Overview
We
are a biopharmaceutical company using our proprietary Precision Timed ReleaseTM (PTRTM) drug delivery platform
technology to build and advance a pipeline of next-generation pharmaceutical products designed to improve the lives of patients suffering
from frequently diagnosed conditions characterized by burdensome daily dosing regimens and suboptimal treatment outcomes. With an initial
focus on the treatment of Attention Deficit/Hyperactivity Disorder (ADHD), we are identifying and evaluating additional therapeutic areas
where our PTR technology may be employed to develop future product candidates, such as anxiety disorders. Our PTR platform incorporates
a proprietary Erosion Barrier Layer (EBL) designed to allow for the release of drug substance at specific, pre-defined time intervals,
unlocking the potential for once-daily, multi-dose tablets.
We
are targeting the ADHD stimulant-based treatment market, with an estimated US market size of $18 billion as of the September 2022. Stimulants
are the most commonly prescribed class of medications for ADHD and account for more than 90% of all ADHD medication prescriptions in
the United States, where approximately 80 million stimulant prescriptions were written during the 12-months ended September 2022. By
contrast, non-stimulant medications are typically employed only in the second-line or adjunctive therapy setting and account for 10%
of all ADHD medication prescriptions. Extended-release, or long-acting, dosage forms of stimulant medications are most frequently deployed
as the first-line treatment for ADHD and constitute approximately 59% of ADHD stimulant prescriptions by volume and nearly 83% of the
dollars. Most of these extended-release dosage forms are approved for once-daily dosing in the morning and were designed to eliminate
the need for re-dosing during the day. However, with the current ‘once-daily’ extended-release dosage forms, most patients
still receive a second or “booster” dose for administration later in the day (typically in the early afternoon) to achieve
entire active-day coverage and suffer from a multitude of unwanted side effects as a result. We believe there is a significant, unmet
need within the current treatment paradigm for true once-daily ADHD stimulant medications with lasting duration and superior side effect
profiles to better serve the needs of patients throughout their entire active-day.
Our
two proprietary, first-line stimulant medications: CTx-1301 (dexmethylphenidate) and CTx-1302 (dextroamphetamine), are being developed
for the treatment of ADHD in the three main patient segments: children (ages 6 -12), adolescents (ages 13-17), and adults (ages18+).
Both CTx-1301 and CTx-1302 are designed to address the key shortcomings of currently approved stimulant therapies by: providing an immediate
onset of action (within 30 minutes); offering ‘entire active-day’ duration; eliminating the need for a ‘booster/recovery’
dose of short-acting stimulant medications; minimizing or eliminating the rebound/crash symptoms associated with early medication ‘wear-off;’
and providing favorable tolerability with a controlled descent of drug blood levels. Furthermore, by eliminating the ‘booster’
dose used by up to 60% of ADHD patients in conjunction with their primary medication, we believe our product candidates will provide
important societal and economic benefits: reducing the abuse and diversion associated with short-acting stimulant medications; allowing
physicians to prescribe one medication versus two; allowing patients to pay for one medication versus two; and allowing payers to reimburse
one medication versus two.
We
completed a proof-of-concept trial in human subjects to validate our PTR platform and in October 2020, announced positive results
from a Phase 1/2 study of CTx-1301 in ADHD patients establishing tolerability, comparative bioavailability, and dose proportionality
of CTx-1301 versus Focalin® XR. In order to meet the pharmacology requirement for the CTx-1301 New Drug Application (NDA)
submission, we completed a food effect study in October 2022, which demonstrated that CTx-1301 can be taken with or without food. A
Phase 3 adult dose-optimization study to assess the efficacy and safety, along with onset and duration, of CTx-1301 in adults with
ADHD was initiated in December 2022, dose optimization of the first cohort has commenced and results are expected in the third
quarter of 2023. We plan to initiate the CTx-1301 Phase 3 fixed-dose pediatric and adolescent safety and efficacy study in mid-2023
with results expected in the first quarter of 2024. Assuming we receive positive clinical results from our pivotal Phase 3 trial for
CTx-1301, we plan to submit an NDA for CTx-1301 under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act in the first
half of 2024 with potential FDA approval in the first half of 2025. If we receive FDA approval for CTx-1301, we may conduct Phase 4 trials. In addition, we plan to initiate a Phase 1/2 bioavailability
study in ADHD patients for CTx-1302 in mid-2024 and, if the results from this study are successful, subsequently initiate pivotal
Phase 3 clinical trials for CTx-1302 in late 2024 or early 2025.
We
believe that our PTR platform has the potential to provide patients and physicians with differentiated pharmaceutical treatment options
that will enhance patient compliance and improve health outcomes in several additional therapeutic areas. We intend to leverage our PTR
platform technology to expand and augment our clinical-stage pipeline by identifying and developing additional assets in other therapeutic
areas where one or more or more active pharmaceutical ingredients (API) need to be delivered several times a day at specific, pre-defined
time intervals and released in a manner that would offer significant improvement over existing therapies. Our criteria for the selection
of additional, future pipeline candidates will include the potential for $1 billion or more in peak annual sales, the potential to deliver
a clearly differentiated therapeutic advantage and the potential to overcome unmet medical needs.
We
are constructing a clinical program for CTx-2103 (buspirone), our anxiety candidate, under Section 505(b)(2) of the Federal Food, Drug,
and Cosmetic Act, which may result in a faster time to NDA submission. As part of that effort:
We
presented results from the human formulation study of CTx-2103 in September 2022 at the annual Psych Congress. Pharmacokinetics were
evaluated for this trimodal tablet providing three precisely timed doses of buspirone versus one immediate release dose. In addition,
scintigraphic imaging visualized transit of the tablets through the gastrointestinal tract to confirm both the site and onset of release,
which will then be correlated with pharmacokinetic data to establish the full release profile of the CTx-2103 formulation.
Based
on the pharmacokinetic profile seen in the data, CTx-2103 achieved the desired triple release of buspirone. These positive results
provided the critical information required to allow us to request a Pre-IND meeting with the FDA to discuss the design of our
clinical and regulatory program for CTx-2103, which we expect to occur in the third quarter of 2023 to allow for a potential IND filing in the fourth quarter of 2023. Furthermore,
we may seek breakthrough therapy designation due to its potential ability to improve efficacy and outcomes and the potential to reduce
the use of benzodiazepines. In 2020, United States sales
for this API accounted for over $2 billion of sales in the $5.2 billion anxiety market. CTx-2103 will be designed as a once-daily,
multi-dose tablet with clear differentiation and compelling advantages over standard treatment options.
Our
Clinical Development Pipeline
Our
Strategy
Our
goal is to be a leading, innovative biopharmaceutical company focused on the development, manufacturing and commercialization of next
generation pharmaceutical products that utilize our PTR drug delivery platform technology to create dosing schedules and drug release
profiles that will improve the lives of patients suffering from a multitude of frequently diagnosed conditions. Key initial elements
of our business strategy to achieve this goal are to:
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Complete
development and obtain regulatory approval for CTx-1301 for the treatment of ADHD. In October 2020, we announced positive
results from a Phase 1/2 bioavailability study in ADHD patients for CTx-1301. We initiated a Phase 3 adult dose-optimization study
for CTx-1301 in December 2022, dose optimization of the first cohort has commenced and results are expected in the third quarter
of 2023. We plan to initiate a Phase 3 fixed-dose pediatric and adolescent safety and efficacy study in mid-2023 with results expected
in the first quarter of 2024. Assuming we receive positive clinical results from our Phase 3 trials, we plan to submit an NDA for
CTx-1301 in the first half of 2024 under the Section 505(b)(2) pathway with potential FDA approval in the first half of 2025. |
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Successfully
commercialize CTx-1301. If we receive FDA approval for our CTx-1301, we plan to commercialize our lead candidate with the
assistance of Indegene, Inc. In March 2023, we entered into to a Joint Commercialization Agreement with Indegene pursuant
to which Indegene will provide commercialization services for CTx-1301, including marketing, sales, market access and distribution,
on a fee for service basis. |
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Advance
clinical trials for CTx-2103 for the treatment of anxiety. In September 2022, we announced that data from the human formulation
study for CTx-2103 demonstrated the ability to deliver a single administration of triple-release buspirone. We will use these results
to design the clinical program for CTx-2103, which will be designed as a once-daily, multi-dose tablet with what we believe will
be clear differentiation and compelling advantages over standard treatment options. |
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Advance
development of CTx-1302 for the treatment of ADHD. We plan to initiate a Phase 1/2 bioavailability study in ADHD patients
for CTx-1302 in the mid-2024 and, if the results from this study are successful, subsequently initiate pivotal Phase 3 clinical trials
in all patient segments for CTx-1302 in late 2024 or early 2025.
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Maximize
the potential of our PTR platform to develop additional product candidates in new indications with significant unmet medical need
and billion-dollar revenue potential. We intend to use our PTR drug delivery platform technology and the streamlined 505(b)(2)
development pathway to develop additional therapeutic assets in other therapeutic areas where one or more active pharmaceutical ingredients
need to be administered several times a day at specific, pre-defined time intervals and released in a manner that would offer significant
improvement over existing therapies. We believe this will lead to improved patient compliance and better health outcomes. Further
indications we intend to evaluate include insomnia, non-opioid pain, Alzheimer’s, hypothyroidism, psychosis, depression, cardiovascular
disorders, Parkinson’s disease, migraine, oral oncology, xerostomia (dry mouth) and bipolar disorder, among others. |
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Acquire
or in-license additional assets or programs complement our portfolio or leverage our technology. We continuously evaluate
potential partnering opportunities or asset acquisitions that can bolster our current product candidate portfolio and provide substantial
value to our organization. We intend to focus on early to mid-stage development product candidates to generate clinical data and
potentially move to later stages of development and ultimately on to commercialization. |
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Out-license
our PTR platform to other companies and license our product candidates outside of the United States. We evaluate opportunities
to license our PTR drug delivery platform technology to other companies looking to transform multiple daily dosing to once daily
administration to satisfy patient needs. We also evaluate opportunities to license our product candidates to third parties for use
outside of the United States. |
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Further
strengthen our intellectual property portfolio. We intend to continue to manage and expand our diverse intellectual property
portfolio and maintain our trade secrets and know-how focused on our PTR platform, current and future pipeline candidates, and proprietary
manufacturing process. We believe these activities will be critical to protect our platform and product candidates from potential
competitors that may try to compete with our therapeutic assets and compression tableting approach. |
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Capitalize
on our existing cGMP expertise. We have developed a proprietary, reliable, high output, specialized manufacturing equipment
with the potential for real-time testing and release that is employed by our third-party manufacturing partner. Our process has been
designed to allow for the creation of a platform that can incorporate other drug substances thus permitting expansion into additional
indications and therapeutic areas. We expect that our investment in these manufacturing capabilities and equipment will substantially
reduce our development timelines and overall development costs for current and future assets. We currently utilize commercial manufacturing
equipment and will not require technology transfer or large scale-up processes to meet clinical or commercial manufacturing needs.
In October 2022, we announced that we have selected Societal CDMO, Inc. (Societal) as our new contract development and manufacturing
organization (CDMO) that will manufacture all clinical, registration, and commercial batches of our lead candidate CTx-1301. Societal
will dedicate a specific manufacturing suite within its Gainesville, GA facility and outfit it with proprietary equipment supplied
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Our
Team
Our
founders and management team have many years of experience in the biopharmaceutical space, holding management positions at leading biopharmaceutical
companies, including Pfizer Inc., Novartis International AG, DuPont de Nemours, Inc. and Sanofi S.A., among others. Our team possesses
substantial experience and expertise across the spectrum of drug development and commercialization of pharmaceutical products, including
multiple psychiatric and nervous system products.
Shane
J. Schaffer, our Co-Founder, Chairman and Chief Executive Officer, has held senior leadership roles at Pfizer Inc., Novartis International
AG and Sanofi S.A. and has over 25 years of experience in drug development and commercialization. Dr. Matthew Brams, our Co-Founder and
Chief Medical Officer, has over 30 years of clinical experience managing patients in the field of adult and child psychiatry and has
been involved in the research, development, and evaluation of multiple ADHD medications. Dr. Raul R. Silva, our Co-Founder and Chief
Science Officer, is a practicing child and adolescent psychiatrist who has served as Associate Professor and Vice Chairman of Child and
Adolescent Psychiatry at NYU School of Medicine in New York City. Laurie A. Myers, our Chief Operating Officer, has held leadership positions
for leading global pharmaceutical companies, including Pfizer Inc., Novartis International AG, DuPont de Nemours, Inc. and Sanofi S.A.
and has over 25 years of experience in drug development, marketing and commercialization.
ADHD
Overview and Drawbacks of Current Therapies
ADHD
is a chronic neurobehavioral and developmental disorder that affects millions of children, adolescents and adults. In the United States,
approximately 6.4 million, or 11%, of children and adolescents aged 4-17 have been diagnosed with ADHD. Among this group, 80% receive
treatment and 65% demonstrate clinical ADHD symptoms that persist into adulthood. Adult ADHD prevalence in the United States is estimated
at approximately 11 million patients, or 4.4%, of the population, almost double the size of the child and adolescent segment combined.
Currently, approximately 20% of the adult ADHD population receives treatment, however an increasing number of adult patients are being
diagnosed and seeking treatment causing the adult ADHD market to grow approximately 10% year over year. Total ADHD medication sales in
the United States continue to grow with sales of all ADHD medications reaching approximately $22.1 billion
for the 12-months ended September 30, 2022.
ADHD
is marked by an on-going pattern of inattention and/or hyperactivity-impulsivity that interferes with functioning and/or development.
According to the American Academy of Child and Adolescent Psychiatry, common manifestations of ADHD in children and adolescents include:
Hyperactivity:
Children always seem to be in motion. A child who is hyperactive may move around touching or playing with whatever is around, or talk
continually. During story time or school lessons, the child might squirm around, fidget, or get up and move around the room. Some children
wiggle their feet or tap their fingers. A teenager or adult who is hyperactive may feel restless and need to stay busy all the time.
Impulsivity:
Children often blurt out comments without thinking first. They may often display their emotions without restraint. They may also fail
to consider the consequences of their actions. Such children may find it hard to wait in line or take turns. Impulsive teenagers and
adults tend to make choices that have a small immediate payoff rather than working toward larger delayed rewards.
Inattentiveness:
Inattentive children may quickly get bored with an activity if it’s not something they really enjoy. Organizing and completing
a task or learning something new is difficult for them. As students, they often forget to write down a school assignment or bring a book
home. Completing homework can be huge challenge. At any age, an inattentive person may often be easily distracted, make careless mistakes,
forget things, have trouble following instructions, or skip from one activity to another without finishing anything
Adult
ADHD patients typically suffer from restlessness, impulsivity, difficulty with time management, trouble regulating emotions and difficulty
managing finances. Adults with ADHD report experiencing an internal sense of fidgetiness and restlessness and experience greater difficulty
communicating with others. Upon entering the job market, many adults have difficulty gaining employment and are at increased risk of
termination due to repeated tardiness or absenteeism. Adults with ADHD earn approximately 30% less and are 10% less likely to be employed
versus their unaffected peers. Additionally, adults with ADHD are more likely to exhibit a variety of comorbidities including drug and
alcohol abuse, social anxiety and depression.
ADHD
in both children and adults has an impact not only on the individual but on their families, friends and peers and because of its prevalence
as one of the most commonly diagnosed behavioral disorders, a critical impact on society, the healthcare system and the economy at large.
On a societal level, versus control groups, ADHD patients experience a greater than 40% higher rate of vehicle accidents, 2x greater
divorce rate, have a 2-fold greater incidence of accidental death, and research from prospective studies indicates that children and
adults with ADHD have approximately twice the incarceration rate. On an economic level, in the United States alone, national annual incremental
cost of ADHD ranged from $143 billion to $266 billion.
Although
there is no single medical, physical, or genetic test for ADHD, qualified mental health care professionals and physicians are able to
provide a diagnostic evaluation after gathering information from multiple sources including ADHD symptom checklists, standardized behavior
rating scales, detailed histories of past and current functioning, and information obtained from close family members or significant
others. Some practitioners will also conduct tests of cognitive ability and academic achievement in order to rule out a possible learning
disability.
Stimulants
are the most commonly prescribed class of medications for ADHD, accounting for more than 90% of all ADHD medication prescriptions.
Stimulants are Schedule II controlled substances and are believed to work by enhancing the effects of dopamine and norepinephrine
neurotransmitters in the brain. Approximately 80 million stimulant prescriptions were written during the 12-months ended September
2022. In contrast, non-stimulant medications are typically deployed as second line or adjunctive therapies and account for 10% of
all ADHD medication prescriptions. Currently, the ADHD market is dominated by four main stimulant medications: Vyvanse®,
Adderall® XR, Concerta®, and Focalin® XR. These products were approved and became available between 2000 and 2007 and
were believed to revolutionize the ADHD treatment paradigm by finally providing a solution to avoid the late morning second dose of
stimulant medication then required by ADHD patients.
Unfortunately,
as designed, all four of the mostly commonly prescribed stimulant drugs deliver all the drug substance during the morning hours. As a
result, most patients still require additional medication to cover the remainder of their active day. Currently, 60% of ADHD patients
require an afternoon ‘booster/recovery’ dose due to lack of duration, slow onset of efficacy, and the crash or rebound effects
in the early afternoon. Additionally, their PK-PD release profiles are such that they leave patients significantly impaired by crash
and rebound effects even while on therapy.
Patients
and practitioners report, that an ideal ADHD stimulant medication would provide all of the following characteristics: entire
active-day duration (14-16 hours); immediate onset of action (within 30 minutes); ability to minimize or avoid crash / rebound effects
associated with rapid decline in medication blood levels; and elimination of the need for short-acting stimulant booster/recovery doses.
The
chart above is based upon the Package Inserts and Summary Basis of Approvals for the approved products.
The
chart above is based upon the Package Inserts and Summary Basis of Approvals for the approved products.
In
recent years, the FDA has approved additional stimulant medications that were designed to meet some of the remaining unmet needs. Chewables,
liquids and oral disintegrating tablets have come to market as has one product with an evening dosing schedule intended to provide early
morning onset. None of these products have been able to meet all of the unmet needs of ADHD patients and prescribers and consequently
all have failed to gain traction as first-line agents. Furthermore, these recent stimulant medications, based on their market share,
appear to offer little advantage over widely available generic products for healthcare practitioners and their patients. They have proven
to be niche remedies occupying a combined 2.0% of the total ADHD prescriptions written in the United States in 2020. Thus, there is an
unmet need for a true once-daily dose providing a fast onset of action, minimization or elimination of the crash/rebound, elimination
of the booster/recovery dose, and most importantly, providing entire active-day efficacy.
The
chart above is based upon the Package Inserts and Summary Basis of Approvals for the approved products.
Our
Solution: Our Proprietary Precision Timed Release Drug Delivery Platform Technology
We
are developing medications capable of achieving true once-daily dosing using our internally developed PTR drug delivery platform technology.
Our CTx-1301, CTx-1302 and CTx-2103 drug candidates contain three releases of active pharmaceutical ingredient combined into one small
tablet dosage form (smaller than many comparable single dose ADHD products). Each release of API is separated with a proprietary EBL,
a functional excipient that is designed to gradually erode throughout the day to provide controlled drug release at specific time intervals,
allowing for a target efficacious period of up to 16 hours.
Illustration
of Our PTR Platform Film-Coated Tablet
Size
Comparison of CTx-1301 Tablet versus Common ADHD and Other Medications
We
believe our PTR technology affords our drug candidates the following advantages over currently available ADHD treatments:
Fast
Onset. Many currently available therapies often take up to 60 minutes or longer to start working and thus can leave patients
with long gaps between dosing and onset. In an effort to minimize this onset gap, patients will often wake up early to take their medication
and attempt to go back to sleep until the medication takes effect. We have designed our drug candidates to be fast-acting so they can
be taken in the morning when the patient starts their day, not predawn while they wait for onset.
Elimination
of Need For Short-Acting Stimulant Boosters. With entire active-day coverage up to a 16-hour period, we believe our technology
will eliminate the need for patients to take afternoon booster doses when their currently prescribed therapies wear off. By eliminating
the need for a booster dose, we believe our candidates will cause less embarrassment for patients, especially child and adolescent patients
who are often forced to take a second dose while at school surrounded by classmates and increase patient compliance especially in the
ADHD population where patients are prone to forget to take the additional dose they need to get through their active day.
Lower
Abuse Potential. We believe our fast onset and entire active-day solution for ADHD patients, if approved, will lower the incidence
of short-acting stimulant drug abuse and diversion. We believe by eliminating the need for the short-acting stimulant booster dose, the
potential for illicit sales and recreational use that often comes as a result of patients carrying short-acting Schedule II controlled
substances to school or work for afternoon dosing will decrease.
Elimination
Crash and Rebound Symptoms. Patients on currently available therapies may report adverse effects or a flare of ADHD symptoms
as their medications wear off; these effects are termed “crash” and “rebound.” Using our precise timing, ratio,
and style of drug delivery, we believe our candidates provide a controlled descent of blood levels, eliminating this uncomfortable experience
for patients.
Lower
Cost. By providing entire active-day efficacy, our drug candidates eliminate the need for doctors to prescribe more than one
medication lowering the overall cost of the condition to individual patients and within the healthcare system at large. Furthermore,
generic medications in the stimulant ADHD category are not tremendously less expensive as they are in other categories of non-controlled
medications. Generic stimulant medications cost anywhere from 55%-90% of the cost of their brand counterparts. We believe, if approved,
our drug candidates will offer a much more cost-effective solution to patients.
Significantly
Improved Tolerability. Because of the PK and PD profile of our drug, we believe patients will experience fewer treatment related
adverse events associated with existing stimulant therapies including insomnia, appetite suppression, and feelings of extreme restlessness,
dysphoria, irritability, fatigue, and flattening of affect.
Availability
in Eight Dosage Strengths at Launch and Single-Enantiomer API Selection. Our CTx-1301 and CTx-1302 product candidates are both
round film-coated tablets that we intend to provide in eight matching dosage strengths. We believe providing practitioners with the ability
to properly titrate and optimize their patients’ daily dosing needs is critical. By having eight dosage strengths at launch, practitioners
will not have to constantly switch their patients to other medications or supplement patients with more short-acting booster medications.
Medications that have launched with three dosage strengths are often ignored or avoided until at least six or seven strengths are available.
Both CTx-1301 and CTx-1302 contain APIs that are Schedule II controlled substances. The APIs of both product candidates utilize just
one of the multiple enantiomers, which may result in improvements in potency, adverse events (Aes), and drug interactions profiles along
with an enhanced therapeutic index.
Our
Lead Candidate CTx-1301: Dexmethylphenidate for the Treatment of ADHD in 6 Years and Older
We
believe our most advanced drug product candidate, CTx-1301, will be the first true once-daily dexmethylphenidate tablet for the treatment
of ADHD, providing onset-of-action within 30 minutes and efficacy for the entire active day (14 to 16 hours versus placebo). CTx-1301
is a trimodal extended-release tablet, based on tablet-in-tablet technology, which provides three releases of dexmethylphenidate hydrochloride
at precise times, ratio, and modality of release. Our CTx-1301 release profile is as follows:
Release
#1: An initial immediate-release, or IR, dose providing 35% of the total daily dose beginning within five to six minutes after administration
and designed to achieve therapeutic efficacy within 30 minutes; and
Release
#2: Three hours after the administration of the dosage form, the first delayed, sustained release (DR1) provides 45% of the total daily
dose released over 90 minutes; and
Release
#3: Seven hours after the administration of the dosage form, a second delayed, immediate release (DR2, the built-in-booster) provides
20% of the total daily dose released over approximately 30 minutes.
Release
Comparison of CTx-1301 versus Focalin XR (Reference Listed Drug)
Our
proprietary, trimodal release profile is engineered to provide patients with a rapid onset of relief from symptoms and to maintain that
relief throughout the entire active day. Further, we believe CTx-1301 will demonstrate a more favorable tolerability profile that results
from this specialized design and unique 35%-45%-20% release profile, compared to the currently available 33%-33%-33% release profile
that would be produced if a patient were to take three individual doses of dexmethylphenidate in the same milligram strengths. CTx-1301
delivers a release profile that cannot be replicated with commercially available short and long-acting formulations and was precisely
engineered and designed to meet the specific needs of ADHD patients and providers.
We
expect CTx-1301 film-coated tablets to be available in eight dosage strengths ranging from 6.25mg to 50mg of dexmethylphenidate. All
excipients are compendial and/or non-novel, well established for use in oral formulations, and are present in the drug product at levels
well below their maximum potencies listed in FDA’s inactive ingredient database (IID).
Our
CTx-1301 Clinical Development Program
The
proposed clinical program for CTx-1301 consists of two Phase 1/2 clinical pharmacology studies and our Phase 3 Mastery clinical efficacy
and safety trials.
Our
Phase 1/2 Bioavailability Trial Results
In
October 2020, we announced positive results from a Phase 1/2 comparative bioavailability study in ADHD subjects, under fasted conditions,
and demonstrated similar bioavailability to our Reference Listed Drug (RLD), Focalin XR. Adjusted geometric mean ratios of primary exposure
parameters (Cmax, AUC0-inf, and AUClast) between CTx-1301 and Focalin XR were within the required 80%
to 125% range, both at the high and the low doses, demonstrating a bridge to the RLD as well as dose proportionality. There were no unexpected
adverse events, no serious adverse events, no deaths, and no other safety signals observed during this study.
Key
Findings
Bridged
to Focalin® XR
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Confirmed
similar bioavailability to Focalin XR and confirmation of our ability to utilize the 505(b)2 pathway |
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Demonstrated
dose proportionality, allowing us to avoid the need to evaluate all individual strengths in vivo |
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Eliminated
any requirement for nonclinical studies and ability to utilize existing safety from the Focalin XR label, potentially resulting in
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Demonstrated
Plasma Levels at 16 hours versus Focalin® XR at 12 hours
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CTx-1301
blood levels demonstrated the potential for an extended duration of action, up to 16 hours |
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Performed
as designed, with its precise 20% ‘built-in-booster’ 3rd delivery confirming that if approved, CTx-1301 would eliminate
patients need for short-acting stimulants and avoid the potential for non-ideal blood levels that could impact normal sleep and appetite |
Demonstrated
Plasma Levels Equal to Focalin® XR at 30 and 60 Minutes
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Confirmed
similar Fast Onset of Action to Focalin XR |
Demonstrated
Controlled Descent of Plasma Levels versus Focalin® XR
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Precise
20% 3rd delivery stopped the mid-afternoon plummeting of blood levels, controlling the decline until early evening |
Demonstrated
Significantly Lower Treatment Emergent Adverse Events
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Patients
received 25% more medication via the PTR Platform in a precisely timed, unique ratio |
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CTx-1301
patients experienced a 28.6% reduction of TEAE’s related to study drug versus Focalin XR |
Our
comparative bioavailability data study versus Focalin XR is presented in Figure 1, Figure 2, and Figure 3
Figure
1: Comparative Bioavailability Study of CTx-1301 versus Focalin XR in Adult ADHD subjects under Fasted Conditions (low dose comparison)
Figure
2: Comparative Bioavailability Study of CTx-1301 versus Focalin XR in Adult ADHD subjects under Fasted Conditions (high dose)
Figure
3: Comparative Bioavailability Study of CTx-1301 versus Focalin XR in individual Adult ADHD subjects under Fasted Conditions (low and
high dose)
Our
Additional Phase 1 Study
We
completed a Phase 1 Food Effect study in October 2022. Primary endpoints demonstrated that CTx-1301 can be taken with or without food.
Fast-Fed
Study |
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Phase 1, open-label, randomized, single-dose, two-period, two-treatment (fed vs fasted), two-sequence, crossover study in 23 healthy
adult subjects, 18-50 years of age, to assess the effect of food on the absorption and bioavailability of CTx-1301. The objectives
of this study were to assess the effect of food on the rate and extent of absorption and the overall bioavailability of a single
dose of CTx-1301. Secondary objectives were to provide pharmacokinetic data on blood plasma levels of CTx-1301 in both
a fasted and fed state, and to evaluate the safety of a single dose of CTx-1301 25 mg tablet. Exploratory objectives were
to further explore the characteristics of CTx-1301 25 mg tablet within selected time intervals. |
Our
Planned Phase 3 MASTERY Trials
We
initiated a Phase 3 adult dose-optimization study in December 2022, dose optimization of the first cohort has commenced and results
are expected in the third quarter of 2023. We plan to initiate a Phase 3 fixed-dose pediatric and adolescent safety and efficacy
study in mid-2023 with results expected in the first quarter of 2024. Assuming we receive positive clinical results from our Phase 3
trials, we expect to file an NDA for CTx-1301 in the first half of 2024 with potential FDA approval in the first half of 2025. Our entire Phase 3 clinical plan will include
approximately 330 patients. Based on the results of our Phase 1/2 clinical trial and communications with the FDA, we expect the
505(b)(2) NDA filing for CTx-1301 will use Focalin XR as a reference drug, using as a basis for approval that drug’s efficacy
and safety data on file at FDA, together with bioavailability/bioequivalence data and efficacy/safety data from our CTx-1301
clinical program.
The
Phase 3 CTx-1301 safety and efficacy studies will utilize diagnostic tools and ADHD evaluations including the ADHD-RS-5, the CGI-S, and
the PERM-P. These tools and evaluations are commonly used as study endpoints in support of an NDA filing.
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The
ADHD-RS, or ADHD Rating Scale is an 18-item scale based on Diagnostic and Statistical Manual of Mental Disorders, 5th edition (DSM-5)
(American Psychiatric Association 2013) which evaluates the criteria of ADHD and rates symptoms on a 4-point scale. Each item is
scored using a combination of severity and frequency ratings from zero (reflecting no symptoms or a frequency of never or rarely)
to three (reflecting severe symptoms or a frequency of very often), so that the total ADHD-RS-5 scores range from zero to 54. |
|
|
|
|
● |
The
CGI-S is the Clinical Global Impressions (Severity) Scale, a single-item scale that measures the severity of psychopathology from
1-7. |
|
● |
The
PERM-P, or Permanent Product Measure of Performance, is a skill-adjusted math test. The PERM-P score is the sum of the number of
math problems attempted plus the number of math problems answered correctly in a 10-minute session. The scores range from 0-800 with
higher scores indicating better performance. |
Our
Phase 3 CTx-1301 clinical safety and efficacy studies include:
|
● |
A
Phase 3, dose-optimized, randomized, double-blind, placebo-controlled, single-center, parallel-group efficacy and safety laboratory
classroom study in adults with ADHD. The primary objective is to evaluate the efficacy of CTx-1301 compared to placebo in treating
adults with ADHD in a laboratory classroom study using the PERM-P. Secondary objectives are to determine onset and duration of clinical
effect of CTx-1301 and to determine safety and tolerability of CTx-1301 compared to placebo. |
|
|
|
|
● |
A
Phase 3, randomized, double-blind, placebo-controlled, multi-center, fixed-dose, parallel-group, efficacy and safety study in children
and adolescent (6-17 y/o) with ADHD. The primary objective is to evaluate the efficacy of a fixed dose of CTx-1301 compared to
placebo using the ADHD-RS-5. Secondary objectives are to evaluate the efficacy of a fixed dose of CTx-1301 compared to placebo using
the CGI-S, safety and tolerability of a fixed dose of CTx-1301, and PK levels after a single dose and at steady state. |
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|
|
|
|
Exploratory
objectives will be evaluated in the adult dose-optimization study to define and evaluate the unique benefits and satisfaction of
optimized treatment with CTx-1301 against prior therapies using patient reported outcomes (PROs). The PRO evaluation will include:
|
|
● |
Subjects
required use of “booster” doses for entire active-day efficacy, avoidance of wear-off effect, crash/rebound, and abuse/diversion
of short-acting stimulants. |
|
|
|
|
● |
Compare
overall treatment satisfaction of prior therapies versus CTx-1301. |
|
|
|
|
● |
Compare
adverse events of prior therapies versus CTx-1301. |
|
|
|
|
● |
Evaluate
importance of a true, once-daily treatment for ADHD. |
|
|
|
|
● |
Evaluate
the incidence of abuse and/or diversion of short-acting booster doses. |
|
|
|
|
● |
Evaluate
important differentiators for patients requiring ADHD treatment by providing a complete solution with entire active-day efficacy,
fast onset of action, avoiding crash/rebound, and eliminating the required short-acting stimulant booster/recovery dose. |
These
exploratory measures will not only provide critical information for clinicians but also provide important data to payers and market access
teams.
CTx-1302:
Dextroamphetamine for the treatment of ADHD in 6 years and older
We
believe our drug product candidate CTx-1302, will be the first true once-daily dextroamphetamine tablet for the treatment of ADHD, providing
onset-of-action within 30 minutes and efficacy for the entire active day, up to 16 hours. CTx-1302 is a trimodal extended-release tablet,
based on tablet-in-tablet technology, that provides three releases of dextroamphetamine at precise times, ratio, and modality of release.
Our CTx-1302 release profile is as follows:
|
● |
Release
#1: An initial immediate-release, or IR, dose providing 45% of the total daily dose begins within five to six minutes after administration
is designed to achieve therapeutic efficacy within 30 minutes; and |
|
|
|
|
● |
Release
#2: Three hours after the administration of the dosage from, the DR1 provides 35% of the total daily dose released over 90 minutes;
and |
|
|
|
|
● |
Release
#3: Seven hours after the administration of the dosage form, a DR2, the built-in-booster provides 20% of the total daily dose released
over approximately 30 minutes. |
We
expect CTx-1302 tablets will be available in eight dosage strengths ranging from 6.25mg to 50mg of dextroamphetamine. All excipients
are compendial and/or non-novel, well established for use in oral formulations, and are present in the drug product at levels well below
their maximum potencies listed in FDA’s IID.
Our
CTx-1302 Clinical Development Program
Our
proposed clinical program for CTx-1302 consists of Phase 1 clinical pharmacology studies and Phase 3 clinical efficacy and safety trials.
We plan to initiate a Phase 1/2 bioavailability study in ADHD patients for CTx-1302 in mid-2024 and, if the results from this study are
successful, subsequently initiate pivotal Phase 3 clinical trials, the branded ACCOMPLISH trials, in late 2024 or early 2025. Our Phase
1 trials are expected to include approximately 100 patients and the Phase 3 clinical plan will include approximately 500 patients.
Our
Planned Phase 1 Trials
Our
proposed Phase 1 CTx-1302 clinical pharmacology studies include:
|
● |
Phase
1/2 Comparative Bioavailability Study: To evaluate and compare the pharmacokinetic profile of CTx-1302 to the RLD, Dexedrine
Spansule in adults with ADHD (18+ y/o). |
|
|
|
|
● |
Phase
1 Food Effect Study: To evaluate the pharmacokinetic profile of CTx-1302 under fed and fasted conditions in adults (18+ y/o). |
|
|
|
|
● |
Phase
1 Single-Dose, Fully-Replicate Crossover Study: To evaluate the intra-subject variability of the in vivo pharmacokinetic profile
of CTx-1302 to the RLD, Dexedrine Spansule in adults (18+ y/o). |
The
Proposed Phase 3 CTx-1302 safety and efficacy studies will utilize diagnostic tools and ADHD evaluations including the ADHD-RS-5, the
CGI-S, and the PERM-P. These tools and evaluations are commonly used and described above.
Our
Planned Phase 3 ACCOMPLISH Trials
|
● |
A
Phase 3, fixed-dose, parallel-design, placebo-controlled, 5-week study in children and adolescent patients (6-17 y/o). The primary
efficacy endpoint is the ADHD-RS-5. The Clinical Global Improvement Severity Scale (CGI-S) will be evaluated as a secondary endpoint. |
|
|
|
|
● |
A
Phase 3, analog workplace efficacy and safety study in adults (18+): The primary efficacy endpoint is the PERM-P. Time to onset
and duration of effect will also be evaluated as key secondary endpoints. |
|
|
|
|
● |
A
long-term dose-optimization safety study will evaluate safety of the pediatric population (6-17 y/o) for six months. This study
will collect and monitor any adverse events that occur during the timeframe of the study. |
Important
exploratory endpoints included in the analog Phase 3 protocols will define and evaluate the unique benefits and satisfaction of optimized
treatment with CTx-1302 against prior therapies using patient reported outcomes (PRO) similar to those from the CTx-1301 Phase 3 plan.
We
expect the 505(b)(2) NDA filing for CTx-1302 will use Dexedrine® Spansule® as a reference drug, using as a basis for approval
that drug’s efficacy and safety data on file at FDA, together with bioavailability/bioequivalence data and efficacy/safety data
from our CTx-1302 clinical program.
CTx-2103:
Buspirone product candidate for the treatment of anxiety related disorders
We
have embarked on a program to develop CTx-2103 (buspirone)
for the treatment of anxiety, which is the most common mental health concern in the U.S. We believe CTx-2103 has the potential to be
the first once-daily formulation of buspirone, one of the most widely prescribed agents in the anxiety market. CTx-2103 is a novel, trimodal,
extended-release tablet that contains the active pharmaceutical ingredient buspirone hydrochloride, a non-benzodiazepine medication,
for which there is no evidence of the development or risk of dependency. However, due to its short half-life, buspirone is prescribed
to be taken several times a day for management of anxiety, which can be challenging for patients and may lead to sub-optimal treatment
outcomes. CTx-2103 will be designed as a once-daily, multi-dose tablet, which we believe will offer clear differentiation and compelling
advantages over currently available treatment options.
Our
CTx-2103 Clinical Development Program
In
June 2022, we completed a human formulation study for CTx-2103. The first human subject study of CTx-2103 was a single-center, open-label,
four-arm crossover study in 10 healthy subjects. Each participant received four different doses of buspirone at different assessment
visits: one timed-release 10mg tablet releasing drug after a four-hour delay, one timed-release 10mg tablet releasing drug after an eight-hour
delay, one triple-pulse 10mg tablet releasing drug at zero, four and eight hours, and one immediate release 10mg tablet of generic buspirone
(the reference product, which is a commercially available formulation).
The
primary objective was to evaluate the absorption of buspirone and the presence of metabolite 1-pyrimidinylpiperazine (1-PP) in blood
plasma from time-delayed formulations and correlate this with scintigraphic time and site of release data. Secondary objectives of the
study will compare the pharmacokinetic performance of the time delayed buspirone products with a commercially available formulation.
Additionally, the study will evaluate the absorption of buspirone and the presence of metabolite 1-PP in blood plasma from a triple-release
product.
Safety
evaluations demonstrated that CTx-2103 is safe and well tolerated. No serious, severe, or clinically meaningful treatment-emergent adverse
events (TEAEs) occurred during this study. Most TEAEs were mild in severity and were consistent with events expected for buspirone. The
evaluation of TEAEs, laboratory examinations, physical examinations, ECG recordings, and measurement of vital signs (blood pressure and
pulse rate) revealed no safety concerns for buspirone.
Based
on the pharmacokinetic profile seen in the data from the formulation study, CTx-2103 achieved the desired triple release of
buspirone hydrochloride. These positive results provided the critical information required to allow us to request a Pre-IND meeting
with the FDA to discuss the design of our clinical and regulatory programs for anxiety, which we expect to occur in the third
quarter of 2023 to allow for a potential IND filing in the fourth quarter of 2023. Furthermore, we may seek breakthrough therapy
designation due to its potential ability to improve efficacy and outcomes and the potential to reduce the use of
benzodiazepines.
Commercialization
Given
our stage of development, we do not currently have any internal sales, marketing, or distribution infrastructure or capabilities. If
CTx-1301 and/or CTx-1302 are approved, we plan to pursue commercialization of our product candidates in the United States, which we expect
will be the first country in which we receive market authorization. We will need a commercial collaboration partner to benefit from their
ability to provide us with more immediate access to marketing, sales, market access and distribution infrastructure to allow us to communicate
with the majority of the high-volume neurology and psychiatry prescribers of ADHD medications and the high prescribing ADHD pediatricians
and family practice providers.
In
addition, we would expect to use multi-channel tactics, including non-personal strategies, to reach physicians, payers, patients and
patient caregivers with the right frequency to help drive behavior. In addition to personal promotion, we intend to reach physicians
through medical education, direct marketing, journal advertising and electronic health record communication. Advocacy groups, patients
and caregivers are extremely active and vocal in the ADHD space. We expect that a direct-to-patient strategy would allow us to access
this social group through focused education and advertising, as well as by employing appropriate social media listening and engagement
to inform these patients and caregivers.
In
March 2023, we entered into to a Joint Commercialization Agreement with Indegene. If we receive FDA approval for CTx-1301, Indegene
will provide commercialization services for CTx-1301 pursuant to statements of work that will set forth, among other things, the
services to be performed by Indegene, the deliverables for such services and the fees to be paid by us. Key services that Indegene
is expected to provide, include: (a) medical affairs & pharmacovigilance; (b) pricing, reimbursement and market access; (c)
commercial operations; and (d) marketing (including field force). See “Material Agreements – Joint Commercialization
Agreement with Indegene, Inc.” below.
Manufacturing
Overview
We
do not currently own or operate a manufacturing facility. Previously, we utilized Pharmaceutical Manufacturing Research Services, Inc.
as our CDMO for the manufacture of our products used in pre-clinical research and clinical trials. In October 2022, we retained Societal
CDMO, Inc. (Societal) as our new CDMO that will manufacture all clinical, registration, and commercial batches of our lead candidate
CTx-1301. Societal will dedicate a specific manufacturing suite within its Gainesville, GA facility and outfit it with proprietary equipment
owned by us.
Any
third-party manufacturers, facilities, and all lots of drug substance and drug products used in our clinical trials are required to be
in compliance with cGMPs. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities,
equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls,
holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities where
our products are produced must meet cGMP requirements and FDA satisfaction before any product is approved and we can manufacture commercial
products. Any third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including
procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations. In
addition, our drug products are classified as Class II controlled substances which requires any future third-party manufacturers to be
approved and regulated by the DEA.
Drug
Substance
We
currently purchase the APIs used in CTx-1301 (Dexmethylphenidate) and CTx-1302 (Dextroamphetamine) and excipients from U.S. based third-party
manufacturers. We anticipate entering into commercial supply agreements with many of these manufacturers in the future. Both APIs are
controlled under U.S. federal law. Dexmethylphenidate, and dextroamphetamine are classified by the DEA as Schedule II controlled substances.
As with all stimulate medications, there is a potential for abuse. Consequently, our procurements, manufacturing, shipping, dispensing
and storing of our product candidates will be subject to regulation, as described in more detail under the “DEA Regulation”
section included elsewhere in this prospectus.
Intellectual
Property
Proprietary
protection
Our
commercial success depends in part on our ability to obtain and maintain proprietary protection for our drug candidates, manufacturing
and process discoveries and other know-how, to operate without infringing the proprietary rights of others, and to prevent others from
infringing on our proprietary rights. We have been building and continue to build our intellectual property portfolio relating to our
ADHD drug candidates, and our innovative proprietary PTR drug delivery platform technology, and our technology platform. Our policy is
to seek to protect our proprietary position by, among other methods, filing U.S. and certain foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also
intend to rely on trade secrets, know-how, continuing technological innovation, and potential in-licensing opportunities to develop and
maintain our proprietary position. We cannot be sure that patents will be granted with respect to any of our pending patent applications
or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents
that may be granted to us in the future will be commercially useful in protecting our technology.
Patent
rights
We
own or have licensed from BDD Pharma five patents and four patent applications in the United States and 85 patents and 16 patent applications
in foreign countries and regions. In addition to the United States, we have patents issued or applications pending in Australia, Canada,
China, Egypt, Europe (with pending applications before the European Patent Office and patents validated with certain member states of
the European Patent Organization), Hong Kong, Israel, India, Japan, Mexico, Russia, Saudi Arabia and South Korea. The patents and patent
applications describe and claim certain features of our product candidates, our PTR drug delivery platform technology and our EBL, including
claims to the product candidates, methods of making the product candidates and treatment methods using the product candidates.
We
have and will continue to actively protect our intellectual property, including filing patent applications for our innovations, prosecuting
our pending patent applications, and maintaining and enforcing our issued patents. No assurances can be given that pending patent applications
will result in the issuance of a patent or that the examination process will not require us to narrow our claims. In addition, issued
patents may be circumvented by third parties, or found unenforceable or invalid if contested before a court or administrative agency.
Thus, we may not be able to successfully enforce our patent rights against third parties. No assurance can be given that others will
not independently develop a similar or competing technology or design around any patents that may be issued to us.
Patent
life determination depends on the date of filing of the application and other factors as promulgated under the patent laws, such as patent
term adjustments and extensions. In most countries, including the United States, the patent term is generally 20 years from the earliest
claimed filing date of a non-provisional patent application in the applicable country. The patents and, if granted, patent applications
owned or licensed to us have expiry dates ranging from 2031 to 2036.
Our
owned and in-licensed patents and patent applications are summarized below.
Family/PCT
Application |
|
“Title”/(Type
of Patent Protection) |
|
Applicant/Owner |
|
Pending
Applications |
|
Issued
Patents |
|
Patent
Expiry |
WO2011107750 |
|
“Delayed
Prolonged Drug Delivery” (A press-coated tablet formulation for a delayed, followed by a prolonged release of an active agent) |
|
DRUG
DELIVERY INTERNATIONAL LTD |
|
|
|
Germany,
Great Britain,
France,
Japan,
Switzerland,
United States |
|
March
2031 |
WO2011107749 |
|
“Pulsatile
Drug Release” (A press-coated tablet formulation for a delayed, followed by a pulsed release of an active agent) |
|
DRUG
DELIVERY INTERNATIONAL LTD |
|
|
|
Austria,
Belgium,
Bulgaria,
Czech Republic,
Denmark,
Finland,
France,
Germany,
Great
Britain, Greece,
Hungary,
Ireland,
Italy,
Japan,
Netherlands,
Norway,
Poland,
Portugal,
Romania,
Slovakia,
Slovenia,
Spain,
Sweden,
Switzerland,
Turkey,
United States |
|
March
2031 |
WO2011107755 |
|
“Immediate
Delayed Release” (A press-coated tablet formulation for a delayed, followed by a pulsed release of an active agent) |
|
DRUG
DELIVERY INTERNATIONAL LTD |
|
United
States |
|
Austria,
Belgium,
Bulgaria,
Czech Republic,
Denmark,
Finland,
France,
Germany,
Great
Britain, Greece,
Hungary,
Ireland,
Italy,
Japan,
Netherlands,
Norway,
Poland,
Portugal,
Romania,
Slovakia,
Slovenia,
Spain,
Sweden,
Switzerland,
Turkey,
United States |
|
March
2031 |
WO2016075496 |
|
“Pharmaceutical
Processing” (A method for making a controlled release material) |
|
DRUG
DELIVERY INTERNATIONAL LTD |
|
Europe,
United States |
|
|
|
November
2035 (when issued) |
Family/PCT
Application |
|
“Title”/(Type
of Patent Protection) |
|
Applicant/Owner |
|
Pending
Applications |
|
Issued
Patents |
|
Patent
Expiry |
WO2016075495 |
|
“Compositions”
(A press coated tablet for delayed release of an active ingredient) |
|
DRUG
DELIVERY INTERNATIONAL LTD |
|
Brazil,
Canada,
China,
Egypt,
India,
South Korea |
|
Australia,
Austria,
Belgium,
Bulgaria,
Czech
Republic, Denmark,
Finland,
France,
Germany,
Great Britain,
Greece,
Hong Kong
Hungary,
Ireland,
Italy,
Japan
Mexico,
Netherlands,
Norway,
Poland,
Portugal,
Romania,
Russia,
Saudi Arabia
Slovakia,
Slovenia
Spain,
Sweden,
Switzerland,
Turkey,
United
States |
|
November
2035 |
WO2016075497 |
|
“Tablet”
(A sustained release tablet comprising a wax, a disintegrant and a therapeutic agent) |
|
DRUG
DELIVERY INTERNATIONAL LTD |
|
Europe |
|
United
States |
|
November
2035 |
WO2016138440 |
|
“Tripulse
Release Stimulant Formulations” |
|
CINGULATE
THERAPEUTICS LLC |
|
Australia,
Canada,
China,
Europe,
Hong
Kong, India,
Israel,
Japan,
Korea,
United States |
|
|
|
February
2036 (when issued) |
US
PROVISIONAL 63/187,037 |
|
“Trimodal,
Precision-Timed Pulsatile Release Tablet” |
|
CINGULATE
THERAPEUTICS LLC |
|
United
States |
|
|
|
May
2042 (when issued) |
|
|
|
|
|
|
|
|
|
|
|
US
PROVISIONAL 63/310,677 |
|
“Trimodal,
Precision-Timed Release Tablet” |
|
CINGULATE
THERAPEUTICS LLC |
|
United
States |
|
|
|
Feb
2043 (when issued) |
Trade
secret and other protection
In
addition to patented intellectual property, we also rely on trade secrets and proprietary know-how to protect our technology and maintain
our competitive position, especially when we do not believe that patent protection is appropriate or can be obtained. Our policy is to
require each of our employees, consultants and advisors to execute a confidentiality and inventions assignment agreement before beginning
their employment, consulting or advisory relationship with us. The agreements generally provide that the individual must keep confidential
and not disclose to other parties any confidential information developed or learned by the individual during the course of the individual’s
relationship with us except in limited circumstances. These agreements generally also provide that we shall own all inventions conceived
by the individual in the course of rendering services to us.
Other
intellectual property rights
We
seek trademark protection in the United States when appropriate. We have filed for trademark protection for the Cingulate, Cingulate
Therapeutics trade dress and mark, which we use with our pharmaceutical research and development as well as products, as well as trade
names that could be used with our potential products. We currently have registered trademarks for Cingulate Therapeutics in the United
States as well as for our PTR technology.
From
time to time, we may find it necessary or prudent to obtain licenses from third party intellectual property holders.
Competition
Our
industry has been exemplified by advancing technologies, intense competition, and a strong emphasis on proprietary products. We may face
competition from both pharmaceutical as well as generic drug companies as there are several short-acting and extended-release branded
products with various formulations, some quite innovative as well as generic versions of these that have yet to satisfy the unmet medical
need. We believe the key competitive factors that will affect the development and commercial success of our product candidates include
oral administration, therapeutic efficacy which includes immediate onset and entire active day duration, safety and tolerability profiles,
market access and pricing. Some competitors have substantially greater financial, technical and human resources than we do; however,
we believe the level of branded competition is diminishing and will continue to decline with the loss of exclusivity for Vyvanse. In
addition, our prospective competitors may also have more experience and expertise in obtaining marketing approvals from the FDA and foreign
regulatory authorities. In addition to product development, testing, approval and promotion, other competitive factors in the pharmaceutical
industry include consolidation, product quality and price, product technology, reputation, customer service and access to technical information.
As a result, our prospective competitors may be able to develop competing or superior products and compete more aggressively and sustain
their competitive advantage over a longer period of time than us. Our products may be rendered obsolete or may lack economic viability
in the face of competition.
If
approved, both CTx-1301 and CTx-1302 will compete against currently marketed, branded, and generic methylphenidate and amphetamine products
for the treatment of ADHD. Some of these currently available products include Janssen’s Concerta, Novartis’ Focalin XR and
Takeda’s Adderall XR and Vyvanse, which will lose exclusivity in 2023.
In
recent years the ADHD market has seen the entrance of many innovative but niche-focused ADHD products that have not commanded the market
share of previous oral stimulants, in particular the extended-release oral stimulants. We are aware that we face competition from small
biotechnology companies focused in ADHD with niche products including Aytu, Tris, Corium, Ironshore, and Rhodes. However, we do not consider
most of these companies to be significant competitors as their products are only capable of capturing small subsets of the overall market
and do not employ substantial commercial efforts; whereas we believe our product candidates offer the potential to overcome longstanding
unmet needs for the majority of ADHD patients. In addition, Cingulate, along with a potential commercialization partner, plans to employ
appropriate resources to successfully commercialize its assets.
The
FDA recently issued revised guidance for bioequivalence testing of generic extended-release methylphenidate. This new guidance makes
it more difficult for new generic products to demonstrate bioequivalence to reference products. We believe this will limit generic competition
in the methylphenidate market. It may be difficult for a generic product to show bioequivalence to a new branded, extended- release dexmethylphenidate
drug with entire active day duration of effect, such as CTx-1301.
Government
Regulation
Government
authorities in the United States at the federal, state and local levels and in other countries regulate, among other things, the research,
development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising,
distribution, post-approval monitoring and reporting, marketing and export and import of drug products. Generally, before a new drug
can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific
for each regulatory authority, submitted for review and ultimately approved by the applicable regulatory authority.
U.S.
Drug Development
In
the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.
Drugs are also subject to other federal, state, and local statutes and regulations. The process of obtaining regulatory approval and
maintaining subsequent compliance with applicable federal, state and local statutes and regulations requires the expenditure of substantial
time, personnel, and financial resources. These agencies and other federal, state and local entities regulate research and development
activities and the testing, manufacture, quality control, labeling, storage, packaging, recordkeeping, tracking, approval, import, export,
distribution, advertising and promotion of pharmaceutical products. Failure to comply with the applicable U.S. regulatory requirements
at any time during product development, the approval process, or after approval may subject an applicant to administrative or judicial
sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of
an approval, a clinical hold, untitled or warning letters, voluntary product recalls or market withdrawals, product seizures, total or
partial suspension of production or distribution injunctions, fines, consent decrees, refusals of government contracts, restitution,
disgorgement, or civil and criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Pharmaceutical
product candidates must be approved by the FDA through the NDA process before they may be legally marketed and sold in the United States.
Cingulate intends to submit our NDAs under the 505(b)(2) regulatory approval pathway. Development and approval of drugs generally involves
the following:
|
● |
Completion
of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practice (GLP) regulations or
other applicable regulations; |
|
|
|
|
● |
Submission
to the FDA of an investigational new drug application (IND), which must become effective before clinical trials involving humans
may begin; |
|
● |
Approval
by an independent institutional review board (IRB) or ethics committee at each clinical trial site before a trial may be initiated
at that site; |
|
|
|
|
●
● |
Performance
of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, other good clinical practices
(GCPs) and other clinical-trial related regulations to evaluate the safety and efficacy of the investigational product for each proposed
indication;
Compiling
of information demonstrating that the product can be properly formulated, manufactured and stored; |
|
● |
Submission
of an NDA to the FDA for marketing approval, including payment of application user fees; |
|
● |
Satisfactory
completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug is produced to assess compliance
with cGMPs and assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality
and purity; |
|
|
|
|
● |
Possible
FDA audit of the clinical trial sites to assure compliance with GCPs and the integrity of the clinical data submitted in support
of the NDA; and |
|
|
|
|
● |
FDA
review and approval of the NDA, including satisfactory completion of an FDA advisory committee review of the product candidate, where
appropriate or if applicable, prior to any commercial marketing or sale of the product in the United States. |
Preclinical
Studies
Before
testing any drug product candidate in humans, it must undergo rigorous preclinical testing. The preclinical developmental stage generally
involves laboratory evaluations of drug chemistry, formulation and stability, as well as studies to evaluate toxicity in animals, which
support subsequent clinical testing. The sponsor must submit the results of the preclinical studies, together with manufacturing information,
analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is
a request for authorization from the FDA to administer an investigational product to humans, and must become effective before human clinical
trials may begin.
Preclinical
studies include laboratory evaluation of product candidate chemistry and formulation, as well as in vitro and animal studies, to assess
the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is
subject to federal regulations and requirements, including GLP regulations for safety and toxicology studies. Some long-term preclinical
testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after an IND for an investigational drug
candidate is submitted to the FDA and human clinical trials have been initiated.
In
the case of testing data to support a 505(b)(2) NDA, some or all of the necessary preclinical data may be referenced in literature or
the FDA’s previous findings of safety and efficacy for an RLD.
Clinical
Trials
All
clinical trials must be conducted under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing
the objectives of the study, the parameters to be used in monitoring the safety and effectiveness criteria to be evaluated. Each protocol
must be submitted to the FDA as part of the IND. Study subjects must sign an informed consent form before participating in a clinical
trial. There are also requirements governing the reporting of on-going clinical trials and clinical trial results to public registries.
An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions
related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and
the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in
the FDA allowing clinical trials to commence. Clinical holds may also be imposed by the FDA at any time before or during studies due
to safety concerns or non-compliance.
In
addition, an IRB representing each institution that is participating in the clinical trial must review and approve the plan for any clinical
trial before it commences at that institution, and the IRB must thereafter conduct a continuing review and reapprove the trial at least
annually. The IRB must review and approve, among other things, the trial protocol and informed consent information to be provided to
clinical trial subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials, including
details of the protocol and eventually study results, also must be submitted within specific timeframes to the National Institutes of
Health for public dissemination on the ClinicalTrials.gov data registry. Information related to the product, patient population, phase
of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration of
the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the
results of these trials can be delayed in some cases for up to two years after the date of completion of the trial. Failure to timely
register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and
also prevent the non-compliant party from receiving future grant funds from the federal government. The NIH’s Final Rule on ClinicalTrials.gov
registration and reporting requirements became effective in 2017, and both NIH and FDA have signaled the government’s willingness
to begin enforcing those requirements against non-compliant clinical trial sponsors.
Clinical
trials conducted to support an NDA are generally conducted in three sequential phases that may overlap or be combined.
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Phase
1 - clinical trials generally involve a relatively small number of healthy volunteers who are initially exposed to a single dose
or multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the safety, dosage tolerance,
structure-activity relationships, mechanism of action, absorption, metabolism, distribution, and excretion in healthy volunteers
or subjects with the target disease or condition. Changes to this general format that are suitable to a product candidate or a specific
patient population may occur but usually are agreed to in advance with the FDA. |
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Phase
2 - clinical trials typically involve studies in a limited patient population to identify possible adverse effects and safety risks,
to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal
dosage. |
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Phase
3 - clinical trials are undertaken in larger subject populations to further evaluate dosage, clinical efficacy and safety in an expanded
patient population, often at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit
ratio of the product candidate and provide, if appropriate, an adequate basis for product labeling. These trials may include comparisons
with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product
during marketing. These trials may be done globally to support global registrations so long as the global sites are also representative
of the U.S. population and the conduct of the study at global sites comports with FDA regulations and guidance, such as compliance
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By
following the 505(b)(2) regulatory approval pathway, the applicant may reduce some of the burden of developing a drug by relying on investigations
not conducted by the applicant and for which the applicant has not obtained a right of reference, such as prior investigations involving
the RLD. In such cases, some clinical trials may not be required or may be otherwise limited; however, Phase 1 trials to establish bioavailability
and pharmacokinetic characteristics of the product candidate and at least one Phase 3 pivotal trial are usually required to support a
505(b)(2) NDA.
Post-approval
trials, sometimes referred to as Phase 4, may be conducted after initial marketing approval. These trials are used to gain additional
experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance
of Phase 4 clinical trials as a condition of approval of an NDA.
During
the development of a new drug product, sponsors have the opportunity to meet with the FDA at certain points, including prior to submission
of an IND, at the end of phase 2, and before submission of an NDA. These meetings can provide an opportunity for the sponsor to share
information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the
next phase of development. Sponsors typically meet with the agency before initiating Phase 3 clinical trials to present their plans for
the pivotal trial that they believe will support approval of the new drug product.
Concurrent
with clinical trials, companies usually complete additional animal studies and must also develop additional information about the physical
characteristics of the drug product and finalize a process for manufacturing the product in commercial quantities in accordance with
cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and,
among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final drug product.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product
candidate does not undergo unacceptable deterioration over its shelf life.
NDA
and FDA Review Process
Assuming
successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, along with detailed
descriptions of the product’s chemistry, manufacturing, and controls, proposed labeling and other relevant information are submitted
to the FDA as part of an NDA requesting approval to market the product. The cost of preparing and submitting an NDA is substantial. Under
federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently over $3.24 million
for an NDA with clinical information, and the manufacturer and/or sponsor under an approved NDA is also subject to an annual program
fee, currently approximately $394,000. These fees are typically increased annually. Fee waivers or reductions are available in certain
circumstances. One such fee waiver is available for applicants that are small businesses, meaning the applicant (including any affiliates)
employs fewer than 500 employees, does not have an approved marketing application for a product that has been introduced or delivered
for introduction into interstate commerce, and is submitting its first marketing application.
Section
505(b)(1) and Section 505(b)(2) of the FDCA are the provisions governing the type of NDAs that may be submitted under the FDCA. Section
505(b)(1) is the traditional pathway for new chemical entities when no other new drug containing the same active pharmaceutical ingredient
or active moiety, which is the molecule or ion responsible for the action of the drug substance, has been approved by the FDA. As an
alternate pathway to FDA approval for new or improved formulations of previously approved products, a company may file a Section 505(b)(2)
NDA. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from studies
not conducted by or for the applicant and for which the applicant has not obtained a right of reference.
Once
the FDA receives an application, it has 60 days to review the NDA to determine if it is substantially complete to permit a substantive
review, before it accepts the application for filing and may request additional information rather than accepting the applications. Once
the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA
under the Prescription Drug User Fee Act (PDUFA) VI, the agency seeks to review applications for standard review drug products within
10 months from the filing acceptance date, and applications for priority review drugs within six months from the filing acceptance date.
The FDA may grant a priority review designation to drugs that are intended to treat a serious condition and that the agency determines
offer major advances in treatment, or provide a treatment where no adequate therapy exists. The FDA does not always meet its PDUFA goal
dates for standard and priority NDAs, and the review process for both standard and priority reviews may be extended by FDA for three
additional months to consider additional, late-submitted information, or information intended to clarify information already provided
in the submission in response to FDA review questions.
Before
approving an NDA, the FDA will typically conduct a pre-approval inspection of the manufacturing facilities for the product candidate
to determine whether they comply with cGMPs, unless the facility has recently had an FDA inspection. The FDA will not approve the product
unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure
consistent production of the product to specifications. Additionally, the FDA may refer applications for novel drug products or drug
products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians
and other experts, for review, evaluation and a recommendation regarding whether the application should be approved and, if so, under
what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers them carefully when making decisions.
NDAs submitted under Section 505(b)(2) are typically not referred to an Advisory Panel for consideration unless new safety information
is revealed in the review cycle.
As
part of the NDA review process, the FDA likely will re-analyze the clinical trial data, which could result in extensive discussions between
the FDA and the applicant. Additionally, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs and
the IND protocol requirements and to assure the integrity of the clinical data submitted to the FDA. The review and evaluation of an
NDA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely
approval, if at all.
After
the FDA evaluates an NDA, it will issue either an approval letter or a complete response letter (CRL). An approval letter authorizes
the commercial marketing of the drug with prescribing information for specific indications. A CRL indicates that the review cycle of
the application is complete, and that the application will not be approved in its present form. A CRL generally describes the deficiencies
in the NDA identified by the FDA and may require substantial additional clinical data or other significant and time-consuming requirements
related to clinical trials, nonclinical studies or manufacturing. Additionally, the CRL may include recommended actions that the applicant
might take to place the application in a condition for approval. If a CRL is issued, the applicant may either resubmit the NDA, addressing
all of the deficiencies identified in the letter, or withdraw the application. If, or when, those deficiencies have been addressed to
the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter to the applicant. The FDA has committed
to reviewing such resubmissions in response to an issued CRL in either two or six months depending on the type of information included.
Even with the submission of this additional information, however, the FDA may decide that the NDA does not satisfy the regulatory criteria
for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than the sponsor
interprets the same data.
There
is no assurance that the FDA will approve a product candidate for marketing, and the sponsor may encounter significant difficulties or
costs during the review process. Even if a product receives marketing approval, the approval may be significantly limited to specific
diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further,
the FDA may require that certain contraindications, warnings or precautions be included in the product labeling, or it may condition
approval on changes to the proposed labeling. The FDA also may condition approval on the development of adequate controls and specifications
for manufacturing and a commitment to conduct post-marketing testing and surveillance to monitor the potential effects and efficacy.
For example, the FDA may require Phase 4 trials designed to further assess a drug’s safety and efficacy.
The
FDA may also place restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk evaluation and
mitigation strategy (REMS) plan in addition to the approved labeling, to help ensure that the benefits of the drug outweigh its risks.
A REMS could include medication guides for patients, communication plans for health care professionals, and/or elements to assure safe
use (ETASU). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, restricted distribution
requirements, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA determines
the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a REMS plan is needed,
the sponsor of the NDA must submit a proposed REMS plan. The FDA will not approve the NDA without an approved REMS, if required. Based
on the required warnings included in the approved labeling of drug products containing the same drug substance as our product candidates
(dexmethylphenidate and dextroamphetamine), we expect that as part of the NDA review and approval process, FDA will require at least
some of our product candidates, in particular CTx-1301 and CTx-1302, to include black box warnings as part of their labeling.
Any
of the above-mentioned limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing
of products and therefore limit commercial success. Marketing approval may be withdrawn for non-compliance with regulatory requirements
or if problems occur following initial marketing.
After
NDA approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling
claims, are subject to further testing requirements, FDA notification, and FDA review and approval. Further, should new safety information
arise, additional testing, product labeling or FDA notification may be required.
Hatch-Waxman
Act and New Drug Marketing Exclusivity
Under
the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Amendments to the FDCA, Congress
authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the
statute and also enacted Section 505(b)(2) of the FDCA. To obtain approval of a generic drug, an applicant must submit an abbreviated
new drug application (ANDA), to the agency. In support of such applications, a generic manufacturer may rely on the preclinical and clinical
testing conducted for a drug product previously approved under an NDA, known as the RLD. Specifically, in order for an ANDA to be approved,
the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration,
the dosage form, and the strength of the drug. In contrast, Section 505(b)(2) permits the filing of an NDA where at least some of the
information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained
a right of reference. A Section 505(b)(2) applicant may eliminate the need to conduct certain preclinical or clinical studies, if it
can establish that reliance on studies conducted for a previously-approved product is scientifically appropriate. Unlike the ANDA pathway
used by developers of bioequivalent versions of innovator drugs, which does not allow applicants to submit new clinical data other than
bioavailability or bioequivalence data, the 505(b)(2) regulatory pathway does not preclude the possibility that a follow-on applicant
would need to conduct additional clinical trials or nonclinical studies; for example, they may be seeking approval to market a previously
approved drug for new indications or for a new patient population that would require new clinical data to demonstrate safety or effectiveness.
The FDA may then approve the new product for all or some of the label indications for which the RLD has been approved, or for any new
indication sought by the Section 505(b)(2) applicant, as applicable.
In
seeking approval of an NDA or a supplement thereto, the NDA sponsor is required to list with the FDA each patent with claims that cover
the sponsor’s product or an approved method of using the product. Upon approval of an NDA, each of the patents listed in the application
for the drug is published in the FDA publication Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the
Orange Book. When an ANDA applicant submits its application to the FDA, the applicant is required to certify to the FDA concerning any
patents listed in the Orange Book for the RLD, except for patents covering methods of use for which the follow-on applicant is not seeking
approval. To the extent a Section 505(b)(2) applicant is relying on studies conducted for an already approved product, such an applicant
is also required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that
an ANDA applicant would.
Specifically,
any applicant who subsequently files an ANDA or 505(b)(2) NDA that references the drug listed in the Orange Book must certify to the
FDA that with respect to each published patent, (i) the required patent information has not been filed by the original applicant of the
RLD; (ii) the listed patent already has expired; (iii) the listed patent has not expired, but will expire on a specified date and approval
is sought after patent expiration; or (iv) the listed patent is invalid, unenforceable or will not be infringed by the manufacture, use
or sale of the new product. These are known as Paragraph I, II, III, and IV certifications, respectively.
If
a Paragraph I or II certification is filed, the FDA may make approval of the application effective immediately upon completion of its
review. If a Paragraph III certification is filed, the approval may be made effective on the patent expiration date specified in the
application, although a tentative approval may be issued before that time. If an application contains a Paragraph IV certification, a
series of events will be triggered, the outcome of which will determine the effective date of approval of the ANDA or 505(b)(2) application.
A
certification that the new product will not infringe the RLD’s listed patents or that such patents are invalid is called a Paragraph
IV certification. If the follow-on applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice
of the Paragraph IV certification to the NDA and patent holders for the RLD once the applicant’s NDA has been accepted for filing
by the FDA. The NDA and patent holders may then initiate a legal challenge to the Paragraph IV certification. The filing of a patent
infringement lawsuit within 45 days of their receipt of a Paragraph IV certification automatically prevents the FDA from approving the
ANDA or 505(b)(2) NDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent or a decision
in the infringement case that is favorable to the ANDA or 505(b)(2) applicant. Alternatively, if the listed patent holder does not file
a patent infringement lawsuit within the required 45-day period, the follow-on applicant’s ANDA or 505(b)(2) NDA will not be subject
to the 30-month stay.
In
addition, under the Hatch-Waxman Amendments, the FDA may not approve an ANDA or 505(b)(2) NDA until any applicable period of non-patent
exclusivity for the referenced RLD has expired. These market exclusivity provisions under the FDCA also can delay the submission or the
approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to
the first applicant to gain approval of a NDA for a drug containing a new chemical entity. A drug is a new chemical entity if the FDA
has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action
of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another
company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required
for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement.
The
FDCA also provides three years of marketing exclusivity for a NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations,
other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval
of the application, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the
conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving follow-on applications
for drugs containing the original active agent. Five-year and three-year exclusivity also will not delay the submission or approval of
a traditional NDA filed under Section 505(b)(1) of the FDCA. However, an applicant submitting a traditional NDA would be required to
either conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary
to demonstrate safety and effectiveness.
Patent
Term Extension
After
NDA approval, owners of relevant drug patents may apply for up to a five-year patent term extension. The allowable patent term extension
is calculated as half of the drug’s testing phase – the time between when the IND becomes effective and NDA submission –
and all of the review phase – the time between NDA submission and approval, up to a maximum of five years. The time can be shortened
if FDA determines that the applicant did not pursue approval with due diligence. The total patent term after the extension may not exceed
14 years. For patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim
patent extension increases the patent term by one year and may be renewed up to four times. For each interim patent extension granted,
the post-approval patent extension is reduced by one year. The director of the Patent and Trademark Office (PTO) must determine that
approval of the drug covered by the patent for which a patent extension is being sought is likely. Interim patent extensions are not
available for a drug for which an NDA has not been submitted.
Pediatric
Clinical Trials and Exclusivity
Under
the Pediatric Research Equity Act (PREA), an NDA or certain types of supplements to an NDA must contain data to assess the safety and
efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for
each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data
or full or partial waivers.
For
purposes of satisfying the requirements of PREA, the appropriate age ranges to be studied may vary, depending on the pharmacology of
the drug or biological product, the manifestations of the disease in various age groups, and the ability to measure the response to therapy.
PREA requires pediatric assessments to be gathered “using appropriate formulations for each age group for which the assessment
is required” (section 505B(a)(2)(A) of the Act). Under PREA, applicants must submit requests for approval of the pediatric formulation
used in their pediatric studies, and failure to submit such a request may render the product misbranded (section 505B(d) of the Act).
FDA interprets the language “request for approval of a pediatric formulation” to mean that applicants must submit an application
or supplemental application for any not previously approved formulation(s) used to conduct their pediatric studies.
The
Food and Drug Administration Safety and Innovation Act, which was signed into law on July 9, 2012, amended the FDCA to require that a
sponsor who is planning to submit an NDA for a new active ingredient, new indication, new dosage form, new dosing regimen or new route
of administration submit an initial Pediatric Study Plan (iPSP) within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting,
as early as practicable before the initiation of the Phase 3 or Phase 2/3 trial. The initial PSP must include an outline of the pediatric
trial(s) that the sponsor plans to conduct, including objectives and design, age groups, relevant endpoints and statistical approach,
or a justification for not including such information, and any request for a deferral of pediatric assessments or a full or partial waiver
of the requirement to provide data from pediatric trials along with supporting information. The FDA and the sponsor must reach an agreement
on the PSP, but the sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to
be considered based on data collected from nonclinical studies, early phase clinical trials, and other clinical development programs.
We have submitted our iPSP, and it was accepted. We continue to be in discussions with the FDA regarding our PREA obligations.
The
Best Pharmaceuticals for Children Act provides NDA holders a six-month extension of any exclusivity – patent or non-patent –
for a drug if certain conditions are met, including satisfaction of a pediatric trial(s) agreed with FDA as a Pediatric Written Request.
Conditions for pediatric exclusivity include the FDA’s determination that information relating to the use of a new drug in the
pediatric population may produce health benefits in that population, the FDA making a written request for pediatric clinical trials,
and the applicant agreeing to perform, and reporting on, the requested clinical trials within the statutory timeframe. This six-month
exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to the written request from the FDA for such
data. Those data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is
deemed to fairly respond to the FDA’s request, the additional protection is granted. Although this is not a patent term extension,
it effectively extends the regulatory period during which the FDA cannot approve another application.
Disclosure
of Clinical Trial Information
Sponsors
of clinical trials of FDA-regulated products are required to register and disclose certain clinical trial information on the website
www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators,
and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results
of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up
to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding
the progress of clinical development programs as well as clinical trial design.
Post-Approval
Requirements
Following
approval of a drug product, the manufacturer and the approved drug product are subject to pervasive and continuing regulation by the
FDA, including, among other things, monitoring and record-keeping activities, reporting of adverse experiences with the product, product
sampling and distribution restrictions, complying with promotion and advertising requirements, which include restrictions on promoting
drugs for unapproved uses or patient populations (i.e., “off-label use”) and limitations on industry-sponsored scientific
and educational activities. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market
or promote such uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses,
and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including adverse publicity,
enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to
the FDA. Prescription drug promotional materials also must be submitted to the FDA in conjunction with their first use. Further, if there
are any modifications to the approved drug product, including changes in indications, labeling or manufacturing processes or facilities,
the applicant may be required to submit and obtain FDA approval of a new NDA or NDA supplement, which may require the applicant to develop
additional data or conduct additional preclinical studies or clinical trials.
FDA
regulations require that products be manufactured in specific approved facilities and in accordance with cGMPs. The cGMP regulations
include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product
containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls,
records and reports and returned or salvaged products. The manufacturing facilities for our product candidates must meet cGMP requirements
and satisfy the FDA or comparable foreign regulatory authorities’ satisfaction before any product is approved and our commercial
products can be manufactured. These manufacturers must comply with cGMPs that require, among other things, quality control and quality
assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers
and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with
the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance
with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production
and quality control to maintain compliance with cGMPs. The discovery of violative conditions, including failure to conform to cGMPs,
could result in enforcement actions including cessation of manufacturing activities. The discovery of problems with a product after approval
may result in restrictions on a product, manufacturer or holder of an approved NDA, including recalls and product seizures.
Further,
changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented, or FDA notification.
If there are any modifications to the drug, including changes to indications, labeling, or manufacturing processes or facilities, the
applicant may be required to submit and obtain FDA approval of a supplemental NDA or new NDA, which may require the applicant to develop
additional data or conduct additional pharmaceutical development/formulation studies, nonclinical studies or clinical trials.
Once
an approval of a prescription drug is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards
is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product,
including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market or
clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential
consequences include, among other things:
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fines,
warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; |
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refusal
of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; |
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product
seizure or detention, or refusal to permit the import or export of products; |
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injunctions
or the imposition of civil or criminal penalties; |
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consent
decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; and |
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In
addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription Drug Marketing
Act (PDMA), which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration
and regulation of drug distributors by the states. Both the PDMA and state laws regulate the distribution of prescription pharmaceutical
product samples and impose requirements to ensure accountability in distribution.
Moreover,
the Drug Supply Chain Security Act (DSCSA) was enacted in 2013 with the aim of building an electronic system to identify and trace certain
prescription drugs distributed in the United States. The DSCSA mandates phased-in and resource-intensive obligations for pharmaceutical
manufacturers, wholesale distributors, and dispensers over a 10-year period that is expected to culminate in November 2023. From time
to time, new legislation and regulations may be implemented that could significantly change the statutory provisions governing the approval,
manufacturing and marketing of prescription drug products regulated by the FDA. It is impossible to predict whether further legislative
or regulatory changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if
any, may be.
DEA
Regulation
The
active ingredients in our current drug product candidates are listed by the U.S. Drug Enforcement Administration, or DEA, as controlled
substances under the Controlled Substances Act of 1970 (CSA). The CSA and its implementing regulations establish a closed chain of distribution
for entities handling controlled substances and impose registration, record-keeping and reporting, security, storage, procurement, manufacturing,
distribution, importation, exportation, labeling, packaging, and other requirements on such entities. The DEA requires individuals or
entities that handle controlled substances to comply with these requirements to ensure legitimate use and prevent diversion of controlled
substances to illicit channels of commerce.
The
CSA categorizes controlled substances into one of five schedules, Schedule I, II, III, IV or V, depending on the potential for abuse
and physical or psychological dependence. Schedule I substances by definition have a high potential for abuse, have no currently accepted
medical use in treatment in the U.S. and lack accepted safety for use under medical supervision. They may not be marketed or sold for
dispensing to patients in the U.S. Pharmaceutical products having a currently accepted medical use and that are otherwise approved for
marketing may be listed as Schedule II, III, IV, or V substances, with Schedule II substances presenting the highest potential for abuse
and physical or psychological dependence, and Schedule V substances presenting the lowest relative potential for abuse and dependence.
Schedule II substances (as well as substances defined as narcotics in any Schedule) are subject to the strictest requirements for registration,
security, recordkeeping and reporting, and the distribution and dispensing of these substances are highly regulated. For example, all
Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist in most situations, unless they are
electronically prescribed pursuant to DEA regulations, and may not be refilled. The active ingredients in our product candidates (dexmethylphenidate
and dextroamphetamine) are Schedule II controlled substances and are under various restrictions. Consequently, the procurement, manufacturing,
shipping, storage, sales and use of the products, if approved, will be subject to a high degree of regulation.
Facilities
that manufacture, distribute, import or export controlled substances must register annually with the DEA. The registration is specific
to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and
manufacturing, and each registration will specify which schedules of controlled substances are authorized. Similarly, separate registrations
are also required for separate facilities.
The
DEA inspects manufacturers, distributors, importers, and exporters to review compliance with the CSA and DEA regulations, including security,
record keeping and reporting prior to issuing a controlled substance registration and on a periodic basis. The specific security requirements
vary by the type of business activity and the schedule and quantity of controlled substances handled by the registrant, with the most
stringent requirements applying to Schedule I and Schedule II substances. Required security measures include background checks on employees
and physical control of inventory through measures such as vaults and inventory reconciliations. Manufacturers and distributors must
also submit regular reports to the DEA of the distribution of Schedule I and II controlled substances, Schedule III narcotic substances,
and other designated substances. Records must be maintained for the handling of all controlled substances, for example, a complete and
accurate record of each substance manufactured, received, sold, delivered, or otherwise disposed of. All DEA registrants must also report
any controlled substance thefts or significant losses and must obtain authorization to destroy or dispose of controlled substances. In
addition to maintaining an importer and/or exporter registration, importers and exporters of controlled substances must obtain a permit
for every import or export of a Schedule I or II substance and a narcotic substance in Schedule III, IV and V. For all other drugs in
Schedule III, IV and V, importers and exporters must submit an import or export declaration.
In
addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II. The DEA
establishes annually an aggregate quota for how much of a controlled substance may be produced in total in the United States based on
the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. The limited aggregate number of opioids
and stimulants that the DEA allows to be produced in the United States each year is allocated among individual companies, which must
submit applications annually to the DEA for individual production and procurement quotas. We must receive an annual quota from the DEA
in order to produce or procure our Schedule II substance for use in manufacturing of our product and product candidates. The DEA may
adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA
has substantial discretion in whether or not to make such adjustments. Distributions of any Schedule I or II controlled substance must
also be accompanied by special order forms, with copies provided to the DEA.
Failure
to maintain compliance with applicable DEA requirements, particularly as manifested in loss or diversion or controlled substances, can
result in administrative, civil or criminal enforcement action. The DEA may seek civil penalties, refuse to renew necessary registrations,
or initiate administrative proceedings to revoke those registrations. In some circumstances, violations could lead to criminal prosecution.
The
various states and the District of Columbia also regulate controlled substances and impose similar licensing, recordkeeping, and reporting
requirements on entities that handle controlled substances. Entities must independently comply with the various state requirements in
addition to the federal controlled substance requirements.
Pharmaceutical
Coverage, Pricing and Reimbursement
Significant
uncertainty exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval.
In the United States, sales of pharmaceutical products depend in significant part on the availability of coverage and adequate reimbursement
by third-party payors, such as state and federal governmental authorities, including those that administer the Medicare and Medicaid
programs, managed care organizations and private insurers. Decisions regarding the extent of coverage and amount of reimbursement to
be provided for each of our product candidates will be made on a plan-by-plan basis. The Medicare and Medicaid programs are often used
as models by private payors and other governmental payors to develop their coverage and reimbursement policies for drugs. However, one
payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage, and adequate
reimbursement, for the product. Each third-party payor determines whether or not it will provide coverage for a drug, what amount it
will pay providers for the drug, and on what tier of its formulary the drug will be placed. These decisions are influenced by the existence
of multiple drug products within a therapeutic class and the net cost to the plan, including the amount of the prescription price, if
any, rebated by the drug’s manufacturer. Typically, generic versions of drugs are placed in a preferred tier. The position of a
drug on the formulary generally determines the co-payment that a patient will need to make to obtain the drug and can strongly influence
the adoption of a drug by patients and physicians. Patients who are prescribed treatments for their conditions and providers performing
the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are
unlikely to use our products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of
our products. Additionally, a third-party payor’s decision to provide coverage for a drug does not imply that an adequate reimbursement
rate will be approved. Also, third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. As
a result, coverage, reimbursement and placement determinations are complex and are often the subject of extensive negotiations between
the payor and the owner of the drug.
Unless
we enter into a strategic collaboration under which our collaborator assumes responsibility for seeking coverage and reimbursement for
a given product, we will be responsible for negotiating coverage, reimbursement and placement decisions for our product candidates. Coverage,
reimbursements and placement decisions for a new product are based on many factors including the coverage, reimbursement and placement
of already marketed branded drugs for the same or similar indications, the safety and efficacy of the new product, availability of generics
for similar indications, the clinical need for the new product and the cost-effectiveness of the product.
Within
the Medicare program, CTx-1301, CTx-1302 and CTx-2103, which, if approved would likely be self-administered drugs, would likely be reimbursed
under the expanded prescription drug benefit known as Medicare Part D. This program is a voluntary Medicare benefit administered by private
plans that operate under contracts with the federal government. These plans develop formularies that determine which products are covered
and what co-pay will apply to covered drugs. The plans have considerable discretion in establishing formularies and tiered co-pay structures,
negotiating rebates with manufacturers and placing prior authorization and other restrictions on the utilization of specific products,
subject to review by the Centers for Medicare and Medicaid Services (CMS) for discriminatory practices. These Part D plans negotiate
discounts with drug manufacturers, which are passed on, in whole or in part, to each of the plan’s enrollees through reduced premiums.
If
a drug product is reimbursed by Medicare or Medicaid, pricing and rebate programs must comply with, as applicable, the Medicare Prescription
Drug Improvement and Modernization Act of 2003 as well as the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of
1990 (OBRA) and the Veterans Health Care Act of 1992, each as amended. Among other things, the OBRA requires drug manufacturers to pay
rebates on prescription drugs to state Medicaid programs and empowers states to negotiate rebates on pharmaceutical prices, which may
result in prices for our future products that will likely be lower than the prices we might otherwise obtain. If products are made available
to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply.
Third-party
payors, including the U.S. government, continue to apply downward pressure on the reimbursement of pharmaceutical products. For example, the Inflation Reduction Act of 2022 reduces the US government
reimbursement for some drugs. Also, the
trend towards managed health care in the United States and the concurrent growth of organizations such as health maintenance organizations
may result in lower reimbursement for pharmaceutical products. We expect that these trends will continue as these payors implement various
proposals or regulatory policies. There are currently, and we expect that there will continue to be, a number of federal and state proposals to implement controls
on reimbursement and pricing, directly and indirectly.
Other
Healthcare Laws and Compliance Requirements
As
we are commercializing our product candidates, if they are approved by the FDA or comparable foreign regulatory agencies for marketing,
we will be subject to additional healthcare statutory and regulatory requirements and enforcement by federal government and the states
and foreign governments in the jurisdictions in which we conduct our business. Healthcare providers, physicians and third-party payors
will play a primary role in the recommendation and prescription of any other product candidates for which we obtain marketing approval.
Our arrangements with third-party payors and customers expose us to broadly applicable fraud and abuse and other healthcare laws and
regulations that constrain the business or financial arrangements and relationships through which we market, sell and distribute any
products for which we obtain marketing approval.
Restrictions
under applicable federal and state healthcare laws and regulations include the following:
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The
federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving
or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the
purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare
and Medicaid programs. The federal Anti-Kickback Statute is subject to evolving interpretations. In the past, the government has
enforced the federal Anti-Kickback Statute to reach large settlements with healthcare companies based on sham consulting and other
financial arrangements with physicians. A person or entity does not need to have actual knowledge of the statute or specific intent
to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services
resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil
False Claims Act; |
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The
federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalty laws, prohibit, among
other things, knowingly presenting or causing the presentation of a false, fictitious or fraudulent claim for payment to the U.S.
government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent
claim to the U.S. government, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money
to the U.S. government. Actions under these laws may be brought by the Attorney General or as a qui tam action by a private individual
in the name of the government. The federal government uses these laws, and the accompanying threat of significant liability, in its
investigation and prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in connection with
the promotion of products for unapproved uses and other allegedly unlawful sales and marketing practices; |
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The
U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) created new federal, civil and criminal statutes
that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare
benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program,
willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment
for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have
actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
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The
Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act (collectively, PPACA), among other things, imposes reporting requirements on manufacturers of FDA-approved
drugs, devices, biologics and medical supplies covered by Medicare, Medicaid, or the Children’s Health Insurance Program to
report, on an annual basis, to CMS information related to payments and other transfers of value to physicians (defined to include
doctors, dentists, optometrists, podiatrists, chiropractors and, beginning in 2022 for payments and other transfers of value provided
in the previous year, certain advanced non-physician health care practitioners), teaching hospitals, as well as ownership and investment
interests held by physicians and their immediate family members; |
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their respective implementing regulations
impose specified requirements relating to the privacy, security and transmission of individually identifiable health information.
Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,”
defined as independent contractors or agents of covered entities, which include certain healthcare providers, health plans, and healthcare
clearinghouses, that create, receive, maintain or transmit protected health information in connection with providing a service for
or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities,
business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages
or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil
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Analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, that may apply to sales or marketing arrangements
and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; |
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State
laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related
to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures to the extent that
those laws impose requirements that are more stringent than the Physician Payments Sunshine Act, as well as state and local laws
that require the registration of pharmaceutical sales representatives; and |
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State
laws and foreign laws and regulations (particularly European Union laws regarding personal data relating to individuals based in
Europe) that govern the privacy and security of health information in certain circumstances, many of which differ from each other
in significant ways, thus complicating compliance efforts. |
In
November 2020, HHS finalized significant changes to the regulations implementing the Anti-Kickback Statute, with the goal of offering
the healthcare industry more flexibility and reducing the regulatory burden associated with those fraud and abuse laws, particularly
with respect to value-based arrangements among industry participants.
Ensuring
that our current and future business arrangements with third parties comply with applicable healthcare laws and regulations involves
substantial costs. It is possible that governmental authorities may conclude that our business practices may not comply with current
or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may
be subject to significant civil, criminal and administrative penalties, including monetary damages, fines, disgorgement, imprisonment,
loss of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement
or other government programs, including Medicare and Medicaid, reputational harm, diminished profits and future earnings, or additional
reporting requirements if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance
with any of these laws, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers
or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal,
civil or administrative sanctions, including exclusions from government funded healthcare programs.
Healthcare
Reform and Potential Changes to Healthcare Laws
The
United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change
the healthcare system in ways that could affect our ability to sell our future products profitably. Among policy makers and payors in
the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing
healthcare costs, improving quality or expanding access. In the United States, the pharmaceutical industry has been a particular focus
of these efforts and has been significantly affected by major legislative initiatives. The FDA’s and other regulatory authorities’
policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our
product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies,
or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we otherwise may have obtained and we
may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
Moreover, among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare
systems with the stated goals of containing healthcare costs, improving quality and/or expanding access.
By
way of example, PPACA was enacted in March 2010 and has had a significant impact on the health care industry in the United States. PPACA
expanded coverage for the uninsured while at the same time containing overall healthcare costs. With regard to biopharmaceutical products,
PPACA, among other things, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program
are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by
manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care
organizations, established annual fees on manufacturers of certain branded prescription drugs, and created a new Medicare Part D coverage
gap discount program.
As
another example, the 2021 Consolidated Appropriations Act signed into law on December 27, 2020, incorporated extensive healthcare provisions
and amendments to existing laws, including a requirement that all manufacturers of drugs and biological products covered under Medicare
Part B report the product’s average sales price to the Department of Health and Human Services (DHHS) beginning on January 1, 2022,
subject to enforcement via civil money penalties.
In
addition, other legislative changes have been proposed and adopted in the United States since the PPACA that affect health care expenditures.
These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control
Act of 2011, which began in 2013 and will remain in effect through 2030 unless additional Congressional action is taken. The Coronavirus
Aid, Relief, and Economic Security Act, (CARES Act), which was signed into law on March 27, 2020 and was designed to provide financial
support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1,
2020 through December 31, 2020, and extended the sequester by one year, through 2030, in order to offset the added expense of the 2020
cancellation. The 2021 Consolidated Appropriations Act was subsequently signed into law on December 27, 2020 and extended the CARES Act
suspension period to March 31, 2021. The most recently enacted pandemic-relief legislation, the American Rescue Plan Act of 2021, which
was signed into law on March 11, 2021, also includes significant healthcare system reforms and programs intended to strengthen the insurance
marketplace established under the PPACA, among others. In addition, other legislative changes that affect the pharmaceutical industry
have been proposed and adopted in the United States since the ACA was enacted. For example, the Inflation Reduction Act of 2022 included,
among other things, a provision that authorizes CMS to negotiate a “maximum fair price” for a limited number of high-cost,
single-source drugs every year, and another provision that requires drug companies to pay rebates to Medicare if prices rise faster than
inflation.
Moreover,
there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which
has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things,
bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government
program reimbursement methodologies for drug products. DHHS has solicited feedback on some of various measures intended to lower drug
prices and reduce the out of pocket costs of drugs and implemented others under its existing authority. For example, in May 2019, DHHS
issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This
final rule codified a DHHS policy change that was effective January 1, 2019. Congress and the executive branch have each indicated that
it will continue to seek new legislative and/or administrative measures to control drug costs, making this area subject to ongoing uncertainty.
Individual
states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing
cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical
benefit managers (PBMs) and other members of the health care and pharmaceutical supply chain, an important decision that may lead to
further and more aggressive efforts by states in this area.
The
FDA’s and other regulatory authorities’ policies also may change and additional government regulations may be enacted that
could prevent, limit or delay regulatory approval of our drug candidates. For example, in December 2016, the 21st Century Cures Act (Cures
Act) was signed into law. The Cures Act, among other things, is intended to modernize the regulation of drugs and devices and to spur
innovation, but its ultimate implementation is uncertain. In addition, in August 2017, the FDA Reauthorization Act was signed into law,
which reauthorized the FDA’s user fee programs and included additional drug and device provisions that build on the Cures Act.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, we may not achieve
or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
We
expect that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage
criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. Any reduction
in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors.
The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain
profitability or commercialize our drugs, once regulatory approval is obtained. We cannot predict the likelihood, nature or extent of
government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, including any future pharmaceutical products for which
we secure marketing approval.
Data
Privacy and the Protection of Personal Information
We
are regulated by laws and regulations governing data privacy, security, and the protection of personal information, including health
information, that are applicable to our business and associated data processing activities. The legislative and regulatory landscape
for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues globally
which will continue to affect our business. In the United States, we may be subject to state security breach notification laws, state
laws protecting the privacy and security of health and personal information and federal and state consumer protections laws which regulate
the collection, use, disclosure and transmission of personal information. These laws may overlap and conflict with each other, and each
of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues for us. If
we fail to comply with applicable data protection laws and regulations we could be subject to penalties or sanctions, including criminal
penalties. Our current and future customers and research partners must comply with laws governing the privacy and security of health
information, including HIPAA and state health information privacy laws. If we knowingly obtain health information that is protected under
HIPAA, called “protected health information,” without observing the correct protocols which may include execution of a business
associate agreement, implementation of privacy or security measures, and other obligations, our customers or research collaborators may
be subject to enforcement actions, and we may have direct liability for the unlawful receipt of protected health information or for aiding
and abetting a HIPAA violation.
State
laws protecting health and personal information are becoming increasingly stringent. For example, California has implemented the California
Confidentiality of Medical Information Act, which imposes restrictive requirements regulating the use and disclosure of health information
and other personally identifiable information, and in 2020 California implemented the California Consumer Privacy Act of 2018 (CCPA).
The CCPA reflects several key concepts included in the EU General Data Protection Regulation (GDPR). The CCPA establishes a new privacy
framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for
consumers in the State of California, imposing special rules on the collection of consumer data from minors, and creating a new and potentially
severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures
and practices to prevent data breaches. On January 1, 2023, the California Privacy Rights Act (CPRA) entered into force and significantly
modified the CCPA. This may result in further uncertainty, additional costs and expenses in an effort to comply, as well as additional
potential for harm and liability for failure to comply. In addition to California, five other states – Colorado, Connecticut, Nevada,
Utah and Virginia – have enacted data privacy laws, and other states in the U.S. are considering privacy laws similar to CCPA/CPRA.
Nevada’s online privacy law (which was amended in 2021) is already in force. The Virginia Consumer Data Protection Act entered
into force on January 1, 2023, and the Privacy Acts of Colorado and Connecticut will become effective on July 1, 2023. Most recently,
Utah legislators passed the Utah Consumer Privacy Act, which will take effect on December 31, 2023
When
we do business and/or conduct clinical trials in the UK or the EEA (i.e. the EU plus Liechtenstein, Norway and Iceland), we are subject
to the European Union’s General Data Protection Regulation (“GDPR”) as well as the GDPR as saved into United Kingdom
law by virtue of section 3 of the United Kingdom’s European Union (Withdrawal) Act 2018 and the UK’s Data Protection Act
2018 (“DPA 2018”) (the “UK GDPR”). The GDPR and UK GDPR apply to business colleagues, employees, service providers,
trial participants and other individuals like investigators or CRO employees who are residents of the UK or EEA. Violations of the
UK GDPR and/or the GDPR can carry hefty fines of up to EUR 20 million / £17.5 million or 4% of the total annual worldwide revenue
in the preceding financial year, whichever is higher.
U.S.
Foreign Corrupt Practices Act
In
general, the Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, prohibits offering to pay, paying, promising to pay, or
authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign
official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business for or with,
or in order to direct business to, any person. The prohibitions apply not only to payments made to “any foreign official,”
but also those made to “any foreign political party or official thereof,” to “any candidate for foreign political office”
or to any person, while knowing that all or a portion of the payment will be offered, given, or promised to anyone in any of the foregoing
categories. “Foreign officials” under the FCPA include officers or employees of a department, agency, or instrumentality
of a foreign government. The term “instrumentality” is broad and can include state-owned or state-controlled entities. Importantly,
United States authorities deem most healthcare professionals and other employees of foreign hospitals, clinics, research facilities and
medical schools in countries with public healthcare and/or public education systems to be “foreign officials” under the FCPA.
When we interact with foreign healthcare professionals and researchers in testing and marketing our products abroad, should any of our
product candidates receive foreign regulatory approval in the future, we must have policies and procedures in place sufficient to prevent
us and agents acting on our behalf from providing any bribe, gift or gratuity, including excessive or lavish meals, travel or entertainment
in connection with marketing our products and services or securing required permits and approvals. The FCPA also obligates companies
whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that
accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an
adequate system of internal accounting controls for international operations.
Material
Agreements
Joint
Commercialization Agreement with Indegene, Inc.
On
March 7, 2023,
we entered into a Joint Commercialization Agreement (the “Commercialization Agreement”)
with Indegene, Inc. (“Indegene”).
The
Commercialization Agreement governs the general terms under which Indegene will provide
commercialization services for CTx-1301, if we receive FDA approval for CTx-1301, upon our request. Pursuant to the Commercialization Agreement,
the parties will enter into statements of work that will set forth, among other things, the services to be performed by Indegene, the
deliverables for such services, and the fees to be paid by us. Each statement of work will be governed by the terms of the Commercialization
Agreement, unless expressly modified in such statement of work. We may elect to receive the following services from Indegene:
(a) medical affairs & pharmacovigilance; (b) pricing, reimbursement and market access; (c) commercial operations; and (d) marketing
(including field force). The parties will negotiate in good faith any changes to the services provided by Indegene due to changes in
circumstances or priorities established by us.
The
Commercialization Agreement will expire three years after the launch of CTx-1301. We may
terminate the Commercialization Agreement upon six (6) months prior written notice to Indegene, and Indegene may terminate the Commercialization
Agreement upon twelve (12) months prior written notice to us. In addition, either party may terminate the Commercialization
Agreement upon thirty (30) days prior, written notice if: (i) the FDA notifies us that it will not approve our NDA for CTx-1301;
or (ii) we suspend or terminate our clinical development program for CTx-1301 in the United States. Either party may terminate the Commercialization
Agreement upon thirty (30) days prior, written notice for material, uncured breaches or immediately in the event of the other
party’s bankruptcy.
During
the term of the Commercialization Agreement, except for medical information services, the
development and publication of peer-reviewed articles and pharmacovigilance services, Indegene will not provide strategic health care
provider and/or patient marketing support (or any other types of services that are in the same category) to any party except us with
respect to any ADHD product. Until the date of any notice of termination of the Commercialization
Agreement or any notice of termination of a given service, we will not engage a party other than Indegene to provide any services
with respect to commercialization of CTx-1301 that are in the same category as any of the services being provided to us by Indegene without
Indegene’s written approval, not to be unreasonably withheld, subject to certain exceptions.
The
Commercialization Agreement contains representations, warranties, confidentiality and indemnity
obligations customary for agreements of this type.
Master
Services Agreement with Societal CDMO, Inc.
Effective
October 24, 2022, we entered into a master services agreement with Societal (the “Manufacturing Agreement”). The
Manufacturing Agreement governs the general terms under which Societal, or one of its affiliates, will provide manufacturing services
as specified by us at Societal’s Gainesville, Georgia manufacturing facility. Such services are performed under agreed statements
of work. Under the terms of the Manufacturing Agreement, we have agreed to pay fees for Societal’s performance of services as provided
in each applicable statement of work.
The
Manufacturing Agreement terminates in October 2027 or such later date as required to complete a
statement of work (the “Initial Term”) and will renew automatically thereafter
for successive twelve (12) month periods (a “Renewal Term”) unless terminated
by either party at least twelve (12) months (if prior to the successful completion of process validation batches for the first product)
or twenty-four (24) months (after successful completion of validation batches for the first product) prior to the end of the Initial
Term or any Renewal Term. The term of each statement of work terminates upon completion of the services under such statement of
work, unless terminated earlier. We may terminate the Manufacturing Agreement or any statement of work upon ninety (90) days prior, written
notice to Societal. Societal may terminate a statement of work due to certain delays or inactivity
or if the services provided under such statement of work cannot be performed in accordance with applicable regulatory requirements;
provided, that Societal shall use commercially reasonable efforts to engage in meaningful discussions with us prior to any such termination.
Societal may terminate the Agreement upon six (6) months prior, written notice if all statements of work have been terminated.
The Manufacturing Agreement or a statement of work may be terminated by either party for material, uncured breaches or in the event of
the other party’s bankruptcy.
The
Manufacturing Agreement includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality,
remedies and warranties.
Patent
and Know-How License Agreement with BDD Pharma Limited
We
entered into a patent and know-how license agreement with BDD Pharma Limited (“BDD Pharma”) in August 2018, which we refer
to as the BDD Pharma License Agreement. Pursuant to the BDD Pharma License Agreement, we have an exclusive license under technology,
patents and know-how owned or controlled by BDD Pharma and relating to a barrier layer for controlled drug release in order to develop,
manufacture, market, use, import, sell or otherwise supply and commercialize products that (i) deliver three distinct doses of dextroamphetamine,
dexmethylphenidate or any methylphenidate based or any amphetamine based drug, (ii) have an extended release in vitro over a period of
more than eight hours or (iii) are otherwise covered by the patents or are made, developed or used in accordance with the know-how. We
also have the right to apply for marketing approvals and carry out clinical trials for the purpose of obtaining marketing approvals of
such products. The rights granted to us are worldwide and exclusive in the field of the treatment of any disease or disorder in humans
amenable to treatment with a methylphenidate-based or amphetamine-based drug or mixture or combination thereof. We have the right to
sublicense the rights granted to us, subject to certain conditions.
BDD
Pharma was entitled to a payment of $198,625 in connection with execution of the BDD Pharma License Agreement. We may be required to
pay BDD Pharma aggregate milestone payments of $750,000 for each product in connection with clinical trial and regulatory milestones,
with different dose strengths of a product being considered the same product for purposes of milestone payments. We may be required to
pay BDD Pharma low to mid-single digit royalties on aggregate net sales of products. We may also be required to pay BDD Pharma low to
mid-single digit royalties on aggregate net receipts of products based on sales made by our sublicensees and non-royalty sublicensing
consideration that we receive.
Unless
terminated earlier, the term of the BDD Pharma License Agreement continues until the later of the expiration of the last-to-expire of
all the patents licensed to us or the last-to-expire of all of our payment obligations. Our royalty payment obligations expire on a product-by-product
and country-by-country basis upon the later of 10 years from the first commercial sale of a product in a country or expiration of the
last-to-expire patent covering the manufacture, use or sale of the product in a country. Currently, the last-to expire patent licensed
from BDD Pharma expires in November of 2035. Upon expiration of our royalty payment obligations, the licenses granted to us become fully-paid,
irrevocable and perpetual.
We,
or BDD Pharma, may terminate the BDD Pharma License Agreement if there is an uncured material breach by the other party or in connection
with the other party’s insolvency. BDD Pharma may terminate the BDD Pharma License Agreement immediately upon written notice if
we, any sublicensee or related party or affiliate directly challenges, or assists a third party in challenging, the validity or enforcement
of the patents owned by BDD Biopharma or the secret nature of the know-how.
Human
Capital Resources
To
achieve our goals, it is crucial that we attract and retain talented employees. To facilitate this, we strive to maintain a safe and
rewarding workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive pay, comprehensive
benefits and health and wellness programs, and programs that build connections among our employees. Our compensation program includes
the granting of stock options to attract, retain, and incentivize employees.
As
of December 31, 2022, we employed 15 full-time employees. Of these, six are engaged in full-time research and development and manufacturing
activities, and nine in full-time general and administrative functions. All of our employees are located in the United States. We utilize
outside consultants and independent contractors to supplement our full-time workforce. None of our employees are represented by a labor
organization or are under a collective-bargaining arrangement. We consider our employee relations to be good.
Corporate
Information
Cingulate
Inc. is a Delaware corporation that was formed in May 2021 to serve as a holding company. Cingulate Therapeutics LLC (CTx) is a Delaware
limited liability company that was formed in November 2012. In connection with the consummation of our IPO, on September 29, 2021, Cingulate
Inc. acquired CTx through the merger of a wholly-owned acquisition subsidiary of Cingulate Inc. with and into CTx (the “Reorganization
Merger”). As a result of the Reorganization Merger, CTx became a wholly-owned subsidiary of Cingulate Inc. Unless otherwise stated
or the context otherwise requires, all information in this prospectus reflects the consummation of the Reorganization Merger and the
IPO.
Our
primary executive offices are located at 1901 West 47th Place, Kansas City, Kansas 66205 and our telephone number is (913)
942-2300. Our website address is www.cingulate.com. The information contained in, or accessible through, our website does not
constitute a part of this prospectus. We have included our website address in this annual report solely as an inactive textual reference.
Facilities
Our
corporate headquarters is located in Kansas City, Kansas, where we lease approximately 14,205 square feet of office space. Our lease
expires in May 2025, with an option to extend. Our manufacturing activities take place at Societal, our CDMO in Gainesville, Georgia.
We believe our current offices, laboratories, and manufacturing spaces are sufficient to meet our needs. We may seek to negotiate new
leases or evaluate additional or alternate space to accommodate operations. We believe that appropriate alternative space is readily
available on commercially reasonable terms.
Our
future operating results could differ materially from the results described in this annual report due to the risks and uncertainties
described below. You should consider carefully the following information about risks in evaluating our business. If any of the following
risks actually occur, our business, financial condition, results of operations and future growth prospects would likely be materially
and adversely affected. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair
our business operations in these circumstances, the market price of our securities would likely decline. In addition, we cannot assure
investors that our assumptions and expectations will prove to be correct. Important factors could cause our actual results to differ
materially from those indicated or implied by forward-looking statements. See “Cautionary Note Regarding Forward Looking Statements”
for a discussion of some of the forward-looking statements that are qualified by these risk factors. Factors that could cause or contribute
to such differences include those factors discussed below.
Summary
of Risks
The
following summarizes key risks and uncertainties that could materially adversely affect us. You should read this summary together with
the more detailed description of each risk factor contained below.
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We
are a biopharmaceutical company with a limited operating history and need additional capital to advance and commercialize our product
candidates. |
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We
have incurred a history of operating losses and expect to continue to incur substantial costs for the foreseeable future. We are
not currently profitable, and we may never achieve or sustain profitability. |
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A
pandemic, epidemic, or outbreak of an infectious disease, such as COVID-19 could cause a disruption to the development of our product
candidates. |
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We
are dependent primarily on the successful development and commercialization of our lead product candidates, CTx-1301 and CTx-1302
for the treatment of ADHD and CTx-2103 for the treatment of anxiety, which are in product development (CTx-1302 and CTx-2103) and
clinical development (CTx-1301) and are not yet approved. We cannot give any assurance that we will receive regulatory approval for
such product candidates or any other product candidates, which is necessary before they can be commercialized. |
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Even
if we obtain regulatory approval for CTx-1301, CTx-1302 and CTx-2103, such approval may be limited, and we will be subject to stringent,
ongoing government regulation. The commercial success of our product candidates, if approved, depends partially upon attaining market
acceptance by physicians, patients, third-party payors, and the medical community. |
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Social
issues around the abuse of opioids and stimulants, including law enforcement concerns over diversion and regulatory efforts to combat
abuse, could decrease the potential market for our product candidates. |
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Our
business is subject to extensive regulatory requirements, and our product candidates that obtain approval will be subject to ongoing
and continued regulatory review, which may result in significant expense and limit our ability to commercialize such products. |
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We
rely on limited sources of supply for CTx-1301, CTx-1302, and CTx-2103 as these are scheduled products, and any disruption in the
chain of supply may impact production and sales of CTx-1301, CTx-1302, and CTx-2103 and cause delays in developing and commercializing
our product candidates and currently manufactured and commercialized product(s). |
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We
rely on third parties to manufacture and package our product candidates and to conduct our clinical trials and our regulatory submissions
for our product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the manufacture
and delivery of our product candidates, completion of such trials and/or regulatory submissions. |
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We
will rely on third parties to commercialize our product candidates and we may rely on third parties to perform many essential services
for any products that we commercialize, including distribution, customer service, accounts receivable management, cash collection
and adverse event reporting. If these third parties fail to perform as expected or to comply with legal and regulatory requirements,
our ability to commercialize CTx-1301, CTx-1302, and/or CTx-2103 will be significantly impacted and we may be subject to regulatory
sanctions. |
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We
will need to further increase the size and complexity of our organization in the future, and we may experience difficulties in executing
our growth strategy and managing any growth. |
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Our
research and development is focused on discovering and developing product candidates, which may not make it to the market. |
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We
are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity
and data leakage risks. |
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If
our intellectual property related to our products or product candidates is not adequate, we may not be able to compete effectively
in our market. |
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An
active trading market for our securities may not be sustained. |
Risks
Related to Our Financial Position and Need for Capital
We
are a biopharmaceutical company with a limited operating history.
We
are a biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. We must complete
clinical studies and receive regulatory approval before commercial sales of a product can commence. The likelihood of success of our
business plan must be considered in light of the problems, substantial expenses, difficulties, complications and delays frequently encountered
in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which we operate.
Pharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk and is a capital-intensive
business.
Accordingly,
you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in
the early stages of development, especially early-stage pharmaceutical companies such as ours. Potential investors should carefully consider
the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider
that we cannot assure you that we will be able to, among other things:
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successfully
implement or execute our business plan, and we cannot assure you that our business plan is sound; |
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successfully
complete product development/formulation, and clinical trials for CTx-1301, CTx-1302, and/or CTx-2103 as well as for the marketing
of any or all products; |
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successfully
manufacture or have manufactured clinical product and establish commercial drug supply in light of the manufacturing delays we experienced
with respect to the clinical supply of CTx-1301 at our former contract manufacturing organization (CMO);
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raise
sufficient funds in the capital markets or otherwise to effectuate our business plan, including the preparation and completion of
our Phase 3 clinical program for CTx-1301; |
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secure
adequate intellectual property protection for our products; |
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attract
and retain an experienced management and advisory team; |
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secure
acceptance of our drug candidates in the medical community and with third-party payors and consumers; |
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launch
commercial sales of our drug candidates, whether alone or in collaboration with others; |
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comply
with post-marketing regulatory requirements; and |
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utilize
the funds that we do have and/or raise in the future to efficiently execute our business strategy. |
If
we cannot successfully execute any one of the foregoing, our business, financial condition, results of operations and future growth prospects
would be materially and adversely affected.
We
have incurred a history of operating losses and expect to continue to incur substantial costs for the foreseeable future. We are not
currently profitable, and we may never achieve or sustain profitability.
We
have never generated revenue from operations, are unlikely to generate revenues for several years, and are currently operating at a loss
and expect our operating costs will increase significantly as we incur costs related to formulation/manufacturing development, the clinical
trials for our drug candidates and operating as a public company. We expect to incur expenses without corresponding revenues unless and
until we are able to obtain regulatory approval and successfully commercialize our lead product candidates, CTx-1301 and CTx-1302, and
our third asset CTx-2103. We may never be able to obtain regulatory approval for the marketing of our drug candidates in any indication
in the United States or internationally. Even if we obtain regulatory approval for CTx-1301, CTx-1302 and/or CTx-2103, development expenses
will continue to increase for any future assets. As CTx-1301 advances to Phase 3 clinical trials and pursuit of FDA approval, we will
incur additional clinical development expenses.
We
have incurred recurring losses since inception and had an accumulated deficit of approximately $69.4 million as of December 31, 2022.
As
of December 31, 2022, we had capital resources consisting of cash and cash equivalents of $5.4 million. We will continue to expend substantial
cash resources for the foreseeable future for the clinical development of our product candidates and development of any other indications
and product candidates we may choose to pursue. These expenditures will include costs associated with manufacturing and clinical development,
such as conducting clinical trials, manufacturing operations and product candidate supply, as well as marketing and selling any products
approved for sale. In particular, our Phase 3 trials in the United States will require substantial funds to complete. Because the conduct
and results of any clinical trial are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete
the development and commercialization of our current and any future product candidates.
We
are uncertain when or if we will be able to achieve or sustain profitability. If we achieve profitability in the future, we may not be
able to sustain profitability in subsequent periods. Failure to become and remain profitable would impair our ability to sustain operations
and adversely affect the price of our securities and our ability to raise capital.
We
will need to raise additional capital to complete the development and commercialization efforts for CTx-1301, CTx-1302 and/or CTx-2103.
If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate certain of our development programs or
other operations.
We
believe that our existing cash and cash equivalents, together with interest thereon, will be sufficient to fund our operations into the
second quarter of 2023. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available
capital resources much faster than we currently expect or require more capital to fund our operations than we currently expect. We will
need to raise additional capital to fund our operations and continue to support our planned development and commercialization activities.
The amount and timing of our future funding requirements will depend on many factors, including:
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the
timing, rate of progress and cost of any clinical trials and other manufacturing/product development activities for our current and
any future product candidates that we develop, in-license or acquire; |
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the
results of the clinical trials for our product candidates in the United States and any foreign countries; |
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the
timing of, and the costs involved in, FDA approval and any foreign regulatory approval of our product candidates, if at all; |
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the
number and characteristics of any additional future product candidates we develop or acquire; |
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our
ability to establish and maintain strategic collaborations, licensing, co-promotion or other arrangements and the terms and timing
of such arrangements; |
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the
cost of commercialization activities if our current or any future product candidates are approved for sale, including manufacturing,
marketing, sales and distribution costs; |
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the
degree and rate of market acceptance of any approved products; |
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costs
under our third-party manufacturing and supply arrangements for our current and any future product candidates and any products we
commercialize; |
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costs
and timing of completion of any additional outsourced commercial manufacturing or supply arrangements that we may establish; |
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costs
of preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims and other intellectual property rights
associated with our product candidates; |
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costs
associated with prosecuting or defending any litigation that we are or may become involved in and any damages payable by us that
result from such litigation; |
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costs
associated with any product recall that could occur; |
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costs
of operating as a public company; |
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the
holder of our $5.0 million promissory note not demanding payment prior to maturity; |
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the
emergence, approval, availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and
competing products or treatments; |
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costs
associated with any acquisition or in-license of products and product candidates, technologies or businesses; and |
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personnel,
facilities and equipment requirements. |
We
cannot be certain that additional funding will be available on acceptable terms, or at all. In addition, future debt financing into which
we may enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional
debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.
If
we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, scale back
or discontinue the development or commercialization of one or more of our product candidates, restrict our operations or obtain funds
by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and
our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do
not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would
likely result in our securityholders losing some or all of their investment in us. In addition, our ability to achieve profitability
or to respond to competitive pressures would be significantly limited.
In
addition, if we are unable to secure sufficient capital to fund our operations, we may have to enter into strategic collaborations that
could require us to share commercial rights to CTx-1301, CTx-1302, and/or CTx-2103 with third parties in ways that we currently do not
intend or on terms that may not be favorable to us or our securityholders.
Raising
additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product
candidates.
Until
such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through public or private equity
or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances
and licensing arrangements, or any combination of these approaches. We do not have any committed external source of funds. To the extent
that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest in our company may
be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder.
Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific
actions, such as redeeming our shares, making investments, incurring additional debt, making capital expenditures, declaring dividends
or placing limitations on our ability to acquire, sell or license intellectual property rights.
If
we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may have to
relinquish valuable rights to our intellectual property, future revenue streams, research programs or product candidates, or grant licenses
on terms that may not be favorable to us. If we are unable to raise additional capital when needed, we may be required to delay, limit,
reduce or terminate our product candidates’ development or future commercialization efforts, or grant rights to develop and market
product candidates that we would otherwise develop and market ourselves.
Our
existing and any future indebtedness could adversely affect our ability to operate our business.
In
August 2022, we issued a $5.0 million promissory note in favor of Werth Family Investment Associates LLC (“WFIA”). Outstanding
principal and all accrued and unpaid interest is due and payable on August 8, 2025 unless accelerated due to an event of default. Beginning
April 1, 2023, WFIA has the right during the first five business days of each calendar quarter to demand payment of all outstanding principal
and interest 120 days following notice to us. Such promissory note combined with our other financial obligations and contractual commitments,
including any additional indebtedness, could have adverse consequences, including:
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us to dedicate a portion of our cash resources to the payment of interest and principal,
including pursuant to a payment demand made by WFIA, thereby reducing money available to
fund working capital, capital expenditures, product development and other general corporate
purposes; |
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our vulnerability to adverse changes in general economic, industry and market conditions; |
| ● | subjecting
us to restrictive covenants that may reduce our ability to take certain corporate actions
or obtain further debt or equity financing; and |
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our flexibility in planning for, or reacting to, changes in our business and the industry
in which we compete. |
Changes
in tax laws may materially adversely affect our business, financial condition, results of operations and cash flows.
We
are subject to tax laws, regulations and policies of the jurisdictions in which we do business, which may include U.S. federal, state,
and local governments and taxing authorities in foreign jurisdictions. Changes in tax laws, as well as other factors, could cause us
to experience fluctuations in our tax obligations and otherwise adversely affect our tax positions and/or our tax liabilities. The income
tax rules in the jurisdictions in which we operate are constantly under review by taxing authorities and other governmental bodies. Changes
to tax laws (which changes may have retroactive application) could adversely affect us or our stockholders. We are unable to predict
what tax proposals may be proposed or enacted in the future or what effect such changes would have on our business, but such changes,
to the extent they are brought into tax legislation, regulations, policies or practices, could affect our financial position and overall
effective tax rates in the future in jurisdictions where we have operations, and increase the complexity, burden, and cost of tax compliance.
Our
ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Our
net operating loss carryforwards (“NOLs”), and certain other tax attributes could be unavailable to offset future income
tax liabilities because of restrictions under U.S. tax law. Under the Tax Cuts and Jobs Act, or the TCJA, federal NOLs generated in tax
years ending after December 31, 2017 may be carried forward indefinitely. The carryforwards are limited to 80% of each subsequent year’s
net income.
In
addition, Sections 382 and 383 of the Code, contain rules that limit the ability of a corporation that undergoes an “ownership
change” (generally, any change in ownership of more than 50% of the corporation’s stock over a three-year period) to utilize
its pre-change NOLs and tax credit carryforwards to offset future taxable income. These rules generally operate by focusing on ownership
changes involving stockholders owning directly or indirectly 5% or more of the stock of a corporation and any change in ownership arising
from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use
of NOLs and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate
and the value of the corporation’s stock immediately before the ownership change. As a result, following any such ownership change,
we might be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire,
in which event we could incur larger federal and state income tax liabilities than we would have had we not experienced an ownership
change.
The
report of our independent registered public accounting firm for the fiscal years ended December 31, 2022 and 2021 contains an explanatory
paragraph regarding substantial doubt about our ability to continue as a going concern.
The
report of our independent registered public accounting firm on our financial statements as of and for the years ended December 31, 2022
and December 31, 2021 includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a
going concern. Since inception, we have experienced recurring operating losses and negative cash flows, and we expect to continue to
generate operating losses and consume significant cash resources for the foreseeable future. Without additional financing, these conditions
raise substantial doubt about our ability to continue as a going concern, meaning that we may be unable to continue operations for the
foreseeable future or realize assets and discharge liabilities in the ordinary course of operations. If we are unable to obtain funding,
we will be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or
commercialization efforts, or we may be unable to continue operations. Although we continue to pursue these plans, there can be no assurance
that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
Risks
Related to Development, Clinical Testing, Manufacturing and Regulatory Approval
We
are dependent primarily on the successful development and commercialization of our lead product candidates, CTx-1301 and CTx-1302 for
the treatment of Attention Deficit / Hyperactivity Disorder (“ADHD”) and CTx-2103 for the treatment of anxiety, which are
in product development (CTx-1302 and CTx-2103) and clinical development (CTx-1301) and are not yet approved. We cannot give any assurance
that we will receive regulatory approval for such product candidates or any other product candidates, which is necessary before they
can be commercialized.
We
have not completed development of and/or obtained regulatory approval for any of our product candidates. Development will require the
commitment of substantial financial resources, extensive product candidate development, and clinical trials. This process takes years
of effort without any assurance of ultimate success.
Our
ability to generate revenue from our product candidates, which we do not expect will occur for several years, if ever, will depend heavily
on their successful development, regulatory approval, and eventual commercialization. The success of our product candidates will depend
on many factors, including, but not limited to:
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successful
completion of product development and requisite clinical trials; |
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successful
completion and achievement of endpoints in our clinical trials; |
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demonstration
that the risks involved with our product candidates are outweighed by the benefits; |
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successful
development of our manufacturing processes for our product candidates, including entering into and maintaining arrangements with
third-party manufacturers; |
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successful
completion of an FDA preapproval inspection of the facilities used to manufacture our product candidates, as well as select clinical
trial sites; |
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receipt
of timely marketing approvals from applicable regulatory authorities, including the determination by the United States Drug Enforcement
Administration (the “DEA”) of the controlled substance schedule for a product candidate, taking into account the recommendation
of the FDA; |
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obtaining
and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our product candidates and otherwise
protecting our rights in our intellectual property portfolio; |
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maintaining
compliance with regulatory requirements, including current good manufacturing practices, or cGMPs; |
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launching
commercial sales of product candidates, if and when approved, whether alone or in collaboration with others; |
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acceptance
of our drug product candidates, if approved, by patients, the medical community and third-party payors; |
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competing
effectively with other therapies; |
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obtaining
and maintaining healthcare coverage and adequate reimbursement; and |
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maintaining
a continued acceptable safety and efficacy profile of the drug products following approval. |
If
we are unable to achieve one or more of the above factors, many of which are beyond our control, in a timely manner or at all, we could
experience significant delays and increased costs or an inability to obtain regulatory approvals or commercialize our product candidates.
Even if regulatory approvals are obtained, we may never be able to successfully commercialize any of our product candidates. Accordingly,
we cannot assure you that we will be able to generate sufficient revenue through the sale of our product candidates or any future product
candidates to continue operations.
Our
product development efforts with respect to CTx-1301, CTx-1302 and/or CTx-2103 may fail for many reasons, including but not limited to:
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the failure of the product
candidate in clinical studies; |
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adverse patient reactions
to the product candidate or indications of other safety concerns; |
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insufficient clinical trial
data to support the effectiveness or superiority of the product candidate; |
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the inability to manufacture
sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-efficient manner;
and |
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changes in the regulatory
environment, including pricing and reimbursement, that make development of a new product or of an existing product for a new indication
no longer attractive. |
Premarket
review of our product candidates by the FDA or other regulatory authorities is a lengthy and uncertain process and approval may be delayed,
limited or denied, any of which would adversely affect our ability to generate operating revenues.
We
are not permitted to market our drug product candidates in the United States until we receive the respective approval of an NDA from
the FDA. The time required to obtain approval, if any, by the FDA is unpredictable, but typically takes multiple years following the
commencement of clinical trials, and depends upon numerous factors, including the substantial discretion of the regulatory authorities
and the type, complexity and novelty of the product candidates involved. We have not submitted a marketing application such as an NDA
to the FDA or any similar application to any other regulatory authority in any jurisdiction.
The
FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate
for many reasons. For example, the FDA:
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could determine that we
cannot rely on the 505(b)(2) regulatory approval pathway for CTx-1301, CTx-1302, CTx-2103 or any other product candidate that we
may identify and develop; |
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could determine that the
information provided by us as part of an IND or NDA is inadequate, contains clinical deficiencies or otherwise fails to demonstrate
safety and effectiveness of any of our product candidates for any indication; |
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may not find the data from
bioequivalence studies and/or clinical trials sufficient to support the submission of an NDA or to obtain marketing approval in the
United States, including any findings that the safety risks outweigh clinical and other benefits of our product candidates; |
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may disagree with our clinical
trial designs or our interpretation of data from product development manufacturing data, bioequivalence studies and/or clinical trials,
or may change the requirements for approval even after it has reviewed and commented on the design for our trials; |
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may determine that we inappropriately
relied on a certain listed drug or drugs for our 505(b)(2) NDA or that approval of our applications for CTx-1301, CTx-1302, CTx-2103
or any other product candidate is blocked by patent or non-patent exclusivity of the listed drug or drugs; |
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may identify deficiencies
in the manufacturing processes or facilities of third-party manufacturers with which we enter into agreements for the supply of the
API used in our product candidates; |
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may identify deficiencies
in our own manufacturing processes or our proposed scale-up of the manufacturing processes or facilities for the production of our
product candidates; |
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may approve our product
candidates for fewer or more limited indications than we request, or may grant approval contingent on the performance of costly post-approval
clinical trials; |
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may change its approval
policies or adopt new regulations; or |
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may not approve the labeling
claims that we believe are necessary or desirable for the successful commercialization of our product candidates. |
The
time and expense of the approval process, as well as the unpredictability of future clinical trial results and other contributing factors,
may result in our failure to obtain regulatory approval to market, in the United States or other jurisdictions, CTx-1301, CTx-1302, CTx-2103,
or any other drug candidates we are developing or may seek to develop in the future, which would significantly harm our business, results
of operations and prospects. In such case, we may also not have the resources to conduct new clinical trials and/or we may determine
that further clinical development of any such drug candidate is not justified and may discontinue any such programs.
Clinical
testing is expensive, difficult to design and implement, can take many years to complete and is outcome uncertain. We may incur additional
costs or experience delays in completing, or ultimately be unable to complete, the commercialization of our product candidates.
It
is impossible to predict when or if any of our product candidates will prove effective or safe in humans and will receive regulatory
approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete product/manufacturing
development and then conduct clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical trials
are expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or
more clinical trials can occur at any stage of development. The outcome of 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. Interpretation of results
from early, usually smaller, studies that suggest positive trends in some subjects, requires caution. Results from later stages of clinical
trials enrolling more subjects may fail to show the desired safety and efficacy results or otherwise fail to be consistent with the results
of earlier trials of the same product candidates. Later clinical trial results may not replicate earlier clinical trials for a variety
of reasons, including differences in trial design, different trial endpoints, or lack of trial endpoints in studies, subject population,
number of subjects, subject selection criteria, trial duration, drug dosage and formulation and lack of statistical power in the earlier
studies. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed
their product candidates performed satisfactorily in early and later stage clinical trials have nonetheless failed to obtain marketing
approval of their products.
We
may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive
marketing approval or commercialize our product candidates, including but not limited to:
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inability to generate satisfactory
preclinical, toxicology or other in vivo or in vitro data capable of supporting the initiation or continuation of clinical trials; |
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regulators or institutional
review boards may not authorize us or our investigators to commence a clinical trial, conduct a clinical trial at a prospective trial
site or amend clinical trial protocols as needed; |
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we may experience delays
in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial
sites and contract research organizations, or CROs; |
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inability, delay or failure
in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical programs; |
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clinical trials of our
product candidates may produce negative or inconclusive results, including failure to demonstrate statistical significance in cases
where that is required, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development
programs; |
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the number of subjects
required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may
be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate; |
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failure of patients to
complete a trial or return for post-treatment follow-up; |
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inability to monitor patients
adequately during or after treatment; |
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clinical sites and investigators
deviating from trial protocols, failing to conduct the trial in accordance with regulatory requirements or dropping out of a trial; |
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our third-party contractors
may fail to comply with regulatory requirements or trial protocols, or meet their contractual obligations to us in a timely manner,
or at all; |
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regulators or institutional
review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance
with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; |
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the cost of clinical trials
of our product candidates may be greater than we anticipate, including if we are not able to pursue the 505(b)(2) NDA pathway for
approval of our product candidates; |
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failure to initiate or
delay of or inability to complete a clinical trial as a result of a clinical hold imposed by the FDA or comparable regulatory authority
due to observed safety findings or other reasons; |
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regulatory authorities
may not agree with our trial design or implementation; |
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inability to manufacture
sufficient quantities of a drug candidate of acceptable quality for use in clinical trials; and |
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our product candidates
may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional
review boards to suspend or terminate the trials. |
If
we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate,
if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials
or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be delayed in obtaining
marketing approval for our product candidates; |
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not obtain marketing approval
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 but without
the claims necessary for us to successfully commercialize our product candidates; |
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obtain approval with labeling
that includes significant use or distribution restrictions or safety warnings; |
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be subject to additional
post-marketing testing, surveillance, or other requirements; or |
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have the product removed
from the market after obtaining marketing approval. |
Our
development costs may also increase if we experience delays in testing, clinical trials, manufacturing or obtaining marketing approvals.
For example, our development costs increased for CTx-1301 due to rescheduling of the Phase 3 fixed-dose study as a result of manufacturing
delays for the final dosage strengths needed for that study. We do not know whether any of our clinical trials will begin as planned,
will need to be restructured or will be completed on schedule, or at all. Significant product manufacturing or clinical trial delays
also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors
to bring products to market before we do and impair our ability to successfully commercialize our product candidates.
Obtaining
regulatory approval for clinical trials of CTx-1301 and CTx-1302 in children and adolescents may require additional studies and/or longer
duration of studies since the requirements for regulatory approval for the pediatric populations are more stringent.
Pediatric
drug development may require additional studies to determine safe dosing and long-term monitoring. These additional studies may require
investment of significant additional resources beyond those required for regulatory approval of the drugs in adults. Approval of CTx-1301
and CTx-1302 may be delayed due to these additional requirements and this may have an adverse effect on the commercial prospects of CTx-1301
and CTx-1302, as well as delay our ability to generate product revenue, possibly materially. In addition, as a result of COVID-19 (or
other potential pandemics), there may be a smaller pool of children from which we can enroll for our clinical trials. We cannot guarantee
that we will receive regulatory approval to commercialize our product candidates in the pediatric populations or the adult population.
Changes
in methods of product candidate manufacturing or formulation may result in additional costs or delay.
As
product candidates are developed through nonclinical testing and early to late-stage clinical trials towards potential approval and commercialization,
various aspects of the development program, such as manufacturing methods and formulation, may be altered along the way in an effort
to optimize processes and results. Such changes may not achieve these intended objectives. Any of these changes could cause our product
candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the
altered materials, or they may alter the safety or risk profile of the product candidate that could involve further FDA or other regulatory
agency inquiries. Such changes may also require additional testing, FDA notification or FDA approval. This could delay completion of
clinical trials, require the performance of bridging clinical trials or the repetition of one or more clinical trials, increase clinical
trial costs, delay approval of our product candidates and jeopardize our ability to commence product sales and generate revenue.
Our
lead product candidates CTx-1301 and CTx-1302 contain controlled substances, the manufacture, use, sale, importation, exportation, prescribing
and distribution of which are subject to regulation by the DEA.
Before
we can commercialize our product candidates, the DEA will need to determine the controlled substance schedule, taking into account the
recommendation of the FDA. This may be a lengthy process that could delay our marketing of a product candidate and could potentially
diminish any regulatory exclusivity periods for which we may be eligible. Our CTx-1301 and CTx-1302 products, if approved, will be regulated
as “controlled substances” as defined in the Controlled Substances Act of 1970 (CSA) and the implementing regulations of
the DEA, which establish registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory,
quota and other requirements administered by the DEA. These requirements are applicable to us, our contract manufacturers and distributors,
as well as prescribers and dispensers of our product candidates. The DEA regulates the handling of controlled substances through a closed
chain of distribution. This control extends to the equipment and raw materials used in the manufacturing and packaging, in order to prevent
loss and diversion into illicit channels of commerce. A number of states and foreign countries also independently regulate these drugs
as controlled substances.
The
DEA regulates controlled substances as Schedule I, II, III, IV or V substances. An approved pharmaceutical product may be listed as Schedule
II, III, IV or V, depending on the potential for abuse and physical or psychological dependence, with Schedule II substances considered
to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. Schedule II drugs
are those that meet the following characteristics:
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the drug has a high potential
for abuse; |
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the drug has a currently
accepted medical use in treatment in the United States or a currently accepted medical use with severe restrictions; and |
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abuse of the drug may lead
to severe psychological or physical dependence. |
The
active pharmaceutical ingredients in CTx-1301 and CTx-1302 (dexmethylphenidate and dextroamphetamine) are currently listed as Schedule
II products. We expect that some of our future product candidates may also be listed by the DEA as Schedule II controlled substances
under the CSA. Consequently, the manufacturing, shipping, storing, selling and using of the products, if approved, will be subject to
a high degree of regulation. Schedule II drugs are subject to the strictest requirements for registration, security, recordkeeping and
reporting, and the distribution, prescribing and dispensing of these drugs are highly regulated.
Annual
registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The
registration is specific to the particular location, activity and controlled substance schedule.
In
addition, a DEA quota system controls and limits the availability and production of controlled substances, and our products may be subject
to the DEA’s production and procurement quota scheme. The DEA establishes an aggregate quota for how much of a controlled substance
may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific
and medicinal needs. Manufacturers of controlled substances are required to apply for quotas on an annual basis. If we or our contract
manufacturers or suppliers do not obtain a sufficient quota from DEA, we may not be able to obtain sufficient quantities of these controlled
substances in order to complete our clinical trials or meet commercial demand, if our product candidates are approved for marketing.
Because
of their restrictive nature, these laws and regulations could limit commercialization of our product candidates containing controlled
substances. Failure to comply with these laws and regulations could also result in withdrawal of our DEA registrations, disruption in
manufacturing and distribution activities, consent decrees, criminal and civil penalties and state actions, among other consequences.
If
we experience delays or difficulties in the enrollment of subjects in clinical trials, our receipt of necessary regulatory approvals
could be delayed or prevented.
We
may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient
number of eligible subjects to participate in these trials as required by the FDA or similar regulatory authorities outside the United
States. We cannot predict how successful we will be at enrolling subjects in future clinical trials. If we are not successful at enrolling
subjects in one clinical trial, it may affect when we are able to initiate our next clinical trial, which could result in significant
delays in our efforts to pursue regulatory approval of and commercialize our product candidates. In addition, some of our competitors
have ongoing clinical trials to treat the same indications as our product candidates, and subjects who would otherwise be eligible for
our clinical trials may instead enroll in clinical trials of our competitors. Subject enrollment is affected by other factors including,
but not limited to:
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the size and nature of
the subject population specified in the trial protocol; |
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the eligibility criteria
for the study in question; |
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the perceived risks and
benefits of the product candidate under study; |
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the fact that the product
candidate may be a controlled substance; |
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severe or unexpected drug-related
adverse events experienced by subjects in a clinical trial; |
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the availability of drugs
approved to treat the diseases or conditions under study; |
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the extent of efforts to
facilitate timely enrollment in clinical trials; |
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the patient referral practices
of physicians; |
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the ability to obtain and
maintain subject informed consent; |
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the ability to retain subjects
in the clinical trial and their return for follow-up; |
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the clinical trial design,
including required tests, procedures and follow-up; |
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the ability to monitor
subjects adequately during and after treatment; |
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delays in adding new investigators
and clinical sites; |
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withdrawal of clinical
trial sites from clinical trials; |
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the presence of other drug
candidates in clinical development for the same indication; and |
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the proximity and availability
of clinical trial sites for prospective subjects. |
Our
inability to enroll a sufficient number of subjects for clinical trials would result in significant delays and could require us to abandon
one or more clinical trials altogether. Enrollment delays in these clinical trials may result in increased development costs for our
product candidates, which could cause our value to decline and limit our ability to obtain additional financing.
Our
clinical trials may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects
may be identified during the development of our product candidates, which could prevent or delay regulatory approval and commercialization,
increase our costs or necessitate the abandonment or limitation of the development of some or all of our product candidates.
Before
obtaining regulatory approvals for the commercial sale of our product candidates, we must demonstrate thorough, lengthy, complex and
expensive product development and clinical trials that our product candidates are both safe and effective for use in each target indication,
and failures can occur at any stage of development. Clinical trials often fail to demonstrate safety and efficacy of the product candidate
studied for the target indication.
As
with many pharmaceutical products, treatment with our product candidates may produce undesirable side effects or adverse reactions or
events. Although our product candidates contain active pharmaceutical ingredients that have already been approved, meaning that the side
effects arising from the use of the active pharmaceutical ingredient or class of drug in our product candidates are generally known,
our product candidates still may cause undesirable side effects.
If
our product candidates are associated with serious side effects in clinical trials or have characteristics that are unexpected, we may
need to limit development to more narrow uses or subpopulations in which the side effects or other characteristics are less prevalent,
less severe or more acceptable from a risk-benefit perspective. The FDA or an institutional review board may also require that we suspend,
discontinue, or limit our clinical trials based on safety information to limit potential serious harm to enrolled subjects. Such findings
could further result in regulatory authorities failing to provide marketing authorization for our product candidates.
Our
product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit
the scope of any approved label or market acceptance, or result in significant negative consequences following marketing approval, if
any.
If
any of our products cause serious or unexpected side effects after receiving market approval, a number of potentially significant negative
consequences could result, including, but not limited to:
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the FDA may require additional
clinical testing or clinical trials or costly post-marketing testing and surveillance to monitor the safety and efficacy of the product; |
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regulatory authorities
may withdraw their approval of the product or impose restrictions on its distribution; |
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we may be required to create
a medication guide outlining the risks of such side effects for distribution to patients, or we may be required to implement a Risk
Evaluation and Mitigation Strategy (REMS) to ensure that the benefits of the product outweigh the risks; |
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regulatory authorities
may require the addition of labeling statements, such as warnings or contraindications; |
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we may be required to change
the way the product is distributed or administered; |
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we may need to voluntarily
recall our products; |
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we could be sued and held
liable for harm caused to individuals exposed to or taking our product candidates; or |
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our reputation may suffer. |
Any
of these events could prevent us from achieving or maintaining market acceptance of the affected product or product candidate and could
substantially increase the costs of commercializing our products and product candidates.
If
the FDA does not conclude that our product candidates are sufficiently bioequivalent, or have comparable bioavailability, to approved
reference drugs, or if the FDA does not allow us to pursue the 505(b)(2) NDA pathway as anticipated, the approval pathway for our product
candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than
anticipated, and the FDA may not ultimately approve our product candidates.
Section
505(b)(2) of the FDCA permits the filing of an NDA where at least some of the information required for approval comes from investigations
that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person
by or for whom the investigations were conducted. The FDA interprets Section 505(b)(2) of the FDCA, for the purposes of approving an
NDA, to permit the applicant to rely, in part, upon published literature or the FDA’s previous findings of safety and efficacy
for an approved product. The FDA may also require the applicant to perform additional clinical trials or measurements to support any
deviation from the previously approved product. The FDA may then approve the new product candidate for all or some of the label indications
for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant. The
FDA may require an applicant’s product label to have all or some of the limitations, contraindications, warnings or precautions
included in the reference product’s label, including a black box warning, or may require the label to have additional limitations,
contraindications, warnings or precautions. A key element of our strategy is to seek FDA approval for our current product candidates,
CTx-1301, CTx-1302, and CTx-2103, through the 505(b)(2) NDA pathway. If the FDA determines that our product candidates do not meet the
requirements of Section 505(b)(2), or if we cannot demonstrate bioequivalence or comparable bioavailability of our product candidates
to approved products, we may need to conduct additional clinical trials, provide additional data and information, and meet additional
standards for regulatory approval applicable to a traditional NDA submitted pursuant to Section 505(b)(1). Moreover, even if the FDA
does allow us to pursue the 505(b)(2) NDA pathway, depending on the product candidate, we may still need to conduct additional clinical
trials, including clinical trials to assess product safety or efficacy. If this were to occur, the time and financial resources required
to obtain FDA approval for our product candidates, and complications and risks associated with our product candidates, would likely substantially
increase.
Moreover,
an inability to pursue the 505(b)(2) NDA pathway could result in new competitive products reaching the market more quickly than our product
candidates, which could hurt our competitive position and our business prospects. Even if we are allowed to pursue the 505(b)(2) NDA
pathway, we cannot assure that our product candidates will receive the requisite approvals for commercialization on a timely basis, if
at all. Other companies may achieve product approval of similar products before we do, which would delay our ability to obtain product
approval, and expose us to greater competition.
In
addition, notwithstanding the approval of a number of products by the FDA under 505(b)(2) over the last few years, some pharmaceutical
companies and others have objected to the FDA’s interpretation of 505(b)(2) of the FDCA to allow reliance on the FDA’s prior
findings of safety and effectiveness. If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation
of 505(b)(2) is successfully challenged in court it could delay or even prevent the FDA from approving any 505(b)(2) NDA that we submit
in the future. Moreover, the FDA has adopted an interpretation of the three-year exclusivity provisions whereby a 505(b)(2) application
can be blocked by exclusivity even if it does not rely on the previously-approved drug that has exclusivity (or any safety or effectiveness
information regarding that drug). Under the FDA’s interpretation, the approval of one or more of our product candidates may be
blocked by exclusivity awarded to a previously-approved drug product that shares certain innovative features with our product candidates,
even if our 505(b)(2) application does not identify the previously-approved drug product as a listed drug or rely upon any of its safety
or efficacy data. Any failure to obtain regulatory approval of our product candidates would significantly limit our ability to generate
revenues, and any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential
revenues.
Even
if our product candidates are approved under 505(b)(2) regulatory pathway, the approval may be subject to limitations on the indicated
uses for which the products may be marketed, including more limited subject populations than we request, may require that contraindications,
warnings or precautions be included in the product labeling, including a black box warning, may be subject to other conditions of approval,
or may contain requirements for costly post-marketing clinical trials, testing and surveillance to monitor the safety or efficacy of
the products, or other post-market requirements, such as a REMS. The FDA also may not approve a product candidate with a label that includes
the labeling claims necessary or desirable for the successful commercialization of that product candidate.
Obtaining
and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining
regulatory approval of our product candidates in other jurisdictions.
Even
if we obtain and maintain regulatory approval of our product candidates in one jurisdiction, such approval does not guarantee that we
will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval
in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing
approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing
and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements
and administrative review periods different from those in the United States, including additional nonclinical studies or clinical trials
as investigations conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.
Obtaining
foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and
costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory
requirements in international markets and/or to receive applicable marketing approvals, our target market will be reduced and our ability
to realize the full market potential of our product candidates will be harmed.
Moreover,
the acceptance of study data from clinical trials conducted outside the United States or another jurisdiction by the FDA or applicable
foreign regulatory authority may be subject to certain conditions. In cases where data from foreign clinical trials are intended to serve
as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign
data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice and (ii) the trials were performed by
clinical investigators of recognized competence and pursuant to GCP regulations. Additionally, the FDA’s clinical trial requirements,
including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory bodies have similar approval
requirements. In addition, any foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials
are conducted. There can be no assurance that the FDA or any applicable foreign regulatory authority will accept data from trials conducted
outside of the United States or the applicable jurisdiction.
We
may be unable to successfully complete our Phase 3 clinical trials for CTx-1301 or any future clinical trials for any other product candidates.
The
conduct of a Phase 3 clinical trial is a complicated process. Although members of our management team have conducted Phase 3 clinical
trials in the past while employed at other companies, we as a company have not conducted a Phase 3 clinical trial before, and as a result
may require more time and incur greater costs than we anticipate. Failure to include the correct treatment regimen, complete, or delays
in, our Phase 3 clinical trials, could prevent us from or delay us in commencing future clinical trials for CTx-1301, obtaining regulatory
approval of and commercializing our product candidates, which would adversely impact our financial performance. In addition, some of
our competitors are currently conducting clinical trials for product candidates that treat the same indications as CTx-1301, and patients
who are otherwise eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.
Patient
enrollment is affected by other factors including:
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the severity of the disease
under investigation; |
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the eligibility criteria
for the study in question; |
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the perceived risks and
benefits of the product candidate under study; |
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the efforts to facilitate
timely enrollment in clinical trials; |
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the patient referral practices
of physicians; |
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the ability to monitor
patients adequately during and after treatment; |
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the proximity and availability
of clinical trial sites for prospective patients; and |
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factors we may not be able
to control, such as potential pandemics that may limit subjects, principal investigators or staff or clinical site availability (e.g.,
the outbreak of COVID-19). |
Even
if we obtain regulatory approval for CTx-1301, CTx-1302, and/or CTx-2103, such approval may be limited, and we will be subject to stringent,
ongoing government regulation.
Even
if regulatory authorities approve CTx-1301, CTx-1302, and/or CTx-2103 for commercialization, the FDA could approve less than the full
scope of indications or labeling claims that we seek or may otherwise require special warnings or other restrictions on their use or
marketing. Regulatory authorities may limit the segments of the target population to which we or others may market CTx-1301, CTx-1302,
and/or CTx-2103 or limit the target population for our other product candidates. The advantages of CTx-1301, CTx-1302, and/or CTx-2103
may not be agreed to by the FDA or other regulatory authorities or such authorities may otherwise object to the inclusion of related
claims in product labeling or advertising and, as a result CTx-1301, CTx-1302, and/or CTx-2103 may not have our expected competitive
advantages when compared to other similar products. Any new legislation addressing drug safety issues could result in delays in product
development or commercialization, or increased costs to assure compliance.
If
we obtain regulatory approval for any of our product candidates, activities such as the manufacturing processes, labeling, packaging,
distribution, adverse event reporting, storage, advertising, promotion and record keeping for the products will be subject to extensive
and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports,
registration, as well as continued compliance with cGMPs. The FDA or comparable regulatory authorities may also impose requirements for
costly post-marketing nonclinical studies or clinical trials (often called “Phase 4 trials”) and post-marketing surveillance
to monitor the safety or efficacy of the product. If we or a regulatory authority discover previously unknown problems with a product,
such as adverse events of unanticipated severity or frequency, production problems or issues with the facility where the product is manufactured
or processed, such as product contamination or significant not-compliance with applicable cGMPs, a regulator may impose restrictions
on that product, the manufacturing facility or us. Accordingly, we and our contract manufacturing organizations (CMOs) will be subject
to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA submission to the FDA
or any other type of domestic or foreign marketing application. If we or our third-party providers, including our contract manufacturing
organizations, or CMOs, fail to comply fully with applicable regulations, then we may be required to initiate a recall or withdrawal
of our products.
In
addition, later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency,
or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in the
following, among other things:
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restrictions on the manufacturing
of the product, the approved manufacturers or the manufacturing process; |
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restrictions on the labeling
or marketing of a product; |
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restrictions on product
distribution or use; |
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requirements to conduct
post-marketing studies or clinical trials; |
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withdrawal of the product
from the market; |
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product recalls; |
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warning or untitled letters
from the FDA or comparable notice of violations from foreign regulatory authorities; |
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refusal of the FDA or other
applicable regulatory authority to approve pending applications or supplements to approved applications; |
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fines, restitution or disgorgement
of profits or revenues; |
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suspension or withdrawal
of marketing approvals; |
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suspension of any of our
ongoing clinical trials; |
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product seizure or detention
or refusal to permit the import or export of products; and |
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consent decrees, injunctions
or the imposition of civil or criminal penalties. |
In
addition, the FDA’s or other regulatory authorities’ policies may change and additional government regulations may be enacted
that could prevent, limit or delay regulatory approval of our drug candidates. If we are slow or unable to adapt to changes in existing
requirements or the adoption of new requirements or policies, or if we are otherwise not able to maintain regulatory compliance, we may
lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or
sustain profitability.
The
FDA’s policies may change, and additional government regulations may be enacted that could prevent, limit or delay marketing approval
of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements
or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which
would adversely affect our business, prospects and ability to achieve or sustain profitability.
Our
employees, independent contractors, principal investigators, consultants, vendors, CROs, CMOs and any partners with which we may collaborate
may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We
are exposed to the risk that our employees, independent contractors, principal investigators, consultants, vendors, CROs, CMOs, and any
partners with which we may collaborate may engage in fraudulent or other illegal activity. Misconduct by these persons could include
intentional, reckless or negligent conduct or unauthorized activity that violates laws or regulations, including those laws requiring
the reporting of true, complete and accurate information to the FDA or other regulatory authorities; manufacturing standards; federal,
state and foreign healthcare fraud and abuse laws; data privacy laws and regulations; or laws that require the true, complete and accurate
reporting of financial information or data. In particular, sales, marketing and other business arrangements in the healthcare industry
are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws may restrict
or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws also involve
the improper use or misrepresentation of information obtained in the course of clinical trials, or illegal misappropriation of drug product,
which could result in regulatory sanctions or other actions or lawsuits stemming from a failure to be in compliance with such laws or
regulations, and serious harm to our reputation. In addition, federal procurement laws impose substantial penalties for misconduct in
connection with government contracts and require certain contractors to maintain a code of business ethics and conduct. Additionally,
we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such
actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have
a material and adverse impact on our business, financial condition, results of operations and prospects including the imposition of civil,
criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment, loss of eligibility to obtain marketing approvals
from the FDA, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages,
reputational harm, diminished profits and future earnings, additional reporting requirements if subject to a corporate integrity agreement
or other agreement to resolve allegations of non-compliance with any of these laws, and curtailment or restructuring of our operations,
any of which could adversely affect our ability to operate our business and our operating results.
We
may be required to modify our business practices, pay fines and significant expenses or experience other losses due to governmental investigations
or other enforcement activities.
We
may become subject to litigation or governmental investigations in the United States and foreign jurisdictions that may arise from the
conduct of our business. Like many companies in our industry, we may from time to time receive inquiries and subpoenas and other types
of information requests from government authorities and we may be subject to claims and other actions related to our business activities.
While
the ultimate outcome of investigations and legal proceedings are difficult to predict, adverse resolutions or settlements of those matters
could result in, among other things:
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significant damage awards,
fines, penalties or other payments, and administrative remedies, such as exclusion and/or debarment from government programs, or
other rulings that preclude us from operating our business in a certain manner; |
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changes to our business
operations to avoid risks associated with such litigation or investigations; |
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product recalls; |
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reputational damage and
decreased demand for our products; and |
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expenditure of significant
time and resources that would otherwise be available for operating our business. |
While
we maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover the total amount of all adverse
resolutions and settlements of claims and liabilities. It also is not possible to obtain insurance to protect against all potential risks
and liabilities.
We
or our current and prospective partners may be subject to product recalls in the future that could harm our brand and reputation and
could negatively affect our business.
We
or our current and prospective partners may be subject to product recalls, withdrawals or seizures if any of our product candidates,
if approved for marketing, fail to meet specifications or are believed to cause injury or illness or if we are alleged to have violated
governmental regulations including those related to the manufacture, labeling, promotion, sale or distribution. Any recall, withdrawal
or seizure in the future could materially and adversely affect consumer confidence in our brands and lead to decreased demand for our
approved products. In addition, a recall, withdrawal or seizure of any of our approved products would require significant management
attention, would likely result in substantial and unexpected expenditures and would harm our business, financial condition and operating
results.
We
will need to obtain FDA approval of any proposed names for our product candidates that gain marketing approval, and any failure or delay
associated with such naming approval may adversely impact our business.
Any
name we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured a formal trademark
registration from the U.S. Patent and Trademark Office (USPTO). The FDA typically conducts a review of proposed product names, including
an evaluation of whether proposed names may be confused with other product names. The FDA may object to any product name we submit if
it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product names, we may be required
to adopt an alternative name for our product candidates, which could result in further evaluation of proposed names with the potential
for additional delays and costs.
Disruptions
at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain
or deploy key leadership and other personnel, or otherwise prevent new or modified products and services from being developed, approved
or commercialized in a timely manner, which could negatively impact our business.
The
ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding
levels, ability to hire and retain key personnel and accept the payment of user fees, statutory, regulatory, and policy changes and other
events that may otherwise affect FDA’s ability to perform routine functions. Average review times at the agency have fluctuated
in recent years as a result. In addition, government funding of other government agencies that fund research and development activities
is subject to the political process, which is inherently fluid and unpredictable.
Disruptions
at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved or cleared by necessary government
agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several
times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
In
response to the global pandemic of COVID-19 and public health emergency declarations in the United States, in March 2020, the FDA temporarily
postponed most inspections of foreign manufacturing facilities and products, postponed routine surveillance inspections of domestic manufacturing
facilities and provided guidance regarding the conduct of clinical trials. The FDA utilized a rating system to assist it in determining
when and where it was safest to conduct such inspections based on data about the virus’s trajectory in a given state and locality
and the rules and guidelines that were put in place by state and local governments. The FDA used similar data to inform resumption of
prioritized operations abroad.
If
a prolonged government shutdown or slowdown occurs, or if global health concerns prevent the FDA or other regulatory authorities from
conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or
other regulatory authorities to timely review and process regulatory submissions, which could have a material adverse effect on our business.
Our
future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens
and other risks and uncertainties.
Our
future profitability will depend, in part, on our ability to commercialize our product candidates in foreign markets for which we intend
to rely on collaborations with third parties. If we commercialize our other product candidates in foreign markets, we would be subject
to additional risks and uncertainties, including:
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our customers’ ability
to obtain market access and appropriate reimbursement for our product candidates in foreign markets; |
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our inability to directly
control commercial activities because we are relying on third parties; |
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the burden of complying
with complex and changing foreign regulatory, tax, accounting and legal requirements; |
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different medical practices
and customs in foreign countries affecting acceptance in the marketplace; |
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import or export licensing
requirements; |
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longer accounts receivable
collection times; |
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longer lead times for shipping; |
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language barriers for technical
training; |
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reduced protection of intellectual
property rights in some foreign countries; |
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foreign currency exchange
rate fluctuations; and |
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the interpretation of contractual
provisions governed by foreign laws in the event of a contract dispute. |
Foreign
sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability,
trade restrictions and changes in tariffs, any of which may adversely affect our results of operations.
A
pandemic, epidemic, or outbreak of an infectious disease, such as COVID-19, could cause a disruption to the development of our product
candidates.
Public
health crises such as pandemics or similar outbreaks could adversely impact our business. In December 2019, COVID-19 (coronavirus disease
2019) spread worldwide. The coronavirus pandemic led to the implementation of various responses, including government-imposed quarantines,
travel restrictions and other public health safety measures. The extent to which a pandemic, epidemic or outbreak of an infectious disease
impacts our operations or those of our third-party partners, including our development studies or clinical trial operations, will depend
on future occurrences, which are highly uncertain and cannot be predicted with confidence, including the duration of any outbreak and
the actions to contain or treat its impact, among others. Although the majority of our operations are conducted in the United States,
the spread of an infectious disease globally could adversely impact our product candidate development or clinical trial operations in
the United States and abroad. Any negative impact infectious diseases have on patient enrollment or treatment or the execution of our
product candidates could cause costly delays to clinical trial activities, which could adversely affect our ability to obtain regulatory
approval for and to commercialize our product candidates, increase our operating expenses, and have a material adverse effect on our
financial results.
Some
factors that may delay or otherwise adversely affect enrollment in the clinical trials of our product candidates, as well as our business
generally, in the event of a pandemic, epidemic or outbreak of an infectious disease include:
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delays in receiving approval
from local regulatory authorities to initiate our planned clinical trials; |
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delays or difficulties
in enrolling or retaining participants in our clinical trials; |
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delays or difficulties
in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; |
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delays in clinical sites
receiving the supplies and materials needed to conduct our clinical trials, including interruption in global shipping that may affect
the transport of clinical trial materials; |
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changes in local regulations
as part of a response to a pandemic, epidemic or infectious disease, which may require us to change the ways in which our clinical
trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether; |
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diversion of healthcare
resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and
hospital staff supporting the conduct of our clinical trials; |
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interruption of key clinical
trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state
governments, employers and others, or interruption of clinical trial participant visits and study procedures, the occurrence of which
could affect the integrity of clinical trial data; |
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risk that participants
enrolled in our clinical trials will acquire an infectious disease while the clinical trial is ongoing, which could impact the results
of the clinical trial, including by increasing the number of observed adverse events; |
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interruptions in preclinical
studies due to restricted or limited operations at our research and development facilities; |
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the potential negative
effect on the operations of our third-party manufacturers; |
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delays in necessary interactions
with local regulators, ethics committees, and other important agencies and contractors due to limitations in employee resources or
forced furlough of employees; |
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limitations in employee
resources at third-party clinical research organizations (CROs) that would otherwise be focused on the conduct of our clinical trials,
including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; |
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refusal of the FDA or other
regulatory authorities to accept data from clinical trials in affected geographies; and |
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delays in FDA pre-approval
inspections, which are a prerequisite for approval. |
Risks
Related to Commercialization
Recently
enacted and future policies and legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize
our product candidates and may affect the reimbursement made for any product candidate for which we receive marketing approval.
Legislative and regulatory actions
affecting government prescription drug procurement and reimbursement programs occur relatively frequently. In the United. States, for
example, the Patient Protection and Affordable Care Act (PPACA) was enacted in 2010 to expand healthcare coverage and made significant
changes to drug reimbursement. Other legislative changes that affect the pharmaceutical industry have been proposed and adopted in the
United States since PPACA was enacted. For example, the Inflation Reduction Act of 2022 included, among other things, a provision that
authorizes CMS to negotiate a “maximum fair price” for a limited number of high-cost, single-source drugs every year, and
another provision that requires drug companies to pay rebates to Medicare if prices rise faster than inflation. Complying with any new
legislation could be time-intensive and expensive, resulting in a material adverse effect on our business.
In
addition, many states have proposed or enacted legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing,
such as by requiring biopharmaceutical manufacturers to publicly report proprietary pricing information or to place a maximum price ceiling
on pharmaceutical products purchased by state agencies. For example, in 2017, California’s governor signed a prescription drug
price transparency state bill into law, requiring prescription drug manufacturers to provide advance notice and explanation for price
increases of certain drugs that exceed a specified threshold. Both Congress and state legislatures are considering various bills that
would reform drug purchasing and price negotiations, allow greater use of utilization management tools to limit Medicare Part D coverage,
facilitate the import of lower-priced drugs from outside the U.S. and encourage the use of generic drugs. Such initiatives and legislation
may cause added pricing pressures on our products.
Changes
to the Medicaid program at the federal or state level could also have a material adverse effect on our business. Proposals that could
impact coverage and reimbursement of our products, including giving states more flexibility to manage drugs covered under the Medicaid
program and permitting the re-importation of prescription medications from Canada or other countries, could have a material adverse effect
by limiting our products’ use and coverage. Furthermore, state Medicaid programs could request additional supplemental rebates
on our products as a result of an increase in the federal base Medicaid rebate. To the extent that private insurers or managed care programs
follow Medicaid coverage and payment developments, they could use the enactment of these increased rebates to exert pricing pressure
on our products, and the adverse effects may be magnified by their adoption of lower payment schedules.
We
cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or
executive action, either in the United States or abroad. We expect that additional state and federal health care reform measures will
be adopted in the future, any of which could limit the amounts that federal and state governments will pay for health care products and
services. Moreover, the Biden Administration, including the Secretary of DHHS, has indicated that lowering prescription drug prices is
a priority, but we do not yet know what steps the administration will take or whether such steps will be successful.
Other
proposed regulatory actions affecting manufacturers could have a material adverse effect on our business. It is difficult to predict
the impact, if any, of any such proposed legislative and regulatory actions or resulting state actions on the use and reimbursement of
our products in the U.S., but our results of operations may be adversely affected.
Unfavorable
pricing regulations, third-party reimbursement practices or healthcare reform initiatives could harm our business in the future.
There
is increasing pressure on pharmaceutical companies to reduce healthcare costs. In the United States, these pressures come from a variety
of sources, such as managed care groups and institutional and government purchasers. Increased purchasing power of entities that negotiate
on behalf of federal healthcare programs and private sector beneficiaries could increase pricing pressures in the future. Such pressures
may also increase the risk of litigation or investigation by the government regarding pricing calculations. The pharmaceutical industry
will likely face greater regulation and political and legal actions in the future.
Adverse
pricing limitations may hinder our ability to recoup our investment in one or more future product candidates, even if our future product
candidates obtain regulatory approval. Adverse pricing limitations prior to approval will also adversely affect us by reducing our commercial
potential. Our ability to commercialize any potential products successfully also will depend in part on the extent to which coverage
and reimbursement for these products and related treatments becomes available from third-party payors, including government health administration
authorities, private health insurers and other organizations. Third-party payors decide which medications they will pay for and establish
reimbursement levels. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical products, will apply to
companion diagnostics.
A
significant trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs
by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that
companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We
cannot be sure that coverage and reimbursement will be available for any product that we commercialize in the future and, if reimbursement
is available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which
we obtain marketing approval in the future. If reimbursement is not available or is available only to limited levels, we may not be able
to successfully commercialize any product candidate that we successfully develop.
There
may be significant delays in obtaining reimbursement for approved products, and coverage may be more limited than the purposes for which
the product is approved by the FDA or regulatory authorities in other countries. Moreover, eligibility for reimbursement does not imply
that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale
and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made
permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments
allowed for lower cost products that are already reimbursed and may be incorporated into existing payments for other services. Net prices
for products may be reduced by mandatory discounts or rebates required by third-party payors and by any future relaxation of laws that
presently restrict imports of products from countries where they may be sold at lower prices than in the United States. Third-party payors
often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but also have their own
methods and approval process apart from Medicare coverage and reimbursement determinations. Accordingly, one third-party payor’s
determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Our inability
to promptly obtain coverage and adequate reimbursement from third-party payors for approved products could have a material adverse effect
on our operating results, our ability to raise capital needed to commercialize potential products and our overall financial condition.
We
may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates
or indications that may be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and management resources, we focus on development programs and product candidates that we identify for specific
indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that
later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial
drugs or profitable market opportunities. Our spending on current and future research and development programs and product candidates
for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or
target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration,
licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and
commercialization rights to such product candidate.
The
commercial success of our product candidates, if approved, depends partially upon attaining market acceptance by physicians, patients,
third-party payors, and the medical community.
Our
ability to generate product revenue will depend significantly on our ability to successfully obtain final marketing approval for and
commercialize our product candidates.
Even
if any of our product candidates CTx-1301, CTx-1302, and/or CTx-2103 obtain regulatory approval, they may not gain sufficient market
acceptance among physicians, patients, third-party payors, and the healthcare community. Failure to achieve market acceptance would limit
our ability to generate revenue and would affect our results of operations. The degree of market acceptance of CTx-1301, CTx-1302, and/or
CTx-2103 will depend on many factors, including:
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the efficacy and potential
advantages of CTx-1301, CTx-1302, and/or CTx-2103 and compared to alternative treatments or competitive products; |
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the effectiveness of our
third-party collaborators’ efforts to educate physicians and patients about the potential benefits and advantages of CTx-1301,
CTx-1302, and/or CTx-2103; |
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the willingness of the
healthcare community and patients to adopt new technologies; |
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the size of the market
for such drug candidate, based on the size of the patient populations we are targeting, in the territories for which we gain regulatory
approval and have commercial rights; |
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the prevalence and severity
of any side effects; |
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the safety of the drug
candidate as demonstrated through broad commercial distribution; |
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the ability to offer our
product candidates for sale at competitive prices; |
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cost-effectiveness of our
product candidates relative to competing products; |
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the ability to manufacture
all our products CTx-1301, CTx-1302 as well as CTx-2103 in sufficient quantities and yields; |
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perceptions of physicians,
patients and the healthcare community, including third-party payors, regarding the safety, efficacy and potential benefits of CTx-1301,
CTx-1302 and/or CTx-2103 compared to competing products or therapies; |
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the timing of any such
marketing approval in relation to other product approvals; |
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any restrictions on concomitant
use of other medications; |
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support from patient advocacy
groups; |
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relative convenience and
ease of administration compared to alternative treatments; and |
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the availability of adequate
coverage and reimbursement from governmental health programs and third-party payors and pricing relative to other competing products
and therapies. |
If
our drug candidates are approved but fail to achieve an adequate level of acceptance by key market participants, we will not be able
to generate significant revenues, and we may not become or remain profitable, which may require us to seek additional financing.
Our
ability to negotiate, secure and maintain third-party coverage and reimbursement for our product candidates may be affected by political,
economic and regulatory developments in the United States and other jurisdictions. Governments continue to impose cost containment measures,
and third-party payors are increasingly challenging prices charged for medicines and examining their cost effectiveness, in addition
to their safety and efficacy. These and other similar developments could significantly limit the degree of market acceptance of any product
candidate of ours that receives marketing approval in the future.
We
may face significant competition from other pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
The
pharmaceutical industry is intensely competitive and subject to rapid and significant technological change. If we fail to stay at the
forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by our competitors
may render our technologies or product candidates obsolete, less competitive or not economical.
We
expect to have competitors both in the United States and internationally, including major multinational pharmaceutical companies. For
example, amphetamine XR is currently marketed in the United States by Shire under the brand name Adderall XR, and methylphenidate is
marketed in the United States by Janssen under the brand name Concerta, and by Novartis under the brand names Focalin XR and Ritalin
LA. Further, makers of branded drugs could also enhance their own formulations in a manner that competes with our enhancements of these
drugs. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development
staff and more experienced marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical
industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory
approval more rapidly than we are able and may be more effective in selling and marketing their products as well. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of
capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug
products or drug delivery technologies that are more effective or less costly than our PTR platform, or any product candidate that we
are currently developing or that we may develop. In addition, our competitors may file citizens petitions with the FDA in an attempt
to persuade the FDA that our products, or clinical trials that support their approval, contain deficiencies or that new regulatory requirements
be placed on the product candidate or drug class of the product candidate. Such actions by our competitors could delay or even prevent
the FDA from approving any NDA that we submit under Section 505(b)(2).
Even
if we are successful in achieving regulatory approval to commercialize a product candidate ahead of our competitors, our future pharmaceutical
products may face direct competition from generic and other follow-on drug products. Any of our product candidates that may achieve regulatory
approval in the future may face competition from generic products earlier or more aggressively than anticipated, depending upon how well
such approved products perform in the United States prescription drug market. Our ability to compete also may be affected in many cases
by insurers or other third-party payors seeking to encourage the use of generic products. Generic products are expected to become available
over the coming years. Even if our product candidates achieve marketing approval, they may be priced at a significant premium over competitive
generic products, if any have been approved by then.
In
addition to creating the 505(b)(2) NDA pathway, the Hatch-Waxman Amendments to the FDCA authorized the FDA to approve generic drugs that
are the same as drugs previously approved for marketing under the NDA provisions of the statute pursuant to ANDAs. An ANDA relies on
the preclinical and clinical testing conducted for a previously approved reference listed drug (RLD) and must demonstrate to the FDA
that it is “bioequivalent” to the RLD. The FDA is prohibited by statute from approving an ANDA when certain marketing or
data exclusivity protections apply to the RLD. If any such competitor or third party is able to demonstrate bioequivalence without infringing
our patents, then this competitor or third party may then be able to introduce a competing generic product onto the market.
We
believe that our ability to successfully compete will depend on, but is not limited to:
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the efficacy and safety
of our product and product candidates, including as relative to marketed products and product candidates in development by third
parties; |
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the time it takes for our
product candidates to complete clinical development and receive marketing approval; |
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the ability to maintain
a good relationship with regulatory authorities; |
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the ability to commercialize
and market any of our product candidates that receive regulatory approval; |
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the price of our product
and product candidates that receive regulatory approval, including in comparison to branded or generic competitors; |
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whether coverage and adequate
levels of reimbursement are available under private and governmental health insurance plans, including Medicare; |
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the ability to protect
intellectual property rights related to our product and product candidates; |
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the ability to manufacture
on a cost-effective basis and sell commercial quantities of our product and product candidates that receive regulatory approval;
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acceptance of any of our
products and product candidates that receive regulatory approval by physicians and other healthcare providers. |
If
our competitors market products that are more effective, safer or less expensive than our product, if any, or that reach the market sooner
than our products, if any, we may enter the market too late in the cycle and may not achieve commercial success, or we may have to reduce
our price, which would impact our ability to generate revenue and obtain profitability.
In
addition, successful commercialization will also depend on whether we can adequately protect against and effectively respond to any claims
by holders of patents and other intellectual property rights that our products infringe their rights, whether any unanticipated adverse
effects or unfavorable publicity develops in respect of our products, as well as the emergence of new or existing products as competition,
which may be proven to be more clinically effective and cost-effective. If we are unable to successfully complete these tasks, we may
not be able to commercialize in a timely manner, or at all, in which case we may be unable to generate sufficient revenues to sustain
and grow our business.
We
cannot predict the interest of potential follow-on competitors or how quickly others may seek to come to market with competing products,
whether approved as a direct ANDA competitor or as a 505(b)(2) NDA referencing one of our future drug products. If the FDA approves generic
versions of our drug candidates in the future, should they be approved for commercial marketing, such competitive products may be able
to immediately compete with us in each indication for which our product candidates may have received approval, which could negatively
impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on our investments in
those product candidates.
Social
issues around the abuse of opioids and stimulants, including law enforcement concerns over diversion and regulatory efforts to combat
abuse, could decrease the potential market for our product candidates.
Media
stories regarding prescription drug abuse and the diversion of opioids, stimulants, and other controlled substances are commonplace.
Law enforcement and regulatory agencies may apply policies that seek to limit the availability of opioids and stimulants. Such efforts
may inhibit our ability to commercialize our product candidates. Aggressive enforcement and unfavorable publicity regarding opioid drugs,
the limitations of abuse-deterrent formulations, public inquiries and investigations into prescription drug abuse, litigation or regulatory
activity, sales, marketing, distribution or storage of our products could harm our reputation. Such negative publicity could reduce the
potential size of the market for our product candidates and decrease the revenue we are able to generate from their sale, if approved.
Additionally,
current and future efforts by Congress, state legislatures, the FDA and other regulatory bodies to combat abuse of opioids and stimulants
may negatively impact the market for our product candidates. It is possible that lawmakers or the FDA will announce new legislation or
regulatory initiatives at any time that may increase the regulatory burden or decrease the commercial opportunity for our product candidates.
Risks
Related to Our Dependence on Third Parties
If
we fail to produce our product or product candidates in the volumes that are required on a timely basis, or fail to comply with stringent
regulations applicable to pharmaceutical drug manufacturers, we may face regulatory penalties and delays in the development and commercialization
of our product candidates.
We
currently depend on third-party suppliers for the supply of the APIs and excipients for our product candidates. Any shortages in the
availability of raw materials could result in production or other delays with consequent adverse effects on us. In addition, because
regulatory authorities must generally approve raw material sources for pharmaceutical products, changes in raw material suppliers may
result in production delays or higher raw material costs. Any such delays could trigger penalties, which would have a negative impact
on our business. If our raw material manufacturers were to encounter difficulties or otherwise fail to comply with their obligations
to us, our ability to obtain FDA approval and market our product and product candidates would be jeopardized. In addition, any delay
or interruption in the supply of clinical trial supplies could delay or prohibit the completion of our bioequivalence and/or clinical
trials, increase the costs associated with conducting our bioequivalence and/or clinical trials and, depending upon the period of delay,
require us to commence new trials at significant additional expense or to terminate a trial.
The
manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing
techniques and process controls. Pharmaceutical companies may encounter difficulties in manufacturing scale up of production. These problems
include manufacturing difficulties relating to production costs and yields, quality control, including stability of the product and quality
assurance testing, shortages of qualified personnel, as well as compliance with federal, state and foreign regulations. We may also need
to purchase additional equipment, some of which can take several months or more to procure, setup and validate, and increase our software
and computing capacity to meet increased demand. Failure to manage this growth or transition could result in turnaround time delays,
higher product costs, declining product quality, or slower responses to competitive challenges. A failure in any one of these areas could
make it difficult for us to meet market expectations for our products and could damage our reputation and the prospects for our business.
Manufacturers
of pharmaceutical products need to comply with cGMP requirements enforced by the FDA through the agency’s facility inspection programs.
The cGMP requirements include, among other things, quality control, quality assurance, the maintenance of records and documentation,
and the obligation to investigate and correct any deviations from regulatory requirements. A failure to comply with these requirements
may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or voluntary
recall, or withdrawal of product approval. If the safety of any of our products or product candidates is compromised due to failure to
adhere to applicable laws or for other reasons, we may not be able to obtain, or to maintain once obtained, regulatory approval for such
product candidate or successfully commercialize such products or product candidates, and we may be held liable for any injuries sustained
as a result. Any of these factors could cause a delay in clinical developments, regulatory submissions, approvals or commercialization
of our products or product candidates, entail higher costs or result in our being unable to effectively commercialize our product candidates.
We
rely on limited sources of supply for CTx-1301, CTx-1302, and/ or CTx 2103 as these are scheduled products, and any disruption in the
chain of supply may impact production and sales of CTx-1301, CTx-1302, and/ or CTx-2103 and cause delays in developing and commercializing
our product candidates and currently manufactured and commercialized product.
The
NDAs we plan to submit for CTx-1301, CTx-1302, and/ or CTx-2103 will include our proposed manufacturing process for each product candidate.
Any change to our manufacturing process, facilities or suppliers could require that we amend our NDA. Any change to our manufacturing
process, facilities or suppliers could require that we amend our NDA. Also, because of our proprietary processes for manufacturing our
product candidates, we cannot immediately transfer manufacturing activities for our drug products to an alternate supplier, and a change
of manufacturing facilities would be time- consuming and could be a costly endeavor. For example, in October 2022, we announced a new
CMO. The CTx-1301 fixed-dose study was delayed while the manufacturing process with the new CMO is established to manufacture the final
dosage strengths needed for the fixed-dose study. A change in manufacturing facilities would also require us to supplement our NDA filings
to include the change of manufacturing site. Identifying an appropriately qualified source of alternative supply for any one or more
of the component substances for our product candidates or product could be time consuming, and we may not be able to do so without incurring
material delays in the development and commercialization of our product candidates. Any alternative vendor would also need to be qualified
through an NDA supplement and may need to undergo an FDA inspection before the supplement can be approved, which could result in further
delay, including delays related to additional clinical trials.
These
factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates,
cause us to incur higher costs and prevent us from commercializing them successfully. Furthermore, if our suppliers fail to deliver the
required commercial quantities of components and APIs on a timely basis and at commercially reasonable prices, including if our suppliers
did not receive adequate DEA quotas for the supply of certain scheduled components, and we are unable to secure one or more replacement
suppliers capable of production at a substantially equivalent cost, commercialization of our lead product candidates, and clinical trials
of future potential product candidates, may be delayed or we could lose potential revenue and our business, financial condition, results
of operation and reputation could be adversely affected.
We
rely and expect to continue to rely completely on third parties to formulate and manufacture our preclinical, clinical trial and commercial
drug supplies. The development and commercialization of any of our drug candidates could be stopped, delayed or made less profitable
if those third parties fail to provide us with sufficient quantities of such drug supplies or fail to do so at acceptable quality levels,
including in accordance with applicable regulatory requirements or contractual obligations, and our operations could be harmed as a result.
We
do not currently have, nor do we plan to acquire, the infrastructure or capability internally, such as our own manufacturing facilities,
to manufacture our preclinical and clinical drug supplies for our clinical trials and preclinical studies or commercial quantities of
any drug candidates that may obtain regulatory approval. We procure bulk drug substance from a sole source, third-party supplier and
have contracted with a CMO to produce our drug candidates at its facilities, and we anticipate that we will continue to do so for the
foreseeable future. Therefore, we lack the resources and expertise to formulate or manufacture our own drug candidates, and our reliance
on third parties increases the risk that we will not have sufficient quantities of bulk drug substances or our product candidates, in
such quantities at an acceptable cost, which could delay, prevent or impair our ability to timely conduct our clinical trials or our
other development or commercialization efforts. For example, we experienced delays in the manufacturing
and delivery of clinical supply for the CTx-1301 fixed-dose study due to operational resource issues at our former CMO. The manufacture
of the clinical supply was further delayed while our new CMO establishes its manufacturing process for CTx-1301.
We
have entered into an agreement with a CMO and intend for that CMO to manufacture all clinical, registration and commercial batches of
our drug candidate, CTx-1301, and we plan to enter into agreements with one or more manufacturers to manufacture, supply, store, and
distribute drug supplies for our future clinical trials and/or commercial sales. We intend to establish or continue those relationships
for the supply of our drug candidates; however, there can be no assurance that we will be able to retain those relationships on commercially
reasonable terms, if at all. If we are unable to maintain those relationships, we could experience delays in our development efforts
as we locate and qualify new CMOs. If any of our current drug candidates or any drug candidates we may develop or acquire in the future
receives regulatory approval, we will rely on one or more CMOs to manufacture the commercial supply of such drugs.
Even
if we are able to maintain our existing third-party relationships or establish any such agreements with other third-party manufacturers,
reliance on third-party manufacturers entails additional risks, including, but not limited to:
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reliance on the third party
for FDA and DEA regulatory compliance and quality assurance; |
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the possible misappropriation
of our proprietary information, including our trade secrets and know-how; |
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disruption and costs associated
with changing suppliers, including additional regulatory filings; |
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the possible breach, termination
or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; |
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a delay or inability to
procure or expand sufficient manufacturing capacity; |
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the inability to negotiate
manufacturing agreements with third parties under commercially reasonable terms; |
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termination or nonrenewal
of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and |
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the reliance on a limited
number of sources, and in some cases, single sources for product components, such that if we are unable to secure a sufficient supply
of these product components, we will be unable to manufacture and sell our product candidates in a timely fashion, in sufficient
quantities or under acceptable terms. |
Each
of these risks could delay our clinical trials, the approval, if any, of our drug candidates or the commercialization of our drug candidates,
could result in higher costs or could deprive us of potential product revenues. Some of these events could be the basis for FDA action,
including injunction, recall, seizure or total or partial suspension of production.
While
we are ultimately responsible for the manufacture of our product candidates, we do not manufacture our products ourselves and are dependent
on our CMOs for compliance with cGMPs. Our agreements with our CMOs require them to perform according to certain CGMP requirements such
as those relating to quality control, quality assurance and qualified personnel, but we cannot control the conduct of our CMOs to implement
and maintain these standards. If our CMOs cannot successfully manufacture material that conforms to our specifications and the strict
regulatory requirements of the FDA or other regulatory authorities, we would be prevented from obtaining regulatory approval for our
drug candidates unless and until we engage a substitute CMO that can comply with such requirements, which we may not be able to do. Any
such failure by any of our CMOs would significantly impact our ability to develop, obtain marketing approval for or market our product
candidates, if approved.
Further,
if our product candidates are approved, our suppliers will be subject to regulatory requirements, covering manufacturing, testing, quality
control and record keeping relating to our product candidates, and subject to ongoing inspections by the regulatory agencies. Failure
by any of our suppliers to comply with applicable regulations may result in long delays and interruptions to our manufacturing capacity
while we seek to secure another supplier that meets all regulatory requirements, as well as market disruption related to any necessary
recalls or other corrective actions.
Third-party
manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States. Our failure,
or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us,
including warning letters, clinical holds or termination of clinical trials, fines, injunctions, restitution, disgorgement, civil penalties,
delays, suspension or withdrawal of approvals or other permits, FDA refusal to approve pending applications, product detentions, FDA
consent decrees placing significant restrictions on or suspending manufacturing and distribution operations, debarment, refusal to allow
import or export, product detentions, adverse publicity, dear-health-care-provider letters or other warnings, license revocation, seizures
or recalls of product candidates, operating restrictions, refusal of government contracts or future orders under existing contracts and
civil and criminal liability, including False Claims Act liability, exclusion from participation in federal health care programs, and
corporate integrity agreements among other consequences, any of which could significantly and adversely affect supplies of our products.
Failure
by our third-party contract manufacturer to maintain DEA regulations as pertain to controlled substances may cause their license to be
revoked and production of our products and product candidates may be interrupted or stopped. This would impact our ability to develop,
obtain marketing approval for or market our product candidates, if approved.
Our
product candidates and any drugs that we may develop may compete with other product candidates and drugs for access to manufacturing
facilities, and we may be unable to obtain access to these facilities on favorable terms.
There
are a limited number of manufacturers that operate under cGMP regulations and possess a DEA license to procure, hold and work with controlled
substances. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing
approval. We do not currently have arrangements in place for redundant supply or a second contract manufacturer. If our current contract
manufacturer cannot perform as agreed, we may be required to replace such manufacturer and we may incur added costs and delays in identifying
and qualifying any such replacement. For example, we experienced delays in the manufacturing and
delivery of clinical supply for the CTx-1301 fixed-dose study due to operational resource issues at our former CMO. The manufacture of
the clinical supply was further delayed while our new CMO establishes its manufacturing process for CTx-1301.
We
expect to rely on third parties to conduct our clinical trials and our regulatory submissions for our product candidates, and those third
parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials and/or regulatory submissions.
We
expect to engage CROs for our planned clinical trials and our regulatory submissions of our product candidates. We expect to rely on
CROs, as well as other third parties, such as clinical data management organizations, regulatory strategists, medical institutions and
clinical investigators, to conduct our planned clinical trials, prepare the appropriate regulatory submissions for our product candidates,
and assist with ensuring compliance with applicable regulatory requirements. Agreements with such third parties might terminate for a
variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our drug
development activities would be delayed.
Our
reliance on these third parties for clinical development activities may reduce our control over these activities but will not relieve
us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance
with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with regulatory standards,
commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical trials to assure
that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are
protected. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial
sites. We also are required to register specified ongoing clinical trials and post the results of completed clinical trials on a government-sponsored
database, ClinicalTrials.gov, within specified timeframes. In addition, we must conduct our clinical trials with product produced under
cGMP requirements. Failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory
approval process. Failure to comply with the applicable requirements related to clinical investigations by us, our CROs or clinical trial
sites can also result in clinical holds and termination of clinical trials, debarment, FDA refusal to approve applications based on the
clinical data, warning letters, withdrawal of marketing approval if the product has already been approved, fines and other monetary penalties,
delays, adverse publicity and civil and criminal sanctions, among other consequences.
Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do
not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory
requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product
candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.
In
addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and
may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result
in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation
of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical
trial itself may be jeopardized, which could result in the delay or rejection of any NDA we submit by the FDA. Any such delay or rejection
could prevent us from commercializing our product candidates. Further, our arrangements with principal investigators are also subject
to scrutiny under other health care regulatory laws, such as the federal Anti-Kickback Statute.
We
also expect to rely on other third parties to store and distribute product supplies for our clinical trials. Any performance failure
or noncompliance with applicable regulatory requirements, including those of the FDA or DEA, on the part of our distributors could delay
clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses
and depriving us of potential product revenue.
If
the third parties with whom we contract do not successfully carry out their contractual duties or obligations or meet expected deadlines
or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols
or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, we may need to conduct additional
trials, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, the
commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be
delayed. To the extent we are unable to successfully identify and manage the performance of third-party service providers in the future,
our business may be adversely affected.
We
depend on collaborations with third parties for the development and commercialization of our product candidates. If those collaborations
are not successful, we may not be able to capitalize on the market potential of these product candidates.
In
March 2023, we entered into to the Commercialization Agreement with Indegene. Pursuant to the Commercialization Agreement, Indegene will
provide us with commercialization services for CTx-1301, including services related to (a) medical affairs & pharmacovigilance; (b)
pricing, reimbursement and market access; (c) commercial operations; and (d) marketing.
We
also may seek additional third-party collaborators for the development and commercialization of our product candidates, including for
the commercialization of any of our product candidates that are approved for marketing outside the United States. Potential collaborators
include co-commercialization partners, as well as regional, national and international large and mid-size pharmaceutical companies.
We
may have limited control over the amount and timing of resources that our current and any future collaborators dedicate to the development
or commercialization of our product candidates. Our ability to generate revenue from these arrangements will depend on our collaborators’
abilities to successfully perform the functions assigned to them in these arrangements. Pursuant to the Commercialization Agreement, we and Indegene will enter into statements of work that will set forth,
among other things, the services to be performed by Indegene, the deliverables for such services and the fees to be paid by us. We may
be unable to negotiate the terms of the statements of work, including the services to be performed by Indegene or the fees payable by
us, on terms acceptable to us, or at all. If we are unable to do so, we will have to seek other collaborations for the commercialization
of CTx-1301, which may delay commercialization.
Our current collaborations pose, and any future
collaborations involving our product candidates would pose the following risks, including but not limited to:
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we may have to relinquish
valuable rights to our intellectual property, future revenue streams, research programs or product candidates, or grant licenses
on terms that may not be favorable to us; |
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collaborators have significant
discretion in determining the efforts and resources that they will apply to these collaborations; |
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collaborators may not perform
their obligations as expected; |
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collaborators may not pursue
development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew
development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or
available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; |
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collaborators may delay
clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate,
repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; |
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product candidates discovered
in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may
cause collaborators to cease to devote resources to the commercialization of our product candidates; |
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a collaborator with marketing
and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources
to the marketing and distribution of such products; |
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disagreements with collaborators,
including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays
or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities
for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and
expensive; |
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collaborators may not properly
maintain or defend our or their intellectual property rights or may use our or their proprietary information in such a way as to
invite litigation that could jeopardize or invalidate such intellectual property or proprietary information or expose us to potential
litigation; |
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collaborators
may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
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we
may be subject to termination fees if we terminate a collaboration; and |
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collaborations may be terminated
for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development
or commercialization of the applicable product candidates. |
The
Commercialization Agreement and any future collaboration agreements may not lead to development or commercialization of product candidates
in the most efficient manner or at all. If a present or future collaborator of ours were to be involved in a business combination, the
continued pursuit and emphasis on our drug development or commercialization program could be delayed, diminished or terminated.
If
we are not able to maintain or establish collaborations, we may have to alter our development and commercialization plans.
In
March 2023, we entered into to the Commercialization Agreement with Indegene. Pursuant to the Commercialization Agreement, Indegene will
provide us with commercialization services for CTx-1301, including services related to (a) medical affairs & pharmacovigilance; (b)
pricing, reimbursement and market access; (c) commercial operations; and (d) marketing.
The
development of our product candidates and clinical programs and the potential commercialization will require substantial additional capital.
For some of our product candidates, we may need to be able to maintain and further collaborate with co-commercial partners or pharmaceutical
companies for the development and/or commercialization of those product candidates.
We
face significant competition in seeking appropriate collaborators. Whether we reach additional definitive agreements for a collaboration
will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of
the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design
or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the
potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate
to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can
exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally.
The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate
on and whether such a collaboration could be more attractive than the one with us for our product candidate.
Pursuant
to the Commercialization Agreement, we and Indegene will enter into statements of work that will set forth, among other things, the services
to be performed by Indegene, the deliverables for such services and the fees to be paid by us. We may be unable to negotiate the terms
of the statements of work, including the services to be performed by Indegene or the fees payable by us, on terms acceptable to us, or
at all. If we are unable to do so, we will have to seek other collaborations for the commercialization of CTx-1301, which may delay commercialization.
We
may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have
to curtail the development of product candidates, reduce or delay one or more of our development programs, delay potential commercialization
or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization
activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own,
we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient
funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.
We
rely on third parties to perform many essential services for any products that we commercialize, including distribution, customer service,
accounts receivable management, cash collection and adverse event reporting. If these third parties fail to perform as expected or to
comply with legal and regulatory requirements, our ability to commercialize CTx-1301, CTx-1302, and/or CTx-2103 will be significantly
impacted and we may be subject to regulatory sanctions.
In
March 2023, we entered into to the Commercialization Agreement with Indegene. Pursuant to the Commercialization Agreement, Indegene will
provide us with commercialization services for CTx-1301, including services related to (a) medical affairs & pharmacovigilance; (b)
pricing, reimbursement and market access; (c) commercial operations; and (d) marketing.
We
may retain additional third-party service providers to perform a variety of functions related to the sale and distribution of any or
all of our products, including CTx-1301, CTx-1302, and CTx-2103, if approved, key aspects of which will be out of our direct control.
These service providers may provide key services related to distribution, customer service, accounts receivable management and cash collection.
We
will substantially rely on Indegene and will substantially rely on any future third-party providers to perform services for us. If
these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or
otherwise do not carry out their contractual duties to us, our ability to deliver product to meet commercial demand may be
significantly impaired. In addition, we may engage third parties to perform various other services for us relating to adverse event
reporting, safety database management, fulfillment of requests for medical information regarding our product candidates and related
services. If the quality or accuracy of the data maintained by these service providers is insufficient or if they fail to comply
with various requirements, we could be subject to regulatory sanctions.
If
we are unable to achieve and maintain adequate levels of coverage and reimbursement for our product or product candidates, if approved,
their commercial success may be severely hindered.
Successful
sales of our product and any product candidates that receive regulatory approval depend on the availability of adequate coverage and
reimbursement from third-party payors. Patients who are prescribed medications for the treatment of their conditions generally rely on
third-party payors to reimburse all or part of the costs associated with their prescription drugs. Adequate coverage and reimbursement
from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Coverage
decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic
alternatives are already available or subsequently become available. Assuming we obtain coverage for a given product, the resulting reimbursement
payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our
products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.
In
addition, the market for CTx-1301, CTx-1302, and CTx-2103 will depend significantly on access to third-party payors’ drug formularies
or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such
formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular
branded drug in their formularies or otherwise restrict patient access through formulary controls or otherwise to a branded drug when
a less costly generic equivalent or other alternative is available.
Third-party
payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling
healthcare costs. In addition, in the United States, no uniform policy requirement for coverage and reimbursement for drug products exists
among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a
result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and
clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will
be applied consistently or obtained in the first instance.
Further,
we believe that future coverage and reimbursement will likely be subject to increased restrictions both in the United States and in international
markets. Third party coverage and reimbursement for our product candidates for which we may receive regulatory approval may not be available
or adequate in either the United States or international markets, which could have a material adverse effect on our business, results
of operations, financial condition and prospects.
Third-party
payors may not adequately cover or reimburse consumers for the purchase of our products.
Our
future revenues and ability to generate positive cash flow from operations may be affected by the continuing efforts of governments and
third-party payors to contain or reduce the costs of healthcare through various means. In certain foreign markets, the pricing of prescription
pharmaceuticals is subject to governmental control. In the United States, there has been, and we expect that there will continue to be,
a number of federal and state proposals to implement similar governmental controls. We cannot be certain what legislative proposals will
be adopted or what actions federal, state or private payors for healthcare goods and services may take in response to any drug pricing
reform proposals or legislation. Such reforms may make it difficult to complete the development and testing of our products, and therefore
may limit our ability to generate revenues from sales and achieve profitability. Further, to the extent that such reforms may affect
our business and collaborators, our ability to commercialize our products may be harmed.
In
the United States and elsewhere, sales of prescription pharmaceutical products still depend in large part on the availability of reimbursement
to the consumer from third-party payors, such as governmental and private insurance plans. Third-party payors are increasingly challenging
the prices charged for medical products. The market for CTx-1301, CTx-1302, and/or CTx-2103 will depend significantly on whether third-party
payors provide coverage and reimbursement. Industry competition to be eligible for reimbursement often leads to downward pricing pressures
on pharmaceutical products. Also, third-party payors may refuse to reimburse for a particular branded drug or product when a less costly
generic equivalent or other alternative is available. In the United States, no uniform policy of coverage and reimbursement for drug
products exists among third-party payors. Because each third-party payor individually approves coverage and reimbursement levels, obtaining
coverage and adequate reimbursement is a time-consuming and costly process. We would be required to provide scientific and clinical support
for the use of our products to each third-party payor separately with no assurance that approval would be obtained. This process could
delay the market acceptance of our products and could have a negative effect on our future revenues and operating results. Even if we
succeed in bringing CTx-1301, CTx-1302 and/or CTx-2103 to market, we cannot be certain that it would be considered cost effective or
that coverage and adequate reimbursement to patients would be available. Patients may be unlikely to use CTx-1301, CTx-1302 and/or CTx-2103
unless coverage is provided, and reimbursement is adequate to cover a significant portion of its cost.
In
addition, in many foreign countries, particularly the countries of the European Union, the pricing of prescription drugs is subject to
government control. In some jurisdictions outside the United States, the proposed pricing for a drug must be approved before it may be
lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides
options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement
and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product,
or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on
the market. Moreover, pricing negotiations with governmental authorities in these countries can take considerable time after the receipt
of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical
trial that compares the cost-effectiveness of our products CTx-1301, CTx-1302, and/or CTx-2103 to other available therapies. We may face
competition for CTx-1301 and/or CTx-1302 from lower-priced products in foreign countries that have placed price controls on pharmaceutical
products. In addition, there may be importation of foreign products that compete with CTx-1301, CTx-1302, and/or CTx-2103, which could
negatively impact our profitability.
We
believe CTx-1301, CTx-1302, and CTx-2103 will need to be priced competitively with current therapies to be eligible for full reimbursement
in the United States and international markets. If we are unable to obtain coverage of, and adequate payment levels for, CTx-1301, CTx-1302,
and/or CTx-2103 from third-party payors, physicians may limit how much or under what circumstances they will prescribe it and patients
may decline to purchase it. This in turn could affect our ability to successfully commercialize any or all of our products and harm our
business.
If
we are unable to support demand for CTx-1301, CTx-1302, and/ or CTx-2103, and any future product candidates, including ensuring that
we have adequate capacity to meet increased demand, or we are unable to successfully manage the evolution of our drug delivery technology
platform, our business could suffer.
As
our volume grows, we will need to extend our platform to support product production at a larger scale within expected turnaround times.
We may need additional certified laboratory scientists and technical and manufacturing personnel to process higher volumes of CTx-1301,
CTx-1302, and/ or CTx-2103, if approved. We may also need to purchase additional equipment, some of which can take several months or
more to procure, setup and validate. There is no assurance that any of these increases in scale, expansion of personnel, equipment, or
process enhancements will be successfully implemented, or that we will have adequate space in our facilities to accommodate such required
expansion.
Our
relationships with customers and third-party payors are subject to applicable anti-kickback, fraud and abuse and other healthcare laws
and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished
profits and future earnings.
For
our products and any product candidates that obtain regulatory approval and are marketed in the United States, if any, our arrangements
with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that
may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for
which we obtain marketing approval. In addition, we may be subject to health information privacy and security regulation by U.S. federal
and state governments and foreign jurisdictions in which we conduct our business. The laws that may affect our ability to operate include:
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the federal Anti-Kickback
Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration,
directly or indirectly, to induce, or in return for, either the referral of an individual, or the purchase or recommendation of an
item or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs; a person
or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
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federal civil and criminal
false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare
and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal
an obligation to pay money to the federal government; actions may be brought by the government or a whistleblower and may include
an assertion that a claim for payment by federal health care programs for items and services which results from a violation of the
federal Anti-Kickback Statue constitutes a false or fraudulent claim for purposes of the False Claims Act; |
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the federal Health Insurance
Portability and Accountability Act of 1996 (HIPAA) that imposes criminal and civil liability for executing a scheme to defraud any
health care benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially
false statement in connection with the delivery of or payment for health care benefits, items or services; similar to the U.S. federal
Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it
in order to have committed a violation; HIPAA, as amended by the Health Information Technology and Clinical Health Act of 2009 (HITECH)
and their respective implementing regulations, which imposes certain obligations, including mandatory contractual terms, on covered
healthcare providers, health plans and healthcare clearinghouses, as well as their business associates, with respect to safeguarding
the privacy, security and transmission of individually identifiable health information; |
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The Physician Payments
Sunshine Act, enacted as part of the PPACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies
that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to Centers for
Medicare and Medicaid Services, or CMS, information related to payments and other transfers of value to physicians and teaching hospitals,
and ownership and investment interests held by physicians and their immediate family members; and |
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analogous state and foreign
laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims
involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and state and
foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other
in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. |
Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial
costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes,
regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to
be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil,
criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government
funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians
or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they
may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare
programs.
Product
liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our products.
We
face an inherent risk of product liability claims as a result of the clinical testing of our product candidates despite obtaining appropriate
informed consents from our clinical trial participants. We will face an even greater risk if we obtain marketing approval for and commercially
sell CTx-1301, CTx-1302 and/or CTx-2103, or any other product candidate. For example, we may be sued if any product that we develop allegedly
causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability
claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product,
negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot
successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization
of our product candidates. Regardless of the merits or eventual outcome, liability claims may result in:
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reduced resources for our
management to pursue our business strategy; |
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decreased demand for our
product candidates or products that we may develop; |
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injury to our reputation
and significant negative media attention; |
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withdrawal of clinical
trial participants; |
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initiation of investigations
by regulators; |
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product recalls, withdrawals
or labeling, marketing or promotional restrictions; |
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significant costs to defend
resulting litigation; |
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substantial monetary awards
to trial participants or patients; |
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loss of revenue; and |
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the inability to commercialize
any products that we may develop. |
If
any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of us and the safety
and quality of our products. We could be adversely affected if we are subject to negative publicity. We could also be adversely affected
if any of our products or any similar products manufactured and distributed by other companies prove to be, or are asserted to be, harmful
to patients. Because of our dependence upon consumer perceptions, any adverse publicity associated with illness or other adverse effects
resulting from patients’ use or misuse of our products or any similar products distributed by other companies could have a material
adverse impact on our financial condition or results of operations.
Our
product liability insurance coverage may not be adequate to cover any and all liabilities that we may incur.
We
currently have $10.0 million in product liability insurance coverage in the aggregate, which may not be adequate to cover any and all
liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable
cost or in an amount adequate to satisfy any liability that may arise. Large judgments have been awarded in class action lawsuits based
on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly
if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business. In addition, we may not be able
to obtain or maintain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability
claims, which could prevent or inhibit the commercial production and sale of our products.
If
we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur
costs that could have a material adverse effect on the success of our business.
We
are subject to numerous environmental, health and safety laws and regulations. Our operations may involve the use of hazardous and flammable
materials, including chemicals and biological materials. Our operations produce hazardous waste products. We expect to contract with
third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials.
In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
Although
we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting
from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential
liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws
and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to
comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Risks
Related to Managing Our Growth, Our Employees, and Our Operations
We
will need to further increase the size and complexity of our organization in the future, and we may experience difficulties in executing
our growth strategy and managing any growth.
Our
management, personnel, systems, and facilities currently in place are not adequate to support our business plan and near-term future
growth. We will need to further expand our manufacturing team, clinical team, managerial, operational, financial, and other resources
to support our planned research, development and commercialization activities.
To
manage our operations, growth and various projects effectively requires that we:
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continue to improve our
operational, financial, management and regulatory compliance controls and reporting systems and procedures; |
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attract and retain sufficient
numbers of talented employees; |
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develop a marketing, sales
and distribution capability; |
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manage our commercialization
activities for our product candidates effectively and in a cost-effective manner; |
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establish and maintain
relationships with development and commercialization partners; |
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manage our clinical trials
effectively; |
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manage our third-party
supply and manufacturing operations effectively and in a cost-effective manner, while increasing production capabilities for our
current product candidates to commercial levels; and |
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manage our development
efforts effectively while carrying out our contractual obligations to partners and other third parties. |
In
addition, historically, we have utilized and continue to utilize the services of part-time outside consultants to perform a number of
tasks for us, including tasks related to product development and clinical testing. Our growth strategy may also entail expanding our
use of consultants to implement these and other tasks going forward. We rely on consultants for certain functions of our business and
will need to effectively manage these consultants to ensure that they successfully carry out their contractual obligations and meet expected
deadlines. There can be no assurance that we will be able to manage our existing consultants or find other competent outside consultants,
as needed, on economically reasonable terms, or at all. If we are not able to effectively manage our growth and expand our organization
by hiring new employees and expanding our use of consultants, we might be unable to implement successfully the tasks necessary to execute
effectively on our planned research, development and commercialization activities and, accordingly, might not achieve our research, development
and commercialization goals.
If
we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product
candidates, we may be unable to generate any revenue.
We
do not currently have an organization for the sale, marketing or distribution of CTx-1301, CTx-1302, or CTx-2103. As a result, we must
build this organization, or enter into a marketing collaboration with a third party, in order to commercialize CTx-1301, CTx-1302, and/
or CTx-2103. The establishment and development of our own sales force in the United States to market CTx-1301, CTx-1302, and/ or CTx-2103
will be expensive and time consuming and could delay any product launch. We cannot be certain that we would be able to successfully develop
this capacity, and even if we do, the cost of establishing and maintaining such an organization may exceed the benefit of doing so.
There
are significant risks involved in building and managing a sales organization, including our ability to hire, retain and incentivize qualified
individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, effectively manage a geographically
dispersed sales and marketing team and successfully negotiate with managed care and third-party payors. Any failure or delay in the development
of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products.
In
March 2023, we entered into to the Commercialization Agreement with Indegene. Pursuant to the Commercialization Agreement, Indegene will
provide us with commercialization services for CTx-1301, including services related to (a) medical affairs & pharmacovigilance; (b)
pricing, reimbursement and market access; (c) commercial operations; and (d) marketing.
We
also may enter into additional strategic partnerships with third parties to commercialize our product candidates.
Pursuant to the
Commercialization Agreement, we and Indegene will enter into statements of work that will set forth, among other things, the
services to be performed by Indegene, the deliverables for such services and the fees to be paid by us. We may be unable to
negotiate the terms of the statements of work, including the services to be performed by Indegene or the fees payable by us, on
terms acceptable to us, or at all. If we are unable to do so, we will have to seek other collaborations for the commercialization of
CTx-1301, which may delay commercialization. We may also
have difficulty establishing relationships with third parties on terms that are acceptable to us, or in all of the regions where we
wish to commercialize our products, or at all. If we are unable to establish adequate sales, marketing and distribution
capabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and may not
become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales
operations and/or ingrained distribution channels. Without an internal team or the support of a third party to perform marketing and
sales functions, we may be unable to compete successfully against these more established companies.
If
we fail to attract and retain management and other key personnel, we may be unable to continue to successfully develop or commercialize
our product candidates or otherwise implement our business plan.
Our
ability to compete in the highly competitive pharmaceuticals industry depends upon our ability to attract and retain highly qualified
managerial, scientific, medical, sales and marketing and other personnel. We are highly dependent on our management and scientific personnel.
The loss of the services of any of these individuals could impede, delay or prevent the successful development of our product pipeline,
completion of our planned clinical trials, commercialization of our product candidates or in-licensing or acquisition of new assets and
could negatively impact our ability to successfully implement our business plan. If we lose the services of any of these individuals,
we might not be able to find suitable replacements on a timely basis or at all, and our business could be harmed as a result. We maintain
“key man” insurance policies on the lives of specific individuals but not on the lives of all critical employees. In order
to retain valuable employees at our company, in addition to salary and cash incentives, we may provide stock options that vest over time.
The value to employees of stock options that vest over time will be significantly affected by movements in our stock price that are beyond
our control and may at any time be insufficient to counteract offers from other companies.
We
might not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for
qualified personnel among biotechnology, pharmaceutical and other businesses. We could have difficulty attracting experienced personnel
to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts. Many
of the other pharmaceutical companies with whom we compete for qualified personnel have greater financial and other resources, different
risk profiles and longer histories in the industry than we do. They also may provide more diverse opportunities and better chances for
career advancement. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience
constraints that will harm our ability to implement our business strategy and achieve our business objectives.
In
addition, we have scientific and clinical advisors who assist us in formulating our development and clinical strategies. These advisors
are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability
to us. In addition, our advisors may have arrangements with other companies to assist those companies in developing products or technologies
that may compete with ours.
Our
research and development is focused on discovering and developing product candidates but these product candidates may not make it to
the market.
Our
development research and clinical development efforts to date have resulted in product candidates, CTx-1301, CTx-1302, for the treatment
of ADHD, and CTx-2103, for the treatment of anxiety. As part of our growth strategy, we intend to identify, develop and market additional
product candidates. We are exploring various therapeutic opportunities for our pipeline and proprietary technologies. We may spend several
years completing our development of any particular current or future internal product candidates, and failure can occur at any stage.
We may not be able to develop drugs that are bioequivalent, safe and effective and/or that have commercially significant improvements
over already approved drugs. The product candidates to which we allocate our resources may not end up being successful. The success of
this strategy depends partly upon our ability to identify, select, discover and acquire promising product candidates and products.
The
process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and
complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for
the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition
or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we
may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the
anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find
acceptable, or at all.
In
addition, future acquisitions may entail numerous operational and financial risks, including:
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exposure to unknown liabilities; |
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higher than expected acquisition
and integration costs; and |
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difficulty in combining
the operations and personnel of any acquired businesses with our operations and personnel. |
Further,
any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical
testing and approval by the FDA and other regulatory authorities.
If
we do not successfully develop and commercialize product candidates based upon our Precision Timed Release platform technology, we will
not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and
adversely affect our stock price.
Our
operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating
results to fall below expectations.
Our
operations to date have been primarily limited to formulating and developing our product candidates and undertaking clinical trials of
our product candidates. We have not yet obtained regulatory approvals for any of our product candidates. Consequently, any predictions
about our future success or viability may not be as accurate as they could be if we had a longer operating history or approved products
on the market. Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control
and may be difficult to predict, including the following:
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delays in the commencement,
enrollment and the timing of clinical testing for our product candidates; |
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the timing and success
or failure of clinical trials for our product candidates or competing product candidates, or any other change in the competitive
landscape of our industry, including consolidation among our competitors or partners; |
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any delays in regulatory
review and approval of product candidates in clinical development; |
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the timing and cost of,
and level of investment in, research and development activities relating to our product candidates, which may change from time to
time; |
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the cost of manufacturing
our product candidates, which may vary depending on FDA guidelines and requirements, and the quantity of production; |
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our ability to obtain additional
funding to develop our product candidates; |
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expenditures that we will
or may incur to acquire or develop additional product candidates and technologies; |
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the level of demand for
our product candidates, should they receive approval, which may vary significantly; |
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potential side effects
of our product candidates that could delay or prevent commercialization or cause an approved drug to be taken off the market; |
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the ability of patients
or healthcare providers to obtain coverage of or sufficient reimbursement for our product candidates, if approved; |
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our dependency on third-party
manufacturers to supply or manufacture our product candidates; |
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our ability to establish
or outsource an effective sales, marketing and distribution infrastructure in a timely manner; |
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market acceptance of our
product candidates, if approved, and our ability to forecast demand for those product candidates; |
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our ability to receive
approval and commercialize our product candidates outside of the United States; |
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our ability to establish
and maintain collaborations, licensing or other arrangements; |
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our ability and third parties’
abilities to protect intellectual property rights; |
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costs related to and outcomes
of potential litigation or other disputes; |
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our ability to adequately
support future growth; |
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our ability to attract
and retain key personnel to manage our business effectively; |
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potential liabilities associated
with hazardous materials; |
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our ability to maintain
adequate insurance policies; and |
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future accounting pronouncements
or changes in our accounting policies. |
Our
operating results and liquidity needs could be negatively affected by market fluctuations and economic downturn.
Our
operating results and liquidity could be negatively affected by economic conditions generally, both in the United States and elsewhere
around the world. The market for discretionary medical products and procedures may be particularly vulnerable to unfavorable economic
conditions. Some patients may consider certain of our product candidates to be discretionary, and if full reimbursement for such products
is not available, demand for these products may be tied to the discretionary spending levels of our targeted patient populations. Domestic
and international equity and debt markets have experienced and may continue to experience heightened volatility and turmoil based on
domestic and international economic conditions and concerns. In the event these economic conditions and concerns continue or worsen,
and the markets continue to remain volatile, our operating results and liquidity could be adversely affected by those factors in many
ways, including weakening demand for certain of our products and making it more difficult for us to raise funds if necessary, and our
stock price may decline. Additionally, although we plan to market our products primarily in the United States, our partners have extensive
global operations, indirectly exposing us to risk.
Our
business and operations would suffer in the event of failures in our internal computer systems.
Despite
the implementation of security measures, our internal computer systems and those of our current and any future partners, contractors
and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication
and electrical failures. While we have not experienced any such material system failure, accident or security breach to date, if such
an event were to occur and cause interruptions in our operations, it could result in a material disruption of our manufacturing activities,
development programs and our business operations. For example, the loss of manufacturing records or clinical trial data from completed
or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or
reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications,
or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further commercialization and
development of our products and product candidates could be delayed.
We
are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity
and data leakage risks.
Significant
disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary
course of business, we collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure
manner to maintain the confidentiality and integrity of such confidential information. The size and complexity of our information technology
systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions
and security breaches from inadvertent or intentional actions by our employees, partners or vendors, from attacks by malicious third
parties, or from intentional or accidental physical damage to our systems infrastructure maintained by us or by third parties. Maintaining
the secrecy of this confidential, proprietary, or trade secret information is important to our competitive business position. While we
have taken steps to protect such information and invested in information technology, there can be no assurance that our efforts will
prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential
information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive
information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation
or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud,
trickery or other forms of deception, or for any other reason, could enable others to produce competing products, use our proprietary
technology or information, or adversely affect our business or financial condition. Further, any such interruption, security breach,
loss or disclosure of confidential information, could result in financial, legal, business, and reputational harm to us and could have
a material adverse effect on our business, financial position, results of operations or cash flow.
Risks
Related to Our Intellectual Property
If
our intellectual property related to our products or product candidates is not adequate, we may not be able to compete effectively in
our market.
We
rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related
to our products, product candidates and technology. Any disclosure to or misappropriation by third parties of our confidential or proprietary
information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in
our market.
Due
to legal standards relating to patentability, validity, enforceability and scope of claim, patents covering pharmaceutical and biotechnology
inventions involve complex legal, scientific and factual questions. Formulation of drug products such as ours with complex release profiles
is an area of intense research, publishing and patenting, which limits the scope of any new patent applications. As a result, our ability
to obtain, maintain and enforce patents is uncertain and any rights under any existing patents, or any patents we might obtain or license,
may not provide us with sufficient protection for our products and product candidates to afford a commercial advantage against competitive
products or processes. The patent applications that we own may fail to result in issued patents in the United States or in foreign countries.
Even if patents do successfully issue, third parties may challenge their patentability, validity (e.g., by discovering previously unidentified
prior art, or a patent-barring event such as a prior public disclosure, use, sale or offer for sale of the invention), enforceability
or scope, which may result in such patents being narrowed, invalidated or held unenforceable. For example, U.S. patents may be challenged
by third parties via inter partes review, post grant review, derivation or interference proceedings at the USPTO, and European
patents may be challenged via an opposition proceeding at the European Patent Office. Furthermore, if we were to assert our patent rights
against a competitor, the competitor could challenge the validity and/or enforceability of the asserted patent rights. Although a granted
U.S. patent is entitled to a statutory presumption of validity, its issuance is not conclusive as to its validity or its enforceability,
and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products.
If
the breadth or strength of protection provided by the patents and patent applications we hold or pursue with respect to our products
and product candidates is successfully challenged, we may face unexpected competition that could have a material adverse impact on our
business. Even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or
prevent others from designing around our claims. For example, a third party may develop a competitive product that provides therapeutic
benefits similar to our products or product candidates but is sufficiently different to fall outside the scope of our patent protection.
Furthermore,
if we encounter delays in our clinical trials or entry onto the market in a particular jurisdiction, the period of time during which
we could market a particular product under patent protection would be reduced.
Even
where laws provide protection, costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary
rights, and the outcome of such litigation would be uncertain. If we or one of our future collaborators were to initiate legal proceedings
against a third party to enforce a patent covering a product or our technology, the defendant could counterclaim that our patent is invalid
and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability
are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including
lack of novelty, obviousness, lack of written description, non-enablement or a patent-barring event, such as a public disclosure, use
or sale of the invention more than a year before the filing date of the application. Grounds for an unenforceability assertion could,
for example, be an allegation that someone connected with prosecution of the patent withheld material information from the USPTO, or
made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner
were unaware during prosecution, or that a third party challenging one of our patents would not assert that a patent-barring event had
occurred. If a plaintiff or a defendant were to prevail on a legal assertion of invalidity and/or unenforceability against one or more
of our patents, we would lose at least part, and perhaps all, of the patent protection for one or more of our products or product candidates.
Such a loss of patent protection could have a material adverse impact on our business.
Moreover,
we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in reexamination, inter partes
review, or interference proceedings challenging our patent rights. Patents based on applications that we file in the future may also
be subject to derivation and/or post-grant review proceedings. An adverse determination in any such submission, proceeding or litigation
could reduce the scope of, or invalidate, our patent rights and allow third parties to commercialize our technology or products and compete
directly with us. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened,
it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
We
may not seek to protect our intellectual property rights in all jurisdictions throughout the world, and we may not be able to adequately
enforce our intellectual property rights even in the jurisdictions where we seek protection.
Filing,
prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively
expensive, and our intellectual property rights in some countries outside the United States are less extensive than in the United States.
In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws
in the United States. Consequently, even where we do elect to pursue patent rights outside the United States, we may not be able to obtain
relevant claims and/or we may not be able to prevent third parties from practicing our inventions in all countries outside the United
States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.
Competitors
may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further,
may possibly export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as
that in the United States. These products may compete with our products and our patents or other intellectual property rights may not
be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our
patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from competing with us.
The
laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many
companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual
property protection. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation
of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner
must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including
government agencies or government contractors. In these countries, patents may provide limited or no benefit.
Patent
protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes.
Accordingly, we have, and may in the future, choose not to seek patent protection in certain countries. Furthermore, while we intend
to protect our intellectual property rights in certain markets for our products, we cannot ensure that we will be able to initiate or
maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual
property rights in such countries may be inadequate.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements
imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The
USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other
provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent
application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might
be able to enter the market earlier than would otherwise have been the case.
If
we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome
in that litigation would have a material adverse effect on our business.
Our
commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell their approved
products and our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties.
Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which
we are developing product candidates. As the pharmaceutical industry expands and more patents are issued, the risk increases that our
products and product candidates may give rise to claims of infringement of the patent rights of others. There may, for example, be issued
patents of third parties of which we are currently unaware, that may be infringed by our products or product candidates, which could
prevent us from being able to commercialize our products or product candidates, respectively. Because patent applications can take many
years to issue, there may be currently pending applications which may later result in issued patents that our products or product candidates
may infringe.
The
pharmaceutical industry is rife with patent litigation between patent holders and producers of follow-on drug products. The possibility
of blocking FDA approval of a competitor’s product for up to 30 months provides added incentive to litigate over Orange Book patents,
but suits involving non-Orange Book patents are also common in the ADHD space. There have been multiple patent litigations involving
nearly all of the medications for treatment of ADHD. This trend may continue and, as a result, we may become party to legal matters and
claims arising in the ordinary course of business.
We
may be exposed to, or threatened with, future litigation by third parties alleging that our products or product candidates infringe their
intellectual property rights. If one of our products or product candidates is found to infringe the intellectual property rights of a
third party, we or our collaborators could be enjoined by a court and required to pay damages and could be unable to commercialize the
applicable approved products and product candidates unless we obtain a license to the patent. A license may not be available to us on
acceptable terms, if at all. In addition, during litigation, the patent holder could obtain a preliminary injunction or other equitable
relief which could prohibit us from making, using or selling our approved products, pending a trial on the merits, which may not occur
for several years.
There
is a substantial amount of litigation involving patent and other intellectual property rights in the pharmaceutical industry generally.
If a third-party claims that we or our collaborators infringe its intellectual property rights, we may face a number of issues, including,
but not limited to:
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infringement and other
intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s
attention from our core business; |
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third parties bringing
claims against us may have more resources than us to litigate claims against us; |
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substantial damages for
infringement, which we may have to pay if a court decides that the product at issue infringes on or violates the third party’s
rights, and, if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s
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a court prohibiting us
from selling our product or any product candidate approved in the future, if any, unless the third party licenses its rights to us,
which it is not required to do; |
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if a license is available
from a third party, we may have to pay substantial royalties, fees or grant cross-licenses to our intellectual property rights; and |
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redesigning any of our
products and product candidates so they do not infringe, which may not be possible or may require substantial monetary expenditures
and time. |
Our
drug development strategy relies heavily upon the 505(b)(2) regulatory approval pathway, which requires us to certify that we do not
infringe upon third-party patents covering approved drugs. Such certifications routinely result in third-party claims of intellectual
property infringement, the defense of which would be costly and time consuming, and an unfavorable outcome in any litigation may prevent
or delay our development and commercialization efforts which would harm our business.
Our
commercial success depends in large part on our avoiding infringement of the patents and proprietary rights of third parties for existing
approved drug products. Because we utilize the 505(b)(2) regulatory approval pathway for the approval of our products and product candidates,
we rely in whole or in part on studies conducted by third parties related to those approved drug products. As a result, upon filing with
the FDA for approval of our product candidates, we will be required to certify to the FDA that either: (1) there is no patent information
listed in the FDA’s Orange Book with respect to our NDA; (2) the patents listed in the Orange Book have expired; (3) the listed
patents have not expired, but will expire on a particular date and approval is sought after patent expiration; or (4) the listed patents
are invalid or will not be infringed by the manufacture, use or sale of our proposed drug product. If we certify to the FDA that a patent
is invalid or not infringed, or a Paragraph IV certification, a notice of the Paragraph IV certification must also be sent to the patent
owner once our 505(b)(2) NDA is accepted for filing by the FDA. The third party may then initiate a lawsuit against us asserting infringement
of the patents identified in the notice. The filing of a patent infringement lawsuit within 45 days of receipt of the notice automatically
prevents the FDA from approving our NDA until the earliest of 30 months or the date on which the patent expires, the lawsuit is settled,
or the court reaches a decision in the infringement lawsuit in our favor. If the third party does not file a patent infringement lawsuit
within the required 45-day period, our NDA will not be subject to the 30-month stay. However, even if the third party does not sue within
the 45-day time limit, thereby invoking the 30-month stay, it may still challenge our right to market our product upon FDA approval;
therefore, some risk of an infringement suit remains even after the expiry of the 45-day limit.
We
may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We
rely on trade secrets to protect our proprietary know-how and technological advances, especially where we do not believe patent protection
is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our
employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other
proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate
remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade
secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary rights. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information
to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position.
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.
Some
of our employees were previously employed at other companies, including actual or potential competitors. We may also engage advisors
and consultants who are concurrently employed at other organizations or who perform services for other entities. Although we try to ensure
that our employees, advisors and consultants do not use the proprietary information or know-how of others in their work for us, we may
be subject to claims that we or our employees, advisors, or consultants have used or disclosed intellectual property, including trade
secrets or other proprietary information, of any such party’s former employer or in violation of an agreement with or legal obligation
in favor of another party. Litigation may be necessary to defend against these claims.
In
addition, while we generally require our employees, consultants, advisors 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. Similarly, we may be subject to claims that an employee, advisor or consultant
performed work for us that conflicts with that person’s obligations to a third party, such as an employer or former employer, and
thus, that the third party has an ownership interest in the intellectual property arising out of work performed for us. Litigation may
be necessary to defend against these claims.
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 be a distraction to management.
Our
decision to seek approval of CTx-1301, CTx-1302, and/or CTx-2103 and other product candidates under 505(b)(2) may increase the risk that
patent infringement suits are filed against us, which would delay the FDA’s approval of such product candidates.
In
connection with any NDA that we file under the 505(b)(2) regulatory pathway, if there are patents that claim the approved drug contained
in our product candidates and referenced in our 505(b)(2) NDA, we must certify to the FDA and notify the patent holder that any patents
listed for the approved drug in the FDA’s Orange Book publication are invalid, unenforceable or will not be infringed by the manufacture,
use or sale of our drug. If a patent infringement lawsuit is filed against us within 45 days of its receipt of notice of our certification,
the FDA is automatically prevented from approving our 505(b)(2) NDA until the earliest of 30 months, expiration of the patent, settlement
of the lawsuit or a court decision in the infringement case that is favorable to us, or such shorter or longer period as may be ordered
by a court. Such actions are routinely filed by patent owners. Accordingly, we may invest significant time and expense in the development
of our product candidates only to be subject to significant delay and patent litigation before our product candidates may be commercialized.
We may not be successful in defending any patent infringement claim. Even if we are found not to infringe, or a plaintiff’s patent
claims are found invalid or unenforceable, defending any such infringement claim would be expensive and time-consuming, and would delay
launch of our products or our other product candidates and distract management from their normal responsibilities.
Risks
Related to the Securities Markets and Ownership of Our Securities
An
active trading market for our common stock or warrants may not be sustained.
An
active trading market for our common stock or warrants may not be sustained. The lack of an active market for our common stock or warrants
may impair investors’ ability to sell their common stock or warrants at the time they wish to sell them or at a price that they
consider reasonable, may reduce the fair market value of their shares of common stock or warrants and may impair our ability to raise
capital to continue to fund operations by selling securities and may impair our ability to acquire additional intellectual property assets
by using our securities as consideration.
The
prices of our securities may be volatile, which could subject us to securities class action litigation and our stockholders could incur
substantial losses.
The
market price for our common stock and warrants may be volatile and subject to wide fluctuations in response to factors including the
following:
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actual or anticipated fluctuations
in our quarterly or annual operating results; |
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actual or anticipated changes
in the pace of our corporate achievements or our growth rate relative to our competitors; |
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failure to meet or exceed
financial estimates and projections of the investment community or that we provide to the public; |
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issuance of new or updated
research or reports by securities analysts; |
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share price and volume
fluctuations attributable to inconsistent trading volume levels of our common stock or warrants; |
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additions or departures
of key management or other personnel; |
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disputes or other developments
related to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies; |
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announcement or expectation
of additional debt or equity financing efforts; |
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sales of our common stock
or warrants by us, our insiders or our other stockholders; and |
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general economic, market
or political conditions in the United States or elsewhere (including, without limitation, conditions arising out the COVID-19 pandemic). |
In
particular, the market prices of clinical-stage companies like ours have been highly volatile due to factors, including, but not limited
to:
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any delay or failure in
a clinical trial for our product candidates or receive approval from the FDA and other regulatory agents; |
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developments or disputes
concerning our product’s intellectual property rights; |
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our or our competitors’
technological innovations; |
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fluctuations in the valuation
of companies perceived by investors to be comparable to us; |
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announcements by us or
our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, capital commitments, new technologies
or patents; |
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failure to complete significant
transactions or collaborate with vendors in manufacturing our product; and |
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proposals for legislation
that would place restrictions on the price of medical therapies. |
These
and other market and industry factors may cause the market price and demand for our common stock and warrants to fluctuate substantially,
regardless of our actual operating performance, which may limit or prevent investors from readily selling their shares of common stock
or warrants and may otherwise negatively affect the liquidity of our common stock and warrants. In addition, the stock market in general,
and Nasdaq Capital Market and emerging growth companies in particular, have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a security
has been volatile, holders of that security have instituted securities class action litigation against the company that issued the security.
If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could
also divert the time and attention of our management.
Our
warrants may not have any value.
There
can be no assurance that the market price of our common stock will ever equal or exceed the exercise price of our outstanding warrants.
In the event that our common stock price does not exceed the exercise price of the warrants during the period when the warrants are exercisable,
the warrants may not have any value.
A
warrant does not entitle the holder to any rights as common stockholders until the holder exercises the warrant for a share of our common
stock.
Until
a warrant holder acquires a share of our common stock upon the exercise of a warrant, the warrant will not provide the holder any rights
as a common stockholder. Upon exercise of a warrant, the warrant holder will be entitled to exercise the rights of a common stockholder
only as to matters for which the record date occurs after the exercise date.
Certain
of the possible adjustments to the warrants may result in a deemed distribution from us to a beneficial owner of a warrant that will
be taxable, even though the beneficial owner does not receive a corresponding distribution of cash.
The
exercise terms of the warrants may be adjusted in certain circumstances. An adjustment to the number of shares of common stock that will
be issued on the exercise of the warrants or an adjustment to the exercise price of the warrants (or, in certain circumstances, a failure
to make adjustments) may be treated as a taxable deemed distribution to a holder of the warrants, even if such holder does not receive
any cash or other property in connection with the adjustment. Holders of the warrants should consult their tax advisors regarding the
proper treatment of any adjustments to the warrants.
We
are an “emerging growth company,” and will be able take advantage of reduced disclosure requirements applicable to “emerging
growth companies,” which could make our securities less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act and, for as long as we continue to be an “emerging growth
company,” we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies
but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 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
stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for
up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235
billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, or (iii)
the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
We
intend to take advantage of these reporting exemptions described above until we are no longer an “emerging growth company.”
Under the JOBS Act, “emerging growth companies” can also delay adopting new or revised accounting standards until such time
as those standards apply to private companies. We have irrevocably elected to avail ourselves of this exemption from new or revised accounting
standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not
“emerging growth companies.”
We
cannot predict if investors will find our securities less attractive if we choose to rely on these exemptions. If some investors find
our securities less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for
our securities and the price of our common stock and warrants may be more volatile.
As
a public company, we are obligated to develop and maintain proper and effective controls over financial reporting. If we fail to maintain
proper and effective internal controls over financial reporting in the future, our ability to produce accurate and timely financial statements
could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our securities.
Section
404 of the Sarbanes Oxley Act requires that we evaluate and determine the effectiveness of our internal controls over financial reporting
and, beginning with this annual report, provide a management report on internal control over financial reporting. When we lose our status
as an “emerging growth company,” as defined in the JOBS Act, and reach an accelerated filer threshold, our independent registered
public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. However, for
so long as we remain an emerging growth company, we intend to take advantage of an exemption available to emerging growth companies from
these auditor attestation requirements. The rules governing the standards that must be met for management to assess our internal control
over financial reporting are complex and require significant documentation, testing, and possible remediation. To comply with the requirements
of being a reporting company under the Exchange Act, we will need to upgrade our systems including information technology; implement
additional financial and management controls, reporting systems, and procedures; and hire additional accounting and finance staff. If
we or, if required, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may
lose confidence in our financial reporting, and the trading price of our common stock or warrants may decline.
We
cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting
in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report
our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting
is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency
in our internal control over financial reporting once that firm begins its Section 404 reviews, we could lose investor confidence in
the accuracy and completeness of our financial reports, the market price of our common stock or warrants could decline, and we could
be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities. Failure to remedy any material weakness
or significant deficiencies in our internal control over financial reporting, or to implement or maintain other effective control systems
required of public companies, could also restrict our future access to the capital markets.
We
will incur significantly increased costs as a result of and devote substantial management time to operating as a public company.
As
a newly public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For
example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and will be required to
comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act,
as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure
and financial controls, changes in corporate governance practices and required filing of annual, quarterly and current reports with respect
to our business and operating results. These requirements will increase our legal and financial compliance costs and will make some activities
more time-consuming and costly. In addition, our management and other personnel will need to divert attention from operational and other
business matters to devote substantial time to these public company requirements. We will also need to hire additional accounting and
financial staff with appropriate public company experience and technical accounting knowledge and may need to establish an internal audit
function. We also expect that operating as a public company will make it more expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. This could also
make it more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive
officers. In addition, after we no longer qualify as an “emerging growth company,” as defined under the JOBS ACT we expect
to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are
deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act. We are just beginning the process of compiling the system and processing documentation needed to comply with
such requirements. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. In that regard,
we currently do not have an internal audit function, and we will need to hire or contract for additional accounting and financial staff
with appropriate public company experience and technical accounting knowledge.
We
cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such
costs.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price
and trading volume could decline.
The
trading market for our common stock and warrants will depend in part on the research and reports that securities or industry analysts
publish about us or our business. We currently have limited research coverage by securities and industry analysts. If we fail to maintain
adequate coverage by securities or industry analysts, the trading price for our stock could be negatively impacted. If one or more of
the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would
likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock
could decrease, which could cause our stock price and trading volume to decline.
Future
sales of our common stock, warrants, or securities convertible into our common stock may depress our stock price.
The
price of our common stock or warrants could decline as a result of sales of a large number of shares of our common stock or warrants
or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult
for us to sell equity securities in the future at a time and at a price that we deem appropriate.
In
addition, in the future, we may issue additional shares of common stock, warrants or other equity or debt securities convertible into
common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance
could result in substantial dilution to our existing stockholders and could cause the price of our common stock or warrants to decline.
Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock and warrants.
If
we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the $1.00 Minimum Bid
Price Requirement set forth in Nasdaq Listing Rule 5550(a)(2), Nasdaq may take steps to delist our common stock and warrants. Such
a delisting would likely have a negative effect on the price of our common stock and warrants and would impair your ability to sell or
purchase our common stock and warrants when you wish to do so. In the event of a delisting, we can provide no assurance that any action
taken by us to restore compliance with listing requirements would allow our common stock and warrants to become listed again, stabilize
the market price or improve the liquidity of our common stock and warrants, prevent our common stock and warrants from dropping below
the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
Anti-takeover
provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our
amended and restated certificate of incorporation, bylaws and Delaware law contain provisions which could have the effect of rendering
more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Our corporate governance documents
include provisions:
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classifying our board of
directors into three classes; |
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authorizing “blank
check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting,
liquidation, dividend, and other rights superior to our common stock; |
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limiting the liability
of, and providing indemnification to, our directors and officers; |
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limiting the ability of
our stockholders to call and bring business before special meetings; |
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requiring advance notice
of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election
to our board of directors; |
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controlling the procedures
for the conduct and scheduling of board of directors and stockholder meetings; and |
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providing our board of
directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings. |
These
provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
As
a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation
law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations
without approval of the holders of substantially all of our outstanding common stock.
Any
provision of our amended and restated certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring
a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock or warrants
and could also affect the price that some investors are willing to pay for our common stock and warrants.
We
do not anticipate paying any cash dividends on our common stock in the foreseeable future.
We
do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings
to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.
Consequently, stockholders must rely on sales of their common stock and warrants after price appreciation, which may never occur, as
the only way to realize any future gains on their investment. There is no guarantee that shares of our common stock or warrants will
appreciate in value or even maintain the price at which stockholders have purchased their shares or warrants.
Our
directors, executive officers and principal stockholders have substantial control over us and could delay or prevent a change of corporate
control.
As
of December 31, 2022, our directors, executive officers and holders of more than 5% of our common stock, together with their affiliates,
beneficially own, in the aggregate, approximately 32% of our outstanding common stock. As a result, these stockholders, acting together,
would have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors
and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, would
have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership could harm the market
price of our common stock and warrants by:
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delaying,
deferring or preventing a change of control of us; |
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impeding
a merger, consolidation, takeover or other business combination involving us; or |
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discouraging
a potential acquiror from making a tender offer or otherwise attempting to obtain control of us. |
See
“Security Ownership of Certain Beneficial Owners and Management” below for more information regarding the ownership of our
outstanding stock by our executive officers, directors and holders of more than 5% of our common stock, together with their affiliates.
Our
amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our
amended and restated certificate of incorporation requires that, unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for each
of the following:
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any derivative action or proceeding brought on our
behalf; |
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any action asserting a
claim for breach of any fiduciary duty owed by any director, officer or other employee of ours to the Company or our stockholders; |
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any action asserting a
claim against us or any director or officer of ours arising pursuant to, or a claim against us or any of our directors or officers,
with respect to the interpretation or application of any provision of, the DGCL, our certificate of incorporation or bylaws; or |
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claim governed by the internal affairs doctrine; |
provided,
that, if and only if the Court of Chancery of the State of Delaware dismisses any of the foregoing actions for lack of subject matter
jurisdiction, any such action or actions may be brought in another state court sitting in the State of Delaware.
The
exclusive forum provision is limited to the extent permitted by law, and it will not apply to claims arising under the Securities Exchange
Act of 1934, as amended, or the Exchange Act, or for any other federal securities laws which provide for exclusive federal jurisdiction.
Furthermore,
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly,
both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions
and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate
of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving
any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice
of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against
us, our directors, officers, or other employees in a venue other than in the federal district courts of the United States of America.
In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended
and restated certificate of incorporation.
Although
we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits
to which it applies, this provision may limit or discourage a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and
our directors, officers and other employees and may result in increased costs for investors to bring a claim. Alternatively, if a court
were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect
our business and financial condition.
We
note that there is uncertainty as to whether a court would enforce the provision and that investors cannot waive compliance with the
federal securities laws and the rules and regulations thereunder. Although we believe this provision benefits us by providing increased
consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging
lawsuits against our directors and officers.