NPTX Neuropathix Inc (CE)

ITEM 1. BUSINESS

Corporate History

The Company was originally incorporated in the State of Delaware on March 25, 2013 under the name TYG Solutions Corp. Our original business plan was to develop iPhone and Android smartphone apps for companies who need an app for their internal and external operations. We subsequently expanded our operations to offering corporate website design services.

On July 25, 2018, the Company entered into a Share Exchange Agreement with Kannalife Sciences, Inc., a Delaware corporation (“Kannalife Sciences”), and certain stockholders of Kannalife Sciences (the “Kannalife Sciences Stockholders”). Pursuant to the terms of the Share Exchange Agreement, the Company acquired substantially all of the issued and outstanding shares of Kannalife Sciences by means of a share exchange with the Kannalife Sciences Stockholders in exchange for newly issued shares of the common stock of the Company (the “Share Exchange”). As a result of the Share Exchange, Kannalife Sciences became a 99.7% owned subsidiary of the Company. The business operations of the Company regarding iPhone and Android smartphone apps was reduced significantly to focus efforts on target therapeutics and drug discovery, and accordingly, by virtue of the Share Exchange, the Company acquired the business of Kannalife Sciences including all of its assets. The Share Exchange was accounted for as a reverse acquisition and change in reporting entity, whereby Kannalife Sciences was the accounting acquirer.

Kannalife Sciences was incorporated in the State of Delaware on August 11, 2010. Kannalife Sciences is a developmental stage phyto-medical/pharmaceutical and drug discovery company that specializes in the research, development of cannabinoid and cannabinoid-based therapeutic products derived from synthetic and botanical sources, including the Cannabis “taxa” (the word “taxa” is the plural of “taxon,” which defines a group of one or more populations of an organism or organisms to form a unit). On November 9, 2018, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State to change its name to Kannalife, Inc. The Company concurrently submitted a request to FINRA for approval of the name change as well as a ticker symbol change to “KLFE,” and such action went effective on January 17, 2019.  Kannalife Sciences remains a wholly owned operational subsidiary of the Company.

On November 4, 2020, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State to change its name to “Neuropathix, Inc.” The Company concurrently submitted a request to FINRA for approval of the name change as well as a ticker symbol change from “KLFE” to “NPTX.” The Company’s name change and ticker symbol change was reviewed and processed by FINRA, and went effective November 6, 2020.

On August 16, 2021, the Company established and incorporated a new wholly owned subsidiary named Dermique Incorporated (“Dermique”). Dermique was established by the Company to hold, operate and commercialize all intellectual property associated with Kannalife Sciences’ previous research and development efforts to create and commercialize novel therapeutic topical over-the-counter cosmeceutical compounds to treat a variety of skin disorders, including but not limited to atopic dermatitis.

Our Business

We are a biopharmaceutical company focused on discovering, developing and commercializing novel therapeutics from our proprietary synthetic cannabinoid derivatives platform potentially useful for a broad range of inflammatory and neuropathic pain related diseases. In our eleven (11) years of operations, dating back to August 2010 under the name Kannalife Sciences, Inc. we have been principally involved in the research and development of new chemical entities (“NCEs”) such as KLS-13019; KLS-13022 (“linoneyldihydroxybenzyl ethoxycarbonyl azetidine” or “LEAÔ”); its related molecules; and synthetic cannabidiol (“CBD”) therapeutics through pre-clinical drug discovery and development processes. We have developed our own intellectual property portfolio and established relationships with third parties who are considered leaders in active pharmaceutical (“APIC”) contract manufacturing, formulation; and contract bulk drug manufacturing. Most all of the operations of the Company to date at Kannalife Sciences have been in the pre-clinical stage of drug discovery. In 2019 the Company began commercialization efforts for over-the-counter cosmeceutical uses of LEAÔ, the Company’s lead compound designed to address topical skin disorders.

The Company anticipates that all proposed and ongoing preclinical studies for LEAÔ will be completed by April 2022. Preclinical studies for LEAÔ completed to date include, include in vitro efficacy, testing of irritants under human repeat insult patch testing (“HRIPT”) and other predictive skin irritant and eye studies, completed formulation of a finished white label skin cream product containing LEAÔ, and stability studies of LEAÔ with only the completion of a three month stability study due for completion in March 2022. Upon the completion of the remaining stability study, the Company intends to move forward in marketing LEAÔ as an over-the-counter active pharmaceutical ingredient (“API”) for bulk sales, white label opportunities, and branded product opportunities in the cosmeceutical market. The results in preclinical testing for LEAÔ indicate better results than cannabidiol (“CBD”) and tacrolimus in addressing symptoms such as pain, itch and burning sensations in target therapeutic areas such as eczema, psoriasis, radiation dermatitis and excess UVB radiation.

Our early research and development efforts began under an exclusive license with National Institutes of Health – Office of Technology Transfer (“NIH-OTT”) for the use of the U.S. Government Patent 6,630,507 – “Cannabinoids as Antioxidants and Neuroprotectants” (the “‘507 Patent”). Through the use of the ‘507 Patent, we centered our initial research into the use of CBD for use in a variety of neurodegenerative and oxidative stress related diseases.  

Our core businesses are comprised of the following:

Phyto Cannabinoids are a class of molecules derived from Cannabis plants. The two primary cannabinoids contained in Cannabis are CBD and D9-tetrahydrocannabinol, or THC. Clinical and preclinical data suggest that CBD has positive effects on treating refractory epilepsy, FXS and arthritis, and THC has positive effects on treating pain. Interest in cannabinoid therapeutics has increased significantly over the past several years as preclinical and clinical data has emerged highlighting the potential efficacy and safety benefits of cannabinoid therapeutics. The cannabinoid therapeutics market is expected to grow significantly due to the potential benefits these products may provide over existing therapies.

CBD was discovered in 1940 and is known to exhibit neuroprotective properties in many experimental systems. However, our early research and development efforts revealed that there could be obstacles for CBD as a drug. The FDA approval of EpidiolexÒ, a CBD based drug manufactured by GW Pharmaceuticals Ltd. for the treatment of Dravet Syndrome and Lennox-Gastaut Syndrome, has indicated that there are certain safety issues. We also believe that the development of CBD as a drug has been confounded by the following: (i) low potency; (ii) a large number of molecular targets; (iii) marginal pharmacokinetic properties; and (iv) designation as a Schedule 1 controlled substance under the Controlled Substances Act.

KLS-13019 versus CBD

Our preclinical efforts to evaluate CBD indicate that there are pharmacological challenges and limitation of CBD. Our preclinical studies have shown that three major concerns were the low potency at 10 mM to achieve high efficacy; complex pharmacology as it hits too many molecular targets; and low oral bioavailability and poor brain penetration.

Comparisons between CBD and KLS-13019

Comparisons between CBD and KLS-13019 have been published in peer reviewed articles in ACS Medicinal Chemistry Letters (2016, 7, 424-428) and two publications in the Journal of Molecular Neuroscience (August 14, 2018, and May 10, 2019). The studies and science referenced in these articles were performed by Advanced Neural Dynamics (“AND”), a third party provider of preclinical pharmacology services and Iteramed (“Iteramed”), a third party provider of medicinal chemistry consulting and synthesis. Both AND and Iteramed are operated by Douglas Brenneman, Ph.D and William A. Kinney Ph.D, respectively. Both Mr. Brenneman and Mr. Kinney are shareholders of the Company, co-inventors in our intellectual property underlying U.S. Patents 9,611,213 and 10,004,722, and with respect to Mr. Kinney, is our Chief Scientific Officer. Mr. Brenneman is a member of our scientific advisory board.

While results of the Company’s preclinical studies on KLS-13019 have shown preclinical efficacy via in vitro studies in CIPN and HE, KLS-13019 will require human clinical trials to determine both safety and efficacy and such matters are subject to clinical trial endpoints and FDA review, with ultimate approval coming at the end of a successful human clinical trial study and new drug application (“NDA”).

Our peer reviewed, preclinical studies published in ACS Medicinal Chemistry Letters, “Discovery of KLS-13019, a Cannabidiol-Derived Neuroprotective Agent, with Improved Potency, Safety, and Permeability” have shown that our lead drug candidate, KLS-13019 has better pharmacokinetics than CBD and lasts longer.

In the ACS abstract and paper, notably, KLS-13019 was found to be 50-fold more potent and >400-fold safer than CBD and exhibited an in vitro profile consistent with improved oral bioavailability. In 2018 Journal of Molecular Neuroscience abstract and paper, the protective responses of CBD and KLS-13019 were compared in dissociated rat hippocampal cultures co-treated with toxic levels of ethanol and ammonium acetate. This comparison revealed that KLS-13019 was 31-fold more potent than CBD in preventing neuronal toxicity from the combined toxin treatment, while both compounds exhibited protective efficacy back to control values.

In addition to the ACS publication, our research and development efforts with KLS-13019 were also the subject of peer reviewed, preclinical studies published in April 2021 in the British Journal of Pharmacology, “Behavioural and Pharmacological Effects of Cannabidiol (CBD) and the Cannabidiol Analogue KLS-13019 in Mouse Models of Pain and Reinforcement” reported the following key results:

The following chart indicates opioid inhibition percentages for both CBD and KLS-13019

The study also reported the following conclusions and Implications:

EpidiolexÒ, a CBD based FDA Approved Drug to Treat Lennox-Gastaut Syndrome and Dravet Syndrome

To date there has been only one cannabidiol based medicament, EpidiolexÒ, approved for use in humans by the FDA. The drug, EpidiolexÒ, is used to treat seizures due to certain medical conditions (such as Lennox-Gastaut syndrome and Dravet syndrome). It is not known how this medication works for these seizures. CBD belongs to a class of drugs known as cannabinoids.

Additionally, the FDA’s Office of Orphan Products Development (“OOPD”) has designated cannabidiol twenty six times since 2013 for a multitude of diseases ranging from rare forms of epilepsy to prevention of reperfusion injury due to organ transplantation to glioblastoma multiforme to autoimmune hepatitis. While our primary indications of OHE and CIPN have not, heretofore, been targeted by CBD-based or CBD-derived drugs and cleared by the FDA or other foreign regulatory agency, neither have the aforementioned twenty six orphan designated indications targeted by CBD. 

CBD is the active ingredient in EpidiolexÒ. The Warnings and Precautions on the Highlights of Prescribing information for EpidiolexÒ states among other things:

In Juvenile Animal Studies, administration of cannabidiol (subcutaneous doses of 0 or 15 mg/kg on Postnatal Days (PNDs) 4 – 6, followed by oral administration of 0, 100, 150, or 250 mg/kg on PNDs 7 – 77) to juvenile rats for 10 weeks resulted in increased body weight, delayed male sexual maturation, neurobehavioral effects (decreased locomotor activity and auditory startle habituation), increased bone mineral density, and liver hepatocyte vacuolation. A no-effect dose was not established. The lowest dose causing developmental toxicity in juvenile rats (15 sc/100 po mg/kg) was associated with cannabidiol exposures approximately 30 times that in humans at the recommended dose of 20 mg/kg/day.

Neuropathix Research and Development in Chemotherapy Induced Peripheral Neuropathy (“CIPN”) 

In the past three years, our most recent research and development efforts have been centered on the use of KLS-13019 as a neuroprotectant and therapeutic agent to treat chronic and neuropathic pain. There is currently no FDA approved drug to treat CIPN. Our preclinical efforts in the research and development of treating CIPN with our lead compound KLS-13019 have been fostered by a successful study grant from National Institutes of Health – National Institute on Drug Abuse (“NIH-NIDA”) that compared KLS-13019 to CBD in the prevention and reversal of neuropathic pain in animal models. As a result of the outcome of this and other preclinical studies, we believe there is strong evidence to support the use of KLS-13019 as a non-opioid solution to chronic and neuropathic pain in human clinical trials.

Our current focus is centered around advancing KLS-13019 as a novel, non-opioid solution for the treatment of chronic and neuropathic pain.

Our present work involves comparing the properties of CBD with our patented novel cannabidiol derived molecule, KLS-13019, that has structural similarities to CBD. The design strategy for KLS-13019 was to increase hydrophilicity while optimizing neuroprotective potency against oxidative stress toxicity relevant to oxidative stress related diseases and neuro-inflammatory disorders. In early pre-clinical studies, the responses of CBD and KLS-13019 were compared in dissociated rat hippocampal cultures in a pre-clinical model for OHE and also CIPN.

CIPN, is a progressive, enduring and often irreversible condition featuring pain, numbness, tingling and sensitivity to cold in the hands and free (sometimes progressing to the arms and legs) that affects between 30% and 40% of patients undergoing chemotherapy. CIPN often causes termination of chemotherapy in cancer patients and presents a two-fold problem, both in the ongoing chemotherapy treatment regimen and the abundant use of opioids and gabapentinoids as the most widely used products to treat CIPN.

$2.97 Million Grant Award from National Institutes of Health (“NIH”) – National Institute of Neurological Disorders and Stroke (“NINDS”) under the HEAL Initiative (“Helping to End Addiction Long-term”)

On September 28, 2021, the Company received a notice of award for a $2.97 million Phase 2 STTR Study Grant from the National Institutes of Health – National Institute of Neurological Disorders and Stroke under the HEAL Initiative (the “NIH-NINDS Study Grant Award”). The NIH-NINDS Study Grant Award is funded through the NIH HEAL Initiative (“Helping End Addiction Long-Term”) for Development of Therapies and Technologies Directed at Enhanced Pain Management. This NIH-NINDS Study Grant Award provides funding specifically in the further development of KLS-13019 for the treatment of chemotherapy induced neuropathic pain (“CIPN”). The grant award of $2.97 million sets forth the funding allocation of $977,054 in year 1; $991,944 in year 2; and $1,001,774 in year 3 and collectively budgets investigational new drug (“IND”) application enabling studies. IND enabling studies to be performed, include but are not limited to animal toxicity studies and drug compound scale up studies under chemistry manufacturing and controls. The NIH-NINDS Study Grant Award budget includes studies to be performed at Temple University; the University of Illinois; and Purisys (formerly, Noramco).

Of significant collateral importance is the current epidemic of opioid addiction and abuse by patients in the United States and around the globe. Adding to the equation is the off-label use of opioids and gabapentinoids for chronic and neuropathic pain as a result of the unmet medical need and no FDA approved non-opioid drug to treat chronic and neuropathic pain, specifically CIPN.

In December 2019, the Company’s wholly owned subsidiary, Kannalife Sciences, Inc. completed an NIH-NINDS phase 1 STTR study grant with Temple University.

Key preclinical animal testing findings of this study were as follows. KLS-13019 has excellent oral bioavailability (F%) 67% was observed in mice. In rat PK, F% was 16% in females and 8% in males. Further PK work in the rat will be done following formulation optimization. The Cmax and half-life of KLS-13019 is adequate in both mice and rats for twice a day treatment. In a separate mouse study, brain and plasma concentrations were equivalent after oral administration, boding well for in vivo efficacy after oral administration. Under the Phase 1 award, the efficacy of KLS-13019 was tested in a mouse model of CIPN as well as a mouse model of opioid reinforcement. It was determined that KLS-13019 was as potent as CBD in preventing the development of paclitaxel induced mechanical sensitivity and superior to CBD in its ability to reverse an established CIPN (Foss et al., 2020). Moreover, KLS13019 was also effective at preventing paclitaxelinduced mechanical sensitivity following oral administration.

To generate CIPN, male C57Bl/6 mice are injected with 8.0 mg/kg paclitaxel IP on alternating days for a total of 4 injections. For prevention studies, test compounds are administered 15 min prior to each paclitaxel injection. For reversal studies, test compounds are administered 2 weeks following paclitaxel administration, after mechanical sensitivity has developed. Mechanical sensitivity is determined by testing with von Frey filaments as described in Ward et al 2011. It was also determined that pretreatment with KLS-13019, but not CBD, attenuated motivated responding to receive infusions of morphine in mice trained to self-administer morphine under an operant procedure called progressive ratio responding. Taken together our results suggest that KLS-13019 may be effective in either preventing or reversing CIPN while having the added benefit of reducing the rewarding effects of prescription opioids.

In April 2021, a peer reviewed scientific research paper was published in the British Journal of Pharmacology (6 April 2021) titled “Behavioural and Pharmacological Effects of Cannabidiol (CBD) and the Cannabidiol Analogue KLS-13019 in Mouse Models of Pain and Reinforcement”. As indicated in the research paper, “The overarching goal of the experiments reported here was to determine the behavioural effects of KLS-13019, a structural analogue of CBD. Specifically, we aimed to determine whether KLS-13019 was as potent and effective as CBD at mitigating mechanical allodynia associated with paclitaxel treatment and whether it was efficacious following oral administration.”

Key findings in the report included the following:

Results from the Preclinical Screening Platform for Pain (“PSPP”)

In April 2020, the company’s wholly owned subsidiary, Kannalife Sciences, Inc. entered into an “Agreement for Submitting Your Asset to the Preclinical Screening Platform for Pain (PSPP) of the National Institute of Neurological Disorders and Stroke” (the “PSPP Agreement”). Critical resources on exploring the mechanism of action and assessment of drug-like actions of KLS-13019 have been provided to Kannalife by the Preclinical Screening Platform for Pain (PSPP) within NINDS.

With NIH HEAL (Helping to End Addiction Long-Term) Initiative support, NINDS has developed a Preclinical Screening Platform for Pain (PSPP) program to facilitate the identification of potential non-addictive treatments (small molecules, biologics, devices, or natural products) for acute and chronic pain conditions. The overall goal of the PSPP is to provide pain researchers from the academic and industry community with an efficient, rigorous one-stop in vivo screening resource to accelerate efficacy profiling and identification of alternatives to opioid analgesics. PSPP conducts an assessment of in vitro and pharmacokinetic profiles, side effect profiles, abuse liability, and efficacy in models relevant to human pain conditions.

A summary of the tier 1 PSPP study included a screen of targets related to pain are as follows. Results from the early tier 1 studies of KLS-13019 under the PSPP has provided valuable data from their screening of 78 pain-related targets. This screening was not only valuable in identifying potential targets, insight into potential sides effects also were obtained, including all of the opiate receptors. The results of this screen indicated KLS-13019 was a remarkably “clean” compound in that none of the 78 targets exhibited high affinity functional activity (EC50 < 100 nM). Low affinity responses (EC50 10-50 µM) were observed for 5HT-3A, COX1 and COX2. KLS-13019 showed a weak activity at the GABA-A α1/β2/γ2 subtype, producing a 14 and 62% increase in the response to an EC20 of GABA at 1 and 10 µM, respectively. KLS-13019 was tested in the positive allosteric mode for the delta, kappa and mu opioid receptors in the presence of an EC20 of agonist. KLS-13019 exhibited only low potency, with EC50 values between 24 and 38 µM for the opiate receptors.

Neuropathix Novel Drug Compounds

Our lead target drug candidate, KLS-13019, is part of an estate of new chemical entities (“NCEs”) underlying U.S. Patent 9,611,213 titled “Functionalized 1,3 Benzene-diols and their Method of Use for the Treatment of Hepatic Encephalopathy.” This patent is part of a divisional patent application by the Company to the United States Patent and Trademark Office (“USPTO”) whereby we sought claims for composition of matter, covered in Pat. 9,611,213, and separate claims for method for treatment, covered by U.S. Patent 10,004,722 titled “Method for Treating Hepatic Encephalopathy or a Disease Associated with Free Radical Mediate Stress and Oxidative Stress with Novel Functionalized 1,3 Benzene-diols.”

KLS-13019 and its related molecules under the aforementioned patents describe novel functionalized 1,3-benzenediols (“Cannabidiol Derived Molecules”) and methods that may be useful and have potential for the treatment of HE and related conditions. The present invention further describes (i) a novel chemotype that may be useful and have potential for the treatment of diseases associated with HE, and (ii) a novel chemotype that may be useful and have potential as neuroprotective agents. The Cannabidiol Derived Molecules under the present invention may be useful and have potential for treating and preventing diseases associated with free radical mediated stress and oxidative stress including, for example, HE, Parkinson’s disease, Alzheimer’s, Huntington’s disease, traumatic head injury, stroke, epilepsy, neuropathic pain, CTE, Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, and Epileptic Encephalopathy.

We intend to study KLS-13019 in patients with chemotherapy induced neuropathic pain. We believe that the claims made in the Pat. 9,611,213 and Pat. 10,004,722 sufficiently cover the use of the novel molecule KLS-13019 in the treatment of neuropathic pain, which is broadly defined and includes chemotherapy induced neuropathic pain (a/k/a: chemotherapy induced peripheral neuropathy). 

To date, we have synthesized, pre-clinically tested and patented our proprietary CBD like NCEs, including KLS-13019, and also formulated a new CBD based molecule, KLS-13023. KLS-13023 is a target drug candidate that includes a synthetic CBD formulated in a gel capsule designed for potential use in humans, which is intended to enable more effective delivery of CBD. The formulation of this product is proprietary and currently held as a trade secret of the Company. CBD is the primary non-psychoactive component of cannabis. KLS-13023 has undergone a manufacturing feasibility study to improve some of the limitations associated with CBD, including but not limited to CBD’s low bioavailability and limited drug like properties and improvement of the delivery of CBD through the first pass in the gut and into the circulatory system. We intend to study KLS-13023 in patients with mild traumatic brain injury. In addition, we expect that KLS-13023 will be classified by the FDA as an NCE. In our preclinical animal studies, KLS-13023 demonstrated effective intervention of neurodegeneration in the OHE disease state.

Acquisition of AND Compounds

On November 17, 2020, the Company signed a binding letter of intent to acquire certain technology described in a patent estate PCT WO2012/074784 A2 – “Novel Fluorinated Sulfamides Exhibiting Neuroprotective Action and Their Method of Use”; and US Patent 8,609,849 – “Novel Hydroxylated Sulfamides Exhibiting Neuroprotective Action and Their Method of Use (the “AND Compounds”). On December 18, 2020, the Company completed the acquisition of the AND Compounds.

The AND Compounds, specifically AND-302, are novel potent neuroprotective sulfamide based drug candidates that have been shown in advanced preclinical discovery efforts to protect against glutamate toxicity, prevent the accumulation of reactive oxygen species (ROS), have a high therapeutic index in a refractory epilepsy test at 6 Hz and show neuroprotective efficacy in the sub-nanomolar range, approximately 1,000 times more potent than current standard of care anti-epileptic drugs (carbamazepine, lamotrigine and topiramate).

Key highlights underlying the AND Compounds include:

• unlike gabapentinoids – Gabitril^® (tiagabine)

• hippocampal kindling validated

• no dopey feel – Topamax^® (topiramate)

We believe these product candidates will provide new treatment options for patients, as well as additional treatment options for patients not currently receiving adequate relief from current treatment regimens.

We are still conducting pre-clinical studies and have not yet commenced our clinical program or tested KLS-13019 or KLS-13023 in humans. For KLS-13019, we plan to conduct Phase 1, and possibly Phase 2, clinical trials in either the U.S. or Australia, subject to applicable regulatory approval. We plan to conduct our Phase 1 clinical trials for KLS-13023 in either the U.S. or Australia, subject to applicable regulatory approval. We plan to submit New Drug Applications (“NDAs”) for KLS-13019 and KLS-13023 to the FDA upon completion of Phase 3 clinical trials, regardless of where the Company conducts Phase 1 and Phase 2 clinical trials.. We expect to initiate clinical trials for KLS-13019 and KLS-13023 in the first half of 2022.

We plan to conduct our Phase 1, and possibly Phase 2, clinical trials for KLS-13019 in the U.S. or Australia, subject to applicable regulatory approval, and do not expect at this time to file an investigational new drug application, or IND, with the U.S. Food and Drug Administration, or the FDA, prior to the commencement of those clinical trials. We must file an IND with the FDA and receive approval from the U.S. Drug Enforcement Agency, or DEA, prior to commencement of any clinical trials in the United States.

In preclinical studies performed pursuant to a small business technology transfers (“STTR”) agreement between us, and Temple University, funded by the National Institutes of Health – National Institute on Drug Abuse (“NIH-NIDA”), our research and results are the subject of two peer reviewed scientific publications in the Journal of Molecular Neuroscience, and one peer reviewed scientific publication in the British Journal of Pharmacology. These peer reviewed publications have described how KLS-13019, is superior to CBD and morphine in the potential to prevent and reverse neuropathic pain caused by paclitaxel, a chemotherapeutic agent used to treat breast, ovarian and non-small cell lung cancer. (See: Business – Preclinical Studies for more information).

The Company is currently in the midst of performing certain IND enabling studies, that include but are not limited to:

Upon completion of all requisite preclinical studies, we expect to open an Investigational New Drug Application, or IND, to pursue a clinical development program with either the U.S. Food and Drug Administration (“FDA”) in the U.S. or the Therapeutic Goods Administration (“TGA”), the regulatory body for therapeutic goods (including medicines, medical devices, gene technology, and blood products) in Australia.

OTC Solutions for Topical Use

In mid 2019, we began screening and conducting preliminary research and development of some of our patented, proprietary cannabidiol-derived NCEs for use as active pharmaceutical ingredients (APIs) in topical solutions, ointments, and creams for various skin disorders such as eczema, psoriasis, radiation dermatitis and excessive UVB radiation.

These disorders general

ly lead to symptoms including neuropathies, inflammation and itch. The Company believes that successful development of its topical APIs can be useful as anti-pruritics, also known as anti-itch drugs and medications that inhibit the itching often associated with a variety of disorders and diseases.

We are considering commercialization routes that include, but are not limited to, filing an FDA Monograph and/or pursing a path to the marketplace through International Nomenclature of Cosmetic Ingredients (“INCI”) certification and registration with the Personal Care Products Council (“PCPC”).

In preclinical testing, KLS-13022, a molecules covered under Pat. 9,611,213 was screened for neuroprotection and may have the potential mechanism of action for reducing inflammation, neuropathic pain and itch. This molecule indicated that it is more soluble than CBD, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than CBD in this regard may be good candidate(s) for use in topical applications. 

OTC Cosmetic Skin Care – KLS-13022

Since mid 2019, the Company has been screening and conducting preliminary research and development of some of its patented, proprietary cannabidiol-derived new chemical entities (“NCEs”), for use as topical solutions, ointments, and creams for disorders such as diabetic neuropathies, diabetic ulcers, and for use as an anti-pruritic. (see: Business – Neuropathix Intellectual Properties) 

In preclinical testing, certain molecules under Patent 9,611,213 were screened for neuroprotection and may have the potential mechanism of action for reducing inflammation and neuropathic pain. These molecules indicate that they are more soluble than cannabidiol, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than cannabidiol in this regard may be good candidate(s) for use in topical applications.

The Company has completed the following relating to KLS-13022:

Based on preclinical testing of LEAÔ versus CBD (cannabidiol) in cultured human epidermal keratinocytes:

The Company has completed formulation of a topical relief cream for use as an OTC cosmetic skin care product to be marketed under the trade name of AtopidineÔ and LEAÔ.

On August 16, 2021, the Company established and incorporated a new wholly owned subsidiary named Dermique Incorporated (“Dermique”). Dermique was established by the Company to hold, operate and commercialize all intellectual property associated with Kannalife Sciences’ previous research and development efforts to create and commercialize novel therapeutic topical over-the-counter cosmeceutical compounds to treat a variety of skin disorders, including but not limited to atopic dermatitis.

Hepatic Encephalopathy (“HE”)

HE is a neuropsychiatric disorder that includes learning deficits and impairment of long-term memory. OHE it is a sub-set of HE. HE is caused by accumulation of toxic substances in the bloodstream that are normally removed by the liver as a result of liver failure. If left unchecked, HE can progress to hepatic coma (also referred to as coma hepaticum) and ultimately death (Cordoba, 2011). The pathogenesis of HE includes damage to the prelimbic cortex, striatum and the hippocampus (Aria et al., 2013). The hippocampus, is a major component of the brains of humans and other vertebrates. The hippocampus belongs to the limbic system and plays important roles in the consolidation of information from short-term memory to long-term memory, and in spatial memory that enables navigation.

It has been previously demonstrated that impaired liver function and liver disease is associated with the production of free radical and oxidative stress (Bailey and Cunningham, 1998). The accumulation of these free radicals and oxidative stress contribute to cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue. Cognitive impairment is when a person has trouble remembering, learning new things, concentrating, or making decisions that affect their everyday life. Cognitive impairment resulting from H ranges from mild to severe. There is a long felt need for neuroprotective agents that are both disease-modifying and effective in treating patients that are experiencing HE. Onset of HE symptoms may be gradual or sudden. Other symptoms may include movement problems, changes in mood, or changes in personality. In the advanced stages, HE can result in a coma.

Opioid Crisis in America

The Centers for Disease Control released a report on November 17, 2021 that indicate there were and estimated 100,306 drug overdose deaths in the United States during 12-month perioed ending in April 2021, an increase of 28.5% from 78,056 deaths during the same period the year before (CDC/NCHS, National Vital Statistics System, Mortality 2021). The misuse of and addiction to opioids—including prescription pain relievers, heroin, and synthetic opioids such as fentanyl – is a serious national crisis that affects public health as well as social and economic welfare. The Centers for Disease Control and Prevention estimates that the total economic burden of prescription opioid misuse alone in the United States is $78.5 billion a year, including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement. (Med Care 2016; 54(10).

 Opioids and Pain – Pain and Addiction

According to a February 2018 research report from BIO, “The State of Innocation in Highly Prevalent Chronic Diseases – Volume II: Pain and Addiction Therapeutics”, the report states that:

Key Takeaways from the BIO research report include:

Research and Development Efforts Funded Through NIH-NINDS Under The HEAL Initiative

Since February 2020, the Company’s lead compound, KLS-13019 has been in the preclinical screening program for pain (PSPP) at the National Institutes of Health – National Institute of Neurological Disorders and Stroke (NIH-NINDS). This program is part of the NIH HEAL (Helping to End Addiction Long-term) Initiative. With NIH-HEAL support, NINDS has developed the PSPP program to facilitate the identification of potential non-addictive treatments (small molecules, biologics, devices, or natural products) for acute and chronic pain conditions.

Research offered by the PSPP will be a key step in transitioning HEAL preclinical programs into clinical programs, directly aligned with the HEAL Initiative goal of accelerating the discovery and pre-clinical development of non-addictive pain treatments (NINDS – Preclinical Screening Platform for Pain – ninds.nih.gov).

The Company’s lead compound, KLS-13019, has already gone through Tier 1 evaluation under the PSPP which, among other things, assesses targets and pharmacokinetics (PK) of KLS-13019 – compared against morphine and diazepam. Certain results from the Tier 1 screening report under the PSPP indicate that KLS-13019 has a low abuse potential and acceptable PK to move to Tier 2 studies for animal model assessment in pain and guardian behavior; wound healing and ability to recover; and Irwin testing for CNS toxicity. Tier 2 studies remain ongoing for KLS-13019 under the PSPP.

On September 28, 2021, the Company received a notice of award for a $2.97 million Phase 2 STTR Study Grant from the National Institutes of Health – National Institute of Neurological Disorders and Stroke under the HEAL Initiative (the “NIH-NINDS Study Grant Award”). The NIH-NINDS Study Grant Award is funded through the NIH HEAL Initiative (“Helping End Addiction Long-Term”) for Development of Therapies and Technologies Directed at Enhanced Pain Management. This NIH-NINDS Study Grant Award provides funding specifically in the further development of KLS-13019 for the treatment of chemotherapy induced neuropathic pain (“CIPN”). The grant award of $2.97 million sets forth the funding allocation of $977,054 in year 1; $991,944 in year 2; and $1,001,774 in year 3 and collectively budgets investigational new drug (“IND”) application enabling studies. IND enabling studies to be performed, include but are not limited to animal toxicity studies and drug compound scale up studies under chemistry manufacturing and controls. The NIH-NINDS Study Grant Award budget includes studies to be performed at Temple University; the University of Illinois; and Purisys (formerly, Noramco).

Corporate Strengths and Weaknesses

We believe that we offer the following key distinguishing characteristics:

We have not moved beyond pre-clinical studies of our drug candidates to date, and there can be no assurances that we will do so in the near future, if ever. While we believe that we are well positioned to be competitive in advancing non-opioid solutions for chronic and neuropathic pain, as well as the cannabinoid like therapeutics space, we also believe that we will face significant challenges in successfully completing one or more clinical trials. In addition, there is a competitive landscape that exists in the market for the Company’s target indications of OHE and CIPN. The competitive landscape is challenging. Competition in the OHE and CIPN spaces is well established, and many companies have significantly greater resources than we do, some of which are viewed as leaders in the current standard of care for these diseases.

With respect to competitive landscape for CIPN, nearly a dozen agents have been studied in randomized controlled trials for the treatment of CIPN, but there has been limited success. The characteristics and results of these studies are summarized in the study and abstract “Management of Chemotherapy Induced Peripheral Neuropathy” (Physician’s Education Resource LLC, Meghna S. Trivedi, MD; Dawn L. Hershman, MD, MS; Katherine D. Crew, MD, MS). Clinical trials of the antiepileptic agents gabapentin and lamotrigine and the antidepressants nortriptyline and amitriptyline have all been negative.  

Additionally, there have been several small placebo-controlled trials which have shown that intravenous administration of glutathione with platinum-based chemotherapy regimens can decrease the incidence of neurotoxicity without diminishing the effect of chemotherapy. A North Central Cancer Treatment Group / Alliance trial conducted in 2014 studied the use of glutathione with carboplatin and paclitaxel for treatment of CIPN, and found no improvement in neurotoxicity symptoms, suggesting that glutathione may not help in taxane-induced CIPN. 

Furthermore, the continuous use of opiates in the current standard of care to treat CIPN have resulted in mixed results, addiction problems and dose tolerance problems.  

We believe that, while the current standard of care is well positioned in the market, there is an unmet need for the treatment of CIPN in the reduction of use of opiates. We believe that this presents us with an opportunity to participate in the market with a novel therapeutic agent to treat CIPN.  

The current standard of care for patients suffering with OHE is 550mg of Xifaxan®, originally an antibiotic useful in treating traveler’s diarrhea and irritable bowel syndrome. Its exact mechanism of action is not known; however, it is theorized that Xifaxan® clinical activity may be attributed to effects on metabolic function of gut microbiota, rather than a change in the relative bacterial abundance. Currently, there is no drug in the market for OHE that is being used to treat the toxic effects on the hippocampus, the cognitive and behavioral dysfunction associated with OHE, and the action of neuroprotection from ammonia and ethanol toxicity. 

Given the competitive landscape in OHE, we believe we can participate in the OHE market with primary and adjunctive therapeutics currently under pre-clinical development, and potentially obtain orphan drug designation for one or more of our target therapeutic agents. 

With respect to certain other proprietary compounds underlying Pat. 9,611,213, we plan on pursuing topical solutions as potential relief creams and/or ointments for neuropathic pain, anti-inflammation, anti-pruritic and skin ulcers. We are considering commercialization routes that include, but are not limited to, filing and FDA Monograph and have already pursued and completed a commercialization path to the marketplace having received INCI certification and registration with the PCPC for LEAÔ.

In preclinical testing, certain molecules under Pat. 9,611,213 were screened for neuroprotection and may have the potential mechanism of action for reducing inflammation and neuropathic pain. These molecules indicate that they are more soluble than CBD, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than CBD in this regard may be good candidate(s) for use in topical applications.

We believe that we will be able to raise sufficient capital to proceed forth with a Phase 1a human safety trial for the treatment of Chemotherapy Induced Peripheral Neuropathy. All preclinical work in this indication, including animal toxicity studies, are expected to be completed before the end of the third quarter 2023. We plan on entering into clinical trials sometime in the second quarter 2024.

Additionally, we believe that we will be able to raise sufficient capital to proceed forth with a Phase 1a human safety trial for the treatment of Overt Hepatic Encephalopathy. All preclinical work in this indication, including animal toxicity studies, are expected to be completed before the end of the first quarter 2024. We plan on entering into clinical trials sometime in the third quarter 2024.

We intend to seek additional capital to proceed with our business plan regarding additional drug pipeline opportunities.

We believe that our current relationships with Purisys, LLC (formerly known as Noramco) (“Purisys”), a supplier of bulk active pharmaceutical ingredients (APIs), specifically pharmaceutical grade CBD, and Catalent Pharma Solutions (“Catalent”), a manufacturer of formulated and packaged pharmaceuticals, will enable us to meet our objectives in the production of target drug candidates that can be used in clinical trials and, beyond successful clinical trials, meet patient demand in commercial sales for each of our target disease indications.Estimated Costs for CIPN Clinical Trials – Phase 1a through Phase 2b

We have estimated that the cost of a Phase 1a and 1b trials, limited to 40 patients in each trial will will cost approximately $1,050,000 and $1,2500,000, respectively. The Company anticipates that a Phase 2a trial limited to 180 patients will cost approximately $3,000,000, with a Phase 2b trial estimated at $4,500,000 for 180 patients. As part of our plans to initiate Phase 1 clinical trials in the U.S. or Australia. The benefit of commencing Phase 1 clinical trials in Australia is that the Australian government has provided incentives that provide for research and development rebates.

Research & Development tax incentives offered by the government actively encourage overseas sponsors to conduct research in Australia. These incentives have also made it attractive for global companies to access Australian research facilities, as holding the intellectual property within Australia is not mandatory. Sponsors wishing to be eligible for this benefit can either establish an affiliate company in Australia (which may take from 1 week to 1 month) or choose a Contract Research Organization (“CRO”) to act on their behalf. 

Controlled Substances Laws and Regulations

Our drug candidates contain controlled substances as defined in the Controlled Substances Act (“CSA”). Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA.

Despite recent approvals by the FDA and DEA for a newly approved medication that contains CBD, the scheduling of these substances, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market KLS-13019 or KLS-13023. Moreover, because our business is almost entirely dependent upon these two product candidates, any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects. See our full description of the impact-controlled substances laws and regulations have on our business in the “Risk Factors” section of this annual report. 

KLS-13019 does not contain CBD and is a new chemical entity that would not fall under the CSA or be deemed a Schedule 1 controlled substance. A new chemical entity (“NCE”) is a molecule developed by the innovator company in the early drug discovery stage, which, after undergoing clinical trials, could translate into a drug that could be a treatment for some disease. Under the Food and Drug Administration Amendments Act of 2007, all NCE’s must first be reviewed by an advisory committee before the FDA can approve these products.

KLS-13023 is a formulation that does contain CBD. At present, CBD is deemed a Schedule 1 controlled substance by the U.S. Drug Enforcement Agency (“DEA”) under the CSA. Like the drug molecule EpidiolexÒ, which was recently approved by the FDA for marketing and sale for use in treating Dravet Syndrome and Lennox-Gasteau Syndrome (forms of child epilepsy), KLS-13023 would need to follow the guidance set forth by the CSA, complete a successful human clinical trial, and apply for rescheduling, as was the case with EpidiolexÒ, now a Schedule 5 drug, before it can be sold and marketed to the public.

On January 14, 2019, we received written notice from the DEA and Chemical Evaluation Section, as follows: “Please be advised that your material meets the definition of ‘Hemp’ and is not regulated under the CSA, as long as it consists of high purity Cannabidiol (CBD) that contains approximately 0.1% delta-9- THC. (However, if it contains more than 0.3% delta-9 THC, it is considered ‘Marihuana’ and would be in Schedule 1 of the CSA).” While this notice is an official notice from the DEA regarding the scheduling of high purity CBD, we will continue to abide by the CSA in all respects with regards to its treatment and handling of CBD.

The active pharmaceutical ingredient (“API”) found in KLS-13023 is highly purified pharmaceutical grade synthetic CBD produced by Purisys and currently under drug master file with the FDA. Purisys (formerly, Noramco) has been manufacturing cannabidiol since 2016 (DMF33223). Today, through our partnership with Purisys, we have the ability to produce on the largest commercial scale. Purisys’ ultra-high purity CBD (“Purisys CBD”) is attractive for drug development projects and falls significantly below the 0.3% THC limits set in the 2018 Farm Bill for use in consumer products. Purisys’ patent-protected manufacturing process produces a consistently odorless, tasteless white powder highest-purity form of CBD that exhibits:

Purisys currently has a drug master file (“DMF”) for its ultra-high purity CBD with the FDA. In November 2019, Purisys received advise notice from the DEA that the Purisys CBD has been removed from Schedule 1 of the CSA.

U.S. Food and Drug Administration (FDA)

The FDA is responsible for advancing the public health by helping to speed innovations that make medicines safer and more effective and by helping the public get the accurate, science-based information it needs to use medicines to maintain and improve public health. In 2004, the FDA provided a guidance document for innovations, challenges, and solutions for new drug products that examine the critical path needed to bring therapeutic products to completion, and how the FDA can collaborate in the process, from laboratory to production to end use, to make medical breakthroughs available to those in need as quickly as possible. 

FDA Approval – What It Means

FDA approval of a drug means that data on the drug’s effects have been reviewed by the Center for Drug Evaluation and Research, and the drug is determined to provide benefits that outweigh its known and potential risks for the intended population. The drug approval process takes place within a structured framework that includes: 

Although many of the FDA’s risk-benefit assessments and decisions are straightforward, sometimes the benefits and risks are uncertain and may be difficult to interpret or predict. The agency and the drug maker may reach different conclusions after analyzing the same data, or there may be differences of opinion among members of the FDA’s review team. As a science-led organization, the FDA uses the best scientific and technological information available to make decisions through a deliberative process. 

Accelerated Approval

In some cases, the approval of a new drug is expedited. Accelerated Approval can be applied to promising therapies that treat a serious or life-threatening condition and provide therapeutic benefit over available therapies. This approach allows for the approval of a drug that demonstrates an effect on a “surrogate endpoint” that is reasonably likely to predict clinical benefit, or on a clinical endpoint that occurs earlier but may not be as robust as the standard endpoint used for approval. This approval pathway is especially useful when the drug is meant to treat a disease whose course is long, and an extended period of time is needed to measure its effect. After the drug enters the market, the drug maker is required to conduct post-marketing clinical trials to verify and describe the drug’s benefit. If further trials fail to verify the predicted clinical benefit, FDA may withdraw approval. 

Since the Accelerated Approval pathway was established in 1992, many drugs that treat life-threatening diseases have successfully been brought to market this way and have made a significant impact on disease course. For example, many antiretroviral drugs used to treat HIV/AIDS entered the market via accelerated approval, and subsequently altered the treatment paradigm. A number of targeted cancer-fighting drugs also have come onto the market through this pathway.  

Drug Development Designations

The FDA also employs several approaches to encourage the development of certain drugs, especially drugs that may represent the first available treatment for an illness, or ones that have a significant benefit over existing drugs. These approaches, or designations, are meant to address specific needs, and a new drug application may receive more than one designation, if applicable. Each designation helps ensure that therapies for serious conditions are made available to patients as soon as reviewers can conclude that their benefits justify their risks. 

FDA Human Clinical Trials

Phase I studies assess the safety of a drug or device. This initial phase of testing, which can take several months to complete, usually includes a small number of healthy volunteers (20 to 100), who are generally paid for participating in the study. The study is designed to determine the effects of the drug or device on humans including how it is absorbed, metabolized, and excreted. This phase also investigates the side effects that occur as dosage levels are increased. About 70% of experimental drugs pass this phase of testing. 

Phase II studies test the efficacy of a drug or device. This second phase of testing can last from several months to two years, and involves up to several hundred patients. Most Phase II studies are randomized trials where one group of patients receives the experimental drug, while a second “control” group receives a standard treatment or placebo. Often these studies are “blinded,” which means that neither the patients nor the researchers know who has received the experimental drug. This allows investigators to provide the pharmaceutical company and the FDA with comparative information about the relative safety and effectiveness of the new drug. Approximately one-third of experimental drugs successfully complete both Phase I and Phase II studies. 

Phase III studies involve randomized and blind testing in several hundred to several thousand patients. This large-scale testing, which can last several years, provides the pharmaceutical company and the FDA with a more thorough understanding of the effectiveness of the drug or device, the benefits and the range of possible adverse reactions. Approximately 70% to 90% of drugs that enter Phase III studies successfully complete this phase of testing. Once Phase III is complete, a pharmaceutical company can request FDA approval for marketing the drug. 

Phase IV studies, often called Post Marketing Surveillance Trials, are conducted after a drug or device has been approved for consumer sale. Pharmaceutical companies have several objectives at this stage: (1) to compare a drug with other drugs already in the market; (2) to monitor a drug’s long-term effectiveness and impact on a patient’s quality of life; and (3) to determine the cost-effectiveness of a drug therapy relative to other traditional and new therapies. Phase IV studies can result in a drug or device being taken off the market or restrictions of use could be placed on the product depending on the findings in the study. 

Therapeutic Goods Administration (TGA) – Australia

Clinical trials conducted in Australia are subject to various regulatory controls to ensure the safety of participants. The TGA regulates the use of therapeutic goods supplied in clinical trials in Australia under the therapeutic goods legislation. 

Clinical trial sponsors must be aware of the requirements to import, export, manufacture and supply therapeutic goods in Australia. The following avenues provide for the importation into and/or supply in Australia of ‘unapproved’ therapeutic goods for use in a clinical trial: 

The CTN Scheme is a notification process involving the following:

The CTX Scheme is an approval process involving the following:

Clinical trials that do not involve ‘unapproved’ therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an ‘unapproved’ therapeutic good. 

Clinical trials that do not involve ‘unapproved’ therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an ‘unapproved’ therapeutic good. 

In Australia, in 2014, the Advisory Council on Medicines Scheduling recommended rescheduling CBD from a prohibited substance to being a prescription medicine because, according to the Advisory Council on Medicines Scheduling, “there is a low risk of misuse or abuse as cannabidiol does not possess psychoactive properties.” The TGA accepted this recommendation, and the decision took effect in July 2015. 

CBD is one of the cannabinoids which may be extracted as a therapeutic good from cannabis. From June 1, 2015, CBD has been included under Schedule 4 (S4) Prescription Only Medicine of the Poisons Standard when preparations for therapeutic use contain 2% or less of other cannabinoids found in cannabis. 

In February 2016, the Australian Federal Government passed legislation that amended the Narcotic Drugs Act, allowing the supply of suitable medicinal cannabis products for the management of painful and chronic conditions. This legislation does not relate to the decriminalization of cannabis for general cultivation or recreational use and it does not include the provision of medicinal grade herbal cannabis, but rather only covers processed, non-smokable medicinal grade products^. 

Much of the detail remains unclear. For example, the legislation does not specify which products will be covered under the amendment, and it does not specify which particular conditions or symptoms will be eligible for treatment with cannabis-based products. Before products can be prescribed, they must be registered with the TGA or, in rare circumstances, receive special approval from the TGA. The registration process requires evidence of testing and efficacy and it is therefore unlikely Australia will see a TGA registered medicinal cannabis product that GPs can prescribe any time soon. 

Whilst there are currently no cannabis-based products that are lawfully produced in Australia, the medicinal use of pharmaceutical products containing cannabinoids is not prohibited, as long as authorization for prescribing is granted from the Commonwealth Therapeutic Goods Administration and at this point in time, NSW Health.

Neuropathix Intellectual Properties

Neuropathix PCT Patent – PCT/US2015/010827

On January 13, 2014, we filed for a provisional patent with the USPTO for our “Novel Functionalized 1, 3-Benzene-diols and Their Treatment of Hepatic Encephalopathy”, under application number 61/926,869.

On January 9, 2015, we filed a non-provisional patent application Patent Cooperation Treaty (“PCT”) Application under application number PCT/US2015/010827 titled, “Novel Functionalized 1,3-Benzene Diols and Their Method of Use for the Treatment of Hepatic Encephalopathy” (the “PCT Patent”). Under the PCT Patent, the present invention describes novel functionalized 1,3-benzenediols (“Cannabidiol Derived Molecules”) and methods that may be useful and have potential for the treatment of HE and related conditions. The present invention further describes a novel chemotype that may be useful and have potential for the treatment of diseases associated with HE. The present invention further describes a novel chemotype that may be useful and have potential as neuroprotective agents.

We believe that the Cannabidiol Derived Molecules under the present invention have potential for treating and preventing diseases associated with free radical mediated stress and oxidative stress including, for example, HE, Parkinson’s disease, Alzheimer’s, Huntington’s disease, traumatic head injury, stroke, epilepsy, neuropathic pain, traumatic head injury, stroke, CTE, Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, and Epileptic Encephalopathy.

The present invention addresses the need to prevent free radical mediated stress and oxidative stress, as well as to prevent the neural damage associated with HE. The present invention further addresses the need to prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with HE. 

On November 29, 2016, as part of our patent cooperation treaty global patent application, the USPTO granted allowance on the composition of matter portion, covering claims 1 through 14 of the Company’s PCT Patent covering claims of our novel cannabidiol derived molecule.

In January 2017, we filed a divisional application with the USPTO to cover the method claims, which were originally covered in claims 15 through 22 of the original PCT Patent. We currently hold a valid allowance in the United States on the composition of matter for a new cannabidiol derived molecules.

On April 4, 2017, we were awarded U.S. Patent 9,611,213 titled “Functionalized 1,3 Benzene-diols and their Method of Use for the Treatment of Hepatic Encephalopathy”. This patent is part of a divisional patent application by the Company to the USPTO whereby we sought separate claims for composition of matter, covered in Pat. 9,611,213, and separate claims for method for treatment.

On June 26, 2018, we were awarded U.S. Patent 10,004,722 titled “Method for Treating Hepatic Encephalopathy or a Disease Associated with Free Radical Mediate Stress and Oxidative Stress with Novel Functionalized 1,3 Benzene-diols.”

We have patent pending status of the same PCT Patent in Canada, the European Union, Brazil, Russia, India, China, Japan and Australia.

National Institutes of Health – Office of Technology Transfer (NIH-OTT) – Patent 6,630,507

On June 12, 2010, we filed an application for an exclusive license with the NIH-OTT for the development and commercialization of a target drug candidate to be used in the treatment of patients suffering with HE. The application for exclusive license was made for the license and use of U.S. patent 6,630,507 “Cannabinoids as Antioxidants and Neuroprotectants, ‘507 Patent. 

On November 17, 2011, we received notice of publication in the Federal Register of NIH-OTT’s Prospective Grant of Exclusive License – Development of Cannabinoid(s) and Cannabidiol(s) Based Therapeutics to treat hepatic encephalopathy in humans.

On June 12, 2012, we entered into an exclusive license with NIH-OTT for the use of the ‘507 Patent in the commercialization of one or more cannabinoid therapeutics to treat HE.

In addition to the exclusive use of the ‘507 Patent for the treatment of hepatic encephalopathy, on July 16, 2014, we formally entered into a second license agreement with NIH-OTT for the non-exclusive license of the ‘507 Patent for the treatment of CTE.

Prior to the expiration of the ‘507 Patent, we were the only company that had use of the ‘507 Patent and corresponding licenses from NIH-OTT. The jurisdictions in which the ‘507 Patent is valid are: the U.S., the U.K., Ireland, the E.U., and Australia. The patent life in these jurisdictions expired on April 21, 2019.

Although we properly maintained and paid all of the minimum annual royalties and past prosecution fees underlying our two licenses of the ‘507 Patent during its lifetime and met the additional financial benchmarks set forth in the NIH licenses L-113-2012/0 and L-302-2014/0, we were not able to secure the necessary funds to advance our drug discovery efforts into human clinical trials. Our financial obligations to NIH-OTT terminated in 2019, effective upon expiration of the ‘507 Patent.

A summary of the Company’s patents and status to each such patent is as set forth below:

PRE-CLINICAL DRUG DISCOVERY

Since inception in 2010, our primary drug discovery plans have revolved around neuroprotection and the use of CBD as well as the development of proprietary CBD-derived molecules as target drug candidates to treat neurodegenerative and oxidative stress related diseases.

Historical Pre-clinical Discovery Efforts

Our research and development efforts at the Pennsylvania Biotechnology Center were originally centered on the creation of novel synthetic cannabinoid and cannabinoid-like molecules, the pre-clinical and in vitro efficacy of CBD, a non-psychotropic molecule, and the testing and control of our lead target drug candidates alongside CBD for the treatment of OHE and CTE.

Conceptual Drug Discovery of Cannabidiol Derived Molecules

An emerging concept is that blockade of free radical mediated stress and oxidative stress will prevent the neural damage associated with HE and prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with HE. Cannabidiol Derived Molecules may have the potential of acting as neuroprotective agents by blocking the damage caused by free radicals and oxidative stress, may prevent the neural damage associated with HE, and may also prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with HE. 

Around 1900, Moses Gomberg, a chemistry professor, discovered that prevention of free radical mediated stress and oxidative stress can prevent damage and death of neuronal tissue, as well as prevent cognitive impairment, learning deficits, and memory impairment associated with damage and death of neuronal tissue. Without wishing to be limited by theory, it is believed that the neuroprotective agents of the disclosure can ameliorate, abate, and otherwise cause to be controlled, diseases associated free radical mediated stress and oxidative stress.

Free radical mediated stress and oxidative stress is also known to contribute to additional pathological conditions including, but not limited to, epilepsy, neuropathic pain, traumatic head injury, stroke, CTE, Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, Epileptic Encephalopathy, and neurodegenerative diseases such as Parkinson’s disease, Alzheimer’s, Huntington’s disease, and amyotrophic lateral sclerosis (“ALS”). Under the present invention, these Cannabidiol Derived Molecules may be capable of acting as neuroprotective agents, and may be useful for the treatment of epilepsy, neuropathic pain, traumatic head injury, stroke, CTE, Post Cardiac Arrest Hypoxic Ischemic Encephalopathy, Epileptic Encephalopathy, and neurodegenerative diseases such as Parkinson’s disease, Alzheimer’s, Huntington’s disease, and ALS.

As of October 2013, we had performed six distinct pre-clinical studies on murine specimens, including functional assay screens on twenty-four viable analogues and pre-clinical studies against CBD as a therapeutic control. Analogues are compounds or molecules having a structure similar to that of another compound or molecule, but differing from it in respect to a certain component.

As a result of the screening process, we found that there were four target candidates along with CBD that were screened for final pre-clinical in vitro testing for pharmacokinetics (“PK”), CACO permeability, lethal dose (“LD”), EC50 and IC90 testing. PK relate to the branch of pharmacology concerned with the movement of drugs within the body. Factors in PK studies include CACO permeability, which relates to assays that measure the ability of a drug to be absorbed from the gastrointestinal tract and thereby to evaluate whether the drug can be suitably dosed via an oral route. EC50 and IC90 relate to the concentration of a drug, antibody or toxicant which induces a response halfway between the baseline and maximum after a specified exposure time. It is commonly used as a measure of a drug’s potency (EC50), and the concentration of a medication in the blood that will inhibit the replication of a specified percentage of microorganisms (IC90).

Our lead target drug candidate was then analyzed using a mouse model to determine, among other things, blood brain barrier xs, tissue and organ distribution, bioavailability, administration (IV vs. Oral), spinal fluid concentration, and blood plasma concentration. A route of “administration” in pharmacology and toxicology is the path by which a drug, fluid, poison, or other substance is taken into the body. “Bioavailability” is a subcategory of absorption and relates to a fraction of an administered dose of a drug that reaches systemic circulation in the body. “Blood plasma concentration,” otherwise known as volume of distribution, is a theoretic concept that relates the amount of drug in the body (dose) to the concentration (C) of drug that is measured (in blood, plasma, and unbound in tissue water).

In May 2014, we commissioned the first of two animal behavioral studies via research pact with Temple University. The aim of the study was to test the effects of CBD and KLS-13019 on cognitive function in a mouse model of OHE in support of the identification of molecules with in vivo efficacy. An established model of OHE, the thioacetamide model (TAA, 200 mg/kg i.p.), was used to assess the effect of CBD (5.0 mg/kg i.p.) and KLS-13019 (0.5 – 5.0 mg/kg i.p.) on learning and memory in male C57Bl6 mice. The autoshaping procedure, an operant learning and memory assay that rapidly assesses acquisition and retention of a simple task, was the primary cognitive assay used. The task is an operant conditioning task wherein food restricted mice are placed in experimental chambers and must learn how to make a behavioral response to gain access to food rewards.

In summary, thioacetamide induced a robust, but variable, toxicity associated with cognitive impairment, morbidity, and mortality. KLS-13019, administered in the absence of thioacetamide, produced no negative behavioral or general health effects, and actually appeared to improve cognitive functioning in the behavioral task. The 5.0 mg/kg dose of KLS-13019 also significantly prevented thioacetamide-induced cognitive performance deficit, and the lower dose of 1.0 mg/kg showed a trend in this direction.

Pharmacokinetic and Pharmacodynamic Comparison Between KLS-13019 and CBD 

Results from PK and PD studies performed in evaluating CBD versus KLS-13019 (molecule name 16), has shown KLS-13019 to be superior in aqueous solubility (potential for drug absorption after oral administration); Log P (ratio which measures difference in solubility in two phases); bioavailability (proportion of the drug that enters the circulation); and C max at 10 mg/kg, p.o. (peak serum concentration).

Results from our pre-clinical efforts in the potential treatment of OHE and the potential treatment of CIPN have shown a marked improvement over 99.7% pure pharmaceutical grade synthetic CBD in side by side pre-clinical comparison. In a pre-clinical comparison for neuroprotection between CBD and KLS-13019, results indicated increased potency for the new molecule (KLS-13019) as determined by six assays, while both molecules exhibited efficacy in preventing oxidative stress-related toxicities back to control values. Treatment with KLS-13019 alone, however, was 5-fold less toxic than CBD. Previous studies suggested that CBD targeted the Na⁺ Ca²⁺ (sodium-calcium) exchanger in mitochondria to regulate intracellular calcium levels, an important determinant of neuronal survival. After treatment with an inhibitor, the mNCX inhibitor (“CGP-37157”), no detectable neuroprotection from ethanol toxicity was observed for either CBD or KLS-13019. Furthermore, AM630 (a CB2 antagonist) significantly attenuated CBD-mediated neuroprotection, while having no detectable effect on KLS-13019 neuroprotection. Our studies indicated KLS-13019 was more potent and less toxic than CBD. Both molecules can act through mNCX. Based on these results, amongst other things, we believe that KLS-13019 may provide an alternative to CBD as a therapeutic candidate to treat disease associated with oxidative stress.

As previously noted, comparisons between CBD and KLS-13019 have been published in peer reviewed articles in ACS Medicinal Chemistry Letters (2016, 7, 424-428) and Journal of Molecular Neuroscience (14 August 2018).

Additional follow on studies recently published on May 10, 2019 in the Journal of Molecular Neuroscience have further advanced our studies on the mechanism of action for CBD and KLS-13019 in pre-clinical testing for the treatment of CIPN. The mechanism of action for CBD-and KLS-13019-mediated protection now has been explored with dissociated dorsal root ganglion (“DRG”) cultures using small interfering RNA (siRNA) to the mitochondrial Na+ Ca2+ exchanger-1 (“mNCX-1”). Treatment with this siRNA produced a 50–55% decrease in the immunoreactive (“IR”) area for mNCX-1 in neuronal cell bodies and a 72–80% decrease in neuritic IR area as determined with high-content image analysis. After treatment with 100 nM KLS-13019 and siRNA, DRG cultures exhibited a 75 ±5% decrease in protection from paclitaxel-induced toxicity, whereas siRNA studies with 10 μM CBD produced a 74± 3% decrease in protection. Treatment with mNCX-1 siRNA alone did not produce toxicity. The protective action of cannabidiol and KLS-13019 against paclitaxel-induced toxicity during a 5-h test period was significantly attenuated after a 4-day knockdown of mNCX-1 that was not attributable to toxicity. This data indicates that decreases in neuritic mNCX-1 corresponded closely with decreased protection after siRNA treatment. Pharmacological blockade of mNCX-1 with CGP-37157 produced complete inhibition of cannabinoid-mediated protection from paclitaxel in DRG cultures, supporting the observed siRNA effects on mechanism. 

Sodium-Calcium Exchanger (“NCX”) (often denoted Na⁺/Ca²⁺ exchanger, NCX, or exchange protein) is an antiporter membrane protein that removes calcium from cells. The exchanger exists in many different cell types and animal species. The NCX is considered to be one of the most important cellular mechanisms for removing Ca²⁺ (calcium ions) from cells. The exchanger is usually found in the plasma membranes and the mitochondria and endoplasmic reticulum of excitable cells.

Mitochondria is a double-membrane-bound organelle found in most eukaryotic organisms. Mitochondria generate most of the cell’s supply of adenosine triphosphate (“ATP”), used as a source of chemical energy. ATP is a complex organic chemical that provides energy to drive many processes in living cells, including muscle contractions, nerve impulse propagation and chemical synthesis.  

According to Fallon, et al. in the March/April 2006 edition of Clinical Medicine, pain is uncontrolled with opioid treatments in approximately 20% of patients with advanced cancer, or 420,000 people in the United States. There are currently no FDA approved non-opioid treatments for patients who do not respond to, or experience negative side effects with, opioid medications. We believe that KLS-13019 has the potential to address a significant unmet need in this large market by treating patients with a product that employs a differentiated non-opioid mechanism of action, and offers the prospect of pain relief without increasing opioid-related adverse side effects.

Neuropathix Early Studies on CBD

In March 2013, we began our pre-clinical research and discovery efforts at the Pennsylvania Biotechnology Center/Baruch Blumberg Institute in Doylestown, PA. We began the research and development, and pre-clinical work focused on the identification, synthesis and/or extraction of novel Cannabis-derived molecules for the treatment of impairments associated with oxidative stress in OHE. Prior research (published on April 16, 2011, in the British Journal of Pharmacology under the title “Cannabidiol Improves Brain and Liver Function in a Fulminant Hepatic Failure Induced Model of Hepatic Encephalopathy in Mice”) produced substantial behavioral and histochemical evidence demonstrating the effectiveness of certain Cannabis-derived molecules, such as CBD, in the improvement of brain and liver function in fulminant hepatic failure. Findings from the above referenced study include reversal of locomotors and cognitive pathologies, reversal of structural changes, such as Alzheimer’s Type II astrogliosis, and reversal of increases in ammonia levels.

In 2014, we published an abstract on our completed studies regarding CBD at the 24th Annual International Cannabinoid Research Society symposium, titled “Cannabidiol Provides Protection from Ethanol and Ammonium Toxicity in a Hippocampal Model of Hepatic Encephalopathy.” In the present study, an in vitro model of HE has been utilized to evaluate the protective properties of CBD, a substance with demonstrated protective properties against oxidative stress in pre-clinical studies targeting the OHE range of neuronal toxicity.

OHE is a known oxidative stress related disorder. Although ammonia is considered the main factor involved in the pathogenesis of OHE, it correlates well with the severity of OHE in acute liver failure, but not in chronic liver disease. Oxidative stress is another factor believed to play a role in the pathogenesis of this syndrome; it represents an imbalance between the production and neutralization of reactive oxygen species, which leads to cellular dysfunction (“Oxidative Stress: A Systemic Factor Implicated in the Pathogenisis of Hepatic Encephalopathy”, Metabolic Brain Disease, 28 June 2013, 175-178).

As part of our research and development efforts, we have sought to establish the pre-clinical efficacy of CBD, which, along with our novel and proprietary lead target molecules, have shown to have neuroprotective properties. From 2013 through 2019 we conducted preclinical evaluations and formulation of our CBD based target drug candidate, KLS-13023. These efforts involved a feasibility study with Catalent Pharma Solutions (“Catalent”) utilizing a highly purified pharmaceutical grade synthetic CBD produced by Purisys (formerly, Noramco) and currently under drug master file with the FDA. While we have evaluated CBD on its own, in a highly purified form, we plan on bringing a CBD based target drug therapeutic revolve around a formulated product in oral dose administration capsule (KLS-13023) and supported with additional intellectual property created by the Company.  

On January 22, 2015, we signed an agreement with Catalent Pharma Solutions LLC (“Catalent”), a $3.9 billion pharmaceutical manufacturer, for the performance of a feasibility study named “Solution for Cannabidiol Softgel Feasibility” (the “CBD OTC Feasibility Study”). Catalent has over eight years of experience in capsule and softgel manufacturing capabilities and experience.

The purpose of the CBD OTC Feasibility Study with Catalent is to advance our plans to submit one or more products for FDA clinical trials to treat certain oxidative stress related and neurodegenerative related diseases such as Traumatic Brain Injury (“TBI”).

TBI, also known as intracranial injury, occurs when an external force injures the brain. TBI can be classified based on severity, mechanism (closed or penetrating head injury), or other features (e.g., occurring in a specific location or over a widespread area). Head injury is a broader category that may involve damage to other structures, such as the scalp and skull. TBI can result in physical, cognitive, social, emotional, and behavioral symptoms, and outcomes can range from complete recovery to permanent disability or death.

The Centers for Disease Control and Prevention (the “CDC”) has compiled statistics on TBI, which occurs more with children and older adults. According to the CDC, total combined rates for TBI-related emergency department (“ED”) visits, hospitalizations and deaths have increased over the past decade. In 2014, there were approximately 2.5 million TBI-related ED visits in the U.S., including over 812,000 among children. Unintentional falls, being unintentionally struck by or against an object, and motor vehicle crashes were the most common mechanisms of injury contributing to a TBI diagnosis in the ED. These three principal mechanisms of injury accounted for 47.9%, 17.1%, and 13.2%, respectively, of all TBI-related ED visits. Rates of TBI-related ED visits per 100,000 population were highest among older adults aged ≥ 75 years (1,682.0), young children aged 0-4 years (1,618.6), and individuals 15-24 years (1,010.1).

On March 4, 2015, the Company and Catalent commenced the feasibility study named “Solution for Cannabidiol Softgel Feasibility.”

On March 16, 2015, we received notice from Catalent that the DEA advised them that the CBD drug code 7360 had been added to Catalent’s Schedule 1 registration and that a quota for a certain quantum of CBD was successfully submitted for the importation of 150 grams of 99.7% pure synthetic cannabidiol from Purisys (formerly, Noramco).

Additionally, on July 13, 2018, we received notice from the DEA that were approved for our own Schedule 1 Controlled Substance license for the purpose of research activity. The addition of this license will further assist the Company in the bailment and delivery of CBD to and from research collaborators like Catalent and Temple University, as well as others.

Our relationship with Catalent was founded on our efforts to produce a formulated version of a CBD based gel capsule, herein referred to as KLS-13023, for further advancements in the treatment of oxidative stress related disorders, such as OHE. Catalent does not share in any royalties or ownership of intellectual property that we provide to Catalent or that is developed under the feasibility study with Catalent described herein. The current feasibility study being performed is for our efforts to create a high quality controlled and assured pharmaceutical grade product for use in an FDA clinical trial to treat patients suffering with OHE. Catalent’s efforts in this instance is as a contract manufacturer involved in the advancement of our intellectual property and for Catalent to be a third party contract manufacturer for the commercial production of KLS-13023.

In late 2019, this novel formulation and feasibility study was completed at Catalent and also validated through repeated in vitro viability assays and pharmacology tests.

We are satisfied by the successful completion of the feasibility study with Catalent, and plan to perform additional research and development and further pre-clinical evaluation of KLS-13023 in mild traumatic brain injury (mTBI) animal models and move towards animal toxicity studies. Thereafter we plan on filing an IND application for KLS-13023 with the FDA. We have only committed to completing the feasibility study with Catalent, and are under no obligation to enter into a commercial drug manufacturing agreement with Catalent. After the completion of our feasibility study with Catalent, we currently believe that the logical next step in our commercial development plans for KLS-13023 is to engage with Purisys (formerly, Noramco) for the API supply of their highly purified pharmaceutical grade CBD and with Catalent as our contract drug manufacturer for KLS-13023.

CBD Reclassified by DEA for Epidiolex

 On September 27, 2018, in a significant decision relating to the classification of CBD, currently classified as a Schedule I narcotic by the DEA under the Controlled Substances Act, the Department of Justice and the DEA announced that EpidiolexÒ, the recently approved medication by the FDA, was being placed in Schedule V of the Controlled Substances Act, the least restrictive schedule of the CSA. On June 26, 2018, the FDA announced it approved EpidiolexÒ for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older. EpidiolexÒ contains CBD. The CBD in EpidiolexÒ is extracted from the cannabis plant and is the first FDA-approved drug to contain a purified extract from the plant. Schedule V drugs represent the least potential for abuse. Schedule V drugs, substances, or chemicals are defined as drugs with lower potential for abuse than Schedule IV and consist of preparations containing limited quantities of certain narcotics.  

We believe this was a significant reclassification that validates our efforts in the research and development of ethical pharmaceuticals containing CBD as an active pharmaceutical ingredient and reduces the regulatory and market risks associated with the use of CBD, still a Schedule I narcotic. 

We have maintained since inception that the only clear path to reclassification is to follow the regulatory path of proving medical purpose through traditional Phase 1 through Phase 3 clinical trials. We believe that the approval of EpidiolexÒ by the FDA on June 26, 2018 and reclassification of CBD as it relates to EpidiolexÒ by the DEA on September 27, 2018, is clear evidence of the need to follow the regulatory path in order to meet the requirements of reclassification of a Schedule I controlled substance. 

Neuropathix Strategic Third Party Business Relationships, Licenses and Joint Ventures

Natural Products Discovery Institute – Pennsylvania Biotechnology Center

In December 2013, we entered into a Materials Transfer and Testing Agreement (“MTTA”) with the Institute for Hepatitis and Virus Research and their division, the Natural Products Discovery Institute (“NPDI”), located at Pennsylvania Biotechnology Center in Doylestown, PA. The purpose of the MTTA, is, among other things, the research of original material made up of plants, plant matter, and plant extracts (the “Plant Materials”) to identify bioactive molecules contained in these Plant Materials which may lead to the commercial production of bioactive molecules. To date, we have screened one plant source and have fractionated extracts to determine its neuroprotective activity. This plant source and extracted material has shown a high degree of neuroprotectant factor in the face of ethanol and ammonium toxicity in neuronal cell cultures. We plan on furthering the commercial development of this material.

On April 2, 2020, we entered into an Intellectual Property Rights Purchase and Transfer Agreement with the BSBI to purchase all of the rights, titles, and interests that would otherwise belong to the BASBI solely under the MTTA Agreement. The purchase price for the acquisition of these rights was twenty five thousand shares of the Company’s restricted common stock.

Subsequent to this transaction with the BSBI, we filed for patent protection on this discovery, which patent describes claims on the process, method and use of this material in the treatment of neurodegenerative diseases. (see: Neuropathix Intellectual Properties) 

Temple University – Animal Behavioral/Pre-Clinical Model

On May 1, 2014, we signed a Research Services Agreement with Temple University to test the effects of CBD and CBD-like molecules in an HE model of cognitive impairment in support of the identification of molecules with in vivo efficacy. The tests were performed by Temple University in the pre-clinical model for HE, and involved a mouse model of OHE and administration of CBD and KLS-13019 conducted by Dr. Sara Jane Ward and Dr. Ronald Tuma, with the study titled – “Cognitive, neurological, and motor function in a mouse model of hepatic encephalopathy: effects of CBD and CBD analogues (KLS-13019).” The results of this study showed that KLS-13019 is superior to CBD in the intervention of cognitive impairment from associated neurotoxicity in the OHE model.

On January 4, 2017, we applied for a Phase 1 Small Business Technology Transfer (“STTR”) grant from the National Institutes of Health – National Institute on Drug Abuse (“NIH-NIDA”). This grant application was made in collaboration with Temple University and titled “Development of KLS-13019 for Chemotherapy Induced Peripheral Neuropathy and Drug Dependence”. In December 2017, we were informed that the Phase 1 grant was awarded.

The following is a summary outline of the aims proposed in the aforementioned grant.

Chemotherapy-induced peripheral neuropathy (CIPN) can be a chronic, severely debilitating consequence of cancer therapy for which there are no effective management strategies. Moreover, upwards of 80% of CIPN patients reported using prescription opioids for pain management, despite the fact that there is only weak evidence that the long-term continuation of opioids provides clinically significant pain relief in these patients.

Mitochondrial dysfunction, oxidative stress, and inflammation have all been implicated in its etiology. We have shown that the non-psychoactive cannabinoid CBD prevents the development of CIPN in a mouse model of paclitaxel-induced cold and mechanical allodynia. This target, allodynia, refers to central pain sensitization (increased response of neurons) following normally non-painful, often repetitive stimulation. It can lead to the triggering of pain response from stimuli that normally do not provoke pain. 

In vitro, we observe that paclitaxel increases microglial expression of several putative mediators of neuropathic pain, and that this effect can be blocked by CBD in a mitochondrial Na+/Ca2+ exchanger (mNCX)- dependent manner. We have also shown that a more potent, hydrophilic analogue of CBD, KLS-13019, protects against paclitaxel-induced oxidative stress in cultured dorsal root ganglia neurons, and that the mechanism underlying this neuroprotection is also regulation of intracellular calcium via the mNCX. Preliminary results demonstrate that KLS-13019 can attenuate mechanical sensitivity associated with CIPN while also reducing microglial activation and T cell infiltration into the spinal cord.

Dorsal root ganglia (“DRG”) is a cluster of neurons (a ganglion) in the dorsal root of a spinal nerve. The cell bodies of sensory neurons known as the first-order neurons are located in the dorsal root ganglia. Even though dorsal root ganglia are a part of the system of peripheral nerves, they lie very close to the spine, and therefore to the central nervous system. That makes them an important connection between the two systems. These nerve clusters help transmit messages toward the brain and play a key role in neuropathic pain development and maintenance. Peripheral nerve injury-induced neuropathic pain is one of major clinical disorders characterized by spontaneous ongoing or intermittent burning pain, sensory abnormalities (dysesthesia), an increased response to painful stimuli (hyperalgesia), and pain in response to normally innocuous stimuli (allodynia).

Our central hypothesis is that administration of CBD or KLS-13019 helps preserve Ca2+ homeostasis by promoting activity of the mNCX, which in turn protects from both mitochondrial dysfunction and microglial activation to prevent the neuronal and glial changes associated with the development and maintenance of paclitaxel-induced neuropathic pain. We believe that results from experiments in AIM 1 will demonstrate that the neuroprotective properties of CBD and KLS-13019 can be reduced by pharmacological or gene knockdown of the mNCX in a statistically significant manner. We believe that results from experiments in AIM 2 will further confirm the i.p. and p.o. efficacy of KLS-13019 vs CBD to prevent or reverse mechanical sensitivity and neuroinflammation in a mouse model of paclitaxel-induced neuropathic pain and that repeated administration of these molecules does not lead to analgesic tolerance. Remarkably, the non-psychoactive CBD has also been shown to inhibit cue-induced heroin-seeking and neurochemical correlates thereof in a rat model of relapse and decrease heroin craving in a small human study. Experiments in AIM 3 are designed to test the hypothesis that KLS-13019 and CBD will attenuate reinstatement of morphine seeking behavior in a rat model of opioid relapse. The overall impact of the results from the proposed research will be significant advancements into (i) identification of specific mechanisms that induce CIPN, (ii) application of this knowledge to facilitate design of novel treatment strategies for neuropathic pain, and (iii) novel treatment strategies to reduce or replace prescription opioid use and decrease prescription opioid abuse.

Chemotherapy-induced peripheral neuropathy (CIPN) can be a chronic, severely debilitating consequence of cancer therapy for which there are no effective management strategies. Moreover, upwards of 80% of CIPN patients reported using prescription opioids for pain management, despite the weak evidence of their efficacy and the risks of long term dependence (Hirayama, ESMO Open 2016). Mitochondrial dysfunction, calcium dysregulation, oxidative stress, and inflammation have all been implicated in its etiology. In pre-clinical studies, CBD, a non-psychoactive component of cannabis sativa, has shown evidence in a murine model to be a potentially effective treatment for CIPN and relieving opiate dependence currently experienced by certain patients undergoing current therapeutic chemotherapy and pain management regimens in cancer treatment. However, CBD has severe limitations in terms of potency, safety, oral bioavailability, and regulatory restrictions. KLS-13019 is a novel new chemical entity that, as per pre-clinical testing, may be able to target these problems. In the NIH-NIDA Phase 1 STTR Study Grant completed in December 2019, our research efforts with Temple University demonstrated the efficacy of KLS- 13019 in models of CIPN and opiate dependence, and also further elucidated its mechanism of action in regulation of calcium levels and inflammatory sequelae.

We have completed all of our work related to the aforementioned grant and are currently in a peer review submission of our research results to the Journal of Molecular Neuroscience. Temple University has completed two of the three aims outlined in the grant proposal, and is currently in the process of completing the third and final aim, morphine reinstatement. We believe that the grant study will be completed on or about June 2019 and the results will be published by Temple University. 

On December 31, 2019, we, together with Temple University, filed a completion report with NIH-NIDA regarding the Phase 1 STTR grant. The results of this study were promising and have set forth our plans to file for a Phase 2 grant due for filing on or before April 7, 2020.

In April 2020, the Company and Temple University filed for a Phase 2 SBIR Grant with National Institutes of Health – National Institute of Neurological Disorders and Stroke (“NIH-NINDS”). Our application provided strong support to further the research and development of our treatment for CIPN.  Phase 2 is focused on the development, demonstration and delivery of the innovation.

In June 2020, the Company was informed that its Phase 2 SBIR grant application received an impact/priority score of 47. Generally speaking, impact/priority scores of 10 to 30 are most likely to be funded. Scores between 31 and 45 might be funded; scores greater than 46 are rarely funded. The Company believed that there were elements of its initial Phase 2 SBIR grant application that were misunderstood and believed it still had a very strong application. After making several critical changes to the original application, in January 2021, the Company resubmitted its Phase 2 SBIR grant application with NIH-NINDS and currently awaits response from NIH-NINDS.

On March 10, 2021, we were notified that our resubmitted application received a summary review and impact/priority score of 20, which is considered by many to be exceptional and rare. This impact/priority score and summary attests to the novelty and advancement of our scientific discovery with KLS-13019.

On September 28, 2021, the Company received a notice of award for a $2.97 million Phase 2 STTR Study Grant from the National Institutes of Health – National Institute of Neurological Disorders and Stroke under the HEAL Initiative (the “NIH-NINDS Study Grant Award”). The NIH-NINDS Study Grant Award is funded through the NIH HEAL Initiative (“Helping End Addiction Long-Term”) for Development of Therapies and Technologies Directed at Enhanced Pain Management. This NIH-NINDS Study Grant Award provides funding specifically in the further development of KLS-13019 for the treatment of chemotherapy induced neuropathic pain (“CIPN”). The grant award of $2.97 million sets forth the funding allocation of $977,054 in year 1; $991,944 in year 2; and $1,001,774 in year 3 and collectively budgets investigational new drug (“IND”) application enabling studies. IND enabling studies to be performed, include but are not limited to animal toxicity studies and drug compound scale up studies under chemistry manufacturing and controls. The NIH-NINDS Study Grant Award budget includes studies to be performed at Temple University; the University of Illinois; and Purisys (formerly, Noramco).

Proposed Study for Traumatic Brain Injury

To investigate the mechanisms of action through which CBD and a cannabinoid analogue (KLS-13019) provide neuroprotection form neurotoxicity factors (glutamate and CCL11) relevant to TBI. Neural damage associated with TBI has been associated with multiple processes including excitotoxicity, oxidative stress and neuroinflammation. Because of the recognized protective effects of cannabinoids on all of these toxic processes, we have chosen to explore the effects and mechanism of action of two molecules: (i) CBD, a substance found in cannabis; and (ii) KLS-13019, a novel CBD-like analogue that has been shown to protect against various toxicity associated with oxidative stress (Kinney et al., 2016). In this proposal, we intend to investigate the protective mechanisms related to the attenuation of CCL11 for both molecules in disease-relevant in vitro test systems that utilized glutatmate as a relevant toxin and then explore their effectiveness in animal models of TBI. 

Catalent Pharma Solutions

In December 2014, we signed a feasibility study contract with Catalent Pharma Solutions (“Catalent”), to, among other things, commence a feasibility study on a dose controlled soft-gel containing CBD as the main active pharmaceutical ingredient (the “CBD Feasibility Study”). The purpose of the CBD Feasibility Study with Catalent is to enable us to develop a proprietary drug product formulation using CBD that has suitable solubility and stability characteristics for IND, enabling pre-clinical studies in animals and clinical studies in humans, as part of our ongoing research and development of a cannabinoid therapeutic for the treatment of neurodegenerative diseases, including CTE and OHE. Catalent is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics, consumer health and animal health products. With over 80 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs approximately 13,900 people, including over 1,000 scientists, at 53 facilities across 4 continents, and in fiscal 2020 generated approximately $3.09 billion in annual revenue. Catalent is headquartered in Somerset, N.J. 

Purisys, LLC (formerly, Noramco, Inc.) 

Noramco, Inc. (“Noramco”) was formed in 1979 to provide a secure source of Codeine Phosphate. On October 1, 2019, Noramco spun off its cannabinoid related business into a separate affiliated company, Purisys, LLC (“Purisys”). With Noramco’s acquisition of Tasmanian Alkaloids and addition of their Athens, Georgia site in 1982, and continuous expansions over the past three decades at both of its U.S. facilities, Noramco and Purisys, together, now contribute to billion dollar affiliate franchises, as well as to significant third-party generic and branded pharmaceutical products worldwide.

Noramco is a world leader in specialty active pharmaceutical ingredients, with a particular focus in controlled substances. Purisys is the leader in manufacturing ultra-high purity cannabinoid ingredients. Purisys’ headquarters and primary production facility is located in Athens, GA, with additional sites in Wilmington, DE and Schaffhausen Switzerland.

In April 2015, we entered into discussions with Purisys (then, Noramco), for, among other things, the long term supply of high purity, pharmaceutical grade, synthetic cannabidiol for the purpose of delivering CBD as an active pharmaceutical ingredient to Catalent in connection with our CBD Feasibility Study.

In addition to the procurement of CBD through Purisys, the Company and Purisys have discussed an additional feasibility study for the scale-up and commercial production of KLS-13019. 

SK Capital Partners (“SK Capital”) acquired Noramco from Johnson & Johnson in July 2016. SK Capital is a private investment firm with a disciplined focus on the specialty materials, chemicals and healthcare sectors. 

PRIMARY TARGETS FOR DRUG DISCOVER AND MARKET SIZE

Target 1: Hepatic Encephalopathy – $2+ Billion Market in the U.S.  

HE is one of the most important clinical manifestations in decompensated liver cirrhosis. Accepted concepts regarding the pathophysiology of HE are that the endogenous neurotoxic substances, including ammonia: (i) escape from catabolism by the liver due both to the impaired function of the cirrhotic liver and also to the presence of portal systemic shunting; (ii) circulate at elevated concentrations in the systemic blood flow; (iii) reach the brain through the blood-brain barrier; and (iv) impair cerebral function leading to disturbances of consciousness. See Discovery of KLS-13019, a Cannabidiol-Derived Neuroprotective Agent, with Improved Potency, Safety, and Permeability. William A. Kinney, Mark E. McDonnell, Hua Marlon Zhong, Chaomin Liu, Lanyi Yang, Wei Ling, Tao Qian, Yu Chen, Zhijie Cai, Dean Petkanas, and Douglas E. Brenneman – ACS Med. Chem. Lett., 2016, 7 (4), pp 424–428.

The majority of these toxins are produced in the intestine by the bacterial flora, and are absorbed into the portal venous flow. In spite of improved therapeutic options for encephalopathy, the long-term survival is still low. Thus, HE remains a serious complication of liver cirrhosis. We believe that the establishment of truly effective prevention modalities and broader application of liver transplantation will help rescue patients suffering from this complication of liver cirrhosis in the near future.

According to an article published in the British Journal of Pharmacology Research, studies conducted over the past decade has produced substantial behavioral and histochemical evidence demonstrating the effectiveness of certain Cannabis-derived molecules such as CBD in the improvement of brain and liver function in fulminant hepatic failure. Findings include reversal of locomotors and cognitive pathologies, reversal of structural changes such as Alzheimer’s Type II astrogliosis, and reversal of increases in ammonia levels. Beyond the supportive preclinical evidence, multiple factors provide reasons for enthusiasm in the pursuit of the HE indication:

HE is a neuropsychiatric disorder that includes learning deficits and impairment of long-term memory. HE can be caused by chronic and excessive ethanol ingestion along with the accumulation of toxic substances that are normally removed by the liver. The pathogenesis of HE in the central nervous system includes damage to the pre-limbic cortex, striatum and the hippocampus, and this pathology is believed to be mediated by the accumulation of free radicals and oxidative stress. HE has primary epidemiological precursors in cirrhosis, hepatitis B, hepatitis C, and portal hypertension. The incidence rate of HE among alcohol induced cirrhosis patients is as high as 45%, making HE a leading opportunistic disease stemming from alcoholism. If left unchecked, HE can progress to hepatic coma and ultimately death. The pathogenesis of HE includes damage to the prelimbic cortex, striatum, and the hippocampus. HE is caused by accumulation of toxic substances in the bloodstream that are normally removed by the liver. 

It has been previously demonstrated that impairment of hepatocytes by ethanol is associated with the production of free radical and oxidative stress. The accumulation of these free radicals and oxidative stress contribute to cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue. An emerging concept is that blockade of free radical mediated stress and oxidative stress will prevent the neural damage associated with hepatic encephalopathy and prevent cognitive impairment, learning deficits, memory impairment, as well as damage and death of neuronal tissue associated with OHE.

Currently in the United States, there are over 1.5 million sufferers of HE across four stages, including approximately 121,000 patients hospitalized each year from the OHE stage of the disease.

Cannabidiol (CBD) vs. KLS-13019 in Overt Hepatic Encephalopathy

In a publication in American Chemical Society Medicinal Chemistry Letters on February 10, 2016, our abstract read as follows:

“Cannabidiol is the nonpsychoactive natural component of C. sativa (cannabis sativa) that has been shown to be neuroprotective in multiple animal models. Our interest is to advance a therapeutic candidate for the orphan indication overt hepatic encephalopathy (OHE). OHE is a serious neurological disorder that occurs in patients with cirrhosis or liver failure. Although cannabidiol has shown evidence in a murine model to be a potentially effective treatment for OHE, it has limitations in terms of safety and oral bioavailability. Herein, we describe a series of side chain modified resorcinols that were designed for greater hydrophilicity and “drug likeness”, while varying hydrogen bond donors, acceptors, architecture, basicity, neutrality, acidity, and polar surface area within the pendent group. Our primary screen evaluated the ability of the test agents to prevent damage to hippocampal neurons induced by ammonium acetate and ethanol at clinically relevant concentrations. Notably, KLS-13019 was 50-fold more potent and >400-fold safer than cannabidiol and exhibited an in vitro profile consistent with improved oral bioavailability.”  

CBD has been shown to be neuroprotective by blocking the damage caused by free radicals and oxidative stress. This effect was independent of cannabinoid receptors because it could not be blocked by a cannabinoid antagonist. CBD has shown evidence in two murine models to be a potentially effective treatment for HE, thioacetamide induced and bile duct ligation induced liver damage, at a dose of 5 mg/kg IP (intraperitoneal injection). Importantly, CBD treated animals in the first study exhibited improvements in both liver and brain function as compared to untreated control animals.

Free radical mediated stress and oxidative stress are also known to contribute to additional pathological conditions including epilepsy, neuropathic pain, traumatic head injury, stroke, CTE, and neurodegenerative diseases such as Parkinson’s disease, Alzheimer’s disease, Huntington’s disease, and ALS.

Other examples of neuroprotection by CBD include use in hypoxia-ischemia and stroke models. A wide range of possible mechanisms have been attributed to CBD’s neuroprotective effects including antioxidant, anti-inflammatory, adenosine signaling, cannabinoid receptor GPR55 (G Protein-coupled receptor 55), and serotonin mediated pathways; however, mitochondrial calcium modulation is fundamental. The GPR55 receptor is a G protein receptor in humans that is encoded by the GPR55 gene. The GPR55 receptor has been identified as a novel cannabinoid receptor. Receptors are sensing molecules which communicate signals between cells to illicit physiological changes in the body. To hedge our bets, we chose to interrogate the hippocampal neuron, as a phenotypic screen that will measure neuroprotection independent of a mechanism.

Target 2: Chronic Traumatic Encephalopathy (CTE) – $2+ Billion Market in the U.S.  

Not unlike OHE, CTE is a neuro-degenerative disease of the brain and is associated with repeated head traumas like concussions.

CTE is a form of encephalopathy that is a progressive neuro-degenerative disease, which can only be definitively diagnosed postmortem, in individuals with a history of multiple concussions and other forms of head injury. The disease was previously called dementia pugilistica (“DP”), as it was initially found in those with a history of boxing. CTE has been most commonly found in professional athletes participating in American football, ice hockey, professional wrestling and other contact sports who have experienced repetitive brain trauma. 

It has also been found in soldiers exposed to a blast or a concussive injury, in both cases resulting in characteristic degeneration of brain tissue and the accumulation of tau protein. Individuals with CTE may show symptoms of dementia, such as memory loss, aggression, confusion and depression, which generally appear years or many decades after the trauma. Repeated concussions and injuries less serious than concussions (“sub-concussions”) incurred during the play of contact sports over a long period can result in CTE. In the case of blast injury, a single exposure to a blast and the subsequent violent movement of the head in the blast wind can cause the condition.

The primary physical manifestations of CTE include a reduction in brain weight, associated with atrophy of the frontal and temporal cortices and medial temporal lobe. The lateral ventricles and the third ventricle are often enlarged, with rare instances of dilation of the fourth ventricle.

Other physical manifestations of CTE include pallor of the substantia nigra and locus ceruleus, and atrophy of the olfactory bulbs, thalamus, mammillary bodies, brainstem and cerebellum. As CTE progresses, there may be marked atrophy of the hippocampus, entorhinal cortex, and amygdala.

On a microscopic scale, the pathology includes neuronal loss, tau deposition, TAR DNA- binding Protein 43 (TDP 43) beta-amyloid deposition, white matter changes, and other abnormalities. The tau deposition occurs as dense neurofibrillary tangles (“NFT”), neurites, and glial tangles, which are made up of astrocytes and other glial cells Beta-amyloid deposition is relatively uncommon feature of CTE.

A small group of individuals with CTE have chronic traumatic encephalo-myopathy (“CTEM”), characterized by motor neuron disease symptoms, which mimics ALS, also known as Lou Gehrig’s disease. Progressive muscle weakness and balance and gait problems seem to be early signs of CTEM.

Target 3: Chemotherapy Induced Peripheral Neuropathy (CIPN) – $3+ Billion Market in U.S. 

In December 2016, as part of a Small Business Technology Transfer (“STTR”) program, we, together with Temple University, filed an STTR grant proposal with the National Cancer Institute (“NCI”) to demonstrate improved in vivo efficacy of an orally administered KLS-13019, our lead target drug candidate, in a head-to-head comparison to intraperitoneal injection (“IP Injection”) of CBD in a model of chemotherapy-induced peripheral neuropathy.

At the conclusion of Phase I STTR application, we hope to demonstrate that KLS-13019 (Per os – taken through the mouth) can control mechanical sensitivity and inflammation associated with CIPN in the absence of tolerance development, and also reduce opioid craving behavior with comparable efficacy to CBD (intraperitoneal injection). In Phase II STTR, we will investigate a back-up series and will execute the CMC, pharmacokinetic, safety pharmacology, and toxicology assessments required for IND filing on KLS-13019.  

A visual image of the chemical structure of cannabidiol and KLS-13019 can be seen as follows, along with selected data describing EC₅₀ (the concentration of a drug that give half-maximum response), Safety Margin (pre-clinical toxicity), and Bioavailability (seen as “F”):

KLS-13019 does not contain CBD and is a new chemical entity that would not fall under the CSA be deemed a Schedule 1 controlled substance.

KLS-13023 is a formulation that does contain CBD. At present, CBD is deemed a Schedule 1 controlled substance by the DEA under the Controlled Substances Act. Like the drug molecule EpidiolexÒ, which was recently approved by the FDA for marketing and sale for use in treating Dravet’s Syndrome and Lennox-Gasteau Syndrome (forms of child epilepsy), KLS-13023 would need to follow the guidance set forth by the CSA, complete a successful human clinical trial and apply for rescheduling, as was the case with EpidiolexÒ, now a Schedule 5 drug.

We currently plan on using KLS-13019 as our lead target drug candidate for the treatment of CIPN. 

The treatment of CIPN is a priority therapeutic opportunity because, to date, no one drug or drug class is considered to be safe and effective in this disabling disease. Tricyclic antidepressants are often the first choice in most patients, but are associated with significant side effects including sedation and cardiovascular complications as well as marginal efficacy (Wolf et al 2008). Anticonvulsants, despite their efficacy in animal models of CIPN, are only partially effective in the majority of patients (Bosnjak et al 2002).

Even more problematic, upwards of 80% of CIPN patients report using prescription opioids for pain management despite lacking strong evidence for efficacy and increasing safety concerns in the face of the current devastating opioid epidemic. The exact mechanism of CIPN has not been fully elucidated and can differ across classes of chemotherapeutic agents. It is therefore necessary to identify novel therapies to prevent or treat CIPN that target one or more of these putative mechanisms. Recently, there has been a resurgence in interest in the potential medical utility of the cannabis plant and its constituents, and mechanism-based basic research is warranted to develop safe and effective cannabinoid-based pain treatments. CBD is a non-psychoactive component of Cannabis sativa that is neuroprotective, independent of cannabinoid receptors (Hampson 1998).

Prior studies at Temple University revealed that CBD prevents the development of paclitaxel-induced mechanical sensitivity in mice in vivo (Ward et al 2011, 2014). Additionally, CBD attenuates morphine reward and heroin seeking behavior in animal models (Ren, Whittard et al. 2009; Katsidoni, Anagnostou et al. 2013) and a small trial in humans suggests attenuation of heroin craving in humans (Hurd, Yoon et al. 2015). However, CBD has limitations in terms of potency, safety, and oral bioavailability. We believe that we may be able to address these problems in our fully owned series of side chain modified derivatives, which have been protected in a non-provisional patent application WO2015/106108A2.

One of the molecules covered by the patent is KLS-13019, which in pre-clinical studies, including PK studies, has shown evidence of improved in vitro efficacy, improved safety, and improved oral bioavailability over CBD in side by side preclinical evaluation, and is not a controlled substance. (Pharmacological Comparisons Between Cannabidiol and KLS-13019, Journal of Molecular Neuroscience, 14 August 2018)

Preliminary Effects of KLS-13019 in CIPN model: In a preliminary study, we treated eight mice with saline and sixteen mice with paclitaxel (Days 1, 3, 5, and 7, 8.0 mg/kg IP). Half of the paclitaxel-treated mice were pretreated with KLS-13019 (2.5 mg/kg IP) and half were pretreated with its vehicle alone. On days 9, 14, and 21 post initiation of injections, mechanical sensitivity was tested using von Frey filaments and compared with baseline sensitivities prior to treatment (Fig. 3). One-way ANOVA revealed a significant effect of KLS-13019 on Day 14 to prevent the development of paclitaxel-induced mechanical sensitivity [F_{(2, 21)} = 4.67, p<0.05]. Dunnett’s multiple comparison’s test revealed a significant difference between the saline and paclitaxel treated groups, but not between the saline and KLS-13019+paclitaxel treated groups. Preliminary flow cytometry results with pooled cords from three mice in each group revealed that paclitaxel-treated mice had increased numbers of CD4+ T cells and microglia in the whole spinal cord, and that this increase is prevented by KLS-13019 treatment. 

E1. Aim 1. Research Plan. Determine target for the neuroprotective actions of CBD and KLS-13019. As mentioned above, DRG neurons are a primary cytotoxic target of chemotherapeutic agents. In addition, spinal microglia have been heavily implicated in the development and maintenance of neuropathic pain and have shown to become activated in animal models of CIPN. At the conclusion of Aim 1, we intend to demonstrate that the neuroprotective properties can be reduced by pharmacological or gene knock-down of a relevant target in a statically significant manner. 

E2. Aim 2. Assess KLS-13019, CBD, and morphine against paclitaxel-induced peripheral neuropathy. At the conclusion of Aim 2, we intend to have demonstrated that KLS-13019 performs as well as CBD (ip and po) against CIPN and CNS inflammation and shows no antinociceptive tolerance as compared to morphine.  

CIPN procedure: Experiments are designed to test the efficacy of novel CBD analogues in attenuating established mechanical sensitivity and inflammation associated with CIPN. Dr. Ward’s laboratory has been using the CIPN procedure for ten years and has demonstrated that CBD treatment can both prevent the development of (Ward et al 2011, 2014) and reverse established (King et al in revision, British Journal of Pharmacology) CIPN in mouse models. CBD and KLS-13019 and their vehicle controls will be tested in groups of mice treated with paclitaxel (8.0 mg/kg IP, days 1, 3, 5 and 7). Testing of each dose for each molecule will require a final sample size of eight. Molecules will be administered daily for three weeks, starting on Day 11 when peak mechanical allodynia has already been achieved. In the initial study, CBD (0.05 - 5 mg/kg ip) will be compared with three doses of KLS-13019 (e.g., 0.05, 0.5 and 5 mg/kg ip) and three doses of morphine (1.0 – 10 mg/kg ip; Neelakantan et al 2016). This will be followed by a study in which KLS-13019 will be assessed at three oral doses. In preliminary studies, we have dosed the mice with KLS-13019 (2.5 - 5 mg/kg ip) with no adverse effects. In addition, KLS-13019 was shown to produce no impairment in the mouse rotorod test at 100 mg/kg po in studies conducted at the Anticonvulsant Screening Program (NIH).

Neuroinflammation assessment: Immunohistochemistry and flow cytometry will run in the PIs laboratory to evaluate markers of pain and inflammation associated with neuropathic pain, including astrocytic and microglial activation, CGRP, and T cell infiltration. Given the fact that we are observing CNS infiltration of T cells that is reversed by treatment with KLS-13019, cranial windows will be surgically implanted (as described in Ni, Tuma et al 2004) in additional groups of vehicle or KLS-13019 + paclitaxel treated mice prior to treatment to longitudinally assess the effect of paclitaxel with or without cannabinoid treatment on leukocyte rolling and adhesion across the development of CIPN.

E2. Aim 3.Assess KLS-13019 and CBD against reinstatement of morphine seeking. At the conclusion of Aim 3, we intend to have demonstrated that KLS-13019 attenuates opioid-seeking behavior as well as CBD.

Morphine Reinstatement: The Principal Investigator has 20 years of experience with behavioral assays with specific expertise in rodent models of substance abuse, including opioid self-administration. A standard rat model of morphine seeking will be used (Vassoler et al 2017) wherein rats make lever presses to receive infusions of morphine. Rats will be surgically implanted with chronically indwelling jugular catheters and trained to self-administer morphine (0.75 mg/kg/inf) in the presence of auditory and visual cues daily for 20 days, followed by 10 days of extinction wherein the morphine is replaced with saline and the conditioned cues are eliminated. During the last three days of extinction, rats will be treated with vehicle, CBD (5.0 mg/kg IP), or KLS-13019 (0.5 – 5.0 mg/kg IP). The following day rats will be exposed to a single reinstatement session wherein lever presses are again paired with auditory and visual cues but saline is delivered instead of morphine. This experimental design is based on Ren et al 2009 results with CBD on cue-induced reinstatement of heroin seeking in rats.

Status of Phase 1 STTR Grant Research

On January 4, 2017, we applied for a Phase 1 Small Business Technology Transfer (“STTR”) grant from the NIH-NIDA. This grant application was made in collaboration with Temple University and titled “Development of KLS-13019 for Chemotherapy Induced Peripheral Neuropathy and Drug Dependence”. In December 2017, we were informed that the Phase 1 grant was awarded.

We have completed all of our work related to the aforementioned grant and are currently in a peer review submission of our research results to the Journal of Molecular Neuroscience. Temple University has completed all three aims outlined in the grant proposal. 

On December 31, 2019, we, together with Temple University, filed a completion report with NIH-NIDA regarding the Phase 1 STTR grant. The results of this study were promising and have set forth our plans to file for a Phase 2 grant due for filing on or before April 7, 2020.

In April 2020, the Company and Temple University filed for a Phase 2 SBIR Grant with National Institutes of Health – National Institute of Neurological Disorders and Stroke (“NIH-NINDS”). Our application provided strong support to further the research and development of our treatment for CIPN.  Phase 2 is focused on the development, demonstration and delivery of the innovation.

In June 2020, the Company was informed that its Phase 2 SBIR grant application received an impact/priority score of 47. Generally speaking, impact/priority scores of 10 to 30 are most likely to be funded. Scores between 31 and 45 might be funded; scores greater than 46 are rarely funded. The Company believed that there were elements of its initial Phase 2 SBIR grant application that were misunderstood and believed it still had a very strong application. After making several critical changes to the original application, in January 2021, the Company resubmitted its Phase 2 SBIR grant application with NIH-NINDS and currently awaits response from NIH-NINDS.

On March 10, 2021, we were notified that our resubmitted application received a summary review and impact/priority score of 20, which is considered by many to be exceptional and rare. This impact/priority score and summary attests to the novelty and advancement of our scientific discovery with KLS-13019.

On September 28, 2021, the Company received a notice of award for a $2.97 million Phase 2 STTR Study Grant from the National Institutes of Health – National Institute of Neurological Disorders and Stroke under the HEAL Initiative (the “NIH-NINDS Study Grant Award”). The NIH-NINDS Study Grant Award is funded through the NIH HEAL Initiative (“Helping End Addiction Long-Term”) for Development of Therapies and Technologies Directed at Enhanced Pain Management. This NIH-NINDS Study Grant Award provides funding specifically in the further development of KLS-13019 for the treatment of chemotherapy induced neuropathic pain (“CIPN”). The grant award of $2.97 million sets forth the funding allocation of $977,054 in year 1; $991,944 in year 2; and $1,001,774 in year 3 and collectively budgets investigational new drug (“IND”) application enabling studies. IND enabling studies to be performed, include but are not limited to animal toxicity studies and drug compound scale up studies under chemistry manufacturing and controls. The NIH-NINDS Study Grant Award budget includes studies to be performed at Temple University; the University of Illinois; and Purisys (formerly, Noramco).

Reduction in Addiction Based Opiate Dependency – HEAL

According to statistics compiled by the National Institutes of Health for the HEAL Initiative (Helping End Addiction Long-term), the public health crisis of opioid misuse and addiction in America is rapidly evolving. More than 47,000 Americans died of opioid overdose in 2017, and more than 2 million Americans live with addiction to opioids. Moreover, more than 50 million Americans suffer from chronic pain, and of those, 25 million live with daily chronic pain and lack effective and safe non-opioid options for pain management.  The widespread use of opioids to treat acute and chronic pain contributed to the approximately 10.3 million people aged 12 years and older in the United States in 2018 who misused opioids, including heroin. These staggering numbers are likely underestimates. They fail to capture the full extent of the damage of the opioid crisis, which reaches across every domain of family and community life – from lost productivity and economic opportunity, to intergenerational and childhood trauma, to extreme strain on community resources, including first responders, emergency rooms, hospitals, and treatment centers. With the full support of the administration, NIH launched the Helping to End Addiction Long-term Initiative, or NIH HEAL Initiative, to provide scientific solutions to the opioid crisis and offer new hope for individuals, families, and communities affected by this devastating crisis. 

NIH-NINDS HEAL Initiative

Launched in April 2018, the NIH Helping to End Addiction Long-term (HEAL) Initiative is an aggressive, trans-agency effort to speed scientific solutions to stem the national opioid public health crisis. The Initiative will advance research to reduce the risks of opioid use and misuse and improve pain management, thereby reducing reliance on opioids. NINDS is the lead Institute for pain research at NIH and leads the Executive Committee of the NIH Pain Consortium, which includes 23 Institutes and Centers. The NIH Pain Consortium’s mission includes improving the treatment of a variety of pain conditions. NINDS will focus efforts in the NIH HEAL Initiative in developing non-addictive pain treatments that may displace the need for opioids, and importantly, serve as effective treatments for acute and chronic pain conditions for which opioids are not effective. This work will be informed by partners from the government, industry, academia, and patients suffering from pain.

Research on Pain and Next Generation Analgesics

Although opioid medications effectively treat acute pain and help relieve chronic pain for some patients, their addiction risk presents a dilemma for healthcare providers who seek to relieve suffering while preventing drug abuse and addiction. Little is yet known about the risk for addiction among those being treated for chronic pain or about how basic pain mechanisms interact with prescription opioids to influence addiction potential. To better understand this, NIDA launched a research initiative on “Prescription Opioid Use and Abuse in the Treatment of Pain.” This initiative encourages a multidisciplinary approach using both human and animal studies to examine factors (including pain itself) that predispose or protect against opioid abuse and addiction. Funded grants cover clinical neurobiology, genetics, molecular biology, prevention, treatment, and services research. This type of information will help develop screening and diagnostic tools that physicians can use to assess the potential for prescription drug abuse in their patients. Because opioid medications are prescribed for all ages and populations, NIDA is also encouraging research that assesses the effects of prescription opioid abuse by pregnant women, children, and adolescents, and how such abuse in these vulnerable populations might increase the lifetime risk of substance abuse and addiction.  

PRIMARY TARGETS FOR TOPICAL MEDICAMENTS AND MARKET SIZE

The Company has completed formulation of a topical relief cream containing LEAÔ as the active pharmaceutical ingredient for use as an OTC cosmetic skin care product.

Since mid 2019, the Company has been screening and conducting preliminary research and development of some of its patented, proprietary cannabidiol-derived new chemical entities (“NCEs”), for use as topical solutions, ointments, and creams for disorders such as diabetic neuropathies, diabetic ulcers, and for use as an anti-pruritic. (see: Business – Neuropathix Intellectual Properties) 

In preclinical testing, certain molecules under Patent 9,611,213 were screened for neuroprotection and may have the potential mechanism of action for reducing inflammation and neuropathic pain. These molecules indicate that they are more soluble than cannabidiol, also deemed a neuroprotectant with potential anti-inflammatory properties. A molecule that is potentially more water soluble than cannabidiol in this regard may be good candidate(s) for use in topical applications.

The Company has completed the following relating to LEA^TM (formerly, KLS-13022):

Based on preclinical testing of LEA^TM versus CBD (cannabidiol) in cultured human epidermal keratinocytes the summary of findings were as follows:

Based on these data, it was concluded that LEA^TM provided positive photoaging potential.

Based on these data it was concluded that the test articles can be considered as safe for use under the conditions of the study, and claims such as, “Dermatologically Tested”, “Clinically Tested”, “Kind to Skin” and “Safe for Skin” are substantiated.

Neuropathic Pain, Anti-Inflammation, Anti-Pruritic & Skin Ulcers

Target 1: Anti-Puritics (Anti-Itch) – $3.85 Billion Global Market in 2019  

In 2019 it is estimated that the top ten product segments for use in U.S. pruritus therapeutics market accounted for USD$448.7 million in sales of products such as corticosteroids and antihistamines. The global compounded annual growth rate (“CAGR”) is expected to be 12.5% annually, which predicts a global market size of USD$10.97 billion by 2030, with U.S. sales estimated at USD$1.295 billion.

Growing worldwide prevalence of atopic dermatitis, allergic contact dermatitis, and urticaria is expected to drive market growth during the forecast period. The introduction of new products based on scientific mechanistic understanding such as the identification of new T-cell subsets, particularly Th17, and Th22 and the patent expiration of PROTOPIC (tacrolimus) is expected to open up new avenues for manufacturers to capitalize on over the forecast period.

Corticosteroids remain the leading product segment. Topical applications of corticosteroids have been found to be extremely effective in the treatment and maintenance therapies pertaining to pruritus. However, according to a 2007 article in American Family Physician, long-term topical corticosteroid use is associated with local and systemic adverse effects that may lead to the underutilization of these effective agents. Common local adverse effects include striae, petechiae, telangiectasia, skin thinning, atrophy, and worsening acne. These effects are reported infrequently in clinical trials, although trials are primarily designed to assess effectiveness rather than safety and tolerability. Most clinical trials of topical steroids are of short duration and, therefore, are unable to evaluate long-term toxicity.

Itching is a sensation that, if sufficiently strong, will provoke scratching or the desire to scratch. It is a frequent and distressing symptom of various dermatological and systemic diseases. It can also occur in some patients without any skin symptoms. Knowledge has been accumulated about the initiation of itch by external stimuli, but the neuronal substrate in the skin has not been completely identified. This has, fortunately, changed to some degree since a group of histamine-sensitive C-fibers were recently identified, which likely represent the afferent units that mediate itch sensations. Histamine, derived from mast cells, is the best known pruritogen. It induces different degrees of itching when applied in different concentrations into the skin. In most dermatological and systemic diseases, except urticaria, histamine is not the main mediator. There are other proinflammatory mediators to consider, such as substance P, proteases, interleukin-2, acetylcholine, vasoactive intestinal peptide (VIP) and opioid peptides.

Several key characteristics of the anti-puritics market are set forth below:

Target 2: Anti Inflammatory – $74 Billion Global Market in 2019

In a research study published in April 2018 – Global Anti-Inflammatory Therapeutics Market Size, Market Share, Application Analysis, Regional Outlook, Growth Trends, Key Players, Competitive Strategies and Forecasts, 2018 to 2026 –the Anti-inflammatory therapeutics market projected to US$ 130.6 Bn by 2026 with CAGR of 8.5% throughout the forecast period from 2018 to 2026. Biologics and immune selective anti-inflammatory derivatives (ImSAIDs) are the promising drugs classes that will play the main role in the market. Global anti-inflammatory therapeutics market from 2018-2026 study is based on exhaustive analysis with insights from industry stakeholders. The detailed study incorporates the market landscape and its growth scenarios for the forecasting period from 2018-2026.

According to World Health Organization (WHO), around 235 million individuals experience the ill effects of asthma around the globe. Symptomatic help amid the inflammation gives alleviation to the patients suffering from inflammatory diseases. In spite of the fact that there are numerous anti-inflammatory drugs present in the market, still, there is an essential requirement for better and novel anti-inflammatory therapeutics drugs with slighter side effects and improved efficacy.

Based on the drug types, the global anti-inflammatory therapeutics market is segmented into biologics, corticosteroids, immune selective anti-inflammatory derivatives (ImSAIDs), and non-steroidal anti-inflammatory drugs (NSAIDs); additionally, the indication studied in this report are categorized into COPD, multiple sclerosis, IBD, psoriatic arthritis, gout, and Others (Osteoarthritis, Systemic Lupus, Psoriasis). Rising prevalence of inflammatory diseases and the strong drug pipeline would additionally boost the anti-inflammatory therapeutics market.

In addition, they are also difficult to imitate due to their complex molecular structure and origin. The global anti-inflammatory market has been driven by factors such as increasing autoimmune and respiratory conditions, new drugs in pipeline and increasing adoption of anti-inflammatory drugs.

In 2014, AstraZeneca had five anti-inflammatory drugs in the final stages of drug development. These drugs are lesinurad, sifalimumab, anifrolumab, mavrilimumab and brodalumab. The companies have filed new patents to overcome the issues of patent expiries of their existing drugs, and to gain a prominent market share. The key companies profiled in this report include Pfizer, Inc., Abbvie, Inc., Johnson & Johnson, GlaxoSmithKline, Merck & CO., Inc., Novartis, F. Hoffman, La Roche AG, Eli Lily and Company, AstraZeneca PLC, and Amgen.

Target 3: Atopic Dermatitis / Eczema – $3+ Billion Market in North America in 2020 

In a research study published in February 2020 – North America Atopic Dermatitis Treat Market Research Study – the size of the atopic dermatitis treatment market in North America is valued at USD$2.95 billion in 2020 and is expected to grow at a CAGR of 13.4% to reach USD$5.52 billion by 2025. Atopic dermatitis is an inflammatory skin disease. The degree of its severity varies from patient to patient. It usually begins in childhood and is mostly confined to flexural surfaces of the body. It is highly prevalent. It is more commonly known as eczema. Itching, redness of skin, cracking, and weeping are symptoms of it. It is a long term disease. Low humidity, cold weather, seasonal allergies are the common causes of it. Pattern of the disease and its severity determine the kind of treatment a patient with eczema is to receive.

The Eczema Therapeutics Market is Dominated by Topical Corticosteroids (TCSs)

Current competition in the eczema therapeutics market contains conventional forms of therapy such as topical corticosteroids, topical immunomodulators and emollients as the most prominent therapies. Among all the available treatment options, topical corticosteroids hold a large share and dominate the market. Topical corticosteroids are available in various strengths (mild, moderate, potent and very potent) and formulations (ointment, cream, lotion and many more), so that they can be used according to the severity of eczema. Calceurin inhibitors (Protopic (tacrolimus) and Elidel (pimecrolimus)) showed higher efficacy in comparison to corticosteroids and these products were widely used after their respective launches. However, in 2005 the FDA issued black box warnings for the calceurin inhibitors (Protopic and Elidel), which has resulted in declining sales of these products. Emollients have good efficacy as well as good safety. They hydrate, moisturize and repair the skin. These products do not offer first line treatment, but they are useful as maintenance therapy in eczema patients.

Significant Unmet Need in Eczema Therapeutics Market Could Drive Market

Eczema is a chronic condition characterized by frequent relapses known as flare-ups. The market has various products that are effective, but their safety profile is not always satisfactory, leaving a significant unmet need in the market. The unmet need is also a result of the lack of effective treatment options for severe conditions; the need for a controlled and targeted drug delivery system; low patience compliance and the black box warnings issued to Elidel and Protopic. The unmet need in eczema therapeutics could be filled by a new entrant with a better safety profile, enhanced patient compliance, and competitive pricing with respect to the available products. 

Target 4: Psoriasis – $5+ Billion Market in North America in 2019

Psoriasis is a common chronic skin disorder. It is also associated with several comorbidities, such as obesity, hypertension, psoriatic arthritis, depression, and diabetes. Psoriasis is characterized by skin flares and inflammation that vary in severity, from minor localized patches to substantial body surface involvement. Around 20% of diagnosed patients have moderate to severe psoriasis. In 2019 in the United States, psoriasis was a $8.48 billion market, of which 90% are from drugs targeting moderate to severe psoriasis patients where the skin manifestation affects more than 3% of the body. See Treatment of Psoriasis in Adults – Steven R. Feldman, MD, PhD, August 24, 2018. For such patients, psoriasis is often a debilitating condition impacting their quality of life and psychological well-being. Over the past decade, biologics have altered the landscape in the management of moderate to severe psoriasis by achieving improved skin clearance, control of symptoms and quality of life for hundreds of thousands of individuals affected.

Psoriasis is linked to pathogenesis caused by dysregulation of T-cell-dependent immune response, as well as hyperproliferation of keratinocytes, the predominant cell type on the outer layer of skin. Biologics target the cytokines usually upregulated as a result of the abnormal immune response.  

 Target 5: Diabetic Foot Ulcers – $3+ Billion Market in U.S. 

The market for Diabetic Foot Ulcers in the U.S. is $3+ billion and growing. There are 29 million people living with diabetes and 86 million pre-diabetics in the U.S. Approximately 25% of diabetics will acquire a non-healing ulcer in their lifetime, which equates to approximately 3 million diabetic ulcers annually. Diabetic foot ulcers lead to over 73,000 amputations annually at a cost that is estimated to exceed $5 billion annually. Hospitalization costs are approximately $20,000 per patient with diabetic foot ulcers and $70,000 for an amputation. The global numbers are more startling. 400 million people are currently living with diabetes worldwide and that number is expected to increase to approximately 600 million by 2035.

The current approach to treating diabetic foot ulcers requires offloading the wound by using appropriate therapeutic footwear, daily saline or similar dressings to provide a moist wound environment, debridement when necessary, antibiotic therapy if osteomyelitis or cellulitis is present, optimal control of blood glucose, and evaluation and correction of peripheral arterial insufficiency. Wound coverage by cultured human cells or heterogeneic dressings/grafts, application of recombinant growth factors, and hyperbaric oxygen treatments also may be beneficial at times, but only if arterial insufficiency is not present. Among people with diabetes, most severe foot infections that ultimately require some part of the toe, foot or lower leg to be amputated start as a foot ulcer. See Diabetic Ulcers Treatment & Management, V.L. Rowe, MD, R. Khardori MD, PhD, FACP, Medscape, March 12, 2018.

Foot ulcers are especially common in people who have one or more of the following health problems:

Many elderly people and diabetics with vision problems also can't see their feet well enough to examine them for problems.

Poor circulation in the leg arteries is called peripheral artery disease. It also causes pain in the leg or buttock during walking. It is caused by atherosclerosis. This is a disease in which fatty deposits of cholesterol build up inside arteries. 

More than any other group, people with diabetes have a particularly high risk of developing foot ulcers. This is because the long-term complications of diabetes often include neuropathy and circulatory problems. Without prompt and proper treatment, a foot ulcer may require hospital treatment. Or, it may lead to deep infection or gangrene and amputation. 

Governmental Regulations

Manufacturing

Although we would be reliant upon the manufacturing of our target drug candidates and API from well-established manufacturers, manufacturers of therapeutic products and their facilities are subject to continual review and periodic inspections by the FDA, the EMA and other comparable foreign regulatory authorities for compliance with current good manufacturing practices (“cGMP”) regulations.

Further, manufacturers of controlled substances must obtain and maintain necessary DEA and state registrations and registrations with applicable foreign regulatory authorities and must establish and maintain processes to ensure compliance with DEA and state requirements and requirements of applicable foreign regulatory authorities governing, among other things, the storage, handling, security, recordkeeping and reporting for controlled substances.

If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may, among other things:

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and may otherwise have a material adverse effect on our business, financial condition and results of operations.

Regulation of CBD

KLS-13023 contains controlled substances as defined in the CSA. Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances, by definition, have a high potential for abuse, have no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example, they may not be refilled without a new prescription.

While cannabis is a Schedule I controlled substance, products approved for medical use in the United States that contain cannabis or cannabis extracts must be placed in Schedules II - V, since approval by the FDA satisfies the “accepted medical use” requirement. If and when KLS-13023 receives FDA approval, the DEA will make a scheduling determination and place it in a schedule other than Schedule I in order for it to be prescribed to patients in the United States. If approved by the FDA, we expect the finished dosage forms of KLS-13023 to be listed by the DEA as a Schedule II or III controlled substance. Consequently, their manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use will be subject to a significant degree of regulation by the DEA. The scheduling process may take one or more years beyond FDA approval, thereby significantly delaying the launch of KLS-13023. Furthermore, if the FDA, DEA or any foreign regulatory authority determines that KLS-13023 may have potential for abuse, it may require us to generate more clinical data than that which is currently anticipated, which could increase the cost and/or delay the launch of KLS-13023.

Because KLS-13023 contains active ingredients of cannabis, which are Schedule I substances, to conduct pre-clinical studies and clinical trials with KLS-13023 in the United States prior to approval, each of our research sites must submit a research protocol to the DEA and obtain and maintain a DEA researcher registration that will allow those sites to handle and dispense with KLS-13023 and to obtain the product from our manufacturer. If the DEA delays or denies the grant of a research registration to one or more research sites, the pre-clinical studies or clinical trials could be significantly delayed, and we could lose and be required to replace clinical trial sites, resulting in additional costs.

We expect that KLS-13023 will be scheduled as Schedule II or III, as a result of which we will also need to identify wholesale distributors with the appropriate DEA registrations and authority to distribute the products to pharmacies and other healthcare providers, and these distributors would need to obtain Schedule II or III distribution registrations. The failure to obtain, or delay in obtaining, or the loss of any of those registrations could result in increased costs to us. If KLS-13023 is a Schedule II drug, pharmacies would have to maintain enhanced security with alarms and monitoring systems and they must adhere to recordkeeping and inventory requirements. This may discourage some pharmacies from carrying the product. Furthermore, state and federal enforcement actions, regulatory requirements, and legislation intended to reduce prescription drug abuse, such as the requirement that physicians consult a state prescription drug monitoring program, may make physicians less willing to prescribe, and pharmacies to dispense, Schedule II products.

We may manufacture the commercial supply of KLS-13023 outside of the United States. If KLS-13023 is approved by the FDA and classified as a Schedule II or III substance, an importer can import for commercial purposes if it obtains from the DEA an importer registration and files an application with the DEA for an import permit for each import. The DEA provides annual assessments/estimates to the International Narcotics Control Board, which guides the DEA in the amounts of controlled substances that the DEA authorizes to be imported. The failure to identify an importer or obtain the necessary import authority, including specific quantities, could affect the availability of KLS-13023 and have a material adverse effect on our business, results of operations and financial condition. In addition, an application for a Schedule II importer registration must be published in the Federal Register, and there is a waiting period for third party comments to be submitted.

Individual states have also established controlled substance laws and regulations. Though state-controlled substance laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule our product candidates as well. While some states automatically schedule a drug based on federal action, other states schedule drugs through rulemaking or a legislative action. State scheduling may delay commercial sale of any product for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product. We or our partners must also obtain separate state registrations, permits or licenses in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions by the states in addition to those from the DEA or otherwise arising under federal law.

We currently obtain the API for KLS-13023 from a bulk manufacturer of pharmaceutical grade API in Switzerland. For KLS-13023, we plan to conduct Phase 1 clinical trials in Australia, subject to applicable regulatory approval. In addition, we may decide to develop, manufacture or commercialize our product candidates in additional countries. As a result, KLS-13023 will also be subject to controlled substance laws and regulations from the Therapeutic Goods Administration in Australia, Health Canada’s Office of Controlled Substances in Canada, and from other regulatory agencies in other countries where we may develop, manufacture or commercialize KLS-13023 in the future. We plan to submit NDA for KLS-13023 to the FDA upon completion of all requisite clinical trials and will require additional DEA approvals at such time as well.

On September 27, 2018, the DOJ and DEA announced that Epidiolex, the newly approved medication by the Food & Drug Administration, was being placed in Schedule V of the Controlled Substances Act, the least restrictive schedule of the CSA. On June 26, 2018, the FDA announced it approved Epidiolex for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older. Epidiolex contains CBD.

The CBD in Epidiolex is extracted from the cannabis plant and is the first FDA-approved drug to contain a purified extract from the plant. Schedule V drugs represents the least potential for abuse. Schedule V drugs, substances, or chemicals are defined as drugs with lower potential for abuse than Schedule IV and consist of preparations containing limited quantities of certain narcotics. Schedule V drugs are generally used for antidiarrheal, antitussive, and analgesic purposes. Some examples of Schedule V drugs are: cough preparations with less than 200 milligrams of codeine or per 100 milliliters (Robitussin AC), Lomotil, Motofen, Lyrica, Parepectolin.

Despite the approvals by the FDA and DEA for Epidiolex, any of these foregoing factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market KLS-13019 or KLS-13023. Moreover, because our business is almost entirely dependent upon these two product candidates, any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects. 

KLS-13019 does not contain CBD and is a new chemical entity that would not fall under the CSA or be deemed a Schedule 1 controlled substance. 

KLS-13023 is a formulation that does contain CBD. At present, CBD is deemed a Schedule 1 controlled substance by the DEA under the CSA. Like the drug molecule EpidiolexÒ, which was recently approved by the FDA for marketing and sale for use in treating Dravet’s Syndrome and Lennox-Gasteau Syndrome (forms of child epilepsy), KLS-13023 would need to follow the guidance set forth by the CSA, complete a successful human clinical trial and apply for rescheduling, as was the case with EpidiolexÒ, now a Schedule 5 drug.

On January 14, 2019, we received written notice from the DEA Drug and Chemical Evaluation Section, as follows: “Please be advised that your material meets the definition of ‘Hemp’ and is not regulated under the CSA, as long as it consists of high purity Cannabidiol (CBD) that contains approximately 0.1% delta-9- THC. (However, if it contains more than 0.3% delta-9 THC, it is considered ‘Marihuana’ and would be in Schedule 1 of the CSA).” While this notice is an official notice from the DEA regarding the scheduling of high purity CBD, we will continue to abide by the CSA in all respects with regards to our treatment and handling of CBD.

The active pharmaceutical ingredient (“API”) found in KLS-13023 is highly purified pharmaceutical grade synthetic CBD produced by Purisys. Purisys has been manufacturing cannabidiol since 2016 (DMF33223). Today, through our partnership with Purisys, we have the ability to produce on the largest commercial scale. Purisys’ ultra-high purity CBD (“Purisys CBD”) is attractive for drug development projects and falls significantly below the 0.3% THC limits set in the 2018 Farm Bill for use in consumer products. Purisys’ patent-protected manufacturing process produces a consistently odorless, tasteless white powder highest-purity form of CBD that exhibits:

Purisys currently has a drug master file (“DMF”) for its ultra-high purity CBD with the FDA. In November 2019, Purisys received advise notice from the DEA that the Purisys CBD has been removed from Schedule 1 of the CSA.

On March 11, 2021, the chairman of the House Judiciary Committee, announced that the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, introduced in 2019, which passed in the U.S. House of Representatives in December 2020, will be re-filed in 2021, seeking ratification by the Senate.

If passed by the U.S. Senate, the MORE Act would deschedule cannabis from the Controlled Substances Act and enact various criminal and social justice reforms to cannabis, including the expungement of prior convictions. The MORE Act also seeks to tax cannabis products at 5% to fund criminal and social reform projects, including an Office of Cannabis Justice within the Department of Justice Office of Justice Programs responsible for administering grants to aid communities negatively affected by the war on drugs. (See: Controlled Substances Laws and Regulations).

Foreign Regulatory Agencies

EMA

In order to market and sell our products in jurisdictions other than the United States and the European Union, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The regulatory approval process outside the United States and the European Union generally includes all of the risks associated with obtaining FDA and EMA approval, but can involve additional testing. We may need to partner with third parties in order to obtain approvals outside the United States and the European Union. In addition, in many countries worldwide, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States and the European Union on a timely basis, if at all. Even if we were to receive approval in the United States or the European Union, approval by the FDA or the EMA does not ensure approval by regulatory authorities in other countries or jurisdictions. Similarly, approval by one regulatory authority outside the United States and the European Union would not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA or the EMA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of our product candidates by regulatory authorities in other foreign jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our business prospects could decline.

Therapeutic Goods Administration (TGA)

Clinical trials conducted in Australia are subject to various regulatory controls to ensure the safety of participants. The TGA regulates the use of therapeutic goods supplied in clinical trials in Australia under the therapeutic goods legislation.

Clinical trial sponsors must be aware of the requirements to import, export, manufacture and supply therapeutic goods in Australia. The following avenues provide for the importation into and/or supply in Australia of ‘unapproved’ therapeutic goods for use in a clinical trial:

The CTN Scheme is a notification process involving the following:

The CTX Scheme is an approval process involving the following:

Clinical trials that do not involve ‘unapproved’ therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an ‘unapproved’ therapeutic good. 

Clinical trials that do not involve ‘unapproved’ therapeutic goods are not subject to requirements of the CTN or CTX schemes. It is the responsibility of the Australian clinical trial sponsor to determine whether a product is considered an ‘unapproved’ therapeutic good. 

On September 27, 2013, the TGA approved Nabiximols (Sativex ®), a pharmaceutical manufactured by GW Pharmaceuticals for its collaborator Novartis Pharmaceuticals Australia Pty Limited, in the treatment for symptom improvement in patients with moderate to severe spasticity due to multiple sclerosis (“MS”) who have not responded adequately to other anti-spasticity medication and who demonstrated clinically significant improvement in spasticity related symptoms during the initial trial of therapy. 

In Australia, in 2014, the Advisory Council on Medicines Scheduling recommended rescheduling CBD from a prohibited substance to being a prescription medicine because, according to the Advisory Council on Medicines Scheduling, “there is a low risk of misuse or abuse as cannabidiol does not possess psychoactive properties.” The TGA accepted this recommendation, and the decision took effect in July 2015. 

CBD is one of the cannabinoids which may be extracted as a therapeutic good from cannabis. From June 1, 2015, cannabidiol has been included under Schedule 4 (S4) Prescription Only Medicine of the Poisons Standard (/publication/poisonsstandard-susmp) when preparations for therapeutic use contain 2% or less of other cannabinoids found in cannabis. 

In February 2016, the Australian Federal Government passed legislation that amended the Narcotic Drugs Act, allowing the supply of suitable medicinal cannabis products for the management of painful and chronic conditions. This legislation does not relate to the decriminalization of cannabis for general cultivation or recreational use and it does not include the provision of medicinal grade herbal cannabis, only processed, non-smokable medicinal grade products’

Much of the detail remains unclear. For example, the legislation does not specify which products will be covered under the amendment, and it does not specify which particular conditions or symptoms will be eligible for treatment with cannabis-based products. Before products can be prescribed, they must be registered with the Therapeutic Goods Administration (TGA) or, in rare circumstances, receive special approval from the TGA. The registration process requires evidence of testing and efficacy and it is therefore unlikely Australia will see a TGA registered medicinal cannabis product that GPs can prescribe any time soon. Whilst there are currently no cannabis-based products that are lawfully produced in Australia, the medicinal use of pharmaceutical products containing cannabinoids is not prohibited, as long as authorization for prescribing is granted from the Commonwealth Therapeutic Goods Administration and at this point in time, NSW Health. 

Raw Materials and Product Manufacturing

The Company does not currently manufacture any API and relies solely upon third party manufacturers to produce research quantities of its compounds, KLS-13019; KLS-13022; and KLS-13023, in the 5 gram to 100 gram scale for its preclinical research.

For the KLS-13023 compound, the Company relies upon Purisys to produce a highly purified synthetic CBD. Purisys has been manufacturing cannabidiol since 2016 (DMF33223). Today, through our partnership with Purisys, we have the ability to produce on the largest commercial scale. Purisys’ ultra-high purity CBD (“Purisys CBD”) is attractive for drug development projects and falls significantly below the 0.3% THC limits set in the 2018 Farm Bill for use in consumer products. Purisys’ patent-protected manufacturing process produces a consistently odorless, tasteless white powder highest-purity form of CBD that exhibits:

Purisys currently has a drug master file (“DMF”) for its ultra-high purity CBD with the FDA. In November 2019, Purisys received advise notice from the DEA that the Purisys CBD has been removed from Schedule 1 of the CSA.

In the event the Company pursues a strategy to move KLS-13023 into FDA clinical trials, it has set up a manufacturing process utilizing Purisys as the bulk API producer of ultra-high purity CBD and Catalent Pharma Solutions (“Catalent”), a manufacturer of formulated and packaged pharmaceuticals, will enable us to meet our objectives in the production of target drug candidates that can be used in clinical trials and, beyond successful clinical trials, meet patient demand in commercial sales for each of our target disease indications. (See: Neuropathix Studies on CBD)

Environmental Matters

No significant pollution or other types of hazardous emission result from our current operations, and we do not anticipate that our operations will be materially affected by federal, state or local provisions concerning environmental controls. Our costs of complying with environmental, health and safety requirements have not been material. Furthermore, compliance with federal, state and local requirements regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have not had, nor are they expected to have, any material effect on the capital expenditures, earnings or competitive position of the Company. However, we will continue to monitor emerging developments in this area.

Competition

There are several companies developing cannabinoid therapeutics for a range of medical indications. The cannabinoid therapeutic area currently includes formulated extracts of the Cannabis plant and synthetic formulations. These formulations include CBD or THC, or a combination of CBD and THC as the active pharmaceutical ingredient. Certain companies such as GW Pharmaceuticals plc have focused on plant-based CBD formulations, while other companies such as Zynerba Pharmaceuticals, Inc. and Insys Therapeutics, Inc. have focused on synthetic CBD formulations.

Employees

We currently have six full time employees. We plan to increase the number of employees in the areas of regulatory affairs, clinical research and testing, and marketing in 2021. There are no collective-bargaining agreements with our employees, and we have not experienced work interruptions or strikes. We believe our relationship with employees is good and we provide health and life insurance for all employees.

Company Website

We maintain a corporate Internet website at: www.neuropathix.com.

The contents of our website are not incorporated in or otherwise to be regarded as part of this Annual Report on Form 10-K.

We file reports with the Securities and Exchange Commission (“SEC”), which are available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, “Section 16” filings on Form 3, Form 4, and Form 5, and other related filings, each of which is provided on our website as soon as reasonably practical after we electronically file such materials with or furnish them to the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.