RISK FACTORS
An investment in our securities
involves a high degree of risk. This prospectus contains a discussion of the risks applicable to an investment in our securities. Prior
to deciding about investing in our securities, you should carefully consider the specific factors discussed within this prospectus. The
risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also affect our operations. The occurrence of any of these known or unknown risks might cause
you to lose all or part of your investment in the offered securities.
Risks Related to Our Financial Position and
Need for Capital
Our financial situation creates doubt whether
we will continue as a going concern.
We were incorporated in September
2017 and have a limited operating history and our business is subject to all the risks inherent in the establishment of a new business
enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently
encountered in connection with development and expansion of a new business enterprise. Since inception, we have incurred losses and expect
to continue to operate at a net loss for at least the next several years as we commence our research and development efforts, conduct
clinical trials, and develop manufacturing, sales, marketing, and distribution capabilities. Our net loss for the years ended December
31, 2022 and 2021 was $27,649,876 and $46,371,364, respectively, and our accumulated deficit as of December 31, 2022 was $95,040,362.
Our net loss for the three months ended March 31, 2023 and 2022 was $5,984,706 and $6,059,141, respectively, and our accumulated deficit
as of March 31, 2023 was $101,025,068. There can be no assurance that the products under development by us will be approved for sale in
the U.S. or elsewhere. Furthermore, there can be no assurance that if such products are approved, they will be successfully commercialized,
and the extent of our future losses and the timing of our profitability are highly uncertain. If we are unable to achieve profitability,
we may be unable to continue our operations. There can be no assurances that we will be able to achieve a level of revenues adequate to
generate sufficient cash flow from operations or additional financing through private placements, public offerings and/or bank financing
necessary to support our working capital requirements. To the extent that funds generated from any private placements, public offerings
and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing
will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about our ability to continue
as a going concern. If adequate working capital is not available, we may be forced to discontinue operations, which would cause investors
to lose their entire investment.
This offering is being made
on a best efforts basis and we may sell fewer than all of the securities offered hereby and may receive significantly less in net proceeds
from this offering. Our cash and cash equivalents were approximately $_____ as of _____, 2023. Assuming
that we receive net proceeds of approximately $[ ] from this offering (assuming an offering with gross proceeds of $[ ]), we believe that
the net proceeds from this offering will meet our capital needs for the next [ ] months under our current business plan. Assuming that
we receive net proceeds of approximately $[ ] from this offering (assuming an offering with gross proceeds of $[ ]), we believe that the
net proceeds from this offering will satisfy our capital needs for the next [ ] months under our current business plan. Assuming
that we receive net proceeds of approximately $[ ] from this offering (assuming an offering with gross proceeds of $[ ]), we believe that
the net proceeds from this offering will satisfy our capital needs for the next [ ] months under our current business plan. There
can be no assurance that our implementation of these contingency plans will not have a material adverse effect on our business.
If we fail to obtain the capital necessary
to fund our operations, we will be unable to continue or complete our product development and you will likely lose your entire investment.
We will need to continue to
seek capital from time to time to continue development of our lead drug candidate beyond our initial combined Phase I/IIa clinical trial
and to acquire and develop other product candidates. Once approved for commercialization, we cannot provide any assurances that any revenues
it may generate in the future will be sufficient to fund our ongoing operations.
Our business or operations
may change in a manner that would consume available funds more rapidly than anticipated and substantial additional funding may be required
to maintain operations, fund expansion, develop new or enhance products, acquire complementary products, business or technologies, or
otherwise respond to competitive pressures and opportunities, such as a change in the regulatory environment or a change in preferred
treatment modalities. In addition, we may need to accelerate the growth of our sales capabilities and distribution beyond what is currently
envisioned, and this would require additional capital. However, we may not be able to secure funding when we need it or on favorable terms.
We may not be able to raise sufficient funds to commercialize the product candidates we intend to develop.
If we cannot raise adequate
funds to satisfy our capital requirements, we will have to delay, scale back or eliminate our research and development activities, clinical
studies, or future operations. We may also be required to obtain funds through arrangements with collaborators, which arrangements may
require us to relinquish rights to certain technologies or products that we otherwise would not consider relinquishing, including rights
to future product candidates or certain major geographic markets. This could result in sharing revenues which we might otherwise retain
for ourselves. Any of these actions may harm our business, financial condition, and results of operations.
The amount of capital we may
need depends on many factors, including the progress, timing and scope of our product development programs; the progress, timing and scope
of our preclinical studies and clinical trials; the time and cost necessary to obtain regulatory approvals; the time and cost necessary
to further develop manufacturing processes and arrange for contract manufacturing; our ability to enter into and maintain collaborative,
licensing and other commercial relationships; and our partners’ commitment of time and resources to the development and commercialization
of our products.
Our obligations
to certain of our creditors are secured by security interests in our assets, so if we default on those obligations, our creditors could
foreclose on some or all of our assets.
Our
obligations to certain of our creditors are secured by security interests in our assets. As of June 15, 2023, approximately $3.6 million
was owed to such secured creditors. Under such agreements, we are required to pay $182,357 on a weekly basis to such creditors. If we
default on our obligations under these agreements, our secured creditors could foreclose on its security interests and liquidate some
or all of these assets, which would harm our financial condition and results of operations and would require us to reduce or cease operations
and possibly seek Bankruptcy Protection.
In the event we
pursue Bankruptcy Protection, we will be subject to the risks and uncertainties associated with such proceedings.
In the event we file for relief
under the United States Bankruptcy Code, our operations, our ability to develop and execute our business plan and our continuation as
a going concern will be subject to the risks and uncertainties associated with bankruptcy proceedings, including, among others: our ability
to execute, confirm and consummate a plan of reorganization; the additional, significant costs of bankruptcy proceedings and related fees;
our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence, and our
ability to comply with terms and conditions of that financing; our ability to continue our operations in the ordinary course; our ability
to maintain our relationships with our consumers, business partners, counterparties, employees and other third parties; our ability to
obtain, maintain or renew contracts that are critical to our operations on reasonably acceptable terms and conditions; our ability to
attract, motivate and retain key employees; the ability of third parties to use certain limited safe harbor provisions of the United States
Bankruptcy Code to terminate contracts without first seeking Bankruptcy Court approval; the ability of third parties to force us to into
Chapter 7 proceedings rather than Chapter 11 proceedings and the actions and decisions of our stakeholders and other third parties who
have interests in our bankruptcy proceedings that may be inconsistent with our operational and strategic plans. Any delays in our bankruptcy
proceedings would increase the risks of our being unable to reorganize our business and emerge from bankruptcy proceedings and may increase
our costs associated with the bankruptcy process or result in prolonged operational disruption for us. Also, we would need the prior approval
of the bankruptcy court for transactions outside the ordinary course of business during the course of any bankruptcy proceedings, which
may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties
associated with any bankruptcy proceedings, we cannot accurately predict or quantify the ultimate impact of events that could occur during
any such proceedings. There can be no guarantees that if we seek Bankruptcy Protection we will emerge from Bankruptcy Protection as a
going concern or that holders of our common stock will receive any recovery from any bankruptcy proceedings.
In the event we
are unable to pursue Bankruptcy Protection under Chapter 11 of the United States Bankruptcy Code, or, if pursued, successfully emerge
from such proceedings, it may be necessary to pursue Bankruptcy Protection under Chapter 7 of the United States Bankruptcy Code for all
or a part of our businesses.
In the event we are unable
to pursue Bankruptcy Protection under Chapter 11 of the United States Bankruptcy Code, or, if pursued, successfully emerge from such proceedings,
it may be necessary for us to pursue Bankruptcy Protection under Chapter 7 of the United States Bankruptcy Code for all or a part of our
businesses. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with
the priorities established by the United States Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly
smaller distributions being made to our stakeholders than those we might obtain under Chapter 11 primarily because of the likelihood that
the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled
manner and as a going concern.
We will need to raise substantial additional
capital, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us
to delay, limit or terminate our product development efforts or cease operations.
We do not expect that our
current cash position will be sufficient to fund our current operations for the next 12 months. Our operating plan may change because
of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity
or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic
alliances and licensing arrangements or a combination of these approaches. In any event, we will require additional capital to obtain
regulatory approval for, and to commercialize, our product candidates. Raising funds in the current economic environment may present additional
challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market
conditions are favorable or if we have specific strategic considerations.
Any additional fundraising
efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize
our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable
to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance
of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares
to decline. The sale of additional equity or convertible securities may dilute our existing stockholders. The incurrence of indebtedness
would result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations
on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other
operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through
arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to
relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have
a material adverse effect on our business, operating results and prospects.
If we are unable to obtain
funding on a timely basis, we may be required to significantly curtail, delay, or discontinue one or more of our research or development
programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business
opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Even if we can raise additional funding,
we may be required to do so on terms that are dilutive to you.
The capital markets have been unpredictable in
the past for unprofitable companies such as ours. In addition, it is generally difficult for development stage companies to raise capital
under current market conditions. The amount of capital that a company such as ours is able to raise often depends on variables that are
beyond our control. As a result, we may not be able to secure financing on terms attractive to us, or at all. If we can consummate a financing
arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable terms,
or at all, our business, including our results of operations, financial condition and our continued viability will be materially adversely
affected.
Risks Related to this Offering
This is a best
efforts offering, with no minimum amount of securities is required to be sold, and we may not raise the amount of capital we believe is
required for our business plans, including our near-term business plans.
The
placement agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The placement
agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount
of the securities. There is no required minimum number of securities that must be sold as a condition to completion of this offering.
Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, placement
agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth above. We
may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors
in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to support our continued
operations, including our near-term continued operations. Thus, we may not raise the amount of capital we believe is required for our
operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable to us.
Management will
have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
Our
management will have broad discretion in the application of the net proceeds we receive in this offering, including for any of the purposes
described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision
to assess whether our management is using the net proceeds appropriately. Because of the number and variability of factors that will determine
our use of our net proceeds from this offering, including the possibility that the proceeds are used to support any products or product
candidates acquired in any transaction with Cellvera Global, their ultimate use may vary substantially from their currently intended use.
The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect
on our business and cause the price of our common stock to decline. Pending their use, we may invest our net proceeds from this offering
in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders.
If you purchase shares of common stock in
this offering, you may incur immediate and substantial dilution in the book value of your shares.
The
public offering price per share of common stock is substantially higher than the net tangible book value per share of our common stock
immediately prior to the offering. After giving effect to the sale of [*] shares of common stock in this offering, at a public offering
price of $[*] per share, and after deducting the estimated placement agent’s fees and estimated offering expenses payable by us,
purchasers of our common stock in this offering will incur immediate dilution of $[*] per share in the net tangible book value
of the common stock they acquire. For a further description of the dilution that investors in this offering may experience, see “Dilution.”
In addition, to the extent that outstanding stock options or warrants have been or may be exercised or other shares issued, you may experience
further dilution.
There is no public market for the warrants
or pre-funded warrants being offered in this offering.
There is no established trading
market for the warrants or pre-funded warrants being offered in this offering, and we do not expect a market to develop. In addition,
we do not intend to apply to list the warrants or pre-funded warrants on any national securities exchange or other nationally recognized
trading system, including The Nasdaq Capital Market. Without an active trading market, the liquidity of the warrants and the pre-funded
warrants will be limited.
The warrants and the pre-funded warrants
are speculative in nature.
The warrants and the pre-funded
warrants offered in this offering do not confer any rights of common stock ownership on their holders, such as voting rights or the right
to receive dividends, but rather merely represent the right to acquire shares of our common stock at a fixed price. Following this offering,
the market value of the warrants and the pre-funded warrants is uncertain and there can be no assurance that the market value of the warrants
and the pre-funded warrants will equal or exceed their exercise price and initial public offering price, respectively.
Except as otherwise provided in the warrants
and the pre-funded warrants, holders of warrants and pre-funded warrants purchased in this offering will have no rights as stockholders
of common stock until such holders exercise their warrants or pre-funded warrants and acquire our common stock.
Except as otherwise provided
in the warrants and the pre-funded warrants, the warrants and the pre-funded warrants offered in this offering do not confer any rights
of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right
to acquire shares of our common stock at a fixed price. A holder of a warrant or pre-funded warrant may exercise the right to acquire
a share of common stock and pay an exercise price of $ or a nominal exercise price of $0.001, respectively, at any time. Upon exercise
of the warrants and the pre-funded warrants, the holders thereof will be entitled to exercise the rights of a holder of common stock only
as to matters for which the record date occurs after the exercise date.
Risks Related to Product Development, Regulatory
Approval, Manufacturing and Commercialization
The regulatory approval process is expensive,
time-consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of our future product candidates,
if any.
We will not be permitted to
market our product candidates in the United States until we receive approval from the FDA, or in any foreign countries until we receive
the requisite approval from corresponding agencies in such countries. The testing, manufacturing, labeling, approval, selling, marketing
and distribution of health and life science-related products are subject to extensive regulation, which regulations differ from country
to country.
Successfully completing our
clinical program and obtaining approval of a Biologics License Application (“BLA”) is a complex, lengthy, expensive and uncertain
process, and the FDA or other applicable foreign regulator may delay, limit or deny approval of our product candidates for many reasons,
including, among others, because:
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we may not be able to demonstrate that our product candidates are safe and effective in treating patients to the satisfaction of the FDA or foreign regulator; |
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the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or foreign regulator for marketing approval; |
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the FDA or foreign regulator may disagree with the number, design, size, conduct or implementation of our clinical trials; |
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the FDA or foreign regulator may require that we conduct additional clinical trials; |
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the FDA or foreign regulator may not approve the formulation, labeling or specifications of our product candidates; |
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the contract research organizations (CROs) and other contractors that we may retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials; |
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the FDA or foreign regulator may find the data from preclinical studies and clinical trials insufficient to demonstrate that our product candidate(s) are safe and effective for their proposed indications; |
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the FDA or foreign regulator may disagree with our interpretation of data from our preclinical studies and clinical trials; |
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the FDA or foreign regulator may not accept data generated at our clinical trial sites or may disagree with us over whether to accept efficacy results from clinical trial sites outside the United States or outside the EU, as applicable, where the standard of care is potentially different from that in the United States or in the EU, as applicable; |
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if and when our BLAs or foreign equivalents are submitted to the applicable regulatory authorities, such agencies may have difficulties scheduling the necessary review meetings in a timely manner, may recommend against approval of our application or may recommend or require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions; |
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the FDA or foreign regulator may require development of a Risk Evaluation and Mitigation Strategy (REMS), which would use risk minimization strategies to ensure that the benefits of certain prescription drugs outweigh their risks, as a condition of approval or post-approval; |
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the FDA or other applicable foreign regulatory agencies may not approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or |
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the FDA or the other applicable foreign regulatory agencies may change their approval policies or adopt new regulations. |
We may encounter substantial delays in completing
our clinical studies which in turn will require additional costs, or we may fail to demonstrate adequate safety and efficacy to the satisfaction
of applicable regulatory authorities.
It is difficult to predict
if or when any of our product candidates, will prove safe or effective in humans or will receive regulatory approval. Before
obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies
to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming, and uncertain
as to outcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure
of one or more clinical studies can occur at any stage of testing. Events that may prevent successful or timely completion of clinical
development include:
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delays in reaching, or failing to reach, a consensus with regulatory agencies on study design; |
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delays in reaching, or failing to reach, agreement on acceptable terms with a sufficient number of prospective contract research organizations (“CROs”) and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
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delays in obtaining required Institutional Review Board (“IRB”) or Ethics Committee (“EC”) approval at each clinical study site; |
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delays in recruiting a sufficient number of suitable patients to participate in our clinical studies including, but not limited to, recruitment challenges due to COVID-19;; |
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imposition of a clinical hold by regulatory agencies, after an inspection of our clinical study operations or study sites; |
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failure by our CROs, other third parties or us to adhere to the clinical study, regulatory or legal requirements; |
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failure to perform in accordance with the FDA’s good clinical practices (“GCP”) or applicable regulatory guidelines in other countries; |
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delays in the testing, validation, manufacturing, and delivery of sufficient quantities of our product candidates to the clinical sites; |
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delays in having patients’ complete participation in a study or return for post-treatment follow-up; |
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clinical study sites or patients dropping out of a study; |
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delay or failure to address any patient safety concerns that arise during the course of a trial; |
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unanticipated costs or increases in costs of clinical trials of our product candidates; |
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occurrence of serious adverse events associated with the product candidates that are viewed to outweigh their potential benefits; or |
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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols. |
We could also encounter delays
if a clinical trial is suspended or terminated by us, by the IRBs or ECs of the institutions in which such trials are being conducted,
by an independent Safety Review Board (“SRB”) for such trial or by the FDA, European Medicines Agency (“EMA”),
or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including
failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical
trial operations or trial site by the FDA, EMA, or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen
safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative
actions or lack of adequate funding to continue the clinical trial.
Any inability to successfully
complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues from product
sales, regulatory and commercialization milestones, and royalties. In addition, if we make manufacturing or formulation changes to our
product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions.
Clinical study delays could
also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors
to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates. In
addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development
and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly
harm our business, financial condition, and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement
or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
The outcome of preclinical
studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial
do not necessarily predict final results. Further, preclinical and clinical data are often susceptible to various interpretations and
analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical
trials have, nonetheless, failed to obtain marketing approval. If the results of our clinical studies are inconclusive or if there
are safety concerns or adverse events associated with our other product candidates, we may:
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be delayed in obtaining marketing approval for our product candidates, if approved at all; |
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obtain approval for indications or patient populations that are not as broad as intended or desired; |
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obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; |
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be required to change the way the product is administered; |
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be required to perform additional clinical studies to support approval or be subject to additional post-marketing testing requirements; |
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have regulatory authorities withdraw their approval of a product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy; |
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be sued; or |
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experience damage to our reputation. |
If we, ours collaborators,
or our contract manufacturing organizations (“CMOs”) fail to comply with applicable regulatory requirements at any stage during
the regulatory process, such noncompliance could result in, among other things delays in the approval of applications or supplements to
approved applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements
to approved applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or
partial suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations
by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.
Additionally, our product
candidates could potentially cause other adverse events that have not yet been predicted. The inclusion of ill patients in our clinical
studies may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using. As
described above, any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and impair
our ability to commercialize our products.
We may not be able to meet requirements
for the chemistry, manufacturing, and control of our drug product candidates.
To receive approval of our
products by the FDA and comparable foreign regulatory authorities, we must show that we and our contract manufacturing partners are able
to characterize, control and manufacture our drug products safely and in accordance with regulatory requirements. This includes synthesizing
the active ingredient, developing an acceptable formulation, performing tests to adequately characterize the formulated product, documenting
a repeatable manufacturing process, and demonstrating that our drug products meet stability requirements. Meeting these chemistry, manufacturing
and control (“CMC”) requirements is a complex task that requires specialized expertise. If we are not able to meet the CMC
requirements, we may not be successful in getting our products approved.
Enrollment and
retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible
by multiple factors outside our control.
We may encounter delays or
difficulties in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials on its current
timelines, or at all, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials.
Enrollment in our clinical trials may be slower than we anticipate, leading to delays in our development timelines. For example, we may
face difficulty enrolling or maintaining a sufficient number of patients in our clinical trials due to the existing alternative treatments
approved for any of our targeted indications as patients may decline to enroll or decide to withdraw from our clinical trials due to the
risk of receiving placebo. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient
population, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and
experience, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments
and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites, the eligibility criteria
for the trial and the proportion of patients screened that meets those criteria, our ability to obtain and maintain patient consents,
and our ability to successfully complete prerequisite studies before enrolling certain patient populations.
Furthermore, any negative
results or new safety signals we may report in clinical trials of our product candidates may make it difficult or impossible to recruit
and retain patients in other clinical trials. Similarly, negative results reported by our competitors about their drug candidates may
negatively affect patient recruitment in our clinical trials. Also, marketing authorization of competitors in this same class of drugs
may impair our ability to enroll patients into our clinical trials, delaying or potentially preventing it from completing recruitment
of one or more of our trials.
Delays or failures in planned
patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability
to develop our product candidates or could render further development impossible. In addition, we expect to rely on CROs and clinical
trial sites to ensure proper and timely conduct of our future clinical trials, and, while we intend to enter into agreements governing
their services, we will be limited in our ability to compel their actual performance.
If our future pre-clinical development or
future clinical Phase I/II studies are unsuccessful, we may be unable to obtain regulatory approval of, or commercialize, our product
candidates on a timely basis or at all.
The successful completion
of pre-clinical development and multiple clinical trials is critical to the success of our future products. If the pre-clinical development
and clinical trials are unsuccessful or produce inconsistent results or unanticipated adverse side effects, or if we are unable to collect
reliable data, regulatory approval of our products could be delayed or not given and as a result we may be unable to commercialize our
products. Generally, we expect to engage third parties such as consultants, universities or other collaboration partners to conduct clinical
trials on our behalf. Incompatible practices or misapplication of our products by these third parties could impair the success of our
clinical trials.
Even if we receive regulatory approval for
any of our product candidates, we may not be able to successfully commercialize the product and the revenue that we generate from their
sales, if any, may be limited.
If approved for marketing,
the commercial success of our product candidates will depend upon each product’s acceptance by the medical community, including
physicians, patients, and health care payors. The degree of market acceptance for any of our product candidates will depend on a number
of factors, including:
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demonstration of clinical safety and efficacy; |
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relative convenience, dosing burden and ease of administration; |
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the prevalence and severity of any adverse effects; |
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the willingness of physicians to prescribe our product candidates, and the target patient population to try new therapies; |
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efficacy of our product candidates compared to competing products; |
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the introduction of any new products that may in the future become available targeting indications for which our product candidates may be approved; |
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new procedures or therapies that may reduce the incidences of any of the indications in which our product candidates may show utility; |
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pricing and cost-effectiveness; |
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the inclusion or omission of our product candidates in applicable therapeutic and vaccine guidelines; |
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the effectiveness of our own or any future collaborators’ sales and marketing strategies; |
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limitations or warnings contained in approved labeling from regulatory authorities; |
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our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors or to receive the necessary pricing approvals from government bodies regulating the pricing and usage of therapeutics; and |
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the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement or government pricing approvals. |
If any of our product candidates
are approved, but do not achieve an adequate level of acceptance by physicians, health care payors, and patients, we may not generate
sufficient revenues and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party
payors on the benefits of our product candidates may require significant resources and may never be successful.
In addition, even if we obtain
regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize our product candidates
successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability
to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to
restrictions or post-approval commitments that render our product candidates not commercially viable. For example, regulatory authorities
may approve any of our product candidates for fewer or more limited indications than we request, may grant approval contingent on the
performance of costly post-marketing clinical trials, or may approve any of our product candidates with a label that does not include
the labeling claims necessary or desirable for the successful commercialization for that indication. Further, the FDA or comparable foreign
regulatory authorities may place conditions on approvals or require risk management plans or a Risk Evaluation and Mitigation Strategy
(“REMS”) to assure the safe use of the drug. If the FDA or applicable foreign regulatory agency concludes a REMS is needed,
the sponsor of the BLA must submit a proposed REMS; the regulatory agencies will not approve the BLA without an approved REMS, if required.
A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. The regulatory agencies may also require a REMS for approved product when
new safety information emerges. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution,
prescription or dispensing of our product candidates. Moreover, product approvals may be withdrawn for non-compliance with regulatory
standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the
commercial success of our product candidates.
Adverse events involving our products may
lead the FDA or applicable foreign regulatory agency to delay or deny clearance for our products or result in product recalls that could
harm our reputation, business and financial results.
Once a product receives regulatory
clearance or approval, the agency has the authority to require the recall of commercialized products in the event of adverse side effects,
material deficiencies or defects in design or manufacture. The authority to require a recall must be based on a regulatory finding that
there is a reasonable probability that the product would cause serious injury or death. Manufacturers may, under their own initiative,
recall a product if any material deficiency in a product is found. A government-mandated or voluntary recall by us or one of our distributors
could occur because of adverse side effects, impurities or other product contamination, manufacturing errors, design or labeling defects
or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect
on our financial condition and results of operations. The regulatory agencies require that certain classifications of recalls be reported
to them within ten (10) working days after the recall is initiated. Companies are required to maintain certain records of recalls, even
if they are not reportable to the regulatory agency. We may initiate voluntary recalls involving our products in the future that we determine
do not require notification of the regulatory agencies. If the regulatory agency disagrees with our determinations, they could require
us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our
sales. In addition, the regulatory agency could take enforcement action for failing to report the recalls when they were conducted.
The in-licensing of technologies and the
successful testing and early development of technologies in the laboratory may not be indicative of future results and may not result
in commercially viable technologies or products. Further, our future products may have to be modified from their originally conceived
versions in order to reach or be successful in the market.
Positive results from laboratory
testing and early developmental successes, may not be predictive of future successful development, commercialization and sales results
and should not be relied upon as evidence that products developed from our technologies will become commercially viable and successful.
Further, the products we plan to develop in the future may have to be significantly modified from their originally conceived versions
in order for us to control costs, compete with similar products, receive market acceptance, meet specific development and commercialization
timeframes, avoid potential infringement of the proprietary rights of others, or otherwise succeed in developing our business and earning
ongoing revenues. This can be a costly and resource draining activity. What appear to be promising technologies when we license them may
not lead to viable technologies or products, or to commercial success.
Complying with numerous regulations pertaining
to our business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.
We are subject to the Clinical
Laboratory Improvement Amendment of 1988, or CLIA, which is a federal law regulating clinical laboratories that perform testing on specimens
derived from humans for the purpose of providing information for the diagnosis, prevention, or treatment of disease. Our clinical laboratory
is in Richmond, Virginia and must be certified under CLIA for us to perform testing on human specimens. CLIA is intended to ensure the
quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications,
administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections.
We currently hold a CLIA certificate to perform high-complexity testing. Laboratories performing high complexity testing are required
to meet more stringent requirements than laboratories performing fewer complex tests. CLIA regulations require clinical laboratories like
ours to comply with various operational, personnel, facilities administration, quality, and proficiency testing requirements intended
to ensure that testing services are accurate, reliable, and timely. CLIA certification is a prerequisite for reimbursement eligibility
for services provided to state and federal health care program beneficiaries. CLIA is user-fee funded. Therefore, all costs of administering
the program must be covered by the regulated facilities, including certification and survey costs. To renew this certificate, we are subject
to survey and inspection every two years. Moreover, CLIA inspectors may make periodic inspections of our clinical laboratory outside of
the renewal process. The failure to comply with CLIA requirements can result in enforcement actions, including the revocation, suspension,
or limitation of our CLIA certificate of compliance, as well as a directed plan of correction, state on-site monitoring, civil money penalties,
civil injunctive suit and/or criminal penalties. We must maintain CLIA compliance and certification to be eligible to bill for assays
provided to Medicare beneficiaries. If we were to be found out of compliance with CLIA program requirements and subjected to sanctions,
our business and reputation could be harmed. Even if it were possible for us to bring our laboratory back into compliance, we could incur
significant expenses and potentially lose revenue in doing so.
Additionally, certain states
require laboratory licenses to test specimens from patients in those states or received from ordering physicians in those states. We may
also be subject to regulation in foreign jurisdictions if we seek to expand international distribution of our assays outside the United
States.
If we were to lose our CLIA
certification or state laboratory licenses, whether because of a revocation, suspension or limitation, we would no longer be able to offer
our assays (including our AditxtScore™ platform), which would limit our revenues and harm our business. If we were to lose, or fail
to obtain, a license in any other state where we are required to hold a license, we would not be able to test specimens from those states.
Our AditxtScore™ tests are currently
being offered as a LDTs. Should the FDA disagree that AditxtScore™ tests are LDTs, if our LDTs do not receive the required emergency
use authorizations, or if the FDA’s regulatory approach to LDTs should change in the future, our commercialization strategy may
be adversely affected, which would negatively affect our results of operations and financial condition.
The FDA has historically asserted
its authority to regulate Laboratory Developed Tests (LDTs) as medical devices under the Federal Food, Drug, and Cosmetic Act (the “FDCA”),
but it has generally exercised enforcement discretion regarding LDTs. This means that even though the FDA believes it can impose regulatory
requirements on LDTs, such as requirements to obtain premarket approval, de novo classification, or clearance of LDTs,
it has generally chosen not to enforce those requirements. The FDA has, on occasion, sent warning letters to laboratories offering LDTs
that the agency believed were not eligible for enforcement discretion because of how they were developed, validated, performed or marketed
and consequent risks to the public.
The FDA considers an LDT to
be a test that is developed, validated, and performed within a single laboratory. We are providing AditxtScore™ as a service as
a Laboratory Developed Test (LDT) to assess immunity status to COVID-19. Our AditxtScore™ tests are currently manufactured
in our Mountain View, CA facility and performed in our Richmond, VA facility. If the FDA believes that the AditxtScore™ is not regulated
as an LDT, we may be forced to stop performing AditxtScore™ while we worked to obtain the appropriate FDA authorizations which
could negative affect our business, results of operations and financial condition.
On November 15, 2021, FDA
revised its guidance document titled “Policy for Coronavirus Disease-2019 Tests During the Public Health Emergency (Revised)”
(“FDA COVID-19 Testing Guidance”) to require all COVID-19 diagnostic assays conducted as LDTs to apply for EUA authorization
within a 60-day period from the revised guidance’s issuance date. The FDA COVID-19 Testing Guidance states that FDA does not
intend to object to continued offering of LDTs that are the subject of submitted EUA requests while FDA reviews the EUA requests. The
FDA COVID-19 Testing Guidance further states that if FDA declines to issue an EUA or otherwise decides not to authorize a test for any
reason, including a determination that there is a lack of adequate data to support authorization, FDA generally expects developers to
cease marketing and offering their test within 15 calendar days. Moreover, if FDA identifies a significant problem or concern with a test,
based either on the provided information or external reports, FDA generally expects the developer to take appropriate steps to address
such problems, which could include a recall of the test and/or notification concerning corrected test reports indicating prior test results
may not be accurate. We have submitted EUA requests for our SARS-CoV-2 LDTs, and the applications are pending before FDA. There
can be no assurance that the EUA requests that we submitted for our SARS-CoV-2 LDTs will be granted on a timely basis or at
all. If FDA declines to issue a EUAs for our SARS-CoV-2 LDTs, we may be required to cease marketing the tests and our business, results
of operations and financial condition could be negatively affected. Regardless of if our EUA applications are granted by FDA, we may recall,
replace, or make corrections to our LDTs if we become aware of a product concern, which could negatively impact manufacturing, supply,
and customer relationships, and may result in adverse regulatory action, including revision or revocation of an EUA.
In addition, there have been
numerous legislative proposals to clarify the FDA’s regulatory authority over medical devices. These include two bills reintroduced
in 2021: the VALID Act, which would expressly grant the FDA authority to regulate LDTs under a risk-based framework; and the VITAL Act,
which would assign LDTs to regulation solely under CLIA and would direct CMS to update its CLIA regulations. We cannot predict if either
of these bills will be enacted in their current (or any other) form and cannot quantify the effect of these bills on our business. In
the meantime, the regulation by the FDA of LDTs remains uncertain. If FDA premarket review, classification or approval is required for
AditxtScore™, our laboratory could be forced to stop performing AditxtScore™ while we worked to obtain the appropriate
FDA authorizations which could negative affect our business, results of operations and financial condition.
We are subject
to various governmental regulations relating to the labeling, marketing and sale of our products.
Both before and after a product
is commercially released, we have ongoing responsibilities under regulations promulgated by the FDA, the Federal Trade Commission, and
similar U.S. and foreign regulations governing product labeling and advertising, distribution, sale, and marketing of our products.
Manufacturers of medical devices
are permitted to promote products solely for the uses and indications set forth in the device’s authorization. A number of enforcement
actions have been taken against manufacturers that promote products for “off-label” uses (i.e., uses that are not
described in the device’s authorization), including actions alleging that claims submitted to government healthcare programs for
reimbursement of products that were promoted for “off-label” uses are fraudulent in violation of the Federal False
Claims Act or other federal and state statutes and that the submission of those claims was caused by off-label promotion. The
failure to comply with prohibitions on “off-label” promotion can result in significant monetary penalties, revocation
or suspension of a company’s business license, suspension of sales of certain products, product recalls, civil or criminal sanctions,
exclusion from participating in federal healthcare programs, or other enforcement actions. In the United States, allegations of such wrongful
conduct could also result in a corporate integrity agreement with the U.S. government that imposes significant administrative obligations
and costs.
We and our employees and contractors are
subject, directly, or indirectly, to federal, state and foreign healthcare fraud and abuse laws, including false claims laws. If we are
unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Our operations are subject
to various federal, state, and foreign fraud and abuse laws. These laws may constrain our operations, including the financial arrangements
and relationships through which we market, sell and distribute our products.
U.S. federal and state laws
that affect our ability to operate include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; |
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federal physician self-referral law, which prohibits a physician from referring a patient to an entity with which the physician (or an immediate family member) has a financial relationship, for the furnishing of certain designated health services for which payment may be made by Medicare or Medicaid, unless an exception applies; |
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federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals, or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payers that are false or fraudulent; |
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Section 242 of HIPAA codified at 18 U.S.C. § 1347, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program (i.e., public or private); |
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federal transparency laws, including the Physician Payments Sunshine Act which requires the tracking and disclosure to the federal government by pharmaceutical and medical device manufacturers of payments and other transfers of value to physicians and teaching hospitals as well as ownership and investment interests that are held by physicians and their immediate family members; and |
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state law equivalents of each of these federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical and medical device companies to comply with their industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict certain payments that may be made to healthcare providers and other potential referral sources; state laws that require drug and medical device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that prohibit giving gifts to licensed healthcare professionals; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states. |
In particular, activities
and arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, waste and other abusive
practices. These laws and regulations may restrict or prohibit a wide range of activities or other arrangements related to the development,
marketing or promotion of products, including pricing and discounting of products, provision of customer incentives, provision of reimbursement
support, other customer support services, provision of sales commissions or other incentives to employees and independent contractors
and other interactions with healthcare practitioners, other healthcare providers and patients.
Because of the breadth of
these laws and the narrow scope of the statutory or regulatory exceptions and safe harbors available, our business activities could be
challenged under one or more of these laws.
Government expectations and
industry best practices for compliance continue to evolve and past activities may not always be consistent with current industry best
practices. Further, there is a lack of government guidance as to whether various industry practices comply with these laws, and government
interpretations of these laws continue to evolve, all of which create compliance uncertainties. Any non-compliance could result in regulatory
sanctions, criminal or civil liability and serious harm to our reputation. It is not always possible to identify and deter misconduct
concerning applicable laws, regulations, guidelines, policies and standards, and the precautions we take to detect and prevent this activity
may not be effective in preventing such conduct, mitigating risks, or reducing the chance of governmental investigations or other actions
or lawsuits stemming from a failure to comply with these laws or regulations.
If a government entity opens
an investigation into possible violations of any of these laws (which may include the issuance of subpoenas or civil investigative demands),
we would have to expend significant resources to defend ourselves against the allegations. Allegations that we, our officers, or our employees
violated any one of these laws can be made by individuals called “whistleblowers” who may be our employees, customers, competitors
or other parties. Government policy is to encourage individuals to become whistleblowers and file a complaint in federal court alleging
wrongful conduct. The government is required to investigate all of these complaints and decide whether to intervene. If the government
intervenes and we are required to pay money back to the government, the whistleblower, as a reward, is awarded a percentage of the collection.
If the government declines to intervene, the whistleblower may proceed on their own and, if they are successful, they will receive a percentage
of any judgment or settlement amount the company is required to pay. The government may also initiate an investigation on its own. Such
actions could have a significant impact on our business, including the imposition of significant fines, and other sanctions that may materially
impair our ability to run a profitable business. In particular, if our operations are found to be in violation of any of the laws described
above or if we agree to settle with the government without admitting to any wrongful conduct or if we are found to be in violation of
any other governmental regulations that apply to us, we, our officers and employees may be subject to sanctions, including civil and criminal
penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment,
the curtailment or restructuring of our operations and the imposition of a corporate integrity agreement, any of which could adversely
affect our business, results of operations and financial condition.
Risks Related to our Company and our Business
Our technology is subject to licenses from
LLU and Stanford, each of which are revocable in certain circumstances, including in the event we do not achieve certain payments and
milestone deadlines. Without these licenses, we may not be able to continue to develop our product candidates.
The LLU License Agreement
may be terminated by LLU in the event of a breach by us of any non-payment provision (including the provision that requires us to meet
certain deadlines for milestone events (each, a “Milestone Deadline”)) not cured within 90 days after delivery of written
notice by LLU. Additional Milestone Deadlines include: (i) the requirement to have regulatory approval of an IND application to initiate
first-in-human clinical trials on or before March 31, 2022, (ii) the completion of first-in-human (phase I/II) clinical trials by March
31, 2024, (iii) the completion of Phase III clinical trials by March 31, 2026 and (iv) biologic licensing approval (BLA) by the FDA by
March 31, 2027. If the LLU License Agreement were to be terminated by LLU, we would lose our most significant asset and may no longer
be able to develop our product candidates, which would have a material adverse effect on our operations.
The February 2020 License
Agreement with Stanford may be terminated by Stanford if we (i) are delinquent on any report or payments; (ii) are not diligently developing
and commercializing Licensed Product (as defined in the February 2020 License Agreement); (iii) miss a milestone described in the agreement;
(iv) are in breach of any other provision of the agreement; or (v) if we provide a false report to Stanford. The Termination discussed
above will take effect only upon 30 days written notice by Stanford unless we remedy the breach within a 30-day cure period. If the February
2020 License Agreement were to be terminated by Stanford, we would lose a significant asset and may no longer be able to develop our product
candidates, which would have a material adverse effect on our operations.
Our results of operations will be affected
by the level of royalty and milestone payments that we are required to pay to third parties.
The LLU License Agreement
and February 2020 License Agreement with Stanford each require us to remit royalty payments and meet certain performance milestones related
to in-licensed intellectual property. Any failure on our part to pay royalties owed or meet milestones could lead to us losing rights
under our licenses and could thereby adversely affect our business. As our product sales increase, we may, from time-to-time, disagree
with our third-party collaborators as to the appropriate royalties owed and the resolution of such disputes may be costly and may consume
management’s time. Furthermore, we may enter into additional license agreements in the future, which may also include royalty payments.
We face substantial competition, which may
result in others discovering, developing or commercializing products before or more successfully than we do.
The development and commercialization
of drugs is highly competitive. We compete with a variety of multinational pharmaceutical companies and specialized biotechnology companies,
as well as products and processes being developed at universities and other research institutions. Our competitors have developed, are
developing or will develop product candidates and processes competitive with our product candidates. Competitive therapeutic treatments
include those that have already been approved and accepted by the medical community and any new treatments that may enter the market.
We believe that a significant number of products are currently available, under development, and may become commercially available in
the future, for the treatment of indications for which we may try to develop product candidates.
More established companies
may have a competitive advantage over us due to their greater size, cash flows and institutional experience. Compared to us, many of our
competitors may have significantly greater financial, technical and human resources. As a result of these factors, our competitors may
have an advantage in marketing their approved products and may obtain regulatory approval of their product candidates before we are able
to, which may limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are safer,
more effective, more widely used and less expensive than ours, and may also be more successful than us in manufacturing and marketing
their products.
Mergers and acquisitions in
the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.
Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large and established companies. These companies compete with us in recruiting and retaining qualified scientific, management and
commercial personnel, establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
Our technologies and products under development,
and our business, may fail if we are not able to successfully commercialize them and ultimately generate significant revenues as a result.
Successful development of
technologies and our product candidates will require significant additional investment, including costs associated with additional development,
completing trials and obtaining regulatory approval, as well as the ability to manufacture or have others manufacture our products in
sufficient quantities at acceptable costs while also preserving product quality. Difficulties often encountered in scaling up production
include problems involving production yields, quality control and assurance, shortage of qualified personnel, production costs and process
controls. In addition, we are subject to inherent risks associated with new technologies and products. These risks include the possibility
that any of our technologies or future products may:
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be ineffective or less effective than anticipated; |
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fail to receive necessary regulatory approvals; |
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be difficult to competitively price relative to alternative solutions; |
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be harmful to consumers or the environment; |
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be difficult to manufacture on an economically viable scale; |
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be subject to supply chain constraints for raw materials; |
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fail to be developed and accepted by the market prior to the successful marketing of alternative products by competitors; |
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be difficult to market because of infringement on the proprietary rights of third parties; or |
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be too expensive for commercial use. |
Furthermore, we may be faced
with lengthy market partner or distributor evaluation and approval processes. Consequently, we may incur substantial expenses and devote
significant management effort to customize products for market partner or distributor acceptance, though there can be no assurance of
such acceptance. As a result, we cannot accurately predict the volume or timing of any future sales.
Customers may not adopt our products quickly,
or at all.
Customers in the sector in
which we operate can be generally cautious in their adoption of new products and technologies. In addition, given the relative novelty
of our future planned products (including our AditxtScore™ platform), customers of those products may require education regarding
their utility and use, which may delay their adoption. There can be no assurance that customers will adopt our products quickly, or at
all.
The significant level of competition in
the markets for our products developed in the future may result in pricing pressure, reduced margins or the inability of our future products
to achieve market acceptance.
The markets for our future
products are intensely competitive and rapidly changing. We may be unable to compete successfully, which may result in price reductions,
reduced margins and the inability to achieve market acceptance for our products.
Our competitors may have longer
operating histories, significantly greater resources, greater brand recognition and large customer bases than we do. As a result, they
may be able to devote greater resources to the manufacture, promotion or sale of their products, receive greater resources and support
from market partners and independent distributors, initiate or withstand substantial price competition or more readily take advantage
of acquisition or other opportunities.
We rely on third parties for the distribution
of our current and future products, including our AditxtScore™ platform. If these parties do not distribute our products in
a satisfactory or timely manner, in sufficient quantities or at an acceptable cost, our sales and development efforts could be delayed
or otherwise negatively affected.
We rely on third parties for
the distribution of our current and future products, including our AditxtScore™ platform. Our reliance on third parties to distribute
products may present significant risks to us, including the risk that should any of these third parties fail to adequately distribute
our products and services to end consumers and other market participants, our business may be materially harmed. Additionally, if we need
to enter into agreements for the distribution of our future products with other third parties, there can be no assurance we will be able
to do so on favorable terms, if at all.
We may rely on third parties to produce
our future products. If these parties do not produce our products at a satisfactory quality, in a timely manner, in sufficient quantities
or at an acceptable cost, our sales and development efforts could be delayed or otherwise negatively affected.
We may rely on third parties
for the manufacture of our future products. Our reliance on third parties to manufacture our future products may present significant risks
to us, including the following:
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reduced control over delivery schedules, yields and product reliability; |
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manufacturing deviations from internal and regulatory specifications; |
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the failure of a key manufacturer to perform as we require for technical, market or other reasons; |
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difficulties in establishing additional manufacturer relationships if we are presented with the need to transfer our manufacturing process technologies to them; |
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misappropriation of our intellectual property; and |
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other risks in potentially meeting our product development schedule or satisfying the requirements of our market partners, distributors, direct customers and end users. |
If we need to enter into agreements
for the manufacturing of our future products, there can be no assurance we will be able to do so on favorable terms, if at all.
If we are unable to establish successful
relations with third-party market partners or distributors, or these market partners or distributors do not focus adequate resources on
selling our products or are otherwise unsuccessful in selling them, sales of our products may not develop.
We anticipate relying on independent
market partners and distributors to distribute and assist us with the marketing and sale of our products. Our future revenue generation
and growth will depend in large part on our success in establishing and maintaining this sales and distribution channel. If our market
partners and distributors are unable to sell our products, or receive negative feedback from end users, they may not continue to purchase
or market our products. In addition, there can be no assurance that our market partners and distributors will focus adequate resources
on selling our products to end users or will be successful in selling them. Many of our potential market partners and distributors are
in the business of distributing and sometimes manufacturing other, possibly competing, products. As a result, these market partners
and distributors may perceive our products as a threat to various product lines currently being distributed or manufactured by them. In
addition, these market partners and distributors may earn higher margins by selling competing products or combinations of competing products.
If we are unable to establish successful relationships with independent market partners and distributors, we will need to further develop
our own sales and distribution capabilities, which would be expensive and time-consuming and might not be successful.
If we are not able to attract and retain
highly skilled employees and contractors, we may not be able to implement our business model successfully.
We will rely upon employees
and third-party consultant/contractors to effectively establish, manage and grow our business. Consequently, we believe that our future
viability will depend largely on our ability to attract and retain highly skilled personnel. In order to do so, we may need to pay
higher compensation, fees, and/or other incentives to our employees or consultants than we currently expect, and such higher compensation
payments would have a negative effect on our operating results. Competition for experienced, high-quality employees, consultants and contractors
is intense and we cannot assure that we will be able to recruit and retain such personnel. We may not be able to hire or retain the necessary
personnel to implement our business strategy. Our failure to hire and retain such personnel could impair our ability to develop new products
and manage our business effectively.
The loss of our management team or other
key personnel would have an adverse impact on our future development and impair our ability to succeed.
In the early stages of development,
our business will be significantly dependent on the Company’s management team and other key personnel. Our success will be particularly
dependent upon Mr. Amro Albanna and Dr. Shahrokh Shabahang. The loss of any one of these individuals or any other future key personnel
could have a material adverse effect on the Company and our ability to further execute our intended business.
The use of our products may be limited by
regulations, and we may be exposed to product liability and remediation claims.
The use of our planned products
may be regulated by various local, state, federal and foreign regulators. Even if we are able to comply with all such regulations
and obtain all necessary registrations, we cannot provide assurance that our future products will not cause injury to the environment,
people, or animals and/or otherwise have unintended adverse consequences, under all circumstances. For example, our products may be improperly
combined with other chemicals or, even when properly combined, our products may be blamed for damage caused by those other chemicals.
The costs of remediation or products liability could materially adversely affect our results, financial condition and operations.
We may be held liable for, or incur costs
to settle, liability and remediation claims if any products we develop, or any products that use or incorporate any of our technologies,
cause injury or are found unsuitable during product testing, manufacturing, marketing, sale or use. These risks exist even with respect
to products that have received, or may in the future receive, regulatory approval, registration or clearance for commercial use. We cannot
guarantee that we will be able to avoid product liability exposure.
At the stage customary to
do so, we expect to maintain product liability insurance at levels we believe are sufficient and consistent with industry standards for
like companies and products. However, we cannot guarantee that our product liability insurance will be sufficient to help us avoid product
liability-related losses. In the future, it is possible that meaningful insurance coverage may not be available on commercially reasonable
terms or at all. In addition, a product liability claim could result in liability to us greater than our assets or insurance coverage.
Moreover, even if we have adequate insurance coverage, product liability claims or recalls could result in negative publicity or force
us to devote significant time and attention to these matters, which could harm our business.
There may be limitations on the effectiveness
of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm our Company.
We do not expect that internal
control over financial accounting and disclosure, even if timely and well established, will prevent all error and all fraud. A control
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control systems
to prevent error or fraud could materially adversely affect our business.
COVID-19 may impact our operations.
On January 30, 2020, the World
Health Organization declared the COVID-19 coronavirus outbreak a “Public Health Emergency of International Concern” and on
March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions
on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus
and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets
of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last
and what the complete financial effect will be to the Company, capital raise efforts and additional development of our technologies may
be negatively affected.
Risks Related to Our Acquisition Strategy
Our acquisition strategy exposes us to substantial
risk.
Our acquisition of companies
is subject to substantial risk, including but not limited to the failure to identify material problems during due diligence (for which
we may not be indemnified post-closing), the risk of over-paying for assets (or not making acquisitions on an accretive basis), the ability
to obtain or retain customers and the risks of entering markets where we have limited experience. While we perform due diligence on prospective
acquisitions, we may not be able to discover all potential operational deficiencies in such entities.
Our
acquisition targets may not perform as expected or the returns from such businesses may not support the financing utilized to acquire
them or maintain them. Furthermore, integration and consolidation of acquired businesses requires substantial human, financial and other
resources and may divert management’s attention from our existing business concerns, disrupt our ongoing business or not be successfully
integrated. Even if we consummate businesses that we believe will be accretive, those businesses may in fact result in a decrease in revenues
as a result of incorrect assumptions in our evaluation of such businesses, unforeseen consequences, or other external events beyond our
control. Furthermore, if we consummate any future acquisitions, our capitalization and results of operations may change significantly,
and stockholders will generally not have the opportunity to evaluate the economic, financial, and other relevant information that we will
consider in determining the application of these funds and other resources. As a result, the consummation of acquisitions may have a material
adverse effect on our business, financial condition, results of operations and cash flows.
We may experience difficulty as we evaluate,
acquire and integrate businesses that we may acquire, which could result in drains on our resources, including the attention of our management,
and disruptions of our on-going business.
We acquire small to mid-sized
businesses in various industry segments. Generally, because such businesses are privately held, we may experience difficulty in evaluating
potential target businesses as much of the information concerning these businesses is not publicly available. Therefore, our estimates
and assumptions used to evaluate the operations, management and market risks with respect to potential target businesses may be subject
to various risks and uncertainties. Further, the time and costs associated with identifying and evaluating potential target businesses
may cause a substantial drain on our resources and may divert our management team’s attention away from the operations of our businesses
for significant periods of time.
In addition, we may have difficulty
effectively integrating and managing acquisitions. The management or improvement of businesses we acquire may be hindered by a number
of factors, including limitations in the standards, controls, procedures and policies implemented in connection with such acquisitions.
Further, the management of an acquired business may involve a substantial reorganization of the business’ operations resulting in
the loss of employees and customers or the disruption of our ongoing businesses. We may experience greater than expected costs or difficulties
relating to an acquisition, in which case, we might not achieve the anticipated returns from any particular acquisition.
We may not be able to effectively integrate
the businesses that we acquire.
Our ability to realize the
anticipated benefits of acquisitions will depend on our ability to integrate those businesses with our own. The combination of multiple
independent businesses is a complex, costly and time-consuming process and there can be no assurance that we will be able to successfully
integrate businesses into our business, or if such integration is successfully accomplished, that such integration will not be costlier
or take longer than presently contemplated. Integration of future acquisitions may include various risks and uncertainties, including
the factors discussed in the paragraph below. If we cannot successfully integrate and manage the businesses within a reasonable time,
we may not be able to realize the potential and anticipated benefits of such acquisitions, which could have a material adverse effect
on our stock price, business, cash flows, results of operations and financial position.
We will consider acquisitions
that we believe will complement, strengthen and enhance our growth. We evaluate opportunities on a preliminary basis from time to time,
but these transactions may not advance beyond the preliminary stages or be completed. Such acquisitions are subject to various risks and
uncertainties, including:
| ● | the
inability to integrate effectively the operations, products, technologies and personnel of the acquired companies (some of which are
in diverse geographic regions) and achieve expected synergies; |
| ● | the
potential disruption of existing business and diversion of management’s attention from day-to-day operations; |
| ● | the
inability to maintain uniform standards, controls, procedures and policies; |
| ● | the
need or obligation to divest portions of the acquired companies; |
| ● | the
potential failure to identify material problems and liabilities during due diligence review of acquisition targets; |
| ● | the
potential failure to obtain sufficient indemnification rights to fully offset possible liabilities associated with acquired businesses;
and |
| ● | the
challenges associated with operating in new geographic regions. |
The integration
of our acquisitions may result in significant accounting charges that adversely affect the announced results of our Company.
The financial results of our
Company may be adversely affected by cash expenses and non-cash accounting charges incurred in connection with our recent acquisitions.
In addition to the anticipated cash charges, costs associated with the amortization of intangible assets are expected. The price of our
common stock could decline to the extent our financial results are materially affected by the foregoing charges or if the foregoing charges
are larger than anticipated.
Our planned acquisitions
may result in unexpected consequences to our business and results of operations.
Although we believe that our
planned acquisitions will generally be subject to risks similar to those to which we are subject to in our existing operations, we may
not have discovered all risks applicable to these businesses during the due diligence process. Some of these risks could produce unexpected
and unwanted consequences for us. Undiscovered risks may result in us incurring financial liabilities, which could be material and have
a negative impact on our business operations.
Failure to manage our growing and changing
business could have a material adverse effect on our business, prospects, financial condition, and results of operations.
As we grow, we expect to encounter
additional challenges to our internal processes, capital commitment process, and acquisition funding and financing capabilities. Our existing
operations, personnel, systems, and internal control may not be adequate to support our growth and expansion and may require us to make
additional unanticipated investments in our infrastructure. To manage the future growth of our operations, we will be required to improve
our administrative, operational, and financial systems, procedures, and controls, and maintain, expand, train, and manage our growing
employee base. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute
our business strategies successfully or respond to competitive pressures. As a result, our business, prospects, financial condition, and
results of operations could be materially and adversely affected.
We face competition for businesses that
fit our acquisition strategy and, therefore, we may have to acquire targets at sub-optimal prices or, alternatively, forego certain acquisition
opportunities.
Our acquisition strategy is
focused on the acquisition of small to mid-sized businesses. In pursuing such acquisitions, we expect to face strong competition from
a wide range of other potential purchasers. Although the pool of potential purchasers for such businesses is typically smaller than for
larger businesses, those potential purchasers can be aggressive in their approach to acquiring such businesses. Furthermore, we expect
that we will need to use third-party financing in order to fund some or all of these potential acquisitions, thereby increasing our acquisition
costs. To the extent that other potential purchasers do not need to obtain third-party financing or are able to obtain such financing
on more favorable terms, they may be in a position to be more aggressive with their acquisition proposals. As a result, in order to be
competitive, our acquisition proposals may need to be aggressively priced, including at price levels that exceed what we originally determined
to be fair or appropriate. Alternatively, we may determine that we cannot pursue on a cost-effective basis what would otherwise be an
attractive acquisition opportunity.
We may not be able to successfully fund
acquisitions due to the unavailability of equity or debt financing on acceptable terms, which could impede the implementation of our acquisition
strategy.
We intend to finance acquisitions
primarily through additional debt and equity financings. Because the timing and size of acquisitions cannot be readily predicted, we may
need to be able to obtain funding on short notice to benefit fully from attractive acquisition opportunities. The sale of additional shares
of any class of equity will be subject to market conditions and investor demand for such shares at prices that may not be in the best
interest of our stockholders. The sale of additional equity securities could also result in dilution to our stockholders. The incurrence
of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants
that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. These risks may
materially adversely affect our ability to pursue our acquisition strategy.
We may change our management and acquisition
strategies without the consent of our stockholders, which may result in a determination by us to pursue riskier business activities.
We may change our strategy
at any time without the consent of our stockholders, which may result in our acquiring businesses or assets that are different from, and
possibly riskier than, the strategy described in this prospectus. A change in our strategy may increase our exposure to interest rate
and currency fluctuations, subject us to regulation under the Investment Company Act or subject us to other risks and uncertainties
that affect our operations and profitability.
In the future, we may seek to enter into
credit facilities to help fund our acquisition capital and working capital needs. These credit facilities may expose us to additional
risks associated with leverage and may inhibit our operating flexibility.
We may seek to enter into
credit facilities with third-party lenders to help fund our acquisitions. Such credit facilities will likely require us to pay a commitment
fee on the undrawn amount and will likely contain a number of affirmative and restrictive covenants. If we violate any such covenants,
our lenders could accelerate the maturity of any debt outstanding. Such debt may be secured by our assets, including the stock we may
own in businesses that we acquire. Our ability to meet our debt service obligations may be affected by events beyond our control and will
depend primarily upon cash produced by businesses that we currently manage and may acquire in the future and distributed or paid to us.
Any failure to comply with the terms of our indebtedness may have a material adverse effect on our financial condition.
In addition, we expect that
such credit facilities will bear interest at floating rates which will generally change as interest rates change. We will bear the risk
that the rates that we are charged by our lenders will increase faster than we can grow the cash flow from our businesses or businesses
that we may acquire in the future, which could reduce profitability, materially adversely affect our ability to service our debt, cause
us to breach covenants contained in our third-party credit facilities and reduce cash flow available for distribution.
If, in the future, we cease to control and
operate our businesses or other businesses that we acquire in the future or engage in certain other activities, we may be deemed to be
an investment company under the Investment Company Act.
We have the ability to make
investments in businesses that we will not operate or control. If we make significant investments in businesses that we do not operate
or control, or that we cease to operate or control, or if we commence certain investment-related activities, we may be deemed to be an
investment company under the Investment Company Act. Our decision to sell a business will be based upon financial, operating and
other considerations rather than a plan to complete a sale of a business within any specific time frame. If we were deemed to be an investment
company, we would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from
the Securities and Exchange Commission, or the SEC, or modify our investments or organizational structure or our contract rights to fall
outside the definition of an investment company. Registering as an investment company could, among other things, materially adversely
affect our financial condition, business and results of operations, materially limit our ability to borrow funds or engage in other transactions
involving leverage and require us to add directors who are independent of us and otherwise will subject us to additional regulation that
will be costly and time-consuming.
If intangible assets
and goodwill that we recorded in connection with our acquisitions become impaired, we may have to take significant charges against earnings.
In
connection with the accounting for our completed acquisitions, we may be required to record a significant amount of intangible assets,
including developed technology, in-process research and development, and customer relationships relating to the acquired product lines,
and goodwill. Under generally accepted accounting principles in the United States, we must assess, at least annually and potentially more
frequently, whether the value of indefinite-lived intangible assets and goodwill have been impaired. Intangible assets and goodwill are
assessed for impairment in the event of an impairment indicator. Any reduction or impairment of the value of intangible assets and goodwill
will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity
in future periods.
Risks Relating to Our Intellectual Property Rights
The failure to obtain or maintain patents,
licensing agreements and other intellectual property could materially impact our ability to compete effectively.
In order for our business
to be viable and to compete effectively, we need to develop and maintain, and we will heavily rely on, a proprietary position with respect
to our technologies and intellectual property. However, there are significant risks associated with our actual or proposed intellectual
property. The risks and uncertainties that we face with respect to our rights principally include the following:
|
● |
pending patent applications, we have filed or will file may not result in issued patents or may take longer than we expect to result in issued patents; |
|
● |
we may be subject to interference proceedings; |
|
● |
we may be subject to reexamination proceedings; |
|
● |
we may be subject to post grant review proceedings; |
|
● |
we may be subject to inter partes review proceedings; |
|
● |
we may be subject to derivation proceedings; |
|
● |
we may be subject to opposition proceedings in the U.S. or in foreign countries; |
|
● |
any patents that are issued to us may not provide meaningful protection; |
|
● |
we may not be able to develop additional proprietary technologies that are patentable; |
|
● |
other companies may challenge patents licensed or issued to us; |
|
● |
other companies may have independently developed and patented (or may in the future independently develop and patent) similar or alternative technologies, or duplicate our technologies; |
|
● |
other companies may design around technologies we have licensed or developed; |
|
● |
enforcement of patents is complex, uncertain, and very expensive and we may not be able to secure, enforce and defend our patents; and |
|
● |
if we were to ever seek to enforce our patents in ligation, there is some risk that they could be deemed invalid, not infringed, or unenforceable. |
We cannot be certain that
any patents will be issued because of any pending or future applications, or that any patents, once issued, will provide us with adequate
protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid or unenforceable,
or narrowed in scope. In addition, since publication of discoveries in scientific or patent literature often lags actual discoveries,
we cannot be certain that we or our licensors were the first to invent or to file patent applications covering them.
It is also possible
that others may have or may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses
requiring the payment of significant fees or royalties to enable us to conduct our business. There is no guarantee that such licenses
will be available based on commercially reasonable terms. As to those patents that we have licensed, our rights depend on maintaining
our obligations to the licensor under the applicable license agreement, and we may be unable to do so.
If we are unable to obtain and maintain
patent protection for our products, or if the scope of the patent protection obtained is not sufficiently broad, competitors could develop
and commercialize products similar or identical to ours, and our ability to successfully commercialize our products could be impaired.
The patent prosecution process
is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable
cost, in a timely manner, or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our development
output before it is too late to obtain patent protection.
The patent position of life
science companies generally is highly uncertain, involves complex legal and factual questions and has in past years been the subject of
much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States
and we may fail to seek or obtain patent protection in all major markets. For example, unlike the U.S., European patent law restricts
the patentability of methods of treatment of the human body. Our pending and future patent applications may not result in patents being
issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive
technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries
may diminish the value of our patents or narrow the scope of our patent protection, even post-grant.
Recent patent reform legislation
has increased the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued
patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act
includes a number of significant changes to United States patent law. These include provisions that affect the way patent applications
are prosecuted and may also affect patent litigation. The U.S. Patent and Trademark Office, or USPTO, recently developed new regulations
and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the
Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear
what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation
could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our
issued patents, all of which could have a material adverse effect on our business and financial condition.
Moreover, we may be subject
to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter
partes review, post-grant review or interference proceedings challenging our patent rights (whether licensed or otherwise held)
or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or
invalidate, our patent rights (whether licensed or otherwise held), allow third parties to commercialize our technology or products and
compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing
third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications (whether
licensed or otherwise held) is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize
current or future product candidates.
Even if our patent applications
(whether licensed or otherwise held) result in the issuance of patents, they may not issue in a form that will provide us with any meaningful
protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be
able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.
The issuance of a patent is
not conclusive as to its inventorship, scope, validity or enforceability, and our licensed or owned patents may be challenged in the courts
or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent
claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit our ability to stop others from using
or commercializing similar or identical products, or limit the duration of the patent protection of our products. Given the amount of
time required for the development, testing and regulatory review of new life science product candidates, patents protecting such candidates
might expire before or shortly after such candidates are commercialized. As a result, our intellectual property rights portfolio may not
provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We may become involved in lawsuits to protect
or enforce our intellectual property rights, which could be expensive, time-consuming, and ultimately unsuccessful.
Competitors may infringe our
intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive
and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging
that we infringe their intellectual property or that our intellectual property is invalid or unenforceable. In addition, in a patent infringement
proceeding, a court may decide that a licensed or owned patent of ours is invalid or unenforceable, in whole or in part, construe the
patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do
not cover that technology. Moreover, lawsuits to protect or enforce our intellectual property rights could be expensive, time-consuming,
and ultimately unsuccessful.
Third parties may initiate legal proceedings
alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain.
Our commercial success depends
upon our ability to develop, manufacture, market and sell our product candidates without infringing the proprietary rights of third parties.
There is considerable intellectual property litigation in the life sciences industry. We cannot guarantee that our product candidates
will not infringe third-party patents or other proprietary rights. We may become party to, or threatened with, future adversarial proceedings
or litigation regarding intellectual property rights with respect to our products and technology, including inter partes review,
interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assert infringement
claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.
If we are found to infringe
a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing
and marketing our products. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even
if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed
to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could
be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a
patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business
operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets
of third parties could have a similar negative impact on our business.
Obtaining and maintaining
our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by
governmental patent agencies, and our own patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees
and annuities on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of
the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment
of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment
or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance
events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond
to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In
such an event, our competitors might be able to enter our markets, which could have a material adverse effect on our business.
We may be subject to claims by third parties
asserting that our employees or we have misappropriated their intellectual property or claiming ownership of what we regard as our own
intellectual property.
Certain employees and contractors
were previously employed at universities or other companies, including potential competitors. Although we try to ensure that our employees
and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these
employees or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s
former employer. Litigation may be necessary to defend against these claims, and any such litigation could have an unfavorable outcome.
In addition, while it is our
policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements
assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops
intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and
we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what
we regard as our intellectual property.
If we fail in prosecuting
or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and adverse results,
and be a distraction to management.
Some intellectual property which we own
or have licensed may have been discovered through government funded programs such as, for example, the government funded programs referenced
in intellectual property licensed under the LLU License Agreement, and thus may be subject to federal regulations such as “march-in”
rights, certain reporting requirements, and a preference for United States industry. Compliance with such regulations may limit our exclusive
rights, subject us to expenditure of resources with respect to reporting requirements and limit our ability to contract with non-U.S.
manufacturers.
Some of the intellectual property
rights we own or have licensed have been generated using United States government funding and may therefore be subject to certain federal
regulations. As a result, the United States government may have certain rights to intellectual property embodied in our current or future
products and product candidates pursuant to the Bayh-Dole Act of 1980. These United States government rights in certain inventions developed
under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental
purpose. In addition, the United States government has the right to require us to grant exclusive, partially exclusive, or non-exclusive
licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize
the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary
to meet requirements for public use under federal regulations (also referred to as “march-in rights”). The United States government
also has the right to take title to these inventions if we fail to disclose the invention to the government and fail to file an application
to register the intellectual property within specified time limits. In addition, the United States government may acquire title to these
inventions in any country in which a patent application is not filed within specified time limits. Intellectual property generated under
a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial
resources. In addition, the United States government requires that any products embodying the subject invention or produced using the
subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner
of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential
licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture
is not commercially feasible. This preference for United States manufacturers may limit our ability to contract with non-U.S. product
manufacturers for products covered by such intellectual property. Any exercise by the government of any of the foregoing rights could
harm our competitive position, business, financial condition, results of operations and prospects.
Intellectual property litigation could cause
us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor,
litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract
our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results
of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be
negative, it could have an adverse effect on the price of our common stock. Such litigation or proceedings could increase our operating
losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may
not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be
able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to
compete in the marketplace.
We may spend considerable resources developing
and maintaining patents, licensing agreements and other intellectual property that may later be abandoned or may otherwise never result
in products brought to market.
Not all technologies and candidate
products that initially show potential as the basis for future products ultimately meet the rigors of our development process and as a
result may be abandoned and/or never otherwise result in products brought to market. In some cases, prior to abandonment we may be
required to incur significant costs developing and maintaining intellectual property and/or maintaining license agreements and our business
could be harmed by such costs.
We rely on information technology, and if
we are unable to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, our operations
could be disrupted, and our business could be negatively affected.
We rely on information technology
networks and systems to process, transmit and store electronic and financial information; to coordinate our business; and to communicate
within our Company and with customers, suppliers, partners and other third parties. These information technology systems may be susceptible
to damage, disruptions or shutdowns, hardware or software failures, power outages, computer viruses, cyber-attacks, telecommunication
failures, user errors or catastrophic events. If our information technology systems suffer severe damage, disruption or shutdown, and
our business continuity plans do not effectively resolve the issues in a timely manner, our operations could be disrupted, and our business
could be negatively affected. In addition, cyber-attacks could lead to potential unauthorized access and disclosure of confidential information,
and data loss and corruption. There is no assurance that we will not experience these service interruptions or cyber-attacks in the future.
Risks Related to Our Common Stock
We received a written notice from Nasdaq
that we have failed to comply with certain listing requirements of the Nasdaq Stock Market, which could result in our Common Stock being
delisted from the Nasdaq Stock Market.
On April 28, 2023, we received
a notification from Nasdaq related to our failure to maintain a minimum bid price of $1 per share. Based upon the closing bid price of
our common stock between March 16, 2023 and April 27, 2023, we no longer met this requirement. However, the Nasdaq Listing Rules also
provide us a compliance period of 180 calendar days in which to regain compliance. Accordingly, if at any time from the date of this notice
until October 25, 2023, the closing bid price our common stock is at least $1 for a minimum of ten consecutive business days, Nasdaq will
provide us with written confirmation of compliance and the matter will be closed. To qualify, we
would be required to meet all other initial listing standards, except for the minimum bid price requirement. In addition, we would be
required to notify Nasdaq of our intent to cure the deficiency during the second compliance period. If we do not regain compliance with
the minimum bid price requirement by the end of the compliance period (or the second compliance period, if applicable), our common stock
will become subject to delisting. If we are delisted from Nasdaq, our common stock may be eligible for trading on an over-the-counter
market. If we are not able to obtain a listing on another stock exchange or quotation service for our common stock, it may be extremely
difficult or impossible for stockholders to sell their shares. We intend to monitor the closing bid price of our common stock and may
be required to seek approval from our stockholders to affect a reverse stock split of the issued and outstanding shares of our common
stock. However, there can be no assurance that the reverse stock split would be approved by our stockholders. Further, there can be no
assurance that the market price per new share of our common stock after the reverse stock split will remain unchanged or increase in proportion
to the reduction in the number of old shares of our common stock outstanding before the reverse stock split. Even if the reverse stock
split is approved by our stockholders, there can be no assurance that we will be able to regain compliance with the minimum bid price
requirement or will otherwise be in compliance with other Nasdaq listing rules.
In
addition to the foregoing, on May 23, 2023, we received written notice from Nasdaq that, based upon the stockholders equity reported
by the Company in its Form 10-Q for the period ended March 31, 2023, and as of March 31, 2023, the Company was no longer in compliance
with Nasdaq Listing Rule 5550(b)(1), which requires a company to maintain a minimum of $2,500,000 in stockholders’ equity, a market
value of listed securities of at least $35 million, or net income from continuing operations of $500,000 in the most recently completed
fiscal year or in two of the three most recently completed fiscal years (the “Continued Listing Requirements”). The May notification
letter further provided that the Company has 45 calendar days, or until July 7, 2023, to submit a plan to regain compliance and if the
plan is accepted by Nasdaq, an extension of up to 180 calendar days, or until November 19, 2023 to evidence compliance. On June
22, 2023, we received a letter from Nasdaq notifying the Company that it has failed to maintain compliance with the minimum bid price
rule in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”) as the closing price of Company’s common stock
has remained below $1.00 for over 30 consecutive trading days. We intend to submit an appeal to Nasdaq, which stays the delisting and
suspension of our securities pending the decision of the Nasdaq Hearings Panel (the “Panel”) no later than 4:00 p.m. Eastern
Time on June 29, 2023. At the hearing, we intend to present its views and its plans to regain compliance with the Equity and Minimum Bid
Price Rules to the Panel. There can be no assurance that we will be able to evidence compliance with the Minimum Bid Price Rule prior
to the hearing. It is our understanding that the Panel typically issues its decision within 30 days after the hearing.
If we are delisted from Nasdaq,
but obtain a substitute listing for our common stock, it will likely be on a market with less liquidity, and therefore experience potentially
more price volatility than experienced on Nasdaq. Stockholders may not be able to sell their shares of common stock on any such substitute
market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result
of these factors, if our common stock is delisted from Nasdaq, the value and liquidity of our common stock, warrants and pre-funded warrants
would likely be significantly adversely affected. A delisting of our common stock from Nasdaq could also adversely affect our ability
to obtain financing for our operations and/or result in a loss of confidence by investors, employees and/or business partners.
We do not expect to pay dividends in the
foreseeable future.
We do not intend to declare
dividends for the foreseeable future, as we anticipate that we will reinvest any and all future earnings in the development and growth
of our business. Therefore, investors will not receive any funds unless they sell their securities, and holders may be unable to sell
their securities on favorable terms or at all. We cannot assure you of a positive return on your investment or that you will not lose
the entire amount of your investment.
We may engage in future acquisitions or
strategic transactions, including the transaction with Cellvera Global, which may require us to seek additional financing or financial
commitments, increase our expenses and/or present significant distractions to our management.
As described herein, on April
19, 2023 entered into an Asset Purchase Agreement with Cellvera Global, pursuant to which we agreed to acquire from Cellvera Ltd a 50%
membership interest in GRA, together with certain other intellectual property assets and all goodwill related thereto. We will need to
acquire additional financing to fund our obligations under the Asset Purchase Agreement or to fund other potential acquisitions or strategic
transactions (particularly if the acquired entity is not cash flow positive or does not have significant cash on hand). Obtaining financing
through the issuance or sale of additional equity and/or debt securities, if possible, may not be at favorable terms and may result in
additional dilution to our current stockholders. Additionally, any such transaction may require us to incur non-recurring or other charges,
may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business,
which could adversely affect our operations and financial results. For example, an acquisition or strategic transaction may entail numerous
operational and financial risks, including the risks outlined above and additionally:
| ● | exposure
to unknown liabilities; |
| ● | disruption
of our business and diversion of our management’s time and attention in order to develop acquired products or technologies; |
| ● | higher
than expected acquisition and integration costs; |
| ● | write-downs
of assets or goodwill or impairment charges; |
| ● | increased
amortization expenses; |
| ● | difficulty
and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; |
| ● | impairment
of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and |
| ● | inability
to retain key employees of any acquired businesses. |
Accordingly, although there can be no assurance
that we will undertake or successfully complete any transactions of the nature described above, and any transactions that we do complete
could have a material adverse effect on our business, results of operations, financial condition and prospects.
While we have entered into an Asset Purchase
Agreement with Cellvera Global and a non-binding letter of intent with the Natural State Entities, we cannot assure you that the transactions
contemplated by the Asset Purchase Agreement ot the non-binding letter of intent will be consummated or, that if such transactions are
consummated, they will be accretive to stockholder value.
As described herein, we entered
into an Asset Purchase Agreement with Cellvera Global, pursuant to which we agreed to acquire from Cellvera Ltd a 50% membership interest
in GRA, together with certain other intellectual property assets and all goodwill related thereto. We also entered into a non-binding
letter of intent with the Natural State Entities. We will be required to obtain additional financing through the sale of additional equity
and/or debt securities to fund such obligations under the Asset Purchase Agreement and the non-binding letter of intent. We can provide
no assurance that we will be successful in securing such financing. In addition, such financing, if available, may not be on favorable
terms and may result in additional dilution to our current stockholders.
The closing of the transaction
contemplated by the Asset Purchase Agreement and the non-binding letter of intent are subject to the satisfaction or waiver of a number
of closing conditions. There is no guarantee that the conditions to closing will be satisfied. Further, even if all conditions to closing
are satisfied, there is no guarantee that the transaction will be completed in the time frame or in the manner currently anticipated,
or that we will recognize the anticipated benefits of the transaction.
Upon dissolution of our Company, you may
not recoup all or any portion of your investment.
In the event of a liquidation,
dissolution or winding-up of our Company, whether voluntary or involuntary, our assets would be used to pay all of our debts and liabilities,
and only thereafter would any remaining assets be distributed to our stockholders, subject to rights of the holders of the Preferred Stock,
if any, on a pro rata basis. There can be no assurance that we will have assets available from which to pay any amounts
to our stockholders upon such a liquidation, dissolution or winding-up. In such an event, you would lose all of your investment.
Limitation of Liability and Indemnification
of Management.
The Delaware General Corporation
Law and the Company’s Amended and Restated Certificate of Incorporation provide for the limitation of the liability of directors
for monetary damages. Such provisions may discourage shareholders from bringing a lawsuit against directors for breaches of fiduciary
duty and may also have the effect of reducing the likelihood of derivative litigation against directors and officers even though such
action, if successful, might otherwise be a benefit to the Company’s shareholders. In addition, a shareholder’s investment
in the Company may be adversely affected to the extent that costs of settlement and damage awards against the Company’s officers
or directors are paid by the Company pursuant to such provisions. Additionally, in accordance with Delaware law and the Company’s
Amended and Restated Certificate of Incorporation, the Company shall indemnify, hold harmless and provide advancement of expenses, to
the fullest extent permitted by applicable law, directors, officers, employees, and agents that are made a party or threatened to be made
a party to legal proceedings by reason of the fact that such parties were working at the request of the Company. We direct you to
the Company’s Amended and Restated Certificate of Incorporation for more information.
Anti-takeover provisions under Delaware
law could discourage, delay or prevent a change in control of our Company and could affect the trading price of our securities.
We are a Delaware corporation,
and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting
us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested
stockholder, even if a change in control would be beneficial to our existing stockholders.
Our management team is required to devote
substantial time to public company compliance initiatives.
As a publicly reporting company,
we incur significant legal, accounting, and other expenses. Our management and other personnel devote a substantial amount of time to
comply with our reporting obligations. Moreover, these reporting obligations increase our legal and financial compliance costs and make
some activities more time-consuming and costly.
Failure to develop our internal controls
over financial reporting as we grow could have an adverse impact on us.
As our Company matures, we
will need to develop our current internal control systems and procedures to manage our growth. We are required to establish and maintain
appropriate internal controls over financial reporting. Failure to establish appropriate controls, or any failure of those controls once
established, could adversely impact our public disclosures regarding our business, financial condition, or results of operations. In addition,
management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed
in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses
and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment
of our internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s
assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
We could issue “blank check” preferred
stock without stockholder approval with the effect of diluting interests of then-current stockholders and impairing their voting
rights, and provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
Our Amended and Restated Certificate
of Incorporation provides for the authorization to issue up to 3,000,000 shares of “blank check” preferred stock with
designations, rights and preferences as may be determined from time to time by our board of directors. Our board of directors is empowered,
without stockholder approval, to issue one or more series of preferred stock with dividend, liquidation, conversion, voting or other rights
which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock
could be used as a method of discouraging, delaying, or preventing a change in control. For example, it would be possible for our board
of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change
control of our company. In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of
control.
Our Amended and Restated Certificate of
Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially
all disputes between the Company and its stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum
for disputes with the Company or its directors, officers or employees.
Our Amended and Restated Certificate
of Incorporation provides that unless the Company consents in writing to the selection of an alternative forum, the State of Delaware
is the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting
a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s
stockholders, (iii) any action asserting a claim against the Company, its directors, officers or employees arising pursuant to any provision
of the Delaware General Corporation Law (the “DGCL”) or our Amended and Restated Certificate of Incorporation or
the Company’s Amended and Restated Bylaws, or (iv) any action asserting a claim against the Company, its directors, officers, employees
or agents governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court
of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable
party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested
in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject
matter jurisdiction. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities
Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims
may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to
enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Section 22 of the Securities
Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the
Securities Act or the rules and regulations thereunder. However, our Amended and Restated Bylaws contain a federal forum provision which
provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United
States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities
Act. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation are deemed to have
notice of and consented to this provision. The Supreme Court of Delaware has held that this type of exclusive federal forum provision
is enforceable. There may be uncertainty, however, as to whether courts of other jurisdictions would enforce such a provision, if applicable.
These choice of forum provisions
may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or
its directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
Alternatively, if a court were to find our choice of forum provisions contained in either our Amended and Restated Certificate of Incorporation
or Amended and Restated Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving
such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
We are an “emerging growth company”
and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common
stock less attractive to investors.
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we intend to take
advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging
growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved. In addition, pursuant to Section 107 of the JOBS Act, as an “emerging growth company”
we intend to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying
with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable
to those of companies that comply with public company effective dates for complying with new or revised accounting standards.
We cannot predict if investors
will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage
of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth
company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion
or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public
offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years;
or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
BUSINESS
Our Mission
We believe the world
needs—and deserves—a new approach to health innovation that is focused on harnessing the power of large groups of stakeholders
who work together to ensure that the most promising treatments make it into the hands of people who need them most.
We were incorporated in the
State of Delaware on September 28, 2017, and our headquarters are located in Richmond, Virginia. The company was founded with a mission
of bringing stakeholders together, to transform promising innovations into products and services that could address some of the most challenging
needs. The socialization of innovation through engaging stakeholders in every aspect of it, is key to transforming more innovations, more
rapidly, and more efficiently.
At
inception, the first innovation we took on was an immune modulation technology titled ADI/Adimune with a focus on prolonging life and
enhancing life quality of patients that have undergone organ transplants. Since then, we expanded our portfolio of innovations, and we
continue to evaluate a variety of promising health innovations.
Our Model
Our
mission is to advance promising health innovations. Our business model begins with identifying and securing innovations through licensing
or acquisition. Once an innovation is secured and becomes “An Aditxt Company,” we seek to accelerate its growth through supporting
and scaling its innovation, operations, and commercialization.
Our
model focuses on identifying promising health innovation and surrounding it with activation resources that take a systemized approach
to bringing that idea to life. We seek to engage various stakeholders for each of our programs on every level: This includes identifying
researchers and research institution partners, such as Stanford University; leading health institutions to get critical trials underway,
such as the Mayo Clinic; manufacturing partners who enable us to take innovations from preclinical to clinical; municipalities and governments,
such as the city of Richmond and the state of Virginia and public health agencies launch our programs, such as Pearsanta’s laboratory;
and thousands of shareholders around the globe. What was once a promising innovation becomes a purposeful product that has the power to
change lives.
We
are not about a single idea or a single innovation. It is about making sure the right innovation is made possible. With any type of innovation,
there is power in numbers and power in people who believe in our mission of “Making Promising Innovations Possible, Together.”
![](https://content.edgar-online.com/edgar_conv_img/2023/06/29/0001213900-23-052531_image_002.jpg)
Our Value Proposition
Far too often, promising treatment or technology
does not reach commercialization due to lack of funds and critical infrastructure. As a result, potentially life-changing and lifesaving
treatments are not available to the individuals who so desperately need them.
Our mission is to make promising
innovation a reality faster and more efficiently. Since inception, we have sought to provide the critical infrastructure consisting of
a highly experienced team and stakeholders skilled in product development, operations, commercialization, engagement and content, finance
and accounting, people, and legal. Our ecosystem has established access to industry leaders, top-rated research and medical institutions,
universities, manufacturing and distribution companies, and critical infrastructure such as CLIA-certified state-of-the art labs and GMP
manufacturing.
We bring the holistic concept
of an efficient ecosystem for advancing and accelerating innovations. Our process: We seek to discover, identify, and license or acquire
promising innovations. We then form and build out a subsidiary around each innovation and support the subsidiaries through innovation,
operations, commercialization, and corporate functions that seek to thrive and grow as a successful, monetizable business.
The Shifting Landscape of Health Innovation
Health
innovation requires significant resources. The convergence of biotech and high-tech offers new possibilities of accelerating breakthrough
innovations faster and more efficiently. This approach reflects our mission of “Making Promising Innovations Possible, Together”.
People deserve innovative solutions,
which have never been more within reach. We believe the best idea, best product and the best solution will come from creating an ecosystem
where all stakeholders, such as vendors, customers, municipalities, and shareholders contribute. When we disrupt the way we’re
innovating, through our collaborative model, we believe we can move faster and more efficiently to activate viable solutions that have
the potential to make a measurable impact.
Our Growth Strategy
The era of precision and personalized
medicine is here. We believe that people around the globe would benefit from health diagnostics and treatments that more accurately pinpoint
the problems and more precisely treat the condition.
In addition to our current
programs, Adimune and Pearsanta, we look to bring in future health innovations in the areas of software and AI, medical devices, therapeutics,
and other technologies that take a fundamentally different approach to health because they prioritize precision medicine, timely disease
root cause analysis, and targeted treatments.
Year over year, we plan to
continue building our infrastructure and adding more personalized and precision health innovations that align with our mission. These
opportunities may come in different forms such as IP, an early-stage company, or a late-stage company. We will continue to scale our
systemized approach to the innovation process, making large-scale automation and enterprise systems available to Aditxt portfolio companies
at every stage of their growth. Specifically, certain subsidiaries will need to grow through further M&A activities, operational
infrastructure implementation, and development or acquisition of critical technologies.
Our Team
Aditxt has assembled an entrepreneurial
team of experts from a variety of different business, engineering, and scientific fields, and commercial backgrounds, with collective
experience that ranges from founding startup innovation companies, to developing and marketing biopharmaceutical and diagnostic products,
to designing clinical trials, and management of private and public companies. We have deep experience in identifying and accessing promising
health innovations and developing them into products and services with the ability to scale. We understand the capital markets, both
public and private, as well as M&A and facilitating complex IPOs.
THE ADITXT PROGRAMS
ADIMUNE, INC.
Formed in January 2023, Adimune™,
Inc. (“Adimune”) is focused on leading Aditxt’s immune modulation therapeutic programs. Adimune’s proprietary
immune modulation product Apoptotic DNA Immunotherapy, or ADI-100™, which utilizes a novel approach that mimics the way our bodies
naturally induce tolerance to our own tissues. It includes two DNA molecules designed to deliver signals to induce tolerance. ADI-100
has been successfully tested in several preclinical models (skin grafting, psoriasis, type 1 diabetes, multiple sclerosis).
In May 2023, Adimune and Mayo
Clinic signed a clinical trial agreement to advance clinical studies targeting autoimmune diseases of the central nervous system (“CNS”)
with the initial focus on the rare, but debilitating, autoimmune disease Stiff Person Syndrome (“SPS”). According to the
National Organization of Rare Diseases, the exact incidence and prevalence of SPS is unknown; however, one estimate places the incidence
at approximately 1 in 1 million individuals in the general population.
Pending approval by the International Review Board,
a human trial for SPS will get underway in the second half of 2023 or the first half of 2024 with enrollment of 10-15 patients, some
of whom also have type 1 diabetes. ADI-100 will be tested for safety and efficacy. ADI-100 is designed to tolerize against an antigen
known as glutamic acid decarboxylase (“GAD”), which is implicated in type-1 diabetes, psoriasis, and in many autoimmune diseases
of the CNS.
Background
The
discovery of immunosuppressive (anti-rejection and monoclonal) drugs over 40 years ago has made possible life-saving organ transplantation
procedures and blocking of unwanted immune responses in autoimmune diseases. However, immune suppression leads to significant undesirable
side effects, such as increased susceptibility to life-threatening infections and cancers, because it indiscriminately and broadly suppresses
immune function throughout the body. While the use of these drugs has been justifiable because they prevent or delay organ rejection,
their use for treatment of autoimmune diseases and allergies may not be acceptable because of the aforementioned side effects. Furthermore,
transplanted organs often ultimately fail despite the use of immune suppression, and about 40% of transplanted organs survive no more
than 5 years.
Through
Aditxt, Adimune has the right of use to the exclusive worldwide license for commercializing ADI nucleic acid-based technology (which
is currently at the pre-clinical stage) from Loma Linda University. (See below). ADI uses a novel approach that mimics the way the body
naturally induces tolerance to our own tissues (“therapeutically induced immune tolerance”). While immune suppression requires
continuous administration to prevent rejection of a transplanted organ, induction of tolerance has the potential to retrain the immune
system to accept the organ for longer periods of time. ADI may allow patients to live with transplanted organs with significantly reduced
immune suppression. ADI is a technology platform which we believe can be engineered to address a wide variety of indications.
We
are developing ADI™ products for organ transplantation including skin allografting, autoimmune diseases, and allergies, with the
initial focus on psoriasis, type 1 diabetes and skin allografting, indications for which we have compelling preclinical data. To submit
a Biologics License Application (“BLA”) for a biopharmaceutical product, clinical safety and efficacy must be demonstrated
in clinical studies conducted with human subjects. For products in our class of drugs, the first-in-human trials will be a combination
of Phase I (safety/tolerability) and Phase II (efficacy) in affected subjects. To obtain approval to initiate the Phase I/IIa studies,
an Investigational New Drug or Clinical Trial Application will be submitted that will include a compilation of non-clinical efficacy
data as well as manufacturing and pre-clinical safety/toxicology data. To date, we have conducted non-clinical studies in a stringent
model of skin transplantation using genetically mismatched donor and recipient animals demonstrating a 3-fold increase in the survival
of the skin allograft in animals that were tolerized with ADI™ compared to animals that receive immune suppression alone. Prolongation
of graft life was observed despite discontinuation of immune suppression after the first 5 weeks. In a non-obese diabetic mouse model
of type 1 diabetes, we showed reversal of hyperglycemia with 80% of the animals showing durable glycemic control for the 40-week study
period. Additionally, in an induced non-clinical model for psoriasis, ADI™ treatment resulted in a 69% reduction in skin thickness
and a 38% decrease in skin flaking (two clinical parameters for assessment of psoriasis skin lesions). The Phase I/IIa studies in psoriasis
will evaluate the safety/tolerability of ADI™ in patients diagnosed with psoriasis. Since the drug will be administered in subjects
diagnosed with psoriasis, effectiveness of the drug to improve psoriatic lesions will also be evaluated. In the type 1 diabetes clinical
studies, newly diagnosed subjects will receive ADI™ treatment to evaluate safety and efficacy. In another Phase I/IIa study, patients
requiring skin allografts will receive weekly intra-dermal injections of ADI™ in combination with standard immune suppression to
assess safety/tolerability and possibility of reducing levels of immunosuppressive drugs as well as prolongation of graft life.
New,
focused therapeutic approaches are needed that modulate only the immune cells involved in rejection of the transplanted organ, as this
approach can be safer for patients than indiscriminate immune suppression. Such approaches are referred to as immune tolerance, and when
therapeutically induced, may be safer for patients and potentially allow long-termer survival of transplanted tissues and organs.
In
the late 1990s, academic research on these approaches was conducted at the Transplant Center in Loma Linda University (“LLU”)
in connection with a project that secured initial grant funding from the U.S. Department of Defense. The focus of that project was induction
of tolerance for skin allografting for burn victims. Twenty years of research at LLU and an affiliated incubator led to a series of discoveries
that have been translated into a large patent portfolio of therapeutic approaches that may be applied to the modulation of the immune
system to induce tolerance to self and transplanted organs.
Advantages
ADI™
is a nucleic acid-based technology (e.g., DNA-based), which we believe selectively suppresses only those immune cells involved
in attacking or rejecting self and transplanted tissues and organs. It does so by tapping into the body’s natural process of cell
turnover (apoptosis) to retrain the immune system to stop unwanted attacks on self or transplanted tissues. Apoptosis is a natural process
used by the body to clear dying cells and to allow recognition and tolerance to self-tissues. ADI™ triggers this process by enabling
the cells of the immune system to recognize the targeted tissues as “self”. Conceptually, it is designed to retrain the immune
system to accept the tissues, similar to how natural apoptosis reminds our immune system to be tolerant to our own “self”
tissues.
While
efforts have been made by various groups to promote tolerance through cell therapies and ex vivo manipulation of patient
cells (takes place outside the body), we believe we will be unique in our approach of using in-body induction of apoptosis to promote
tolerance to specific tissues. In addition, ADI treatment itself will not require additional hospitalization, only an injection
of minute amounts of the therapeutic drug into the skin.
Reduce Chronic Rejection
Moreover,
preclinical studies have demonstrated that ADI treatment significantly and substantially prolongs graft survival, in addition to successfully
“reversing” other established immune-mediated inflammatory processes.
While
immunosuppressants control acute rejection during the early time-period after receiving an organ, chronic rejection of the organ that
occurs one or more years after the transplant procedure continues to pose a major challenge for organ recipients.
Chronic
rejection has been likened to autoimmunity (a misdirected immune response that occurs when the immune system goes awry), where specific
tissues in the transplanted organ become targets of immune attack. In other words, chronic rejection may not be caused just by differences
between the donor and the recipient, but rather by an immune response by the recipient to specific tissues in the organ. Our pre-clinical
studies suggest that ADI™ has the ability to tolerize to specific tissues in a transplanted organ, and conceivably, reduce incidences
of chronic rejection.
Reduce immune suppression
Studies
in animal models have shown that conditioning/desensitizing the animals to receive the transplant, prolongs the survival of the transplanted
tissue or organ. These studies have used repeated exposure to low doses of protein components in specific organs to reduce immunologic
recognition and attack on the transplanted organ.
Based
on some of our data, we believe that with ADI™ treatment, recipients can be conditioned/desensitized, thereby retraining the immune
system to more readily accept the organ and also reduce the levels of immunosuppressive drugs needed post-transplantation.
Preformed Antibodies
Studies
have shown that presence of preformed antibodies prior to transplantation procedures increases the rate of organ rejection. Preformed
antibodies can develop in previously transplanted patients, patients who have given birth, and patients who have previously received
blood transfusions. With more than 113,000 patients on transplant waiting lists in the U.S. alone, patients with pre-existing antibodies
have much lower chances of qualifying to receive organs due to their increased risk of rejection – even with immune suppression.
Sadly,
transplanted patients have a probability of needing re-transplantation at some point due to eventual chronic rejection of their transplanted
organ, with the possible exception of some newborn recipients. With increased incidence of preformed antibodies, these patients may never
have the opportunity to receive another organ. Based on experimental data, we believe that ADI™ may have the potential to address
this issue providing these individuals better opportunities for receiving an organ.
Technology Platform
ADI™
utilizes a novel approach that mimics the way our bodies naturally induce tolerance to our own tissues. It is a technology platform,
which we believe can be engineered to address a wide variety of indications. ADI™ includes two DNA molecules which are designed
to deliver signals to induce tolerance. The first DNA molecule encodes a pro-apoptotic protein, which induces ‘programmed’
cell death (apoptosis). This is a core component of the technology because it is intended to greatly increase the recruitment of
dendritic cells, which are implicated in regulating the immune system. The second DNA molecule encodes the protein of interest (guiding
antigen), which is modified to promote a path of tolerance. The guiding antigen is intended to result in tolerance induction specific
to the tissue where the protein is found.
![](https://content.edgar-online.com/edgar_conv_img/2023/06/29/0001213900-23-052531_image_003.jpg)
ADI™ has shown efficacy
in several preclinical models (skin grafting, psoriasis, type 1 diabetes, alopecia areata and multiple sclerosis) and its efficacy can
be attributed to multiple factors:
| 1. | ADI™
does not rely on a single mechanistic approach. It has multiple components (interchangeable
target antigen, apoptosis, methylated plasmid DNA) that affect different arms of the immune
system, which can be manipulated. |
|
2. |
ADI™ activates key immune cells known
to maintain tolerance in test animals and humans. |
|
3. |
ADI™ has been successfully applied
to a stringent transplantation model. |
|
4. |
ADI™ lends itself to repeat dosing,
which may be required to achieve its full potential therapeutic effect. |
Proof of Concept: Skin Grafting
Results shown are 5 weeks
post-transplantation
The proof-of-concept experiment
performed in transplantation was a skin allograft transplantation procedure in which the donor skin was obtained from white BALB/c mice
and transplanted to black C57BL/6 mice. The experiment was designed to address a more challenging scenario where the donor tissue was
obtained from a donor which is genetically mismatched with the recipient. This is unlike clinical scenarios where the donor and recipient
are genetically matched as much as possible. While these experiments were repeated in several separate experiments, the results shown
here were obtained from a study conducted with 14 mice in the ADI™ treatment group and 7 mice in the control group. Prior to submission
of an Investigational New Drug or Clinical Trial Application, additional non-clinical studies will be conducted to establish the precise
protocol (e.g. timing of vaccine administration, dosing, and appropriate immunosuppressive agents that will be used in combination with
ADI™) that will be used in the clinical trials. Pre-clinical safety/toxicology studies have already been conducted by a GLP lab
to ensure product safety for clinical testing. These studies have shown no signs of toxicity to ADI™ treatment in mice.
![](https://content.edgar-online.com/edgar_conv_img/2023/06/29/0001213900-23-052531_image_004.jpg)
![](https://content.edgar-online.com/edgar_conv_img/2023/06/29/0001213900-23-052531_image_005.jpg)
Proof of Concept: Psoriasis
![](https://content.edgar-online.com/edgar_conv_img/2023/06/29/0001213900-23-052531_image_006.jpg)
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Psoriasis causes increased skin thickness
and scaling in an established 10-day psoriasis model |
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ADI™ treatment resulted in a 69% reduction
in skin thickening and 38% reduction in scaling over the 10-day study period |
Proof of Concept: Type 1 Diabetes
![](https://content.edgar-online.com/edgar_conv_img/2023/06/29/0001213900-23-052531_image_007.jpg)
Typically, 90% of female NOD
mice developed spontaneous autoimmune diabetes. Disease progression may be different for individual animals.
![](https://content.edgar-online.com/edgar_conv_img/2023/06/29/0001213900-23-052531_image_008.jpg)
ADI™ was administered
once a week for 8 weeks after each animal developed hyperglycemia. All animals responded with 80% showing durable response for the entire
40-week study period.
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Type 1 or autoimmune diabetes is a condition
where the body’s immune system mistakenly attacks cells in the pancreas resulting in diminished production of insulin |
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ADI™ incorporates an antigen (GAD)
expressed in the pancreas |
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Administration of ADI™ using GAD as
the antigen over an 8-week period in animals with T1D restores insulin production and reverses hyperglycemia |
Pre-clinical and Clinical Plans
The resources and efforts used
for the IND-enabling work summarized below supports both the psoriasis and TID clinical programs
High-level objectives for psoriasis
clinical program:
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● |
Completion of IND-enabling work. Aditxt
has initiated GMP manufacturing of clinical grade material that will be used for the first-in-human studies in subjects with psoriatic
lesions. Included in the manufacturing program is stability studies; the regulatory agency requires one month of stability data for
the GMP material for submission of the clinical trial application (CTA). Stability data will continue to be gathered while the clinical
trials are ongoing and up to 24 months. Aditxt has also completed the in-life portion of the toxicology studies. Safety data have
been recorded and Aditxt is now awaiting immunotoxicology data, which are forthcoming. |
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Upon completion of GMP manufacturing and
toxicology studies, a CTA will be submitted in Q4 2022 to initiate the Phase I/II FIH clinical trials. |
The FIH clinical studies will
combine Phase I (designed to test clinical safety) and Phase IIa (designed to obtain proof of effectiveness in human subjects), in subjects
with psoriatic skin lesions. We have selected this indication for several reasons, including:
|
1. |
Our existing preclinical data have shown
promising results in reducing scaling and skin thickness in the mouse model; |
|
2. |
The relative ease of visualization of healing
of psoriatic lesions; and |
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3. |
The need for therapies that suitable and
justifiable in individuals with mild to moderate psoriasis (current biologic therapies are primarily used in moderate to severe cases). |
We have identified a contract
research organization with capabilities to conduct a multi-center study and ability to recruit the needed number of subjects to complete
the clinical trials. Upon approval by the regulatory agency clinical trials will be initiated.
High-level objectives for type
1 diabetes (T1D) clinical program:
|
● |
Completion of IND-enabling work. Aditxt
has initiated GMP manufacturing of clinical grade material that will be used for the first-in-human studies in subjects with psoriatic
lesions. Included in the manufacturing program is stability studies; the regulatory agency requires one month of stability data for
the GMP material for submission of the clinical trial application (CTA). Stability data will continue to be gathered while the clinical
trials are ongoing and up to 24 months. Aditxt has also completed the in-life portion of the toxicology studies. Safety data have
been recorded and Aditxt is now awaiting immunotoxicology data, which are forthcoming. |
|
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● |
Clinical Phase I/II Study to demonstrate
safety and clinical proof-of-concept in T1D |
Our clinical studies will combine
Phase I (designed to test clinical safety) and Phase II (designed to obtain proof of effectiveness in human subjects), in T1D patients.
We have selected this indication for several reasons, including:
|
1. |
Our existing preclinical data have shown
promising results using ADI™ to reverse hyperglycemia in the mouse model; and |
|
|
|
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2. |
There is currently no treatment for T1D
and the only option for patients suffering from T1D is insulin replacement therapy. |
We will be identifying clinical
trial centers with adequate patients. Upon approval by the FDA and/or the applicable regulatory agency clinical trials will be initiated.
High-level objectives for skin
allograft clinical program:
|
● |
Completion of preclinical studies to identify
the appropriate protocol for dosing and combination of ADI™ with immune suppression protocols. |
|
|
|
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● |
Completion of IND-enabling work including
GMP manufacturing and toxicology studies. |
|
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|
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Clinical Phase I/II Study to demonstrate
safety and clinical proof-of-concept in patients requiring skin allografts. |
Our clinical studies will combine
Phase I (designed to test clinical safety) and Phase II (designed to obtain proof of effectiveness in human subjects), in patients requiring
skin allografts. We have selected this indication for several reasons, including:
|
1. |
Our existing preclinical data have shown
promising results using ADI™ to prolong skin allograft survival in mismatched mouse model; and |
|
|
|
|
2. |
The relative ease of visualization of graft
quality without the need for biopsies. |
We will be identifying clinical
trial centers with adequate patients. Upon approval by the FDA and/or the applicable regulatory agency clinical trials will be initiated.
We are developing our immune
monitoring platforms with the objective of utilizing them as clinical assays in pre-clinical and clinical studies. The multiplex technologies
could potentially allow evaluation of more analytes with less tissue samples.
Drug Approval Process
In the United States, FDA approval
is required before any new drugs can be introduced to the market. We currently have a product candidate for our first-in-human studies,
but as of the date of report, we have not submitted an application to the regulatory agencies for approval.
We are working with a contract
manufacturer who has the know-how, product ingredients including plasmid DNA molecules, and our patent-pending bacterial strain. Several
batch runs have been successfully completed to demonstrate our ability to produce the DNA plasmids in a GMP facility. Based on validation
studies, we are reasonably confident in our ability to produce clinical grade product candidates at larger scales. The contract manufacturer
has provided a proposal for manufacturing of our clinical grade material, which will be signed and accepted once we are ready to initiate
GMP manufacturing. We are not currently party to an agreement with this contract manufacturer.
The product candidate selected
for clinical trials must be subjected to pre-clinical safety/toxicology studies by an independent GLP (Good Laboratory Practice) laboratory
to demonstrate its suitability for clinical testing in human patients. Upon completion of manufacturing and safety/toxicology testing,
an Investigational New Drug (IND) application will be prepared for submission to the regulatory agencies.
Upon receipt of clearance to
initiate clinical testing, the ADI™ product can be tested in human patients. Our product will be tested in clinical trials, one
in patients with psoriasis and one in patients who require skin allografting. Therefore, our first-in-human studies will be combined
Phase I/Phase II studies in which safety and efficacy data will be obtained. We plan to start with in skin indications (psoriasis and
skin allografting) because we believe these indications will be most efficient in providing safety and efficacy data in clinical trials.
In parallel, we will continue to develop additional product formulations for other indications.
We are developing our immune
monitoring platforms with the objective of utilizing them as clinical assays in pre-clinical and clinical studies. The multiplex technologies
could potentially allow evaluation of more analytes with less tissue samples.
Target Market
Psoriasis affects close to
100 million people worldwide and presents a large market estimated at over $20 billion annually. Treatments range include topical and
systemic therapeutics including vitamin D analogs, steroids, retinoids, immunosuppressants and biologics (i.e. monoclonal antibodies).
While in more recent years, several classes of biologics have entered the market, most are primarily used for patients suffering from
moderate to severe psoriasis because of their impairment of systemic immune responsiveness to infections and cancers. Aditxt believes
that products based on the ADI™ platform will not be associated with similar side effects and can be targeted for use in mild to
moderate cases.
T1D is one of the most common
chronic disorders in children and affects nearly 2 million Americans, and has an incidence and prevalence increasing at alarming rates
in industrialized countries. Current treatment consists of daily delivery of insulin as replacement therapy, but administration of the
hormone can induce life-threatening hypoglycemia and does not completely prevent morbidity and mortality associated with the disease.
Aditxt is leveraging the ADI™ technology to develop a new class of immunotherapy designed to arrest the autoimmune destruction
of the insulin producing beta cells of the pancreas. This will be the first therapy to accomplish that long sought after goal, thus increasing
life span and quality of life for up to 40,000 of US citizens and about 300,000 people around the world who develop T1D each year, with
a 3-5% increase in yearly incidence.
In the U.S. alone, there are
over 36,000 patients who receive organ transplantations each year, with more than 113,000 on transplant waiting lists.
The field of organ transplantation
has been made possible and continues to rely on broad-acting immunosuppressive drugs, high levels of which can result in a compromised
immune system that renders organ recipients susceptible to cancer and potentially life-threatening infections including re-activation
of latent viruses.
In addition, immunosuppressants
control acute rejection during the early time-period after receiving an organ but chronic rejection of the organ remains an unmet challenge
for surgeons and transplant recipients.
While efforts have been made
by various groups to promote tolerance through cell therapies and ex vivo manipulation of patient cells, these procedures take
place outside the body and typically require hospitalization.
Moreover, transplanted patients
will need re-transplantation at some point, with the possible exception of some newborn recipients. With increased incidence of preformed
antibodies, these patients may never have the opportunity to receive another organ. Preformed antibodies can develop in previously transplanted
patients, patients who have given birth, and patients who have previously received blood transfusions. These patients have much lower
chances at qualifying to receive organs due to their increased risk of rejection - even with immune suppression. The potential to reduce
formation of preformed antibodies in these patients will provide better opportunities for them to receive another transplanted organ.
There are gaps between current
approaches and what the market needs. We believe that ADI™ addresses these gaps. ADI™ is easy to administer (does not require
ex-vivo treatment of patient cells), it does not appear to suppress the immune system, it may allow patients to live with transplanted
organs with significantly reduced immune suppression, it may provide for long-term survival of transplanted tissues and organs, may be
more effective because it does not rely on a single immune pathway/mechanism, and potentially provides patients with pre-existing antibodies
a chance to qualify to receive organs.
While these advantages present
opportunities for unmet medical needs in the field of organ transplantation, the industry in which we operate is highly competitive.
A small company such as us will meet significant challenges including regulatory requirements for approval of a new class of therapeutic
agents, challenges in large scale manufacturing and marketing, cost of developing a novel therapeutic agent, which may require co-development
partners who may or may not be willing to work with us, and the willingness of transplant surgeons to adopt our therapeutic vaccines
in their existing immune suppression protocols. These challenges pose risks that we may not be able to overcome.
License Agreement with Loma Linda University -
On March 8, 2018, we entered
into an Assignment Agreement (the “Assignment Agreement”) with Sekris Biomedical, Inc. (“Sekris”). Sekris was
a party to a License Agreement with Loma Linda University (“LLU”), entered into and made effective on May 25, 2011, and amended
on June 24, 2011, July 16, 2012 and December 27, 2012 (the “Original Agreement,” and together with the Assignment Agreement,
the “Sekris Agreements”). Pursuant to the Assignment Agreement, Sekris transferred and assigned all of its rights and obligations
in and to liabilities under the Original Agreement, of whatever kind or nature, to us. In exchange, on March 8, 2018, we issued a warrant
to Sekris to purchase up to 10,000 shares of our common stock (the “Sekris Warrant”). The warrant was immediately exercisable
and has an exercise price of $200.00 per share. The expiration date of the warrant is March 8, 2023. On March 15, 2018, as amended on
July 1, 2020, we entered into a LLU License Agreement directly with Loma Linda University, which amends and restates the Sekris Agreements.
Pursuant to the LLU License
Agreement, we obtained the exclusive royalty-bearing worldwide license in and to all intellectual property, including patents, technical
information, trade secrets, proprietary rights, technology, know-how, data, formulas, drawings, and specifications, owned or controlled
by LLU and/or any of its affiliates (the “LLU Patent and Technology Rights”) and related to therapy for immune-mediated inflammatory
diseases (the ADI™ technology). In consideration for the LLU License Agreement, we issued 500 shares of common stock to LLU.
Pursuant to the LLU License
Agreement, we are required to pay an annual license fee to LLU. Also, we paid LLU $455,000 in July 2020 for outstanding milestone payments
and license fees. We are also required to pay to LLU milestone payments in connection with certain development milestones. Specifically,
we are required to make the following milestone payments: $175,000 on March 31, 2022; $100,000 on March 31, 2024; $500,000 on March 31,
2026; and $500,000 on March 31, 2027. Additionally, as consideration for prior expenses incurred by LLU to prosecute, maintain and defend
the LLU Patent and Technology Rights, we made the following payments to LLU: $70,000 due at the end of December 2018, and a final payment
of $60,000 due at the end of March 2019. We are required to defend the LLU Patent and Technology Rights during the term of the LLU License
Agreement. Additionally, we will owe royalty payments of (i) 1.5% of Net Product Sales and Net Service Sales on any Licensed Products
(defined as any finished pharmaceutical products which utilizes the LLU Patent and Technology Rights in its development, manufacture
or supply), and (ii) 0.75% of Net Product Sales and Net Service Sales for Licensed Products and Licensed Services not covered by a valid
patent claim for technology rights and know-how for a three (3) year period beyond the expiration of all valid patent claims. We also
are required to produce a written progress report to LLU, discussing our development and commercialization efforts, within 45 days following
the end of each year. All intellectual property rights in and to LLU Patent and Technology Rights shall remain with LLU (other than improvements
developed by or on our behalf).
The LLU License Agreement shall
terminate on the last day that a patent granted to us by LLU is valid and enforceable or the day that the last patent application licensed
to us is abandoned. The LLU License Agreement may be terminated by mutual agreement or by us upon 90 days written notice to LLU. LLU
may terminate the LLU License Agreement in the event of (i) non-payments or late payments of royalty, milestone and license maintenance
fees not cured within 90 days after delivery of written notice by LLU, (ii) a breach of any non-payment provision (including the provision
that requires us to meet certain deadlines for milestone events (each, a “Milestone Deadline”)) not cured within 90 days
after delivery of written notice by LLU and (iii) LLU delivers notice to us of three or more actual breaches of the LLU License Agreement
by us in any 12-month period. Additional Milestone Deadlines include: (i) submission of an IND/clinical trial application to initiate
first-in-human clinical trials on or before March 31, 2022, (ii) the completion of first-in-human (phase I/II) clinical trials by March
31, 2024, (iii) the completion of Phase III clinical trials by March 31, 2026 and (iv) biologic licensing approval by the FDA by March
31, 2027.
PEARSANTA, INC.
Formed in January 2023, our
subsidiary PearsantaTM, Inc. (“Pearsanta”) is seeking to take personalized medicine to a whole new level by delivering
“Health by the Numbers”. Since its foundation, we have been building the platform for enabling our vision of Any-test, Anytime,
Anywhere. Our plan for Pearsanta’s platform is for it to be the transactional backbone for sample collection, sample processing
(on- and off-site), and reporting. This requires the development and convergence of multiple components developed by Pearsanta or through
transactions with third parties including collection devices, Lab on Chip technologies, Lab Developed Test (LDT) assays, data-driven
analysis engine, and telemedicine. According to a comprehensive research report by Market Research Future, the clinical and consumer
diagnostic market is estimated to hit $429.3 billion by 2030.
We believe that timely and
personalized screening, enables for more informed decisions about treatments. Pearsanta’s platform is being developed to be a seamless
digital healthcare solution. This platform will integrate at-location sample collection, Point-of-Care (POC) and LDT, and analytical
reporting engine, with telemedicine enabled visits with licensed physicians to review test results and, if necessary, order a prescription.
Pearsanta’s goal of extending its platform to provide a more complete picture about someone’s health status and how their
dynamic status combined with their genetic makeup may affect their response to medication. The POC component of Pearsanta would enable
diagnostic testing at-home, at work, in pharmacies, and more to generate results quickly so that an individual can access necessary treatment
faster. With certain infections, prescribing the most effective treatment according to one’s numbers can prevent hospital emergency
room admissions and potentially life-threatening consequences.
Examples of potential indication-focused
tests for the Test2Treat platform will include the evaluation for advanced urinary tract infections (“UTIs”), COVID-19/flu/respiratory
syncytial virus, sexually transmitted infections, gut health, pharmacogenomics (i.e., how your genes affect the way your body responds
to certain therapeutics), and sepsis. These offerings are novel and needed. We believe that the current standard of care using broad
spectrum antibiotic treatment can be ineffective and life-threatening. For example, according to a recent CDC report, improperly prescribed
antibiotics are used in 50% of outpatient cases. Further, according to a recent article published in Physicans Weekly, only 1% of board-certified
critical care medicine physicians are trained in infectious disease.
Licensed Technologies - AditxtScoreTM
We intend to sublicense to
Pearsanta an exclusive worldwide sub-license for commercializing the AditxtScore™ technology which provides a personalized comprehensive
profile of the immune system. AditxtScore is intended to detect individual immune responses to viruses, bacteria, peptides, drugs, supplements,
bone marrow and solid organ transplants and cancer. It has broad applicability to many other agents of clinical interest impacting the
immune system, including those not yet identified such as emerging infectious agents.
AditxtScore will seek to enable
individuals and their healthcare providers to understand, manage and monitor their immune profiles and to stay informed about attacks
on or by their immune system. We believe AditxtScore can also assist the medical community and individuals by being able to anticipate
the immune system’s potential response to viruses, bacteria, allergens, and foreign tissues such as transplanted organs. This technology
may be able serve as warning signal thereby allowing for more time to respond appropriately. Its advantages include the ability to provide
simple, rapid, accurate, high throughput assays that can be multiplexed to determine the immune status with respect to several factors
simultaneously, in 3-16 hours. In addition, it can determine and differentiate between distinct types of cellular and humoral immune
responses (T and B cells and other cell types). It also provides for simultaneous monitoring of cell activation and levels of cytokine
release (i.e., cytokine storms).
This capability may be possible
by having the ability to determine the body’s potential response and for developing a plan to deal with an undesirable reaction
by the immune system. Its advantages include the ability to provide a simple, rapid, accurate, high throughput assays that can be multiplexed
to determine the immune status with respect to several factors simultaneously, in 3-16 hours. In addition, it can determine and differentiate
between various types of cellular and humoral immune responses (T and B cells and other cell types). It also provides for simultaneous
monitoring of cell activation and levels of cytokine release (i.e., cytokine storms).
We are also evaluating plans
to obtain regulatory approval for AditxtScore’s use as a clinical assay and seeking to secure manufacturing, marketing and distribution
partnerships for application in the various markets. To obtain regulatory approval to use AditxtScore™ as a clinical assay, we
have conducted validation studies to evaluate its performance in detection of antibodies and plan to continue conducting additional validation
studies for new applications in autoimmune diseases.
We plan to utilize AditxtScore™
in our upcoming pre-clinical and clinical studies to monitor subjects’ immune response before, during and after ADI™ drug
administration. We are also evaluating plans to obtain regulatory approval for AditxtScore™’s use as a clinical assay and
seeking to secure manufacturing, marketing and distribution partnerships for application in the various markets. To obtain regulatory
approval to use AditxtScore™ as a clinical assay, we have conducted validation studies to evaluate its performance in detection
of antibodies and plan to continue conducting additional validation studies for new applications in autoimmune diseases and transplantation.
(1) Organ Rejection
Typically,
by the time a transplanted or a native organ shows signs of failure, the damage is already done, and reversal of the tissue injury becomes
challenging. Access to early warning signs of damage would be invaluable to reverse or even prevent the damage. We believe that there
are currently no practical, efficient assays available to measure cellular immune responses and available tools do not provide timely
information for patients. AditxtScore™ can be used to provide a sensitive and rapid tool for pre-transplant monitoring and to determine
T and B cell response and to differentiate between various types of cellular immune responses. It can be multiplexed providing information
about the number of cells responding as well as quantifying the amounts of various cytokines released by the cells in the same assay.
Determination of cellular response has valuable applications for prediction, monitoring, early detection, and treatment of disease, including
organ failure/rejection, as well as treatment efficacy. It can also reveal dysfunction of the immune system that can potentially contribute
to more severe disease.
(2) Autoimmunity
Our
immune system develops to differentiate self from non-self. In autoimmunity, the body’s ability to distinguish this difference
is impaired. Detection of early signs of immune misrecognition may allow earlier intervention to reduce tissue destruction and to potential
reverse the process more effectively. Better tools are needed to recognize immune responses to our own tissues earlier, and with more
sensitivity and accuracy. We believe that AditxtScore™ harnesses the promise to develop such tools that can be used for early diagnosis,
evaluation of treatment effectiveness and determination of the need for maintenance therapies when needed.
(3) Allergies
Our
immune system protects us by acting as a barrier against foreign substances and by eliminating them when they penetrate our bodies. Once
the initial exposure has occurred, memory cells develop to prepare the body against a future exposure. This process is called immunity.
In certain situations, however, instead of immunity, the immune system develops memory cells that result in a more severe reaction during
a future exposure to the same substance. This type of response is called a hypersensitivity response, commonly known as an allergic response.
AditxtScore™ can be used to develop multiplex panels each designed to test and monitor immune response to allergens. Based on the
ability of this technology to run multiple tests in a single assay, 100 or more substances can potentially be tested simultaneously.
(4) Drug/Vaccine
Response
We
believe that there are currently no effective assays to predict and easily assess responses to drugs or vaccines. To determine whether
an individual has responded to a particular vaccine, antibody titers are measured. This process may take several days or even weeks.
Furthermore, for vaccines that require a series of injections, titers are not measured between injections and may not be known for months.
AditxtScore™ can be used to determine whether a patient is a responder or non-responder (e.g. individuals with a suppressed immune
response may be non-responders). It can provide an effective and rapid tool for potentially determining beneficial responses to a vaccine
and can be used to monitor levels of immune responsiveness post vaccination. It can allow evaluation of multiple vaccines in a single
test (for memory B cell detection). We believe that this application can be useful for vaccines, cancer therapeutics anti-rejection drugs,
anti-viral drugs, among others.
(5) Disease
Susceptibility
Disease
susceptibility can vary from one individual to another, and it can be a function of various factors, including genetic variability and
differences in human leukocyte antigens (HLA) encoded by major histocompatibility complex (MHC) and responsible for regulation of the
immune system in humans. People with certain HLA types may have higher or lower susceptibility to diseases. AditxtScore™ can be
used to develop assays to evaluate differences in HLA types in individuals to help elucidate the relationship between certain HLA types
and susceptibility to various diseases.
(6) Infectious
Diseases
We
believe that infectious diseases can cause a major predicament for scientific and medical professionals, epidemiologists, and infectious
disease specialists, who need to determine how to treat patients in real-time while efficacious therapies are still being developed.
Proper decision making requires understanding why some affected individuals show minor or no symptoms, some recover, and others die.
We feel that this is fundamental to creating effective targeted therapeutics which may differ depending on the underlying profile of
the individual at risk for, or with, disease. The immune system plays a major role in how any given individual responds to the infectious
agent. This response can be inadequate or too robust or appropriately effective. Regardless, the kinetics of the response by the cellular
and humoral (antibody) immune systems to the infectious agent are often unknown. A basic critical question, then, is what do the dynamics
of the immune response look like from exposure to and through the disease period and during convalescence for those who survive and those
who don’t; and how might vaccines and therapies alter these profiles such that predictions of vaccine/drug efficacy could be inferred
prior to vaccination/treatment and/or disease severity or progression be prognosticated. We believe that AditxtScore™ can be used
to help address these questions with multiplex assays each designed to test and monitor the immune response to infectious agents.
License Agreement with Leland Stanford Junior
University (“Stanford”)
On February 3, 2020, we entered
into an exclusive license agreement (the “February 2020 License Agreement”) with Stanford with regard to a patent concerning
a method for detection and measurement of specific cellular responses. Pursuant to the February 2020 License Agreement, other than as
described below, we received an exclusive worldwide license to Stanford’s patent with regard to use, import, offer, and sale of
Licensed Products (as defined in the agreement). The license to the patented technology is exclusive, including the right to sublicense,
beginning on the effective date of the agreement and ending when the patent expires. Under the exclusivity agreement, we acknowledged
that Stanford had already granted a non-exclusive license in the Nonexclusive Field of Use, under the Licensed Patents in the Licensed
Field of Use in the Licensed Territory (as those terms are defined in the February 2020 License Agreement”). However, Stanford
agreed to not grant further licenses under the Licensed Patents in the Licensed Field of Use in the Licensed Territory. On December 29,
2021, we entered into an amendment to the February 2020 License Agreement which extended our exclusive right to license the technology
deployed in AditxtScoreTM and securing worldwide exclusivity in all fields of use of the licensed technology.
We were obligated to pay and
paid a fee of $25,000 to Stanford within 60 days of February 3, 2020. We also issued 375 shares of the Company’s common stock to
Stanford. An annual licensing maintenance fee is payable by us on the first anniversary of the February 2020 License Agreement in the
amount of $40,000 for 2021 through 2024 and $60,000 starting in 2025 until the license expires upon the expiration of the patent. The
Company is required to pay and has paid $25,000 for the issuances of certain patents. The Company will pay milestone fees of $50,000
on the first commercial sales of a licensed product and $25,000 at the beginning of any clinical study for regulatory clearance of an
in vitro diagnostic product developed and a potential licensed product. We are also required to: (i) provide a listing of the management
team or a schedule for the recruitment of key management positions by March 31, 2020 (which has been completed), (ii) provide a business
plan covering projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts until
at least $10,000,000 in revenue by June 30, 2020 (which has been completed), (iii) conduct validation studies by September 30, 2020 (which
has been completed), (iv) hold a pre-submission meeting with the FDA by September 30, 2020 (which has been completed), (v) submit a 510(k)
application to the FDA, Emergency Use Authorization (“EUA”), or a Laboratory Developed Test (“LDT”) by March
31, 2021, (which has been completed), (vi) develop a prototype assay for human profiling by December 31, 2021 (which has been completed),
(vii) execute at least one partnership for use of the technology for transplant, autoimmunity, or infectious disease purposes by March
31, 2022, and (viii) will provide further development and commercialization milestones for specific fields of use in writing by December
31, 2022.
In addition to the annual license
maintenance fees outlined above, we will pay Stanford royalties on Net Sales (as such term is defined in the February 2020 License Agreement)
during the of the term of the agreement as follows: 4% when Net Sales are below or equal to $5 million annually or 6% when Net Sales
are above $5 million annually. The February 2020 License Agreement may be terminated upon our election on at least 30 days advance notice
to Stanford, or by Stanford if we: (i) are delinquent on any report or payment; (ii) are not diligently developing and commercializing
Licensed Product; (iii) miss certain performance milestones; (iv) are in breach of any provision of the February 2020 License Agreement;
or (v) provide any false report to Stanford. Should any events in the preceding sentence occur, we have a thirty (30) day cure period
to remedy such violation.
Plan of Operations
The
initial application of the platform was AditxtScore™ for COVID-19, which was designed to provide a more complete assessment of
an individual’s infection and immunity status with respect to the SARS-CoV-2 virus. Infection status is determined by evaluating
the presence or absence of the virus, and immunity status by measuring levels of antibodies against viral antigens and their ability
to neutralize the virus.
In
early 2021, we established our AditxtScore™ Immune Monitoring Center in Richmond, Virginia (the “Center”). The Center
operates as a Clinical Laboratory Improvement Amendments (CLIA) certified facility for the processing of our AditxtScore™ for COVID-19
Lab Developed Test (LDT) for our prospective channel partners, including labs and hospitals.
In
August 2020, we filed for an Emergency Use Authorization (EUA) with the FDA with the ultimate objective of filing a 510(K) application.
On January 14, 2022, we submitted requests to obtain two EUAs for our antibody and neutralizing tests following an announcement on November
15, 2021 by the Department of Health and Human Services that COVID-19 related tests will require FDA review and FDA’s position
that COVID-19 tests that have been in use prior to the announcement must submit applications for EUAs but can continue to operate unless
informed otherwise. In the meantime, we are providing AditxtScore™ as a service as a Laboratory Developed Test (LDT) to assess
immunity status to COVID-19.
The
public health emergency declaration for COVID-19 ended in May 2023. Thus, COVID-related assays are no longer considered as priority for
review by FDA and will not be considered for EUAs. Assays that are not developed for evaluation of infection or immunity status to SARS-CoV-2
will continue to be offered as LDTs.
Intellectual Property (IP)
We strive to protect and enhance
the proprietary technology, inventions, and improvements that are commercially important to our business, including seeking, maintaining
and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek to protect our proprietary
position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States,
to protect our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation
of our business. We also rely on trade secrets and know-how relating to our proprietary technology and product candidates, continuing
innovation, and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of immuno-therapy.
We also plan to rely on data exclusivity, market exclusivity, and patent term extensions when available. Our commercial success will
depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions, and improvements;
to preserve the confidentiality of our trade secrets; to obtain and maintain licenses to use intellectual property owned by third parties;
to defend and enforce our proprietary rights, including any patents that we may own in the future; and to operate without infringing
on the valid and enforceable patents and other proprietary rights of third parties.
Our
innovation portfolio includes: (1) ADI™ immune modulation technologies, which are currently at the pre-clinical stage and are designed
to retrain the immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases,
and allergies; and (2) AditxtScore™ immune monitoring technologies designed to provide a personalized comprehensive profile of
the immune system. Both categories are protected by multiple families of patents and patent applications, including several issued U.S.
and non-U.S. patents.
The
projected expiration dates for the ADI™ patents and patents issuing from pending applications extend until 2043 for some patents.
As of the date of this report, our patent portfolio for ADI™ includes both patents and patent applications licensed from LLU or
Stanford and patent applications owned solely by Aditxt, including 120 granted patents, 2 allowed patent applications and 30 pending
patient applications in U.S. and other regions. These patents and patent applications cover three different technical aspects of ADI™,
treatment of autoimmune diseases and type 1 diabetes, treatment of organ transplantation, and development of a new class of immunotherapeutics
for various indications. The patents and patent applications cover both methods of treatment for these indications as well as compositions
of matter including plasmids that are able to induce tolerance to antigens or prevention of immune attack on antigens, depending on the
indication, along with methods of producing such plasmids.
The
AditxtScore™ technology is also protected by multiple families of patents and patent applications, including several issued U.S.
and non-U.S. patents. The projected expiration dates for these AditxtScore™ patents and patents issuing from pending applications
ranges from 2037 to 2043. As of the date of this report, our patent portfolio for AditxtScore™ includes both patents and patent
applications licensed from Stanford and patent applications owned solely by Aditxt, including granted patents and 12 applications. These
patents and patent applications encompass methods, systems and kits for detection and measurement of specific immune responses.
We
also possess and/or in-license substantial know-how and trade secrets relating to the development and commercialization of our product
candidates, including related manufacturing processes and technology. We plan to continue expanding and strengthening our IP portfolio
with additional patent applications in the future.
In
March 2021, we signed an agreement with a regulatory consultant based in Munich, Germany, which will play a central role in navigating
the first ADI™ therapeutic program through the clinical trial and regulatory process. The firm has been working with the Aditxt’s
ADI™ team to submit a clinical trial application to the regulatory agency in Germany. Psoriasis is the first indication being
targeted for clinical trial in the ADI™ therapeutics pipeline. Other candidates that are advancing toward clinical trials
include ADI™ for type 1 diabetes and skin allografting.
Proposed Acquisitions – Natural State
Entities
In June 2023, Pearsanta signed
a non-binding letter of intent to acquire Natural State Laboratories and Natural State Genomics. Natural State Entities is a premier
full-service laboratory headquartered in Little Rock, AR, offering diagnostic, molecular, genetic, and toxicology services.
This proposed acquisition is intended to strengthen
Pearsanta’s operational infrastructure and product offerings, while also broadening the company’s roster of top-tiered scientists
and executives. The acquisition is expected to act as a catalyst for strategic revenues due to a large network of nursing care facilities,
hospitals, and physician practices utilizing a full suite of diagnostic testing. Additional revenue would be realized from expanded reimbursement
credentialing with new private payors and regions.
Subject to satisfactory completion
of due diligence, the consideration for the transaction as contemplated in the letter of intent includes: (i) cash payments to be paid
at closing to shareholders of NSL/NSG; (ii) cash payments to be paid at closing to certain of NSL/NSG’s creditors; (iii) assumption
of debt by Pearsanta from NSL/NSG; (iv) an earnout amount to be paid to the legacy NSL/NSG shareholders no later than May 1, 2024 based
on the net sales of Pearsanta and NSL/NSG business lines through the period ended December 31, 2023; and (v) the issuance of an aggregate
of 20,000,000 shares of common stock of Pearsanta to NSL/NSG employees who will join Pearsanta. The entire consideration in the form of
cash payments, debt assumption and any earnout payments will be in an amount not to exceed $55 million. None of the proceeds from this
Offering are intended to be used to finance the transaction consideration.
In order to consummate the
transaction contemplated by this non-binding letter of intent, Pearsanta must obtain adequate financing to make the required cash payments
at closing, as well as negotiate and execute definitive agreements and other closing conditions, including board approval. The parties
have agreed to an exclusivity period until July 27, 2023 (as may be extended by the parties), with a view to settling the definitive
agreement. However, there can be no assurance that a definitive agreement will be entered into or that the proposed acquisition will
be completed as proposed or at all.
Advantages
The
sophistication of the AditxtScore technology includes the following:
| ● | Greater sensitivity/specificity |
| | |
| ● | 20-
fold higher dynamic range, greatly reducing signal to noise compared to conventional assays |
| | |
| ● | Ability
to customize assays and multiplex a large number of analytes with speed and efficiency |
| | |
| ● | Ability
to test for cellular immune responses, i.e. B & T cell, cytokines. |
| | |
| ● | Proprietary
reporting algorithm. |
ADIVIR, INC.
Formed in April of 2023, Adivir™,
Inc., is Aditxt’s most recently formed wholly owned subsidiary, dedicated to the clinical and commercial development efforts of
innovative antiviral products, starting with Favipiravir-based monotreatment or combination therapies. These products have the potential
to address a wide range of infectious diseases, including those that currently lack viable treatment options.
Background
On
April 18, 2023, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Cellvera Global
Holdings LLC (“Cellvera Global”), Cellvera Holdings Ltd. (“BVI Holdco”), Cellvera, Ltd. (“Cellvera
Ltd.”), Cellvera Development LLC (“Cellvera Development” and together with Cellvera Global, BVI Holdco, Cellvera
Ltd. and Cellvera Development (the “Sellers”), AiPharma Group Ltd. (“Seller Owner” and collectively
with the Sellers, “Cellvera”), and the legal representative of Cellvera, pursuant to which, the Company will purchase
Cellvera’s 50% ownership interest in G Response Aid FZE (“GRA”), certain other intellectual property and all
goodwill related thereto (the “Acquired Assets”). Unless expressly stated otherwise herein, capitalized terms
used but not defined herein have the meanings ascribed to them in the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, the
consideration for the Acquired Assets consists of (A) $24.5 million, comprised of: (i) the forgiveness of the Company’s $14.5 million
loan to Cellvera Global, and (ii) approximately $10 million in cash, and (B) future revenue sharing payments for a term of seven years.
GRA holds an exclusive, worldwide license for the antiviral medication, Avigan® 200mg, excluding Japan, China and Russia. The other
50% interest in GRA is held by Agility, Inc. (“Agility”).
Additionally,
upon the closing, the Share Exchange Agreement previously entered into as of December 28, 2021, between Cellvera Global Holdings, LLC
f/k/a AiPharma Global Holdings, LLC (together with other affiliates and subsidiaries) and the Company, and all other related agreements
will be terminated.
The
obligations of the Company to consummate the Closing are subject to the satisfaction or waiver, at or prior to the Closing of certain
conditions, including but not limited to, the following:
| (i) | Satisfactory
completion of due diligence; |
| (ii) | Completion
by the Company of financing sufficient to consummate the transactions contemplated by the Asset Purchase Agreement; |
| (iii) | Receipt
by the Company of all required Consents from Governmental Bodies for the Acquisition, including but not limited to, any consents required
to complete the transfer and assignment of Cellvera’s membership interests in GRA; |
| (iv) | Receipt
of executed payoff letters reflecting the amount required to be fully pay all of each of Seller’s and Seller Owner’s Debt
to be paid at Closing; |
| (v) | Receipt
by the Company of a release from Agility; |
| (vi) | Execution
of an agreement acceptable to the Company with respect to the acquisition by the Company of certain intellectual property presently held
by a third party; |
| (vii) | Execution
of an amendment to an asset purchase agreement previously entered into by Cellvera with a third party that effectively grants the Company
the rights to acquire the intellectual property from the third party under such agreement; |
| (viii) | Receipt
of a fairness opinion by the Company with respect to the transactions contemplated by the Asset Purchase Agreement; and |
| (ix) | Receipt
by the Company from the Seller Owner of written consent, whether through its official liquidator or the Board of Directors of Seller
Owner, to the sale and purchase of the Acquired Assets and Assumed Liabilities pursuant to the Assert Purchase Agreement. |
There
can be no assurance that the conditions to closing will be satisfied or that the proposed acquisition will be completed as proposed or
at all.
Our commitment to building
our antiviral portfolio is strategic and timely. We believe that there has never has there been a more important time to address the growing
global need to uncover new treatments or commercialize existing ones that treat life-threatening global viral infections.
Employees
We have sixty-one (61) full
time employees. We consider the relations with our employees to be good.