |
| 21 | | |
| 194 | | |
| (89 | )% |
Net
loss attributable to owners of the Company | |
| (8,200 | ) | |
| (6,631 | ) | |
| 24 | % |
Other comprehensive loss: | |
| | | |
| | | |
| | |
Items that will never be reclassified to profit
or loss | |
| | | |
| | | |
| | |
Re-measurements of defined benefits liability,
net of taxes of CHF 0 | |
| (26 | ) | |
| (72 | ) | |
| (64 | )% |
Items that are or may be reclassified to profit
or loss | |
| | | |
| | | |
| | |
Foreign currency translation differences, net
of taxes of CHF 0 | |
| 89 | | |
| 16 | | |
| 456 | % |
Other comprehensive
loss | |
| 63 | | |
| (56 | ) | |
| (213 | )% |
Total
comprehensive loss attributable to owners of the Company | |
| (8,137 | ) | |
| (6,687 | ) | |
| 22 | % |
Research
and development expense
| |
Year
Ended December 31, | |
| |
2020 | | |
2019 | | |
Change | |
| |
(in thousands
of CHF) | | |
% | |
Research and development expense | |
| | |
| | |
| |
Clinical projects | |
| (477 | ) | |
| (993 | ) | |
| (52 | )% |
Pre-clinical projects | |
| (243 | ) | |
| (182 | ) | |
| 34 | % |
Drug manufacture and substance | |
| (615 | ) | |
| (481 | ) | |
| 28 | % |
Employee benefits | |
| (1,121 | ) | |
| (1,374 | ) | |
| (18 | )% |
Other research and development
expenses | |
| (407 | ) | |
| (295 | ) | |
| 38 | % |
Total | |
| (2,863 | ) | |
| (3,325 | ) | |
| (14 | )% |
Research
and development expense decreased by 14% from CHF 3.3 million in 2019 to CHF 2.9 million in 2020. Our research and development expense
is dependent on the development phases of our research projects and may therefore fluctuate significantly from year to year. The variances
in expense between 2019 and 2020 are mainly due to the following factors:
| ● | Capitalization
of internal costs for AM-125. In the year ended December 31, 2020, we capitalized direct
costs related to our AM-125 program for a total amount of CHF 2.3 million, compared to CHF
3.2 million in the year ended December 31, 2019. |
| ● | Clinical
projects. In the year ended December 31, 2020, we incurred lower service and milestone costs
for our studies with intranasal betahistine, mainly reflecting the completion of Phase 1b
trial with AM-201. |
| ● | Pre-clinical
projects. In the year ended December 31, 2020, pre-clinical expenses increased by 33% principally
due to the initiation of our AM-301 project activities. |
| ● | Drug
manufacture and substance. In the year ended December 31, 2020, drug manufacture and substance
expenses increased by 28% mainly due to AM-301 project activities. |
| ● | Employee
benefits. Employee benefit costs decreased in 2020 due to lower headcount and lower recruiting
fees. In addition, we received reimbursements under the Swiss short-time work scheme, which
was used for three months in connection with a temporary reduction in project activities
due to the COVID-19 pandemic. |
| ● | Other
research and development expenses. Other research and development expenses increased by CHF
0.1 million in the year ended December 31, 2020 compared to the year ended December 31, 2019
primarily due to AM-301 regulatory costs. |
General
and administrative expense
| |
Year
Ended December 31, | |
| |
2020 | | |
2019 | | |
Change | |
| |
(in thousands
of CHF) | | |
% | |
General and administrative expense | |
| | |
| | |
| |
Employee benefits | |
| (811 | ) | |
| (1,011 | ) | |
| (20 | )% |
Business development | |
| (96 | ) | |
| (114 | ) | |
| (16 | )% |
Travel expenses | |
| (29 | ) | |
| (103 | ) | |
| (72 | )% |
Administration expenses | |
| (1,646 | ) | |
| (2,653 | ) | |
| (38 | )% |
Lease expenses | |
| (14 | ) | |
| (27 | ) | |
| (48 | )% |
Depreciation tangible assets | |
| (4 | ) | |
| (11 | ) | |
| (64 | )% |
Capital tax expenses | |
| 6 | | |
| (15 | ) | |
| (133 | )% |
Total | |
| (2,594 | ) | |
| (3,934 | ) | |
| (34 | )% |
General
and administrative expenses decreased by 34% from CHF 3.9 million in 2019 to CHF 2.6 million in the year ended December 31, 2020. The
decrease is related to lower employee benefits due to lower headcount and reimbursements under the Swiss short-time work scheme, which
was used for three months in connection with a temporary reduction in company activities due to the COVID-19 pandemic. Administration
costs decreased mainly due to lower consultancy costs (redomestication in the previous period) and lower headcount.
Interest
income
Interest
income decreased in the year ended December 31, 2020 compared to year the ended December 31, 2019 due to no interest earned in the year
ended December 31, 2020 on short-term deposits.
Interest
expense
Interest
expense in 2020 includes interest related to the convertible loan agreement with FiveT Capital. This compares to CHF 0.03 million in
the year ended December 31, 2019 which was related to the Hercules loan.
Foreign
currency exchange gain/(loss), net
Foreign
currency exchange loss increased in 2020 mainly due to the depreciation of the USD and EUR against the Swiss Franc.
Revaluation
gain/(loss) from derivative financial instruments
Expenses
related to fair value measurement of derivatives embedded in the FiveT convertible loan of CHF 2,250,222 were recorded as financial expenses
in profit or loss for the financial year 2020.
On
January 31, 2019, we made the final payment to Hercules under the facility, comprising the last amortization payment as well as an end
of term charge. With the final payment, all covenants and collaterals in favor of Hercules have been lifted. In addition, Hercules agreed
to return the warrant held by Hercules exercisable for 783 common shares at an exercise price of $788 per common share for no consideration
to us in exchange for our payment to Hercules.
On
February 21, 2017, we issued 10,000,000 (pre-merger) warrants, each warrant entitling its holder to purchase 0.70 of a common share at
an exercise price of $1.20. Additionally, the underwriter was granted a 30-day option to purchase up to 1,500,000 (pre-merger) additional
common shares and/or 1,500,000 (pre-merger) additional warrants. On February 15, 2017, the underwriter partially exercised its option
for 1,350,000 (pre-merger) warrants. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection with
this offering. As of December 31, 2020, the outstanding warrants issued in the February 2017 offering were exercisable for up to 39,725
common shares at an exercise price of $240.00 per common share. As of December 31, 2020, the fair value of the warrants amounted to CHF
0. The revaluation loss of the derivative for the twelve months ended December 31, 2020 amounted to CHF 0, compared to 2019 where there
was a revaluation gain of CHF 166,301. Since its initial recognition as of February 21, 2017, the fair value decreased by CHF 5,091,817,
resulting in a gain in the corresponding amount (fair value as of February 21, 2017: CHF 5,091,817).
On
January 30, 2018 we issued warrants in connection with a direct offering of 62,499 common shares, each warrant entitling its holder to
purchase 0.6 common share at an exercise price of $100.00 per common share. As of December 31, 2020, the warrants became exercisable
for an aggregate of 37,501 of our common shares (assuming we decide to round up fractional common shares to the next whole common share),
at an exercise price of $100.00 per common share. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection
with this offering. As of December 31, 2020, the fair value of the warrants amounted CHF 6,318. The revaluation loss of the derivative
for the twelve months ended December 31, 2020 amounted to CHF 1,965, compared to 2019 where there was a revaluation gain of CHF 285,298.
Since its initial recognition on January 30, 2018, the fair value of the warrants has decreased by CHF 2,477,429 resulting in a gain
in the corresponding amount (fair value as of January 30, 2018: CHF 2,483,747).
On
July 17, 2018, the Company issued Series A warrants each entitling its holder to purchase 0.35 of a common share for an aggregate of
314,102 common shares, and Series B warrants entitling its holder to purchase 0.25 of a common share for an aggregate of 224,358 common
shares in connection with the July 2018 Registered Offering of 897,435 common shares. The original exercise price was CHF 7.80 per common
share. Revaluation gain/(loss) shows the changes in fair value of the outstanding Series B warrants issued in connection with this offering.
As
of December 31, 2019, 145,226 Series A warrants were exercised for an aggregate amount of CHF 1,132,762 and 143,221 Series B warrants
were exercised for an aggregate amount of CHF 1,117,125.
As
of December 31, 2019, 143,221 Series B exercised warrants were subject to revaluation at the time that they were exercised and the fair
value amounts to CHF 3,005,348 (2018: CHF 3,005,348). Since its initial recognition on July 17, 2018 the fair value of the warrants has
increased by CHF 2,433,099, resulting in a loss in the corresponding amounts (fair value as of July 17, 2018: CHF 572,249).
As
of December 31, 2019, the number of Series B warrants outstanding subject to revaluation were 34,535 and the fair value amounted to CHF
0.00. On June 18, 2020, the outstanding warrants expired without further warrants being exercised. As a result, no further revaluation
gain or loss was recognized for the year ended December 31, 2020 (fair value as of July 17, 2018: CHF 137,987).
Income
tax expense
Income
tax expense reflects the assessment of deferred tax assets and liabilities.
Remeasurements
of defined benefits liability
Remeasurements
of the net defined benefits liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and
the effect of the asset ceiling (if any, excluding interest), decreased 64% from 2019 to 2020. The loss in 2020 is primarily due to an
actuarial loss arising from experience adjustment.
Foreign
currency translation differences
Foreign
currency translation differences increased by 456% from 2019 to 2020. The increase was primarily related to changes in the opening and
closing balance of the group’s currency translation differences.
B. |
Liquidity and capital
resources |
Since
inception, we have incurred significant operating losses. Only in 2021 we started to generate revenue. We have financed our operations
through the public offerings of our common shares, private placements of equity securities and short-term loans.
Cash
flow
Comparison
of the years ended December 31, 2021 and 2020
The
table below summarizes our consolidated statement of cash flows for the years ended December 31, 2021 and 2020:
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in thousands
of CHF) | |
Net cash used in operating activities | |
| (13,673 | ) | |
| (4,844 | ) |
Net cash used in investing activities | |
| (3,505 | ) | |
| (2,315 | ) |
Net cash from financing activities | |
| 6,614 | | |
| 16,961 | |
Net effect of currency translation on cash | |
| 289 | | |
| 72 | |
Cash and cash equivalents
at the beginning of the period | |
| 11,259 | | |
| 1,385 | |
Cash
and cash equivalents at the end of the period | |
| 984 | | |
| 11,259 | |
The
increase in cash used in operating activities from CHF 4.8 million in 2020 to CHF 13.7 million in 2021 primarily reflects the increase
in research and development activities, the increase in headcount, the market launch of Bentrio™ as well as the related increase
in net working capital.
Cash used in investing activities increased from CHF 2.3 million in
2020 to CHF 3.5 million in 2021. The increase is primarily due to higher purchases of intangible assets related to AM-125 as well as the
payment of the cash component of the Trasir acquisition price.
The
cash inflow from financing activities decreased from CHF 17.0 million in 2020 to CHF 6.6 million in 2021 due to lower proceeds from equity
issues and the exercise of warrants. Also, in 2020 we had obtained CHF 1.5 million through the provision of the FiveT convertible loan.
Comparison
of the years ended December 31, 2020 and 2019
The
table below summarizes our consolidated statement of cash flows for the years ended December 31, 2020 and 2019:
| |
Year
Ended December 31, | |
| |
2020 | | |
2019 | |
| |
(in thousands
of CHF) | |
Net cash used in operating activities | |
| (4,844 | ) | |
| (8,393 | ) |
Net cash used in investing activities | |
| (2,315 | ) | |
| (3,001 | ) |
Net cash from financing activities | |
| 16,961 | | |
| 7,378 | |
Net effect of currency translation on cash | |
| 72 | | |
| 8 | |
Cash and cash equivalents
at the beginning of the period | |
| 1,385 | | |
| 5,393 | |
Cash
and cash equivalents at the end of the period | |
| 11,259 | | |
| 1,385 | |
The
decrease in cash used in operating activities from CHF 8.4 million in 2019 to CHF 4.8 million in 2020 reflects the impact of lower operating
expenses primarily driven by lower project activities as the COVID-19 pandemic weighed on enrollment rates for the TRAVERS trial with
AM-125, the conclusion of the Phase 1b trial with AM-201 and lower consultancy costs.
Cash
used in investing activities decreased from CHF 3.0 million in 2019 to CHF 2.3 million in 2020. The decrease is due to lower investments
in intangible assets in 2020.
The
cash inflow from financing activities increased from CHF 7.4 million to CHF 17.0 million due to higher proceeds from equity issues, the
exercise of warrants as well the provision of the FiveT convertible loan.
Cash
and funding sources
The
table below summarizes our sources of financing for the years ended December 31, 2021, 2020 and 2019.
| |
Equity
Capital and
Preference
Shares | | |
Loans | | |
Total | |
| |
(in thousands
of CHF) | |
2021 | |
| 6,686 | | |
| — | | |
| 6,686 | |
2020 | |
| 15,438 | | |
| 1,550 | | |
| 16,988 | |
2019 | |
| 8,845 | | |
| — | | |
| 8,845 | |
Total | |
| 30,969 | | |
| 1,550 | | |
| 32,519 | |
On
February 4, 2022, the Company entered into a convertible loan agreement (the “Loan Agreement”) with FiveT Investment Management
Ltd. (the “Lender”), pursuant to which the Lender has agreed to loan to the Company CHF 5,000,000 (the “Loan”),
which Loan bears interest at the rate of 10% per annum and matures 12 months from the date (the “Disbursement Date”) the
Loan proceeds were disbursed to the Company, which occurred on February 8, 2022. The Company may prepay all or part of the Loan after
six months after the Disbursement Date; provided that the Company will pay an amount equal to 130% of the desired prepayment amount.
The Lender has the right to convert all or part of the Loan, including accrued and unpaid interest, at its option, into common shares,
subject to the limitation that the Lender own no more than 9.99% of the common shares at any time. The conversion price of the Loan into
common shares is USD 1.9458, which corresponds to 150% of USD 1.2972 (the trading volume weighted average price, the “VWAP”,
per common share on the NASDAQ stock exchange on the Disbursement Date), converted into Swiss Francs at the midpoint of the interbank
exchange rate shown by UBS on the day of receipt of the conversion notice at 4:00 pm Central European Time. The conversion price shall
be lowered in the event that the Company raises equity before the maturity date of the Loan through a public or private offering of common
shares at an issue price that is at least 10 (ten) % below the VWAP (the “New Issue”), according to the formula set forth
in the Loan Agreement (the “Adjustment”). Sales of common shares through equity line or at-the-market programs are not considered
New Issues triggering the Adjustment.
On
December 3, 2020, the Company entered into securities purchase agreements with several institutional investors for the purchase and sale
of 2,000,000 common shares at an offering price of $4.00 per share, pursuant to a registered direct offering. The net proceeds of the
offering were approximately $7.3 million.
On
September 8, 2020, FiveT provided a convertible loan to our subsidiary Altamira. The loan had a principal amount of CHF 1.5 million,
a duration of 18 months, and carried an interest rate of 8% p.a. Under the terms of the agreement, FiveT had the right to convert the
loan or parts thereof including accrued interest into common shares of either Altamira or Auris Medical Holding Ltd., subject to additional
provisions and certain restrictions. On December 2, 2020, FiveT converted principal of CHF 895,455 into 737,000 shares of Auris Medical
Holding Ltd. at the pre-defined maximum conversion price of $1.35 per share. At December 31, 2020, the remaining principal amount outstanding
together with accrued interest was CHF 636,465. Under the terms and conditions of the convertible loan, we had the right to repay the
convertible loan and accrued interest at 130% after the first six months at the earliest On March 4, 2021, FiveT converted the remaining
outstanding amount under the loan, thus retiring the loan.
Due
to the COVID-19 pandemic, in 2020 Swiss banks granted special loans under certain conditions with a guarantee by the Swiss Government.
Our Company was eligible for a loan of CHF 50,000, which was granted on March 26, 2020. The loan is interest-free and may be repaid at
any time with a maximum term of five years. The company repaid the loan on June 18, 2021.
On
April 23, 2020, the Company entered into a purchase agreement and a Registration Rights Agreement with Lincoln Park Capital Fund, LLC
(the “2020 Commitment Purchase Agreement”). Pursuant to the purchase agreement, LPC agreed to subscribe for up to USD 10,000,000
of our common shares over the 30-month term of the purchase agreement. In 2020, we issued 1,200,000 of our common shares to LPC for an
aggregate amount of USD 1.1 million. At the date of this annual report, we have sold 1,500,000 of our common shares to LPC for a total
amount of USD 1.6 million. The 2020 Commitment Purchase Agreement effectively replaced the 2018 Commitment Purchase Agreement. Under
the 2018 Commitment Purchase Agreement LPC agreed to purchase common shares for up to $10,000,000 over the 30-month term of the Purchase
Agreement. Prior to its termination we had issued 587,500 common shares for aggregate proceeds of $1.8 million to LPC under the 2018
Commitment Purchase Agreement. The 2018 Commitment Purchase Agreement replaced the Purchase Agreement that we entered into with LPC on
October 10, 2017 (the “2017 Commitment Purchase Agreement”), which was terminated as a result of the Merger. Under the 2017
Commitment Purchase Agreement, LPC agreed to subscribe for up to $13,500,000 of our common shares, and prior to its termination, we had
issued an aggregate of 2,600,000 (pre-merger) common shares for aggregate proceeds of $1.8 million to LPC under the 2017 Commitment Purchase
Agreement.
Under
the 2020 Commitment Purchase Agreement, we have the right, from time to time at our sole discretion over the 30-month period from and
after May 12, 2020, to require LPC to subscribe for up to 150,000 of our common shares, subject to adjustments as set forth below (such
maximum number of shares, as may be adjusted from time to time, the “Regular Purchase Share Limit”; each such purchase, a
“Regular Purchase”); provided, however, that (i) the Regular Purchase Share Limit shall be increased to 300,000 of our common
shares if the total number of outstanding common shares on the purchase date exceeds 10,000,000, (ii) the Regular Purchase Share Limit
shall be increased to 350,000 of our common shares if the closing sale price of our common shares is not below $1.00 on the purchase
date and the total number of outstanding common shares on the purchase date exceeds 12,500,000 and (iii) the Regular Purchase Share Limit
shall be increased to 400,000 of our common shares if the closing sale price of our common shares is not below $1.00 on the purchase
date and the total number of outstanding common shares on the purchase date exceeds 15,000,000. The Regular Purchase Share Limit is subject
to proportionate adjustment in the event of a reorganization, recapitalization, non-cash dividend, stock split or other similar transaction;
provided, that if after giving effect to such full proportionate adjustment, the adjusted Regular Purchase Share Limit would preclude
us from requiring LPC to subscribe for common shares at an aggregate purchase price equal to or greater than $150,000 in any single Regular
Purchase (which dollar threshold shall not be adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction), then the Regular Purchase Share Limit for such Regular Purchase will not be fully adjusted, but rather the Regular
Purchase Share Limit for such Regular Purchase shall be adjusted as specified in the 2020 Commitment Purchase Agreement, such that, after
giving effect to such adjustment, the Regular Purchase Share Limit will be equal to (or as close as can be derived from such adjustment
without exceeding) $150,000. We may not require LPC to purchase in any single Regular Purchase common shares having an aggregate purchase
price greater than $1,000,000 (which dollar threshold shall not be adjusted for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction). We may not issue any of our common shares as a Regular Purchase on a date in which the closing
sale price of our common shares is below the sum of (x) the U.S. Dollar equivalent of the then applicable par value per common share
and (y) $0.01 (which dollar amount shall not be subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction). The purchase price for Regular Purchases shall be equal to the lesser of (i) the lowest sale
price of our common shares on the applicable purchase date and (ii) the average of the three lowest closing sale prices of our common
shares during the 10 business days immediately prior to the applicable purchase date, as reported on the Nasdaq Capital Market.
In
addition to Regular Purchases described above, we may also direct LPC to purchase “accelerated amounts” and/or “additional
accelerated amounts” on any business day on which we have properly submitted a Regular Purchase Notice, and/or an Accelerated Purchase
(as defined elsewhere in this prospectus) has been completed and all of the shares to be purchased thereunder have been properly delivered
to LPC in accordance with the 2020 Commitment Purchase Agreement prior to such time on such business day, and provided that the closing
price of our common shares on such business day is not less than $1.00 per share. In all instances, we may not issue common shares to
LPC under the 2020 Commitment Purchase Agreement if it would result in LPC beneficially owning more than 4.99% of our outstanding common
shares. The net proceeds under the 2020 Commitment Purchase Agreement will depend on the frequency and prices at which we issue our common
shares to LPC.
On
May 15, 2019, the Company completed a public offering of (i) 440,000 common shares with a par value of CHF 0.40 each, together with warrants
to purchase 440,000 common shares, and (ii) 1,721,280 pre-funded warrants, with each pre-funded warrant exercisable for one common share,
together with warrants to purchase 1,721,280 common shares, including 110,000 common shares and warrants to purchase 110,000 common shares
sold pursuant to a partial exercise by the underwriters of the underwriters’ over-allotment option (the “May 2019 Registered
Offering”). The exercise price for the pre-funded warrants was CHF 0.01 per common share and for the warrants CHF 4.34. In December
2020, 1,263,845 warrants were exercised at a total exercise price of CHF 5.5 million; at December 31, 2020 a total of 897,435 warrants
were still outstanding. In March 2021, the remaining warrants were exercised for CHF 3.9 million.
On
November 30, 2018, we entered into the A.G.P. Sales Agreement with A.G.P. Pursuant to the terms of the A.G.P. Sales Agreement, as amended
on April 5, 2019, we may offer and sell our common shares, from time to time through A.G.P. by any method deemed to be an “at-the-market”
offering as defined in Rule 415(a)(4) promulgated under the Securities Act. Pursuant to the A.G.P. Sales Agreement, we may sell common
shares up to a maximum aggregate offering price of $25.0 million. In 2021, we sold 1,184,700 shares under the ATM for aggregate proceeds
of $3.5 million. As of the date of this Annual Report, we have sold 2,943,318 of our common shares for an aggregate offering price of $6.7
million pursuant to the A.G.P. Sales Agreement.
We
have no other ongoing material financial commitments, such as lines of credit or guarantees that are expected to affect our liquidity
over the next five years, other than leases.
Funding
requirements
We
expect that we will need additional funding. We expect our total cash need in 2022 to be in the range of CHF 11 to 13 million. As part
of our strategic repositioning, we are aiming to spin off or divest our traditional development projects in neurotology, rhinology and
allergology, which may provide us with additional sources of funding.
As
of the date of this Annual Report we have warrants outstanding, which are exercisable for an aggregate of 246,102 common shares at a
weighted average exercise price of $59.85 per share, an equity commitment to sell up to $8.4 million of additional common shares to LPC
pursuant to the LPC Purchase Agreement and an at-the-market offering program pursuant to the A.G.P. Sales Agreement for sales of up to
$18.3 million of additional common shares.
We
have based our estimate of funding requirements on assumptions that may prove to be wrong, and we could use our capital resources sooner
than we currently expect. Our future funding requirements will depend on many factors, including but not limited to:
|
● |
the scope, rate of progress,
results and cost of our clinical trials, nonclinical testing, and other related activities; |
|
|
|
|
● |
the cost of manufacturing
clinical supplies, and establishing commercial supplies, of our product candidates and any product that we may develop; |
|
|
|
|
● |
the number and characteristics
of product candidates that we pursue; |
|
|
|
|
● |
the cost, timing, and outcomes
of regulatory approvals; |
|
|
|
|
● |
the cost and timing of
establishing sales, marketing, and distribution capabilities; and |
|
|
|
|
● |
the terms and timing of
any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments
thereunder. |
We
expect that we will require additional funding to complete our development programs with AM-125, AM-AM-301, and AM-401, obtain regulatory
approval for them and to commercialize our product candidates AM-125 AM-401 or any other product candidate and to further advance the
market roll-out of Bentrio™. If we receive regulatory approval for AM-125 or AM-401, and if we choose not to grant any licenses
to partners, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution,
depending on where we choose to commercialize. Additional funds may not be available on a timely basis, on favorable terms, or at all,
and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are not
able to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization
efforts.
We
may raise additional capital through the sale of equity or convertible debt securities. In such an event, your ownership interest will
be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect your rights as a
holder of our common shares.
For
more information as to the risks associated with our future funding needs, see “Item 3. Key Information—D. Risk factors.”
Significant
accounting policies and use of estimates and judgment
Our
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which have been prepared in accordance with IFRS. The preparation of these financial statements requires us to make judgments, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
While
our significant accounting policies are more fully described in the notes to our audited consolidated financial statements appearing
elsewhere in this Annual Report, we believe that the following accounting policies are the most critical to aid you in fully understanding
and evaluating our financial condition and results of operations.
Intangible
assets
Research
and development
The
project stage forms the basis for the decision as to whether costs incurred for the Company’s development projects can be capitalized.
For the AM-125 program, given the current stage of the development project, the nature of the development approach and the fact that
there is an existing market for oral betahistine, direct development expenditures have been capitalized, including certain expenses related
to the patenting of intellectual property.
Intellectual
property-related costs for patents are part of the expenditure for the research and development projects. Therefore, registration costs
for patents are expensed when incurred as long as the research and development project concerned does not meet the criteria for capitalization.
Licenses,
Intellectual Property and Data rights
Intellectual
property rights that are acquired by the Company are capitalized as intangible assets if they are controlled by the Company, are separately
identifiable and are expected to generate future economic benefits, even if uncertainty exists as to whether the research and development
will ultimately result in a marketable product. Consequently, upfront and milestone payments to third parties for the exclusive use of
pharmaceutical compounds in specified areas of treatment are recognized as intangible assets.
Measurement
Intangible
assets acquired that have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.
Subsequent
expenditure
Subsequent
expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All
other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
Amortization
All
licenses of the Company have finite lives. Amortization will start once the Company’s intangible assets are available for use.
Amortization of licenses is calculated on a straight-line basis over the period of the expected benefit or until the license expires.
The estimated useful life of the Company’s licenses is 10 years from the date first available for use or the remaining term of
patent protection. The Company assesses at each balance sheet date whether intangible assets which are not yet ready for use are impaired.
Income
tax
Income
tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business
combination, or items recognized directly in equity or in other comprehensive income/loss, or OCI.
Current
tax
Current
tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or
receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. Taxable
profit differs from “loss before tax” as reported in the consolidated statement of profit or loss and other comprehensive
loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
Deferred
tax
Deferred
income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not recognized for:
| ● | temporary
differences on the initial recognition of assets or liabilities in a transaction that is
not a business combination and that affects neither accounting nor taxable profit or loss; |
| ● | temporary
differences related to investments in subsidiaries to the extent that the Company is able
to control the timing of the reversal of the temporary differences and it is probable that
they will not reverse in the foreseeable future; and |
| ● | taxable
temporary differences arising on the initial recognition of goodwill. |
Deferred
income tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred
income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
Deferred
tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when
they relate to income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on
a net basis.
Employee
benefits
The
Company maintains a pension plan for all employees employed in Switzerland through payments to an independent collective foundation.
Under IFRS, the pension plan qualifies as a defined benefit plan. There are no pension plans for the subsidiaries in Ireland, Australia
and the United States.
The
Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior periods, discounting that amount and deducting the fair value of any
plan assets.
The
recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions
in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum
funding requirements.
Remeasurements
of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the
effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Company determines the net interest
expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined
benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes
in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense
and other expenses related to defined benefit plans are recognized in profit or loss.
Share-based
compensation
Stock
Options
The
Company maintains a share-based payment plan in the form of a stock option plan for its employees, members of the Board of Directors
as well as key service providers. Stock options are granted at the Board’s discretion without any contractual or recurring obligations.
The
share-based compensation plan qualifies as an equity settled plan. The grant-date fair value of share-based payment awards granted to
employees is recognized as an expense, with a corresponding increase in equity, over the period that the employees become unconditionally
entitled to the awards. Under the Company’s equity incentive plan (the “Equity Incentive Plan” or “EIP”)
adopted in August 2014 and amended in April 2017 and June 2019, 50% of granted share options granted to employees vest after a period
of service of two years from the grant date and the remaining 50% vest after a period of service of three years from the grant date.
Share options granted to members of the Board of Directors from 2016 onwards vest after a period of one year after the grant date.
The
amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet
the related service and non-market performance conditions at the vesting date. Share-based payments that are not subject to any further
conditions are expensed immediately at grant date. In the year the options are exercised the proceeds received net of any directly attributable
transaction costs are credited to share capital (par value) and share premium.
Valuation
of stock options
The
fair value of our stock options is determined by our Management and our Board of Directors and takes into account numerous factors to
determine a best estimate of the fair value of our share options as of each grant date.
Option
pricing and values are determined based on the Black Scholes option pricing model, and assumptions are made for inputs such as volatility
of our stock and the risk-free rate.
Recent
accounting pronouncements
See
Note 4 to our audited financial statements included elsewhere in this Annual Report for a full description of recent accounting pronouncements,
including the expected dates of adoption and effects on the Company’s financial condition, results of operations and cash flows.
| C. | Research
and development, patents and licenses, etc. |
See
“Item 4. Information on the Company—A. History and Development of the Company,” “Item 4. Information on the Company—B.
Business Overview” and Item 5. Operating and Financial Review and Prospects—A. Operating Results – Results of Operations.”
See
“Item 5. Operating and Financial Review and Prospects.”
E. | Critical
Accounting Estimates |
Not
applicable.
See
“Forward-Looking Statements.”
ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. | Directors
and senior management |
Our
directors have been elected for a one-year term and, accordingly, the term will expire at the time of our 2022 annual general meeting.
All directors except Calvin W. Roberts will stand for re-election.
The
following table presents information about our executive officers and directors.
Name | |
Position | |
Age | | |
Initial
Year
of
Appointment | |
Executive Officers | |
| |
| | |
| |
Thomas Meyer | |
Chairman, Director and Chief
Executive Officer | |
| 54 | | |
| 2003 | |
Samuel A. Wickline | |
Chief Scientific Officer | |
| 69 | | |
| 2021 | |
Marcel Gremaud | |
Chief Financial Officer | |
| 64 | | |
| 2021 | |
| |
| |
| | | |
| | |
Non-Executive Directors | |
| |
| | | |
| | |
Armando Anido | |
Director | |
| 64 | | |
| 2016 | |
Mats Blom | |
Director | |
| 57 | | |
| 2017 | |
Alain Munoz | |
Director | |
| 72 | | |
| 2018 | |
Calvin W. Roberts | |
Director | |
| 69 | | |
| 2015 | |
Margrit Schwarz | |
Director | |
| 58 | | |
| 2021 | |
Unless
otherwise indicated, the current business addresses for our executive officers and directors is Altamira Therapeutics Ltd., Clarendon
House, 2 Church Street, Hamilton HM 11, Bermuda.
Executive
Officers
Thomas
Meyer, Founder, Chairman of the Board of Directors and Chief Executive Officer: Mr. Meyer founded Auris Medical in April 2003. Prior
to founding us, he was the Chief Executive Officer of Disetronic Group, a leading Swiss supplier of precision infusion and injection
systems. He worked for Disetronic in various functions starting in 1988, becoming member of the Board of Directors in 1996, Deputy Chief
Executive Officer in 1999 and Chief Executive Officer in early 2000. Prior to joining Disetronic, he advised several Swiss companies
in strategy, marketing and corporate finance. He is currently the Chairman of the Board of Directors of PharmaTrail Ltd. He holds a Ph.D.
(Dr.rer.pol.) in business administration from the University of Fribourg, Switzerland.
Samuel
A. Wickline, Chief Scientific Officer: Mr. Wickline, MD, is the founder of Trasir Therapeutics, Inc., which we acquired in
2021 and formed the basis for our activities in RNA therapeutics. Before joining Altamira Therapeutics, he was the Director of the USF
Health Heart Institute, Associate Dean and Chair in Cardiovascular Medicine, Professor of Cardiovascular Sciences, Molecular Physiology
and Pharmacology, and Medical Engineering at the University of South Florida (USF). Previously, he was Professor of Medicine, Physics,
Biomedical Engineering, and Cell Biology and Physiology at Washington University, St. Louis.
Marcel
Gremaud, Chief Financial Officer: Mr. Gremaud, CPA, has been Altamira Therapeutics’
Chief Financial Officer since November 2021. Mr. Gremaud has acquired more than 30 years’ experience in controlling and accounting
in international pharma companies and start-ups. In 2001 he founded Gremaud GmbH, an audit and accounting company supporting companies
in financial consolidation and accounting in accordance with IFRS or Swiss GAAP FER.
Non-Executive
Directors
Armando
Anido, Director, Chairman of the Compensation Committee: Mr. Anido has been a member of our Board of Directors since April 2016.
Mr. Anido has more than 30 years of executive, operational and commercial leadership experience in the biopharmaceutical industry. He
has served as Chairman and Chief Executive Officer of Zynerba Pharmaceuticals, Inc., since October 2014. Prior to Zynerba, Mr. Anido
served as Chief Executive Officer of NuPathe, Inc., and Auxilium Pharmaceuticals, Inc. Prior to Auxilium, Mr. Anido held commercial leadership
roles at MedImmune, Glaxo Wellcome and Lederle Labs. He is currently a member of the Board of Directors of SCYNEXIS, Inc. (SCYX), and
he was a member of the Board of Directors of Aviragen Therapeutics, Inc. until it merged with Vaxart Inc. (VXRT) and Adolor Corporation
until it was sold to Cubist Pharmaceuticals. Mr. Anido earned a BS in Pharmacy and an MBA from West Virginia University.
Mats
Blom, Director: Mr. Blom has been a member of our Board of Directors since April 2017. Mr. Blom is Chief Financial Officer
(CFO) of NorthSea Therapeutics B.V., a biotechnology company focused on oral, structurally engineered lipid therapeutics. Prior to
joining NorthSea, he served as CFO of Modus Therapeutics A/B, a biotechnology company developing therapeutics to restore healthy
blood flow for patients with debilitating diseases, Zealand Pharma A/B, a biotechnology company focused on the discovery,
design and development of innovative peptide-based medicines, and Swedish Orphan International, an orphan drug company acquired
by BioVitrum in 2009. In addition, Mr. Blom has extensive managerial experience and has held CFO positions at Active Biotech
AB and Anoto Group AB. Previously, he served as a management consultant at Gemini Consulting and Ernst &
Young. He is currently a member of the Board of Directors of Hansa Biopharma AB (HNSA), Egetis Therapeutics AB (EGTX) and
Pephexia Therapeutics ApS. Mats Blom holds a BA in Business Administration and Economics from the University of
Lund and an MBA from IESE University of Navarra, Barcelona.
Alain
Munoz, Director: Mr. Munoz, MD, has been a member of our Board of Directors since March 2018 and previously served on our Board
of Directors between 2007 and 2015. Mr. Munoz is an entrepreneur and independent management consultant in the pharmaceutical and
biotechnology industry. From 1990 to 2000, Dr. Munoz worked with the Fournier Group, as Research and Development Director and then
Senior Vice President of the Pharmaceutical Division. He joined Fournier from Sanofi Research, where he started as Director in the
cardiovascular and anti-thrombotic products department and then as Vice President international development. Dr. Munoz is qualified
in cardiology and anesthesiology from the University Hospital of Montpellier, France where he was head of the clinical cardiology
department. He has been a member of the Scientific Committee of the French drug agency. He serves on the Board of Zealand Pharma A/S
(ZEAL.CO) and Amryt Pharma Plc (AMYT.L). He is Chairman of the Board of Acticor Biotech (ALACT.PA and a member of the Scientific
Advisory Board of Valneva (VLA.PA).
Calvin
W. Roberts, Director: Mr. Roberts, MD, has been a member of our Board of Directors since April 2015. Mr. Roberts is President and
CEO of Lighthouse Guild International, a not for profit provider of services to the blind and visually impaired. Previously, he was Senior
Vice President and Chief Medical Officer, Eye Care at Bausch Health Companies Inc. (NYSE: BHC). Dr. Roberts is a specialist in cataract
and refractive surgery and has been a pioneer in the use of ophthalmic non-steroidals. Since 1982 he has been a Clinical Professor of
Ophthalmology at Weill Medical College of Cornell University. In addition, he had a private ophthalmology practice in New York City between
1998 and 2008 and is the author of over 50 peer-reviewed articles. Dr. Roberts was a member of the Board of Directors and the Audit Committee
of Alimera Sciences, Inc. (NASDAQ: ALIM) from its founding in 2003 until 2019, and of Iveric Bio Corporation (NASDAQ: ISEE) since 2019.
Margrit Schwarz, Director:
Ms. Schwarz has been a member of our Board of Directors since July 2021. She currently serves as Chief Business Officer of HepareGeniX,
a clinical-stage biotechnology company in the liver regeneration space. Prior executive positions include Chief Operating Officer of
Draupnir Bio, and Chief Scientific Officer and Head of R&D at Genevant Sciences, where she was responsible for developing a portfolio
of RNAi and mRNA drug candidates in the liver and rare disease space. Dr Schwarz has also served as VP & Global Head External Innovation
at Roche, VP & Therapeutic Area Head Cardiorenal at Boehringer Ingelheim, and Director Research at Amgen. She has led preclinical
R&D and IND-enabling phases for multiple development candidates, including the anti-PCSK9 therapeutic antibody Repatha, launched
in 2015. She is an Entrepreneur-in-Residence at Novo Seeds and has been a member of the Board of Directors of the KERN Conference since
2009. She holds a PhD in biochemistry from the University of Cologne, Germany, and an MBA from Columbia University, NY.
Board
Diversity Matrix (As of March 31, 2022)
To
be completed by Foreign Issuers (with principal executive offices outside of the U.S.) and Foreign Private Issuers |
Country
of Principal Executive Offices: |
Bermuda |
Foreign
Private Issuer |
Yes |
Disclosure
Prohibited Under Home Country Law |
No |
Total
Number of Directors |
6 |
|
Female |
Male |
Non-Binary |
Did
Not Disclose Gender |
Part
I: Gender Identity |
Directors |
1 |
5 |
0 |
0 |
Part
II: Demographic Background |
Underrepresented
Individual in Home Country Jurisdiction |
0 |
LGBTQ+ |
0 |
Did
Not Disclose Demographic Background |
0 |
For
the year ended December 31, 2021, the aggregate compensation accrued or paid to the members of our board of directors and our executive
officers for services in all capacities was CHF 946,449 (2020: CHF 947,701).
For
the year ended December 31, 2021, the amount set aside or accrued by us to provide pension, retirement or similar benefits to members
of our board of directors or executive officers amounted to a total of CHF 29,467 (2020: CHF 26,870).
Compensation
awarded to the Board of Directors in 2021
The
total compensation of the members of the board of directors in 2021 is outlined below:
In
CHF | |
Cash
Compensation | | |
Social
Contributions | | |
Stock
Options(2) | | |
Total | |
Thomas Meyer, PhD, Chairman(1) | |
| — | | |
| — | | |
| — | | |
| — | |
Armando Anido, MBA | |
| 41.311 | | |
| — | | |
| 12,012 | | |
| 53,323 | |
Mats Blom, MBA | |
| 41,311 | | |
| — | | |
| 12,012 | | |
| 53.323 | |
Alain Munoz, MD | |
| 41,311 | | |
| — | | |
| 12,012 | | |
| 53,323 | |
Calvin W. Roberts, MD | |
| 41,311 | | |
| — | | |
| 12,012 | | |
| 53,323 | |
Margrit Schwarz, PhD | |
| 18,491 | | |
| — | | |
| — | | |
| 18,491 | |
Total | |
| 183,735 | | |
| — | | |
| 48,048 | | |
| 231,783 | |
(1) |
Disclosed under “Compensation
Awarded to Our Executive Officers” below. The Chief Executive Officer does not receive any additional compensation for the
exercise of the office of the Chairman. |
(2) |
In 2021, 10,672 options were granted to each eligible member of the
Board of Directors, with an exercise price of USD 3.20 per common share and an expiration date of May 17, 2029. The fair value calculation
of the options was based on the Black-Scholes option pricing model. Assumptions were made regarding inputs such as volatility and the
risk-free rate in order to determine the fair value of the options. |
Compensation
Awarded to our Executive Officers in 2021
The
total compensation and the highest individual compensation to our executive officers in 2021 are outlined below
in
CHF | |
Fixed
Cash Compensation | | |
Variable
Compensation (1) | | |
Social
contributions and fringe benefits | | |
Stock
Options(2) | | |
Total | |
Thomas
Meyer, PhD, Chief Executive Officer(3) | |
| 366,000 | | |
| 542,705 | | |
| 109,086 | | |
| 152,665 | | |
| 1,170,456 | |
Executive
Officers Total(4) | |
| 523,230 | | |
| 542,705 | | |
| 144,536 | | |
| 192,362 | | |
| 1,402,833 | |
(1) | The
variable compensation is paid in shares of the company. |
(2) | 2021 option grants, exercise prices of $3.511 and $1.889, expiration
date April 30, 2029 and October 31, 2029, respectively. The fair value calculation of the options was based on the Black-Scholes option
pricing model. Assumptions were made regarding inputs such as volatility and the risk-free rate in order to determine the fair value of
the options. |
(3) | Highest
paid executive. |
(4) | On
December 31, 2021, we had two executive officers. |
Employment
Agreements
We
have entered into employment and/or consulting agreements with our executive officers Thomas Meyer, Samuel A. Wickline and Marcel Gremaud.
The employment and/or consulting agreements provide for the compensation that Messrs. Meyer, Wickline and Gremaud are entitled to receive,
including certain equity grants, and the employment agreement of Mr. Meyer contains a termination notice period of six months. The Company
will have title to the intellectual property rights developed in connection with the executive officer’s employment, if any.
None
of our directors has entered into service agreements with the Company. However, we may in the future enter into employment or services
agreements with such individuals, the terms of which may provide for, among other things, cash or equity-based compensation and benefits.
Equity
Incentive Plans
Equity
Incentive Plan
In
August 2014, as amended and restated in June 2019, we established the EIP with the purpose of motivating and rewarding those employees
and other individuals who are expected to contribute significantly to our success, and advancing the interests of our shareholders by
enhancing our ability to attract, retain and motivate individuals. Since January 15, 2021, the maximum number of shares available for
issuance under the EIP is 1,500,000 common shares. The option exercise price for options under the EIP is determined by the compensation
committee at the time of grant but shall not be less than the par value of a common share on the grant date.
Plan
administration. The EIP is administered by our compensation committee. Approval of the committee is required for all grants of awards
under the EIP. The committee may delegate to one or more officers the authority to grant options and stock appreciation rights, and the
committee may delegate to another committee (which may consist of solely one director) the authority to grant all types of awards.
Eligibility.
Any director, employee, consultant or any other individual who provides services to us or any of our affiliates is eligible to be selected
to receive an award under the EIP.
Awards.
Awards include options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based
awards.
Vesting
period. The committee determines the time or times at which an option becomes vested and exercisable, provided that the minimum vesting
period is 12 months. The committee may specify in an award agreement that an “in-the-money” option be automatically exercised
on its expiration date. For restricted stock and restricted stock units, the award agreement will specify the vesting schedule and, with
respect to restricted stock units, the delivery schedule.
Accelerated
vesting. Subject to any additional vesting conditions that may be specified in an individual award agreement, the EIP provides that
upon a change of control of the Company (as defined in the EIP) the committee may cause options and stock appreciation rights to be cancelled
in consideration of full acceleration of the award or a substitute award with equal intrinsic value (as defined in the EIP). It also
provides that the committee may decide, or include in any award agreement, the circumstances in which, and the extent to which, an award
may be exercised, settled, vested, paid or forfeited in the event of a participant’s termination of service prior to exercise or
settlement of an award.
Amendment.
Our board of directors has the authority to amend the EIP subject, in certain circumstances, to required shareholder approval or the
consent of an affected participant.
Indemnification
Section
98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability
which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach
of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty
in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against
any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or
in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act.
Our
Bye-laws provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect of their
fraud or dishonesty. Our Bye-laws provide that the shareholders waive all claims or rights of action that they might have, individually
or in right of the company, against any of the company’s directors or officers for any act or failure to act in the performance
of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director or officer. Section
98A of the Companies Act permits us to purchase and maintain insurance for the benefit of any officer or director in respect of any loss
or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not we may otherwise
indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a
purpose.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Company, the Company has been advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
Board
Composition and Election of Directors
Our
board of directors is currently composed of six members, see “Item 6. Directors, Senior Management and Employees—A. Directors
and senior management.” Each director is elected for a one-year term.
Our
Bye-laws provide that directors may be elected at either the annual general meeting or a special general meeting. Unless shareholders
determine otherwise, under our Bye-laws directors hold office until the next annual general meeting or until their successors are elected
or appointed or their office is otherwise vacated.
We
are a foreign private issuer. As a result, in accordance with the Nasdaq stock exchange listing requirements, we comply with home country
governance requirements and certain exemptions thereunder rather than the Nasdaq stock exchange corporate governance requirements. For
an overview of our corporate governance principles, see “Item 16G. Corporate governance.”
Committees
of the Board of Directors
Audit
Committee
The
audit committee, which consists of Mats Blom, Alain Munoz and Calvin W. Roberts, assists our board of directors in overseeing our accounting
and financial reporting processes and the audits of our financial statements. In addition, the audit committee is directly responsible
for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. Mr. Blom
serves as chairman of the committee. The audit committee consists exclusively of members of our board of directors who are financially
literate, and Mr. Blom is considered an “audit committee financial expert” as defined by the SEC. Our board of directors
has determined that Mr. Blom, Mr. Munoz and Mr. Roberts satisfy the “independence” requirements set forth in Rule 10A-3 under
the Exchange Act.
The
audit committee is governed by a charter that complies with Nasdaq rules. The audit committee is responsible for, among other things:
| ● | the
appointment, compensation, retention and oversight of any auditor or accounting firm engaged
for the purpose of preparing or issuing an audit report or performing other audit, review
or attest services; |
| ● | pre-approving
the audit services and non-audit services to be provided by our independent auditor before
the auditor is engaged to render such services; |
| ● | reviewing
and discussing with the independent auditor its responsibilities under generally accepted
auditing standards, the planned scope and timing of the independent auditor’s annual
audit plan(s) and significant findings from the audit; |
| ● | obtaining
and reviewing a report from the independent auditor describing all relationships between
the independent auditor and the Company consistent with the applicable PCAOB requirements
regarding the independent auditor’s communications with the audit committee concerning
independence; |
| ● | confirming
and evaluating the rotation of the audit partners on the audit engagement team as required
by law; |
| ● | reviewing
with management and the independent auditor, in separate meetings whenever the Audit Committee
deems appropriate, any analyses or other written communications prepared by the Management
and/or the independent auditor setting forth significant financial reporting issues and judgments
made in connection with the preparation of the financial statements, including analyses of
the effects of alternative IFRS methods on the financial statements; and other critical accounting
policies and practices of the Company; |
| ● | reviewing,
in conjunction with the Chief Executive Officer and Chief Financial Officer of the Company,
the Company’s disclosure controls and procedures and internal control over financial
reporting; |
| ● | establishing
procedures for the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters, and the confidential,
anonymous submission by employees of the Company of concerns regarding questionable accounting
or auditing matters; |
| ● | approving
or ratifying any related person transaction (as defined in our related person transaction
policy) in accordance with our related person transaction policy. |
The
audit committee meets at least four times per year.
Compensation
Committee
The
compensation committee, which consists of Armando Anido and Alain Munoz, assists our board of directors in overseeing our cash compensation
and equity award recommendations for our executive officers along with the rationale for such recommendations, as well as summary information
regarding the aggregate compensation provided to our directors and executive officers. While Bermuda law does not require that we adopt
a compensation committee, we have established a compensation committee in accordance with Bermuda law. As a result, our practice varies
from the requirements of Nasdaq Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities, composition and
independence of compensation committees.
As of December 31, 2021, we had 17 employees (14.5 full time equivalents,
FTEs). The breakdown by cost centers is as follows: Research & Development: 10 FTEs, General & Administration: 2.9 FTEs, Sales
& Marketing: 1.1 FTEs, Cost of Goods Sold: 0.5 FTEs. 13.5 FTEs were located in Switzerland and 1 FTE in the U.S. None of our employees
is subject to a collective bargaining agreement or represented by a trade or labor union. We consider our relations with our employees
to be good.
See
“Item 7. Major Shareholders and Related Party Transactions—A. Major shareholders.”
ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The
following table presents information relating to the beneficial ownership of our common shares as of March 15, 2022 by:
| ● | each
person, or group of affiliated persons, known by us to own beneficially 5% or more of our
outstanding common shares; |
| ● | each
of our executive officers and directors; and |
| ● | all
executive officers and directors as a group. |
The
number of common shares beneficially owned by each entity, person, executive officer or director is determined in accordance with the
rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any common shares over which the individual has sole or shared voting power or investment power as well
as any common shares that the individual has the right to acquire within 60 days of March 15, 2022 through the exercise of any option,
warrant or other right. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table
have sole voting and investment power with respect to all common shares held by that person.
Common
shares that a person has the right to acquire within 60 days of March 28, 2022 are deemed outstanding for purposes of computing the percentage
ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any
other person, except with respect to the percentage ownership of all executive officers and directors as a group. Unless otherwise indicated
below, the address for each beneficial owner is Altamira Therapeutics Ltd., Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
The
percentage of common shares beneficially owned is based on 15,264,261 common shares issued and outstanding as of March 28, 2022. Each
common share confers the right on the holder to cast one vote at a general meeting of shareholders and no shareholder has different voting
rights.
| |
Shares
Beneficially
Owned | |
Shareholder | |
Number | | |
Percent | |
5% Shareholders | |
| | |
| |
- | |
| — | | |
| — | |
Executive Officers and Directors | |
| | | |
| | |
Thomas Meyer, PhD (1) | |
| 1,088,070 | | |
| 7.13 | % |
Armando Anido, MBA (2) | |
| 69,990 | | |
| * | |
Mats Blom, MBA (3) | |
| 69,869 | | |
| * | |
Alain Munoz, MD (4) | |
| 69,869 | | |
| * | |
Calvin W. Roberts, MD (5) | |
| 69,974 | | |
| * | |
Margrit Schwarz | |
| — | | |
| * | |
Samuel A. Wickline, MD (6) | |
| 620,669 | | |
| 4.07 | % |
Marcel Gremaud, CPA | |
| — | | |
| * | |
All current directors and executive officers
as a group (8 persons) | |
| 1,988,750 | | |
| 13.03 | % |
* | Indicates
beneficial ownership of less than 1% of the total outstanding common shares. |
| (1) | Consists
of 836,431 common shares, warrants to purchase 89,744 common shares and options to purchase
161,895 common shares under the EIP. |
| (2) | Consists
of options to purchase common shares under the Company’s EIP. |
| (3) | Consists
of options to purchase common shares under the Company’s EIP. |
| (4) | Consists
of 62 common shares owned by Alain Munoz and options to purchase common shares under the
Company’s EIP. |
| (5) | Consists
of 76 common shares jointly owned by Calvin W. Roberts and Andrea Colvin Roberts. Also, consists
of 100 common shares held by Calvin W. Roberts, MD PC Pension Plan. Calvin Roberts is a trustee
for Calvin W. Roberts, MD PC Pension Plan. Also consists of options to purchase common shares
under the Company’s EIP. |
| (6) | Consists
of 620,669 common shares. |
Holders
As
of March 28, 2022, we had six shareholders of record of our common shares.
Significant
Changes in Ownership by Major Shareholders
None
B. | Related
party transactions |
Related
Person Transaction Policy
Prior
to our initial public offering, we entered into a new related person transaction policy under which any such transaction must be approved
or ratified by the audit committee or the board of directors.
Indemnification
Agreements
We
have entered into indemnification agreements with our directors and executive officers. The indemnification agreements and our Bye-laws
require us to indemnify our directors and executive officers to the fullest extent permitted by law.
Employment
Agreements
Certain
of our executive officers have entered into employment agreements with the Company, certain of which provide for notice of termination
periods and include restrictive covenants. None of our directors have entered into service agreements with the Company. See “Item
6. Directors, Senior Management and Employees—B. Compensation—Employment Agreements.”
Mandate
Agreement
Ante
Treuhand AG (“Ante Treuhand”) provided the Chief Financial Officer to the Company until November 18, 2021. The Chief Financial
Officer is an employee of Ante Treuhand and is not paid directly by the Company. Fees paid to Ante Treuhand for CFO services were CHF
231,770 in 2021 compared to CHF 173,030 in 2020. Fees paid to Ante Treuhand for other services provided during the year ended December
31, 2021 were CHF 18,020 compared to CHF 3,025 in 2020.
Gremaud
GmbH provides the Chief Financial Officer to the company since November 18, 2021. The Chief Financial Officer is an employee of Gremaud
GmbH and is not paid directly by the Company. Fees paid to Gremaud GmbH for CFO services were CHF 14,720 for 2021. Fees paid to Gremaud
GmbH for other services provided during the year ended December 31, 2021 were CHF 161,596 compared to CHF 27,625 in 2020.
| C. | Interests
of experts and counsel |
Not
applicable.
ITEM
8. FINANCIAL INFORMATION
| A. | Consolidated
statements and other financial information |
Financial
Statements
See
“Item 18. Financial Statements,” which contains our financial statements prepared in accordance with IFRS.
Legal
Proceedings
From
time to time we may become involved in legal proceedings that arise in the ordinary course of business. During the period covered by
the financial statements contained herein, we have not been a party to or paid any damages in connection with litigation that has had
a material adverse effect on our financial position.
No
assurance can be given that future litigation will not have a material adverse effect on our financial position. See “Item 3. Key
Information—D. Risk factors.”
Dividends
and Dividend Policy
We
have never paid or declared any cash dividends on our shares, and we do not anticipate paying any cash dividends on our common shares
in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors
and any payment of dividends will, amongst other requirements, be subject to legal restrictions.
A
discussion of the significant changes in our business can be found under “Item 4. Information on the Company—A. History
and development of the Company” and “Item 4. Information on the Company—B. Business Overview.”
ITEM
9. THE OFFER AND LISTING
| A. | Offering
and listing details |
Not
applicable.
Not
applicable.
Our common shares began trading
on the Nasdaq Global Market on August 11, 2014 under the symbol “EARS”. On September 28, 2017, we transferred our common shares
from the Nasdaq Global Market to the Nasdaq Capital Market under the same symbol (“EARS”). On March 14, 2018, our post-Merger
common shares began trading on the Nasdaq Capital Market. Following approval of our shareholders at a Special General Meeting of Shareholders
held on July 21, 2021 we changed our name from Auris Medical Holding Ltd. to Altamira Therapeutics Ltd., and our shares started trading
under the new name and the new ticker symbol “CYTO” on the Nasdaq Capital Market on July 26, 2021.
There
can be no assurance that our common shares will remain listed on the Nasdaq Capital Market. See “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Common Shares—Our common shares may be involuntarily delisted from trading on The Nasdaq
Capital Market if we fail to comply with the continued listing requirements. A delisting of our common shares is likely to reduce the
liquidity of our common shares and may inhibit or preclude our ability to raise additional financing.”
Not
applicable.
Not
applicable.
Not
applicable.
ITEM
10. ADDITIONAL INFORMATION
Not
applicable.
| B. | Memorandum
of Continuance and Bye-laws |
We
are an exempted company incorporated under the laws of Bermuda. On January 24, 2019, our board of directors determined that it would
be in our best interest to change our legal seat and jurisdiction of incorporation, respectively, from Switzerland to Bermuda pursuant
to the Redomestication. Our shareholders approved the Redomestication and adopted the Memorandum of Continuance and the Bye-laws at an
extraordinary meeting of shareholders held on March 8, 2019. Upon the issuance of a certificate of continuance by the Registrar of Companies
in Bermuda on March 18, 2019, the Company discontinued as a Swiss company and, pursuant to Article 163 of the Swiss Federal Act on Private
International Law and pursuant to Section 132C of the Companies Act continued existence under the Companies Act as a Bermuda company
with the name “Auris Medical Holding Ltd.”
At
a Special General Meeting of Shareholders held on July 21, 2021, the Company adopted the new name “Altamira Therapeutics Ltd.”
which was registered with the Bermuda Registrar of Companies and a Certificate of Change of Name was issued by the Bermuda Registrar
of Companies.
Set
forth below is a description of our share capital, Memorandum of Continuance and Bye-laws. Additionally, set forth below is a comparison
of select provisions of the corporate laws of Delaware and Bermuda showing the default positions in each jurisdiction that govern shareholder
rights.
Bermuda
Description of Share Capital
The
following description of our share capital summarizes certain provisions of our Memorandum of Continuance (which is equivalent for these
purposes to a memorandum of association under Bermuda law) and our Bye-laws. Such summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the provisions of our Memorandum of Continuance and Bye-laws in effect
from the continuance of the Company. We urge you to read the forms of our Memorandum of Continuance and Bye-laws, included as exhibits
to this Annual Report.
General
We are an exempted company
incorporated under the laws of Bermuda. We began our current operations in 2003 as a corporation organized in accordance with Swiss law
and domiciled in Switzerland under the name Auris Medical AG, and our name was changed to Auris Medical Holding AG on April 22, 2014.
Following the Merger on March 13, 2018, the surviving entity was named Auris Medical Holding AG. Upon the issuance of a certificate of
continuance by the Registrar of Companies in Bermuda on March 18, 2019, the Redomestication was effected and we continued in Bermuda pursuant
to Section 132C of the Companies Act as a Bermuda company, subject to the Companies Act and other laws of Bermuda, with the name “Auris
Medical Holding Ltd”. At a Special General Meeting of Shareholders held on July 21, 2021, the Company adopted the new name “Altamira
Therapeutics Ltd.”. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
The
Memorandum of Continuance provides that the objects of our business are unrestricted, and we have the capacity, rights, powers and privileges
of a natural person.
Since the Redomestication,
other than the 2019 Reverse Share Split and as otherwise described herein, including the change of the company name to Altamira Therapeutics
Ltd. on 21 July 2021, there have been no material changes to our share capital, mergers, amalgamations or consolidations of us or any
of our subsidiaries, no material changes in the mode of conducting our business, no material changes in the types of products produced
or services rendered and no name changes. There have been no bankruptcy, receivership or similar proceedings with respect to us or our
subsidiaries.
There
have been no public takeover offers by third parties for our shares nor any public takeover offers by us for the shares of another company
which have occurred during the last or current financial years.
Share
Capital
As
of December 31, 2021, our authorized share capital consisted of 25,000,000 common shares, par value CHF 0.01 per share, and 20,000,000
preference shares, par value CHF 0.02 per share, and there were 14,964,261 common shares issued and outstanding, excluding 1,329,510
common shares issuable upon exercise of options and 246,102 common shares issuable upon exercise of warrants, and no preference shares
issued and outstanding. All the Company’s issued and outstanding shares are fully paid in.
Pursuant
to our Bye-laws, subject to any resolution of the shareholders to the contrary, our board of directors is authorized to issue any of
our authorized but unissued shares. There are no limitations on the right of non-Bermudians or non-residents of Bermuda to hold or vote
our shares.
Common
Shares
Holders
of common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of common shares are entitled to one vote
per share on all matters submitted to a vote of holders of common shares. Unless a different majority is required by law or by our Bye-laws,
resolutions to be approved by holders of common shares require approval by a simple majority of votes cast at a general meeting at which
a quorum is present.
In
the event of our liquidation, dissolution or winding up, the holders of common shares are entitled to share equally and ratably in our
assets, if any, remaining after the payment of all of our debts and liabilities, subject to any liquidation preference on any issued
and outstanding preference shares.
Preference
Shares
Pursuant
to Bermuda law and our Bye-laws, our board of directors by resolution may establish one or more series of preference shares having such
number of shares, designations, dividend rates, relative voting rights, conversion or exchange rights, redemption rights, liquidation
rights and other relative participation, optional or other special rights, qualifications, limitations or restrictions as may be fixed
by the board without any further shareholder approval. Such rights, preferences, powers and limitations as may be established could have
the effect of discouraging an attempt to obtain control of us.
Dividend
Rights
Under
Bermuda law, the board of directors may declare a dividend without shareholder approval, but a company may not declare or pay dividends
if there are reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities
as they become due; or (ii) the realizable value of its assets would thereby be less than its liabilities. Under our Bye-laws, each common
share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend right
of the holders of any preference shares.
Variation
of Rights
If
at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms of issue
of the relevant class, may be varied either: (i) with the consent in writing of the holders of 75% of the issued shares of that class;
or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant class of shareholders
at which a quorum consisting of at least two or more persons holding or representing issued and outstanding shares of the relevant class
is present. Our Bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless expressly
provided by the terms of issue of existing shares, vary the rights attached to existing shares. In addition, the creation or issue of
preference shares ranking prior to common shares will not be deemed to vary the rights attached to common shares or, subject to the terms
of any other series of preference shares, to vary the rights attached to any other series of preference shares.
Transfer
of Shares
Our
board of directors may in its absolute discretion and without assigning any reason refuse to register the transfer of a share that it
is not fully paid. Our board of directors may also refuse to recognize an instrument of transfer of a share unless it is accompanied
by the relevant share certificate and such other evidence of the transferor’s right to make the transfer as our board of directors
shall reasonably require. Subject to these restrictions, a holder of common shares may transfer the title to all or any of his common
shares by completing a form of transfer in the form set out in our Bye-laws (or as near thereto as circumstances admit) or in such other
common form as the board may accept. The instrument of transfer must be signed by the transferor and transferee, although in the case
of a fully paid share our board of directors may accept the instrument signed only by the transferor.
Share
Split and Reverse Share Split effected by consolidating our common shares
Our
board of directors may in its absolute discretion and without further approval of shareholders divide, consolidate or sub-divide our
share capital in any manner permitted by the Companies Act, including approving a reverse share split by consolidating our common shares
(together with a corresponding increase in the par value thereof) in a ratio determined by the board of directors. Our Bye-laws also
provide that upon an alteration or reduction of share capital where fractions of shares or some other difficulty would arise, our board
of directors may deal with or resolve the same in any manner as it thinks fit.
Meeting
of Shareholders
Under
Bermuda law, a company is required to convene at least one general meeting of shareholders each calendar year (the “annual general
meeting”). However, the members may by resolution waive this requirement, either for a specific year or period of time, or indefinitely.
When the requirement has been so waived, any member may, on notice to the company, terminate the waiver, in which case an annual general
meeting must be called.
Bermuda
law provides that a special general meeting of shareholders may be called by the board of directors of a company and must be called upon
the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right to vote at general meetings.
Bermuda law also requires that shareholders be given at least five days’ advance notice of a general meeting, but the accidental
omission to give notice to any person does not invalidate the proceedings at a meeting. Our Bye-laws provide that the board of directors
may convene an annual general meeting or a special general meeting. Under our Bye-laws, at least 14 days’ notice of an annual general
meeting or a special general meeting must be given to each shareholder entitled to vote at such meeting. This notice requirement is subject
to the ability to hold such meetings on shorter notice if such notice is agreed: (i) in the case of an annual general meeting by all
of the shareholders entitled to attend and vote at such meeting; or (ii) in the case of a special general meeting by a majority in number
of the shareholders entitled to attend and vote at the meeting holding not less than 95% in nominal value of the shares entitled to vote
at such meeting. The quorum required for a general meeting of shareholders is two or more persons present in person at the start of the
meeting and representing in person or by proxy issued and outstanding common shares.
Access
to Books and Records and Dissemination of Information
Members
of the general public have a right to inspect the public documents of a company available at the office of the Registrar of Companies
in Bermuda. These documents include the company’s memorandum of association (or memorandum of continuance), including its objects
and powers, and certain alterations to the memorandum of association (or memorandum of continuance). The shareholders have the additional
right to inspect the bye-laws of the company, minutes of general meetings and the company’s audited financial statements, which
must be presented to the annual general meeting. The register of members of a company is also open to inspection by shareholders and
by members of the general public without charge. The register of members is required to be open for inspection for not less than two
hours in any business day (subject to the ability of a company to close the register of members for not more than thirty days in a year).
A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a
branch register outside of Bermuda. A company is required to keep at its registered office a register of directors and officers that
is open for inspection for not less than two hours in any business day by members of the public without charge. A company is also required
to file with the Registrar of Companies in Bermuda a list of its directors to be maintained on a register, which register will be available
for public inspection subject to such conditions as the Registrar may impose and on payment of such fee as may be prescribed. Bermuda
law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records.
Election
and Removal of Directors
Our
Bye-laws provide that our board shall consist of three directors or such greater number as the board may determine. Our board of directors
currently consists of six directors, but it is anticipated that our board will consist of five directors following the holding of our
annual general meeting in 2022. Each director shall hold office for such term as the shareholders may determine or, in their absence
of such determination, until the next annual general meeting or until their successors are elected or appointed or their office is otherwise
vacated.
Any
shareholder or shareholders holding or representing not less than 5% of the total voting rights wishing to propose for election as a
director someone who is not an existing director or is not proposed by our board must give notice of the intention to propose the person
for election. Where a director is to be elected at an annual general meeting, that notice must be given not less than 90 days nor more
than 120 days before the anniversary of the last annual general meeting prior to the giving of the notice or, in the event the annual
general meeting is called for a date that is not 30 days before or after such anniversary the notice must be given not later than 10
days following the earlier of the date on which notice of the annual general meeting was posted to members or the date on which public
disclosure of the date of the annual general meeting was made. Where a director is to be elected at a special general meeting, that notice
must be given not later than 10 days following the earlier of the date on which notice of the special general meeting was posted to members
or the date on which public disclosure of the date of the special general meeting was made.
A
director may be removed, with cause, by the shareholders, provided notice of the shareholders meeting convened to remove the director
is given to the director. The notice must contain a statement of the intention to remove the director and must be served on the director
not less than fourteen days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal.
Proceedings
of Board of Directors
Our
Bye-laws provide that our business is to be managed and conducted by our board of directors. Bermuda law permits individual and corporate
directors and there is no requirement in our Bye-laws or Bermuda law that directors hold any of our shares. There is also no requirement
in our Bye-laws or Bermuda law that our directors must retire at a certain age.
The
remuneration of our directors is determined by our board of directors, and there is no requirement that a specified number or percentage
of “independent” directors must approve any such determination. Our directors may also be paid all travel, hotel and other
expenses properly incurred by them in connection with our business or their duties as directors.
Provided
a director discloses a direct or indirect interest in any contract or arrangement with us as required by Bermuda law, such director is
entitled to vote in respect of any such contract or arrangement in which he or she is interested unless he or she is disqualified from
voting by the chairman of the relevant board meeting.
Indemnification
of Directors and Officers
Section
98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability
which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach
of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty
in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against
any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or
in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act.
Our
Bye-laws provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect of their
fraud or dishonesty. Our Bye-laws provide that the shareholders waive all claims or rights of action that they might have, individually
or in right of the company, against any of the company’s directors or officers for any act or failure to act in the performance
of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director or officer. Section
98A of the Companies Act permits us to purchase and maintain insurance for the benefit of any officer or director in respect of any loss
or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not we may otherwise
indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a
purpose. See “Comparison of Corporate Law—Indemnification of directors and executive management and limitation of liability.”
Amendment
of Memorandum of Continuance and Bye-laws
Bermuda
law provides that the memorandum of association (or memorandum of continuance) of a company may be amended by a resolution passed at
a general meeting of shareholders. Our Bye-laws provide that no bye-law shall be rescinded, altered or amended, and no new bye-law shall
be made, unless it shall have been approved by a resolution of our board of directors and by a resolution of our shareholders. In the
case of certain bye-laws, such as the Bye-laws relating to election and removal of directors, approval of business combinations and amendment
of bye-law provisions, the required resolutions must include the affirmative vote of at least 66 2∕3% of our directors then in
office and of at least 66 2∕3% percent of the votes attaching to all shares in issue.
Under
Bermuda law, the holders of an aggregate of not less than 20% in par value of a company’s issued share capital or any class thereof
have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum of association (or memorandum
of continuance) adopted by shareholders at any general meeting, other than an amendment which alters or reduces a company’s share
capital as provided in the Companies Act. Where such an application is made, the amendment becomes effective only to the extent that
it is confirmed by the Bermuda court. An application for an annulment of an amendment of the memorandum of association (or memorandum
of continuance) must be made within twenty-one days after the date on which the resolution altering the company’s memorandum of
association (or memorandum of continuance) is passed and may be made on behalf of persons entitled to make the application by one or
more of their number as they may appoint in writing for the purpose. No application may be made by shareholders voting in favor of the
amendment.
Amalgamations,
Mergers and Business Combinations
The
amalgamation or merger of a Bermuda company with another company or corporation (other than certain affiliated companies) requires an
amalgamation or merger agreement that is approved by the company’s board of directors and by its shareholders. Unless the company’s
bye-laws provide otherwise, the approval of 75% of the shareholders voting at such meeting is required to approve the amalgamation or
merger agreement, and the quorum for such meeting must be two persons holding or representing more than one-third of the issued shares
of the company. Our Bye-laws provide that an amalgamation or a merger (other than with a wholly owned subsidiary or as described below)
that has been approved by the board must only be approved by a majority of the votes cast at a general meeting of the shareholders at
which the quorum shall be two or more persons present in person and representing in person or by proxy issued and outstanding common
voting shares. Any amalgamation or merger or other business combination (as defined in the Bye-laws) not approved by our board of directors
must be approved by the holders of not less than 66 2∕3% of all votes attaching to all shares then in issue entitling the holder
to attend and vote on the resolution.
Under
Bermuda law, in the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the
Bermuda company who did not vote in favor of the amalgamation or merger and who is not satisfied that fair value has been offered for
such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to
appraise the fair value of those shares.
Our
Bye-laws contain provisions regarding “business combinations” with “interested shareholders”. Pursuant to the
Bye-laws, in addition to any other approval that may be required by applicable law, any business combination with an interested shareholder
within a period of three years after the date of the transaction in which the person became an interested shareholder must be approved
by our board and authorized at an annual or special general meeting by the affirmative vote of at least 66 2∕3% of our issued and
outstanding voting shares that are not owned by the interested shareholder, unless: (i) prior to the time that the shareholder becoming
an interested shareholder, our board of directors approved either the business combination or the transaction that resulted in the shareholder
becoming an interested shareholder; or (ii) upon consummation of the transaction that resulted in the shareholder becoming an interested
shareholder, the interested shareholder owned at least 85% of our issued and outstanding voting shares at the time the transaction commenced.
For purposes of these provisions, “business combinations” include mergers, amalgamations, consolidations and certain sales,
leases, exchanges, mortgages, pledges, transfers and other dispositions of assets, issuances and transfers of shares and other transactions
resulting in a financial benefit to an interested shareholder. An “interested shareholder” is a person that beneficially
owns 15% or more of our issued and outstanding voting shares and any person affiliated or associated with us that owned 15% or more of
our issued and outstanding voting shares at any time three years prior to the relevant time.
Compulsory
Acquisition of Shares Held by Minority Holders
An
acquiring party is generally able to acquire compulsorily the common shares of minority holders in the following ways:
(1)
By a procedure under the Companies Act known as a “scheme of arrangement.” A scheme of arrangement could be effected by obtaining
the agreement of the company and of holders of its shares (or any class of shares), representing in the aggregate a majority in number
and at least 75% in value of the shares or class of shares present and voting at a court ordered meeting held to consider the scheme
or arrangement. The scheme of arrangement must then be sanctioned by the Bermuda Supreme Court. If a scheme of arrangement receives all
necessary agreements and sanctions, upon the filing of the court order with the Registrar of Companies in Bermuda, all holders of common
shares could be compelled to sell their shares under the terms of the scheme or arrangement.
(2)
If the acquiring party is a company it may compulsorily acquire all the shares of the target company, by acquiring pursuant to a tender
offer 90% of the shares or class of shares not already owned by, or by a nominee for, the acquiring party (the offeror), or any of its
subsidiaries. If an offeror has, within four months after the making of an offer for all the shares or class of shares not owned by,
or by a nominee for, the offeror, or any of its subsidiaries, obtained the approval of the holders of 90% or more of all the shares to
which the offer relates, the offeror may, at any time within two months beginning with the date on which the approval was obtained, require
by notice any nontendering shareholder to transfer its shares on the same terms as the original offer. In those circumstances, nontendering
shareholders will be compelled to sell their shares unless the Supreme Court of Bermuda (on application made within a one-month period
from the date of the offeror’s notice of its intention to acquire such shares) orders otherwise.
(3)
Where one or more parties holds not less than 95% of the shares or a class of shares of a company, such holder(s) may, pursuant to a
notice given to the remaining shareholders or class of shareholders, acquire the shares of such remaining shareholders or class of shareholders.
When this notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms
set out in the notice, unless a remaining shareholder, within one month of receiving such notice, applies to the Supreme Court of Bermuda
for an appraisal of the value of its shares. This provision only applies where the acquiring party offers the same terms to all holders
of shares whose shares are being acquired.
Anti-Takeover
Provisions
Two-thirds
supermajority shareholder voting requirement: Our Bye-laws provide that, except to the extent that a proposal has received the prior
approval of the board, the approval of an amalgamation, merger or consolidation with or into any other person shall require the affirmative
vote of not less than 66 2∕3% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the
resolution (except for certain “business combinations” with “interested shareholders” as set forth in Amalgamations,
Mergers and Business Combinations above).
Amendments
to the Bye-laws: Our Bye-laws provide that no bye-law may be rescinded, altered or amended and no new bye-law may be made until the
same has been approved by a resolution of the board and by a resolution of the shareholders. In the case of certain bye-laws, such as
the Bye-laws relating to election and removal of directors, approval of business combinations and amendment of bye-law provisions, the
required resolutions must include the affirmative vote of at least 66 2∕3% of our directors then in office and of at least 66 2∕3%
percent of the votes attaching to all issued and outstanding shares.
Limitations
on the election of directors: Our Bye-laws provide that a person may be proposed for election or appointment as a director at a general
meeting either by the board or by one or more shareholders holding our shares which in the aggregate carry not less than 5% of the voting
rights in respect of the election of directors. In addition, unless a person is proposed for election or appointment as a director by
the board, when a person is proposed for appointment or election as a director, written notice of the proposal must be given to us as
follows. Where a director is to be appointed or elected: (1) at an annual general meeting, such notice must be given not less than 90
days nor more than 120 days before the anniversary of the last annual general meeting prior to the giving of the notice or, in the event
the annual general meeting is called for a date that is not 30 days before or after such anniversary the notice must be given not later
than 10 days following the earlier of the date on which notice of the annual general meeting was posted to shareholders or the date on
which public disclosure of the date of the annual general meeting was made; and (2) at a special general meeting, such notice must be
given not later than 10 days following the earlier of the date on which notice of the special general meeting was posted to shareholders
or the date on which public disclosure of the date of the special general meeting was made.
Shareholder
Suits
Class
actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily
be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained
of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum
of association (or memorandum of continuance) or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that
are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater
percentage of the company’s shareholders than that which actually approved it.
When
the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders,
one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating
the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders
or by the company.
Our
Bye-laws contain a provision by virtue of which our shareholders waive any claim or right of action that they have, both individually
and on our behalf, against any director or officer in relation to any action or failure to take action by such director or officer, except
in respect of any fraud or dishonesty of such director or officer. The SEC has advised that the operation of this provision as a waiver
of the right to sue for violations of federal securities laws would likely be unenforceable in U.S. courts.
Capitalization
of Profits and Reserves
Pursuant
to our Bye-laws, our board of directors may (i) capitalize any part of the amount of our share premium or other reserve accounts or any
amount credited to our profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares
to be allotted as fully paid bonus shares pro-rata (except in connection with the conversion of shares) to the shareholders; or (ii)
capitalize any sum standing to the credit of a reserve account or sums otherwise available for dividend or distribution by paying up
in full, partly paid or nil paid shares of those shareholders who would have been entitled to such sums if they were distributed by way
of dividend or distribution.
Exchange
controls
We
have received consent under the Exchange Control Act 1972 from the Bermuda Monetary Authority for the issue and transfer of the common
shares to and between non-residents of Bermuda for exchange control purposes provided our shares remain listed on an appointed stock
exchange, which includes the Nasdaq Capital Market. In granting such consent the Bermuda Monetary Authority accepts no responsibility
for our financial soundness or the correctness of any of the statements made or opinions expressed in this Annual Report.
Registrar
or Transfer Agent
A register of holders of
the common shares is maintained by Conyers Corporate Services (Bermuda) Limited in Bermuda, and a branch register is maintained in the
United States by American Stock Transfer & Trust Company, LLC, who serves as branch registrar and transfer agent.
Untraced
Shareholders
Our
Bye-laws provide that our board of directors may forfeit any dividend or other monies payable in respect of any shares which remain unclaimed
for six years from the date when such monies became due for payment. In addition, we are entitled to cease sending dividend warrants
and checks by post or otherwise to a shareholder if such instruments have been returned undelivered to, or left uncashed by, such shareholder
on at least two consecutive occasions or, following one such occasion, reasonable enquires have failed to establish the shareholder’s
new address. This entitlement ceases if the shareholder claims a dividend or cashes a dividend check or a warrant.
Certain
Provisions of Bermuda Law
We
have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows
us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our ability to transfer funds
(other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders
of our common shares.
We
have received consent from the Bermuda Monetary Authority for the issue and free transferability of all of our common shares to and between
non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes
the Nasdaq Capital Market. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda
Monetary Authority as to our performance or creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary
Authority shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions
or statements expressed in this Annual Report. Certain issues and transfers of common shares involving persons deemed resident in Bermuda
for exchange control purposes require the specific consent of the Bermuda Monetary Authority.
In
accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the case of
a shareholder acting in a special capacity (for example as a trustee), certificates may, at the request of the shareholder, record the
capacity in which the shareholder is acting. Notwithstanding such recording of any special capacity, we will not be bound to investigate
or see to the execution of any such trust. We will take no notice of any trust applicable to any of our shares, whether or not we have
been notified of such trust.
Comparison
of Corporate Law
Set
forth below is a comparison of select provisions of the corporate laws of Delaware and Bermuda showing the default positions in each
jurisdiction that govern shareholder rights.
DELAWARE
CORPORATE LAW |
|
BERMUDA
CORPORATE LAW |
|
|
|
Mergers and
similar arrangements |
|
Under the Delaware General
Corporation Law, with certain exceptions, a merger, consolidation, sale, lease or transfer of all or substantially all of the assets
of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. A
shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be
entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held
by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction.
The Delaware General Corporation Law also provides that a parent corporation, by resolution of its board of directors, may merge
with any subsidiary, of which it owns at least 90.0% of each class of capital stock without a vote by the shareholders of such subsidiary.
Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights. |
|
The
amalgamation or merger of a Bermuda company with another company or corporation (other than certain affiliated companies) requires
the amalgamation or merger agreement to be approved by the company’s board of directors and by its shareholders. Unless the
company’s bye-laws provide otherwise, the approval of 75% of the shareholders voting at a general meeting is required to approve
the amalgamation or merger agreement, and the quorum for such meeting must be two persons holding or representing more than one-third
of the issued shares of the company. The Bye-laws provide that a merger or an amalgamation (other than with a wholly owned subsidiary
or as described below) that has been approved by the board must only be approved by a majority of the votes cast at a general meeting
of the shareholders at which the quorum shall be two or more persons present in person and representing in person or by proxy issued
and outstanding voting shares.
The
Bye-laws contain provisions regarding “business combinations” with “interested shareholders”. Pursuant to
our Bye-laws, in addition to any other approval that may be required by applicable law, any business combination with an interested
shareholder within a period of three years after the date of the transaction in which the person became an interested shareholder
must be approved by Auris Medical’s board and authorized at an annual or special general meeting by the affirmative vote of
at least 66 and 2/3rds% of Auris Medical’s issued and outstanding voting shares that are not owned by the interested shareholder,
unless: (i) prior to the time that the shareholder becoming an interested shareholder, our board of directors approved either the
business combination or the transaction that resulted in the shareholder becoming an interested shareholder; or (ii) upon consummation
of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least
85% of our issued and outstanding voting shares at the time the transaction commenced. For purposes of these provisions, “business
combinations” include mergers, amalgamations, consolidations and certain sales, leases, exchanges, mortgages, pledges, transfers
and other dispositions of assets, issuances and transfers of shares and other transactions resulting in a financial benefit to an
interested shareholder. |
|
|
|
|
|
An
“interested shareholder” is a person that beneficially owns 15% or more of our issued and outstanding voting shares and
any person affiliated or associated with us that owned 15% or more of our issued and outstanding voting shares at any time three
years prior to the relevant time. |
|
|
Under Bermuda
law, in the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the Bermuda
company who did not vote in favor of the amalgamation or merger and who is not satisfied that fair value has been offered for such
shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to
appraise the fair value of those shares. Note that each share of an amalgamating or merging company carries the right to vote in
respect of an amalgamation or merger whether or not is otherwise carries the right to vote. |
DELAWARE
CORPORATE LAW |
|
BERMUDA
CORPORATE LAW |
|
|
|
Shareholders’
suits |
|
Class actions and derivative
actions generally are available to shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate
waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party
to recover attorneys’ fees incurred in connection with such action. |
|
Class
actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would
ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where
the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of
the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that
are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater
percentage of the company’s shareholders than that which actually approved it.
When
the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the
shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including
an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders
by other shareholders or by the company.
The
Bye-laws contain a provision by virtue of which Auris Medical’s shareholders waive any claim or right of action that they have,
both individually and on Auris Medical’s behalf, against any director or officer in relation to any action or failure to take
action by such director or officer, except in respect of any fraud or dishonesty of such director or officer. |
|
|
|
Shareholder
vote on board and management compensation |
|
Under the Delaware General
Corporation Law, the board of directors has the authority to fix the compensation of directors, unless otherwise restricted by the
certificate of incorporation or bylaws. |
|
The Bye-laws contains a
provision that the board of directors has the power to determine the remuneration, if any, of the directors. |
|
|
|
Annual vote
on board renewal |
|
Unless directors are elected
by written consent in lieu of an annual meeting, directors are elected in an annual meeting of stockholders on a date and at a time
designated by or in the manner provided in the bylaws. Re-election is possible. |
|
The Bye-laws provide that
the directors shall hold office for such term as the shareholders may determine or, in their absence of such determination, until
the next annual general meeting, or until their successors are elected or appointed or their office is otherwise vacated. Re-election
is possible. |
|
|
|
Classified boards are permitted. |
|
Provision for staggered
boards of directors may be included in a company’s bye-laws. |
DELAWARE
CORPORATE LAW |
|
BERMUDA
CORPORATE LAW |
|
|
|
Indemnification
of directors and executive management and limitation of liability |
|
The
Delaware General Corporation Law provides that a certificate of incorporation may contain a provision eliminating or limiting the
personal liability of directors (but not other controlling persons) of the corporation for monetary damages for breach of a fiduciary
duty as a director, except no provision in the certificate of incorporation may eliminate or limit the liability of a director for:
any
breach of a director’s duty of loyalty to the corporation or its shareholders;
acts
or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
statutory
liability for unlawful payment of dividends or unlawful stock purchase or redemption; or
any
transaction from which the director derived an improper personal benefit. |
|
Section 98 of the Companies
Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue
of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except
in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation
to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any
liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or
in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act. |
|
|
|
A Delaware corporation
may indemnify any person who was or is a party or is threatened to be made a party to any proceeding, other than an action by or
on behalf of the corporation, because the person is or was a director or officer, against liability incurred in connection with the
proceeding if the director or officer acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation; and the director or officer, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. |
|
The Bye-laws contain provisions
that provide that Auris Medical shall indemnify its officers and directors in respect of their actions and omissions, except in respect
of their fraud or dishonesty. Our bye-laws provide that the shareholders waive all claims or rights of action that they might have,
individually or in right of the company, against any of the company’s directors or officers for any act or failure to act in
the performance of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director
or officer. Section 98A of the Companies Act permits Auris Medical to purchase and maintain insurance for the benefit of any officer
or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty or breach
of trust, whether or not we may otherwise indemnify such officer or director. We have purchased and maintain a directors’ and
officers’ liability policy for such a purpose. |
Unless
ordered by a court, any foregoing indemnification is subject to a determination that the director or officer has met the applicable
standard of conduct:
by
a majority vote of the directors who are not parties to the proceeding, even though less than a quorum;
by
a committee of directors designated by a majority vote of the eligible directors, even though less than a quorum;
by
independent legal counsel in a written opinion if there are no eligible directors, or if the eligible directors so direct; or
by
the shareholders. |
|
|
|
|
|
Moreover, a Delaware corporation
may not indemnify a director or officer in connection with any proceeding in which the director or officer has been adjudged to be
liable to the corporation unless and only to the extent that the court determines that, despite the adjudication of liability but
in view of all the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for those expenses
which the court deems proper. |
|
|
DELAWARE
CORPORATE LAW |
|
BERMUDA
CORPORATE LAW |
|
|
|
Directors’
fiduciary duties |
|
A
director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components:
the
duty of care; and
the
duty of loyalty. |
|
At common law, members
of a board of directors owe a fiduciary duty to the company to act in good faith in their dealings with or on behalf of the company
and exercise their powers and fulfill the duties of their office honestly. This duty includes the following elements: (i) a duty
to act in good faith in the best interests of the company; (ii) a duty not to make a personal profit from opportunities that arise
from the office of director; (iii) a duty to avoid conflicts of interest; and (iv) a duty to exercise powers for the purpose for
which such powers were intended. |
|
|
|
The duty of care requires
that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under
this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding
a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best
interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing
by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed
by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director
are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best
interests of the corporation. However, this presumption may be rebutted by evidence a breach of one of the fiduciary duties. |
|
The
Companies Act also imposes a duty on directors and officers of a Bermuda company to: (i) act honestly and in good faith with a view
to the best interests of the company; and (ii) exercise the care, diligence and skill that a reasonably prudent person would exercise
in comparable circumstances.
In
addition, the Companies Act imposes various duties on directors and officers of a company with respect to certain matters of management
and administration of the company. |
|
|
|
Should such evidence be
presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the
transaction was of fair value to the corporation. |
|
|
|
|
|
Shareholder
action by written consent |
|
A Delaware corporation
may, in its certificate of incorporation, eliminate the right of shareholders to act by written consent. |
|
The Companies Act provides
that shareholders may take action by written consent, except in respect of the removal of an auditor from office before the expiry
of his term or in respect of a resolution passed for the purpose of removing a director before the expiration of his term of office.
A resolution in writing is passed when it is signed by the members of the company who at the date of the notice of the resolution
represent such majority of votes as would be required if the resolution had been voted on at a meeting or when it is signed by all
the members of the company or such other majority of members as may be provided by the bye-laws of the company. |
ELAWARE
CORPORATE LAW |
|
BERMUDA
CORPORATE LAW |
|
|
|
Shareholder
proposals |
|
A shareholder of a Delaware
corporation has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions
in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in
the governing documents, but shareholders may be precluded from calling special meetings. |
|
Shareholder(s) may, as
set forth below and at their own expense (unless the company otherwise resolves), require the company to: (i) give notice to all
shareholders entitled to receive notice of the annual general meeting of any resolution that the shareholder(s) may properly move
at the next annual general meeting; and/or (ii) circulate to all shareholders entitled to receive notice of any general meeting a
statement in respect of any matter referred to in the proposed resolution or any business to be conducted at such general meeting.
The number of shareholders necessary for such a requisition is either: (i) any number of shareholders representing not less than
5% of the total voting rights of all shareholders entitled to vote at the meeting to which the requisition relates; or (ii) not less
than 100 shareholders. |
|
|
|
|
|
Pursuant to the Bye-laws,
any shareholder or shareholders holding or representing not less than 5% of the total voting rights wishing to propose for election
as a director someone who is not an existing director or is not proposed by Auris Medical’s board must give notice of the intention
to propose the person for election in accordance with the Bye-laws. |
|
|
|
Cumulative
voting |
|
Under the Delaware General
Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation
provides for it. |
|
Under Bermuda law, the
voting rights of shareholders are regulated by the company’s bye-laws and, in certain circumstances, by the Companies Act. The
Bye-laws provide for a plurality of voting for elections of directors, and cumulative voting for elections of directors is not permitted. |
|
|
|
Removal of
directors |
|
A Delaware corporation
with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote,
unless the certificate of incorporation provides otherwise. |
|
Under the Bye-laws, a director
may be removed, with cause, by the shareholders, provided notice of the shareholders meeting convened to remove the director is given
to the director. The notice must contain a statement of the intention to remove the director and must be served on the director not
less than fourteen days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal. |
|
|
|
Transactions
with interested shareholders |
|
The Delaware General Corporation
Law generally prohibits a Delaware corporation from engaging in certain business combinations with an “interested shareholder”
for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person
or group who or which owns or owned 15.0% or more of the corporation’s outstanding voting stock within the past three years. |
|
There
is no similar law in Bermuda.
The
Bye-laws contain provisions regarding “business combinations” with “interested shareholders” which are described
above under “mergers and similar arrangements.” |
|
|
|
Dissolution;
Winding up |
|
Unless the board of directors
of a Delaware corporation approves the proposal to dissolve, dissolution must be approved by shareholders holding 100.0% of the total
voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority
of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation
a supermajority voting requirement in connection with dissolutions initiated by the board. |
|
A
Bermuda company may be wound up by the Bermuda court on application presented by the company itself, its creditors (including contingent
or prospective creditors) or its contributories. The Bermuda court has authority to order winding up in a number of specified circumstances
including where it is, in the opinion of the Bermuda court, just and equitable to do so.
A
Bermuda company limited by shares may be wound up voluntarily when the shareholders so resolve in general meeting. In the case of
a voluntary winding up, the company shall, from the commencement of the winding up, cease to carry on its business, except so far
as may be required for the beneficial winding up thereof. |
DELAWARE
CORPORATE LAW |
|
BERMUDA
CORPORATE LAW |
|
|
|
Variation
of rights of shares |
|
A Delaware corporation
may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate
of incorporation provides otherwise. |
|
Under the Bye-laws, if
at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms
of issue of the relevant class, may be varied either: (i) with the consent in writing of the holders of 75% of the issued shares
of that class; or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant
class of shareholders at which a quorum consisting of at least two persons holding or representing issued shares of the relevant
class is present. The Bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless
expressly provided by the terms of issue of existing shares, vary the rights attached to existing shares. In addition, the creation
or issue of preference shares ranking prior to common shares will not be deemed to vary the rights attached to common shares or,
subject to the terms of any other series of preference shares, to vary the rights attached to any other series of preference shares. |
|
|
|
Amendment
of governing documents |
|
A Delaware corporation’s
governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate
of incorporation provides otherwise. |
|
A Bermuda company’s
memorandum of association and bye-laws may be amended by resolutions of the board of directors and the shareholders, subject to the company’s
bye-laws. |
|
|
|
Inspection
of Books and Records |
|
Shareholders of a Delaware
corporation, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose, and to obtain copies of list(s) of shareholders and other books and records of the corporation and its subsidiaries,
if any, to the extent the books and records of such subsidiaries are available to the corporation. |
|
Members of the general
public have a right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda. These
documents include the company’s memorandum of association/continuance, including its objects and powers, and certain alterations
to the memorandum of association/continuance. The shareholders have the additional right to inspect the bye-laws of the company, minutes
of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. The
register of members of a company is also open to inspection by shareholders without charge, and by members of the general public on payment
of a fee. The register of members is required to be open for inspection for not less than two hours in any business day (subject to the
ability of a company to close the register of members for not more than thirty days in a year). A company is required to maintain its
share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside of Bermuda. A
company is required to keep at its registered office a register of directors and officers that is open for inspection for not less than
two hours in any business day by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders
to inspect or obtain copies of any other corporate records. |
DELAWARE
CORPORATE LAW |
|
BERMUDA
CORPORATE LAW |
|
|
|
Payment of
dividends |
|
The
board of directors may approve a dividend without shareholder approval. Subject to any restrictions contained in its certificate
of incorporation, the board may declare and pay dividends upon the shares of its capital stock either:
out
of its surplus, or
in
case there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding
fiscal year.
Stockholder
approval is required to authorize capital stock in excess of that provided in the charter. Directors may issue authorized shares
without stockholder approval. |
|
Under Bermuda law, the
board of directors may declare a dividend without shareholder approval, but a company may not declare or pay dividends if there are
reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become
due; or (ii) that the realizable value of its assets would thereby be less than its liabilities. Under the Bye-laws, each common
share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend
right of the holders of any preference shares. |
|
|
|
Creation
and issuance of new shares |
|
All creation of shares
requires the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors
by the provisions of the company’s certificate of incorporation. |
|
The authorized share capital
of a Bermuda company is determined by the company’s shareholders. |
Except
as otherwise disclosed in this Annual Report (including the Exhibits), we are not currently, and have not been in the last two years,
party to any material contract, other than contracts entered into in the ordinary course of business.
We
have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows
us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our ability to transfer funds
(other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders
of our common shares.
We
have received consent from the Bermuda Monetary Authority for the issue and free transferability of all of our common shares to and between
non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes
the Nasdaq Capital Market. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda
Monetary Authority as to our performance or creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary
Authority shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions
or statements expressed in this Annual Report. Certain issues and transfers of common shares involving persons deemed resident in Bermuda
for exchange control purposes require the specific consent of the Bermuda Monetary Authority.
The following summary contains a description of the material Bermuda,
Swiss and U.S. federal income tax consequences of the acquisition, ownership and disposition of common shares, but it does not purport
to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase common shares. The summary
is based upon the tax laws of Bermuda and regulations thereunder, of Switzerland and regulations thereunder and on the tax laws of the
United States and regulations thereunder as of the date hereof, which may be subject to change.
Bermuda
Tax Considerations
At the present time, there is no Bermuda income or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares.
We have received an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in
the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset,
gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable
to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily
resident in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda. There is no double taxation treaty
between Bermudas and the United States or Switzerland.
Swiss
Tax Considerations
With
the deletion of Auris Medical Holding AG from the Swiss Commercial Register as of December 9, 2020, we consider that our taxability
in Switzerland has ceased.
Material
U.S. Federal Income Tax Considerations for U.S. Holders
The following is a description
of the material U.S. federal income tax consequences to the U.S. Holders (defined below) of owning and disposing of common shares, but
it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular person’s decision
to hold the common shares. This discussion applies only to a U.S. Holder that holds common shares as capital assets for U.S. federal income
tax purposes. In addition, it does not describe all of the tax consequences that may be relevant in light of the U.S. Holder’s particular
circumstances, including alternative minimum tax consequences, the potential application of the provisions of the Internal Revenue Code
of 1986, as amended (the “Code”), known as the Medicare contribution tax and tax consequences applicable to U.S. Holders subject
to special rules, such as:
| ● | certain
financial institutions; |
| ● | dealers
or traders in securities who use a mark-to-market method of tax accounting; |
| ● | persons
holding common shares as part of a straddle, wash sale, conversion transaction or persons
entering into a constructive sale with respect to the common shares; |
| ● | persons
whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
| ● | entities
classified as partnerships for U.S. federal income tax purposes; |
| ● | tax-exempt
entities, including an “individual retirement account” or “Roth IRA”; |
| ● | persons
that own or are deemed to own ten percent or more of our stock by vote or value; |
| ● | persons
who acquired our common shares pursuant to the exercise of an employee stock option or otherwise
as compensation; or |
| ● | persons
holding shares in connection with a trade or business conducted outside of the United States. |
If
an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax treatment
of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding common shares
and partners in such partnerships should consult their tax advisers as to their particular U.S. federal income tax consequences of holding
and disposing of the common shares.
This
discussion is based on the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations,
all as of the date hereof, any of which is subject to change, possibly with retroactive effect.
A
“U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of common shares and is:
| ● | an
individual who is a citizen or resident of the United States; |
| ● | a
corporation, or other entity taxable as a corporation, created or organized in or under the
laws of the United States, any state therein or the District of Columbia; or |
| ● | an
estate the income of which is subject to U.S. federal income taxation regardless of its source. |
| ● | a
trust with respect to which a U.S. court is able to exercise primary supervision over its
administration and one or more U.S. persons have the authority to control all of its substantial
decisions, or that has a valid election in effect to be treated as a U.S. person under applicable
U.S. Treasury Regulations. |
U.S.
Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing
of common shares in their particular circumstances.
Passive
Foreign Investment Company Rules
Special U.S. tax rules apply
to U.S. Holders of stock in a company that are considered to be a PFIC. However, our actual PFIC status for the current or any future
taxable year is uncertain and cannot be determined until after the end of such taxable year. In addition, we may, directly or indirectly,
hold equity interests in other PFICs, or Lower-tier PFICs. In general, a non-U.S. corporation will be considered a PFIC for any taxable
year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its
assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S.
corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate
share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive
income generally includes dividends, interest, rents, royalties and capital gains. Cash is a passive asset for PFIC purposes. Goodwill
(the value of which may be determined by reference to the company’s market capitalization) is generally treated as an active asset
to the extent attributable to activities intended to produce active income.
Based on our gross income,
the average value of our assets, including goodwill, and the nature of the current stage of our business, we do not believe we were a
PFIC for the year ended December 31, 2021. There can be no assurance that the IRS will agree with our conclusion and that the IRS would
not successfully challenge our position. Furthermore, there can be no assurance regarding our PFIC status for the current year or any
particular year in the future because PFIC status is factual in nature, depends upon factors not wholly within our control, generally
cannot be determined until the close of the taxable year in question and is determined annually. Our status as a PFIC will depend on the
nature and composition of our income and the nature, composition and value of our assets (which may be determined based on the fair market
value of each asset, with the value of goodwill and going concern value being determined in large part by reference to the market value
of our common shares, which may be volatile). Our status may also depend, in part, on how quickly we utilize the cash proceeds from our
fundraising activities in our business. Accordingly, there can be no assurance that we will not be a PFIC in the current or for any future
taxable year. Therefore, U.S. Holders should invest in our common shares only if they are willing to bear the U.S. federal income tax
consequences associated with investments in PFICs.
If we are a PFIC for any
taxable year and any of our non-U.S. subsidiaries or other companies in which we own equity interests were also a PFIC (any such entity,
a “Lower-tier PFIC”), under attribution rules, U.S. Holders will be deemed to own their proportionate shares of Lower-tier
PFICs and will be subject to U.S. federal income tax according to the rules described in the following paragraphs on (i) certain distributions
by a Lower-tier PFIC and (ii) a disposition of shares of a Lower-tier PFIC, in each case as if the U.S. Holder held such shares directly,
even if the U.S. Holder has not received the proceeds of those distributions or dispositions.
Generally, if we are a PFIC
for any taxable year during which a U.S. Holder holds our shares, the U.S. Holder may be subject to certain adverse tax consequences.
Unless a U.S. Holder makes a timely “mark to market” election or “qualified electing fund” election, each as discussed
below, gain recognized on a disposition (including, under certain circumstances, a pledge) of common shares by the U.S. Holder, or on
an indirect disposition of shares of a Lower-tier PFIC, will be allocated ratably over the U.S. Holder’s holding period for the
shares. The amounts allocated to the taxable year of disposition and to years before we became a PFIC, if any, will be taxed as ordinary
income. The amounts allocated to each other taxable year will be subject to tax at the highest rate in effect for that taxable year for
individuals or corporations, as appropriate, and an interest charge will be imposed on the tax attributable to the allocated amounts.
Further, to the extent that any distribution received by a U.S. Holder on our common shares (or a distribution by a Lower-tier PFIC to
its shareholder that is deemed to be received by a U.S. Holder) exceeds 125% of the average of the annual distributions on the shares
received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, the distribution will be subject
to taxation in the same manner as gain, described immediately above.
If
we are a PFIC for any year during which a U.S. Holder holds common shares, we generally will continue to be treated as a PFIC with respect
to the U.S. Holder for all succeeding years during which the U.S. Holder holds common shares, even if we cease to meet the threshold
requirements for PFIC status. U.S. Holders should consult their tax advisers regarding the potential availability of a “deemed
sale” election that would allow them to eliminate this continuing PFIC status under certain circumstances.
If
we are a PFIC and our common shares are “regularly traded” on a “qualified exchange,” a U.S. Holder may make
a mark-to-market election that would result in tax treatment different from the general tax treatment for PFICs described above. Our
common shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the
common shares is traded on a qualified exchange on at least 15 days during each calendar quarter. Nasdaq, on which the common shares
are currently listed, is a qualified exchange for this purpose. U.S. Holders should consult their tax advisers regarding the
availability and advisability of making a mark-to-market election in their particular circumstances and the consequences to them if
the common shares are delisted from Nasdaq (see “Item 3. Key Information—D. Risk Factors—Risks Related to Our
Business and Industry—Our common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to
comply with the continued listing requirements. A delisting of our common shares is likely to reduce the liquidity of our common
shares and may inhibit or preclude our ability to raise additional financing” above). In particular, U.S. Holders should
consider carefully the impact of a mark-to-market election with respect to their common shares given that we may have Lower-tier
PFICs for which a mark-to-market election may not be available.
If we are a PFIC and a U.S.
Holder makes the mark-to-market election, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value
of the common shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of
any excess of the adjusted tax basis of the common shares over their fair market value at the end of the taxable year (but only to the
extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election,
the U.S. Holder’s tax basis in the common shares will be adjusted to reflect the income or loss amounts recognized. Any gain recognized
on a sale or other disposition of common shares in a year in which we are a PFIC will be treated as ordinary income and any loss will
be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark to-market
election). Distributions paid on common shares will be treated as discussed below under “Taxation of Distributions.”
Once made, the election cannot be revoked without the consent of the IRS unless the common shares cease to be marketable.
Alternatively, if we are
a PFIC and a U.S. Holder can make an election, if we provide the necessary information, to treat us and each Lower-tier PFIC as a qualified
electing fund (a “QEF Election”) in the first taxable year that we (and each Lower-tier PFIC) are treated as a PFIC with respect
to the U.S. Holder. A U.S. Holder must make the QEF Election for each PFIC by attaching a separate properly completed IRS Form 8621 (Information
Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) for each PFIC to its timely filed U.S. federal
income tax return. Upon request of a U.S. Holder, we intend to provide the information necessary for a U.S. Holder to make a QEF Election
with respect to us for any other taxable year for which we determine that we were a PFIC and will use commercially reasonable efforts
to cause each Lower-tier PFIC which we control to provide such information with respect to such Lower-tier PFIC. However, no assurance
can be given that such QEF Election information will be available for any Lower-tier PFIC and we cannot guarantee that we will continue
to provide such determination or information in future years.
If a U.S. Holder makes a
QEF Election with respect to a PFIC, the U.S. Holder will be currently taxable on its pro rata share of the PFIC’s ordinary
earnings and net capital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is classified
as a PFIC. If a U.S. Holder makes a QEF Election with respect to us, any distributions paid by us out of our earnings and profits that
were previously included in the U.S. Holder’s income under the QEF Election will not be taxable to the U.S. Holder. A U.S. Holder
will increase its tax basis in its common shares by an amount equal to any income included under the QEF Election and will decrease its
tax basis by any amount distributed on the common shares that is not included in its income. In addition, a U.S. Holder will recognize
capital gain or loss on the disposition of common shares in an amount equal to the difference between the amount realized and its adjusted
tax basis in the common shares. A U.S. Holder will not be taxed on the ordinary income and net capital gain under the QEF rules for any
year that we are not a PFIC. U.S. Holders should note that if we are a PFIC and they make QEF Elections with respect to us and Lower-tier
PFICs, they may be required to pay U.S. federal income tax with respect to their common shares for any taxable year significantly in excess
of any cash distributions received on the shares for such taxable year. U.S. Holders should consult their tax advisers regarding making
QEF Elections in their particular circumstances.
Furthermore,
if we were a PFIC or, with respect to a particular U.S. Holder, were treated as a PFIC for the taxable year in which we paid a dividend
or the prior taxable year, the preferential dividend rate with respect to dividends paid to certain non-corporate U.S. Holders will not
apply.
If
we were a PFIC for any taxable year during which a U.S. Holder held common shares, such U.S. Holder would be required to file an annual
information report with such U.S. Holder’s U.S. Federal income tax return on IRS Form 8621.
U.S.
Holders should consult their tax advisers concerning our PFIC status and the tax considerations relevant to an investment in a PFIC.
Taxation
of Distributions
As
discussed above under “Item 8. Financial Information—Dividends and Dividend Policy,” we do not currently expect to
make distributions on our common shares. In the event that we do make distributions of cash or other property, subject to the PFIC rules
described above, distributions paid on common shares, other than certain pro rata distributions of common shares, will be treated
as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles).
Because we may not calculate our earnings and profits under U.S. federal income tax principles, we expect that distributions generally
will be reported to U.S. Holders as dividends. The U.S. dollar amount of any dividend will be treated as foreign-source dividend income
to U.S. Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code.
Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend.
Sale
or Other Disposition of Common Shares
Subject
to the PFIC rules described above, for U.S. federal income tax purposes, gain or loss realized on the sale or other disposition of common
shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the common shares for more than
one year. The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed
of and the amount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source
gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations. U.S. Holders should consult their tax advisers regarding the proper treatment of gain or loss, the availability
of a foreign tax credit, and for U.S. Holders that sell common shares for an amount denominated in a currency other than the U.S. dollar
should consult their tax advisers regarding any potential foreign currency gain or loss that may have to be recognized.
Information
Reporting and Backup Withholding
Payments
of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally
are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other
exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies
that it is not subject to backup withholding.
Backup
withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit
against the holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is
timely furnished to the IRS.
Information
Reporting with Respect to Foreign Financial Assets
Certain
U.S. Holders who are individuals and certain entities may be required to report information relating to an interest in our common shares,
subject to certain exceptions (including an exception for common shares held in accounts maintained by certain U.S. financial institutions).
U.S. Holders should consult their tax advisers regarding whether or not they are obligated to report information relating to their ownership
and disposition of the common shares.
F. |
Dividends and paying
agents |
Not
applicable.
Not
applicable.
We
are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information
with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an Internet website that contains reports
and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
Under
Bermuda law shareholders have the right to inspect the bye-laws of the company, minutes of general meetings and the company’s audited
financial statements, which must be presented to the annual general meeting. The register of members of a company is also open to inspection
by shareholders and by members of the general public without charge. The register of members is required to be open for inspection for
not less than two hours in any business day (subject to the ability of a company to close the register of members for not more than thirty
days in a year).
As
a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content
of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit
recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file
periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered
under the Exchange Act.
I. |
Subsidiary information |
Not
applicable.
ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Credit
Risk
We
manage credit risk on a group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well as from other
receivables. Our policy is to invest funds in low risk investments including interest bearing deposits. Only independent banks and financial
institutions are used and banks with which we currently hold term deposits have a minimum S&P rating of “A”. Receivables
are not past due and not impaired and include only well-known counterparties.
We
hold cash and cash equivalents in our principal operating currencies (CHF, USD, EUR and AUD).
Market
Risk
In
the ordinary course of our business activities, we are exposed to various market risks that are beyond our control, including fluctuations
in foreign exchange rates, and which may have an adverse effect on the value of our financial assets and liabilities, future cash flows
and profit. As a result of these market risks, we could suffer a loss due to adverse changes in foreign exchange rates. Our policy with
respect to these market risks is to assess the potential of experiencing losses and the consolidated impact thereof, and to mitigate
these market risks.
Currency
Risk
We
operate internationally and are exposed to foreign exchange risk arising from various exposures, primarily with respect to the US Dollar
and Euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in
foreign operations. To manage foreign exchange risk we maintain foreign currency cash balances to cover anticipated future purchases
of materials and services in foreign currencies. We do not hedge our foreign exchange risk.
As
of December 31, 2021, a 5% increase or decrease in the USD/CHF exchange rate with all other variables held constant would have resulted
in a CHF 77,827 (2020: CHF 455,241) increase or decrease in the net result. Also, a 5% increase or decrease in the EUR/CHF exchange rate
with all other variables held constant would have resulted in a CHF 117,247 (2020: CHF 13,648) increase or decrease in the net annual
result.
We
have subsidiaries in the United States, Ireland and Australia, whose net assets are exposed to foreign currency translation risk. Due
to the small size of these subsidiaries the translation risk is not significant.
ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not
applicable.
Not
applicable.
Not
applicable.
D. |
American Depositary
Shares |
Not
applicable.
|
|
|
|
|
|
|
|
Non-cash changes |
|
|
|
|
|
|
01.01.2021 |
|
|
Financing
Cash
Flows 1) |
|
|
Fair
value
revaluation |
|
|
Other
changes 2) |
|
|
31.12.2021 |
|
Derivative financial instrument |
|
|
316,757 |
|
|
|
— |
|
|
|
410,918 |
|
|
|
(726,442 |
) |
|
|
1,233 |
|
Loans |
|
|
523,920 |
|
|
|
(50,000 |
) |
|
|
— |
|
|
|
(473,920 |
) |
|
|
— |
|
Lease liabilities |
|
|
— |
|
|
|
(21,700 |
) |
|
|
— |
|
|
|
597,436 |
|
|
|
575,736 |
|
Total |
|
|
840,677 |
|
|
|
(71,700 |
) |
|
|
410,918 |
|
|
|
(602,926 |
) |
|
|
576,969 |
|
| |
| | |
| | |
Non-cash
changes | | |
| |
| |
01.01.2020 | | |
Financing
Cash Flows 1) | | |
Fair
value revaluation | | |
Other
changes 2) | | |
31.12.2020 | |
Derivative
financial instrument | |
| 4,353 | | |
| — | | |
| 219,315 | | |
| 93,089 | | |
| 316,757 | |
Loans | |
| — | | |
| 1,522,931 | | |
| — | | |
| (999,011 | ) | |
| 523,920 | |
Total | |
| 4,353 | | |
| 1,522,931 | | |
| 219,315 | | |
| (905,922 | ) | |
| 840,677 | |
1) |
The financing cash flows
are from loan borrowings or loan and lease repayments. |
2) |
Other non-cash changes
include conversion of convertible loan including de-recognition of embedded derivative and initial recognition of lease liability. |
Credit
risk
Credit
risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well as from trade and
other receivables. The Company’s policy is to invest funds in low risk investments including interest bearing deposits. Trade and
other receivables were current as of December 31, 2021 and December 31, 2020, not impaired and included only well-known counterparties.
The
Group has been holding cash and cash equivalents in the Group’s principal operating currencies (CHF, USD, EUR and AUD) with international
banks of high credit rating.
The
Group’s maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statement
of financial position:
| |
December 31,
2021 | | |
December 31,
2020 | |
Financial assets | |
| | |
| |
Cash
and cash equivalents | |
| 984,191 | | |
| 11,258,870 | |
Trade
receivables | |
| 21,746 | | |
| — | |
Other
receivables | |
| 255,187 | | |
| 10,040 | |
Total | |
| 1,261,124 | | |
| 11,268,910 | |
As
of December 31, 2021 other receivables consisted of cash receivable from a capital increase implemented over the year end and on
December 31, 2020 of a bank deposit for guaranteeing credit card liabilities.
Market
risk
Currency
risk
The
Group operates internationally and is exposed to foreign exchange risk arising from various exposures, primarily with respect to US Dollar,
Euro and Australian Dollar. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net
investments in foreign operations. The summary of quantitative data about the exposure of the Group’s financial assets and liabilities
to currency risk was as follows:
| |
2021 | | |
2020 | |
in
CHF | |
USD | | |
EUR | | |
AUD | | |
USD | | |
EUR | |
Cash
and cash equivalents | |
| 388,950 | | |
| 539,474 | | |
| — | | |
| 9,214,709 | | |
| 694,287 | |
Trade
and other receivables | |
| 1,436,086 | | |
| 26,843 | | |
| 1,274,271 | | |
| 479 | | |
| — | |
Trade
and other payables | |
| (104,676 | ) | |
| (2,615,791 | ) | |
| — | | |
| (75,712 | ) | |
| (397,853 | ) |
Accrued
expenses | |
| (163,823 | ) | |
| (295,467 | ) | |
| — | | |
| (34,648 | ) | |
| (569,400 | ) |
Net
statement of financial position exposure -asset/(liability) | |
| 1,556,537 | | |
| (2,344,941 | ) | |
| 1,274,271 | | |
| 9,104,828 | | |
| (272,966 | ) |
As
of December 31, 2021, a 5% increase or decrease in the USD/CHF exchange rate with all other variables held constant would have resulted
in a CHF 77,827 (2020: CHF 455,241) increase or decrease in the net result. A 5% increase or decrease in the EUR/CHF exchange rate with
all other variables held constant would have resulted in a CHF 117,247 (2020: CHF 13,648) increase or decrease in the net result. Also,
a 5% increase or decrease in the AUD/CHF exchange rate with all other variables held constant would have resulted in a CHF 63,714 (2020:
CHF 0) increase or decrease in the net result.
The
Company has subsidiaries in the United States, Australia and Ireland, whose net assets are exposed to foreign currency translation risk.
Due to the small size of the subsidiaries the translation risk is not significant.
Capital
risk management
The
Company and its subsidiaries are subject to capital maintenance requirements under local law in the country in which it operates. To
ensure that statutory capital requirements are met, the Company monitors capital, at the entity level, on an interim basis as well as
annually. From time to time the Company may take appropriate measures or propose capital increases to ensure the necessary capital remains
intact.
6.
Segment information
Geographical
information
The
Group’s non-current assets by the Company’s country of domicile were as follows:
| |
December 31,
2021 | | |
December 31,
2020 | |
Switzerland | |
| 14,734,738 | | |
| 9,030,778 | |
Australia | |
| 144,854 | | |
| 151,269 | |
Total | |
| 14,879,592 | | |
| 9,182,047 | |
Non-current
assets exclude financial instruments.
7.
Property and Equipment
| |
Production
equipment | | |
Office
furniture and EDP | | |
Total | |
At cost | |
| | |
| | |
| |
As
of January 1, 2020 | |
| 353,488 | | |
| 233,706 | | |
| 587,194 | |
Additions | |
| — | | |
| — | | |
| — | |
Disposals | |
| — | | |
| — | | |
| — | |
As of
December 31, 2020 | |
| 353,488 | | |
| 233,706 | | |
| 587,194 | |
Additions | |
| — | | |
| — | | |
| — | |
Disposals | |
| — | | |
| — | | |
| — | |
As of
December 31, 2021 | |
| 353,488 | | |
| 233,706 | | |
| 587,194 | |
| |
| | | |
| | | |
| | |
Accumulated
depreciation | |
| | | |
| | | |
| | |
As of
January 1, 2020 | |
| (290,491 | ) | |
| (230,031 | ) | |
| (520,522 | ) |
Charge
for the year | |
| (16,481 | ) | |
| (3,555 | ) | |
| (20,036 | ) |
Disposals | |
| — | | |
| — | | |
| — | |
As of
December 31, 2020 | |
| (306,972 | ) | |
| (233,586 | ) | |
| (540,558 | ) |
Charge
for the year | |
| (46,516 | ) | |
| (119 | ) | |
| (46,635 | ) |
Disposals | |
| — | | |
| — | | |
| — | |
As of
December 31, 2021 | |
| (353,488 | ) | |
| (233,705 | ) | |
| (587,193 | ) |
| |
| | | |
| | | |
| | |
Net
book value | |
| | | |
| | | |
| | |
As of
December 31, 2020 | |
| 46,516 | | |
| 120 | | |
| 46,636 | |
As of
December 31, 2021 | |
| — | | |
| 1 | | |
| 1 | |
As
of December 31, 2021, and 2020 no items of property and equipment were pledged.
8. Right-of-use
assets and lease liabilities
Right-of-use
assets | |
Office
building | | |
Total | |
At cost | |
| | |
| |
As of
January 1, 2020 | |
| — | | |
| — | |
As of
December 31, 2020 | |
| — | | |
| — | |
Additions | |
| 594,436 | | |
| 594,436 | |
Disposals | |
| — | | |
| — | |
As of
December 31, 2021 | |
| 594,436 | | |
| 594,436 | |
| |
| | | |
| | |
Accumulated
depreciation | |
| | | |
| | |
As of
January 1, 2020 | |
| — | | |
| — | |
As of
December 31, 2020 | |
| — | | |
| — | |
Charge
for the year | |
| (29,722 | ) | |
| (29,722 | ) |
Disposals | |
| — | | |
| — | |
As of
December 31, 2021 | |
| (29,722 | ) | |
| (29,722 | ) |
| |
| | | |
| | |
Net
book value | |
| | | |
| | |
As of
December 31, 2020 | |
| — | | |
| — | |
As of
December 31, 2021 | |
| 564,714 | | |
| 564,714 | |
Low
value and short-term lease expenses | |
December 31,
2021 | | |
December 31,
2020 | |
| |
| | |
| |
Expense
related to short-term leases | |
| 52,280 | | |
| 61,509 | |
Expense
related to leases of low value assets | |
| — | | |
| — | |
Total | |
| 52,280 | | |
| 61,509 | |
Lease
liabilities | |
December 31,
2021 | | |
December 31,
2020 | |
As of
January 1 | |
| — | | |
| — | |
Additions | |
| 594,436 | | |
| — | |
Interest
expenses | |
| 3,000 | | |
| — | |
Repayment
of lease liability | |
| (21,700 | ) | |
| — | |
As of December 31 | |
| 575,736 | | |
| — | |
| |
| | | |
| | |
thereof
non-current | |
| 461,485 | | |
| — | |
thereof current | |
| 114,251 | | |
| | |
Maturities
of lease liabilities | |
December 31,
2021 | | |
December 31,
2020 | |
| |
| | |
| |
Year 1 | |
| 130,200 | | |
| — | |
Year 2 | |
| 130,200 | | |
| — | |
Year 3 | |
| 130,200 | | |
| — | |
Year 4 | |
| 130,200 | | |
| — | |
Year 5 | |
| 97,650 | | |
| — | |
Undiscounted lease payments | |
| 618,450 | | |
| — | |
Less:
unearned interest | |
| (42,714 | ) | |
| — | |
Total | |
| 575,736 | | |
| — | |
9.
Intangible assets
| |
Licenses | | |
IP
& Data
rights | | |
Patents | | |
Internally
generated | | |
Total | |
At cost | |
| | |
| | |
| | |
| | |
| |
As
of January 1, 2020 | |
| 1,482,520 | | |
| 193,989 | | |
| 239,593 | | |
| 4,849,511 | | |
| 6,765,613 | |
Exchange
differences | |
| | | |
| | | |
| | | |
| 6,120 | | |
| 6,120 | |
Additions | |
| — | | |
| — | | |
| 177,623 | | |
| 2,166,054 | | |
| 2,343,677 | |
As of
December 31, 2020 | |
| 1,482,520 | | |
| 193,989 | | |
| 417,216 | | |
| 7,021,685 | | |
| 9,115,410 | |
Exchange
differences | |
| — | | |
| — | | |
| — | | |
| (3,654 | ) | |
| (3,654 | ) |
Additions | |
| 3,893,681 | | |
| — | | |
| 55,938 | | |
| 2,783,431 | | |
| 6,733,050 | |
As of
December 31, 2021 | |
| 5,376,201 | | |
| 193,989 | | |
| 473,154 | | |
| 9,801,462 | | |
| 15,844,806 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated
amortization and impairment losses | |
| | | |
| | | |
| | | |
| | | |
| | |
As of
December 31, 2020 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Impairment | |
| (1,482,520 | ) | |
| (47,409 | ) | |
| — | | |
| — | | |
| (1,529,929 | ) |
As of
December 31, 2021 | |
| (1,482,520 | ) | |
| (47,409 | ) | |
| — | | |
| — | | |
| (1,529,929 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net
book value | |
| | | |
| | | |
| | | |
| | | |
| | |
As of
December 31, 2020 | |
| 1,482,520 | | |
| 193,989 | | |
| 417,216 | | |
| 7,021,685 | | |
| 9,115,410 | |
As of
December 31, 2021 | |
| 3,893,681 | | |
| 146,580 | | |
| 473,154 | | |
| 9,801,462 | | |
| 14,314,877 | |
Intangible
assets comprise upfront and milestone payments related to licenses. The increase in 2021 was related to the acquisition of Trasir Therapeutics
Inc., which was treated as an asset acquisition because substantially all the fair value of Trasir was concentrated in a worldwide exclusive
license agreement with Washington University (Note 3). Further, in 2021 all intangible assets related to the projects AM-101, AM-111
and AM-201 were impaired, taking into account the future repositioning of the company. Amortization will commence once the intangible
assets are available for use, which will be the case after regulatory approvals are obtained and the related products are available for
use.
In
2019, a US patent on AM-125 was issued and a related EU application was allowed. As a consequence, we started to capitalize prosecution
and registration costs. In 2021, we capitalized CHF 55,938 (2020: CHF 177,623).
Commencing
with the business year 2018, the Company recorded intangibles related to direct development expenditure of its AM-125 program. The capitalized
amount for the year ended December 31, 2021 was CHF 2,839,369 (2020: CHF 2,343,677). The additions to internally generated intangibles of CHF 2,783,431 are net of CHF 94,118 government grants obtained
under the Australian R&D tax incentive program (2020: CHF 0).
10.
Inventories
| |
December 31,
2021 | | |
December 31,
2020 | |
| |
| | |
| |
Finished
goods | |
| 839,221 | | |
| — | |
Total | |
| 839,221 | | |
| — | |
As
of December 31, 2021, the Company' s inventory consisted of the product Bentrio, a drug-free nasal spray for protection against airborne
viruses and allergens. Bentrio has a limited shelf life, which may affect the salability of the product, and is packaged in various configurations
(stock keeping units, “SKUs”) for different markets and in different languages to address specific requirements under national
rules and regulations or by trade channels. During product launch, shelf life is still relatively short since data from supporting stability
studies are still limited; this tends to restrict salability through certain trade channels. In addition, there is only limited visibility
on product take-up across different markets due to the lack of a sales history, and national rules and regulations may require prior
approval of certain marketing materials and messages. Based on a management review of the inventory as at December 31, 2021 for any obsolete
or slow-moving items, the Company wrote down finished good inventories in the amount of CHF 2.0 million in 2021. The amount of the write
down was expensed to the income statement under Cost of Sales.
11.
Other receivables
| |
December 31,
2021 | | |
December 31,
2020 | |
R&D
tax credit receivable | |
| 470,958 | | |
| — | |
Receivable
from share issuance | |
| 255,187 | | |
| — | |
Advance
payments to suppliers | |
| — | | |
| 479 | |
Value
added tax receivable | |
| 168,851 | | |
| 38,337 | |
Withholding
tax receivable | |
| 7,336 | | |
| 6,087 | |
Deposit
credit cards | |
| — | | |
| 10,040 | |
Other | |
| 15,501 | | |
| 25,918 | |
Total
other receivables | |
| 917,833 | | |
| 80,861 | |
As
described in note 3 Significant accounting policies, the Company obtains government grants under the Australian R&D Tax Incentive
program. The R&D tax credit receivable as of December 31, 2021 relates to the reimbursement application for compensation of R&D
expenditures incurred in 2021. Other receivables were not considered impaired in the years under review.
12.
Prepayments
| |
December 31,
2021 | | |
December 31,
2020 | |
Advance
payments to suppliers | |
| 859,492 | | |
| 5,020 | |
Clinical
projects and related activities | |
| — | | |
| 164,916 | |
Insurance | |
| 137,418 | | |
| 104,590 | |
Other | |
| — | | |
| 3,063 | |
Total
prepayments | |
| 996,910 | | |
| 277,589 | |
13.
Cash and cash equivalents
| |
December 31,
2021 | | |
December 31,
2020 | |
Cash
in bank accounts | |
| 984,191 | | |
| 11,258,870 | |
Cash
on hand | |
| — | | |
| — | |
Total
cash and cash equivalents | |
| 984,191 | | |
| 11,258,870 | |
14.
Capital and reserves
Share
capital
The
issued share capital of the Company at December 31 consisted of:
| |
December 31,
2021 | | |
December 31,
2020 | |
| |
Number | | |
CHF | | |
Number | | |
CHF | |
Common shares with a par value of CHF 0.01 each | |
| 14,964,261 | | |
| 149,643 | | |
| 11,417,159 | | |
| 114,172 | |
Total | |
| 14,964,261 | | |
| 149,643 | | |
| 11,417,159 | | |
| 114,172 | |
| |
Common
Shares
(Number) | |
| |
2021 | | |
2020 | |
As
of January 1 | |
| 11,417,159 | | |
| 4,125,949 | |
Exercise of warrants | |
| 897,435 | | |
| 1,263,845 | |
LPC equity
line | |
| — | | |
| 1,610,120 | |
ATM program | |
| 1,184,700 | | |
| 1,628,827 | |
Share-based
payments (bonus) | |
| 174,610 | | |
| 51,418 | |
Conversion
convertible loan | |
| 516,814 | | |
| 737,000 | |
Shares
issued for Trasir acquisition | |
| 773,543 | | |
| — | |
Registered
direct offering | |
| — | | |
| 2,000,000 | |
Total,
as of December 31 | |
| 14,964,261 | | |
| 11,417,159 | |
On
June 1, 2021, the Company completed the acquisition of Trasir. The upfront acquisition price of USD 2.5 million was paid with 764,370
non-registered common shares at USD 3.27 each to the selling shareholders. In addition, 9,173 non-registered common shares were issued
to reimburse USD 30,000 in expenses incurred by certain selling Trasir shareholders.
On
December 3, 2020, the Company entered into securities purchase agreements with several institutional investors for the purchase and sale
of 2,000,000 common shares at an offering price of $4.00 per share, pursuant to a registered direct offering. The net proceeds of the
offering were approximately $7.3 million.
On
December 1, 2020, a tranche of the convertible loan provided by FiveT in the amount of CHF 895,455 was converted into 737,000 common
shares at a conversion price of $1.35. On March 4, 2021 the remaining amount of CHF 604,545 plus interest of CHF 40,628 were converted
into 516,814 common shares at a conversion price of $1.35.
On
April 23, 2020, the Company entered into a purchase agreement and a Registration Rights Agreement with Lincoln Park Capital Fund, LLC
(the “2020 Commitment Purchase Agreement”). Pursuant to the purchase agreement, LPC agreed to subscribe for up to USD 10,000,000
of our common shares over the 30-month term of the purchase agreement. In 2020, we issued 1,200,000 of our common shares to LPC for an
aggregate amount of USD 1.1 million. The 2020 Commitment Purchase Agreement replaced the 2018 Commitment Purchase Agreement. Under the
2018 Commitment Purchase Agreement agreed to purchase common shares for up to $10,000,000 over the 30-month term of the Purchase Agreement.
Prior to its termination we had issued 587,500 common shares for aggregate proceeds of $1.8 million to LPC under the LPC Purchase Agreement.
The Purchase Agreement replaced the Purchase Agreement that we entered into with LPC on October 10, 2017 (the “2017 Commitment
Purchase Agreement”), which was terminated as a result of the Merger. Under the 2017 Commitment Purchase Agreement, LPC agreed
to subscribe for up to $13,500,000 of our common shares, and prior to its termination, we had issued an aggregate of 2,600,000 (pre-merger)
common shares for aggregate proceeds of $1.8 million to LPC under the 2017 Commitment Purchase Agreement.
On
May 15, 2019, the Company completed a public offering of (i) 440,000 common shares with a par value of CHF 0.40 each, together with warrants
to purchase 440,000 common shares, and (ii) 1,721,280 pre-funded warrants, with each pre-funded warrant exercisable for one common share,
together with warrants to purchase 1,721,280 common shares, including 110,000 common shares and warrants to purchase 110,000 common shares
sold pursuant to a partial exercise by the underwriters of the underwriters’ over-allotment option (the “May 2019 Registered
Offering”). The exercise price for the pre-funded warrants was CHF 0.01 per common share and for the warrants CHF 4.34. The net
proceeds to us from the May 2019 Registered Offering were approximately $7.7 million, after deducting underwriting discounts and other
offering expenses payable by us. All pre-funded warrants were exercised in 2019. In December 2020, 1,263,845 warrants were exercised.
The remaining 897,435 warrants were exercised in March 2021.
On
November 30, 2018, we entered into the A.G.P. Sales Agreement with A.G.P. Pursuant to the terms of the A.G.P. Sales Agreement, as amended
on April 5, 2019, we may offer and sell our common shares, from time to time through A.G.P. by any method deemed to be an “at-the-market”
offering as defined in Rule 415(a)(4) promulgated under the Securities Act. Pursuant to the A.G.P. Sales Agreement, we may sell common
shares up to a maximum aggregate offering price of $25.0 million. In 2021, we sold 1,184,700 shares under the ATM. As of the date of
this Annual Report, we have sold 1,943,318 of our common shares for an aggregate offering price of $5.4 million pursuant to the
A.G.P. Sales Agreement. The related transaction costs of CHF 71,161 were charged to equity.
Authorized
share capital
On
January 24, 2019, our board of directors determined that it would be in our best interest to change our legal seat and jurisdiction of
incorporation, respectively, from Switzerland to Bermuda (the “Redomestication”). The Company’s Memorandum of Continuance
and the Bye-laws that were adopted at an extraordinary meeting of shareholders held on March 8, 2019 provided for an authorized share
capital of 200,000,000 common shares and 20,000,000 preference shares. Following a reverse share split at a ratio of 20-for-1 on May
1, 2019, a decision by the annual general meeting of shareholders on June 4, 2020 to increase the authorized share capital and the reduction
of the par value of June 30, 2020, our authorized share capital consists of 25,000,000 common shares, par value CHF 0.01 per share, and
20,000,000 preference shares, par value CHF 0.02 per share.
15.
Share-based compensation
Description
In
2014, the Group introduced an equity incentive plan (the (“EIP”) as amended in 2017 and 2019. In September 2019, all employees
and directors of the Company opted-in to forfeit all option grants received prior to 2019 in exchange for new options (the “September
2019 Conversion Grant”). The number of new options was calculated on a value neutral basis using the Black-Scholes model. Including
the September 2019 Conversion Grant, the Company granted 390,620 options in 2019 under the EIP. Plan C was terminated in 2019. The last
outstanding options under Plan C were replaced by the September 2019 Conversion Grant. In 2021, the Company granted 342,263 options (2020:
726,637 options) under the EIP.
Holders
of vested options are entitled to purchase common shares of the Company. Under the Equity Incentive Plan, the Board of Directors defined
the exercise price as the average daily closing price of the Company’s shares during the 30 days preceding the date of grant. All
options are to be settled by the physical delivery of shares. The key terms and conditions related to the grants under these programs
at December 31, 2021 are as follows:
Plan | |
Number
of options
outstanding | | |
Vesting
conditions | |
Contractual
life of options |
Equity
Incentive Plan Board | |
| 279,771 | | |
1 year service from grant date | |
6 years |
Equity
Incentive Plan Management & Staff | |
| 523,881 | | |
2 years’ service from grant date (50%) | |
8 years |
Equity
Incentive Plan Management & Staff | |
| 523,881 | | |
3 years’ service from grant date (50%) | |
8 years |
Measurement
of fair values
The
fair value of the options was measured based on the Black-Scholes formula.
|
|
Stock
Option Plan |
|
|
|
Equity
Incentive
Plan 2021 |
|
Equity
Incentive
Plan 2021 |
|
Equity
Incentive
Plan 2020 |
|
Equity
Incentive
Plan 2020 |
|
Fair
value at grant date |
|
USD 0.932 (2 year vesting) 1) USD 1.107 (3 year vesting) 1) |
|
USD 1.241 (1 year vesting) 2) USD 1.850 (2 year vesting) 2) USD 2.183 (3 year vesting) 2) |
|
USD 0.325 (2 year vesting) 1) USD 0.391 (3 year vesting) 1) |
|
USD 0.258 (1 year vesting) 2) USD 0.514 (2 year vesting) 2) USD 0.578 (3 year vesting) 2) |
|
Share
price at grant date |
|
USD 1.64 |
|
USD 3.54 |
|
USD 0.79 |
|
USD 0.92 |
|
Exercise
price |
|
USD 1.889 |
|
USD 3.511 |
|
USD 0.878 |
|
USD 0.825 |
|
Expected
volatility |
|
93.4% |
|
101.3% |
|
84.96% |
|
72.72% |
|
Expected
life |
|
2 and 3 years |
|
1, 2 and 3 years |
|
2 and 3 years |
|
1, 2 and 3 years |
|
Expected
dividends |
|
— |
|
— |
|
— |
|
— |
|
Risk-free
interest rate |
|
0.47% |
|
0.06% |
|
0.82% |
|
0.61% |
|
1) |
October grants for the
respective year |
2) |
April grants for the respective
year |
The
Company uses its own historic volatility to calculate expected volatility. The expected life of all options is assumed to correspond
to the vesting period.
The
total expense recognized for equity-settled share-based payment transactions were CHF 1,206,303 in 2021 (2020: CHF 368,793, 2019:
CHF 228,920).
Share
based compensation loss related to employee stock options amounted to CHF 1,223,696 in 2021 (2020: CHF 351,401, 2019: CHF
226,601).
Share
based compensation expense of CHF 0 related to the purchase of intangibles was capitalized for the year ended December 31, 2021 (2020:
CHF 0, 2019: 2,319).
The
number and weighted average exercise prices (in CHF) of options under the share option programs are as follows:
|
|
2021 |
|
|
2020 |
|
|
|
Number of
options |
|
|
Weighted average
exercise price |
|
|
Weighted average
remaining term |
|
|
Number of
options |
|
|
Weighted average
exercise price |
|
|
Weighted average
remaining term |
|
Outstanding at January 1 |
|
|
1,038,537 |
|
|
|
1.58 |
|
|
|
7.01 |
|
|
|
324,053 |
|
|
|
3.01 |
|
|
|
7.60 |
|
Expired during the year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Forfeited during the year |
|
|
(51,290 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised during the year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Granted during the year |
|
|
342,263 |
|
|
|
2.27 |
|
|
|
— |
|
|
|
714,484 |
|
|
|
0.87 |
|
|
|
— |
|
Outstanding
at December 31 |
|
|
1,329,510 |
|
|
|
1.65 |
|
|
|
6.56 |
|
|
|
1,038,537 |
|
|
|
1.58 |
|
|
|
7.01 |
|
Exercisable at December 31 |
|
|
288,446 |
|
|
|
— |
|
|
|
— |
|
|
|
37,576 |
|
|
|
— |
|
|
|
— |
|
The
range of exercise prices for outstanding options was CHF 0.75 to CHF 28.79 as of December 31, 2021 and CHF 0.73 to CHF 27.93 as
of December 31, 2020.
16.
Trade and other payables
| |
December 31,
2021 | | |
December 31,
2020 | |
Trade
accounts payable - third parties | |
| 3,544,384 | | |
| 722,272 | |
Other | |
| 153,339 | | |
| 40,181 | |
Total
trade and other payables | |
| 3,697,723 | | |
| 762,453 | |
17.
Accrued expenses
| |
December 31,
2021 | | |
December 31,
2020 | |
Accrued
research and development costs including milestone payments | |
| 557,391 | | |
| 1,105,089 | |
Professional
fees | |
| 179,461 | | |
| 172,273 | |
Accrued
vacation & overtime | |
| 51,218 | | |
| 44,466 | |
Employee
benefits incl. share based payments | |
| 196,917 | | |
| 101,821 | |
Other | |
| 63,588 | | |
| 9,457 | |
Total
accrued expenses | |
| 1,048,575 | | |
| 1,433,106 | |
18.
Other operating income
| |
December 31,
2021 | | |
December 31,
2020 | | |
December 31,
2019 | |
Income
from R&D tax incentive (Government grants) | |
| 458,157 | | |
| — | | |
| — | |
Refund
of share issuance stamp duty | |
| — | | |
| 100,002 | | |
| — | |
Other
income | |
| 2,553 | | |
| 74,473 | | |
| — | |
Total
other operating income | |
| 460,710 | | |
| 174,475 | | |
| — | |
19.
Cost of Sales
| |
December 31,
2021 | | |
December 31,
2020 | | |
December 31,
2019 | |
Product
purchases, packaging and logistics | |
| 173,758 | | |
| — | | |
| — | |
Employee
benefit and expenses | |
| 89,238 | | |
| — | | |
| — | |
Inventory
write-down | |
| 1,977,558 | | |
| — | | |
| — | |
Total
cost of sales | |
| 2,240,554 | | |
| — | | |
| — | |
20.
Research and development expense
| |
December 31,
2021 | | |
December 31,
2020 | | |
December 31,
2019 | |
Pre-clinical
projects | |
| 587,019 | | |
| 242,617 | | |
| 182,346 | |
Clinical
projects | |
| 2,957,752 | | |
| 476,972 | | |
| 993,085 | |
Product
and process development | |
| 1,100,453 | | |
| 614,744 | | |
| 481,453 | |
Employee
benefits and expenses | |
| 1,897,155 | | |
| 1,120,814 | | |
| 1,373,543 | |
Lease
expenses from short-term lease | |
| — | | |
| 34,147 | | |
| 26,057 | |
Patents
and trademarks | |
| 465,587 | | |
| 246,592 | | |
| 168,367 | |
Regulatory
projects | |
| 354,507 | | |
| 110,612 | | |
| 80,347 | |
Impairment
intangible assets | |
| 1,529,929 | | |
| — | | |
| — | |
Depreciation
tangible assets | |
| 46,635 | | |
| 16,481 | | |
| 20,083 | |
Total
research and development expense | |
| 8,939,037 | | |
| 2,862,979 | | |
| 3,325,281 | |
Research
and development expenses were capitalized in the amount of CHF 2,839,369 during 2021 compared to CHF 2,343,677 in 2020.
21.
Sales and marketing expense
| |
December 31,
2021 | | |
December 31,
2020 | | |
December 31,
2019 | |
Marketing
and sales expenses | |
| 1,132,864 | | |
| — | | |
| — | |
Employee
benefits and expenses | |
| 204,157 | | |
| — | | |
| — | |
Product
samples | |
| 161,167 | | |
| — | | |
| — | |
Total
sales and marketing | |
| 1,498,218 | | |
| — | | |
| — | |
22.
General and administrative expense
| |
December 31,
2021 | | |
December 31,
2020 | | |
December 31,
2019 | |
Employee
benefits and expenses | |
| 1,554,778 | | |
| 811,373 | | |
| 1,010,708 | |
Business
development | |
| 967,046 | | |
| 95,663 | | |
| 113,959 | |
Travel
expenses | |
| 75,829 | | |
| 28,898 | | |
| 102,679 | |
Administration
expenses | |
| 2,245,862 | | |
| 1,645,530 | | |
| 2,653,914 | |
Lease
expenses from short-term lease | |
| 52,280 | | |
| 13,871 | | |
| 27,362 | |
Depreciation
Right-of-use assets | |
| 29,722 | | |
| — | | |
| — | |
Depreciation tangible assets | |
| — | | |
| 3,555 | | |
| 10,740 | |
Capital
tax expenses | |
| 21,059 | | |
| (4,228 | ) | |
| 14,501 | |
Total
general and administrative expenses | |
| 4,946,576 | | |
| 2,594,662 | | |
| 3,933,863 | |
23.
Employee benefits
| |
December 31,
2021 | | |
December 31,
2020 | | |
December 31,
2019 | |
Salaries | |
| 1,865,633 | | |
| 1,260,359 | | |
| 1,832,382 | |
Pension
costs | |
| 165,801 | | |
| 156,843 | | |
| 130,792 | |
Other
social benefits | |
| 275,258 | | |
| 116,290 | | |
| 217,448 | |
Share
based payments costs | |
| 1,223,696 | | |
| 351,401 | | |
| 226,601 | |
Other
personnel expenditures | |
| 214,940 | | |
| 47,295 | | |
| (22,973 | ) |
Total
employee benefits | |
| 3,745,328 | | |
| 1,932,188 | | |
| 2,384,250 | |
In
2021 share based compensation expense included CHF 902,817 for one regular and one extraordinary share bonus grant related to the strategic
repositioning of the Company. The latter, which amounts to CHF 810,252, including CHF 360,112 for a future share grant contingent on
achieving the Positive Results related to the Trasir transaction. Share based compensation included expense related to employee stock
options of CHF 320,879 in the year 2021 compared to CHF 351,401 in 2020. On the other hand, expenses for salaries in the previous year
had benefited from reimbursements of CHF 63,208 under the Swiss short-time work scheme, which had been used for three months in connection
with a temporary reduction in project activities due to the COVID-19 pandemic.
Benefit
plans
The
Company participates in a retirement plan (the “Plan”) organized as an independent collective foundation, that covers all
of its employees in Switzerland, including management. The collective foundation is governed by a foundation board. The board is made
up of an equal number of employee and employer representatives of the affiliated companies. The Company has no direct influence on the
investment strategy of the collective foundation. Moreover, certain elements of the employee benefits are defined in the same way for
all affiliated companies. This is mainly related to the annuity factors at retirement and to interest allocated on retirement savings.
The employer itself cannot determine the benefits or how they are financed directly. The foundation board of the collective foundation
is responsible for the determination of the investment strategy, for making changes to the pension fund regulations and in particular,
also for defining the financing of the pension benefits.
The
old age benefits are based on retirement savings for each employee, coupled with annual retirement credits and interest (there is no
possibility to credit negative interest). At retirement age, the insured members can choose whether to take a pension for life, which
includes a spouse’s pension, or a lump sum. In addition to retirement benefits, the plan benefits also include disability and death
benefits. Insured members may also buy into the scheme to improve their pension provision up to the maximum amount permitted under the
rules of the plan and may withdraw funds early for the purchase of a residential property for their own use subject to limitations under
Swiss law. On leaving the Company, retirement savings are transferred to the pension institution of the new employer or to a vested benefits
institution. This type of benefit may result in pension payments varying considerably between individual years. In defining the benefits,
the minimum requirements of the Swiss Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and its implementing
provisions must be observed. The BVG defines the minimum pensionable salary and the minimum retirement credits. In Switzerland, the minimum
interest rate applicable to these minimum retirement savings is set by the Swiss Federal Council at least once every two years. The rate
was 1.00% in 2019, 1.00% in 2020 and 1.00% in 2021.
The
assets are invested by the collective foundation to which many companies contribute, in a diversified portfolio that respects the requirements
of the Swiss BVG. Therefore, disaggregation of the pension assets and presentation of plan assets in classes that distinguish the nature
and risks of those assets is not possible. Under the Plan, both the Company and the employee share the costs equally. The structure of
the plan and the legal provisions of the BVG mean that the employer is exposed to actuarial risks. The main risks are investment risk,
interest risk, disability risk and the risk of longevity. Through the affiliation to a collective foundation, the Company has minimized
these risks, since they are shared between a much greater number of participants.
For
accounting purposes under IFRS, the plan is treated as a defined benefit plan.
The
following tables present information about the net defined benefit liability and its components:
Change
in defined benefit obligation
| |
2021 | | |
2020 | |
Defined
benefit obligation at January 1 | |
| 3,529,602 | | |
| 3,087,947 | |
Service
costs | |
| 162,200 | | |
| 151,624 | |
Plan
participants’ contribution | |
| 101,066 | | |
| 76,032 | |
Interest
cost | |
| 10,464 | | |
| 9,482 | |
Actuarial
losses | |
| 159,845 | | |
| 58,912 | |
Plan
amendments | |
| (3,115 | ) | |
| — | |
Transfer-out
amounts | |
| (142,951 | ) | |
| (201,310 | ) |
Transfer-in
amounts of new employees | |
| 860,521 | | |
| 346,915 | |
Defined
benefit obligation at December 31 | |
| 4,677,632 | | |
| 3,529,602 | |
The
defined benefit obligation includes only liabilities for active employees. The weighted average modified duration of the defined benefit
obligation at December 31, 2021 is 19.9 years (2020: 21.9 years).
Change
in fair value of plan assets
| |
2021 | | |
2020 | |
Fair value
of plan assets at January 1 | |
| 2,662,226 | | |
| 2,327,500 | |
Interest
income | |
| 8,586 | | |
| 7,429 | |
Return
on plan assets excluding interest income | |
| 424,829 | | |
| 32,794 | |
Employer
contributions | |
| 101,066 | | |
| 76,032 | |
Plan
participants’ contributions | |
| 101,066 | | |
| 76,032 | |
Transfer-out
amounts | |
| (142,951 | ) | |
| (201,310 | ) |
Transfer-in
amounts of new employees | |
| 860,521 | | |
| 346,915 | |
Administration
expense | |
| (6,030 | ) | |
| (3,166 | ) |
Fair
value of plan assets at December 31 | |
| 4,009,313 | | |
| 2,662,226 | |
Net
defined benefit liability recognized in the statement of financial position
| |
December 31,
2021 | | |
December 31,
2020 | |
Present
value of funded defined benefit obligation | |
| 4,677,632 | | |
| 3,529,602 | |
Fair
value of plan assets | |
| (4,009,313 | ) | |
| (2,662,226 | ) |
Net
defined benefit liability | |
| 668,319 | | |
| 867,376 | |
Defined
Benefit Cost
| |
2021 | | |
2020 | | |
2019 | |
Service
cost | |
| 159,085 | | |
| 151,624 | | |
| 138,580 | |
Net interest
expense | |
| 1,878 | | |
| 2,053 | | |
| 5,137 | |
Administration
expense | |
| 6,030 | | |
| 3,166 | | |
| 4,051 | |
Total
defined costs for the year recognized in profit or loss | |
| 166,993 | | |
| 156,843 | | |
| 147,768 | |
Remeasurement
of the Defined Benefit Liability
| |
2021 | | |
2020 | | |
2019 | |
Actuarial
loss (gain) arising from changes in financial assumptions | |
| (74,284 | ) | |
| 13,031 | | |
| 360,541 | |
Actuarial
loss (gain) arising from experience adjustments | |
| 463,238 | | |
| 45,881 | | |
| (215,156 | ) |
Actuarial
gain arising from demographic assumptions | |
| (229,109 | ) | |
| — | | |
| — | |
Return
on plan assets excluding interest income | |
| (424,829 | ) | |
| (32,794 | ) | |
| (73,375 | ) |
Total
defined benefit cost for the year recognized in the other comprehensive loss (income) | |
| (264,984 | ) | |
| 26,118 | | |
| 72,010 | |
Assumptions
At December
31 | |
2021 | | |
2020 | | |
2019 | |
Discount
rate | |
| 0.30 | % | |
| 0.20 | % | |
| 0.30 | % |
Future
salary increase | |
| 0.85 | % | |
| 0.60 | % | |
| 1.10 | % |
Pension
indexation | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
Mortality
and disability rates | |
| BVG2015G | | |
| BVG2015G | | |
| BVG2015G | |
Sensitivity
analysis
Reasonably
possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected
the defined benefit obligation by the amounts shown below.
December
31, | |
2021 | | |
2020 | |
Change
in assumption | |
| 0.25% increase | | |
| 0.25% increase | |
Discount
rate | |
| (200,601 | ) | |
| (166,228 | ) |
Salary
increase | |
| 22,961 | | |
| 13,602 | |
Pension
indexation | |
| 110,958 | | |
| 88,460 | |
Change
in assumption | |
| + 1 year | | |
| + 1 year | |
Life
expectancy | |
| 98,983 | | |
| 88,215 | |
24.
Finance income and finance expense
| |
2021 | | |
2020 | | |
2019 | |
Interest
income | |
| 3,219 | | |
| 258 | | |
| 17,882 | |
Net foreign
currency exchange gain | |
| 1,458,429 | | |
| 3,207,649 | | |
| 1,343,153 | |
Revaluation
gain from derivative financial instruments | |
| 5,085 | | |
| — | | |
| 663,725 | |
Total
finance income | |
| 1,466,733 | | |
| 3,207,907 | | |
| 2,024,760 | |
Interest
expense (incl. Bank charges) | |
| 189,695 | | |
| 135,151 | | |
| 28,628 | |
Net foreign
currency exchange loss | |
| 1,129,788 | | |
| 3,541,202 | | |
| 1,562,725 | |
Revaluation
loss from derivative financial instruments | |
| 416,003 | | |
| 2,250,222 | | |
| — | |
Transaction
costs | |
| — | | |
| 219,615 | | |
| — | |
Total
finance expense | |
| 1,735,486 | | |
| 6,146,190 | | |
| 1,591,353 | |
Finance
(expense)/income, net | |
| (268,753 | ) | |
| (2,938,283 | | |
| 433,407 | |
In 2021, the revaluation loss from derivative financial instruments
of CHF 416,003 is related to the revaluation of the financial derivatives embedded in the FiveT convertible loan (note 29), at conversion.
The revaluation gain of CHF 5,085 is related to the revaluation of outstanding warrants from public offerings (note 30). In 2020 there
was a revaluation loss from derivative financial instruments of CHF 2,250,222 and in 2019 a revaluation gain of CHF 663,725. In 2021,
net foreign currency exchange gains contain translation gains of CHF 289,961 (2020: CHF 71,525; 2019: CHF 7,744) which arose on the Company’s
USD and EUR denominated cash and cash equivalents. In 2021, finance expenses included interest paid of CHF 3,700 (2020: CHF 0; 2019: CHF
3,745).
25.
Taxation
The
Group’s income tax expense recognized in the consolidated statement of profit or loss and other comprehensive loss was as follows:
| |
2021 | | |
2020 | | |
2019 | |
Deferred
income tax expense | |
| (570,730 | ) | |
| (389,384 | ) | |
| (213,355 | ) |
Deferred
income tax gain | |
| 549,110 | | |
| 410,668 | | |
| 407,192 | |
| |
| (21,620 | ) | |
| 21,284 | | |
| 193,837 | |
The
Group’s effective income tax expense differed from the expected theoretical amount computed by applying the Group’s applicable
weighted average tax rate of 13.5% in 2021 (2020: 12.1%, 2019: 12.5%) as summarized in the following table:
Reconciliation | |
2021
| | |
2020 | | |
2019 | |
Loss before
income tax | |
| (17,368,546 | ) | |
| (8,221,449 | ) | |
| (6,825,738 | ) |
Income
tax at statutory tax rates applicable to results in the respective countries | |
| 2,348,057 | | |
| 991,120 | | |
| 854,636 | |
Effect
of unrecognized temporary differences | |
| (632,031 | ) | |
| (302,557 | | |
| 89,974 | |
Effect
of unrecognized taxable losses | |
| (1,885,486 | ) | |
| (184,881 | ) | |
| (913,309 | ) |
Effect
of utilization of previously unrecognized taxable losses | |
| — | | |
| — | | |
| 193,155 | |
Effect
of impairment of deferred tax assets | |
| (75,375 | ) | |
| — | | |
| (131,055 | ) |
Effect
of previously unrecognized deferred tax asset | |
| — | | |
| 97,458 | | |
| 20,977 | |
Effect
of expenses not considerable for tax purposes | |
| — | | |
| (47,894 | ) | |
| (29,549 | |
Effect
of changes in local tax legislation and/or local tax rates | |
| — | | |
| — | | |
| 110,758 | |
Effect
of impact from application of different tax rates | |
| 223,215 | | |
| (531,962 | ) | |
| (1,750 | ) |
Income
tax gain/(loss) | |
| (21,620 | ) | |
| 21,284 | | |
| 193,837 | |
The
tax effect of taxable temporary differences that give rise to deferred income tax liabilities or to deferred income tax assets as of
December 31 is presented below:
Deferred
Tax Liabilities | |
December 31,
2021 | | |
December 31,
2020 | |
Intangible
assets | |
| (51,914 | ) | |
| (252,174 | ) |
Deferred
unrealized foreign exchange gains | |
| — | | |
| (350,054 | ) |
Other
receivables | |
| (122,449 | ) | |
| — | |
Total | |
| (174,363 | ) | |
| (602,228 | ) |
Deferred
Tax Asset | |
December 31,
2021 | | |
December 31,
2020 | |
Net
operating loss (NOL) | |
| 31,879 | | |
| 476,363 | |
Total | |
| 31,879 | | |
| 476,363 | |
Deferred
Tax, net | |
| (142,484 | ) | |
| (125,865 | ) |
Deferred
Tax 2021 | |
Opening
Balance | | |
Recognized
in Profit or
Loss | | |
Recognized
in Equity | | |
Exchange
Differences | | |
Closing
Balance | |
Intangible
assets | |
| (252,174 | ) | |
| 199,056 | | |
| — | | |
| 1,204 | | |
| (51,914 | ) |
Deferred
unrealized foreign exchange gains | |
| (350,054 | ) | |
| 350,054 | | |
| — | | |
| — | | |
| — | |
Other
receivables | |
| — | | |
| (127,000 | ) | |
| — | | |
| 4,551 | | |
| (122,449 | ) |
Net
operating loss (NOL) | |
| 476,363 | | |
| (443,730 | ) | |
| — | | |
| (754 | ) | |
| 31,879 | |
Total | |
| (125,865 | ) | |
| (21,620 | ) | |
| — | | |
| 5,001 | | |
| (142,484 | ) |
Deferred
Tax 2020 | |
Opening
Balance | | |
Recognized
in Profit or Loss | | |
Recognized
in Equity | | |
Closing
Balance | |
Intangible
assets | |
| (212,844 | ) | |
| (39,330 | ) | |
| — | | |
| (252,174 | ) |
Deferred
unrealized foreign exchange gains | |
| — | | |
| (350,054 | ) | |
| — | | |
| (350,054 | ) |
Derivative
financial asset | |
| (26,156 | ) | |
| 26,156 | | |
| — | | |
| — | |
Net
operating loss (NOL) | |
| 91,851 | | |
| 384,512 | | |
| — | | |
| 476,363 | |
Total | |
| (147,149 | ) | |
| 21,284 | | |
| — | | |
| (125,865 | ) |
As
of December 31, 2021, the Group had unrecognized tax loss carryforwards amounting to CHF 109.9 million (2020: CHF 114.0 million),
of which CHF 108.6 million related to Auris Medical AG, Otolanum AG, Zilentin AG and Altamira Medica AG in Switzerland, CHF 1.3 million
to Altamira Therapeutics Inc. in the United States (2020: CHF 113.0 million for Auris Medical AG, Otolanum AG, Zilentin AG and Altamira
Medica AG and CHF 1.0 million for Auris Medical Inc.).
The
Group’s unrecognized tax loss carryforwards with their expiry dates are as follows:
| |
December 31,
2021 | | |
December 31,
2020 | |
Within
1 year | |
| 28,909,896 | | |
| 19,575,171 | |
Between
1 and 3 years | |
| 50,673,943 | | |
| 56,866,795 | |
Between
3 and 7 years | |
| 29,007,049 | | |
| 36,701,692 | |
More
than 7 years | |
| 1,264,262 | | |
| 870,200 | |
Total | |
| 109,855,150 | | |
| 114,013,858 | |
Due
to the uncertainty surrounding the future results of operations and the uncertainty as to whether the Group can use the loss carryforwards
for tax purposes, deferred tax assets on tax loss carryforwards were only considered to the extent that they offset taxable temporary
differences within the same taxable entity. No deferred tax assets are calculated on temporary differences related to pension obligations
from IAS 19.
The
tax effect of the major unrecognized temporary differences and loss carryforwards is presented in the table below:
| |
December 31,
2021 | | |
December 31,
2020 | |
Deductible temporary differences | |
| | |
| |
Employee
benefit plan | |
| 87,149 | | |
| 113,106 | |
Derivative financial instruments | |
| — | | |
| 36,973 | |
Other accounts payable | |
| 344,822 | | |
| 258,303 | |
Stock
option plans | |
| — | | |
| — | |
Total
potential tax assets | |
| 431,971 | | |
| 408,382 | |
Taxable
unrecognized temporary differences | |
| | | |
| | |
Convertible
loan | |
| — | | |
| 19,359 | |
Total
unrecognized potential tax liabilities | |
| — | | |
| 19,359 | |
Offsetting
potential tax liabilities with potential tax assets | |
| — | | |
| (19,359 | ) |
Net potential
tax assets from temporary differences not recognized | |
| 431,971 | | |
| 389,023 | |
Potential
tax assets from loss carry-forwards not recognized | |
| 14,271,306 | | |
| 14,896,367 | |
Total
potential tax assets from loss carry-forwards and temporary differences not recognized | |
| 14,703,277 | | |
| 15,285,390 | |
26.
Loss per share
| |
December 31,
2021 | | |
December 31,
2020 | | |
December 31,
2019 | |
Loss
attributable to owners of the Company | |
| (17,390,166 | ) | |
| (8,200,165 | ) | |
| (6,631,901 | ) |
Weighted
average number of shares outstanding | |
| 13,246,281 | | |
| 6,014,146 | | |
| 2,909,056 | |
Basic
and diluted loss per share | |
| (1.31 | ) | |
| (1.36 | ) | |
| (2.28 | ) |
For
the years ended December 31, 2021 and 2020 basic and diluted loss per share is based on the weighted average number of shares issued
and outstanding and excludes shares to be issued under the Stock Option Plans (Note 15) as they would be anti-dilutive. As of December 31,
2021, the Company had 1,329,510 options outstanding under its stock option plans. The average number of options outstanding between January
1, 2021 and December 31, 2021 was 1,149,761 (633,314 for the period between January 1, 2020 and December 31, 2020). As of December 31,
2021, the Company had warrants to purchase up to 246,102 of its common shares issued and outstanding (as of December 31, 2020, the Company
had warrants to purchase up to 1,143,537 common shares).
27.
Commitments and contingencies
Lease
commitments
The
future minimum lease payments under non-cancellable lease term that are not accounted for in the statement of financial position were
as follows:
| |
December 31,
2021 | | |
December 31,
2020 | |
Within
one year | |
| 3,450 | | |
| 25,580 | |
Between
one and five years | |
| — | | |
| — | |
Total | |
| 3,450 | | |
| 25,580 | |
Office
lease expenses of CHF 52,280, CHF 50,260 and CHF 49,314 were recorded in 2021, 2020 and 2019, respectively, in the consolidated statement
of profit or loss and other comprehensive loss.
28.
Related party transactions
For
purposes of these consolidated financial statements, parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making financial or operational decisions. Also, parties under
common control of the Group are considered to be related. Key management personnel are also related parties. In considering each possible
related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.
Ante
Treuhand AG (“Ante Treuhand”) provided the Chief Financial Officer to the Company until November 18, 2021. The Chief Financial
Officer is an employee of Ante Treuhand and is not paid directly by the Company. Fees paid to Ante Treuhand for CFO services in 2021
were CHF 231,770 (CHF 2020: 173,030). Fees paid to Ante Treuhand for other services provided during the year ended December 31, 2021
were CHF 3,025 (2020: CHF 18,020).
Gremaud
GmbH provides the Chief Financial Officer to the Company since November 19, 2021. The Chief Financial Officer is an employee of Gremaud
GmbH and is not paid directly by the Company. Fees paid to Gremaud GmbH for CFO services in 2021 were CHF 14,720. Fees paid to Gremaud
GmbH for other services provided during the year ended December 31, 2021 were CHF 161,596 (2020 CHF 27,625).
Compensation
of the members of the Board of Directors and Management
In
2021, the total compensation paid to management amounted to CHF 1,210,472 (2020: CHF 522,237; 2019: CHF 934,179). The fees paid to members
of the Board of Directors in 2021 for their activities as board members totaled CHF 165,245 (2020: CHF 163,476; 2019: CHF 170,755).
| |
Executive
Management | | |
Board
of Directors | | |
Total | |
| |
2021 | | |
2020 | | |
2019 | | |
2021 | | |
2020 | | |
2019 | | |
2021 | | |
2020 | | |
2019 | |
Short
term benefits | |
| 781,204 | | |
| 407,147 | | |
| 717,905 | | |
| 165,245 | | |
| 163,476 | | |
| 170,755 | | |
| 946,449 | | |
| 570,623 | | |
| 888,660 | |
Post-employee
benefits years | |
| 29,467 | | |
| 26,870 | | |
| 42,560 | | |
| — | | |
| — | | |
| — | | |
| 29,467 | | |
| 26,870 | | |
| 42,560 | |
Share Bonuses | |
| 902,817 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 902,817 | | |
| — | | |
| — | |
Share-based
payment charge | |
| 192,362 | | |
| 204,840 | | |
| 109,912 | | |
| 48,046 | | |
| 57,148 | | |
| 49,323 | | |
| 240,408 | | |
| 261,988 | | |
| 159,235 | |
Total | |
| 1,905,850 | | |
| 638,857 | | |
| 870,377 | | |
| 213,291 | | |
| 220,624 | | |
| 220,078 | | |
| 2,119,141 | | |
| 859,481 | | |
| 1,090,455 | |
In
2021, CHF 240,408 (2020: CHF 261,988; 2019: CHF 159,235) was expensed for grants of stock options to members of the Board of Directors
and management. The 2021 share based payment charge shown above excludes adjustments for instruments forfeited in 2021 due to termination
of service. In 2021 one regular and one extraordinary bonus were granted in shares. Contributions to pension schemes amounted to CHF
29,467, CHF 26,870 and CHF 42,560 during the years 2021, 2020 and 2019, respectively. No termination benefits or other long-term
benefits were paid.
Members
of the Board of Directors and management held 989,606, 769,101 and 271,999 stock options as of December 31, 2021, 2020, and 2019,
respectively.
29.
Loan
| |
December 31,
2021 | | |
December 31,
2020 | |
Loan guaranteed by Swiss government
(COVID-19) | |
| — | | |
| 50,000 | |
Convertible
loan | |
| — | | |
| 473,920 | |
Total | |
| — | | |
| 523,920 | |
Convertible
Loan Agreement
| |
December 31,
2021 | | |
December 31,
2020 | |
As of January 1 | |
| 473,920 | | |
| — | |
Gross proceeds at disbursement date | |
| — | | |
| 1,500,000 | |
Embedded derivative, separated | |
| — | | |
| (230,974 | ) |
| |
| | | |
| | |
Transaction costs allocated to host | |
| — | | |
| (22,495 | ) |
Carrying amount at initial
recognition | |
| — | | |
| 1,246,531 | |
| |
| | | |
| | |
Converted principal amount | |
| (644,813 | ) | |
| (895,455 | ) |
Accrued interest at 8% | |
| 8,348 | | |
| 31,920 | |
Amortization | |
| 162,545 | | |
| 90,924 | |
| |
| | | |
| | |
As of December 31 | |
| — | | |
| 473,920 | |
On
September 7, 2020, our affiliate Altamira Medica AG (“Altamira”) and Auris Medical Holding Ltd. (“the Company”)
entered into a convertible loan agreement with FiveT Capital Holding AG (“FiveT”) to raise CHF 1,500,000 to fund the initial
development of AM-301. The loan has a term of 18 months and carries interest at 8% p.a., which shall not be paid in cash but added to
the loan outstanding amount. At maturity, the unconverted outstanding amount of the loan including accrued interest shall become payable
in cash. Altamira may choose to repay the total outstanding amount including the accrued interest at 130%, first time after 6 months
with a prior written notice of 1 month. Prior to the expiry of the repayment notice period, the lender may convert the repayment amount.
Under
the convertible loan agreement FiveT has the right to convert the outstanding principal amount including interest into the Company’s
common shares or alternatively into Altamira shares. The pricing of a conversion into our common shares is at the lower of 150% of the
share price at close of the disbursement date ($1.35 fixed on September 8, 2020) and 95% of the average price of our common share at
close of the 5 trading dates preceding the date of the conversion notice. However, the conversion price shall not be less than the higher
of the par value and the backward-looking 3-month floor price of 75% of the average closing price of our common shares. The pricing of
a conversion into Altamira shares is at the lower of CHF 3.00 and the issue price of a qualified financing round, meaning that a third-party
investor will hold at least 10% of Altamira shares after completion of such financing round. The convertible loan agreement further contains
a limitation on the conversion rights in the sense that they may not result in an ownership interest of more than 9.99% in the Company
or 49.99% in Altamira. By December 31, 2020, an amount of CHF 895,455 has been converted into 737,000 common shares of the Company (at
a conversion price of $1.35).
The
convertible loan is classified as a hybrid contract containing a host that is a financial liability and embedded derivatives separated
from the host and measured at fair value with all changes in fair value recognized in profit or loss. The embedded financial derivatives
are valued by an independent consultant initially and at period end at fair value, applying a simulation-based valuation approach. The
valuation of the embedded financial derivatives is based on input parameters, classified as Level 3. One of the significant inputs is
the historical volatility of the Company’s common shares. The underlying share price development has been simulated based on a
Geometric Brownian Motion (GBM). In accordance with the GBM definition, a normalized, sustainable level of volatility was applied. The
normalized volatility used as per December 31, 2020 was 90.9%, over a lookback period of 12 months. Other significant assumptions relate
to the expected exercise date, the expected execution date, the calculation of the repayment amount, as well as assumptions with regards
to the early repayment trigger and to the conversion option in Altamira shares. The embedded derivatives of the convertible loan are
closely related to each other and are therefore accounted for as a single instrument (i.e., a compound derivative). Due to the conversion
based on market share price, the conversion right may result in a variable number of conversion shares and the embedded derivatives are
therefore classified as a financial liability.
The
carrying amount of the host contract at initial recognition is the difference between the carrying amount of the hybrid contract and
the fair value of the embedded derivatives. The host is then subsequently measured at amortized cost, using the effective interest rate
method. As of December 31, 2020, the carrying amount (including accrued interest) of the host for the unconverted outstanding loan amounted
to CHF 473,920 and is included in the balance sheet under current liabilities. On March 4, 2021, the remaining amount of CHF 644,813
including amortization and interest was converted into 516,814 common shares of Altamira at a conversion price of USD 1.35. As a result,
the carrying amount of the convertible loan as of December 31, 2021 is CHF 0.
The
fair value of the embedded derivatives of the outstanding loan units amounted to CHF 0 (31.12.2020: CHF 310,439 included in current derivative
financial instruments). Expenses related to fair value measurement of embedded derivatives of CHF 416,003 (2020: CHF 2,248,257) as well
as effective interest and transaction costs of CHF 170,893 (2020: CHF 127,418) were recorded as financial expenses in profit or loss.
30.
Warrants from Public Offering
On
February 21, 2017, the Company completed a public offering (the “February 2017 Offering”) of 10,000,000 (pre-merger) common
shares with a nominal value of CHF 0.40 each and 10,000,000 (pre-merger) warrants, each warrant entitling its holder to purchase 0.70
of a common share. The net proceeds to the Company from the February 2017 Offering were approximately CHF 9.1 million ($ 9.1 million),
after deducting underwriting discounts and other estimated offering expenses payable by us. The Company had transaction costs amounting
to CHF 903,919. The transactions costs were recorded as CHF 397,685 in equity for the issuance of the common shares and CHF 506,234 to
finance expense in the statement of profit or loss and comprehensive loss for the issuance of the warrants.
The
underwriter was granted a 30-day option to purchase up to 1,500,000 (pre-merger) additional common shares and/or 1,500,000 (pre-merger)
additional warrants. On February 15, 2017, the underwriter partially exercised its 30-day option to purchase additional common shares
and/or warrants in the amount of 1,350,000 (pre-merger) warrants.
Consequently,
the Company issued warrants to purchase up to 7,945,000 (pre-merger) of its common shares at an exercise price of $ 1.20 per share. The
warrants are exercisable during a five-year period beginning on date of issuance. The fair value calculation of the warrants is based
on the Black-Scholes option price model. Assumptions are made regarding inputs such as volatility and the risk-free rate in order to
determine the fair value of the warrant. If a warrant is exercised, the Company will receive variable proceeds because the Company’s
functional currency is CHF and the exercise price is in USD, which results in the warrants being considered liability instruments. Therefore,
the warrants were assigned fair values using the Black-Scholes model. The residual value was assigned to the common share sold along
with each warrant in accordance with IAS 32 Financial instruments. The gross proceeds from the February 2017 offering were CHF 9,998,305
of which CHF 5,091,817 (fair value as of February 21, 2017) was assigned to the warrants and CHF 4,906,488 was assigned to equity.
As
of December 31, 2021, the outstanding warrants issued in the 2017 February Offering are exercisable for up to 39,725 common shares at
an exercise price of $240.00. As of December 31, 2021, the fair value of the warrants amounted to CHF 0.00 (2020: CHF 0.00). As the fair
value remained unchanged, no revaluation gain or loss resulted for the year ended December 31, 2021.
On
January 30, 2018, the Company issued warrants in connection with a direct offering of 62,499 common shares, each warrant entitling its
holder to purchase 0.6 common shares at an exercise price of $100.00 per common share. As of December 31, 2021, the outstanding warrants
issued in such offering were exercisable for up to 37,501 common shares at an exercise price of $100.00 per common share. As of December
31, 2021 the fair value of the warrants amounted to CHF 1,233 (2020: CHF 6,318). The revaluation gain of the derivative for the twelve
months ended December 31, 2021 amounted to CHF 5,085 (2020: revaluation loss of CHF 1,965). Since its initial recognition on January
30, 2018, the fair value of the warrants has decreased by CHF 2,482,514 resulting in a gain in the corresponding amount (fair value as
of January 30, 2018: CHF 2,483,747).
On
July 17, 2018, the Company issued Series A warrants each entitling its holder to purchase 0.35 of a common share for an aggregate of
314,102 common shares, and Series B warrants entitling its holder to purchase 0.25 of a common share for an aggregate of 224,358 common
shares in connection with the July 2018 Registered Offering of 897,435 common shares, each warrant entitling its holder to purchase
one common share at an original exercise price of CHF 7.80 per common share. Revaluation gain/(loss) show the changes in fair value of
the outstanding Series B warrant issued in connection with this offering.
As
of December 31, 2019, 145,226 Series A warrants were exercised for an aggregate amount of CHF 1,132,762 and 143,221 Series B warrants
were exercised for an aggregate amount of CHF 1,117,125.
As
of December 31, 2019, 143,221 Series B exercised warrants were subject to revaluation at the time that they were exercised and the fair
value amounted to CHF 3,005,348. Since its initial recognition on July 17, 2018 the fair value of the warrants has increased by CHF 2,433,099,
resulting in a loss in the corresponding amounts (fair value as of July 17, 2018: CHF 572,249). On June 18, 2020, the Series B warrants
expired without further warrants being exercised.
Due
to the expiry on June 18, 2020, no Series B warrants were outstanding and subject to revaluation on December 31, 2021 and 2020. Accordingly,
there was no revaluation gain or loss on these warrants for the year ended December 31, 2021 and 2020.
31.
Events after the balance sheet date
On February 4, 2022, the Company entered into a convertible loan agreement
(the “Loan Agreement”) with FiveT Investment Management Ltd. (the “Lender”), pursuant to which the Lender has
agreed to loan to the Company CHF 5,000,000 (the “Loan”), which Loan bears interest at the rate of 10% per annum and matures
12 months from the date (the “Disbursement Date”) the Loan proceeds were disbursed to the Company, which occurred on February
8, 2022. The Company may prepay all or part of the Loan after six months after the Disbursement Date; provided that the Company will pay
an amount equal to 130% of the desired prepayment amount. The Lender has the right to convert all or part of the Loan, including accrued
and unpaid interest, at its option, into common shares, subject to the limitation that the Lender own no more than 9.99% of the common
shares at any time. The conversion price of the Loan into common shares is USD 1.9458, which corresponds to 150% of USD 1.2972 (the trading
volume weighted average price, the “VWAP”, per common share on the NASDAQ stock exchange on the Disbursement Date), converted
into Swiss Francs at the midpoint of the interbank exchange rate shown by UBS on the day of receipt of the conversion notice at 4:00 pm
Central European Time. The conversion price shall be lowered in the event that the Company raises equity before the maturity date of the
Loan through a public or private offering of common shares at an issue price that is at least 10 (ten) % below the VWAP (the “New
Issue”), according to the formula set forth in the Loan Agreement (the “Adjustment”). Sales of common shares through
equity line or at-the-market programs are not considered New Issues triggering the Adjustment.
On
March 4, 2022 we announced that we had entered into an exclusive licensing and distribution agreement for Bentrio™ with Nuance
Pharma Ltd. ("Nuance") in Chinese Mainland, Hong Kong, Macau and South Korea (the "Territory"). Under the terms of
the Agreement, we will initially supply Bentrio™ to Nuance. Nuance will make an upfront payment of $1 million and pay to Altamira
development and commercial milestones of up to $3 million and up to $19.5 million, respectively. Nuance will have the right to register
and commercialize Bentrio™ in the Territory. In a second stage, Nuance will assume local production of the product for the Territory
upon certain milestones. Once Nuance assumes local production of Bentrio™, it will pay to Altamira a staggered royalty on net sales
in the Territory at a high-single to low-double-digit percentage.
F-41
International Financial Reporting Standards
1235
The financing cash flows are from loan borrowings or loan and lease repayments.
Other non-cash changes include conversion of convertible loan including de-recognition of embedded derivative and initial recognition of lease liability.
April grants for the respective year
October grants for the respective year
false
FY
0001601936
0001601936
2021-01-01
2021-12-31
0001601936
dei:BusinessContactMember
2021-01-01
2021-12-31
0001601936
2021-12-31
0001601936
2020-01-01
2020-12-31
0001601936
2019-01-01
2019-12-31
0001601936
2020-12-31
0001601936
ifrs-full:ClassesOfShareCapitalMember
2018-12-31
0001601936
ifrs-full:SharePremiumMember
2018-12-31
0001601936
ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember
2018-12-31
0001601936
ifrs-full:RetainedEarningsMember
2018-12-31
0001601936
2018-12-31
0001601936
ifrs-full:ClassesOfShareCapitalMember
2019-01-01
2019-12-31
0001601936
ifrs-full:SharePremiumMember
2019-01-01
2019-12-31
0001601936
ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember
2019-01-01
2019-12-31
0001601936
ifrs-full:RetainedEarningsMember
2019-01-01
2019-12-31
0001601936
ifrs-full:ClassesOfShareCapitalMember
2019-12-31
0001601936
ifrs-full:SharePremiumMember
2019-12-31
0001601936
ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember
2019-12-31
0001601936
ifrs-full:RetainedEarningsMember
2019-12-31
0001601936
2019-12-31
0001601936
ifrs-full:ClassesOfShareCapitalMember
2020-01-01
2020-12-31
0001601936
ifrs-full:SharePremiumMember
2020-01-01
2020-12-31
0001601936
ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember
2020-01-01
2020-12-31
0001601936
ifrs-full:RetainedEarningsMember
2020-01-01
2020-12-31
0001601936
ifrs-full:ClassesOfShareCapitalMember
2020-12-31
0001601936
ifrs-full:SharePremiumMember
2020-12-31
0001601936
ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember
2020-12-31
0001601936
ifrs-full:RetainedEarningsMember
2020-12-31
0001601936
ifrs-full:ClassesOfShareCapitalMember
2021-01-01
2021-12-31
0001601936
ifrs-full:SharePremiumMember
2021-01-01
2021-12-31
0001601936
ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember
2021-01-01
2021-12-31
0001601936
ifrs-full:RetainedEarningsMember
2021-01-01
2021-12-31
0001601936
ifrs-full:ClassesOfShareCapitalMember
2021-12-31
0001601936
ifrs-full:SharePremiumMember
2021-12-31
0001601936
ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember
2021-12-31
0001601936
ifrs-full:RetainedEarningsMember
2021-12-31
0001601936
cyto:AurisMedicaNewCoHoldingAGMember
2021-01-01
2021-12-31
0001601936
cyto:AurisMedicaNewCoHoldingAGMember
2021-12-31
0001601936
cyto:OtolanumAGMember
2021-01-01
2021-12-31
0001601936
cyto:OtolanumAGMember
2021-12-31
0001601936
cyto:ZilentinAGMember
2021-01-01
2021-12-31
0001601936
cyto:ZilentinAGMember
2021-12-31
0001601936
cyto:AltamiraMedicaAGMember
2021-01-01
2021-12-31
0001601936
cyto:AltamiraMedicaAGMember
2021-12-31
0001601936
cyto:AurisMedicalIncMember
2021-01-01
2021-12-31
0001601936
cyto:AurisMedicalIncMember
2021-12-31
0001601936
cyto:AurisMedicalLtdMember
2021-01-01
2021-12-31
0001601936
cyto:AurisMedicalLtdMember
2021-12-31
0001601936
cyto:AurisMedialPtyLtdMember
2021-01-01
2021-12-31
0001601936
cyto:AurisMedialPtyLtdMember
2021-12-31
0001601936
ifrs-full:BottomOfRangeMember
2021-01-01
2021-12-31
0001601936
ifrs-full:TopOfRangeMember
2021-01-01
2021-12-31
0001601936
ifrs-full:LicencesMember
2021-01-01
2021-12-31
0001601936
2021-06-01
0001601936
cyto:CHMember
2021-01-01
2021-12-31
0001601936
cyto:CHMember
2021-12-31
0001601936
cyto:CHMember
2020-12-31
0001601936
cyto:CHMember
2019-12-31
0001601936
country:US
2021-01-01
2021-12-31
0001601936
country:US
2021-12-31
0001601936
country:US
2020-12-31
0001601936
country:US
2019-12-31
0001601936
srt:EuropeMember
2021-01-01
2021-12-31
0001601936
srt:EuropeMember
2021-12-31
0001601936
srt:EuropeMember
2020-12-31
0001601936
srt:EuropeMember
2019-12-31
0001601936
country:AU
2021-01-01
2021-12-31
0001601936
country:AU
2021-12-31
0001601936
country:AU
2020-12-31
0001601936
country:AU
2019-12-31
0001601936
cyto:CHMember
2020-01-01
2020-12-31
0001601936
cyto:CHMember
2019-01-01
2019-12-31
0001601936
country:US
2020-01-01
2020-12-31
0001601936
country:US
2019-01-01
2019-12-31
0001601936
srt:EuropeMember
2020-01-01
2020-12-31
0001601936
srt:EuropeMember
2019-01-01
2019-12-31
0001601936
country:AU
2020-01-01
2020-12-31
0001601936
country:AU
2019-01-01
2019-12-31
0001601936
cyto:ProductionEquipmentMember
2021-01-01
2021-12-31
0001601936
cyto:OfficeFurnitureAndElectronicDataProcessingEquipmentMember
2021-01-01
2021-12-31
0001601936
cyto:USDsMember
2021-01-01
2021-12-31
0001601936
cyto:USDsMember
2020-01-01
2020-12-31
0001601936
cyto:EUROMember
2021-01-01
2021-12-31
0001601936
cyto:EUROMember
2020-01-01
2020-12-31
0001601936
cyto:AustralianDollarMember
2021-01-01
2021-12-31
0001601936
cyto:AustralianDollarMember
2020-01-01
2020-12-31
0001601936
cyto:CashAndCashEquivalents1Member
2021-12-31
0001601936
cyto:CashAndCashEquivalents1Member
2020-12-31
0001601936
cyto:LoansAndReceivablesMember
2021-12-31
0001601936
cyto:LoansAndReceivablesMember
2020-12-31
0001601936
cyto:NoncurrentFinancialAssetsMember
2021-12-31
0001601936
cyto:NoncurrentFinancialAssetsMember
2020-12-31
0001601936
cyto:OtherReceivableMember
2021-12-31
0001601936
cyto:OtherReceivableMember
2020-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:TradeAndOtherPayablesMember
2021-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:TradeAndOtherPayablesMember
2020-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:AccruedExpensesMember
2021-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:AccruedExpensesMember
2020-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:Loans1Member
2021-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:Loans1Member
2020-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:NoncurrentLeaseLiabilitiesMember
2021-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:NoncurrentLeaseLiabilitiesMember
2020-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:CurrentLeaseLiabilitiesMember
2021-12-31
0001601936
ifrs-full:FinancialLiabilitiesAtAmortisedCostCategoryMember
cyto:CurrentLeaseLiabilitiesMember
2020-12-31
0001601936
cyto:AtFairValueThroughProfitAndLossMember
2021-12-31
0001601936
cyto:AtFairValueThroughProfitAndLossMember
2020-12-31
0001601936
ifrs-full:NotLaterThanThreeMonthsMember
2021-12-31
0001601936
ifrs-full:LaterThanTwoMonthsAndNotLaterThanThreeMonthsMember
2021-12-31
0001601936
cyto:LaterThanTwoYearsMember
2021-12-31
0001601936
ifrs-full:NotLaterThanThreeMonthsMember
2020-12-31
0001601936
ifrs-full:LaterThanTwoMonthsAndNotLaterThanThreeMonthsMember
2020-12-31
0001601936
cyto:LaterThanTwoYearsMember
2020-12-31
0001601936
cyto:DerivativeFinancialInstrumentLiabilitiesMember
ifrs-full:Level2OfFairValueHierarchyMember
2021-01-01
2021-12-31
0001601936
cyto:DerivativeFinancialInstrumentLiabilitiesMember
ifrs-full:Level2OfFairValueHierarchyMember
2020-01-01
2020-12-31
0001601936
cyto:DerivativeFinancialInstrumentLiabilitiesMember
ifrs-full:Level3OfFairValueHierarchyMember
2021-12-31
0001601936
cyto:DerivativeFinancialInstrumentLiabilitiesMember
ifrs-full:Level3OfFairValueHierarchyMember
2020-12-31
0001601936
cyto:ChangeInVolatilityMember
2021-01-01
2021-12-31
0001601936
cyto:ChangeInVolatilityMember
2020-01-01
2020-12-31
0001601936
ifrs-full:DerivativesMember
2020-12-31
0001601936
ifrs-full:DerivativesMember
2021-01-01
2021-12-31
0001601936
ifrs-full:DerivativesMember
2021-12-31
0001601936
cyto:LoanMember
2020-12-31
0001601936
cyto:LoanMember
2021-01-01
2021-12-31
0001601936
cyto:LoanMember
2021-12-31
0001601936
ifrs-full:LeaseLiabilitiesMember
2020-12-31
0001601936
ifrs-full:LeaseLiabilitiesMember
2021-01-01
2021-12-31
0001601936
ifrs-full:LeaseLiabilitiesMember
2021-12-31
0001601936
cyto:TotalMember
2020-12-31
0001601936
cyto:TotalMember
2021-01-01
2021-12-31
0001601936
cyto:TotalMember
2021-12-31
0001601936
ifrs-full:DerivativesMember
2019-12-31
0001601936
ifrs-full:DerivativesMember
2020-01-01
2020-12-31
0001601936
cyto:LoanMember
2019-12-31
0001601936
cyto:LoanMember
2020-01-01
2020-12-31
0001601936
cyto:TotalMember
2019-12-31
0001601936
cyto:TotalMember
2020-01-01
2020-12-31
0001601936
cyto:CashAndCashEquivalentMember
2021-12-31
0001601936
cyto:CashAndCashEquivalentMember
2020-12-31
0001601936
ifrs-full:TradeReceivablesMember
2021-12-31
0001601936
ifrs-full:TradeReceivablesMember
2020-12-31
0001601936
cyto:OtherReceivableMember
2021-12-31
0001601936
cyto:OtherReceivableMember
2020-12-31
0001601936
cyto:CashAndCashEquivalentMember
2021-12-31
0001601936
cyto:CashAndCashEquivalentMember
2020-12-31
0001601936
cyto:OtherReceivablesOneMember
2021-12-31
0001601936
cyto:OtherReceivablesOneMember
2020-12-31
0001601936
cyto:TradeAndOtherPayablesMember
2021-12-31
0001601936
cyto:TradeAndOtherPayablesMember
2020-12-31
0001601936
cyto:AccruedExpensesMember
2021-12-31
0001601936
cyto:AccruedExpensesMember
2020-12-31
0001601936
country:CH
2021-12-31
0001601936
country:CH
2020-12-31
0001601936
country:AU
2021-12-31
0001601936
country:AU
2020-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
cyto:ProductionEquipmentMember
2019-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
ifrs-full:FixturesAndFittingsMember
2019-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
2019-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
cyto:ProductionEquipmentMember
2020-01-01
2020-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
ifrs-full:FixturesAndFittingsMember
2020-01-01
2020-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
2020-01-01
2020-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
cyto:ProductionEquipmentMember
2020-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
ifrs-full:FixturesAndFittingsMember
2020-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
2020-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
cyto:ProductionEquipmentMember
2021-01-01
2021-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
ifrs-full:FixturesAndFittingsMember
2021-01-01
2021-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
2021-01-01
2021-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
cyto:ProductionEquipmentMember
2021-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
ifrs-full:FixturesAndFittingsMember
2021-12-31
0001601936
ifrs-full:GrossCarryingAmountMember
2021-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
cyto:ProductionEquipmentMember
2019-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
ifrs-full:FixturesAndFittingsMember
2019-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
2019-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
cyto:ProductionEquipmentMember
2020-01-01
2020-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
ifrs-full:FixturesAndFittingsMember
2020-01-01
2020-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
2020-01-01
2020-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
cyto:ProductionEquipmentMember
2020-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
ifrs-full:FixturesAndFittingsMember
2020-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
2020-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
cyto:ProductionEquipmentMember
2021-01-01
2021-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
ifrs-full:FixturesAndFittingsMember
2021-01-01
2021-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
2021-01-01
2021-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
cyto:ProductionEquipmentMember
2021-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
ifrs-full:FixturesAndFittingsMember
2021-12-31
0001601936
ifrs-full:AccumulatedDepreciationAndAmortisationMember
2021-12-31
0001601936
cyto:NetBookValueMember
cyto:ProductionEquipmentMember
2020-12-31
0001601936
cyto:NetBookValueMember
ifrs-full:FixturesAndFittingsMember
2020-12-31
0001601936
cyto:NetBookValueMember
2020-12-31
0001601936
cyto:NetBookValueMember
cyto:ProductionEquipmentMember
2021-12-31
0001601936
cyto:NetBookValueMember
ifrs-full:FixturesAndFittingsMember
2021-12-31
0001601936
cyto:NetBookValueMember
2021-12-31
0001601936
ifrs-full:OfficeEquipmentMember
2019-12-31
0001601936
ifrs-full:OfficeEquipmentMember
2020-12-31
0001601936
ifrs-full:OfficeEquipmentMember
2021-01-01
2021-12-31
0001601936
ifrs-full:OfficeEquipmentMember
2021-12-31
0001601936
cyto:LicensesMember
2019-12-31
0001601936
cyto:IPDataRightsMember
2019-12-31
0001601936
cyto:PatentMember
2019-12-31
0001601936
cyto:InternallyGeneratedsMember
2019-12-31
0001601936
cyto:InternallyGeneratedsMember
2020-01-01
2020-12-31
0001601936
cyto:LicensesMember
2020-01-01
2020-12-31
0001601936
cyto:IPDataRightsMember
2020-01-01
2020-12-31
0001601936
cyto:PatentMember
2020-01-01
2020-12-31
0001601936
cyto:LicensesMember
2020-12-31
0001601936
cyto:IPDataRightsMember
2020-12-31
0001601936
cyto:PatentMember
2020-12-31
0001601936
cyto:InternallyGeneratedsMember
2020-12-31
0001601936
cyto:LicensesMember
2021-01-01
2021-12-31
0001601936
cyto:IPDataRightsMember
2021-01-01
2021-12-31
0001601936
cyto:PatentMember
2021-01-01
2021-12-31
0001601936
cyto:InternallyGeneratedsMember
2021-01-01
2021-12-31
0001601936
cyto:LicensesMember
2021-12-31
0001601936
cyto:IPDataRightsMember
2021-12-31
0001601936
cyto:PatentMember
2021-12-31
0001601936
cyto:InternallyGeneratedsMember
2021-12-31
0001601936
2020-12-02
2020-12-03
0001601936
2020-11-25
2020-12-01
0001601936
2020-12-01
0001601936
2021-03-01
2021-03-04
0001601936
2021-03-04
0001601936
2020-04-01
2020-04-23
0001601936
2019-05-01
2019-05-15
0001601936
2019-01-20
2019-01-24
0001601936
2021-06-01
2021-06-30
0001601936
cyto:OrdinarySharesWithNominalValueMember
2021-12-31
0001601936
cyto:OrdinarySharesWithNominalValueMember
2020-12-31
0001601936
ifrs-full:BottomOfRangeMember
2021-12-31
0001601936
ifrs-full:TopOfRangeMember
2021-12-31
0001601936
ifrs-full:BottomOfRangeMember
2020-12-31
0001601936
ifrs-full:TopOfRangeMember
2020-12-31
0001601936
cyto:EquityIncentivePlanEmployeesMember
2021-12-31
0001601936
cyto:EquityIncentivePlanEmployeesMember
2021-01-01
2021-12-31
0001601936
cyto:EquityIncentivePlanEmployeesOneMember
2021-12-31
0001601936
cyto:EquityIncentivePlanEmployeesOneMember
2021-01-01
2021-12-31
0001601936
cyto:EquityIncentivePlan2021Member
cyto:OneYearVestingPeriodMember
2021-01-01
2021-12-31
0001601936
cyto:EquityIncentivePlan2021Member
cyto:TwoYearVestingPeriodMember
2021-01-01
2021-12-31
0001601936
cyto:EquityIncentivePlan2020Member
cyto:OneYearVestingPeriodMember
2020-01-01
2020-12-31
0001601936
cyto:EquityIncentivePlan2020Member
cyto:TwoYearVestingPeriodMember
2020-01-01
2020-12-31
0001601936
cyto:MarketingAndSalesExpensesMember
2021-01-01
2021-12-31
0001601936
cyto:MarketingAndSalesExpensesMember
2020-01-01
2020-12-31
0001601936
cyto:MarketingAndSalesExpensesMember
2019-01-01
2019-12-31
0001601936
cyto:EmployeeBenefitsAndExpensesMember
2021-01-01
2021-12-31
0001601936
cyto:EmployeeBenefitsAndExpensesMember
2020-01-01
2020-12-31
0001601936
cyto:EmployeeBenefitsAndExpensesMember
2019-01-01
2019-12-31
0001601936
cyto:ProductSamplesMember
2021-01-01
2021-12-31
0001601936
cyto:ProductSamplesMember
2020-01-01
2020-12-31
0001601936
cyto:ProductSamplesMember
2019-01-01
2019-12-31
0001601936
ifrs-full:ActuarialAssumptionOfDiscountRatesMember
2021-12-31
0001601936
ifrs-full:ActuarialAssumptionOfDiscountRatesMember
2020-12-31
0001601936
ifrs-full:ActuarialAssumptionOfExpectedRatesOfSalaryIncreasesMember
2021-12-31
0001601936
ifrs-full:ActuarialAssumptionOfExpectedRatesOfSalaryIncreasesMember
2020-12-31
0001601936
ifrs-full:ActuarialAssumptionOfExpectedRatesOfPensionIncreasesMember
2021-12-31
0001601936
ifrs-full:ActuarialAssumptionOfExpectedRatesOfPensionIncreasesMember
2020-12-31
0001601936
ifrs-full:OtherMaterialActuarialAssumptionsMember
2021-01-01
2021-12-31
0001601936
ifrs-full:OtherMaterialActuarialAssumptionsMember
2020-01-01
2020-12-31
0001601936
ifrs-full:ActuarialAssumptionOfLifeExpectancyAfterRetirementMember
2021-12-31
0001601936
ifrs-full:ActuarialAssumptionOfLifeExpectancyAfterRetirementMember
2020-12-31
0001601936
cyto:DerivativeFinancialAssetMember
2021-12-31
0001601936
cyto:DerivativeFinancialAssetMember
2020-12-31
0001601936
cyto:DeferredUnrealizedForeignExchangeGainsMember
2021-12-31
0001601936
cyto:DeferredUnrealizedForeignExchangeGainsMember
2020-12-31
0001601936
cyto:OtherReceivablesMember
2021-12-31
0001601936
cyto:OtherReceivablesMember
2020-12-31
0001601936
cyto:NetOperatingLossMember
2021-12-31
0001601936
cyto:NetOperatingLossMember
2020-12-31
0001601936
ifrs-full:IntangibleAssetsOtherThanGoodwillMember
2021-12-31
0001601936
ifrs-full:IntangibleAssetsOtherThanGoodwillMember
2021-01-01
2021-12-31
0001601936
cyto:DeferredUnrealizedForeignExchangeGainsMember
2021-12-31
0001601936
cyto:DeferredUnrealizedForeignExchangeGainsMember
2021-01-01
2021-12-31
0001601936
ifrs-full:OtherIntangibleAssetsMember
2021-12-31
0001601936
ifrs-full:OtherIntangibleAssetsMember
2021-01-01
2021-12-31
0001601936
cyto:NetOperatingLossMember
2021-12-31
0001601936
cyto:NetOperatingLossMember
2021-01-01
2021-12-31
0001601936
ifrs-full:IntangibleAssetsOtherThanGoodwillMember
2020-12-31
0001601936
ifrs-full:IntangibleAssetsOtherThanGoodwillMember
2020-01-01
2020-12-31
0001601936
cyto:DeferredUnrealizedForeignExchangeGainsMember
2020-12-31
0001601936
cyto:DeferredUnrealizedForeignExchangeGainsMember
2020-01-01
2020-12-31
0001601936
cyto:DerivativeFinancialAssetMember
2020-12-31
0001601936
cyto:DerivativeFinancialAssetMember
2020-01-01
2020-12-31
0001601936
cyto:NetOperatingLossMember
2020-01-01
2020-12-31
0001601936
cyto:WithinOneYearMember
2021-12-31
0001601936
cyto:WithinOneYearMember
2020-12-31
0001601936
cyto:BetweenOneAndThreeYearsMember
2021-12-31
0001601936
cyto:BetweenOneAndThreeYearsMember
2020-12-31
0001601936
cyto:BetweenThreeAndSevenYearsMember
2021-12-31
0001601936
cyto:BetweenThreeAndSevenYearsMember
2020-12-31
0001601936
cyto:MoreThanSevenYearsMember
2021-12-31
0001601936
cyto:MoreThanSevenYearsMember
2020-12-31
0001601936
ifrs-full:NotLaterThanOneYearMember
2021-12-31
0001601936
ifrs-full:NotLaterThanOneYearMember
2020-12-31
0001601936
ifrs-full:LaterThanOneYearAndNotLaterThanFiveYearsMember
2021-12-31
0001601936
ifrs-full:LaterThanOneYearAndNotLaterThanFiveYearsMember
2020-12-31
0001601936
cyto:GremaudGmbHMember
2021-01-01
2021-12-31
0001601936
cyto:GremaudGmbHMember
2020-01-01
2020-12-31
0001601936
ifrs-full:KeyManagementPersonnelOfEntityOrParentMember
2021-01-01
2021-12-31
0001601936
ifrs-full:KeyManagementPersonnelOfEntityOrParentMember
2020-01-01
2020-12-31
0001601936
ifrs-full:KeyManagementPersonnelOfEntityOrParentMember
2019-01-01
2019-12-31
0001601936
cyto:BoardOfDirectorsMember
2021-01-01
2021-12-31
0001601936
cyto:BoardOfDirectorsMember
2020-01-01
2020-12-31
0001601936
cyto:BoardOfDirectorsMember
2019-01-01
2019-12-31
0001601936
2020-08-20
2020-09-07
0001601936
2020-09-07
0001601936
2020-09-07
2020-09-07
0001601936
ifrs-full:LoansToGovernmentMember
2021-12-31
0001601936
ifrs-full:LoansToGovernmentMember
2020-12-31
0001601936
cyto:ConvertibleLoanAgreementMember
2021-12-31
0001601936
cyto:ConvertibleLoanAgreementMember
2020-12-31
0001601936
cyto:PublicOfferingMember
2017-02-21
0001601936
cyto:PublicOfferingMember
2017-02-01
2017-02-21
0001601936
cyto:WarrantsMember
2017-02-21
0001601936
cyto:WarrantsMember
2017-02-01
2017-02-21
0001601936
cyto:WarrantsMember
2021-01-01
2021-12-31
0001601936
cyto:PublicOfferingMember
2017-02-01
2017-02-28
0001601936
cyto:WarrantsMember
2017-02-01
2017-02-28
0001601936
ifrs-full:IssuedCapitalMember
2017-02-01
2017-02-28
0001601936
cyto:WarrantsMember
2018-01-02
2018-01-30
0001601936
cyto:WarrantsMember
2018-01-30
0001601936
cyto:WarrantsMember
2021-12-31
0001601936
cyto:SeriesBWarrantsMember
2018-07-01
2018-07-17
0001601936
cyto:SeriesBWarrantsMember
2020-01-01
2020-12-31
0001601936
cyto:SeriesAWarrantsMember
2018-07-01
2018-07-17
0001601936
cyto:SeriesAWarrantsMember
2018-07-17
0001601936
cyto:SeriesBWarrantsMember
2018-07-17
0001601936
cyto:SeriesAWarrantsMember
2019-01-01
2019-12-31
0001601936
cyto:SeriesBWarrantsMember
2019-01-01
2019-12-31
0001601936
cyto:NonadjustingEventMember
2022-02-01
2022-02-04
0001601936
cyto:NonadjustingEventMember
2021-03-01
2021-03-04
0001601936
cyto:NonadjustingEventMember
ifrs-full:BottomOfRangeMember
2021-03-01
2021-03-04
0001601936
cyto:NonadjustingEventMember
ifrs-full:TopOfRangeMember
2021-03-01
2021-03-04
xbrli:shares
iso4217:CHF
iso4217:CHF
xbrli:shares
xbrli:pure
iso4217:USD
iso4217:EUR
iso4217:AUD
iso4217:CHE
iso4217:USD
xbrli:shares